Federal Court Fines Premera Blue Cross $123,000 For Plan Disclosure Violation | The Kennedy Forum

Federal Court Fines Premera Blue Cross $123,000 For Plan Disclosure Violation
February 10, 2022

Last December, Congress clarified key disclosure requirements for patients regarding covered benefits under their health plan. Under the Consolidated Appropriations Act of 2021, which amended and reinforced the rights included in the Mental Health Parity and Addiction Equity Act of 2008 (the Federal Parity Law), patients and their authorized representatives have the right to gain reasonable access to and copies of all documents, records, and other related information pertaining to any denial of coverage (along with other key plan information) at no charge. In addition, covered plans must provide key information documenting their parity compliance for mental health coverage. It should be noted that these disclosure rights have been available for some time under the Employee Retirement Income Security Act of 1974 (ERISA).

These individual rights were recently put to the test when Federal District Court Judge Robert Shelby fined Premera Blue Cross $123,100 in statutory penalties, plus reasonable attorney fees, for violating the disclosure requirements associated with ERISA and the Federal Parity Law.[i] Shelby’s fine was largely tied to the Defendants three-year delay in turning over key documents to the Plaintiffs. This is the first instance of a judge leveraging ERISA’s statutory fines for failure to disclose key documents related to a parity-driven legal action.

In this case, the parents of a minor sued Premera; the third-party administrator (TPA); and the self-funded health plan, Microsoft, for improper denial of benefits[ii], violations of the Federal Parity Law[iii], and statutory penalties under ERISA.[iv] Premera denied insurance coverage for residential treatment care (RTC) for the Plaintiffs’ son, who was diagnosed with oppositional defiant disorder, autism spectrum disorder, pervasive developmental disorder, and anxiety. The Plaintiff’s son’s suicide threats and increasing violent behavior, which sometimes required local police assistance, led them to seek continued treatment for him at a behavioral health RTC program. Premera denied insurance coverage based on its conclusion that the care was not medically necessary and that his condition did not meet the InterQual Criteria for RTC placement. The TPA’s rationale was in contrast to the family’s and several treating providers’ opinions who believed the recommended treatment at the RTC facility represented a warranted level of care. Frustrated after failing to get the denial overturned through the appeals process, the family sued Premera and Microsoft with the help of their attorney, Brian King. 

Although Judge Shelby dismissed the ERISA recovery of benefits claim, he denied the Defendant’s motion to dismiss the ERISA parity claim and subsequently fined the Defendants. One of the main issues that led to the fines was Premera’s failure to disclose key plan documents including the plan’s administrative service agreement (ASA). Judge Shelby noted in his ruling that “(t)he length of delay and number of requests…support the imposition of significant statutory penalties,” adding that “the set of documents requested by the family was discrete and important to their rights under ERISA.” In addition to failing to turn over the ASA, the plan was not forthcoming about the InterQual Criteria used to make its denials, information that would have “put the Family in a position to make informed decisions about how best to protect their rights.” 

Ultimately, Judge Shelby penalized the Defendants for not disclosing key information about the plan which would have allowed the Plaintiffs to assert their rights. He noted “if the administrator fails to provide the participant with information with the scope of the ERISA disclosure provision after 30 days from the request, the plan administrator may in the court’s discretion be personally liable to such participant or beneficiary in the amount up to $100 a day from the date of such failure or referral and the court may in its discretion order such other relieve as it deems proper…The court concludes that Defendants failed to satisfy their disclosure obligation and in doing so interfered with the family’s ability to under and protect their rights.”[v] Because the Defendants’ delay totaled 1231 days, the fine was calculated to $123,100 plus attorney fees. 

The Kennedy Forum is one of several advocacy organizations trying to showcase the right of consumers to get more information about a health plan’s parity compliance activities within 30 days of a parity request. This case reinforces that right. See www.paritytrack.org, www.parityregistry.org, and www.dontdenyme.org to learn more about your rights under the Federal Parity Law and applicable state laws. 

[i] M. S. v. Premera Blue Cross, U.S. Dist. Ct. for the Dist. of Utah, August 10, 2021 (Case No.: 2:19-cv-00199-RJS-CMR). 
[ii] ERISA recovery of benefits claim 29 USC § 1132(a)(1)(B).
[iii] ERISA parity claim 29 USC §1132(a)(1). 
[iv] ERISA penalty provision 29 USC § 1132(i) and CFR § 2575.502c-1.
[v] The daily fine has been raised by the U.S. Department of Labor to $110 per day.