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Williams v. Aetna Life Insurance Co.

United States District Court, E.D. Kentucky, Central Division, Lexington

October 8, 2014



KAREN K. CALDWELL, Chief District Judge.

In this civil action, the plaintiffs, John Everett Williams and Michelle Josie Williams (collectively "the Plaintiffs"), appeal the refusal of the defendant, Aetna Life Insurance Company ("Aetna"), to pay medical benefits allegedly due under an employee benefits plan governed by the Employee Retirement Income System Act of 1974 ("ERISA"), 29 U.S.C. §1001 et seq. In compliance with the Court's Scheduling Orders [DE #23, 29, 31, 48], the parties have submitted their Joint Report regarding the appropriate standard of review [DE #27], their cross motions for judgment [DE #50, 52], and their responses [DE #53, 54]. Also pending before the Court is Aetna's unopposed motion to supplement the administrative record [DE #49].


After a premature birth, the plaintiff Michelle Williams ("Williams") spent over nine months in the neonatal intensive care unit. Once released, she remained on a ventilator until about 20 months of age. She subsequently developed problems from the respiratory syncytial virus, or RSV, at age two. Currently, Williams is twenty-four years old and continues to suffer from a variety of medical conditions, including selective antibody deficiency, also know as selective immunodeficiency [AR 354, 368, 965, 1352, 1412]. This condition prevents her immune system from making antibodies appropriately [AR 305]. As a result, she has been treated with intravenous immunoglobulin or "IVIG" therapy [AR 262-63, 357-58, 969, 1046-47, 1647]. IVIG therapy is given intravenously every 3 to 4 weeks, takes about 3 hours, and costs over $5, 000 per infusion [AR 968, 1557]. Williams has a central veinous access device which her physicians use to infuse the IVIG into her body [AR 968]. Without IVIG therapy, the Plaintiffs allege that Williams will suffer chronic respiratory infections, including pneumococcus or bronchiectasis, the former of which can kill a person within 6 hours, the latter of which leads to continued lung deterioration and death generally 20 years or so younger than the anticipated life span of the individual [AR 312, 355].

In March 2009, the Plaintiffs made a claim for Williams' IVIG treatment with the National Rural Electric Cooperative Association ("NRECA")[AR 354, 368, 1302]. At that time, the Plaintiffs had medical coverage under the NRECA through its self-funded Group Benefits Program based on John Williams' employment [AR 1360]. That claim was denied on July 23, 2009 and again on December 16, 2009[AR 1362]. According to the Plaintiffs, this denial was based on the fact that the NRECA had mis-diagnosed Williams with common variable immune deficiency instead of selective antibody deficiency. [ See AR 357-58, 965-66, 1046-47, 1646-47]. A lawsuit challenging this denial was ultimately resolved through settlement [AR 1358-65]. The Plaintiffs allege that this settlement was the result of the conclusion of the NRECA's medical consultant that it was possible that Williams had selective antibody deficiency, for which IVIG therapy is an covered treatment [AR 1647].

Shortly after this settlement, John Williams' employer switched from a self-funded plan to one insured by Aetna, effective January 1, 2011. There is no dispute that this Plan is an "employee welfare benefit plan" as defined by ERISA. Based on the Plan, Aetna is the party obligated to pay benefits and determine eligibility for benefits. This action arises out of Aetna's refusal to pay for Williams' IVIG treatments beginning in January 2011 and continuing through December 31, 2013, when John Williams' employer switched back to a self-funded plan.

Pursuant to the Court's Scheduling Orders, Aetna filed the administrative record under seal on February 7, 2014 [DE #37]. On June 27, 2014, Aetna filed its motion to supplement the administrative record with several documents inadvertently omitted from the earlier filing [DE #49]. As the Plaintiffs have not opposed this motion, the Court will grant the motion to supplement.



Before turning to the merits of this action, the Court must first decide if the Plaintiffs have exhausted their administrative remedies with respect to any or all of the Plaintiffs' claims for Williams' IVIG treatments during the relevant time frame. Although ERISA is silent as to whether exhaustion of administrative remedies is a prerequisite to bringing a civil action, it does require that every employee benefit plan give "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. The Sixth Circuit has read this requirement to mean that "the administrative scheme of ERISA requires a participant to exhaust his or her administrative remedies prior to commencing suit in federal court." Coomer v. Bethesda Hosp., Inc., 370 F.3d 499, 504 (6th Cir. 2004)(citing Miller v. Metro. Life Ins. Co., 925 F.2d 979, 986 (6th Cir. 1991)). However, "a court is obliged to exercise its discretion to excuse nonexhaustion where resorting to the plan's administrative procedure would simply be futile or the remedy inadequate." Fallick v. Nationwide Mut. Ins. Co., 162 F.3d 410, 419 (6th Cir. 1998).

In accordance with section 1133 of ERISA, the Plan at issue provides a tiered administrative review process. See 29 U.S.C. § 1133. Within 30 days after a participant submits a claim for nonemergency services, Aetna must make a "claim determination" [AR 946]. If Aetna determines that the service is covered, it will process and pay the claim pursuant to the terms, conditions and limitations of the Plan. However, if Aetna determines that a medical service or supply is not covered by the Plan, it will issue an "adverse benefit determination" instead [AR 945]. An adverse benefit determination may be based on, among other things, a person's "eligibility for coverage;" a "determination that the service or supply is experimental or investigational;" or a "determination that the service or supply is not medically necessary" [ Id. ]. In addition to stating the reason for the denial, the Plan requires the adverse benefit determination to provide information on how to appeal the decision through the two-leveled appeal process [AR 946].

To pursue a "level one" appeal, Plan participants "have 180 calendar days following the receipt of notice of an adverse benefit determination to request [a] level one appeal" [AR 947 (emphasis omitted)]. The appeal will be conducted "by Aetna personnel not involved in making the adverse benefit determination." If the decision is upheld at the level one phase, "and the reason for the adverse determination was based on medical necessity or experimental or investigational reasons, " a Plan participant may "file a level two appeal... within 60 calendar days following the receipt of notice of a level one appeal." The "level two" appeal will be conducted "by Aetna personnel not involved in making an adverse benefit determination." A decision will be issued within 30 days of receipt of the request for level two appeal [ Id. ].

Once these two levels of appeal have been exhausted, and if the denial was based on a determination that "a service or treatment is experimental or investigational, " a Plan participant may request external review by "an independent physician, selected by an External Review Organization, who has expertise in the problem or question involved" [AR 948 (emphasis omitted)]. Finally, the Plan provides that if a party wishes to initiate litigation on a contested claim, exhaustion of this process is mandatory. Specifically, the Plan provides:

You must exhaust the applicable Level one and Level two processes of the Appeal Procedure before you:
• contact the Georgia Department of Insurance to request an investigation of a complaint or appeal; or
• file a complaint or appeal with the Georgia Department of Insurance; or
• establish any:
-litigation; or
-administrative proceeding.

[ Id. ].


Williams received IVIG treatments every 3 to 4 weeks during the time period that Aetna administered the Plan (January 1, 2011 thru December 31, 2013). Aetna has denied coverage for all Williams' IVIG claims. Aetna, however, argues that the Plaintiffs only contested three of its adverse benefit determinations - for IVIG treatments in January 2011, March 2011, and January 2012. Additionally, Aetna contends that only one of those claims - January 2012 - was fully exhausted. On the other hand, the Plaintiffs argue that all Williams' claims for IVIG treatment in 2011 should be deemed exhausted due to Aetna's failure to provide material information in accordance with its fiduciary duties and ERISA laws and regulations. Because they fully exhausted the January 2012 claim, and because all remaining claims in 2012 and 2013 are identical in nature, the Plaintiffs argue that it would be futile to require exhaustion of those claims.


The Plaintiffs' first claim under the Plan for Williams' IVIG treatment was made by Williams' physician, Lawrence T. McKean, M.D, on January 4, 2011 [AR 003]. In a January 22, 2011 adverse benefits determination mailed to Plaintiff John Williams, Aetna denied the claim because it considered the treatment to be "experimental or investigational" [AR 011, 1644-45]. Dr. McKean's office filed a level one appeal of this adverse benefit determination on February 4, 2011 [AR 003], and followed up with a phone call, noted in the record as a "misdirected verbal appeal, " on February 10, 2011 [AR 011]. ...

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