Tenth Circuit Finds Denial of Benefits Arbitrary and Capricious

On December 5, 2023, in Ian C. v. United Healthcare Ins. Co., the Tenth Circuit Court of Appeals (Tenth Circuit) reversed the district court’s ruling that the defendant’s claim denial was not arbitrary and capricious because the defendant did not provide a “full and fair review” of the plaintiff’s claims.

The plaintiff was a participant covered by an employer-sponsored group health plan. The plaintiff’s son underwent inpatient residential treatment for mental health and substance abuse issues, and the plaintiff submitted claims to the plan on behalf of his son. The defendant, UnitedHealthcare Insurance Company, was the claims fiduciary for the plan and was responsible for determining whether the plan would cover the treatment. After approving coverage for the first two weeks of treatment, the defendant determined that further treatment was medically unnecessary and denied coverage. The plaintiff exhausted the plan’s appeals process, but the appeal reviewers supported the defendant’s determination that further coverage was unnecessary. The plaintiff then took the defendant to court, where the court found for the defendant. The plaintiff then appealed to the Tenth Circuit.

The Tenth Circuit applied an arbitrary and capricious standard to the defendant’s denials. Under ERISA, which governs employer-sponsored group health plans, the plan can authorize the plan administrator to determine benefits on a discretionary basis, which is the case here. Accordingly, the arbitrary and capricious standard is a deferential standard that will uphold the administrator’s decisions so long as they are made on a reasoned basis and are supported by substantial evidence. In addition, under ERISA, the administrator must provide a full and fair review of claims, in which the administrator must consider the claimant’s evidence and consider all grounds for coverage raised by the claimant.

Applying this standard to the defendant’s initial denial, the Tenth Circuit determined that the defendant failed to consider evidence provided by the plaintiff that supported their claim for coverage and did not consider all the grounds for coverage put forth by the claimant. The arbitrary and capricious standard also requires that administrative appeals of adverse decisions provide a full and fair review, which means that the appeal must reevaluate the claims with a clean slate. Despite the presence of the evidence in the record that supported the plaintiff’s grounds for coverage, the subsequent denials deferred to the initial reviewer’s findings. After making these determinations, the Tenth Circuit concluded that the defendant’s actions were arbitrary and capricious and remanded the matter back to the district court for further deliberation.

Employers should make sure that their plans’ appeals process considers all of the evidence provided by claimants and all grounds that the claimants put forth to justify coverage.

Ian C. v. United Healthcare Ins. Co. »