Loyola University of Chicago v. Humana Ins. Co.

• Decision Date: 14 June 1993
• Docket Number: No. 92-2417,92-2417
• Citation: 996 F.2d 895
• Parties: 16 Employee Benefits Cas. 2457, Pens. Plan Guide P 23883F LOYOLA UNIVERSITY OF CHICAGO, Plaintiff-Appellant, v. HUMANA INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 895

996 F.2d 895

16 Employee Benefits Cas. 2457, Pens. Plan Guide P 23883F

LOYOLA UNIVERSITY OF CHICAGO, Plaintiff-Appellant, v. HUMANA INSURANCE COMPANY, Defendant-Appellee.

No. 92-2417.

United States Court of Appeals Seventh Circuit.

Argued Jan. 5, 1993.

Decided June 14, 1993.

Paula M. Carstensen, John J. Reidy, Charles E. Reiter, III (argued), Ruff, Weidenaar & Reidy, Leon S. Conlon, Lundblad & Conlon, Chicago, IL, for plaintiff-appellant.

Robert J. Bates, Jr. (argued), Patrick M. Ouimet, Pope & John, Chicago, IL, for defendant-appellee.

Before BAUER, Chief Circuit Judge, MANION, Circuit Judge, and EVANS, Chief District Judge. ^*

TERENCE T. EVANS, Chief District Judge.

Forty-four-year-old Billy Via was a qualified participant under a group health plan provided by defendant Humana Insurance Company. On July 9, 1988, Mr. Via experienced chest pains and was admitted to Holy Family Hospital, where he was diagnosed with acute anterior wall myocardial infarction. On July 29, 1988, Mr. Via was transferred, with an intra-aortic balloon in place, to Loyola University Medical Center for coronary Mr. Via underwent the surgery on August 3, but could not be weaned from the cardiac bypass machine. The surgeon, Dr. Henry Sullivan, had two choices: let Mr. Via die on the operating table or insert a Jarvik-7 total artificial heart to prolong his life until a heart donor could be located. The surgeon, of course, implanted the Jarvik-7. On September 5, when a compatible human heart became available, Mr. Via was given a heart transplant. He survived only 2 weeks with the replacement human heart, however, and died on September 19, 1988.

                artery bypass surgery.   Before undergoing the surgery, Mr. Via assigned his benefits under the health plan to Loyola.   On August 2, after finding medical necessity, Humana authorized Mr. Via's admission to Loyola and 7 days of care
                

Humana originally denied all coverage for Mr. Via's hospitalization at Loyola. On December 28, 1988, Dr. Ronald Lankford, vice-president of medical affairs at Humana, notified Loyola that coverage for the Jarvik implant, the heart transplant, and related expenses was denied. Dr. Lankford's letter stated that Humana would not cover the implantation of the Jarvik heart because it was experimental and that in regard to the heart transplant Humana had decided that Mr. Via did not meet Medicare guidelines for determining whether he was a good candidate. After an objection to Dr. Lankford's conclusions by Loyola's doctors, Humana affirmed its denial of benefits. Eventually, about 6 months after this lawsuit was filed, Humana did pay Loyola for all medical charges incurred prior to the implantation of the artificial heart.

Loyola brought suit under the Employee Retirement Income Security Act, 29 U.S.C. § 1132(a)(1), for payment of the remaining expenses associated with the Jarvik implant and heart transplant. The expenses totaled approximately $500,000. Judge Harry D. Leinenweber granted Humana's motion for summary judgment and denied Loyola's cross-motion for partial summary judgment. Loyola appeals.

The Policy

The portion of the group health benefit plan pertinent to Mr. Via's surgeries, the "Major Transplant Benefit Rider," reads as follows:

Contrary to any limitations on major transplants contained in the Group Policy, we will pay benefits under this rider for covered major transplant expenses, as defined below, incurred by an insured person for an approved major transplant.

MAJOR TRANSPLANT means pretransplant, transplant and post-discharge services, supplies, care and treatment received for or in connection with the medically necessary transplantation of the following human organs or tissue: heart, liver, kidney and bone marrow.

For a major transplant procedure to be considered approved to this Major Transplant Benefit, prior approval from our Medical Affairs Department in advance of the procedure is required. Such approval will be based on written criteria and procedures established by our Medical Affairs Department.... If approval is not given, benefits will not be provided for the procedure.

....

EXCLUSIONS

No benefit is payable for or in connection with a major transplant if:

1. Our Medical Affairs Department is not contacted for prior authorization of the procedure.

2. Our Medical Affairs Department does not approve coverage for the procedure, based on established criteria for medical necessity or based on a determination that the procedure is experimental for the condition involved.

All issues in this case turn on this quoted language of the major transplant benefit rider.

The Standard of Review

We review de novo Judge Leinenweber's decision granting summary judgment. Panozzo v. Rhoads, 905 F.2d 135, 137 (7th Cir.1990). To prevail on the motion for summary judgment, Humana has to show through the pleadings, depositions, answers to interrogatories, and affidavits that there is no genuine issue as to any material fact and that it is entitled to judgment as a matter of law. Federal Rule of Civil Procedure 56(c). The initial burden is on the moving party to show that there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). Once the movant has satisfied this burden, the party opposing the motion must come forward with evidence to show that there remains an issue of fact to be tried. Fed.R.Civ.P. 56(e).

For analysis of the denial of benefits, the de novo standard of review applies unless a benefit plan gives its plan administrator discretionary authority to construe the terms of the plan or determine who is eligible to receive benefits. Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). In the event that the administrator's discretion is unrestrained or limited only by the requirement of good faith, the arbitrary and capricious standard of review is proper. Exbom v. Central States Southeast and Southwest Areas Health and Welfare Fund, 900 F.2d 1138, 1142 (7th Cir.1990). Under the arbitrary and capricious standard, a denial of benefits will not be set aside if the denial was based upon a reasonable interpretation of the plan documents. Exbom, 900 F.2d at 1142-43; Shull v. State Machinery Co. Employees Profit Sharing Plan, 836 F.2d 306 (7th Cir.1987). If the administrator makes an informed judgment and articulates an explanation for it that is satisfactory in light of the relevant facts, then the administrator's decision is final. Exbom, 900 F.2d at 1143. Judge Leinenweber applied the arbitrary and capricious standard. ¹

The Humana benefit plan does not contain any magic words granting discretion to the plan administrator. But the major transplant benefit rider provides that for a heart transplant to be covered, prior approval from Humana's Medical Affairs Department in advance of the procedure is required and that "[s]uch approval will be based on written criteria and procedures established by our Medical Affairs Department.... If approval is not given, benefits will not be provided for the procedure." (Emphasis added.) The exclusion clause states that no major transplant benefit is payable if Humana's "Medical Affairs Department does not approve coverage for the procedure based on established criteria for medical necessity or based on a determination that the procedure is experimental for the condition involved." A general limitations clause in another portion of the plan expressly excludes "experimental procedures or treatment methods as determined by us or the appropriate technological assessment body established by the state or federal government."

Loyola, desiring the broader de novo standard of review, argues that the plan does not give Humana discretionary authority. Pointing to Adams v. Blue Cross/Blue Shield, Inc., 757 F.Supp. 661 (D.Md.1991), Loyola contends that the language "as determined by us" is vague and ambiguous. Loyola further asserts that the plan does not contain any definition of either "experimental procedures or treatment methods" or "experimental for the condition involved." According to Loyola, nowhere is authority granted to the administrator to construe these ambiguous terms.

We disagree. We believe that the benefits plan gives Humana's Medical Affairs Department discretion. Discretion in regard to prior approval and eligibility for major transplant coverage is two-fold: discretion in establishing the criteria ² for coverage and then discretion in applying the criteria to each patient's situation. Exclusions from major transplant coverage are determined based on either standard criteria or on a determination within the discretion of the Medical Affairs Department that the procedure is experimental. This provision gives Humana the authority to interpret what "experimental" means. In sum, these provisions indicate that coverage determinations and definition of the terms pertinent to this case are committed to the discretion of Humana's Medical Affairs Department.

Loyola relies heavily upon Adams in making its argument for de novo review. In Adams, the relevant plan language excluded as "experimental" procedures and treatments that were "not generally acknowledged as accepted medical practice by the suitable practicing specialty in Maryland, as decided by us." Adams, 757 F.Supp. at 664, 666-67 (emphasis added). The district court in Adams determined that the language italicized above was vague and ambiguous and did not confer discretionary authority on the plan administrator. Id. at 667.

In this case, though, sufficient discretion is given in regard to major transplants alone to warrant the arbitrary and capricious standard. The statement from another portion of the policy on experimental procedures "as determined by us" is unnecessary for this determination and was not even used by Judge Leinenweber in making this call. Moreover, Adams is distinguishable. The benefit plan in Adams contained...