Ariana M. v. Humana Health Plan of Tex., Inc.

• Decision Date: 01 March 2018
• Docket Number: No. 16-20174,16-20174
• Citation: 884 F.3d 246
• Parties: ARIANA M., Plaintiff–Appellant, v. HUMANA HEALTH PLAN OF TEXAS, INCORPORATED, Defendant–Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

884 F.3d 246

ARIANA M., Plaintiff–Appellant,
v.
HUMANA HEALTH PLAN OF TEXAS, INCORPORATED, Defendant–Appellee.

No. 16-20174

United States Court of Appeals, Fifth Circuit.

FILED March 1, 2018

Lisa S. Kantor, Managing Senior Counsel, Peter S. Sessions, Esq., Kantor & Kantor, L.L.P., 19839 Nordhoff Street, Northridge, CA 91324, Amar B. Raval, Plummer Law Group, Suite 270, 4203 Montrose Boulevard, Houston, TX 77006, for Plaintiff–Appellant.

Carlos Ramon Soltero, Cleveland Terrazas, P.L.L.C., Suite 306B, 4611 Bee Cave Road, Austin, TX 78746, Rachael Kelly Padgett, Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C., Suite 1150, 500 W. 5th Street, Austin, TX 78701-0000, for Defendant–Appellee.

Before STEWART, Chief Judge, and JOLLY, JONES, SMITH, DENNIS, CLEMENT, PRADO, OWEN, ELROD, SOUTHWICK, HAYNES, GRAVES, HIGGINSON, and COSTA, Circuit Judges.^*

GREGG COSTA, Circuit Judge, joined by STEWART, Chief Judge, DENNIS, PRADO, SOUTHWICK, HAYNES, GRAVES, and HIGGINSON, Circuit Judges:

When an ERISA plan lawfully delegates discretionary authority to the plan administrator, a court reviewing the denial of a claim is limited to assessing whether the administrator abused that discretion. Firestone Tire & Rubber Co. v. Bruch , 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). For plans that do not have valid delegation clauses, the Supreme Court has held that "a denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard." Id. For a quarter century, we have interpreted that holding to apply only to a denial of benefits based on an interpretation of plan language. The result is a bifurcated standard of review for challenges in our circuit to the denial of ERISA benefits. Courts reviewing challenges to the legal interpretation of a plan do not, as Firestone says, give any deference to the administrator's view of plan language. But challenges to an administrator's factual determination that a beneficiary is not eligible are reviewed under the same abuse-of-discretion standard that applies when plans have delegated discretion. Pierre v. Conn. Gen. Life Ins. Co. , 932 F.2d 1552, 1562 (5th Cir. 1991). When Pierre was decided, it created a circuit split with one other court of appeals that had read Firestone to set a default de novo standard for both legal and factual determinations.

884 F.3d 248

Reinking v. Phila. Am. Life Ins. Co. , 910 F.2d 1210, 1213–14 (4th Cir. 1990), overruled on other grounds by Quesinberry v. Life Ins. Co. of N. Am. , 987 F.2d 1017 (4th Cir. 1993). In the time since, seven other courts of appeals have chimed in. Every one has taken the view that the standard of review does not depend on whether the denial is deemed to be based on legal or factual grounds.

We thus have long stood alone in limiting Firestone 's de novo review to denials based on interpretations of plan terms. Our outlier view did not affect a great number of ERISA cases, however, because delegation clauses that remove a case from the default standard of Firestone are so prevalent. But the importance of this issue may be growing. As part of a trend in a number of states,¹ Texas recently enacted a law banning insurers' use of delegation clauses. TEX. INS. CODE § 1701.062(a). Assuming that the antidelegation statute is not preempted by federal law—something we do not decide today as that defense has not been asserted—a lot more ERISA cases will be subject to Firestone 's default standard of review. So we granted en banc review of this case to reconsider Pierre and determine the default standard of review that applies when a beneficiary challenges a plan denial based on a factual determination of ineligibility.

I.

Ariana M. is a dependent covered by an Eyesys Vision Inc. group health plan. Humana Health Plan of Texas, Inc. insures and makes benefits determinations for that plan. So when Ariana was admitted to Avalon Hills, a facility that treats eating disorders, Humana determined whether and for how long to cover her partial hospitalization. According to the plan's terms, partial hospitalization includes comprehensive treatment for a minimum of five hours per day, five days a week. This treatment is more intensive than any form of outpatient care.

When she was admitted, Ariana had over 100 self-inflicted cuts on her body, while her escalating eating disorder interfered with her ability to lead a normal life. This was no isolated occurrence. By that time, Ariana had a six-year history of eating disorders, though she claimed that her body-image dissatisfaction dated back to early childhood.

A beneficiary is only eligible for partial hospitalization for mental health services if the treatment is "medically necessary." Medically necessary services are those "that a health care practitioner exercising prudent clinical judgment would provide to his or her patient for the purpose of preventing, evaluating, diagnosing or treating an illness or bodily injury , or its symptoms."

Ariana's treatment lasted from April to September 2013. Though Humana, at various points, denied certification for continued treatment—reversing course only on appeal by Avalon Hills—it did eventually authorize forty-nine days of partial hospitalization. But Humana declined to allow partial hospitalization beyond June 5th, claiming it was no longer medically necessary.

In reaching this conclusion, Humana had two doctors evaluate Ariana's records. Dr. Manjeshwar Prabhu—a contract physician with Humana's behavioral-health vendor—conducted the initial review, finding that Ariana no longer qualified for treatment

884 F.3d 249

under the Mihalik criteria. Mihalik provides a set of privately licensed guidelines used to evaluate the need for certain medical services. In Prabhu's view, Ariana posed no imminent danger to herself or others and showed no medical instability or functional impairments, so a lower level of care, such as an intensive outpatient treatment, was appropriate. Though Avalon Hills—whose physicians participated in a peer-to-peer review of Ariana's case with Prabhu—acknowledged she was neither suicidal nor psychotic, it informed Prabhu that Ariana was not progressing in her treatment. In the view of a therapist at the facility, Ariana appeared to be at her "baseline behaviors."

Avalon Hills appealed the denial. That prompted Humana to seek an additional review from Dr. Neil Hartman, a psychiatrist with Advanced Medical Reviews. He evaluated Ariana's medical records—including Prabhu's determination—and consulted her treating physicians. Hartman concluded that Ariana's partial hospitalization was no longer necessary because she was "medically stable," "not aggressive," and "not a danger to [herself or others]."

Ariana then filed this lawsuit. The plan has a clause granting to Humana "full and exclusive discretionary authority to: [i]nterpret plan provisions; [m]ake decisions regarding eligibility for coverage and benefits; and [r]esolve factual questions relating to coverage and benefits." Early in the lawsuit, Ariana argued that the clause was unenforceable because Texas prohibits discretionary clauses. TEX. INS. CODE § 1701.062(a). In response, Humana agreed to not rely on the delegation clause (and thus did not raise a preemption defense to the Texas statute) and said it would defend its denial under the default "de novo " standard. Despite using the "de novo " label, Humana made clear that it was invoking the "abuse of discretion" standard Pierre applies to factual determinations even when a plan does not grant the administrator discretion. Ariana argued that the Texas law did not just invalidate delegation clauses but also overrode Pierre 's deferential standard of review.

The district court disagreed that Texas law could dictate the ERISA standard of review. The court thus applied Pierre and assessed whether Humana's decision fell "somewhere on a continuum of reasonableness—even if on the low end." Ariana M. v. Humana Health Plan of Tex., Inc. , 163 F.Supp.3d 432, 439 (S.D. Tex. 2016) (quoting Holland v. Int'l Paper Co. Ret. Plan , 576 F.3d 240, 247 (5th Cir. 2009) ). It held that Humana did not abuse its discretion in finding Ariana's continued partial hospitalization medically unnecessary—Prabhu and Hartman both conducted peer-to-peer reviews with her treating physicians, reviewed her medical files, provided reports citing the Mihalik criteria, and explained why she did not qualify for continued partial hospitalization under the plan. Id. at 442. As a result, the district court granted Humana's motion for summary judgment and denied Ariana's. Id. at 443.

A panel of this court affirmed. Ariana M. v. Humana Health Plan of Tex., Inc. , 854 F.3d 753, 762 (5th Cir. 2017). The panel rejected Ariana's contention that the Texas statute mandated a specific standard of review, finding instead that the "plain text of the statute provides only that a discretionary clause cannot be written into an insurance policy." Id. at 757. Therefore, Texas's antidelegation law did not alter "normal Pierre deference." Id. The panel also recognized that Pierre deference, under this court's long-held view, dictated abuse of discretion as the appropriate standard to review an administrator's factual determinations, irrespective of whether the ERISA plan contains a discretionary clause. Id. at 756–57 (citing

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