Wilson v. Group Hospitalization

• Decision Date: 04 May 1992
• Docket Number: Civ. A. No. 92-0859 (HHG).
• Citation: 791 F. Supp. 309
• Parties: Deborah Ann WILSON, Plaintiff, v. GROUP HOSPITALIZATION AND MEDICAL SERVICES, INC., t/a Blue Cross and Blue Shield of the National Capital Area, Defendant.
• Court: U.S. District Court — District of Columbia

791 F. Supp. 309

Deborah Ann WILSON, Plaintiff, v. GROUP HOSPITALIZATION AND MEDICAL SERVICES, INC., t/a Blue Cross and Blue Shield of the National Capital Area, Defendant.

Civ. A. No. 92-0859 (HHG).

United States District Court, District of Columbia.

May 4, 1992.

Anthony Wilson, Landover, Md., Victor E. Long, Washington, D.C., for plaintiff.

Charles J. Steele, Mary Atchley Jester, Foley & Lardner, Washington, D.C., for defendant.

OPINION

HAROLD H. GREENE, District Judge.

In this case plaintiff, a victim of advanced breast cancer, seeks a preliminary injunction to enjoin defendant, her group health insurance carrier under an ERISA program, 29 U.S.C. § 1001 et seq., from refusing to pay for the only treatment that may abate her cancer and save her life. At issue is an amendment to the insurance plan by the insurer that it claims to have eliminated from coverage autologous bone marrow transplants. The Court concludes that notice of the amendment was insufficient, and that the amended plan does not exclude the treatment in question. The motion for a preliminary injunction will be granted.

I Facts

Plaintiff Deborah Wilson is a thirty-seven year old woman who suffers from advanced breast cancer. Plaintiff's employer, International Life Sciences Institute/Nutrition Foundation (ILSINF), entered into a benefits plan for its employees with defendant Group Hospitalization and Medical Services, Inc., also known as Blue Cross/ Blue Shield of the National Capital Area (hereinafter Blue Cross). The plan is governed by ERISA. 29 U.S.C. § 1132(a)(3). Plaintiff has applied for coverage from Blue Cross for the needed chemotherapy-bone marrow transplant, but the application was denied¹ on the basis of an amendment to the benefits contract adopted on November 30, 1991.

Plaintiff was scheduled to undergo her chemotherapy treatment beginning 6:30 a.m. on April 14, 1992 at the Johns Hopkins Hospital in Baltimore, Maryland. Johns Hopkins refused to treat her unless there was a guarantee or certification of payment by plaintiff herself or by her insurance carrier. Plaintiff personally could not guarantee payment, and her insurance carrier Blue Cross refused to certify that it would pay, relying on the November 30, 1991 amendment to the health plan.

On April 13, 1992 this Court issued a temporary restraining order enjoining Blue Cross from refusing to certify that it would cover the costs of plaintiff's treatment under the plan. With TRO in hand, plaintiff was admitted as scheduled and began to receive the needed treatment. By agreement of the parties, the temporary restraining order was extended until today, May 4, 1992. Following the filing of briefs, a hearing on the motion for a preliminary injunction was held on May 1, 1992.

The procedure at issue is known as high dose chemotherapy with autologous bone marrow transplant. In this procedure, bone marrow is extracted from the patient's body and purified of cancer cells. Meanwhile, the patient is treated to extraordinarily high doses of chemotherapy that would destroy her bone marrow and kill her if the marrow were not removed. With the bone marrow removed, the higher doses of chemotherapy are better able to treat — that is, kill — the cancer cells than the lower levels used ordinarily. After the chemotherapy, the bone marrow is returned to the body.

Ms. Wilson received four days of the chemotherapy treatment. Six days later her bone marrow was returned to her body. With the chemotherapy itself completed, Ms. Wilson remains in Johns Hopkins Hospital for another five to six weeks. She is currently receiving blood stimulants and medication to guard against infections while her immune system is particularly vulnerable.

The Court must weigh four factors in considering a motion for a preliminary injunction: (1) the likelihood that plaintiff will succeed on the merits; (2) the threat of irreparable harm to plaintiff if the injunction is not granted; (3) the possibility that defendant and others will suffer substantial harm in the event that injunctive relief is granted; and (4) the interest of the public. Population Institute v. McPherson, 797 F.2d 1062, 1078 (D.C.Cir.1986); Washington Metropolitan Area Transit Commission v. Holiday Tours, Inc., 559 F.2d 841, 843 (D.C.Cir.1977).

II Sufficiency of Notice

It is undisputed that under ERISA insurance benefits may be amended, added, or deleted. See, e.g., Young v. Standard Oil (Indiana) and Amoco Oil Co., 849 F.2d 1039 (7th Cir.1988); Moore v. Reynolds Metals Co. Retirement Program for Salaried Employees, 740 F.2d 454, 456 (6th Cir.1984). But notice of changes must be given in a timely and understandable manner. The issue is whether notice of the amendment to the plan satisfied the requirements of ERISA.

In the recent past, Blue Cross, along with a host of other insurance carriers, refused to cover the costs of the bone marrow treatment, claiming that it was excluded as an "experimental" or "investigative" treatment under the terms of its plan. Employees denied coverage, however, began to litigate whether the treatment was experimental, and they met with increasing success. See, e.g., Pirozzi v. Blue Cross/Blue Shield of Virginia, 741 F.Supp. 586, 591 (E.D.Va.1990). Blue Cross has acknowledged both in its papers and at the hearing on the preliminary injunction that it was because it could no longer exclude coverage of the treatment as "experimental," that it sought to amend the plan directly to achieve the exclusion. That amendment is the focus of this case.

As noted, under ERISA the insurance carrier has the contractual power to change the terms of the insurance policy. Notice of such a change must be made available to the employer who is the sponsor of the ERISA benefits plan, so that it may decide whether to continue under the carrier's terms or to seek a new and different plan with another carrier. Thus, timely and effective notice of any change is critical.

Blue Cross purports to have notified plaintiff's employer, ILSINF,² of the amendment at issue by a letter dated November 30, 1991. However, the timeliness and effectiveness of Blue Cross' notice to the employer are in serious doubt.

It appears that ILSINF did receive notice of the amendment on January 4, 1992. However, that notice, four days after the effective date of the amendment, appears to be insufficient.³ Blue Cross asserts that it sent notice to the employer on November 27, 1991, but there is no record evidence to support that claim that notice was sent on that date. Indeed, plaintiff argues with some persuasiveness that it is unlikely that the November 30, 1991 amendment was mailed three days before it ostensibly existed.⁴

More important, the substance of the notice is also unsatisfactory. Blue Cross asserts that the chemotherapy-bone marrow treatment at issue here is excluded by virtue of a plan change described under the heading "organ transplants." The notice states that

services or supplies for or related to transplant procedures, including human organ transplants, are not covered, except for the following procedures:

. . . . .

Autologous bone marrow for:

-Non-Hodgkin's lymphoma, Stage III A or B, or Stage IV A or B;

-Hodgkin's lymphoma Stage III A or B, or Stage IV A or B;

-Neuroblastoma, Stage III or Stage IV -Acute lymphocytic leukemia following first or second relapse;

-Acute non-lymphocytic leukemia following first or second relapse.

As discussed in greater detail in Section IV, infra, it is not at all apparent that high dose chemotherapy is excluded from coverage simply because bone marrow transplantation is a necessary incident to the procedure. The plan does and continues to cover chemotherapy for breast cancer. The Blue Cross letter did not effectively give notice to the employer that an employee beneficiary undergoing chemotherapy treatment would be denied coverage simply because related bone marrow removal and transplantation is also necessary.

The ineffectiveness of the notice is most clearly evidenced by Blue Cross' ultimate amendment. That amendment, which took effect on January 1, 1992, clearly states that high dose chemotherapy treatment is excluded "when supported by transplant procedures." Blue Cross/Blue Shield 1992 Service Benefit Plan Brochure for the Federal Employee Program. The difference between the explicitness of the notice and the actual amendment underscores that the employer was not effectively advised of Blue Cross' prospective change.

Blue Cross' own citations emphasize the importance of the employer's decision in what benefits are to be conferred under its ERISA program. See, e.g., Nazay v. Miller, 949 F.2d 1323, 1328 (3d Cir.1991); Moore v. Reynolds Metals Co. Retirement Program for Salaried Employees, 740 F.2d 454, 456 (6th Cir.1984). Thus, where notice to the employer is not timely or effective, ERISA is violated because the employer is not able to make a voluntary and informed choice as to its benefits program.

III Defendant's Fiduciary Duty and Conflict of Interest

Under ERISA the employer administers the benefits plan and, in the case of health insurance, adjudicates claims for coverage under the plan. The employer's role in that capacity is that of a fiduciary. See 29 U.S.C. § 1104. However, frequently the employer delegates responsibility for adjudication of claims to the insurance carrier, as indeed was the case here. With its assumption of the role of a claims adjudicator, the carrier also assumes the employer's role as fiduciary. See Brown v. Blue Cross & Blue Shield of Alabama, 898 F.2d 1556, 1561 (11th Cir.1990).

The insurance carrier which both issues a policy and administers it occupies dual roles that create an inherent conflict of interest. See id. In its fiduciary role, the insurance company interprets the plan, determining what expenses are covered. This fiduciary, however, is the same company that will ultimately pay for those expenses from its own coffers. Thus, the insurance...