Second Circuit Applies Stricter Rules for a Plan Administrator's Noncompliance with Benefit Claims Regulations

Summary

The US Court of Appeals for the Second Circuit's recent ruling addresses various issues that could arise during a plan administrator's review of a participant's benefit claim and appeal and any ensuing litigation, including the deference to be granted upon review in a federal court, civil penalties and the possibility of introducing additional evidence outside the administrative record. This decision demonstrates the need for employers to review their benefit plans' claims procedures to ensure they comply with applicable law and best practices.

In Depth

On April 12, 2016, the US Court of Appeals for the Second Circuit in Halo v. Yale Health Plan, 2016 WL 1426291 (2d Cir. Apr. 12, 2016), addressed various issues that could arise during a plan administrator's review of a participant's benefit claim, appeal and any ensuing litigation. The Second Circuit held that, under the Employee Retirement Income Security Act of 1974, as amended (ERISA):

When denying a claim for benefits, a plan administrator's failure to comply with the US Department of Labor's (DOL) claims procedure regulations in 29 C.F.R. § 2560.503‐1 will result in the plan administrator's claim determination receiving no deference on review in federal court, unless the plan's claims procedures fully conform to regulatory requirements and the plan administrator can establish that any failure was inadvertent and harmless; Civil penalties are not available to a plan participant or beneficiary for a plan administrator's failure to comply with the claims procedure regulations; and A plan administrator's failure to comply with the DOL's claims procedure regulations could warrant the introduction of additional evidence outside the administrative record if the claim determination is challenged in litigation. Background

In Halo, the plaintiff was a college student who was insured under the university's health plan. The plaintiff underwent eye surgery with doctors who were outside of the plan's network. The university's health plan stated that treatment with an out-of-network provider was covered under the plan only if it constituted an emergency or if the plan preauthorized the treatment.

Because the participant's surgery did not meet the plan's coverage requirements for out-of-network treatment, the plan administrator denied the plaintiff's claim for coverage. In her subsequent lawsuit, the plaintiff alleged that the plan and the plan administrator violated the DOL's claims procedure...