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Dealing With Appeals: It’s OK To Change Your Mind

Posted in Court Cases, Plan Administration, Welfare Plans

With PPACA, we have added an extra component of the appeals process to include an external review.  While this is added for health plans, other welfare plans like disability or life, and of course retirement plans, do not have this same requirement.  But what happens if, during the course of the appeals process, the plan administrator comes across information that might impact the decision on appeal that makes the administrator want to grant the appeal?  Does the administrator have to disclose why? 

First, we can operate on the presumption that there would not be an appeal unless the participant was being denied a benefit (or at least seeking to modify a benefit granted).  The initial "internal" appeal requires the administrator to consider what ever additional information the participant chooses to provide.  Plus the administrator has to provide to the participant that information it relied on in denying the claim.  But the administrator may also get information from someone other than the participant during the appeal.  So how does this impact the appeals process? 

In the recent case of Lee v. Hartford Life, the District Court for the District of Columbia dealt with an issue where, while the appeal was pending, the administrator received another medical report from its doctor affirming its original denial.  Hartford did not share that opinion with the participant until after the appeal was denied.  She subsequently claimed she was denied a full and fair review on appeal because she did not know about this second report during her appeal.  The Court confirmed that, when an appeal is filed, the administrator has to give the participant documents generated and relied on prior to the original claim denial, but not any documents received after the initial appeal is filed.  So the subsequent report was not something that had to be disclosed during the appeal because the appeal was already made.  Of course after the appeal was denied, the administrator has to reveal the basis for that denial, which it did, which gave rise to this lawsuit.

When applied to a health plan with an external review, the steps would work something like this: (1) initial claims denied; (2) appeal filed, give all documents relied on for original denial; (3) when appeal denied, give all documents relied on when making the denial of the appeal (including, in this case, the second report).  After a claim is denied and an appeal is filed, you don’t necessarily have to supplement your original denial with information acquired after the appeal is filed until you actually deny the appeal.  So, why the title question about changing your mind?  Well, because information only has to be produced that existed prior to the filing of the appeal, but not information received during the appeal process unless the appeal is also denied.  If the plan administrator receives subsequent information that makes it want to rescind the original denial, it appears that there would not be an obligation to explain why the reversal occurred.  A plan administrator can simply grant the appeal without ever specifying it relied on something other than the participants appeal submission.

The point is you might not want the participant to know why you changed your mind, only that you did.  Plan administrators sometimes want to keep their resources close to the vest.  Fortunately, under this case, the basis for granting an appeal (or reversing a denial of benefits) does not have to be disclosed.  If the appeal is granted, there is no more requirement to provide a disclosure to the participant.  So it is OK to change your mind between the initial denial and the determination on the appeal and simply grant the appeal.  If there is no denial of the appeal, there is no obligation to disclose why it was granted.