James L. Moss (Plan Participant) v. Unum Group; Paul Revere Life Insurance Company; New York Life Insurance Company
Date Filed 02-03-2016
We know what you’re thinking. “What does Exhaustion of the Administrative Remedies Requirement mean and if it isn’t mentioned in any ERISA/PPACA statutes then why does it matter to me?” Well, it matters to you because, although it isn’t explicitly mentioned in ERISA/PPACA statutes, it is still explicitly mentioned by judges around the country. It’s what we call “case law,” and it is just as important as laws, such as ERISA/PPACA that are mandated by statutes.
Before we discuss “exhaustion” of administrative remedies, it will help to explain what an “administrative remedy” is. For the sake of brevity, we won’t list all “administrative remedies,” but we will list one very important one: submitting an appeal of an adverse benefit determination. While submitting such an appeal may seem very straightforward, in practice it is much more difficult than it seems—as the current case of this month’s post, Moss v. Unum, will later show.
“Exhaustion” of the administrative remedies requirement finds support in public policy considerations. Namely, “the reduction of frivolous litigation, the promotion of consistent treatment of claims, the provision of a nonadversarial method of claims settlement, the minimization of costs of claim settlement and a proper reliance on administrative expertise.” Diaz v. United Agric. Emp. Welfare Benefit Plan & Trust, 50 F.3d 1478, 1483 (9th Cir. 1995); see also Denton v. First Nat’l Bank, 765 F.2d 1295, 1300-01 (5th Cir. 1985) (“exhaustion ‘is necessary to keep from turning every ERISA action, literally, into a federal case’ by preventing ‘premature judicial intervention in [the plan administrators’] decision-making process’”) (citation omitted); Taylor v. Bakery & Confectionary Union & Indus. Int’l Welfare Fund, 455 F.Supp. 816, 820 (E.D.N.C. 1978) (“If claimants were allowed to litigate the validity of their claims before a final decision [by the plan administrator] was rendered, the costs of dispute settlement would increase markedly for employers. Employees would also suffer financially because, rather than utilize a simple procedure which allows them to deal directly with their employer, they would have to employ an attorney and bear the costs of adversary litigation in the courts.”).
From the perspective of many federal courts, exhaustion of a plan’s remedies (such as submitting “proper” appeals) prior to filing a lawsuit is desirable because it “may render subsequent judicial review unnecessary… because a plan’s own remedial procedures will resolve many claims.” Commc’ns Workers v. AT&T Co., 40 F.3d 426, 432 (D.C. Cir. 1994). As a result, in many instances, if a provider does not exhaust his/her plan’s available remedies prior to filing a lawsuit, his/her claim might be barred. Watts v. BellSouth Telecomm., Inc., 316 F.3d 1203, 1206 (11th Cir. 2003); see also Springer v. Wal–Mart Assocs. Group Health Plan, 908 F.2d 897, 900 (11th Cir. 1990) (recognizing “the right to seek federal court review matures only after [the exhaustion] requirement has been appropriately satisfied or otherwise excused”).
Now, before you start to sulk at the thought another administrative milestone that must be passed, it’s important to realize that not every case will require a claimant to “exhaust” his/her administrative remedies requirement prior to filing a lawsuit. There are exceptions to the Exhaustion Requirement. These exceptions include: 1) Futility; 2) Lack of Meaningful Access; and 3) the Unreasonable Procedures/”Deemed Exhausted” Exception.
Discussing all of the exceptions would require more space than this post would allow so, again for the sake of brevity we, with the help of Moss, will show you one of these exceptions in action: the Futility Exception.
The Futility Exception to the Exhaustion Requirement is an exception that health care providers frequently resort to in response to an insurance company’s claim that they have failed to exhaust their patient’s plan’s remedies. Courts have said that the Futility Exception is present when resorting to a plan’s remedies would be “clearly useless.” Commc’ns Workers, 40 F.3d at 432 (internal quotations and citation omitted). Other courts have set higher bars to establish the Futility Exception and have held that, to show that the Futility Exception is present, a healthcare provider must show that “it is certain that [her/his patient’s] claim [for reimbursement/payment] will be denied on appeal, not merely that [he/she] doubts that an appeal will result in a different decision.” Lindemann v. Mobil Oil Corp.,79 F.3d 647, 650 (7th Cir. 1996) (citation omitted); Commc’ns Workers, 40 F.3d at 432 (explaining that “[t]he futility exception is… quite restricted” and “to come under the futility exception, [plaintiffs] must show that it is certain that their claim will be denied on appeal, not merely that they doubt an appeal will result in a different decision.”) (citation and internal quotations omitted); Davenport v. Harry N. Abrams, Inc., 249 F.3d 130, 133-34 (2d Cir. 2001) (a claimant must make a “clear and positive showing” of futility to come within the exception).
Despite such differing views and seemingly unclear guidance, there are still some clear examples through which healthcare providers have shown, and can show, Futility. Such examples include: (1) Situations in which a plan’s appeal procedures directed the claimant to submit her claim to the same person who initially investigated and subsequently directed the benefit retraction (Luppino v. Sedgwick Claims Mgmt. Serv., Inc., No. CIV A 08-CV-5315 (DMC-MF), 2010 WL 1999316, at *6 (D.N.J. May 19, 2010)); (2) Situations in which a committee reviewing a claimant’s claims did not have the power to remedy claimant’s perceived harm (Bacon v. Stiefel Labs., Inc., 677 F.Supp.2d 1331, 1340 (S.D. Fla. 2010)); (3) Situations in which, following an initial adverse benefit determination, the plan administrator refused to provide backup and supporting documentation relating to such decision and failed to provide further instruction relating to filing an additional appeal other than referring the claimant to the plan administrator’s customer service department’s 800 number (In re Managed Care Litig., 595 F.Supp.2d 1349, 1353-54 (S.D. Fla. 2009))and; (4) Situations in which, on four separate occasions, a claimant directed inquiries to his employer seeking review of an adverse benefits determination, the employer failed to inform the claimant of his appeal rights at any time and the employer did not respond to the claimant’s counsel’s letter requesting review of the decision (Ludwig v. NYNEX Service Co., 838 F.Supp. 769, 782 (S.D.N.Y. 1993)).
There are, unfortunately, also clear examples through which claimants have not been able to show Futility. See Bickley v. Caremark RX, Inc., 461 F.3d 1325, 1328 (11th Cir.2006) (per curiam) (rejecting futility argument as speculative because participant had not attempted to pursue administrative remedies and explaining that “bare allegations of futility are no substitute for the ‘clear and positive’ showing of futility required before suspending the exhaustion requirement.”).
Moss, the subject of this post, is an unfortunate example of the latter. In Moss, the claimant (Moss) submitted a claim for reimbursement of his medical expenses to his employer (Unum). His claim was denied. The denial letter indicated that Moss needed to submit a written appeal within 180 days of the denial if Moss wished to contest the decision. Instead of submitting a written appeal, however, Moss, through his attorney, merely submitted an oral disagreement. In response to such oral disagreement, Unum sent Moss another letter indicating that Moss needed to submit a written appeal within 180 days of the denial if Moss wished to contest the decision. Instead of submitting a written appeal, however, Moss filed a complaint against Unum in a federal district court. The complaint stated that Moss should be excused from exhausting his administrative remedies because attempting to do so would be “futile” since Unum’s decision was made in “bad faith.” To Moss’ surprise, the district court dismissed Moss’ complaint. Desperate, Moss then submitted a written appeal to Unum. However, because 180 days had passed since Moss’ denial, Unum refused to review its decision. Frustrated, Moss submitted an appeal of the district court’s decision to the United States Court of Appeals for the Fifth Circuit. The Fifth Circuit upheld the district court’s decision. The Circuit Court ruled that merely alleging bad faith or futility is not enough to excuse Moss from his requirement to exhaust his administrative remedies and that merely alleging futility was exactly what Moss did.
We all know that dealing with insurance companies can be very difficult and frustrating. We understand the roadblocks that you’ve faced when dealing with them not only because we have been unfortunate enough to face those roadblocks ourselves, but because we have been fortunate enough to determine methods by which to overcome them as well. Don’t become another Moss. Call us, and together let us help you surmount the obstacles that insurance companies have been placing in front of you.