HIPAA and the HITECH Act: Increased Regulatory Enforcement Leads to Major Civil Monetary Penalties for Privacy Violations
Healthcare Law Newsletter
The Ninth Circuit Court of Appeals in Salomaa v. Honda Long Term Disability Plan, Case No. 08-55426, addressed how district courts should analyze whether a claim administrator abused its discretion in making a determination regarding a long-term disability claim. In so doing, it has created more confusion than clarity.
Plaintiff Samuel Salomaa made a claim for long-term disability benefits to CIGNA, the claim administrator and insurer of the Honda Long Term Disability Plan, an employee welfare benefit plan established by Salomaa's employer. Salomaa asserted that he could no longer work due to symptoms that his doctors diagnosed as chronic fatigue syndrome. CIGNA denied Salomaa's claim. He appealed, and CIGNA upheld the initial determination. Salomaa brought suit in the Central District of California, which ordered judgment in favor of the plan. Salomaa appealed.
In a split decision authored by Judge Andrew J. Kleinfeld, the Ninth Circuit reversed, ordering that Salomaa be awarded long-term disability benefits. The majority stated that it was following established case law regarding the tests for abuse of discretion, including the Supreme Court's holding in Conkright v. Frommert, 130 S.Ct. 1640, 1644 (2010), under which a discretionary claim determination will not be reversed by a reviewing court so long as it was "reasonable." In fact, however, the majority's reversal is based upon the claim administrator's failure to take steps that existing case law did not require, and which, according to the dissent, are inconsistent with both Supreme Court and existing Ninth Circuit authority.
Salomaa acknowledged that under Conkright, "[w]e now know that the administrator's decision cannot be disturbed if it is reasonable." But citing a non-ERISA case, United States v. Hinkson, 585 F.3d 1247 (9th Cir. 2009) (en banc), the majority concluded that the test for a finding of abuse of discretion is a factual determination, where the issue is "whether 'we are left with a definite and firm conviction that a mistake has been committed,' ... [and] [t]o do so, we consider whether application of a correct legal standard was '(1) illogical, (2) implausible, or (3) without support in inferences that may be drawn from the facts in the record.'"
In applying this set of principles, however, the Salomaa majority assumed that it was unreasonable (and therefore an abuse of discretion) for the claim administrator to reject a treating physician's opinion of disability without first having the claimant personally examined – contrary to (as the dissent pointed out) Supreme Court authority. See, e.g., Black & Decker Disability Plan v. Nord, 538 U.S. 822 (2003). The majority also concluded that it was an abuse of discretion for the claim administrator to make its decision without first providing the claimant with a report obtained from a reviewing physician consultant – despite contrary Ninth Circuit authority. See, e.g., Silver v. Executive Car Leasing Long-Term Disability Plan, 466 F.3d 727, 732 (9th Cir. 2006); see also Leon v. Quintiles Transnational Corp., 2008 WL 4927361, *1 (9th Cir. 2008).
According to the Salomaa majority, a failure to have a claimant personally examined indicates bias, since the majority presumes (although the dissent disputes) that an administrator that decides not to have a claimant examined does so because of "the risk that the physicians it employs may conclude that the claimant is entitled to benefits." The majority does not explain how such a perceived risk would be created by a personal examination, but not by a record review.
The majority's view that there was an abuse of discretion – and a failure to provide a full and fair review due to the fact that a reviewing physician's report during the appeal process was not provided to the claimant before a final decision – was based upon Abram v. Cargill, Inc., 395 F.3d 882 (8th Cir. 2005). Abram had held that ERISA regulations (as they existed prior to 2002) required that a claimant be provided with a physician's report before the final benefit determination. The Eighth Circuit, however, later held that for claims subsequent to January 1, 2002, the rule is otherwise. Thus, where, as in Salomaa, a claim is subject to the regulations that took effect in 2002, a claim administrator is not required to disclose a report obtained during the appeal investigation, prior to the final claim determination. To so require, the Eighth Circuit explained, would "set up an unnecessary cycle of submission, review, re-submission, and re-review ... [which] would undoubtedly prolong the appeal process, which, under the regulations, should normally be completed within 45 days." Midgett, supra, 561 F.3d at 897, quoting Metzger v. UNUM Life Ins. Co. of Am., 476 F.3d 1161, 1166 (10th Cir. 2007), and citing 29 C.F.R. § 2560.503-1(i)(3)(i). This is the rule that was established by the Ninth Circuit itself, in Silver, supra.
Finally, the Salomaa majority elevates a Social Security Administration award of disability benefits to the level of "evidence" of disability "of sufficient significance that failure to address [the fact of an award] offers support that the plan administrator's denial was arbitrary, an abuse of discretion. Weighty evidence may ultimately be unpersuasive, but it cannot be ignored."