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Denial of Child's Insurance Coverage Case Remanded by 1st Circuit

The First Circuit reversed and remanded a lower court decision that favored a health insurance company that denied specialized psychiatric coverage for a child Asperger's. In many ways the decision was one based less on deep matters of psychiatry and more on the proper application of legal procedure.

The case implicated ERISA, the Employee Retirement Income Security Act of 1974. Although, the circuit stopped short and decided the case based mostly on procedure rather than on substantive issues.

Health Insurance and M.G.'s Problems

The case arose out a dispute between the mother of a child with behavioral problems and the Blue Cross Blue Shield ("BCBS") and their denial of coverage. The child, M. G., had behavioral problems from a very young age and was under a judicial order to take medications because he would attack his parents and physically threaten them. His mother brought M.G. to a facility in Utah that specialized in educating children with mental illnesses. His caretakers eventually diagnosed him with Asperger's, anxiety problems, and ADHD.

The problem was that M.G.'s father's insurance only covered the "least intensive" types of coverage. BCBS's hired psychiatrist reasonably determined that M.G.'s treatment at the facility and his further stay went beyond this "least intensive" cap. BCBS denied coverage, obviously.

Procedure for Denial of Coverage Suits Under ERISA

Under federal labor law (Title 29, sec. 1132), appellate procedure is clearly defined for ERISA case. The district applied a "arbitrary and capricious" review of the companies decision and found that BCBS did not abuse its discretion in making its decision in denying M.G. coverage under ERISA law. This is not surprising because that standard or review is essentially the appellate review equivalent of "rational basis review" -- meaning notoriously high standards of overturning a decision.

However, the circuit reviewed the contract that governed the BCBS policy and found that the language contained within did not retain authority in BCBS any discretionary authority. Thus, the more typical de novo standard should have applied because "the default rule favors de novo review." Firestone Tire & Rubber Co. v. Bruch. In that instacce, the judge should have formed her own opinion not based on the opinion of the lower court.

Remand, of course, does not guarantee a win for M.G., but at least it guarantees a chance. The issue of discretionary power by health insurance companies will continue to be an area of future contentious legal battles.

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