Heaton v. State Health Benefits Com'n

• Decision Date: 27 April 1993
• Parties: Mary-Ellen HEATON, Petitioner-Appellant, v. STATE HEALTH BENEFITS COMMISSION, Respondent-Respondent.
• Court: New Jersey Superior Court — Appellate Division

Page 141

264 N.J.Super. 141

624 A.2d 69

Mary-Ellen HEATON, Petitioner-Appellant, v. STATE HEALTH BENEFITS COMMISSION, Respondent-Respondent.

Superior Court of New Jersey,

Appellate Division.

Submitted Oct. 6, 1992.

Decided April 27, 1993.

Ferro Doyne LaBella & Logerfo, for petitioner-appellant (Michael F. Logerfo, on the brief).

Robert J. Del Tufo, Atty. Gen., for respondent (Andrea M. Silkowitz, Asst. Atty. Gen., of counsel, and Kathy Rohr, Deputy Atty. Gen., on the brief).

Greenberg Margolis, attorneys, submitted an amicus curiae brief for American Ass'n of Retired Persons (Steve S. Zaleznick, Michael R. Schuster, Bruce Vignery, Patricia DeMichele, Robin Talbert, of counsel, and Howard Mankoff, on the brief).

Before Judges PRESSLER, R.S. COHEN and KESTIN.

The opinion of the court was delivered by

COHEN, R.S., J.A.D.

Mary-Ellen Heaton was an employee of the Harrington Park Board of Education, and was therefore insured under the New Jersey State Health Benefits Program. Her husband Jack was a covered dependent. The statutory Program provides major medical benefits administered on behalf of the State by Prudential Insurance Company. The statute includes lifetime major medical expense benefits of $1 million for each covered person, but limits benefits for "eligible expenses incurred because of mental illness or functional nervous disorders" ¹ to an annual $10,000 and a lifetime $20,000. N.J.S.A. 52:14-17.29(A)(2). The handbook distributed to employees, which we understand to embody the terms of the Program as communicated to the employees, describes the $10,000/$20,000 limits as applying to "mental, psychoneurotic and personality disorders." We do not read this phrase as an attempt to alter or explain the statutory language. The regulations adopted by the State Health Benefits Commission do not deal with the matter at all. N.J.A.C. 17:9-1.1 to -7.4.

Jack Heaton was admitted to the Carrier Foundation on July 3, 1987, suffering from advanced Alzheimer's disease. He was discharged on August 25, 1987, to the psychiatric hospital (now known as Ramapo Ridge Psychiatric Hospital) at the Christian Health Care Center (CHCC). On September 22, 1989, some twenty-five months later, he was transferred to the nursing home portion of CHCC.

Prudential and the State Health Benefits Commission determined that the expenses incurred for Mr. Heaton's care at the CHCC psychiatric hospital were subject to the $10,000/$20,000 benefits limitation, and also that the treatment there was custodial, medically unnecessary, and therefore not eligible for reimbursement. Denial of the Heaton claim was then referred as a contested case for hearing in the Office of Administrative Law. After a plenary hearing, the administrative law judge determined that the treatment for Heaton's Alzheimer's disease was necessary and that it was not subject to the benefits limitation for mental disease. The Commission rejected that conclusion and affirmed its original determination. Its thesis was that although Heaton's mental disorder may have been the result of a medical condition, the treatment he received was for a mental disorder. It also decided that Heaton's stay at CHCC's psychiatric hospital was custodial and therefore unnecessary. We disagree on both counts, and therefore reverse.

The Program was first established and described in the New Jersey Health Benefits Program Act in 1961. L.1961, c. 49; N.J.S.A. 52:14-17.25 to -33. It originally enrolled only state employees, but 1964 amendments extended benefits to employees of counties, municipalities, school districts, and other public agencies on an optional basis, that is, if the public entity chose to participate in the Program. L.1964, c. 125, § 3-14; N.J.S.A. 52:14-17.34 to -45.

The evidence before the administrative law judge on the question whether Alzheimer's is a mental disease permitted only one conclusion, that Alzheimer's is an organic mental disorder caused by a progressive degeneration of brain cells. It is a disturbance in behavior and thinking resulting from a known physical cause, as contrasted with schizophrenia and personality disorders, which are functional, i.e., they have no known physical cause. Alzheimer's is listed in the Diagnostic and Statistical Manual of Mental Disorders (DSM III) as a physical disorder.

Alzheimer's cannot be cured. Patient care consists of dealing with behavioral or psychological symptoms, usually with drugs. Some patients need only custodial care. Others, like Jack Heaton, develop "behavioral disturbances to the point where for his own safety and management he required a psychiatric facility because this is the only place where a situation like this could be handled safely." However, according to the Heatons' expert witness, this did not mean Alzheimer's is primarily a psychiatric condition, but rather that the physical changes in the brain gave rise to psychiatric symptoms.

Heaton's symptoms in 1987 included agitation and resulting behavior problems so severe as to make him impossible to manage in a nursing home, and to require that he receive treatment with a major tranquilizer in the setting of a psychiatric hospital. Out of necessity, custodial care is also afforded in the psychiatric hospital, but the primary focus is on treatment and security. Only after such a patient becomes manageable, usually as the result of the progress of the disease itself, can he be put in a nursing facility for predominantly custodial care. For those reasons, the care provided at the psychiatric hospital was necessary, since it was the setting in which the required medication and physical management of the patient was available.

The Program's expert witness agreed that Alzheimer's is an organic physical disease, but emphasized that patients are treated psychiatrically, just like patients who suffer from nonorganic functional mental illnesses. To him, the kind of treatment administered required classification of Alzheimer's as a mental disease.

The Commission took the position that the statutory limits for mental, psychoneurotic and personality disorders were intended to limit coverage where the treatment at issue addressed behavioral problems, regardless of the cause. Thus, even if the etiology of a mental disorder is biological, resulting psychiatric treatment is subject to the psychiatric limit.

The issue of the application of the mental-disease benefit limitation is not a medical issue. It is a matter of statutory interpretation. There is no dispute that Alzheimer's is a physical condition, organic and not functional in nature, and that treatment of acutely agitated patients is appropriately undertaken by psychiatrists in psychiatric hospitals. The issue is whether application of the benefit limit to a patient's mental condition is to be determined according to its etiology, or according to the nature of the symptoms treated and the modalities of treatment.

The Commission's position would limit Program coverage for necessary psychiatric treatment not only of organic brain diseases but, if we understand it correctly, also for necessary psychiatric treatment necessitated by traumatic physical injuries to the brain or other parts of the body. Hospitalization for surgery for a traumatic brain injury or a brain tumor, for instance, would be fully covered, but psychiatric treatment of resulting personality and behavior changes would be covered only within the $10,000/$20,000 limit for mental illness.

If we were dealing with a commercial insurance policy, we would have no difficulty ruling that the mental illness benefit limitation does not apply to necessary psychiatric treatment for Alzheimer's disease. The language of limitation is, at the very least, ambiguous on the question whether cause or treatment of a condition engages the limitation. In those circumstances, the ambiguous language is construed against the profferer. A case directly on point is Sachs v. Commercial Ins. Co., 119 N.J.Super 226, 290 A.2d 760 (Law Div.1972), aff'd o.b., 124 N.J.Super. 258, 306 A.2d 83 (App.Div.1973).

In Sachs, defendant insurer issued a group major medical expense policy for members of the New Jersey State Bar Association. Plaintiff's decedent suffered from cerebral arteriosclerosis, progressive in nature, causing a gradual deterioration of the patient's intellectual powers. Defendant declined to pay for over two years' resulting hospitalization. It relied on benefit limitations in defendant's two policies, in one for "mental illness" and, the other for "mental or nervous illness, disorder or emotional disturbance."

In Sachs, we held the limitations to apply "only to purely mental disorders involving functional etiology, and not to mental symptomology produced by organic disease." Id. 119 N.J.Super. at 233, 290 A.2d 760. "In this case," we ruled, "the affliction involved a physical deterioration and blockage of the vessels in the brain because of sclerosis. The illness or disorder was thus the arteriosclerosis; the mental and intellectual deterioration was but the end result thereof." Id. at 233-34, 290 A.2d 760.

The coverage provisions of the State Health Benefits Program Act, N.J.S.A. 52:14-17.29(A)(2) have been amended on five occasions since Sachs. L.1975, c. 12 § 1; L.1976, c. 41 § 1; L.1981, c. 483 § 1; L.1985, c. 428 § 1; L.1989, c. 48 § 1. The argument could well be made that such frequent attention to the Program coverages would have eventually included a change in "mental disease" language if the Legislature disagreed with Sachs' construction of almost identical language contained in an insurance policy.

This court is not alone in ruling that benefit limitations like those for "expenses incurred because of mental illness or functional nervous disorders," N.J.S.A. 52:14-17.29(A)(2), focus on etiology as opposed to treatment.

The United States Court of Appeals, Seventh Circuit, had a similar problem in Phillips v. Lincoln Nat'l Life Ins. Co., 978...