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The Wagner Law Group

The Wagner Law Group, A Professional Corporation, is a nationally recognized ERISA & employee benefits, estate planning, employment, labor & human resources practice. 


Established in 1996, The Wagner Law Group has 22 attorneys engaged exclusively in employee benefits, estate planning and employment law. Six of our attorneys are AV rated by Martindale-Hubbell as having very high to preeminent legal abilities and ethical standards. The firm is among the largest ERISA boutiques in the country. Our practice is national in scope, with clients in more than 40 states and several foreign countries.





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The Wagner Law Group


  Integrity | Excellence



Tel: (617) 357-5200 

Fax: (617) 357-5250 

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Boston, MA 02110

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Tel: (813) 603-2959

Fax: (813) 603-2961

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San Francisco

Tel: (415) 625-0002

Fax: (415) 358-8300

315 Montgomery Street

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San Francisco, CA 94104


St. Louis

Tel: (314) 236-0065

Fax: (314) 236-5743
100 South 4th Street, Suite 550
St. Louis, MO  63102 







February 26, 2016


 Health and Welfare Law Alert




No Discretionary Authority Without Clear and Specific Language





The U.S. Court of Appeals for the First Circuit recently confirmed that in order for a claims administrator's benefit denial to be entitled to review under the "abuse-of-discretion" standard, the plan language must unambiguously state that the claims administrator has discretionary authority to construe plan terms and determine when benefits are due. In Stephanie C. vs. Blue Cross Blue Shield of Massachusetts HMO Blue Inc., the First Circuit ruled that a federal judge had erred in using the abuse-of-discretion standard to review Blue Cross Blue Shield's ("BCBS's") benefits denial determination because the relevant plan language describing the claims administrator's decision-making authority was too vague.


NOTE: Under the deferential "abuse-of-discretion" standard, the plan administrator's decision would be upheld unless it was "arbitrary and capricious." Conversely, under the "de novo" standard, the court examines the claim without consideration of, or deference to, the claims administrator's decision.


Background. The plaintiff's son was a beneficiary in a health plan for which BCBS served as claims administrator. The subscriber certificate stated that coverage under the plan was dependent upon a determination by BCBS that treatment was medically necessary. In particular, the subscriber certificate specified that the plan would cover treatment for psychiatric illnesses, but that BCBS would approve only the least intensive type of setting required for treatment and that nonemergency inpatient treatment required approval before admission.


The plan provided that BCBS was a fiduciary with full discretionary authority and that all determinations by BCBS would be conclusive and binding unless it was shown that its determination was arbitrary and capricious.


The plaintiff - without receiving prior approval from BCBS-enrolled her son in a wilderness therapy program where he was diagnosed with Asperger's syndrome. The plaintiff subsequently submitted claims to BCBS. While BCBS agreed to cover three sets of evaluations as a "one-time exception," it denied the room-and-board claims based on its determination that the medical condition did not rise to the level required for an acute residential psychiatric stay.  


The plaintiff unsuccessfully appealed the denial of benefits internally and then sued. The lower court reviewed the benefits determination under the abuse-of-discretion standard and ruled in favor of BCBS. In turn, the plaintiff appealed the decision to the First Circuit.


First Circuit Review. After reviewing the matter, the First Circuit sided with the plaintiff, finding that the "default rule favors de novo review" unless a benefit plan gives an administrator or fiduciary discretionary authority to determine benefits eligibility.   The First Circuit noted that when such authority exists, it must be expressly stated and clearly communicated to plan participants. Only when both requirements are satisfied can an administrator's decision be reviewed under the arbitrary, capricious or abuse-of-discretion standard.


The lower court had determined that the plan's subscriber certificate sufficiently conveyed the grant of discretionary decision-making authority (to BCBS) because it stated that BCBS "decides which health care services and supplies that you receive... are medically necessary and appropriate for coverage." The First Circuit disagreed with the lower court, finding that this language merely provided that no benefits would be paid if BCBS determined they were not due.   Instead, the First Circuit ruled that clarity of language is crucial to accomplishing a grant of discretionary authority under an ERISA plan and that the BCBS certificate lacked that degree of clarity.


Outcome. Ultimately, the First Circuit held that in order for a claims administrator to be entitled to have its determinations reviewed under an abuse-of-discretion standard, the plan language must unambiguously indicate that the claims administrator has discretion to construe plan terms and determine when benefits are due. Because BCBS's language did not meet this standard, the First Circuit ruled that the lower court should have reviewed BCBS's benefit denial decision de novo. Accordingly, the First Circuit remanded the case to the lower court for reconsideration.





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