A Selective Review: When Can a Health Plan Administrator’s Determination Be Overruled for Insufficient Review of a Claim?, published by Benefits Law Journal, written by Abbye Alexander, Christopher Tellner, and Henry Norwood, 3-17-2025

Kaufman Dolowich’s Abbye Alexander, Christopher Tellner, and Henry Norwood‘s article “A Selective Review: When Can a Health Plan Administrator’s Determination Be Overruled for Insufficient Review of a Claim”, was published in the Spring 2025 issue (Vol. 38, NO.1) of the Benefits Law Journal.

In this article, the authors explain that when courts find that health plan administrators have performed insufficient, selective reviews, this typically results in courts reversing the administrators’ benefit determinations.

For the full article, please see below: 

When a patient submits a health benefits claim to their insurer for payment, the health plan administrator is often afforded great deference in determining the existence and extent of coverage. While this deference is great, it is not without its limits. Health plan administrators are bound by the terms of the patient’s health plan. In the event the administrator has exceeded or acted outside the terms of the health plan, they are said to have abused their discretion.

When making their determinations, it is possible for health plan administrators to abuse their discretion in many contexts. One con-text in which this issue can arise is when the administrator disregards the record evidence presented by the patient, known as a “selective review.” When courts find that an administrator performs an insufficient, selective review, this typically results in courts reversing the administrator’s benefit determinations. Courts have found selective reviews warranting reversal in circumstances when the administrator failed to consider the full claim file, favored the administrator’s retained physician over the insured’s physician, and favored the administrator’s own medical necessity determination over that of the insured’s treating providers.

Understanding the circumstances when courts have reversed plan administrators’ determinations for a selective review of the administrative record can aid administrators, providers, and patients in understanding the degree of review necessary when making these determinations.

HEALTH PLAN ADMINISTRATORS & DISCRETIONARY REVIEW

When an insured submits a claim to their health or disability insurer, the degree of coverage to apply to the claim is determined by the plan administrator. The administrator can be the insurer, a third party administrator hired by the insurer for this purpose, or the insured’s employer acting as the claims administrator. While the administrator is not always the insurer itself, the administrator is bound by the terms of the health plan.

A vital concept at play in the context of health plan benefits determinations is that of the standard of review. The standard of review focuses on the degree of deference the reviewing court will apply to the administrator’s decision. There are two standards of review potentially applicable to a court’s review of a plan administrator’s decision on a patient’s claim: (1) abuse of discretion, and (2) de novo. Prior to the U.S. Supreme Court’s ruling in Firestone Tire & Rubber Co. v. Bruch,1 denial of health plan benefits disputes were always subject to what is referred to as “abuse of discretion” review.

Abuse of discretion review is deferential to the determinations of plan administrators. Under this standard, courts would only reverse an administrator’s determination if the determination was found to be in plain error – that is, if the administrator abused their discretion. Abuse of discretion review thus requires the reviewing court to begin its analysis with the administrator’s determination and only challenge that determination if it is clearly against the weight of the evidence. The Supreme Court altered this standard of review in Firestone, when it held that abuse of discretion review only applies if the health plan affirmatively grants plan administrators the authority to interpret the health plan’s terms. Many health plans include an explicit discretionary authority provision for this purpose.

In instances when the health plan is determined not to grant administrators the discretion to interpret plan terms, but merely to conduct a factual inquiry, courts must apply the plain meaning of the health plan terms and construe the terms strictly against the insurer. If the administrator’s determination is contrary to the plan terms and record evidence when construing them against the insurer, the court may overturn the administrator’s determination. This standard of review is referred to as de novo review. De novo review thus requires the court to begin its analysis prior to the administrator’s decision – at the moment the patient submitted their claim. The court reviews the case from its onset.

The standard of review may be critical to the outcome of the case.2 Generally, patients and/or providers seeking court intervention to overturn administrators’ decisions favor de novo review because this standard deprives the administrator’s decision of any deference it would otherwise be afforded. Health plans and administrators, on the other hand, generally favor abuse of discretion review because the court gives the administrators’ determinations deferential weight.

THE ADMINISTRATIVE RECORD

Courts reviewing benefits determinations are limited to a review of the documents that were available to the health plan administrator at the time of their determination. These documents available to the administrator, and to which the courts are limited, is referred to as the “administrative record.” Determining which documents are included and excluded in the administrative record is frequently a matter of contention in health plan litigation.

The administrative record is intended to consist of all documents, records and other information relevant to a patient’s benefits claim. The record should include documents that the administrator relied upon, documents submitted by the patient and provider, other documents considered or created while making the benefit determination regardless of whether they were relied on, and the health plan itself. One court noted a particular concern with ensuring the reviewing courts have access to a complete administrative record: “ERISA plan administrators could cherry-pick evidence that supports the denial of a claim when compiling the administrative record – and all but guarantee victory in every ERISA benefits case – since the district court’s abuse-of-discretion review would . . . be strictly confined to that one-sided evidence.”3 This problem of administrators cherry-picking evidence to create a selective review of the administrative record is frequently raised in health plan litigation and can result in a full reversal or full affirmation of the administrators’ determinations.

SELECTIVE REVIEW OF THE ADMINISTRATIVE RECORD

Caselaw demonstrates how courts analyze the selective review argument often raised by patients and providers to challenge administrators’ benefits determinations. The interplay of the applicable standard of review, contents of the administrative record, and the administrators’ efforts (or lack thereof) to review the record can be seen driving the courts’ analysis in each case. Cases overturning the administrators’ decisions for a selective review of the record are often based on: (1) the administrators’ overemphasis of evidence warranting denial of benefits at the expense of evidence favoring an award of benefits, and (2) complete ignorance of evidence favoring an award of benefits.

Overemphasis of Evidence Warranting Denial of Benefits

In Pelchat v. UNUM Life Insurance Company of America,4 the plain-tiff-insured of a long term disability plan issued and administered by the defendant-insurer, was involved in six motor vehicle collisions in a one-to-two-year span. As a result, the plaintiff claimed she was unable to perform her job functions as a schedule coordinator for a medical facility and was granted short term disability coverage through the defendant. Following surgery to address the plaintiff’s injuries, the defendant granted her request for long term disability coverage. As the plaintiff’s long term disability period came near expiring, she requested the defendant extend the coverage period, as she was still experiencing pain. As part of this request, the plaintiff underwent a functional capacity evaluation, which concluded that the plaintiff could functionally return to her full time employment. The plaintiff disputed this result on the basis that the evaluation tested her mobility, while her job required extended periods of sitting. Despite this, the plaintiff attempted to return to work full time. The plaintiff claimed she was still unable to sit for long periods of time without experiencing back pain, resulting in her working part time, and eventually resigning from her employment. The defendant then denied her request to extend long term disability benefits.

The plaintiff sought administrative review of this determination. As part of this process, the defendant interviewed the plaintiff and her primary care physician, reviewed the plaintiff’s medical records,
employment records, and functional capacity test, and engaged their own medical consultant to review the plaintiff’s claim. The plaintiff’s primary care physician opined the plaintiff suffered a long term disability, while the defendant’s medical consultant disagreed and affirmed the results of the functional capacity test. Accordingly, the defendant sustained its prior determination and denied the plaintiff extended long term disability coverage. The plaintiff filed suit to enforce her benefits plan and obtain coverage.

At the outset, the court determined that the plan clearly provided the administrator the discretion to interpret the terms of the plan, warranting deference to the administrator’s determination. Despite this deference to the defendant’s determination, the court found that the defendant abused their discretion in denying the plaintiff long term disability benefits. In particular, the court found that the defendant’s reliance on the functional capacity test and its own medical consultant’s opinion was unreasonable.

The court found the functional capacity evaluation irrelevant to assess whether the plaintiff could return to her employment because the evaluation examined her ability to move, while her job was almost entirely sedentary.

The court also found the defendant’s medical consultant was out-weighed and contradicted by the weight of record evidence, such as the plaintiff’s physicians, medical records and employment records. Rather than remanding the case for reconsideration, the court deter-mined the defendant’s abuse of discretion was clear enough to warrant a reversal of the defendant’s determination and ordered the defendant to grant the plaintiff’s long term disability request.

Ignorance of Evidence Favoring Award of Benefits

In a 2008 case, Sowers v. Sun Healthcare Group, Inc.,5 the plaintiff, a beneficiary of a health plan administered by the defendant, which was also his employer, sought coverage for gastric bypass surgery to treat morbid obesity. The plaintiff submitted, in relevant part, letters of necessity and medical records from his physicians attesting to the necessity of the procedure. The defendant denied the claim, on two bases: (1) the procedure did not appear medically necessary, and (2) the plaintiff had not engaged in a medical weight loss plan prior to opt¬ing for surgery, as required by the plan. The plaintiff appealed, provid¬ing letters of necessity from additional health providers who evaluated the plaintiff and providing documentation establishing the plaintiff had, in fact, engaged in a medical weight loss program prior to opting for surgery. The defendant again denied the request on the same bases as the initial denial. The plaintiff filed suit for benefits under the plan.

On review, the court, applying the abuse of discretion standard, quickly noted the irregularities with the defendant’s determination.

First, the court noted that the defendant miscommunicated sev¬eral details about the health plan itself, such as incorrectly stating the appeal and notice requirements.

Next, the court determined that the administrator’s medical neces-sity determination was not supported by any record evidence.

Finally, the court reasoned that the administrator appeared to have ignored the fact that the plaintiff did submit documentation of engag-ing in a weight loss program prior to seeking surgical intervention, suggesting the defendant had not fully reviewed the administrative record.

On these bases, the court ordered the defendant reverse its determination and provide benefits for the surgery.

Courts Affirming Administrators’ Denial of Coverage

While courts are inclined to overturn benefits decisions when administrators fail to fully or accurately review the administrative record, several recent decisions upholding benefits determinations provide insight into what constitutes a sufficient review of the administrative record.

The U.S. District Courts for the Districts of Utah and Washington (Western District) recently decided two similar cases in Christina M. and A.M. v. United Healthcare6 and S.L., by and through J.L. and L.L. v. Premera Blue Cross, et al.7 The cases both involved health insurance claims made on behalf of minors for coverage of long term stays at residential behavioral health facilities. Despite letters from the plaintiffs’ attesting to the necessity of the long term residential stays, the insurers denied coverage on two bases: (1) lack of medical necessity based on the opinions of the insurers’ retained physicians, and (2) failure to comply with the requirements of the health plans.

In Christina M., the administrator denied coverage because it was clear that the minor plaintiff had familial support available, which negated the need for 24 hour care at a residential facility.

In S.L., the health plan required the patient receive psychiatric eval-uation at least weekly prior to admission to a residential facility, which the plaintiff had not received.

In the resulting lawsuits, the Christina M. court reviewed the case under the de novo standard, while the S.L. court reviewed the case under the abuse of discretion standard. After analyzing the administrators’ review of the respective administrative records, the courts each affirmed the administrators’ determinations to deny coverage. The court in Christina M. reasoned that, while the insured’s documentation likely established the necessity of behavioral health treatment, it did not establish the need for 24 hour residential treatment based on the support available to the insured. The court in S.L. relied heavily on the insured’s failure to comply with the benefit plan requirements regarding documentation of weekly psychiatric evaluations. The courts affirmed the denial of benefits on these bases.

CONCLUSION

The legal authorities in this area demonstrate that a health benefits case can turn entirely on whether the plan administrator gave the administrative record a full, fair and thorough review prior to making their benefits determination. Documentation of an administrator’s review of each document in the record can help ensure a full review sufficient to withstand court scrutiny. Further, administrators should note disagreement between their retained physicians and the insured’s physicians and explicitly weigh each opinion to ensure the record reflects each side was considered. On the insured side, compliance with the terms of the benefit plan is key, as courts are willing to affirm coverage denials if the plan’s requirements are not satisfied, despite supporting documentation of medical necessity.

Courts are willing to grant or deny benefits on the basis of selective review, as opposed to simply remanding the matter for further review. This all-or-nothing approach taken by the courts elevates the impor-tance of the issue. A mere selective review of the record may be the primary factor determining an entire case.

The authors, attorneys with Kaufman Dolowich LLP, may be contacted at aalexander@kaufmandolowich.com, ctellner@kaufmandolowich.com and henry.norwood@kaufmandolowich.com, respectively.

NOTES
1. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 (1989).
2. See Payne v. Borg, 982 F.2d 335, 338 (9th Cir. 1992) (“The relevant standards of review are critical to the outcome of this case.”); Walsh v. Centeio, 692 F.2d 1239, 1241 (9th Cir. 1982) (“[T]he outcome of the instant case turns on the standard of review. . . .”).
3. Walker v. AT&T Benefit Plan, 338 F.R.D. 658, 661 (C.D. Cal. June 24, 2021).
4. Pelchat v. UNUM Life Ins. Co. of Am., 2003 WL 21105075 (N.D. Ohio Mar. 25, 2003).
5. Sowers v. Sun Healthcare Group, Inc., 2008 WL 3285752 (S.D. Ohio Aug. 8, 2008).
6. Christina M. and A.M. v. United Healthcare, 2024 WL 4534687 (D. Utah Oct. 21, 2024).
7. S.L., by and through J.L. and L.L. v. Premera Blue Cross, et al., 675 F.Supp.3d 1138 (W.D. Washington May 31, 2023).
BENEFITS LAW JOURNAL 7 VOL. 38, NO. 1 SPRING 2025

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