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Stephanie C. v. Blue Cross Blue Shield of Massachusetts Hmo Blue, Inc.

United States Court of Appeals, First Circuit

February 17, 2016

STEPHANIE C., Individually and as Guardian of M.G., Plaintiff, Appellant,


Brian S. King, with whom Law Firm of Brian S. King and Jonathan M. Feigenbaum were on brief, for appellant.

Joseph D. Halpern, with whom Law Office of Joseph Halpern and Donald J. Savery were on brief, for appellee.

Before Lynch, Selya and Kayatta, Circuit Judges.


SELYA, Circuit Judge.

In this benefits-denial case, brought pursuant to the Employee Retirement Income Security Act of 1974 (ERISA), codified in relevant part at 29 U.S.C. § § 1001-1461, Stephanie C. (Stephanie), individually and on behalf of her minor son M.G., challenges a decision of the claims administrator, Blue Cross Blue Shield of Massachusetts HMO Blue, Inc. (BCBS), partially denying her claim for benefits. The denial related to some charges incurred during M.G.'s stay at a residential/educational mental healthcare facility. The district court upheld the partial denial. See Stephanie C. v. Blue Cross Blue Shield of Mass. HMO Blue, Inc., No. 13-13250, 2015 WL 1443012, at *12 (D. Mass. Mar. 29, 2015).

In this venue, Stephanie asserts that the district court erred in failing to find that BCBS committed procedural violations; that the court appraised her benefits-denial claim through the wrong lens; and that the court, in all events, erroneously upheld the partial denial of benefits. We reject Stephanie's claims that BCBS committed procedural violations. From that point forward, however, the case raises important questions concerning what a plan sponsor or claims administrator must do to reserve discretion in the handling of benefits claims. Here, the district court did not hold BCBS to these obligations and, thus, employed the wrong standard of review when considering the partial denial of benefits. Accordingly, we vacate the district court's judgment and remand for further proceedings consistent with this opinion.


Stephanie's son, M.G., is a derivative beneficiary of an ERISA-regulated group health insurance plan (the Plan) furnished by his father's employer, Harmonix Music Systems, Inc. (Harmonix). The Plan is denominated as a " Preferred Blue PPO Preferred Provider Plan," the terms of which are set out in a subscriber certificate (the Certificate). In pertinent part, the Certificate makes clear that coverage under the Plan remains subject to a determination of medical necessity made by BCBS. It specifies that the Plan covers treatment for psychiatric illnesses, including biologically based conditions (e.g., autism) and, for children until age nineteen, for non-biologically based conditions (e.g., behavioral problems). Such benefits do not accrue for residential, custodial, or medically unnecessary services, such as those performed in " educational, vocational, or recreational settings." The Certificate also stipulates that only the least intensive type of setting required for treatment of a condition will receive approval. Any non-emergency inpatient course of treatment needs approval before the patient is admitted to the facility.

The premium account agreement (the PAA) defines the relationship between participating employers -- such as Harmonix -- and BCBS. It provides that ERISA governs the claims administration framework. Under it, Harmonix is the plan administrator and BCBS is the claims administrator. The PAA further states that BCBS " is the fiduciary to whom [Harmonix] ha[s] granted full discretionary authority" and that " [a]ll determinations of [BCBS] . . . will be conclusive and binding on all persons unless it can be shown that [a particular] determination was arbitrary and capricious."

M.G. experienced a number of mental health issues beginning in early childhood. A detailed description of his mental health history is set forth in the district court's rescript, see Stephanie C., 2015 WL 1443012, at *1-6, and we assume the reader's familiarity with that account. For present purposes, a sketch (concentrating on the pertinent period) suffices.

M.G.'s condition intensified in severity in the summer of 2010 (the summer between his freshman and sophomore years in high school). At that time, he became physically aggressive toward his parents and attended weekly mental health therapy sessions. Although enrolled in an intensive outpatient educational facility, he continued to exhibit aggressive behavior that led to multiple arrests. His problems escalated because he steadfastly refused to take medications despite a court order requiring him to do so.

Concerned about the apparent inadequacy of his care, Stephanie enrolled M.G. (at her own expense and without prior approval) in Vantage Point by Aspiro (Aspiro), a wilderness therapy program based in Utah, which specializes in neurodevelopmental disorders.[1] M.G. remained at Aspiro from October of 2010 to January of 2011. His psychological evaluators there diagnosed him as having Asperger's Syndrome, anxiety disorder, and attention deficit and hyperactivity disorder. Noticing some improvement, they recommended that he continue therapy in a longer-term setting.

On the advice of a consultant and without prior approval, Stephanie proceeded to enroll M.G. in Gateway Academy (Gateway), a private school treatment center in Utah that BCBS insists is " out of network" (that is, not in a contractual relationship with BCBS). While at Gateway, M.G.'s aggressive and emotionally erratic behavior continued; among other things, he engaged in inappropriate sexual contact and committed a variety of petty criminal offenses.

In April of 2011, Harmonix submitted claims to BCBS for three sets of psychiatric evaluations and consultation services (performed during the period from January 27, 2011 to February 23, 2011) in connection with M.G.'s admission to Gateway. In late June, BCBS informed Harmonix that Gateway was a non-covered provider but that it would cover the three sets of evaluations " as a one-time exception." Gateway itself submitted claims in September of 2011 and March of ...

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