Canter v. Alkermes Blue Care Elect Preferred Provider Plan

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF OHIO

WESTERN DIVISION

KEITH W. CANTER,

Plaintiff,

Case No. 1:17-cv-399

v. JUDGE DOUGLAS R. COLE

Magistrate Judge Litkovitz

ALKERMES BLUE CARE ELECT

PREFERRED PROVIDER PLAN,

et al.,

Defendants.

OPINION AND ORDER

This cause comes before the Court on Magistrate Judge Litkovitz’s January 22,

2020, Report and Recommendation (“R&R”) (Doc. 88). That R&R recommends that

the Court grant in part and deny in part Plaintiff Keith W. Canter’s Motion for

Judgment on the Administrative Record (Doc. 69). The R&R also recommends the

Court grant in part and deny in part Defendant Blue Cross and Blue Shield of

Massachusetts, Inc.’s (“BCBSMA”) Motion for Judgment on the Administrative

Record (Doc 70). Finally, the R&R recommends that this matter be remanded to

BCBSMA for a redetermination of Canter’s benefit claim based upon a complete

administrative record.

BCBSMA filed its Objections (Doc. 90) on February 28, 2020. Canter filed an

Opposition (Doc. 92), and BCBSMA filed a Reply (Doc. 94).

Also before the Court is Canter’s Motion for Leave to file a sur-reply (“Motion

to File Sur-Reply,” Doc. 95). BCBSMA filed an Opposition to Canter’s Motion (Doc.

96), and Canter filed a Reply (Doc. 97).

For the reasons stated more fully below, the Court GRANTS Canter’s Motion

for Leave to file a sur-reply (Doc. 95). Further, the Court OVERRULES BCBSMA’s

Objections (Doc. 90) and ADOPTS the R&R (Doc. 88). Accordingly, the Court

GRANTS Canter’s Motion for Judgment on the Administrative Record (Doc. 69) with

respect to his procedural ERISA claims under 29 U.S.C. § 1133 and substantive

ERISA claims under 29 U.S.C. § 1132(a)(1)(B) and DENIES his Motion in all other

respects. The Court also GRANTS BCBSMA’s Motion for Judgment on the

Administrative Record (Doc. 70) with respect to Canter’s 29 U.S.C. § 1132(c) claim

and DENIES BCBSMA’s Motion in all other respects. Finally, the Court REMANDS

this matter to BCBSMA for reconsideration of Canter’s claim for benefits based upon

a complete administrative record.

BACKGROUND

Canter was employed full-time at Alkermes, Inc. (“Alkermes”) until July 6,

2015. (R&R, Doc. 88, #24041). As part of his employment with Alkermes, Canter was

a participant in the Alkermes Blue Care Elect Preferred Provider Plan (the “Plan”),2

which is underwritten and insured by defendant BCBSMA. (Id.). Alkermes is the

Plan administrator and BCBSMA is the claims administrator. (Id.).

Since August 2008, Canter has received treatment for hip, leg, and back pain.

(R&R, Doc. 88, #2405). Originally, Canter received that treatment from Dr. Clifford

1 Refers to Page ID #.

2 Canter’s Complaint also originally brought a claim against Alkermes Blue Care Elect

Preferred Provider Plan. (Compl., Doc. 1). However, Canter dismissed the Plan as a

defendant without prejudice on August 16, 2017. (Doc. 17). Accordingly, the sole remaining

defendant is BCBSMA.

Valentin of Wellington Orthopaedic and Sports Medicine. (Canter Appeal, Doc. 25,

#675–703). But, beginning in summer 2015, Canter began seeking treatment at the

Laser Spine Institute (“LSI”). (LSI Statement, Doc. 25, #738). On July 1, 2015, Canter

underwent an MRI and x-rays at LSI. (Id.). On July 2, 2015, in anticipation of

surgery, Canter had a pre-operative visit with LSI’s Dr. Raj Kakarlapudi. (R&R, Doc.

88, #2423). Shortly thereafter, on July 6, 2015, Canter returned to LSI, where Dr.

Kakarlapudi performed a lumbar decompression and discectomy. (Id. at #2404).

After the surgery, Canter filed a claim with BCBSMA requesting coverage.

(Id.). BCBSMA informed Canter that it would request his medical records, (R&R,

Doc. 88, #2422), and subsequently contacted LSI to request records related to

Canter’s surgery. (Id.; Ltr. from BCBSMA to LSI, Doc. 26, #1008). When BCBSMA

contacted LSI, however, it directed its record request only to the records from July 6,

2015—the date of Canter’s actual surgery. (R&R, Doc. 88, #2423). As a result, it

appears that LSI never sent BCBSMA records related to Canter’s pre-operative visits,

including records related to the MRI and x-rays taken on July 1, 2015. (Id.).

Subsequently, in a letter dated March 14, 2016, BCBSMA denied Canter’s

request for coverage. (Id. at #2404–05). The denial letter noted, in pertinent part:

[y]ou are requesting coverage for bilateral transpedicular

decompression and discectomy. We could not approve coverage of this

service because you did not meet the medical necessity criteria for

coverage of lumbar transpedicular decompression and discectomy. For

coverage, there must be documentation of [] your symptoms, physical

findings, imaging results, and specific non-operative therapies including

anti-inflammatory medications, activity modification, and either a

supervised home exercise program or physical therapy. Imaging must

contain neural compression or a diagnosis made on electromyography,

nerve conduction studies. The criteria used to guide this decision were

InterQual® Smartsheet™ Hemilaminectomy, Lumbar +/-

Discectomy/Foraminotomy.

(Id. at #2405 (quoting Mar. 2016 Denial Ltr., Doc. 25, #704)). The letter indicated that

Canter had the right to appeal the decision. Also enclosed was a copy of the InterQual

Smartsheet criteria3 referenced in the letter as well as a “Fact Sheet” explaining

BCBSMA’s review and appeal procedures. (Id.).

On March 24, 2016, Canter submitted a pro se appeal to BCBSMA via email.

(Id.). In support of his appeal, Canter wrote a letter and submitted various medical

records related to his treatment with Dr. Valentin. (Id. at #2405). However, Canter

did not submit any records from LSI with his appeal. (Canter Appeal, Doc. 25, #675–

703).

BCBSMA referred Canter’s appeal to an independent review company, MCMC,

who selected Dr. David H. Segal, a board-certified neurological surgeon, to conduct

the review. (Id. at #2408). Based on Dr. Segal’s review, BCBSMA denied Canter’s

appeal, explaining that Canter

did not meet the medical necessity criteria required for coverage of

lumbar hemilaminectomy and placement of percutaneous nerve

stimulator motor unit because there [was] no documented motor or

sensory deficit, weakness, documented nerve root compression on

imaging studies or worsening motor deficit. There [was] also no

documentation of failure of physical therapy home exercise or activity

modification …. The requested service [was] not medically necessary for

the Member’s condition based on the failure to meet the provided

InterQual guidelines.

(Apr. 2016 Denial Ltr., Doc. 25, #773–74).

3 The R&R describes the InterQual criteria as “nationally recognized, third-party guidelines.”

(Doc. 88, #2436 (quoting Stephanie C. v. Blue Cross Blue Shield of Massachusetts, Inc., 813

F.3d 420 (1st Cir. 2016))).

Canter then contacted Kelly Bryant, an employee in Alkermes’ human

resources department, for assistance. (Email from K. Bryant to K. Canter, Doc. 1-4,

#166). Bryant, in turn, contacted a representative at BCBSMA, who stated:

I do see that Keith [Canter] has a surgical claim denied on 7/6/2015. It

[was] denied because we required medical records and an itemized bill.

I see that information was received; however, the documentation

provided did not show medical necessity. A grievance was submitted and

denied. This is a high dollar claim with an out of network provider.

There was no authorization on file at the time of services. It looks as

though they tried to obtain an authorization after the fact (on 3/3/16).

That was denied because the member did not meet the criteria for

surgery based on the medical records.

(R&R, Doc. 88, #2411 (quoting Email from K. Bryant to K. Canter, Doc. 1-4, #166)).

After receiving this communication from BCBSMA, Bryant responded to Canter’s

inquiry and explained, in pertinent part, that “[a]t this point, [BCBSMA] have

advised that there is nothing else they can do on their end and that you are eligible

to file a second and final grievance.” (R&R, Doc. 88, #2411).

Canter then retained counsel, and on November 23, 2016, he filed a second

request to appeal the denial of his claim. (Id. at #2411–12). BCBSMA never responded

to this second appeal letter, and on March 15, 2017, Canter’s counsel sent another

letter stating that BCBSMA had until April 3, 2017, to respond, or else Canter would

assume he had exhausted all administrative remedies. (Id. at #2413). BCBSMA never

responded. (Id.).

On June 12, 2017, Canter initiated this lawsuit, bringing three separate

ERISA claims against BCBSMA. (Compl., Doc. 1). First, Canter alleges that

BCBSMA violated his procedural rights under 29 U.S.C. § 1133 by failing to provide

adequate notice when it denied his claim; failing to process his second appeal; and

relying on the opinion of Dr. Segal, who Canter alleges was incompetent to review his

claim.

Second, Canter alleges that BCBSMA improperly denied him benefits due

under the terms of his plan in violation of 29 U.S.C. § 1132(a)(1)(b) because BCBSMA

substituted an outside document, the InterQual criteria, in lieu of applying the Plan

language, and denied his claim without adequate factual substantiation. Canter also

alleges that BCBSMA had a conflict of interest because it improperly categorized his

request as a “high dollar claim.”4

Third, Canter alleges that BCBSMA is liable under 29 U.S.C. § 1132(c)(1)

because it failed to produce the entire Plan with the Schedule of Benefits and other

relevant sections when Canter requested it.

Canter moved for Judgment on the Administrative Record (Doc. 69) on

February 28, 2019; BCBSMA did likewise on March 1, 2019 (see Doc. 70). After both

Motions were fully briefed, the Magistrate Judge issued the R&R. (Doc. 88).

The R&R found that BCBSMA had violated Canter’s procedural rights under

29 U.S.C. § 1133 by failing to provide adequate notice when it denied his claim and

by failing to process his second appeal. The R&R also found that BCBSMA had

violated 29 USC § 1132(a)(1)(B) by denying Canter’s claim without adequate factual

4 Canter’s Complaint also originally described a claim against BCBSMA for breach of

fiduciary duty under 29 U.S.C § 1104(a)(1). (Compl., Doc. 1, #12). However, Canter later

clarified that “his breach of fiduciary duty claims are subsumed in his claim for payment of

benefits under 29 U.S.C. 1132(a)(1)(b).” (R&R, Doc. 88, #2444). Therefore, the R&R concluded

that “it need not address such claim separately to the extent such claim exists.” (Id.).

substantiation and by relying exclusively on the InterQual criteria in reaching its

decision. Accordingly, the R&R recommended that this matter be remanded to

BCBSMA for a redetermination of Canter’s claim for benefits based on a complete

administrative record. (Doc. 88, #2443–44). Finally, the R&R dismissed Canter’s

claim under 29 U.S.C. § 1132(c)(1) alleging that BCBSMA had failed to provide a copy

of the Plan upon request, because Canter “states he is not requesting penalties under

29 U.S.C. § 1132(c)(1) against BCBSMA.” (Id. at #2444).

BCBSMA filed its Objections to the R&R (Doc. 90) on February 28, 2020,

arguing that the R&R improperly concluded that BCBSMA (1) had violated Canter’s

procedural rights under 29 U.S.C. § 1133, and (2) had incorrectly denied Plan benefits

to Canter under 29 USC § 1132(a)(1)(B). Canter filed an Opposition to BCBSMA’s

Objections (Doc. 92), and BCBSMA filed a Reply (Doc. 94).5

Canter has also moved for leave to file a sur-reply in opposition to BCBSMA’s

Objections. (Doc. 95). That Motion has also been fully briefed. (Doc. 96; Doc. 97), and

the Court begins its discussion there.

CANTER’S MOTION FOR LEAVE TO FILE A SUR-REPLY

As an initial matter, the Court must determine whether it can consider

Canter’s proposed Sur-Reply. (Doc. 95-1). Although local rules generally do not permit

parties to file sur-reply briefs, a party may request leave of the Court to do so upon a

showing of good cause. S.D. Ohio Civ. R. 7.2(a)(2). As this Court has previously

5 Canter has not objected to the R&R’s recommendation that the Court grant BCBSMA

judgment on the administrative record on his claim for failure to produce a copy of the Plan

upon request under 29 U.S.C. § 1132(c)(1). Seeing no clear error in the Magistrate Judge’s

conclusion, the Court adopts that recommendation here.

explained, “[g]enerally, ‘good cause’ exists where the reply brief raises new grounds

that were not included in [the] movant’s initial motion”—or, in this case, BCBSMA’s

initial Objections. NCMIC Ins. Co. v. Smith, 375 F. Supp. 3d 831, 835–36 (S.D. Ohio

2019) (internal citations omitted). “Good cause for a sur-reply also exists where a

party seeks to ‘clarify misstatements’ contained in the reply brief.” Id. (citations

omitted).

Here, Canter argues that a sur-reply is appropriate because he seeks to “clarify

misstatements” in BCBSMA’s Objections and Reply—specifically, BCBSMA’s

allegedly “conclusory statement about the applicable standard of review.” (Reply in

Supp. of Mot. to File Sur-Reply, Doc. 97, #2539). Without deciding the merits of

Canter’s underlying arguments as to the appropriate standard of review (a subject

the Court turns to in the next section), the Court finds Canter’s argument persuasive

insofar as he argues a sur-reply is necessary to clarify an alleged misstatement.

In granting Canter’s Motion to File a Sur-Reply, the Court also notes that

BCBSMA erred in filing a Reply in support of its Objections in the first instance, as

Fed. R. Civ. P. 72(b)(2) does not provide for a reply-round of briefing on objections to

an R&R. Hendricks v. Hazzard, No. 2:11-cv-399, 2013 WL 571846, at *1 (S.D. Ohio

Feb. 13, 2013). That said, Canter did not move to strike the Reply, and thus the Court

will consider BCBSMA’s Reply in ruling on its Objections. However, because Rule

72(b)(2) contemplates that the non-objecting party should have the final word in

briefing, that is a further basis supporting good cause to consider Canter’s proposed

Sur-Reply.

Accordingly, the Court GRANTS Canter’s Motion for Leave to file a sur-reply

(Doc. 95) and considers the arguments in Canter’s Sur-Reply in reaching its

conclusions below.

BCBSMA’S OBJECTIONS TO THE R&R

Next, the Court turns to BCBSMA’s Objections to the R&R. (Doc. 90). The

parties disagree on multiple issues. First, BCBSMA and Canter dispute which

standard of review the Court should apply in evaluating the R&R. Second, the parties

disagree as to whether the R&R properly concluded that BCBSMA violated Canter’s

procedural rights under 29 U.S.C. § 1133. Finally, the parties disagree as to the

R&R’s conclusion that BCBSMA incorrectly denied Canter’s benefit claim under 29

U.S.C. § 1132(a)(1)(b). The Court addresses each of these issues in turn.

A. The Court Reviews De Novo The Portions Of The R&R To Which

BCBSMA Properly Objected.

The parties dispute what standard of review the Court should apply in deciding

whether to adopt the R&R. BCBSMA argues that the Court should review the R&R

de novo with respect to “those portions of the report or specified proposed findings or

recommendations to which objection is made.” (Reply, Doc. 94, #2504 (citing Render

v. Warden, S. Ohio Corr. Facility, 889 F. Supp. 2d 1014, 1019 (S.D. Ohio 2012)).

Canter, on the other hand, argues that because the Magistrate Judge’s

recommendation to remand is not dispositive, the R&R should instead be reviewed

under the more lenient “clearly erroneous or contrary to law” standard as required

under Fed. R. Civ. P. 72(a). (Sur-Reply, Doc. 95-1, #2519).

In determining which standard of review to apply in adopting a Magistrate

Judge’s findings, the “threshold issue” is whether the motion in question is

dispositive. (Id. at #2518). As the Sixth Circuit has explained, under Fed. R. Civ. P.

72, “[a] district court normally applies a ‘clearly erroneous or contrary to law’

standard of review for nondispositive preliminary measures. See 28 U.S.C.

§ 636(b)(1)(A); Fed. R. Civ. P. 72(a). A district court must review dispositive motions

under the de novo standard. See 28 U.S.C. § 636(b)(1)(B); Fed. R. Civ. P. 72(b).” Baker

v. Peterson, 67 F. App’x 308, 310 (6th Cir. 2003).

Canter, though, is incorrect that the Motions at issue here are “non-dispositive”

for the purposes of Rule 72. Canter reaches this incorrect conclusion by conflating the

“dispositive” inquiry with the “final appealable order” inquiry appellate courts use to

determine whether a matter is ripe for appellate review. (Id. at #2522 (arguing that

“a district court’s order remanding an ERISA claim to the plan administrator [is] not

a final and appealable decision”) (quoting Laake v. Benefits Committee, 793 F. App’x

413, 414 (6th Cir. 2019))). These are separate inquiries. Indeed, by Canter’s logic, a

Magistrate Judge’s R&R denying summary judgment would not be considered

dispositive because such findings would ordinarily not be eligible for appellate review.

That is plainly incorrect. See, e.g., Turner v. Ohio Dep’t of Rehab. & Corr., No. 2:19-

cv-2376, 2021 WL 3486328, at *1 (S.D. Ohio Aug. 9, 2021) (reviewing an R&R

recommending summary judgment be denied de novo); Fugate v. Erdos, No. 1:19-cv-

30, 2021 WL 4437473, at *1 (S.D. Ohio Sept. 28, 2021) (same); Brevaldo v.

Muskingum Cnty. Sheriff’s Office, No. 2:18-cv-446, 2020 WL 6536475, at *1 (S.D.

Ohio Nov. 6, 2020) (same).

Moreover, this Court has repeatedly applied a de novo standard of review when

a Magistrate Judge issues an R&R on a party’s motion for judgment on the

administrative record. See, e.g., Jones v. Allen, No. 2:11-cv-380, 2013 WL 4455833, at

*4 (S.D. Ohio Aug. 16, 2013); Mattingly v. Humana Health Plan, Inc., No. 1:15-cv-

781, 2018 WL 5619947, at *1 (S.D. Ohio Aug. 22, 2018); Cole v. Robbins & Myers, Inc.,

3:09cv191, 2010 WL 3909474, at *3 (S.D. Ohio Sept. 30, 2010). This includes R&Rs

where the Magistrate Judge recommends that a claim for improperly denied ERISA-

plan benefits be remanded to the plan administrator for reconsideration. See, e.g.,

Dirkes v. Hartford Life Group Ins. Co., No. 1:05-cv-254, 2008 WL 2788059, at *2 (S.D.

Ohio July 15, 2008). Because this Court has repeatedly held that motions for

judgment on the administrative record are dispositive for the purposes of Rule 72,

and Canter has offered no persuasive reason to depart from this practice, the Court

finds a de novo standard of review applies.

Accordingly, the Court conducts its review de novo under Fed. R. Civ. P.

72(b)(3). This review, however, applies only to “any portion to which a proper

objection was made.” Richards v. Colvin, No. 2:12-cv-748, 2013 WL 5487045, at *1

(S.D. Ohio Sept. 30, 2013). In response to such an objection, “[t]he district court ‘may

accept, reject, or modify the recommended disposition; receive further evidence; or

return the matter to the magistrate judge with instructions.’” Id. (quoting Fed. R.

Civ. P. 72(b)(3)). A general objection, by contrast, “has the same effect[] as would a

failure to object.” Howard v. Sec’y of Health & Human Servs., 932 F.2d 505, 509 (6th

Cir. 1991); Boyd v. United States, No. 1:16-cv-802, 2017 WL 680634, at *1 (S.D. Ohio

Feb. 21, 2017). That is, a litigant must identify each issue in the R&R to which he

objects with sufficient clarity that the Court can identify it, or else that issue is

deemed waived. Miller v. Currie, 50 F.3d 373, 380 (6th Cir. 1995) (“The objections

must be clear enough to enable the district court to discern those issues that are

dispositive and contentious.”).

B. BCBSMA Violated Canter’s Procedural Rights Under 29 U.S.C. § 1133.

Canter brings a claim for violation of ERISA’s procedural protections under

29 U.S.C. § 1133. As the Sixth Circuit has explained, in evaluating § 1133 claims, the

“question of whether the procedure employed by the fiduciary in denying the claim

meets the requirements of Section 1133 is a legal question which [the Court] must

review de novo.” Moore v. Metro. Life Ins. Co., No. 18-5325, 2019 WL 1499337, at *3

(6th Cir. Jan. 3, 2019) (quoting Kent v. United of Omaha Life Ins., 96 F.3d 803, 806

(6th Cir. 1996)). Moreover, “[i]n reviewing a procedural claim, a court may consider

evidence outside the administrative record.” Id. (citing VanderKlok v. Provident Life

& Accident Ins., 956 F.2d 610, 617 (6th Cir. 1992)).

Section 1133 provides that an employee benefit plan must: “(1) provide

adequate notice in writing to any participant or beneficiary whose claim for benefits

under the plan has been denied, setting forth the specific reasons for such denial,

written in a manner calculated to be understood by the participant,” and “(2) afford

a reasonable opportunity to any participant whose claim for benefits has been denied

for a full and fair review by the appropriate named fiduciary of the decision denying

the claim.” 29 U.S.C. § 1133.

As the Sixth Circuit has explained, “[t]he ‘essential purpose’ of [§ 1133] is

twofold: (1) to notify the claimant of the specific reasons for a claim denial, and (2) to

provide the claimant an opportunity to have that decision reviewed by the fiduciary.”

Wenner v. Sun Life Assur. Co. of Canada, 482 F.3d 878, 882 (6th Cir. 2007) (emphases

omitted). In evaluating whether § 1133’s notice requirements have been met, the

Sixth Circuit applies the “substantial compliance” test. Id. Under that test, the Court

“considers all communications between an administrator and plan participant to

determine whether the information provided was sufficient under the circumstances.

If the communications between the administrator and participant as a whole fulfill

the twin purposes of § 1133, the administrator’s decision will be upheld even where

the particular communication does not meet those requirements.” Id. (internal

quotation marks and citations omitted).

If the Court finds that an administrator has failed to substantially comply with

§ 1133’s requirements, then it may remand the matter to the administrator for

reconsideration on a complete administrative record. Smith v. Health Servs. of

Coshocton, 314 F. App’x 848, 856–57 (6th Cir. 2009). However, “remand is not

required if it would represent a useless formality. Pursuant to Sixth Circuit case law,

remand represents a useless formality if the plan administrator provides at least one

reasonable basis for the denial of benefits, even if two different and independent

reasons are given for the denial.” Id. (internal citations and quotation marks omitted).

In this case, the Magistrate Judge found that BCBSMA had violated Canter’s

rights under § 1133 in two ways. First, the R&R found that BCBSMA’s March 2016

denial letter was inadequate under § 1133(1), because (1) it failed to describe what

information was necessary for Canter to perfect his claim and why such material was

necessary, (2) it did not notify Canter of the evidence BCBSMA relied upon in

reaching its decision, and (3) it did not discuss the Plan terms defining medical

necessity. (R&R, Doc. 88, #2417–24). Second, the R&R found that BCBSMA failed to

afford Canter a full and fair review under § 1133(2) by refusing to process his second

appeal after BCBSMA’s agent informed Canter that a second appeal was permitted.

(Id. at #2424–28). Moreover, because the R&R concluded that remand would not be a

“useless formality,” it recommended that the case be remanded back to BCBSMA for

further review. (Id. at #2445). BCBSMA objects to each of these findings by the

Magistrate Judge, and the Court turns to its specific arguments below.

1. BCBSMA’s Denial Letter Was Inadequate.

BCBSMA’s March 2016 denial letter to Canter stated, in pertinent part:

[y]ou are requesting coverage for bilateral transpedicular

decompression and discectomy. We could not approve coverage of this

service because you did not meet the medical necessity criteria for

coverage of lumbar transpedicular decompression and discectomy. For

coverage, there must be documentation of [] your symptoms, physical

findings, imaging results, and specific non-operative therapies including

anti-inflammatory medications, activity modification, and either a

supervised home exercise program or physical therapy. Imaging must

contain neural compression or a diagnosis made on electromyography,

nerve conduction studies. The criteria used to guide this decision were

InterQual® Smartsheet™ Hemilaminectomy, Lumbar +/-

Discectomy/Foraminotomy.

(R&R, Doc. 88, #2405 (quoting Mar. 2016 Denial Ltr., Doc. 25, #704)). The R&R found

that the March 2016 denial letter violated § 1133(1)’s procedural protections for three

reasons. First, the R&R found that the denial letter failed to describe what

information was necessary for Canter to perfect his claim and why such information

was necessary. Second, the R&R found that the letter failed to notify Canter of the

evidence that BCBSMA relied upon in reaching its decision. And third, the R&R

found that the letter was procedurally inadequate because it failed to make reference

to the relevant Plan terms upon which BCBSMA’s decision was based. BCSMA

objects to each of these findings.

a. The Denial Letter Failed To Explain What Additional Information

Was Necessary For Canter To Perfect His Claim.

First, the R&R found that the denial letter violated § 1133(1) because it

“fail[ed] to advise [Canter] how his medical records and information fell short of

meeting the medical necessity definition of the Plan, including the InterQual

criteria.” (R&R, Doc. 88, #2419). In response, BCBSMA argues that its denial letter

was satisfactory, because it “informed [Canter] what was required for coverage.”

(Obj., Doc. 90, #2455). In particular, BCBSMA notes that its letter explicitly informed

Canter that, in order to meet the definition of medical necessity, “there must be

documentation of your symptoms, physical findings, imaging results, and specific

non-operative therapies including anti-inflammatory medications, activity

modification, and either a supervised home exercise program or physical therapy.

Imaging must confirm neural compression or a diagnosis made on electromyography,

nerve conduction studies.” (Id.).

BCBSMA’s argument is unavailing. Although BCBSMA is correct that its

letter informed Canter of what information is required for coverage, it errs in arguing

that this suffices to meet § 1133’s requirements. In reaching the conclusion that the

denial letter fell short, the R&R relied on the implementing regulations for § 1133.

These regulations state that, in denying a claim, the administrator must provide “the

specific reason for the determination” and a “description of any additional material

or information necessary for the claimant to perfect the claim and an explanation of

why such material or information is necessary.” 29 CFR § 2560.503-1(g)(1) (emphasis

added). BCBSMA’s letter, by contrast, simply informed Canter of all the information

that he needed to meet the definition of medical necessity, without explaining which

requirements, if any, he had already satisfied and which remained outstanding.

Thus, BCBSMA failed to satisfy the implementing regulation’s requirement that it

inform Canter of what “additional material … [was] necessary to perfect [his] claim.”

Id. (emphasis added). Because BCBSMA did not explain what additional information

was necessary, the Court finds its March 2016 denial letter was inadequate.6

6 In its Objections, BCBSMA argues that courts “have narrowly interpreted [29 C.F.R.

§ 2560.503-1(g)(1)(iii)] as requiring the plan administrator to tell a claimant what additional

information must be supplied to bring the claim to completion, not what additional

information is needed to win.” (Obj., Doc. 90, #2455 (quoting Myers v. Bricklayers & Masons

Local 22 Pension Plan, No. 3:13-cv-75, 2014 WL 3530962, at *4 (S.D. Ohio July 14, 2014)).

But even if the implementing regulations are interpreted narrowly, BCBSMA still appears

to concede that the regulations require the administrator to explain “what additional

information must be supplied to bring the claim to completion”—which BCBSMA’s March

2016 letter failed to do.

b. BCBSMA’S Denial Letter Failed To Advise Canter Of The

Evidence Relied Upon In Reaching Its Decision.

Next, the R&R rejected BCBSMA’s March 2016 denial letter as procedurally

inadequate because it “failed to notify [Canter] of the evidence it relied on and that

its decision was based on an incomplete record.” (Doc. 88, #2422). In particular, the

R&R found that, even though BCBSMA repeatedly advised Canter that it had

requested his medical records from LSI, the records request BCBSMA sent to LSI

was “specifically limited to the date range of ‘July 6, 2015 to July 6, 2015,’ the date of

[Canter’s] actual surgery.” (Id. at #2422–23). Moreover, BCBSMA compounded this

issue by failing to advise Canter of what evidence it relied upon in reaching its

decision, thus making it difficult for Canter to realize that BCBSMA’s prior

representations that it had requested the relevant records from LSI were—in fact—

not entirely correct. (Id. at #2422).

BCBSMA’s Objections on this point are somewhat confusing. BCBSMA first

argues that, although its records request appeared to limit the date range to the day

of Canter’s actual surgery, “this records request is effectively a request for ‘complete

medical records’ related to the Procedure in Laser Spine Institute’s possession,

because it includes records related to the pre-operative visits referenced in the R&R.”

(Obj., Doc. 90, #2456). However, the preoperative x-rays and MRIs are not in the

administrative record. (R&R, Doc. 88, #2423). Thus, BCBSMA seems to argue that it

effectively requested Canter’s complete records from LSI—and if any documents are

missing from the administrative record, then, it was because LSI failed to properly

deliver them as BCBSMA requested. BCBSMA, though, offers no support for its

argument that a records request specifically limited to the date of Canter’s surgery

should have actually been interpreted as a request for all Canter’s relevant records

from LSI. Accordingly, the Court rejects this argument.

BCBSMA next argues that, even if it failed to request all the relevant records

from LSI, “[r]egardless, after receiving BCBSMA’s claim denial, [Canter] and Laser

Spine Institute were plainly on notice that … the medical records submitted did not

satisfy the InterQual criteria and … additional records” were necessary. (Obj., Doc.

90, #2456). But this argument disregards the Magistrate Judge’s legal finding that

“[t]he persistent core requirements of review intended to be full and fair [under

§ 1133] include knowing what evidence the decision-making relied upon.” (R&R, Doc.

88, #2422 (quoting Zack v. McLaren Health Advantage, Inc., 340 F. Supp. 3d 648,

662-63 (E.D. Mich. 2018))). While BCBSMA does not directly contend that there is no

such requirement, it makes this argument implicitly by suggesting that its

responsibilities under § 1133 were satisfied merely by telling Canter that the

administrative record, as it currently stood, was not sufficient to approve his claim,

even though BCBSMA did not inform him what was in the record, or why it fell short.

But BCBSMA offers no compelling case law to support this argument.7 For that

7 To its credit, BCBSMA does cite to one case, Boone v. Liberty Life Assur. Co., 161 F. App’x

469 (6th Cir. 2005), where it states that the Sixth Circuit “[found] that an ERISA claimant

was not prejudiced even though ‘Liberty’s reason for initially denying benefits (a failure to

provide sufficient medical data) was indeed different from its later decision to uphold the

denial of benefits (an absence of objective medical evidence establish disability).’” (Obj., Doc.

90, #2456–57 (quoting Boone, 161 F. App’x at 474)). BCBSMA does not fully explain, however,

how it believes Boone applies to the instant case.

reason, the Court rejects BCBSMA’s argument that its March 2016 denial letter

satisfied § 1133’s evidentiary disclosure requirements.

c. The Court Need Not Decide Whether BCBSMA’s Denial Letter

Adequately Referenced The Specific Plan Provisions On Which Its

Determination Was Based.

Finally, the R&R found that the denial letter was procedurally inadequate

because it violated 29 CFR § 2560.503-1(g)(1)(ii), which required the letter to

reference “the specific plan provisions on which [its] determination [was] based.” (See

R&R, Doc. 88, #2417, 2420). BCBSMA objects to this conclusion. (Doc. 90, #2457).

However, because the Court finds that, even if BCBSMA were correct that it satisfied

the requirements of 29 CFR § 2560.503-1(g)(1)(ii), its denial letter would still have

failed to substantially comply with § 1133 for the reasons already discussed, the

Court need not reach the merits of BCBSMA’s objections on this issue.

2. BCBSMA Was Required To Process Canter’s Second Appeal.

BCBSMA also objects to the R&R’s conclusion that BCBSMA violated § 1133’s

procedural protections by failing to review Canter’s second appeal.

As an initial matter, the R&R and BCBSMA both seem to agree that the Plan,

by its terms, ordinarily only contemplates a single appeal of a claim denial. (R&R,

Doc. 88, #2425; Obj., Doc. 90, #2458). But the R&R found that this was not an

ordinary case, because after Canter received the March 2016 denial letter, he

contacted Bryant, Alkermes’ HR representative, who informed him in writing that he

was “eligible to file a second and final grievance.” (R&R, Doc. 88, #2411 (quoting email

from K. Bryant to K. Canter, Doc. 1-4, #166)).

Although Bryant did not work for BCBSMA, the R&R found that she was

BCBSMA’s agent on the basis of apparent authority. (Id. at #2427). More specifically,

the R&R pointed to the Fact Sheet BCBSMA provided Canter when it denied his first

appeal in March 2016, which stated—in a section entitled “a member’s right to

appeal”—that “[m]embers who live outside of Massachusetts may have other rights

based on laws based in their home state. Members should check with their employer’s

benefit office for more information.” (R&R, Doc. 88, #2427). In directing Canter to

contact Bryant to discuss his appeal rights, BCBSMA clothed Bryant with apparent

authority to answer Canter’s questions on that front. And there is no question that

Bryant represented to Canter that a second appeal was permitted.8 It is also clear

that Canter relied on this representation to his detriment because, by filing a second

appeal, Canter “forfeited his right to an external review [with the Commonwealth of

Massachusetts Health Policy Commission’s Office of Patient Protection] and the

opportunity to present additional evidence into the administrative record.” (Id. at

#2426). In short, given Bryant’s apparent authority, Canter reasonably relied on her

representations that a second appeal was permitted, and thus the R&R properly

concluded that BCBSMA was obligated to process his second appeal.

8 BCBSMA argues that Canter should not have understood Bryant’s email to mean he was

entitled to file a second appeal because the email also stated that BCBSMA had advised

“there is nothing else they can do on their end.” (Obj., Doc. 90, #2459 (quoting Email from K.

Bryant to K. Canter, Doc. 1-4, #166)). But BCBSMA takes this statement out of context. The

full sentence in the email stated that “[a]t this point, [BCBSMA] have advised that there is

nothing else they can do on their end and that you are eligible to file a second and final

grievance.” (Email from K. Bryant to K. Canter, Doc. 1-4, #166 (emphasis added)). Thus,

Bryant’s email clearly represented to Canter that a second appeal was permitted.

BCBSMA claims otherwise on two grounds. First, BCBSMA argues that

Bryant did not have apparent authority. That is so, BCBSMA argues, because “[t]he

portion of the Fact Sheet cited by the R&R relates to external review, not internal

appeals to BCBSMA; specifically, it advises Members who live outside of

Massachusetts to check with their employer because they may have additional rights

with respect to external review.” (Obj., Doc. 90, #2460). Thus, BCBSMA argues, the

Fact Sheet did “not give Ms. Bryant actual authority to speak on BCBSMA’s behalf

with respect to internal BCBSMA appeals.” (Id.).

Two problems with that. First, the R&R does not suggest that the Fact Sheet

gave Bryant “actual authority.” Rather, her actual authority, if any, springs from the

“Premium Account Agreement,” as BCBSMA notes. (Id.). The question here, though,

is Bryant’s apparent authority. Bryant’s actual authority is largely irrelevant to that

question.

Second, BCBSMA errs in its understanding of apparent authority. To be sure,

BCBSMA gets the legal standard right in its Objections. There, BCBSMA explains

that “[a]pparent authority is the power held by an agent … when a third party

reasonably believes the actor has authority to act on behalf of the principal and that

belief is traceable to the principal’s manifestations.” (Obj., Doc. 90, #2460 (quoting

Restatement (Third) of Agency § 2.02)). But when BCBSMA goes to apply that

standard on the facts here, its argument runs off the tracks.

For example, on the “reasonably believes” front, BCBSMA argues that Canter’s

reliance on Bryant’s representations was unreasonable, because—BCBSMA

maintains—the Fact Sheet only granted Bryant authority with respect to external

review, not all possible avenues of review. Having reviewed the Fact Sheet, the Court

cannot agree. While BCBSMA’s Objections do not clearly explain the textual basis for

this argument, the argument appears to be based on the fact that the relevant

sentence in the Fact Sheet granting Bryant authority directly followed a paragraph

describing the procedures for external review. (Fact Sheet, Doc. 25, #707–08). If that

is indeed BCBSMA’s argument, the Court rejects it. To be sure, had the sentence

granting Bryant authority been in the same paragraph as the paragraph describing

the procedures for external review, then BCBSMA’s argument might have some heft.

But here, the relevant sentence conferring authority on Bryant was a freestanding

paragraph with no apparent relationship to the one preceding it. Nothing in the

relevant sentence suggests that the authority it confers on Bryant is limited to

external review—rather, it states in broad terms that “[m]embers who live outside of

Massachusetts may have other rights.” As this section of the Fact Sheet is directed

at appeal rights generally, the reference to “other rights” suggests that Bryant had

authority to speak with regard to any avenues of review available to Canter, not only

the right to external review. Accordingly, based on the plain terms of BCBSMA’s own

Fact Sheet, Canter “reasonably believe[d]” that Bryant was empowered to act as

BCBSMA’s agent for the purposes of identifying the avenues of appeal open to him

as a non-Massachusetts resident. (See Obj., Doc. 90, #2460).

BCBSMA next argues that, even if Bryant was its agent, Canter could not have

reasonably relied on her representations regarding the availability of a second

appeal. This is because the Plan documents were clear that only one appeal was

available, and “reliance can seldom, if ever, be reasonable or justifiable if it is

inconsistent with the clear and unambiguous terms of plans documents available to

or furnished to the party.” (Id. at #2459 (quoting Riverview Health Inst. LLC v. Med.

Mut. of Ohio, 601 F.3d 505, 520 (6th Cir. 2010))).

The problem for BCBSMA on this argument, though, is that Bryant’s

representation that a second appeal was available was consistent with the Plan

documents that had been furnished to Canter. The Fact Sheet specifically said that,

because Canter was a non-Massachusetts resident, he “may have other rights based

on laws passed in [his] home state” and that he should “check with [his] employer’s

benefit office for more information.” (Fact Sheet, Doc. 25, #708 (emphasis added)).

Whether a second appeal is available under Ohio law would seem to be exactly the

kind of “other right” that the Fact Sheet contemplates here—and thus BCBSMA’s

argument that Bryant’s representations directly contradicted the Plan documents are

without merit.

3. Remand Would Not Be A Useless Formality.

BCBSMA next argues that, even if it violated Canter’s procedural rights under

§ 1133, the R&R’s recommendation that this matter be remanded is incorrect because

doing so would be a useless formality.

The R&R found that remand would not be a useless formality because “the

contemporaneous MRI and clinical evidence from the Laser Spine Institute that

BCBSMA failed to request would likely support” Canter’s argument that his

procedure was medically necessary. (Doc. 88, #2428). In response, BCBSMA—

somewhat cryptically—argues that “[r]emand is a useless formality here because …

the Procedure was not medically necessary based on the evidence submitted during

the administrative process.” (Obj., Doc. 90, #2457).

BCBSMA’s argument, though, fails to directly confront the issue at hand. Even

if Canter’s procedure was not medically necessary “based on the evidence submitted

during the administrative process,” the R&R found that important evidence was not

submitted during the administrative process as a result of BCBSMA’s procedural

failures. When this missing evidence is considered, it may (or may not) shift the

needle and reveal that Canter’s procedure was—in fact—medically necessary.

Accordingly, the Court rejects BCBSMA’s argument that remand is inappropriate in

this case as a useless formality.

C. BCBSMA Incorrectly Denied Canter’s Benefit Claim Under 29 U.S.C.

§ 1132(a)(1)(b).

BCBSMA also objects to the R&R’s findings regarding Canter’s substantive

ERISA claims. Under 29 U.S.C. § 1132(a)(1)(B), an ERISA plan participant or

beneficiary may bring a civil action “to recover benefits due to him under the terms

of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to

future benefits under the terms of the plan.” In this case, the R&R found that

BCBSMA erroneously denied Canter ERISA benefits because it “improperly

interpreted the terms of the Plan by limiting the medical necessity inquiry to whether

[Canter] satisfied the InterQual criteria,” (Doc. 88, #2438), and accordingly

recommended that the matter be remanded to the plan administrator for further

proceedings. (Id. at #2443).

BCBSMA argues that the R&R erred by incorrectly applying a de novo

standard of review to BCBSMA’s decision to deny benefits, instead of an arbitrary

and capricious standard. (Obj., Doc. 90, #2463). However, BCBSMA also maintains

that under either standard of review, the R&R should have concluded that BCBSMA’s

decision to deny benefits to Canter was correct. (Id. at #2463–68). The Court

addresses each of these objections in turn.

1. The Appropriate Standard of Review Is De Novo.

As the Sixth Circuit recently observed, “[a] federal court considering [a

§ 1132(a)(1)(B)] claim starts with the presumption that it should review the

administrator’s denial of benefits de novo. If, however, the terms of the plan give the

administrator discretionary power to make benefits decisions, the court reviews the

administrator’s denial under a deferential arbitrary-and-capricious standard.” Card

v. Principal Life Ins. Co., 17 F.4th 620, 624 (6th Cir. 2021) (internal citations omitted).

In determining whether the terms of a given plan grant the administrator

discretionary authority, the Sixth Circuit has also stated that, “[a]lthough ‘magic

words’ are not required, this Court has ‘consistently required that a plan contain a

clear grant of discretion’ to the administrator or fiduciary before applying the

deferential arbitrary and capricious standard.” Frazier v. Life Ins. Co. of N. Am., 725

F.3d 560, 566 (6th Cir. 2013) (quoting Perez v. Aetna Life. Ins. Co., 150 F.3d 550, 555

(6th Cir. 1998)).

In this case, the R&R observed that the operative Subscriber Certificate in

effect at the time of Canter’s surgery stated that “Blue Cross and Blue Shield decides

which health care services and supplies that you receive (or you are planning to

receive) are medically necessary and appropriate for coverage.” (R&R, Doc. 88, #2431

(quoting Subscriber Certificate, Doc. 77-2, #1655) (emphasis in original)). Based, in

part, on the fact that the First Circuit had previously “applied a de novo standard of

review based on identical Plan language,” the R&R concluded that the terms of the

Plan did “not clearly grant discretion to BCBSMA to construe Plan terms and make

eligibility decisions.” (Id. at #2432–33 (citing Stephanie C. v. Blue Cross Blue Shield

of Massachusetts, Inc., 813 F.3d 420 (1st Cir. 2016))). Accordingly, the R&R found a

de novo standard of review was appropriate in evaluating whether BCBSMA correctly

denied Canter’s benefit claim. (Id.).

In its Objections, BCBSMA concedes that the language the R&R identified in

the Subscriber Certificate is “alone insufficient to confer the discretion necessary for

application of the arbitrary-and-capricious standard.” (Doc. 90, #2461). However,

BCBSMA argues that the R&R nonetheless errs because the Subscriber Certificate

was only one of multiple documents that together composed the ERISA Plan. (Id. at

#2462–63). Specifically, BCBSMA argues that the Premium Account Agreement

between BCBSMA and Alkermes is incorporated by reference into the Plan and that

document makes clear that BCBSMA has “‘full discretionary authority’ and that “[a]ll

determinations of BCBSMA … will be conclusive and binding on all persons unless it

can be shown that the interpretation or determination was arbitrary and capricious.’”

(Id. at #2462). Thus, BCBSMA argues, the R&R errs in concluding that the Court

should review BCBSMA’s denial of Canter’s benefit claim de novo.

The Court is not convinced. As the R&R correctly explained, BCBSMA has

offered

no evidence … that the premium account agreement was ever disclosed

to [Canter] when coverage attached. The premium account agreement

cannot be used against [Canter] to bring clarity to an ambiguously

worded grant of discretion when “the terms appear in a financing

agreement between the employer and the claims administrator that was

never seasonably disseminated to the beneficiaries against whom

enforcement is sought.”

(R&R, Doc. 88, #2433–34 (quoting Stephanie C., 813 F.3d at 429)).

In its Objections, BCBSMA does not state, or even suggest, that the Premium

Account Agreement was in fact disclosed to Canter. If BCBSMA is instead arguing

that the Premium Account Agreement can nonetheless provide the basis for

discretionary authority, even when it was not disseminated to the plan beneficiary,

the Court disagrees. In support of its argument, BCBSMA cites to one district court

case, Rothe v. Duke Energy Long Term Disability Plan, in which the Court “appl[ied

the] arbitrary-and-capricious standard because the insurance policy was incorporated

by reference into ‘Duke’s Long Term Disability Plan’ and granted the insurer

‘discretionary authority to determine eligibility for benefits and to construe the terms

of the plan.’” (Obj., Doc 90, #2463 (citing Rothe, No. 1:15cv211, 2016 WL 5661686, at

*2 (S.D. Ohio Sept. 30, 2016))). But Rothe fails to directly address the question at

hand, which is not whether the Premium Account Agreement could ever be considered

a plan document, but rather whether it should be considered a plan document when

the plan beneficiary argues that it was never “seasonably disseminated” to him. And

to the extent the Sixth Circuit has addressed that question, it has suggested that

“group policies” can only be considered plan documents when they are “provided to

employees by the insurance company.” Hogan v. Life Ins. Co. of N. Am., 521 F. App’x

410, 415 (6th Cir. 2013) (citing Yeager v. Reliance Standard Life Ins. Co., 88 F.3d 376,

380-81 (6th Cir. 1996)). Similarly, at least one district court in this Circuit has

observed that, to be considered a plan document, the “plan participant [must be able

to] read [the document] to determine his or her rights or obligations under the plan.”

L&W Assocs. Welfare Benefit Plan v. Estate of Wines, No. 12-cv-13524, 2014 WL

117349, at *8 (E.D. Mich. Jan. 13, 2014) (citation omitted).9 In short, if the Premium

Account Agreement was not provided to Canter (and BCBSMA does not suggest that

9 Admittedly, in Weinkauf v. Unicare Life & Health Insurance Co., No. 1:09-CV-638, 2010 WL

1839441, at *3 (W.D. Mich. Apr. 23, 2010), the Western District of Michigan held that a

document could be considered part of the plan so long as it was available to the plan member,

even if it was never actually disseminated to him or her.

The Court respectfully disagrees with the Weinkauf Court on this issue for two reasons.

First, Weinkauf’s holding on this issue primarily relied on the Seventh Circuit’s decision in

Fritcher v. Health Care Serv. Corp., 301 F.3d 811, 817 (7th Cir. 2002). In that case, the

Seventh Circuit declined to consider an administrative services agreement between the plan

administrator and the member’s employer to be part of the Plan. In doing so, the Seventh

Circuit noted that one of ERISA’s purposes is “to afford employees the opportunity to inform

themselves … of their rights and obligations under the plan.” Fritcher, 801 F.3d at 817. The

Weinkauf Court took the phrase “opportunity to inform themselves” to mean the mere

availability of a given document would suffice to make that document part of the plan. But

in Fritcher, the Seventh Circuit did not address whether the plan member could have

accessed the document had he asked for it. Rather, the Seventh Circuit only suggested that

the Plan member had never had the “opportunity” to read the document—without offering

much color as to what “opportunity” meant. Thus, while Fritcher does not necessarily

contradict Weinkauf’s conclusion that a document need only be available to a member to be

considered a Plan document, it does not offer significant support for that proposition either.

Second, Weinkauf is also in tension with the Sixth Circuit’s decision in Hogan, where the

Court suggested that, to be considered a plan document, the document must have been

“provided to employees by the insurance company,” not merely made available to them.

Hogan, 521 F. App’x at 415 (emphasis added).

it was), then it is not a valid plan document. Thus, the Court finds that BCBSMA’s

denial of Canter’s benefit claim is subject to de novo review.

2. BCBSMA’s Denial Of The Benefit Claim Was Incorrect.

Finally, the Court turns to the R&R’s conclusion that BCBSMA improperly

denied Canter’s benefit claim. In reaching that conclusion, the R&R found that

BCBSMA had relied too heavily on the InterQual criteria in deciding that Canter’s

surgery was not medically necessary. While the R&R concluded that BCBSMA was

“permitted to consider the InterQual guidelines as one factor in determining whether

[Canter’s] lumbar surgery” was medically necessary, (Doc. 88, #2437), BCBSMA

erred in relying on the InterQual criteria exclusively. As the R&R explained, the Plan

provided a list of six factors BCBSMA was required to consider in determining

whether Canter’s procedure was medically necessary. Specifically, the Plan stated, in

pertinent part:

Blue Cross and Blue Shield decides which health care services and

supplies that you receive (or you are planning to receive) are medically

necessary and appropriate for coverage. It will do this by using all of the

guidelines described below.

All health care services must be required services that a health care

provider, using prudent clinical judgment, would provide to a patient in

order to prevent or to evaluate or to diagnose or to treat an illness,

injury, disease, or its symptoms. And, these health care services must

also be:

• [1] Furnished in accordance with generally accepted standards of

professional medical practice (as recognized by the relevant

medical community);

• [2] Clinically appropriate, in terms of type, frequency, extent, site,

and duration; and they must be considered effective for your

illness, injury, or disease;

• [3] Consistent with the diagnosis and treatment of your condition

and in accordance with Blue Cross and Blue Shield medical

policies and medical technology assessment criteria;

• [4] Essential to improve your net health outcome and as beneficial

as any established alternatives that are covered by Blue Cross

and Blue Shield;

• [5] Consistent with the level of skilled services that are furnished

and furnished in the least intensive type of medical care setting

that is required by your medical condition; and

• [6] Not more costly than an alternative service or sequence of

services at least as likely to produce the same therapeutic or

diagnostic results to diagnose or treat your illness, injury, or

disease.

(Subscriber Certificate, Doc. 77-2, #1655 (emphasis added)). Although BCBSMA was

permitted to consider the InterQual criteria as part of its analysis under the third

factor (i.e. as a “Blue Cross and Blue Shield[] medical policy”), (R&R, Doc. 88, #2437),

BCBSMA could not use the InterQual criteria to the total exclusion of the other

medical necessity factors in the Plan. (Id. at #2438). Rather, the R&R reasoned, the

phrase “using all of the guidelines below” suggested that BCBSMA was required to

consider all six of the enumerated factors holistically before reaching its decision.

Moreover, the R&R added, the InterQual criteria’s strict focus on certain types of

evidence—specifically, the requirement that there be evidence of nerve compression

in imaging—caused BCBSMA to disregard other potentially relevant evidence,

including Dr. Kakarlapudi’s operative report documenting nerve root compression.

(Id. at #2439–41).

In its Objections, BCBSMA argues that the R&R misinterprets the Plan

language to require that BCBSMA consider all the medical necessity factors before

reaching a decision to deny coverage. (Obj., Doc. 90, #2467). BCBSMA notes that the

Plan specifically prefaces the medical necessity factors with the phrase: “these health

care services must also be ….” (Id.). BCBSMA argues that the term “must” indicates

that, to be considered medically necessary, Canter’s procedure must meet all the

factors in the plan. (Id.). Stated differently, the “medical necessity factors,” are not—

by BCBSMA’s logic—“factors” at all. Rather, they are elements. Accordingly, Canter’s

failure to satisfy even one element would itself be sufficient to demonstrate that his

procedure was not medically necessary. (Id. at #2468).

The Court finds, though, that it is unnecessary to determine whether BCBSMA

has offered a more persuasive interpretation of the medical necessity

factors/elements. BCBSMA’s argument here essentially proceeds in three steps.

First, BCBSMA argues, based on the language of the Plan, that it was permitted to

deny Canter’s claim if he failed to satisfy even one of the six medical necessity

factors/elements. Second, to satisfy the third medical necessity factor/element

(“[c]onsistent with the diagnosis and treatment of your condition and in accordance

with Blue Cross and Blue Shield medical policies”), BCBSMA was permitted to rely

solely on the InterQual criteria. And third, Canter’s surgery was plainly not medically

necessary under the InterQual criteria. Taken together, BCBSMA argues that these

three steps prove that it properly denied Canter’s benefit claim.

Even if the Court accepts BCBSMA’s first point, however, its argument falters

on points two and three: whether BCBSMA was permitted to rely solely on the

InterQual criteria and whether BCBSMA’s interpretation of the InterQual criteria

was, in fact, correct. As the R&R explained, “the InterQual (IQ) guidelines themselves

note the limitations of their use.” (Doc. 88, #2421). Specifically, the guidelines state:

IQ reflects clinical interpretations and analyses and cannot alone either

(a) resolve medical ambiguities of particular situations; or (b) provide the

sole basis for definitive decision. IQ is intended solely for use as

screening guidelines with respect to medical appropriateness of

healthcare services. All ultimate care decisions are strictly and solely

the obligation and responsibility of your health care provider.

(Id. (quoting InterQual Guidelines, Doc. 82, #1965) (emphasis added)). In this case,

BCBSMA attempts to do exactly what the InterQual criteria caution against by

relying on them as the sole basis for its decision-making. Thus, BCBSMA cannot

argue that its denial was “in accordance with” the InterQual criteria, because the

InterQual criteria themselves state that it would not be appropriate to rely on them

as the sole basis for definitive decision-making.

This understanding of the limitations of the InterQual criteria is also

consistent with case law cited in the R&R—in particular, the Sixth Circuit’s decision

in Kalish v. Liberty Mut./Liberty Life Assur. Co., 419 F.3d 501 (6th Cir. 2005). There,

the Court found that the plan administrator had arbitrarily and capriciously denied

a benefit claim based, in part, on the fact that its decision to deny benefits had relied

on a report by a physician who had neither examined the plaintiff himself nor

rebutted the contrary medical conclusions of a physician who had. Id. at 510. While

the Sixth Circuit emphasized that “reliance on a file review does not, standing alone,

require the conclusion that [a plan administrator] acted improperly,” id. at 508, it

also observed that “[p]lan administrators … may not arbitrarily refuse to credit a

claimant’s reliable evidence, including the opinions of a treating physician.” Id. at

507 (quoting Black & Decker Disability Plan v. Nord, 538 U.S. 822, 832 (2003)).

Like in Kalish, in this case BCBSMA relied on the opinions of physicians who

had not examined Canter. Although BCBSMA was not required to defer to the

medical observations of Dr. Kakarlapudi, its physicians should have, at the very least,

discussed Dr. Kakarlapudi’s operative report in reaching their conclusions. Doing so

would have also been consistent with the InterQual criteria, which themselves

emphasize their limitations in “resolv[ing] medical ambiguities of particular

situations.” (InterQual Guidelines, Doc. 82, #1965).

Moreover, as noted above, BCBSMA also relied on an incomplete

administrative record when applying the InterQual Guidelines. For example, it

appears that the administrative record was lacking the MRIs and x-rays that may

have revealed the nerve compression that BCBSMA argues is missing here. The

Court offers no opinion on how that determination will play out on a more fulsome

record, but merely observes that the current determination that the procedure was

not medically necessary under InterQual Guidelines is based on incomplete

information. For those reasons, the Court must reject BCBSMA’s argument that it

properly denied Canter’s benefit claim.

CONCLUSION

For the reasons set forth above, the Court GRANTS Canter’s Motion for Leave

to File a Sur-Reply (Doc. 95).

Further, the Court OVERRULES BCBSMA’s Objections to the Magistrate

Judge’s R&R (Doc. 90), and thus ADOPTS the R&R (Doc. 88). Accordingly, the Court

GRANTS Canter’s Motion for Judgment on the Administrative Record (Doc. 69) with

regard to his procedural claims under 29 U.S.C. § 1133 and substantive claims

under 29 U.S.C. § 1132(a)(%(B), and DENIES his Motion in all other respects.

The Court GRANTS BCBSMA’s Motion for Judgment on the Administrative

Record (Doc. 70) with respect to Canter’s 29 U.S.C. § 1132(c) claim and DENIES

BCBSMA’s Motion in all other respects.

The Court REMANDS this matter to BCBSMA for reconsideration of Canter’s

claim for benefits based upon a complete administrative record. The Court DIRECTS

the Clerk to ADMINISTRATIVELY TERMINATE this matter on the Court’s

docket, but the Court retains jurisdiction to review any new administrative

determination at the request of any party.

SO ORDERED.

March 23, 2022

DATE DOUGLAS R. COLE

UNITED STATES DISTRICT JUDGE

34