HMO Found Liable for Coverage Information Gap

June 30, 2010 (PLANSPONSOR.com) – A benefit plan fiduciary violated its responsibilities under the Employee Retirement Income Security Act (ERISA) by not warning members contacting its call center that they could not rely on coverage determinations by customer service representatives. 

That was a key finding by a federal appellate court in a suit filed by an employee of a Wisconsin library equipment distributor who challenged a benefits denial by her health maintenance organization (HMO) that left her facing a $77,974 medical bill for the costs of surgery to correct complications of an earlier stomach-stapling procedure and two hospital stays.  

The 7^th U.S. Circuit Court of Appeals threw out a ruling by U.S. District Judge Barbara B. Crabb of the United States District Court for the Western District of Wisconsin that was in favor of the HMO, Dean Health Plan, with instructions to further consider plaintiff Deborah Kenseth’s claims.  

Circuit Judge Ilana Diamond Rovner, writing for the appellate court, declared that Dean was open to ERISA liability by not only providing plan members with explanatory documents that were murky to lay people, but by suggesting members considering a medical procedure contact its customer service representatives without warning them they could not rely on the Dean representatives’ information about whether the procedure being considered was covered under the plan.   

“The facts support a finding that Dean breached its fiduciary duty to Kenseth by providing her with a summary of her insurance benefits that was less than clear as to coverage for her surgery, by inviting her to call its customer service representative with questions about coverage but failing to inform her that whatever the customer service representative told her did not bind Dean, and by failing to advise her what alternative channel she could pursue in order to obtain a definitive determination of coverage in advance of her surgery,” Rovner asserted.