THE LAW OF HMO/PPO SPECIAL NEEDS STATE MANDATES
By: Christopher E. Angelo, Attorney at Law
Angelo & Di Monda
1721 North Sepulveda Boulevard
Manhattan Beach, California 90266
1. Assembly Bill 88 and “Medically Necessary”:
a. Healthcare plans shall “provide coverage for the … medically necessary treatment of severe mental illnesses of a person of any age” in an amount equal to those benefits offered “to other medical conditions.” Health & Safety Code § 1374.72(a); Insurance Code §10144.5(a).
The same applies for “serious emotional disturbances,” but only: in children under 18 years of age; with one or more DSM mental disorders (except primary substance disorders or developmental disorders); that result in inappropriate behavior; and which meet one or more of the following criteria:
(1) substantial impairment in at least two of the following: self care, school functioning, family relationships, or ability to function in the community; and
(2) further resulting in any of the following occurrences: risk of removal or actual removal from home; mental disorder has lasted beyond six months or is likely to continue beyond one year without treatment; child displays psychotic features, suicidal or violent tendencies due to a mental disorder unrelated to substance abuse or developmental delay; or the child meets special education eligibility requirements under Government Code §7570 et seq. because “a child with a disability shall be the joint responsibility of the Superintendent of Public Instruction and the Secretary of Health and Welfare … [and] the [former] shall ensure that this chapter is carried out through monitoring and supervision.” Health & Safety Code §1374.72(a), (e); Insurance Code §10144.5 (a), (e); incorporating Welfare and Institutions Code §5600.3 and Government Code §7570 et seq. (Special education school district mandates.)
(3) every plan shall provide an external, independent review process to re-examine any plan’s coverage decision regarding experimental or investigational therapies. Health & Safety Code § 1370.4.
b. ”Severe mental illnesses” include: “(1) schizophrenia; (2) schizoaffective disorder; (3) bipolar disorder (manic-depressive illness); (4) major depressive disorders; (5) panic disorder; (6) obsessivecompulsive disorder; (7) pervasive developmental disorder or autism; (8) anorexia nervosa; and (9) bulimia nervosa.” Health & Safety Code § 1374.72(d)(1)-(9); Insurance Code § 10144.5(d)(1)-(9). Non-group lifetime waivers of mental health coverage rights are unenforceable. Health & Safety Code § 1374.5. Plans may not enter into MediCare Supplement contracts that contain State-prohibited provisions. Health & Safety Code § 1358.10.
c. Mandated services are: “(1) outpatient services; (2) inpatient hospital services; (3) partial hospital services; (4) prescription drugs, if the… contract includes coverage [already] for prescription drugs.” Health & Safety Code § 1374.72(b)(1)-(4); Insurance Code § 10144.5(b)(1)-(4). No plan shall refuse to cover, refuse to continue to cover or limit the amount of coverage solely because of a physical or mental impairment, except where the refusal, limitation or rate differential is based on sound actuarial principles applied to actual experience, or, if insufficient actuarial experience is available, then to sound underwriting practices. Health & Safety Code § 1367.8.
A plan shall provide, upon an enrollee’s request, a list of all medical groups, psychologists and social workers within the enrollee’s “general geographic area.” Health & Safety Code § 1367.26.
An enrollee shall not be prohibited from selecting any primary care physician who contracts with the plan in the service area where the enrollee lives or works. Health & Safety Code § 1373.3. Plans that offer professional mental health services on an employer-sponsored group basis, shall maintain and provide to an enrollee upon request its “written continuity of care policy.” This policy must include provisions “ensuring that reasonable consideration is given to the potential clinical effect on an enrollee’s treatment caused by a change of provider.” Health & Safety Code § 1373.95(a)(2)(E), (c).
Mental health providers include psychiatrists, licensed psychologists, licensed marriage and family therapists or licensed social workers. Effective 2003, non-network mental health providers may be required by plans to agree in writing to the same contractual terms that are imposed upon network providers. Health & Safety Code § 1373.95(b)(3), (e)(2).
Effective January 1, 2004, every plan shall have a “standing referral procedure” that allows for an enrollee to receive “continuing care from a specialist” or “specialty care center” without constant and repetitive requests for preapproval from the primary care physician and/or the medical director of the plan itself. This only applies to those enrollees suffering from “life-threatening, degenerative or disabling” medical conditions that require “specialized medical care over a prolonged period of time.” The plan may limit the number of visits and the period of time the visits are authorized, and may also require regular reports from the specialist. Once the enrollee provides a proposed continuous treatment program supported by “all appropriate medical records and other items of information necessary [for the plan] to make the determination” that such a standing referral treatment program is medically necessary, the plan must reach its decision within three business days of the enrollee’s request for this treatment program. If the plan agrees that such specialty care is necessary, the referral to the specialist shall be made within four business days thereafter. A “specialty care center” means a center that is accredited by the State or Federal government or by a voluntary national health organization having special expertise in treating this type of condition. ”Standing referral” means a “referral by a primary care physician to a specialist for more than one visit to the specialist, as indicated in the treatment plan, if any, without the primary care physician having to provide a specific referral for each visit.” Health & Safety Code § 1374.16.
d. In the “historical and statutory notes” of the above two statutes, the California Legislature “finds and declares” that “mental illness is treatable,” that inadequate treatment “causes relapse and untold
suffering for individuals… and their families,” that the lack of adequate treatment “has contributed significantly to homelessness, involvement with the criminal justice system, and other significant social problems experienced by individuals with mental illness and their families,” that the failure to provide adequate coverage “has resulted in significant increased expenditures for state and local governments,” and “that other states that have adopted mental illness legislation have experienced minimal additional costs if medically necessary services were well managed.” In short, severe mental illnesses are deemed treatable, limited only by medical necessity.
e. State mandates nullify contrary plan language, Samson v. Transamerica (1981) 30 Cal.3d 220, 231; 178 Cal.Rptr. 343, 350, and are not preempted by federal ERISA law. Metropolitan Life v. Mass. (1985) 471 U.S. 724. State mandated healthcare standards may generally be found at Health & Safety Code §§ 1367-1374.16. Knox-Keene Managed Care Organizations (MCOs) are governed by the Health & Safety Code and not the Insurance Code. Williams v. California Physicians’ Service (1999) 72 Cal.App.4th 722, 729. Nevertheless, MCOs may still be sued for bad faith denial of medical care. Sarchett v. Blue Shield (1987) 43 Cal.3d 1, fn. 1. Knox-Keene plans must provide “access” to “quality services,” “protect and promote interests of enrollees” and maintain “consumer protections.” Health & Safety Code §§ 1341, 1342.1.
2. “Medically Necessary” defined and applied: “when it is reasonable and necessary to protect life, to prevent significant illness or significant disability, or to alleviate severe pain.” Welfare & Institutions Code §14059.5. Whether proposed treatment is “reasonable and necessary” can be established by medical literature. For instance, early intervention is medically necessary because “at least six comprehensive [early intervention] treatment programs designed to stimulate wide-spread changes in young children with autism have published positive outcome data in peer-reviewed journals … [¶]. All the studies reported (a) significant acceleration of developmental rates, resulting in significant IQ gains; (b) significant language gains in the treated children; (c) improved social behavior and decreased symptoms of autism … [¶]. [Children with autism appear most able to benefit when intervention is begun very early, between ages 2 and 4, making far more progress than do older children receiving the same interventions..., and when intervention is intensive, including 15 or more hours per week of focused treatment with very low child-to-adult ratios over one to two years or more". Rogers, "Early Intervention in Autism," Journal of Autism and Developmental Disorders (April, 1996) Vol. 26, No. 2, Plenum Press, New York and London, pps. 243-245. Jurors may determine medical necessity unless an enrollee has waived this right. Holmes v. Kizer (1992) 11 Cal.App.4th 395, 13 Cal.Rptr.2d 746.
3. Financial inducements to limit medically necessary care are illegal. Health & Safety Code § 1348.6(a). Plans are prohibited from engaging in any "unfair payment pattern," such as unreasonable delays, denials, benefit/service reductions, or repeated failures to pay the uncontested portions of a claim. Health & Safety Code § 1371.37.
4. "Medical Care" defined: "under the general or special supervision and upon the advice of or to be rendered by a physician". Family Code § 6902.
5. Every plan must also provide "basic health care services," defined as: "physician referrals, hospital inpatient services, home health services, preventive and emergency healthcare services." Health & Safety Code § 1345(b)(1)-(6); § 1367(i).
6. Every plan must also provide "Emergency Medical Care," defined as: "Medical conditions which, if not immediately diagnosed and treated, could lead to serious physical or mental disability or death." Health &Safety Code § 1799.110(b). Emergency services may be denied only if the plan reasonably determines that "the enrollee did not require emergency services" and "the enrollee reasonably should have known that an emergency did not exist." Health & Safety Code § 1371.4(c).
7. Every plan must also provide: "continuity of care," "good professional practice," "ready referral," "allied health manpower... consistent with good medical practice," "medical decisions ... unhindered by fiscal and administrative management." Health & Safety Code § 1367(d)-(i). These obligations "shall not be waived when the plan delegates any services that it is required to perform to its medical groups... or other contracting entities." Health & Safety Code § 1367(j). These "continuity of care" duties require "program requirements" to be maintained by the Plan, including screening measures to prevent the occurrence or spreading of disease (28 CCR 1300.70) as well as "healthcare documentation" for the "detection of asymptomatic diseases." (28 CCR 1300.67.1) Violations of the above can cause license revocation. Health & Safety Code § 1386.
8. Plans have duty to "thoroughly investigate" requests for care and "fully inquire" into "all possible bases" that might support the request for care. Egan v. Mut. of Omaha (1979) 24 Cal.3d 809, 819.
9. Plans have duty to "promptly respond" (utilization review decisions) to requests for care within 72 hours after receipt of relevant information that an enrollee faces an imminent and serious threat to his health, otherwise within 5 business days. Health & Safety Code § 1367.01. However, the National Committee for Quality Assurance (NCQA), an accrediting body to whom most managed care organizations (MCOs) promise allegiance, publishes Standards for the Accreditation of Managed Care Organizations that require plans to respond to non-urgent care requests within 2 working days, and urgent care requests within 1 working day, of obtaining the necessary information. NCQA Standard UM 4.
10. Plans are prohibited from excluding persons suffering from progressive, degenerative and dementing illnesses from receiving home-based care. Insurance Code § 11512.177; Health & Safety Code § 1373.14 [includes, but is not limited to, Alzheimer’s disease, stroke, illness or injury-caused dementias, alcoholism, AIDS, and other mental or nervous disorders that would fall within the reach of these statutes]. Plan contracts shall not contain any provision restricting a hospital’s duty to arrange for appropriate posthospital care at home or at a skilled or intermediate care facility. Health & Safety Code §§ 1367.5, 1262.5.
11. MCOs have duty to ensure that qualified health professions make utilization review decisions. NCQA Standard UM 3 provides that “qualified health professionals access the clinical information used to support [utilization review] decisions” and that there be procedures for “using board-certified physicians from appropriate specialty areas to assist in making determinations of medical necessity.” Furthermore, only a health care provider “who is competent to evaluate the specific clinical issues involved in the health care services requested” may deny a request for care based on medical necessity. Health & Safety Code § 1367.01(e). MCOs must communicate decisions to delay, deny or modify requests for care in writing and provide a clear and concise explanation of the reasons for its decision, a description of the criteria or guidelines used, and clinical reasons for decisions regarding medical necessity. Health & Safety Code § 1367.01(h)(4). An MCO’s internal “written policies and procedures establishing the process by which the plan” approves, delays or denies requests by providers and enrollees “shall be disclosed by the plan to providers and enrollees upon request.” Health & Safety Code §§ 1367.01(b), 1363.5.
12. Plans have a non-delegable duty to “process claims fairly and in good faith.” Hughes v. Blue Cross (1989) 215 Cal.App.3d 832, 848. See also, Health & Safety Code § 1367(j), 1345(f)(1). Where “an insurer has used an agent [or primary care medical group] to determine when to pay benefits, the agent’s derelictions might support liability in tort” against the plan. Rattan v. USAA (2001) 84 Cal.App.4th 715, 723. More specifically, NCQA Standard UM 12 provides that an MCO “is accountable for all the [utilization review] activities conducted for its members. Although it may delegate all or parts of [utilization review], it retains accountability for the decisions made.” This is consistent with the fact that MCOs, although not insurers, are still subject to the same insurer duties of good faith and fair dealing because an MCO “provides health care… as an insurer.” Rush Prudential HMO v. Moran (2002) 536 US 355. Accord, Smith v. PacifiCare (2001) 93 Cal.App.4th 139, 157-8. Lastly, parent companies of MCOs, if publicly traded, sometimes disclose in their SEC 10-K filings certain admissions about their involvement or control over subsidiary MCO business. To the extent that the parent company acts as a joint-venturer with the subsidiary MCO to restrict the delivery of medically necessary care, it too may be liable for torts or civil wrongs committed against enrollees. Grant v. Weatherholt (1954) 123 Cal.App.2d 34, 45. Similarly, MCOs and primary care physician (PCP) medical groups also enter into contracts which normally provide PCPs with financial incentives to deny care in two forms, capitation payments and risk-sharing pools. Capitation payments are legal under Health & Safety Code § 1348.6 and involve fixed monthly payments by a plan to the PCP medical group on a per capita basis, meaning based solely on the number of subscribers assigned to that medical group by the plan and irrespective of whether any treatment is rendered to any of the subscribers. For instance, an HMO or MCO may pay a PCP $35 per month for each subscriber, whether or not that subscriber is ever seen by the PCP. If the subscriber becomes extremely ill and requires substantial care, the PCP must pay for the expensive care although it still only receives $35 for the subscriber. The PCP is expected to purchase sufficient “stop-loss” insurance to cover the risk of assigned subscriber medical expenses exceeding capitated payments. MCOs also withhold a portion of capitated payments to establish a “risk-sharing pool” of funds to limit the utilization of certain medical services, such as hospital stays and prescription drug costs. If the actual year-end total cost of hospital stays for all members exceeds the withheld risk-sharing pool budget, the PCP, not the plan, will be financially responsible for at least some of the additional cost. If the cost is less than the budget, the PCP receives a percentage of the money left in the pool. Because MCOs have tremendous bargaining power over PCPs, many PCPs have experienced extreme financial trouble, if not bankruptcy. Hence, a marginal PCP, desirous of reaching solvency, may have a strong financial motive to deny medical care.
13. Medical Necessity and Civil Code § 3428: Managed care entities now have “a duty of ordinary care to arrange for… medically necessary healthcare service.” See also, Health & Safety Code § 1345(f)(1). If the breach of this duty causes “substantial harm” through the unreasonable “denial, delay or modification of the healthcare service recommended for, or furnished to, a subscriber or enrollee,” then the victim may sue. A primary care physician (PCP) medical group [aka Independent Practice Association (IPA)] who interferes with the Evidence of Coverage by improperly denying or delaying covered medical care for its own financial gain may be sued for tortious interference with the contract between the healthcare plan and the enrollee, Wilson v. Blue Cross (1990) 222 Cal.App.3d 660, 673, or for breach of fiduciary duty for failing to disclose to the enrollee financial incentives in its IPA Services Agreement with the Plan that may affect coverage decisions. Moore v. Regents (1990) 51 Cal.3d 120, 128-32. Remember, the primary difference between traditional “indemnity” insurance and current MCOs is the requirement in the latter that care other than “primary care” usually requires prior authorization by the plan even if the care would otherwise be medically necessary and covered. Wickline v. State of California (1986) 192 Cal.App.3d 1630 (malpractice implications also discussed). Nothing precludes “a finding of liability on the part of a plan, any entity contracting with a plan, or a provider, based on the… statutory or common law.” Health & Safety Code § 1371.25. Upon request, Plan must disclose its service “guidelines used… to determine whether to authorize, modify or delay services.” These guidelines must be developed by healthcare providers, be “consistent with sound clinical principles” and be updated annually. Health & Safety Code § 1363.5, 1367.01(b). Every parent has a right to request and obtain any and all records (25¢ per page or 50¢ per page from microfilm), irrespective of whether all bills have been paid. Health & Safety Code § 123110(b) and (g). Assuming that one may sue a Plan for excessive bad faith red tape delay based on violation of the duty to ensure “that medical decisions are rendered by qualified medical providers, unhindered by fiscal and administrative management” [Health & Safety Code § 1367.(g)], an enrollee can not do so until after exhausting all internal administrative and appeal remedies made available by the Plan whenever requests for care are originally denied, delayed or modified by it on the grounds that the requested care was not medically necessary. Civil Code § 3428(k)(1); Abelleira v. District Court of Appeal (1941) 17 Cal.2nd 280, 292-293; Sierra Club v. San Joaquin Local Agency Formation Com. (1999) 21 Cal.4th 489, 501.
14. Broughton v. CIGNA Healthplans (1999) 21 Cal.4th 1066, 1080, 90 Cal. Rptr.2d 334: Abusive HMO practices can now be stopped by court order even if the insured signed an arbitration clause. See also, Engalla v.Permanente (1997) 15 Cal.4th 951, 64 Cal.Rptr.2d 843 [HMO's delay can waive its arbitration right on damage claims]; Guess? Inc. v. Superior Court (2000) 79 Cal.App.4th 553, 94 Cal.Rptr.2d 201. Failure to disclose waiver of jury right in a clear and separate article immediately before the signature line for the group representative and individual enrollee makes arbitration clause unenforceable. Malek v. Blue Cross (2004) 121 Cal.App.4th 44. One injured or killed by a private employer-provided group [ERISA] healthcare plan’s denial of medically necessary care cannot sue for damages. 29 USC § 1001; Aetna Health, Inc. v. Davila (2004) 124 S.Ct.Rptr. 2488, 2498-99. ERISA is inapplicable where: employer does not endorse, but merely recommends a plan; employee participation is completely voluntary; premiums are paid entirely by the employee; the employer’s sole function is to collect the premiums through payroll deductions and to remit the premiums to the insurer; and the employer receives no consideration, except reasonable compensation for collecting and remitting the premiums [29 CFR § 2510.3-1(j)(1)-(4) (2002); Qualls v. Blue Cross (9th Cir. 1994) 22 F.3d. 839, 843; Kanne v. Conn. Gen. Life Ins. (9th Cir. 1988) 867 F.2d 489, 492; Johnson v. Watts (1st Cir. 1995) 63 F.3d 1129, 1133, 1136; Hrabe v. Paul Revere Life (M.D. Ala. 1996) 951 F.Supp. 997, 1001]; claims by government employees like judges, teachers, police, district attorneys, etc. [29 USC § 1002(32), 1003(b)]; claims by church or church business employees [29 USC §§1003(b)(2); 1002(33)(A); 1002(33)(C)(iv)]; claims by independent contractors or those insured as individuals [Nationwide Mut. Ins. v. Darden (1992) 503 US 319, 320-21, 327-28; Harper v.Am. Chambers Life Ins. (9th Cir. 1990) 898 F.2d 1432, 1434]; claims by self-employed persons [Kennedy v. Allied Mut. Ins. (9th Cir. 1991) 952 F.2d 262, 264; 29 CFR § 2510.3-3(b)-(c) (2002)] unless the partner or sole proprietor has an employee covered under the same policy [ Peterson v. Am. Life & Health Ins. (9th Cir. 1995) 48 F.3d 404, 409]. Medical malpractice claims are not preempted by ERISA. PacifiCare of Oklahoma v. Burrage (10th Cir. 1995) 59 F.3d 151; Dukes v. US Healthcare (3rd Cir. 1995) 57 F.3d 350. However, a $250,000 pain and suffering limit exists for medical malpractice claims no matter how serious the injury.
15. Applying law to Autism: Denying speech, physical, occupational and applied behavioral analysis therapies once a diagnosis of autism is made is arbitrary, capricious and unenforceable. In addition, exclusions based on developmental delay and non-restorative medical conditions do not apply to autism. Wheeler v. Aetna Life Ins. Co. (N.D.Ill. 2003) 31 Employee Benefits Cas. 1782, 2003 WL 21789029 (N.D. Ill.). California courts may rely on unpublished decisions like Wheeler, so long as these decisions originate from other states. Labrilla v. Farmer Group Inc. (2004) 119 Cal.App.4th 1070, 16 Cal.Rptr.3d 25, 31-32.
16. Remember Leverage: Strike arbitration clause; support federal Patient’s Bill of Rights; know your judicial candidates’ record before voting (contact Autism Society of Los Angeles); tell your U.S. Senators and Congresspersons to legislatively overrule the U.S. Supreme Court’s decision in Aetna Health v. Davila (2004) 542 U.S. 200, which held that federal ERISA law did not allow enrollees to sue employer-provided healthcare plans (only) for death or injury caused by the denial of medically necessary care unless the person killed or injured is a government employee, church employee or business owner; be jealous in protecting your civil liberties or lose them!
Not Reported in F.Supp.2d
31 Employee Benefits Cas. 1782, Pens. Plan Guide (CCH) P 23985Q
(Cite as: 2003 WL 21789029 (N.D.Ill.))
United States District Court,
N.D. Illinois, Eastern Division.
Michael WHEELER and Bryce Wheeler, Plaintiffs,
AETNA LIFE INSURANCE COMPANY, Defendant.
No. 01 C 6064.
July 23, 2003.
*1 Before the court is defendant Aetna Life Insurance Company’s motion for summary judgment. For the reasons stated below, the motion is denied.
Plaintiff Michael Wheeler claims that defendant, Aetna Life Insurance Company (“Aetna”), violated ERISA by wrongfully denying coverage for medical treatment of his son, co-plaintiff Bryce Wheeler, who suffers from various conditions, including autism. Aetna argues that the denial of benefits was reasonable based upon the medical records and language of the insurance plan.
The undisputed facts are as follows. Michael Wheeler is employed by Westmoreland Country Club (“Westmoreland”) and at all relevant times was a participant in the insurance plan provided by Aetna, Group Insurance Policy Number 434025. Michael Wheeler’s son, Bryce, was born on March 8, 1994, and since March 1997 has been a covered dependent under the insurance policy.
Bryce Wheeler’s Diagnoses
When Bryce was 18 months old, he began to exhibit delays in speech development and deficits in motor skills, and he had hearing difficulties. In 1996, Bryce was evaluated by various medical specialists. An electroencephalogram (EEG) was performed, and was interpreted as “possibly abnormal” because of “left temporal slowing” or “subcortical abnormality in the left.” [FN1] The report indicated that “the record is recorded in sleep only and should be cautiously interpretated [sic]. Perhaps repeated reconfirmation.” (Aetna’s Statement of Material Facts, Ex. B, at 559.) An MRI study of Bryce’s brain performed around the same time was normal. (Id. at 560.)
FN1. On the EEG report, the sentence containing these phrases apparently has a missing word: “This EEG is possibly abnormal because of left temporal slowing which could be seen with —— or subcortical abnormality in the left.” (Aetna’s Statement of Material Facts, Ex. B, at 559.)
In 1997, Bryce was diagnosed (by physicians at the Child Evaluation Center at the University of Louisville in Kentucky) with autism, central nervous system immaturity/dysfunction, speech and language delays, perceptual/fine motor and self-care skills delays, and sensory integration difficulties. [FN2] (Id. at 556-66, 648.) Thereafter, Dr. Michael Chez, a pediatric neurologist and Bryce’s primary treating physician, treated Bryce for “encephalopathy, receptive/expressive language delay, autism and pervasive developmental delay.” [FN3] (Id. at 504-505.)
FN2. “Autism” is defined in various ways and in various levels of detail, but here is a standard dictionary definition: “A mental disorder originating in infancy that is characterized by self-absorption, inability to interact socially, and language dysfunction.” Merriam-Webster Online Dictionary (July 17, 2003), at http://www.merriam-webster.com.
FN3. Aetna’s statement of material facts states: “Dr. Michael Chez, a neurologist and Bryce Wheeler’s primary treating physician, treated Bryce for receptive/expressive language delay, autism, pervasive developmental delay and “possible” encephalopathy,” citing Dr. Chez’s letter to Aetna dated September 23, 2000. (¶ 11.) However, this may not be a fair characterization of Dr. Chez’s letter. The letter states: “Bryce is followed in our practice for a diagnosis of encephalopathy, receptive/expressive language delay, autism and pervasive developmental delay. He also has a history of abnormal EEG, which indicates a possible encephalopathic process, which may be contributing to his global delays including central auditory processing disorder and motor apraxia.” (Aetna’s Statement of Material Facts, Ex. B, at 504 (emphasis added).) The way in which the letter is phrased makes it difficult to tell if Dr. Chez has in fact diagnosed Bryce with encephalopathy or simply “possible” encephalopathy.
Aetna also states that “Dr. Chez’s suggestion that Bryce has ‘possible’ encephalopathy is premised solely upon November 6, 1996 EEG conducted by Dr. Robert Tillet in which he found it was ‘possibly abnormal.” ‘ (Aetna’s Statement of Material Facts, ¶ 12.) It appears to us that Aetna’s attribution of the diagnosis “solely” to the EEG is pure conjecture. Dr. Chez does not state the premise for his diagnosis of encephalopathy or “possible” encephalopathy. Accordingly, paragraph 12 of Aetna’s Statement of Material Facts is stricken as unsupported by the evidence.
“Encephalopathy” is defined as “a disease of the brain, especially one involving alterations of brain structure.” Merriam-Webster Online Dictionary (July 17, 2003), at http://www .merriam-webster.com.
Plaintiffs’ Requests for Benefits Payments for Various Therapies
Plaintiffs’ medical providers submitted bills to Aetna relating to speech therapy, occupational therapy, physical therapy, applied behavioral analysis therapy, and sensory integration therapy treatments for Bryce. There are four providers at issue here: (1) Early Intervention Approaches (physical therapy and applied behavioral analysis therapy); (2) Therapeutic Resources (occupational therapy and sensory integration therapy); (3) Children’s Therapy and Resource Center (speech therapy); and (4) Zier & Associates (occupational therapy). Aetna sent letters to Early Intervention Approaches and Therapeutic Resources requesting additional information, including physician orders and treatment plans, initial treatment date, initial evaluation, therapy notes for each session, progress notes, anticipated length of therapy, discharge date, and credentials of the provider. Aetna received and reviewed records from those providers as well as from Children’s Therapy and Resource Center and from Bryce’s previous medical providers, some of which had diagnosed Bryce’s conditions.
*2 Aetna states that its claim processors, “without sending the claims for review, mistakenly and sporadically paid for some of” Bryce’s treatments that it now contends are not covered under the policy. (Aetna’s Statement of Material Facts, ¶ 38.) On April 6, 2000, Mary M. Hurley of Aetna sent Michael Wheeler a letter, quoted infra, notifying him that Aetna would not cover claims for physical therapy, occupational therapy, sensory integration therapy, or speech therapy not related to previous ear infections. The letter stated that sporadic claims that had been paid were done so in error, but that Aetna was not seeking overpayment refunds. Moreover, Ms. Hurley stated that there was still a possibility that coverage for the speech therapy would be allowed if the Wheelers submitted additional documentation detailing Bryce’s treatments and showing that the loss of speech was related to prior ear infections. (Id., Ex. B, at 257-58.)
On June 8, 2000, Doni Dukarski of Aetna sent Mrs. Wheeler a letter reiterating what information Aetna required to review the denial of benefits for speech therapy and also requesting additional information “[t]o reconsider the Physical and Occupational therapies.” (Id., Ex. B, at 360.) Ms. Dukarski stated that “this can be sent for additional review, if we provide enough information for the Medical area to get a complete picture of what’s happened with Bryce.” (Id.)
In November 2000, the Wheelers responded to Ms. Dukarski’s letter, appealing the denial of benefits and attaching numerous documents detailing Bryce’s medical history, diagnoses, therapies, and progress. (Id., Ex. B, at 509- 511.) [FN4] The material submitted by the Wheelers included the September 2000 letter to Aetna from Dr. Chez containing his diagnoses of Bryce, as well as initial evaluations of Bryce and diagnoses performed by various providers in 1996.
FN4. Although the Wheelers’ letter states exactly what documents were enclosed with the letter, Aetna has not provided us with the enclosures in such a way that we can tell what specific documents Aetna received from the Wheelers with the letter (in other words, the enclosures do not follow the letter, in Exhibit B). This is not highly significant, but it is an example of the slipshod manner in which Aetna has submitted relevant documents. Exhibit B to Aetna’s Statement of Material Facts is the 1366-page claim file for Bryce, and the claim file has not been presented in any way that would be helpful to the court. It is neither chronologically nor topically organized. Aetna’s internal documents are mixed in with provider documents, and the claim file appears to contain multiple copies or versions of the same material. We have done our best to wade through Aetna’s unorganized mound of paper.
Plaintiffs attach to their statement of material facts certain medical documents, including a letter from Dr. Chez dated November 20, 2002 (while this motion was being briefed). Aetna moves (in a footnote in its reply) to strike those documents because they were not part of the administrative record. Aetna’s motion is denied as moot because we have not taken the additional documents into consideration. Our review is limited to the information actually submitted to Aetna. See Perlman v. Swiss Bank Corp. Comprehensive Disability Prot. Plan, 195 F.3d 975, 981-82 (7th Cir.1999).
Thereafter, Aetna began its medical review. For the first level of review, Monica Oberley, a registered nurse, completed a Clinical Claim Review Referral form, dated December 21, 2000, summarizing in detail Bryce’s medical records and making an initial recommendation regarding the appeal. Ms. Oberley recommended affirming the denial of benefits, and the “rationale for [her] decision” was as follows:
This is a very complicated case. I had denied s.t. based on child with autism and based on initial review it appeared to be d/t his autism and they are doing some sensory integration in his therapy. Parents had stated he spoke some until he was 18mo old and then stopped. This plan does have eep general exclusions and speech must be restorative. New information states he had several episodes of otitis media and eventually had tube placement. Hearing test prior to placement was wnl. Upon diagnosis of autism it was stated it is normal for children with autism to lose speech at that age. The o.t. was denied as we do not cover o.t. for learning or developmental delays and feel the listening program is more geared to sensory integration. We would also deny the ABA as it is more sensory integration related and we would not cover. The therapies are also billing cpt code (99362) which we have been told is for conferences with teachers. We have paid intermittent claims for therapies. A letter was sent from a Member Service Representative to member on 4/6/00 stating that some claims had been paid in error and it was not felt we should collect overpayments for those claims but not felt we should pay any further. I do note that a few claims were paid after that date.
*3 Unsure if we should benefit the speech therapy even though he is making some progress because it seems to be more geared for sensory integration and I am not sure if the loss of speech was d/t the otitis media or the autism. I do not feel we should cover the O.T. or the ABA as it appears to be for the autism and not for a disease or injury. Feel it is more sensory integration related also. We should not allow the ept codes 99362 for teacher conferences.
(Id., Ex. B, at 577-78.) The appeal was then referred to a Medical Director for Aetna, Dr. John Reed.
On January 11, 2001, Dr. Reed completed a “CMM Medical Director Referral Response” regarding the Wheelers’ appeal. It is unclear what documents Dr. Reed reviewed in order to make his decision. His decision was as follows, in relevant part:
Do not approve benefits for the multiple requested therapies (speech, occupational, physical, and Applied Behavioral Analysis), as this member’s plan excludes therapies for conditions of developmental delay, learning or educational problems, and non-restorative medical conditions. Also, Aetna coverage policy notes that sensory integration therapy is not covered, as the effectiveness of sensory integration therapy has not been proven.
(Id., Ex. B, at 659.) On January 25, 2001, Dr. Reed sent a letter to Mr. Wheeler, quoted infra, notifying Mr. Wheeler that Aetna was “unable to approve payment for the services requested.” (Id., Ex. B, at 667-68.) Dr. Reed stated that the Wheelers had the right to a second appeal of Aetna’s determination.
The Wheelers appealed again. On May 1, 2001, Dr. Joel Hellmann, another Medical Director for Aetna, completed the “CMM Medical Director Referral Response” for the second appeal. Dr. Hellmann concluded that Aetna should deny coverage for all of the therapies except for the first six months of speech therapy. His “explanation/rationale” was as follows:
Aetna U.S. Healthcare provides coverage for Speech therapy subject to plan descriptions and benefit limitations. In general, speech therapy is covered for the treatment of non-chronic conditions, for acute illness and injuries that result in an impairment in the ability to speak, or when the patient has a speech-language disorder that is the result of a disease or injury causing loss of previously existing speech function.
Aetna U.S. Healthcare does not cover sensory (auditory) integration therapy. This procedure has been proposed as a treatment approach to the management of children with various communication, behavioral, emotional, and learning disorders. The effectiveness of this therapy is unproven.
Occupational therapy is a health care service that involves the use of purposeful activities to help people regain performance skills lost through injury or illness.
Aetna U.S. Healthcare does not extend coverage for long term occupational therapy in the management of patients with chronic diseases except as indicated in our individual benefit plans.
*4 Aetna U.S. Healthcare does not cover sensory integration therapy. The effectiveness of this therapy has not been proven.
Medical documentation reviewed include [sic] 4/6/00 discussion with customer service, 6/8/00 request for information, and 11/13/00 member response with review of all documents noted in that letter. Documentation establishes that there was one possibly abnormal EEG, not reconfirmed as recommended in the report and “cautiously interpreted”; a more clear diagnosis of autism, delays in language, social, behavioral, perceptual, and motor skills; a 7/15/96 note that the patient was not talking much and didn’t seem to hear as well as he had with an impression of repeated OM over a 6-9 month period, marked speech delay, and subsequent invasive treatment with PE tubes; a 9/96 assessment that behaviors diagnostic of autism included unusual eye contact, diminished facial expressiveness, and inadequate co-ordination of eye gaze, vocalization and gesture.
The documentation reviewed indicates the vast majority of problems can be attributable to the primary diagnosis of autism or developmental delay. There is a question as to whether the documented recurrent ear infections caused a loss of some already existing speech function and played a contributory role in the delayed speech development. Based on this review would recommend that a component of the speech delay be considered to be due to the ear infections, although this is not entirely clear, and that speech therapy be considered allowed expenses for a period of 6 months to allow for the component of speech delay that may be attributable to the documented ear infections.
The other services for sensory integration therapy, occupational therapy would be considered developmental delays, likely due to the primary diagnosis of autism, and would not be covered services.
(Id., Ex. B, at 694.) On May 7, 2001, Dr. Hellmann sent a letter to plaintiffs’ counsel, quoted infra, notifying counsel of his decision. Dr. Hellmann also stated that the Wheelers had reached the final level of appeal available through Aetna. (Id., Ex. B, at 690-91.)
The Group Insurance Plan Issued by Aetna and Aetna’s Positions Regarding Coverage for Certain Therapies
The group insurance contract between Aetna and Westmoreland provides:
For the purpose of … ERISA, Aetna is a fiduciary with complete authority to review all denied claims for benefits under this policy. This includes, but is not limited to, the denial of certification of the medical necessity of hospital or medical treatment. In exercising such fiduciary responsibility, Aetna shall have discretionary authority to:
determine whether and to what extent employees and beneficiaries are entitled to benefits; and construe any disputed or doubtful terms of this policy.
Aetna shall be deemed to have properly exercised such authority unless Aetna abuses its discretion by acting arbitrarily and capriciously.
*5 (Aetna’s Statement of Material Facts, Ex. D, Group Life and Accident and Health Insurance Policy, at 9190.)
Regarding benefits, the relevant terms of the policy, as set forth in the Summary Plan Description, are as follows:
• “Charges incurred by a person for the effective treatment of … a mental disorder while not confined as a full-time inpatient in a hospital; or treatment facility; are Covered Medical Expenses.”
• “Effective Treatment of a Mental Disorder” is defined as a “program that: is prescribed and supervised by a physician; and is for a disorder that can be favorably changed.”
• A “mental disorder” is defined as “a disease commonly understood to be a mental disorder whether or not it has a physiological or organic basis and for which treatment is generally provided by or under the direction of a mental health professional such as a psychiatrist, a psychologist or a psychiatric social worker. A mental or nervous disorder includes; but is not limited to: … Pervasive Mental Developmental Disorder (Autism).”
• Coverage is not provided for charges “for or related to services, treatment, education testing or training related to learning disabilities or developmental delays.”
• Coverage is not provided for charges “for or in connection with speech therapy. This exclusion does not apply to charges for speech therapy that is expected to restore speech to a person who has lost existing speech function (the ability to express thoughts, speak words, and form sentences) as the result of disease or injury.”
• Coverage is not provided for charges “for services and supplies [n]ot necessary, as determined by Aetna, for the diagnosis, care or treatment of the physical or mental condition involved. This applies even if they are prescribed, recommended or approved by the attending physician or dentist.”
• A service is “necessary” “if Aetna determines that it is appropriate for the diagnosis, the care or the treatment of the disease or injury involved.”
• To be “appropriate,” the service must “[b]e care or treatment, as likely to produce a significant positive outcome as, and no more likely to produce a negative outcome than, any alternative service or supply, both as to the disease or injury involved and the person’s overall health condition.”
• “In determining if a service or supply is appropriate under the circumstances, Aetna will take into consideration: [i]nformation provided on the affected person’s health status; [r]eports in peer reviewed medical literature; [r]eports and guidelines published by nationally recognized health care organizations that include supporting scientific data; [g]enerally recognized professional standards of safety and effectiveness in the United States for diagnosis, care or treatment; [t]he opinion of health professionals in the generally recognized health specialty involved; and [a]ny other relevant information brought to Aetna’s attention.”
*6 (Aetna’s Statement of Material Facts, Ex. C, Summary Plan Description, at 18, 20, 22, 36, 41, 42.)
Aetna issues Coverage Policy Bulletins (“CPBs”), which express Aetna’s position as to whether certain services or treatments meet the requirements for coverage under its plans. The CPBs include reviews of medical literature. On August 27, 1999, Aetna issued a CPB stating that “sensory (auditory) integration therapy” is not covered because its effectiveness is unproven. (Aetna’s Statement of Material Facts, Ex. B, at 729-30.) On October 19, 1998, Aetna issued a CPB relating to occupational therapy, which states that Aetna “does not extend coverage for long term occupational therapy in the management of patients with chronic diseases except as indicated in our individual benefit plans.” (Id. at 5-6.) The plan documents here do not state that long-term occupational therapy for the treatment of chronic diseases is covered.
Plaintiffs filed this action in August 2001, alleging the wrongful denial of benefits by Aetna in violation of the Employment Retirement Income Security Act, 29 U.S.C. § 1001 et seq. (“ERISA”). In their complaint, plaintiffs seek an order directing Aetna to resume payment for Bryce’s therapies and to pay previous charges incurred for those therapies, in addition to attorney’s fees and costs. Aetna now moves for summary judgment.
Summary judgment “shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). In considering such a motion, the court construes the evidence and all inferences that reasonably can be drawn therefrom in the light most favorable to the nonmoving party. See Pitasi v. Gartner Group, Inc., 184 F.3d 709, 714 (7th Cir.1999). “Summary judgment should be denied if the dispute is ‘genuine’: ‘if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” ‘ Talanda v. KFC Nat’l Mgmt. Co., 140 F.3d 1090, 1095 (7th Cir.1998) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). The court will enter summary judgment against a party who does not “come forward with evidence that would reasonably permit the finder of fact to find in [its] favor on a material question.” McGrath v. Gillis, 44 F.3d 567, 569 (7th Cir.1995).
Plaintiffs concede that our review is limited to determining whether the denial of benefits was “arbitrary and capricious.” This is because the plan delegated to Aetna the fiduciary responsibility and discretionary authority to interpret the plan’s terms and determine eligibility for benefits. See Herzberger v.. Standard Ins. Co., 205 F.3d 327, 331 (7th Cir.2000).
“Under the arbitrary and capricious standard, a plan administrator’s decision should not be overturned as long as (1) ‘it is possible to offer a reasoned explanation, based on the evidence, for a particular outcome,’ (2) the decision ‘is based on a reasonable explanation of relevant plan documents,’ or (3) the administrator has based its decision on a consideration of the relevant factors that encompass the important aspects of the problem .” ‘ Hess v. Hartford Life & Accident Ins. Co., 274 F.3d 456, 461 (7th Cir.2001) (citation omitted). Although the arbitrary and capricious standard grants significant deference to the plan’s determination of eligibility, our review is not simply a “rubber stamp”: “[I]f fiduciaries or administrators of an ERISA plan controvert the plain meaning of a plan, their actions are arbitrary and capricious.” Swaback v. American Info. Techs. Corp., 103 F.3d 535, 540 (7th Cir.1996). The arbitrary and capricious standard, though deferential, nonetheless requires “a ‘rational’ connection between the issue to be decided, the evidence in the case, the text under consideration, and the conclusion reached.” Exbom v. Central States, S.E. & S.W. Areas Health & Welfare Fund, 900 F.2d 1138, 1143 (7th Cir.1990) (citation omitted).
*7 Aetna was required to give the Wheelers every reason for its denial of benefits at the time of denial. [FN5] See Reich v. Ladish Co., 306 F.3d 519, 524 n. 1 (7th Cir.2002). There are three letters in the record that Aetna sent to plaintiffs which state Aetna’s reasons for the denial of benefits for Bryce’s various therapies. [FN6] We will quote the relevant portions of each letter, beginning with the April 6, 2000 letter from Mary M. Hurley:
FN5. Therefore, we will not consider additional reasons for Aetna’s denial of benefits, to the extent that it attempts to bolster its decisions at this juncture.
FN6. The letters are replete with grammatical errors, repetitions, and sentences that are incomplete and difficult to understand. We quote the letters verbatim.
Dear Mr. Wheeler:
This letter serves as a reiteration of the telephone discussion that I had today with Mrs. Wheeler concerning the ongoing treatment that Bryce has been and is continuing to receive from three different providers: Early Intervention Approaches, Therapeutic Resources, Inc., and Children’s Therapy & Resource Center.
Sensory integration treatment is not covered under your health benefits plan with Aetna U.S. Healthcare for any diagnosis. It is excluded from coverage and there is no documentation that you or the provider(s) can give to us that will allow it to be covered.
Physical therapy, occupational therapy, and speech therapy, if billed in relation to autism, is not covered.
All instances where we have reviewed these services prior to payment have been denied. Upon review of the file, it does appear that sporadic claims have been allowed without review in error. Despite these errors in payment, we are not seeking overpayment refunds from your providers at this time.
The last issue is speech therapy. Currently, the standing review does indicate that all charges for speech therapy should be denied as well. However, as I mentioned to Mrs. Wheeler on the phone, there is a chance that speech therapy charges for Bryce can be covered because the loss of speech may have been related to otitis media (ear infections). To appeal our denial, we are in need of the following items before the file can be referred to the Independent Medical Consultant for review:
1. Initial evaluation for speech therapy
2. The first two months of speech therapy notes
3. The name and address of the doctor who was treating Bryce for ear infections
4. That doctor’s notes from that treatment
It is my hope that with this additional information surrounding Bryce’s speech therapy that the review will come back more favorably and benefits will be allowed for that portion of his treatment.
Mary M. Hurley, Customer Service Team Leader
Aetna U.S. Healthcare
(Aetna’s Statement of Material Facts, Ex. B, at 257-58).
The letter to the Wheelers from Dr. Reed, who reviewed the first appeal, states in pertinent part:
Dear Mr. Wheeler:
We have received your request to reevaluate our determination regarding a predetermination of benefits for Bryce Wheeler for the proposed multiple requested therapies (speech, occupational, physical), and Applied Behavioral Analysis. After completing this review, we are unable to approve payment for the services requested.
*8 Coverage is provided for a service which is necessary. A service furnished by a particular provider is necessary if Aetna U.S. Healthcare determines that it is appropriate for the diagnosis, the care, or treatment of the disease or injury involved. After review of the medical documentation submitted, it has been determined that the multiple requested therapies (speech, occupational, physical), and Applied Behavioral Analysis will not be covered benefits under the provisions of the Plan.
The medical staff is unable to approve benefits for the multiple requested therapies (speech, occupational, physical, and Applied Behavioral Analysis), as this member’s plan excludes therapies for conditions of developmental delay, learning or educational problems, and non-restorative medical conditions. Also, sensory integration therapy is not covered, as Aetna coverage policy notes its effectiveness has not been proven.
Despite this determination about plan benefits, we want to emphasize that the member and physician still make the final determination whether the proposed treatment is performed.
You have the right to a second appeal of our determination….
John B. Reed, D.O.
(Id., Ex. B, at 667-68.)
The third letter, which was sent to counsel for the Wheelers, was signed by Dr. Hellmann. It states in relevant part:
Dear Attorney Saphire-Bernstein:
We have received your request for a final review of benefit reimbursement of the speech therapy, occupational therapy and sensory integration therapy for Bryce Wheeler. After completing this review, we are unable to approve payment for these services.
Under the Plan, benefits for speech therapy are not covered. Aetna U.S. Healthcare provides coverage for speech therapy subject to plan descriptions and benefit limitations. In general, speech therapy is covered for the treatment of non-chronic conditions, for acute illness and injuries that result in an impairment in the ability to speak, or when the patient has a speech- language disorder that is the result of a disease or injury causing loss of previously existing speech function.
Aetna U.S. Healthcare does not cover sensory (auditory) integration therapy. This procedure has been proposed as a treatment approach to the management of children with various communication, behavioral, emotional, and learning disorders. The effectiveness of this therapy is unproven.
Occupational therapy is a health care service that involves the use of purposeful activities to help people regain performance skills lost through injury or illness. Aetna U.S. Healthcare does not extend coverage for long term occupational therapy in the management of patients with chronic diseases except as indicated in our individual benefit plans.
Aetna U.S. Healthcare does not cover sensory integration therapy. The effectiveness of this therapy has not been proven.
Medical documentation reviewed include 4/6/00 discussion with customer service, 6/8/00 request for information, and 11/13/00 member response with review of all documents noted in that letter. Documentation establishes that there was one possibly abnormal EEG, not reconfirmed as recommended in the report and “cautiously interpreted”; a more clear diagnosis of autism; delays in language, social, behavioral, perceptual and motor skills, a 7/15/96 note that the patient was not talking much and didn’t seem to hear as well as he had with an impression of repeated OM over a 6-9 month period, marked speech delay, and subsequent invasive treatment with PE tubes, a 9/96 assessment that behaviors diagnostic of autism included unusual eye contact, diminished facial expressiveness, and inadequate coordination of eye gaze, vocalization and gesture.
*9 The documentation reviewed indicates the vast majority of problems can be attributable to the primary diagnosis of autism or developmental delay. There is a question as to whether the documented recurrent ear infections caused a loss of some already existing speech function and played a contributory role in the delayed speech development. Based on this review we would recommend that a component of the speech delay be considered to be due to the ear infections, although this is not entirely clear, and that speech therapy be considered allowed expenses for a period of 6 months to allow for the component of speech delay that may be attributable to the documented ear infections.
The other services for sensory integration therapy, occupational therapy would be considered developmental delays, likely due to the primary diagnosis of autism, and would not be covered services. Therefore, the Plan will not cover these services.
With this review, your request for benefit reimbursement of health care services has reached the final level of appeal available through Aetna U.S. Healthcare….
Joel B. Hellmann, MD
(Id., Ex. B, at 690-91.)
A few initial comments regarding the three letters are in order. Our first observation upon reviewing these letters is that they utterly fail to consider the actual language of the plan at issue here. The letters also largely fail to connect Aetna’s denial of benefits to the specific situation and Bryce’s diagnoses. Ms. Hurley’s letter is cursory and simply states that sensory integration therapy is not covered, without explaining why. As for the other therapies, Ms. Hurley states that they are not covered “if billed in relation to autism,” which is simply incorrect, given that autism is a covered condition under the plan. [FN7] Dr. Reed’s letter is similarly cursory. He invokes the exclusion of coverage for treatment that Aetna deems not necessary, but fails to state whether it is Aetna’s position that any of the therapies are in fact not necessary. Dr. Reed states that benefits for the “multiple requested therapies” will be denied because the plan does not cover “conditions of developmental delay, learning or educational problems, and non-restorative medical conditions.” This statement completely ignores the diagnosis of autism. Dr. Reed further explains that sensory integration therapy is not covered because its effectiveness has not been proven, but does not tie this explanation to any particular language of the plan.
FN7. Aetna concedes that autism is a covered condition under the plan.
Dr. Hellmann’s letter is the most intelligible and comprehensive of the three letters (which is not saying much, as we will discuss infra ). Therefore, we will use it as our primary basis for reviewing Aetna’s denial of benefits.
Dr. Hellmann states that “[i]n general, speech therapy is covered for the treatment of non-chronic conditions, for acute illness and injuries that result in an impairment in the ability to speak, or when the patient has a speech- language disorder that is the result of a disease or injury causing loss of previously existing speech function.” The question is not, however, what is covered “in general.” The question is what the plan specifically provides. The summary plan description states that the exclusion of coverage for speech therapy does not apply to charges for speech therapy “that is expected to restore speech to a person who has lost existing speech function (the ability to express thoughts, speak words, and form sentences) as the result of a disease or injury.” (Aetna’s Statement of Material Facts, Ex. C, Summary Plan Description, at 22.) The text pertaining to speech therapy makes no reference to or distinction between “non-chronic” or “chronic” conditions. [FN8]
FN8. We recognize that whether a condition is chronic affects the question of whether speech therapy can be expected to restore function. However, we point out the absence of language in the plan regarding “chronic” conditions because Aetna characterizes autism as a “chronic” condition, and then argues from this characterization that Bryce’s therapies are accordingly not covered. There is no basis in the plan for making this “chronic/non-chronic” distinction, or for so simplifying the analysis regarding speech therapy.
*10 Thus, for speech therapy to be a covered benefit under the plan, (1) there must have been existing speech function, (2) lost as the result of disease or injury, (3) which is expected to be restored by the therapy. Dr. Hellmann never explains why, in Aetna’s view, Bryce’s therapy does not meet this test. He does not explain whether it is Aetna’s view that autism (which is considered under the plan to be a “disease,” see definitions supra ) did not cause Bryce to lose existing speech function, or whether Aetna considers the therapy to be non-restorative, or both. Instead, Dr. Hellmann glosses over autism as the possible cause and goes right to the ear infections: “There is a question as to whether the documented recurrent ear infections caused a loss of some already existing speech function and played a contributory role in the delayed speech development. Based on this review we would recommend that a component of the speech delay be considered to be due to the ear infections, although this is not entirely clear, and that speech therapy be considered allowed expenses for a period of 6 months to allow for the component of speech delay that may be attributable to the documented ear infections.” (Aetna’s Statement of Material Facts, Ex. B, at 691.)
Dr. Hellmann is correct that it is not entirely clear from the medical history whether the ear infections played a role in Bryce’s speech problems. However, there are several indications in the medical history that Bryce’s speech problems stem from autism. First, there is a psychological evaluation, dated September 4, 1996, by Dr. Allan Bloom of the Child Evaluation Center. The evaluation indicates that Bryce had “fairly normal” speech development until he was about 18 months old, at which time there was “an alarming and precipitous drop in communication…. Prior to 18 months, Bryce was using many single words, as well as some word combinations. At this present time, the youngster was essentially nonverbal.” (Id. at 556.) After observing Bryce, Dr. Bloom diagnosed Bryce with autism and stated that “[t]he decline in communication at 18 months was consistent with the development and pattern of many children with autism.” Dr. Bloom added: “Bryce will obviously require intensive speech and language therapy.” (Id. at 558.)
Dr. Bloom’s report was issued in the context of the Child Evaluation Center’s more extensive examination of Bryce. The Center’s comprehensive evaluation, authored by two pediatricians, states: “Bryce is a 31 month old youngster who was referred to the Child Evaluation Center because of concerns about his loss of ability to talk, odd behaviors and attention problems…. During the first 18 months of his life, Bryce seemed to have normal language development. He had acquired the ability to say things such as, “Wow,” “What’s that?” (while pointing with two fingers). After losing this ability, however, he is beginning to make some gains in that he now babbles….” The report also contains a diagnosis of autism. (Id. at 561-66 (emphasis added).) Furthermore, it is the opinion of Bryce’s treating physician, Dr. Chez, that the loss of Bryce’s speech function resulted from “pathological brain activity.” (Id. at 504.) [FN9] Thus, there is support in the medical history from which to conclude that autism caused Bryce to lose previously existing speech skills. Conversely, there is no indication in the medical history that the loss of speech skills was caused by anything else (save the ear infections). [FN10] Aetna has offered no reasoned explanation for why it ignored this support.
FN9. “Pathological” means “diseased” or “altered by disease.” Webster’s Third New International Dictionary 1655 (1971).
FN10. We do not find unreasonable Aetna’s determination that the medical history is unclear as to whether the ear infections resulted in or contributed to the loss of speech. (Aetna’s position, evidently, is that if the loss of speech were due to ear infections, the therapy would be covered.) The medical history indicates that Bryce was experiencing ear infections at approximately the same time his loss of speech occurred, but none of Bryce’s providers attributes the loss of speech to the ear infections.
*11 We move on to the question of whether the therapy is expected to restore Bryce’s speech. Again, it is unclear whether Aetna’s position is that the therapy is non-restorative, but even if it were, there is no basis in the medical records for that conclusion. The August 18, 2000 “Speech and Language Treatment Plan Summary,” completed by Bryce’s speech and language pathologist at the Children’s Therapy and Resource Center, indicates that Bryce “continued to respond well to individual speech and language therapy,” that pictures and gestures were used to elicit speech, and that Bryce’s spontaneous use of speech increased. (Id. at 521.) One of the long-term goals set for Bryce is a “functional communication system.” (Id.) In addition, Dr. Chez states that speech therapy will enable Bryce to “continue to increase his processing ability” and that speech therapy is important “in order to restore the loss of function that came about as a result of pathological brain activity.” Dr. Chez recommends a minimum of 2 to 3 speech therapy sessions per week. (Id. at 504.)
We conclude that Aetna failed to acknowledge the actual language of the plan provisions and failed to analyze Bryce’s speech problems, in light of the medical records, in accordance with those plan provisions. Aetna did not and does not explain why it rejected the opinions of Bryce’s medical providers. Aetna also chose not to conduct an independent medical examination. Because Aetna failed to make a rational connection between the evidence, the plan language, and its conclusion to terminate speech therapy benefits, its termination of benefits was arbitrary and capricious.
Sensory Integration Therapy
Regarding sensory integration therapy, Dr. Hellmann states: “Aetna U.S. Healthcare does not cover sensory (auditory) integration therapy. This procedure has been proposed as a treatment approach to the management of children with various communication, behavioral, emotional, and learning disorders. The effectiveness of this therapy is unproven.” (Id. at 690.)
There is no exclusion under the plan for therapies whose “effectiveness … is unproven.” Dr. Hellmann never states that Aetna determined that sensory integration therapy is unnecessary for Bryce’s treatment. For purposes of this motion, we will assume that Dr. Hellmann is implying that sensory integration treatment is unnecessary. (That is the argument Aetna advances in its briefs.) [FN11] Even giving the letter this generous interpretation, though, it is clear that such a conclusion was arbitrary and does not comport with the plain language of the plan.
FN11. Aetna does not argue, nor do the letters state, that the charges for sensory integration therapy were not for the “effective treatment of a mental disorder” as that phrase is defined in the plan. Aetna does not argue that the therapy was not prescribed and supervised by a physician or that it is for a disorder that cannot be favorably changed.
We begin with the plan’s definitions of “necessary” and “appropriate” treatment. A service is “necessary” if it is “appropriate for the diagnosis, the care or the treatment of the disease or injury involved.” (Aetna’s Statement of Material Facts, Ex. C, Summary Plan Description, at 42.) To be “appropriate,” treatment must be “as likely to produce a significant positive outcome as, and no more likely to produce a negative outcome than, any alternative service or supply, both as to the disease or injury involved and the person’s overall health condition.” (Id.) Furthermore, the plan states that when determining if a service is appropriate “under the circumstances, Aetna will take into consideration” information provided on the affected person’s health status.” (Id. (emphasis added).)
*12 It is clear from the terms of the plan that the necessary/appropriate determination will involve an individualized determination, considering the particular circumstances, medical condition, and health condition, of the possible outcome of a certain treatment relative to alternative treatments. No such determination was made here with respect to Bryce. Aetna does not state that the sensory integration therapy was not as likely to produce a significant positive outcome as and no more likely to produce a negative outcome than any alternative treatments, nor does Aetna state what the possible alternative treatments are. Moreover, there was no individualized determination of what was necessary or appropriate treatment in light of Bryce’s particular situation. Instead, Aetna refers (in its briefs, not in its letters to the Wheelers) to its “Coverage Policy Bulletin,” which states that Aetna will not cover sensory integration therapy.
As with the analysis regarding speech therapy, this constituted cursory analysis that did not comport with the terms of the plan. Aetna may very well have a “Coverage Policy Bulletin” relating to sensory integration therapy, but it failed to consider the express terms of the plan–the definitions of “necessary” and “appropriate,” and it failed to make a rational connection between the particular medical evidence and its conclusion to terminate benefits for this therapy. Aetna’s decision regarding these benefits, therefore, was arbitrary and capricious.
Physical/Occupational/Applied Behavioral Analysis Therapies
Regarding occupational therapy, Dr. Hellmann states as follows: “Occupational therapy is a health care service that involves the use of purposeful activities to help people regain performance skills lost through injury or illness. Aetna U.S. Healthcare does not extend coverage for long term occupational therapy in the management of patients with chronic diseases except as indicated in our individual benefit plans.” (Aetna’s Statement of Material Facts, Ex. B, at 690.) In addition, Dr. Hellmann states: “The other services for sensory integration therapy, occupational therapy would be considered developmental delays, likely due to the primary diagnosis of autism, and would not be covered services.” (Id. at 691.) Dr. Hellmann does not refer specifically to either physical or applied behavioral analysis therapy, but Dr. Reed’s letter states: “The medical staff is unable to approve benefits for the multiple requested therapies (speech, occupational, physical, and Applied Behavioral Analysis), as this member’s plan excludes therapies for conditions of developmental delay, learning or educational problems, and non-restorative medical conditions.” [FN12] (Id. at 667.)
FN12. There is no basis in the plan language for the “non-restorative medical conditions” portion of this reasoning. As for the “learning or educational problems” portion, the exact language of the plan refers to “learning disabilities.” (Aetna’s Statement of Material Facts, Ex. C, Summary Plan Description, at 22.) Even a cursory review of the medical history shows that Bryce has not been diagnosed with a learning disability.
Dr. Hellmann’s first reason for denying benefits for occupational therapy is that Aetna does not cover “long term occupational therapy” for patients with “chronic diseases.” This conclusion evidently is based on a Coverage Policy Bulletin, but it is not based on any language of the plan. There is no language in the plan carving out a “chronic disease” or a “long-term therapy” exception to coverage. Accordingly, this reasoning is wholly arbitrary.
*13 Dr. Hellmann and Dr. Reed provide a second reason for the denial of benefits: the therapies are related to developmental delays–which may or may not be due to autism, depending on whose letter you read. Dr. Reed states that Aetna does not cover “therapies for conditions of developmental delay.” (Id. at 667 .) Dr. Hellmann’s version of this reasoning is that occupational therapy is not covered because it is related to “developmental delays, likely due to the primary diagnosis of autism.” (Id. at 691.)
Aetna’s position in its briefs is somewhat unclear–it seems to want to have it both ways and relies on both versions of the developmental delay argument. Dr. Reed’s position appears to be that the therapies are not covered benefits because they relate to developmental delays and not autism. There is no explanation for how Dr. Reed or Aetna came to this conclusion, and it is arbitrary given the records. The diagnosis of autism is primary and pervasive throughout Bryce’s medical records. Dr. Hellmann, on the other hand, states that the developmental delays in his opinion are likely due to the autism. Aetna admits that autism is a covered condition under the plan. Thus, there is a tension here, unless Aetna’s position is that developmental delays are not covered even if they are caused by autism.
The plan is ambiguous regarding this issue. Charges for the effective treatment of mental disorders are clearly covered, and autism (which the plan also deems “Pervasive Mental Developmental Disorder”) is explicitly included as a mental disorder. However, the plan excludes coverage for treatment “related to” “developmental delays.”
We interpret the terms of the policy “in an ordinary and popular sense as would a [person] of average intelligence and experience.” Phillips v. Lincoln Nat’l Life Ins. Co., 978 F.2d 302, 308 (7th Cir.1992). Ambiguous terms in an insurance contract are strictly construed in favor of the insured. See id. Accordingly, we find that the “developmental delay” exclusion is inapplicable to developmental delays caused by autism. This reading is the only reasonable reading of the plan and comports with the plan’s own definition of autism. Defining autism as a developmental disorder, but then excluding treatment for developmental delays caused by autism, would in effect render the provision for coverage for autism meaningless.
Therefore, under either version of the “developmental delay” argument, Aetna’s decision to deny benefits for the physical, occupational, and applied behavioral analysis therapies was arbitrary and capricious. Aetna either misconstrued the terms of the plan in an arbitrary fashion, or it concluded with absolutely no basis in the medical records that the therapies were related to developmental delays unrelated to autism.
We find as a matter of law that Aetna’s termination of benefits for all of Bryce Wheeler’s therapies was arbitrary and capricious. It appears that on the basis of this finding, summary judgment for the plaintiffs would be appropriate, but plaintiffs have not cross-moved for summary judgment. Therefore, we will give defendant leave to file a memorandum, if it wishes, showing cause why we should not enter summary judgment for plaintiffs. Defendant may file this memorandum by August 4, 2003.
*14 Defendant’s motion for summary judgment is denied.
2003 WL 21789029 (N.D.Ill.), 31 Employee Benefits Cas. 1782, Pens. Plan Guide (CCH) P 23985Q
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