Bails v. BLUE CROSS/BLUE SHIELD OF ILLINOIS

Citations: 438 F. Supp. 2d 914; 38 Employee Benefits Cas. (BNA) 1641; 2006 U.S. Dist. LEXIS 52428; 2006 WL 1987829Docket: 04 C 4649

Court: District Court, N.D. Illinois; July 11, 2006; Federal District Court

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Patrick Bails, the plaintiff, alleges that the United Airlines Employees Welfare Benefit Plan wrongfully denied medical benefits for his two children. Blue Cross and Blue Shield of Illinois, responsible for claims administration, is also a defendant in the case. Both parties have filed for summary judgment, acknowledging that the Employee Retirement Income Security Act (ERISA) applies to the Plan, which grants the Plan Administrator discretion in benefit determinations, subject to an arbitrary and capricious review standard.

This standard permits an administrator's decision to stand if it can be reasonably explained based on evidence, aligns with the relevant plan documents, or considers pertinent factors. However, the review is not entirely deferential; courts may declare a decision arbitrary and capricious if the decision lacks a reasoned basis or if the administrator fails to engage with the claimant's submissions. The administrator must demonstrate a rational connection between the facts, the decision to be made, and the choice ultimately rendered. Importantly, while defending their decision in court, administrators cannot introduce new evidence but may expound on their original rationale.

Under arbitrary and capricious review, a plan's decision is typically evaluated based on the evidence available to the reviewing body. The case involves Patrick Bails, a participant in the United Airlines Medical and Dental Plan, and his children Michael and Emily, who are beneficiaries. The key issue is whether their speech therapy is covered under the 2003 Revision of the Medical Plan. Michael, diagnosed with autism, has received speech therapy since 1998, while Emily has faced speech problems since 18 months old and has been in therapy since age two. Prior to 2004, the Plan covered their therapy, but coverage has been denied since then, with denials upheld through administrative appeals.

Following a denial letter from Blue Cross on February 16, 2004, citing a lack of evidence for potential functional restoration, further appeals were made, including a follow-up evaluation from a treating physician. Coverage was again denied on April 8, 2004, emphasizing the unpredictable nature of Michael's progress due to his severe conditions. An additional denial on April 29, 2004, confirmed that while Michael has shown some progress, the anticipated duration of therapy (10-20 years) does not align with the plan's criteria for coverage, which stipulates that only rehabilitative services are covered, excluding educational or maintenance care. The speech therapy provided to Michael is considered cognitive training rather than rehabilitative, leading to the conclusion that it falls outside the Plan's coverage parameters.

Coverage for medical services is limited to those deemed "Medically Necessary," as determined by the Plan Administrator. Such services must be appropriate and required for diagnosing or treating a patient's condition and must be safe and effective based on accepted clinical evidence. The Medical Plan explicitly excludes "Educational" services, which do not diagnose or treat but instead aim to inform the patient or caregiver about health conditions, and "Maintenance Care," defined as treatments with no reasonable expectation of significant improvement. 

Specifically, speech therapy is not covered unless it actively treats impairments from disease, trauma, congenital anomalies, or prior therapeutic processes. Coverage is contingent upon the therapy being prescribed by a licensed physician, delivered by a qualified speech therapist, and aimed at achieving specific, measurable improvement within a predictable timeframe. 

Defendants denied benefits for Michael's speech therapy, claiming it was Educational and constituted Maintenance Care. The plaintiff argues these denials are arbitrary, asserting that Michael's therapy is treatment rather than education. The plaintiff also maintains there is evidence supporting a reasonable expectation of improvement in Michael's condition, countering the Maintenance Care claim. A letter from Michael's speech therapist indicates that the therapy integrates academic work, suggesting it is not solely educational. The defendants cited this letter and Michael's lack of a school placement as justification for classifying the therapy as Educational, which was referenced in the final administrative appeal decision.

The Educational exclusion in the medical plan applies specifically to teaching related to the beneficiary's injury or illness, not to traditional educational settings. Defendants argued that Michael's speech therapy was intended to educate him about his condition and healthful practices; however, this assertion lacks supporting evidence and was introduced late in the proceedings, raising doubts about its consideration. The denial of benefits based on the Educational services exclusion was deemed arbitrary and capricious, as it contradicts the plain language of the Medical Plan.

The coverage decision for Michael's speech therapy also involves the Maintenance Care exclusion, which assesses whether treatment is likely to improve a patient's condition. Defendants claim that Michael's required long-term speech therapy (10 to 20 years) does not meet the reasonable expectation of significant improvement, citing a physician's statement about the patient's progress. While the defendants reference policy guidelines indicating that treatment must show a likely expectation of measurable improvement in a predictable time frame, the plaintiff disputes whether the evidence justifies the conclusion that there is no reasonable expectation of improvement. Overall, the determination of coverage must align with a reasonable interpretation of the Maintenance Care exclusion.

Plaintiff argues that the reviewing psychiatrist and defendants overlook substantial evidence of Michael's improvement in treatment, particularly highlighted in reports from his treating physicians and speech therapist, Michele Ricamato. A March 15, 2001 Progress Report from Ricamato indicates significant advancements in Michael's receptive language and auditory processing, noting substantial progress in communication and play skills. A follow-up report from January 22, 2004, also documents "excellent progress" over the preceding months and outlines continued goals for improvement, despite some challenges in phonological processing and understanding.

Dr. John Hicks, who has been involved in Michael's care since early 2000, warns in a January 22, 2004 letter that reducing speech therapy services could hinder Michael's current skills and future progress, emphasizing the importance of ongoing therapy with Ricamato. Dr. Stanley Greenspan, Michael's psychiatrist, stresses the necessity of intensive speech therapy in a January 22, 2004 letter, stating that without such a program, Michael's prognosis for improvement is at risk. A March 16, 2004 Follow-Up Evaluation Report from Dr. Greenspan acknowledges Michael's gains in some areas while identifying others that require attention. It highlights Michael's ability to engage socially with warmth and pleasure but notes difficulties in sustaining two-way communication and continuous social problem-solving. Overall, the reports collectively illustrate significant progress in Michael's treatment while identifying areas for further development.

Michael is demonstrating the ability to connect ideas logically and can improve his two-way communication skills with practice involving gestures and words. He faces challenges due to auditory processing, language issues, sensory modulation difficulties, motor planning and sequencing problems, and some visual-spatial processing difficulties. Despite these challenges, he is making progress in various areas of information processing. 

Diagnostically, Michael has static encephalopathy (ICD-9 742.9), which is characterized by speech and language, motor, sensory, and affective dysfunction, stemming from unspecified causes. This condition suggests a non-progressive impairment in central nervous system functioning that can improve with appropriate interventions. Evidence indicates that children with similar conditions can show significant progress into adulthood with comprehensive intervention programs. 

Michael's prognosis for improvement is favorable, hinging on his learning curve over the coming months and years with proper support. A comprehensive program is recommended, including professional therapies, a home program, and an educational program. Without such intervention, there is a high risk of regression and loss of current capabilities. Dr. Greenspan recommends a follow-up evaluation in three to six months to assess Michael's progress. His reports indicate that significant improvements were observed in 2004 and are expected to continue. 

The Medical Plan emphasizes the need for a reasonable expectation of significant improvement rather than complete recovery. The policy specifically requires a likelihood of measurable improvement within a predictable timeframe, which aligns with the observed progress in Michael's therapy.

As of Spring 2004, medical records indicated a reasonable expectation of improvement in Michael's condition, making the denial of coverage for his speech therapy under the Maintenance Care exclusion an abuse of discretion. The denial was based on arbitrary grounds, prompting an order for defendants to provide coverage starting from February 16, 2004. In the case of Emily, defendants initially authorized $2,000 for her early 2004 speech therapy but later denied further benefits after requesting clinical information that was not received. An April 9, 2004 denial letter cited the lack of justification for the service due to absent clinical data. However, in early May, both Emily's speech therapist and pediatrician submitted supporting documentation. Dr. Forsey-Koukol asserted the medical necessity of continued therapy, stating that Emily had Apraxia of Speech and had shown the most improvement with her current therapist, Michele Ricamato. Ricamato provided a detailed account of Emily's treatment history and progress, noting significant improvements and outlining specific long-term and short-term therapeutic goals. Despite this, defendants denied further benefits, claiming the treatment was not eligible under the plan due to exclusions related to psychosocial speech delays and other specified conditions.

On May 19, 2004, a determination letter indicated that an inquiry was conducted into the cause of Emily's apraxia, revealing no diagnosis attributable to disease, trauma, or congenital anomaly. The "Case Event Summary" noted that if the etiology of the language disorder were determined to be congenital, the service would be covered. An appeal by Ricamato resulted in another denial, with a review by a BCBSIL Appeals Medical Director concluding that the submitted materials were insufficient to establish medical necessity. The denial specified the need for additional information, including detailed therapy session notes and relevant medical history. The Medical Plan defines "Medically Necessary" with specific criteria, including the necessity of services for diagnosis or treatment and the absence of less intensive alternatives. Notably, beginning in 2004, benefit payments were suspended pending a medical necessity review after reaching $2,000 in claims for speech therapy. The plaintiff argues that the denial was arbitrary, claiming that the documentation already provided should suffice, while defendants counter that they required further evidence to assess whether the apraxia fell under coverage exclusions related to its etiology.

The review of coverage for speech therapy initiated as a medical necessity assessment also evaluated whether the therapy was related to a condition within the Medical Plan's coverage. The initial decision on May 19 denied coverage due to exclusions for treatment of psychosocial speech delay and related issues. However, the July 19 determination cited insufficient proof of medical necessity and requested further evidence regarding the conditions leading to "speech apraxia or speech delay." The defendants argue that coverage is excluded under section 8.1(a)(21) of the Medical Plan, which only covers speech therapy for impairments caused by disease, trauma, congenital anomalies, or previous therapeutic processes.

The speech therapist's report indicated no injuries but raised the possibility of a congenital anomaly, for which no supporting medical evidence was presented. The only remaining potential cause is disease, and while it is acknowledged that Emily has apraxia, the term "disease" is not defined in the Medical Plan but generally refers to impairments affecting vital functions. In contrast, "disorder" indicates an abnormal physical or mental condition. The Claims Administrator has the right to request adequate documentation, which the existing medical records failed to adequately address regarding the causes of Emily's apraxia. Thus, the inquiry into the apraxia's origin was reasonable, as it aligns with the defendants' focus on establishing the cause to determine coverage eligibility.

The exclusion in the Medical Plan pertains specifically to "speech impairment" resulting from a disease. The administrative determinations and defendants’ arguments do not clarify what constitutes a disease within the Medical Plan. It is acknowledged that Emily has apraxia; if apraxia qualifies as a disease under the exclusion, then her speech impairment is attributable to it. Since the Claims Administrator did not address this aspect, the denial of benefits cannot be sustained based on the rationale that the speech impairment was not disease-related.

Defendants assert that coverage was rightly discontinued due to the potential application of a developmental delay exclusion, arguing that neither the plaintiff nor the healthcare providers provided sufficient documentation to assess whether Emily's speech impairment was a developmental delay. The relevant exclusion states that payment will not be made for speech therapy if it does not treat a speech impairment resulting from disease, trauma, congenital anomaly, or prior therapeutic process, or if it addresses conditions such as developmental delays or is unlikely to significantly improve the condition.

The language of the exclusion is problematic; specifically, the wording is convoluted and creates ambiguity regarding the relationship between phrases. The syntax suggests that the clause concerning developmental delays may inadvertently modify "swallowing disorder," despite the grammatical inconsistency with singular and plural forms. If developmental delays do not modify swallowing disorders, the exclusion would imply a blanket denial for all swallowing disorder speech therapy, contradicting the Medical Policy Guidelines, which allow coverage for such therapies if they stem from disease, trauma, congenital anomalies, or prior therapeutic intervention. Thus, to reconcile the exclusion with the Policy Guidelines, it is concluded that developmental delays modify swallowing disorders, indicating that the exclusion applies specifically to swallowing disorders caused by developmental delays.

Developmental delays do not automatically exclude speech therapy related to swallowing disorders under subsection (21). Under ERISA, the contra proferentem rule does not apply when a plan administrator has discretion to interpret plan language. The Policy Guidelines clarify ambiguities in subsection 8.1(A)(21), and the Claims Administrator must adhere to these guidelines. The May 19 determination incorrectly excluded speech therapy for various diagnoses without reference to subsection 8.1(A)(21). The July 19 denial was based on a claimed lack of medical necessity rather than a developmental delay exclusion. The suggestion to submit further medical information does not imply that therapy for speech delays is excluded or require proving that the delay is unrelated to a developmental delay. Denying coverage based on a developmental delay exclusion would therefore constitute an abuse of discretion. The Claims Administrator also failed to consider whether Emily's apraxia constituted a "disease" under the Medical Plan. Consequently, Emily's coverage must be reinstated effective March 1, 2004, without remand for reconsideration. The court has dismissed minor plaintiffs Michael and Emily Bails from the case without prejudice, denied defendants' motion for summary judgment, and granted plaintiffs' motion for summary judgment.

Judgment is entered in favor of Patrick Bails, reinstating speech therapy benefits for his children, Michael and Emily Bails, effective February 16, 2004, and March 1, 2004, respectively. As minors, Michael and Emily cannot sue independently; their claims are brought by their father as their guardian. They will be dismissed from the action without prejudice, as Patrick can represent all claims as the plan participant.

Blue Cross's Medical Policy defines apraxia as a disorder from cortical damage that affects voluntary motor control without associated weakness. The denial of speech therapy benefits on April 29, 2004, stated that the therapy was not rehabilitative, as it did not restore a lost capacity. Defendants cited the Medical Plan's exclusion for speech therapy relating to swallowing disorders and non-restorative conditions like developmental delay, but they only contested the coverage based on educational and maintenance care exclusions, not on the non-restorative language. There is no dispute that Michael's communication impairment is due to disease or congenital anomalies. Since the defendants did not argue that Michael's condition is non-restorative, that point does not need further consideration.