Doe v. Group Hospitalization & Medical Services

• Decision Date: 18 August 1993
• Docket Number: No. 92-2525,92-2525
• Citation: 3 F.3d 80
• Parties: , 16 Employee Benefits Ca 2850 John DOE; Firm Doe, Plaintiffs-Appellants, v. GROUP HOSPITALIZATION & MEDICAL SERVICES, d/b/a Blue Cross and Blue Shield of the National Capital Area, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 80

3 F.3d 80

62 USLW 2124, 16 Employee Benefits Ca 2850

John DOE; Firm Doe, Plaintiffs-Appellants, v. GROUP HOSPITALIZATION & MEDICAL SERVICES, d/b/a Blue Cross and Blue Shield of the National Capital Area Defendant-Appellee.

No. 92-2525.

United States Court of Appeals Fourth Circuit.

Argued April 1, 1993.

Decided Aug. 18, 1993.

Kirk R. Ruthenberg, Sonnenschein, Nath & Rosenthal, Washington, DC, argued (Duane C. Quaini, Amy L. Bess, Sonnenschein, Nath & Rosenthal, Washington, DC, on the brief), for plaintiffs-appellants.

Charles Joseph Steele, Foley & Lardner, Washington, DC, argued (Mary Atchley Jester, Foley & Lardner, Washington, DC, on the brief), for defendant and appellee.

Before POWELL, Associate Justice (Retired), United States Supreme Court, sitting by designation, and HALL and NIEMEYER, Circuit Judges.

OPINION

NIEMEYER, Circuit Judge:

John Doe, a 59-year-old law partner of Firm Doe in Washington, D.C., was diagnosed in late 1991 with multiple myeloma, a rare and typically fatal form of blood cancer. His physician, Dr. Kenneth C. Anderson of the Dana-Farber Cancer Institute, affiliated with Harvard Medical School, prescribed a treatment that involved an initial course of chemotherapy to reduce the percentage of tumor cells. Provided Doe responded to the therapy and achieved a "minimal disease status," Dr. Anderson recommended that Doe then undergo high-dose chemotherapy and radiation therapy combined with an autologous bone marrow transplant. The bone marrow transplant procedure, prescribed to replace bone marrow damaged by the treatment, consists of "harvesting" some of the patient's bone marrow, freezing it for preservation, and, after the chemotherapy, reinfusing it for regeneration. The cost of the entire treatment was estimated at $100,000. Dr. Anderson stated that the prescribed treatment "offers this gentleman his only chance of long-term survival."

John Doe and Firm Doe sought health insurance benefits for the prescribed treatment from Group Hospitalization and Medical Services, Inc., doing business as Blue Cross and Blue Shield of the National Capital Area (Blue Cross). Blue Cross insured and administered Firm Doe's employee welfare benefit plan pursuant to a group insurance contract entered into effective January 1, 1989. Relying on language in the contract that excludes benefits for bone marrow transplants undergone in treating multiple myeloma, as well as for "related" services and supplies, Blue Cross denied benefits. John Doe and Firm Doe promptly filed suit against Blue Cross under Sec. 502 of the Employee Retirement Insurance Security Act (ERISA), 29 U.S.C. Sec. 1132, claiming that Blue Cross denied benefits based solely upon improperly adopted amendments to the group insurance contract and that, in any event, the contract's language as amended did not exclude coverage for the treatment. On cross-motions for summary judgment, the district court entered judgment for Blue Cross, holding that "Blue Cross may properly deny coverage to John Doe and his physicians based on the Group Contract and amendments thereto." This appeal followed.

Reviewing the plan administrator's discretionary decision to deny coverage under a less deferential standard than would typically be applied because of the administrator's conflict of interest, we reverse the portion of the decision denying benefits for chemotherapy and radiation therapy and affirm the remainder.

I

The group insurance contract to which we must look to resolve the issues in this case was purportedly amended by a letter sent to Firm Doe dated November 30, 1990. The amendment is important because it supplied the language on which Blue Cross relied to deny coverage and gave Blue Cross discretion in deciding eligibility and contract interpretation issues.

John Doe and Firm Doe contend that Blue Cross failed to comply with the terms of the group insurance contract and the provisions of ERISA when attempting to amend the contract with the November 30, 1990, letter. Failing validity of the amendment, they argue there is no language on which Blue Cross could have relied to deny benefits for John Doe in connection with the prescribed treatment of his cancer.

In December 1991 John Doe was evaluated and diagnosed with multiple myeloma, having entered the hospital in November for acute back pain radiating down his legs. By letter dated January 30, 1992, John Doe's physician, Dr. Anderson, prescribed a treatment of chemotherapy and radiation that included an autologous bone marrow transplant. On March 30, 1992, Dr. Gregory K. Morris, vice president and medical director of Blue Cross, wrote Dr. Anderson denying the request for coverage of the proposed treatment. Specifically referring to the language of the November 30, 1990, amendment that excludes from coverage treatment of myeloma by means of bone marrow transplant and services and supplies related thereto, Dr. Morris stated that Blue Cross will be "unable to provide benefits for Mr. [Doe]." Relying on the same language Blue Cross also, at a later date, denied coverage for blood tests prescribed in the subsequent months by Doe's doctor, stating that "they [too] are related to non[-]covered bone marrow transplant." John Doe's appeal for reconsideration of Blue Cross' position was denied by Blue Cross, and Doe and Firm Doe thereafter filed this suit. ^*

The November 30 letter was a form letter apparently sent to all administrators of Blue Cross group insurance contracts. It opens by stating that its purpose is to "inform you of updates" to the group contract. It then addresses changes to no less than eight separate aspects of coverage in four single-spaced pages, including one headed "Organ Transplants" that includes the language in question. The letter concludes:

The changes described in this Letter of Amendment will not result in a change in your group rates at this time. Please attach this Letter of Amendment to your copy of the Group Contract(s).

A Subscriber Bulletin is enclosed for your Employees which summarizes these changes. You may duplicate this bulletin as needed, or request additional copies by contacting the marketing service representative for your group. If you have any questions about these changes, please contact your service representative.

John Doe and Firm Doe contend that the amendment was ineffective for two reasons: It was not adopted in accordance with the contract's specified time periods for making amendments, and, even if it was timely, the language of the amendment misled the contract holder, Firm Doe, and its employees about the nature of the changes.

We address first John Doe and Firm Doe's argument that the amendment was untimely. The original contract, effective January 1, 1989, provided that amendments could be made after the initial contract year provided Blue Cross gave the contract holder "at least 60 days written notice prior to such change." In August 1989, eight months after the commencement of the contract and therefore during its initial year, Blue Cross changed the notice requirement from 60 days to 30 days. Since that amendment could not take effect during the initial contract year, we agree with the district court's ruling that it took effect January 1, 1990, and therefore applied to the November 30, 1990, amendment issued 11 months later.

While the November 30 amendment did not provide for an effective date, by reason of the contract language requiring 30 days notice before an amendment could be made, the November 30 amendment became effective 30 days later, by January 1, 1991, and was therefore effective on March 10, 1992, when Blue Cross relied on it to deny benefits.

John Doe and Firm Doe maintain that the August 1989 amendment, changing the notice period from 60 days to 30, was ineffective. Therefore, they contend, the November 30, 1990, amendment could not go into effect on January 1, 1991, because all changes had to become effective on the anniversary date of the contract, and 60 days would have put the effective date after the anniversary date. We find no contract language to support this argument; indeed the contract provides for amendment "on or after the first anniversary" upon proper notice. Furthermore, even if we accept the argument, the effect at best for John Doe would be a delay of the amendment until the next anniversary date, January 1, 1992, still before the action of Blue Cross taken on March 10, 1992.

In connection with their second point, John Doe and Firm Doe argue that while the language contained in the section headed "Organ Transplants" purports to "clarify" the types of transplants covered ("In order to clarify which types of transplants are covered, a list of the covered procedures [is] being added to your Contract as follows" (emphasis added)), coverage was in fact narrowed by the amendment because before the amendment transplants were simply not addressed and were therefore presumptively covered so long as they were not excluded under some other provision. They argue, therefore, that Blue Cross failed to disclose the intended effect of the limitation for organ transplants, downplaying the significance of the letter. Doe and Firm Doe maintain that this conclusion is corroborated by the fact that no effective date for the letter amendment was provided, arguing that an amendment would properly give an effective date. In short, they maintain that Blue Cross failed to put Firm Doe on notice of an amendment. From our review of the letter and the parties' conduct in response to it, we find this argument unpersuasive.

Health care benefits provided in an employee benefit plan are not vested benefits; the employer may modify or withdraw these benefits at any time, provided the changes are made in compliance with ERISA and the terms of the plan. See 29 U.S.C. Sec. 1051 (ERISA vesting provisions do not apply to employee welfare benefit plans); Sejman v. Warner-Lambert Co., 889 F.2d 1346, 1349 (4th Cir.198...