Zalduondo v. Aetna Life Insurance

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
)
CAROLINA ZALDUONDO )
)
Plaintiff, )
)
v. ) Civil No. 10-1685 (RCL)
)
AETNA LIFE INSURANCE CO. )
)
Defendant. )
)
MEMORANDUM OPINION
Plaintiff Carolina Zalduondo brings this ERISA action against Aetna Life Insurance
Company, alleging improper denial of coverage for her arthroscopic hip surgery. Defendants
now move for summary judgment. Upon consideration of the defendant’s Renewed Motion [55]
for Summary Judgment, the plaintiff’s Opposition [58] thereto, and the defendant’s Reply [59]
the Court will GRANT the Motion and dismiss the case with prejudice.
I. BACKGROUND
Plaintiff Zalduondo is a member of the WPP Group USA, Inc. employee healthcare
benefit plan, of which defendant Aetna is a service provider that administers and adjudicates
claims for benefits. Zalduondo began suffering from extreme pain in her hip in 2009, rendering
her almost unable to walk. Pl.’s Statement of Undisputed Material Facts in Supp. of its
Opposition to Def.’s Renewed Mot. for Summ. J. (“Pl.’s SUMF”) ¶ 37, ECF No. 58. She visited
orthopedist Dr. Terri McCambridge, who correctly identified the source of the pain as two labral
tears in Zalduondo’s hip, which needed to be repaired through arthroscopic hip surgery. Id. at
¶ 39. McCambridge referred Zalduondo to Dr. Andrew Wolff, an orthopedic surgeon who was
widely regarded as an expert in arthroscopic hip surgery. Id. Zalduondo discovered that Aetna
did not cover Dr. Wolff as an in-network physician, however, and she sought referrals for other
surgeons who would be covered at the in-network rate. Administrative Record (“AR”) 67.
While Dr. Wolff was an overwhelming favorite, other orthopedic surgeons were suggested; none
of which were in Aetna’s network. Id.
Concluding that none of the in-network orthopedic surgeons in the area could perform
her surgery, Zalduondo requested that Aetna cover Dr. Wolff’s services at the in-network rate.
Pl.’s SUMF ¶ 42. On September 1, 2009, Aetna denied her request for coverage because it
concluded that in-network providers were available who could perform the surgery. AR 81.
Aetna referred her to DocFind, Aetna’s online directory of in-network physicians, and provided
three names of in-network providers listed on DocFind that Aetna claimed could treat her
condition. Id. Zalduondo contacted the offices of these physicians. Id. at 67–68. According to
her, two of the offices informed her that the doctors did not perform arthroscopic hip surgery and
the other office informed her that the doctor was a pediatric orthopedic surgeon and “was not
able to confirm his ability” to perform Zalduondo’s surgery. Id.
Based on this knowledge, Zalduondo proceeded to have Dr. Wolff perform the surgery
on September 16, 2009. Pl.’s SUMF ¶ 47. Aetna responded by covering some of Dr. Wolff’s
services at a reduced, out-of-network rate and denying coverage of the labral repairs entirely
because it deemed them “experimental or not medically necessary.” AR 260–279. Zalduondo
appealed the former decision on October 1, 2009, and provided Aetna with an explanation of
why the three in-network doctors it recommended were insufficient. Id. at 67–68. On November
18, Aetna affirmed its appeal, stating that it had reviewed DocFind and had again concluded that
Zalduondo had in-network options available to her that could have performed the surgery
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instead. Id. at 85. As examples, it listed two new doctors, Brian Evans and Mark Zawadsky,1
who shared an office. Id. The administrative record indicates that two people in this office
informed Aetna “that these MDs perform [h]ip arthroscopies with labral repairs.” AR 60. Aetna
also informed Zalduondo that she had 60 days to file a second-level appeal. Id. at 87.
On January 8, 2010, Zalduondo sent Aetna a short letter that she said “serv[ed] as [her]
official request for a second level appeal.” AR 88. However, she stated that she had retained
counsel to assist her with the appeal, which she said would include challenges to “several of
Aetna’s more recent decisions regarding coverage in this matter,” and asked for an extension to
file the appeal. Id. Rather than grant her request for an extension, Aetna apparently construed
this letter as the second-level appeal itself, because on January 27, 2010, it mailed Zalduondo a
letter informing her that it denied her second-level appeal. Id. at 99. The letter again referred
her to Mark Zawadsky as an example of a physician who could treat her injury. Id.
Zalduondo’s newly retained counsel, Denise Clark, then filed her client’s official second-
level appeal on February 4, after the 60-day window for filing the appeal had expired. Id. at 107.
Clark explained that the office of Drs. Zawadsky and Evans informed Zalduondo that neither
doctor performed hip arthroscopies to make labral repairs.2 Id. While the title of her letter
specifically indicated that it was appealing “the denial of in-network preferred benefit level,” Ms.
Clark also included a section challenging Aetna’s refusal to cover the labral repairs because of
their being deemed “experimental or not medically necessary.” Id. at 108. Aetna responded to
1
Before visiting Dr. McCambridge, Zalduondo twice visited Dr. Zawadsky, who misdiagnosed her injury. Pl.’s
SUMF ¶ 38.
2
In her letter Clark noted that she called the office herself and was told that while Dr. Zawadsky specialized in knee
replacements, he had performed 25 hip arthroscopies over the last ten years. Id. She did not deem this to be enough
for him to be considered qualified, however. Id.
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this letter on February 15, 2010, stating that it had received the Clark letter but that Zalduondo
had exhausted all her appeal rights after the January 27 final decision. Id. at 103.
Zalduondo invoked this Court’s jurisdiction by filing a claim under ERISA challenging
both Aetna’s refusal to pay for Dr. Wolff’s services at the in-network preferred benefit rate and
Aetna’s denial of coverage of the labral repairs for being experimental.3 On April 24, 2013, this
Court denied Aetna’s motion for summary judgment without prejudice, ruling that it could not
yet determine the level of discretion it owed to Aetna’s decisions because Aetna had not yet
supplied the official plan document. Aetna has since supplemented the record with this
document [54] and filed a renewed motion for summary judgment [55].
II. LEGAL STANDARD
A. Summary Judgment
“[C]ourt[s] shall grant summary judgment if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a); Accord Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). The
mere existence of any factual dispute will not defeat summary judgment; the requirement is that
there be no genuine dispute about a material fact. Anderson, 477 U.S. at 247–48. A fact is
“material” if, under the applicable law, it could affect the outcome of the case. Id. A dispute is
“genuine” if the “evidence is such that a reasonable jury could return a verdict for the non
moving party.” Id. If the moving party satisfies its burden of demonstrating the absence of a
genuine issue of material fact, the burden shifts to the nonmoving party to present specific facts
showing a genuine issue for trial. Fed.R.Civ.P. 56(e); Anderson, 477 U.S. at 252.
3
A more complete procedural history of this case is available in this Court’s previous opinion, Zalduondo v. Aetna
Life Ins. Co., 2013 WL 1769718 (D.D.C. Apr. 25, 2013).
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B. ERISA Standard of Review
This Court has jurisdiction to hear this matter under the Employee Retirement Income
Security Act of 1974, Pub.L.No. 93-406, 88 Stat. 829 (codified in scattered sections of 29
U.S.C.) (“ERISA”). ERISA provides participants of employee benefit plans with “a panopoly of
remedial” devices when they believe they have been wronged under the terms of their plans.
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 108 (1989). Zalduondo specifically
invokes 29 U.S.C. § 1132(a)(1)(B), which empowers her to bring a civil action “to recover
benefits due to [her] under the terms of [her] plan, to enforce [her] rights under the terms of the
plan, or to clarify [her] rights to future benefits under the terms of the plan.”
In Firestone, the Supreme Court held that district court review of a denial of benefits
under § 1132(a)(1)(B) is to be de novo “unless the benefit plan gives the administrator or
fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of
the plan. Firestone, 489 U.S. at 115. When the plan grants this discretion, courts must apply a
“more deferential arbitrary and capricious standard.” Pettaway v. Teachers Ins. & Annuity Ass’n
of Am., 644 F.3d 427, 433 (D.C. Cir. 2011). Our circuit applies this standard simply by asking
whether the agency’s decision was reasonable. Id. at 435 (quoting Wagener v. SBC Pension
Benefit Plan––Non Bargained Program, 407 F.3d 395, 402 (D.C. Cir. 2005)); Block v. Pitney
Bowes, Inc., 952 F.2d 1450, 1452 (D.C. Cir. 1992). “A decision will be found . . . reasonable if
it is the result of a deliberate, principled reasoning process and if it is supported by substantial
evidence.” Buford v. UNUM Life Ins. Co. of Am., 290 F. Supp. 2d 92, 100 (D.D.C. 2003)
(internal quotation marks omitted); see also Ass’n of Data Processing Serv. Org. v. Bd. of
Governors of Fed. Reserve System, 745 F.2d 677, 684 (D.C. Cir. 1984) (Scalia, J.) (equating the
substantial evidence test with the arbitrary or capricious test). “Substantial evidence means
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‘more than a scintilla but less than a preponderance.’” Buford, 290 F. Supp. at 100 (quoting
Leonard v. Southwestern Bell Corp. Disability Income Plan, 341 F.3d 696, 701 (8th Cir. 2003)).
When determining whether the evidence was substantial, courts may only consider materials that
were before the plan administrators at the time they made the decision. Block, 952 F.2d 1450.
III. ANALYSIS
A. Deferential Review
The Court finds, and Plaintiff concedes, that the plan gives Aetna the discretion described
in Firestone, thus entitling it to review under the arbitrary and capricious standard. In its
previous opinion, this Court observed that the Summary Plan Description (“SPD”) explicitly
conferred this discretion, stating “the Plan Administrator has delegated to Aetna the discretionary
authority to construe and interpret the terms of the Plan, and to make final, binding
determinations concerning availability of benefits under the Plan.” Zalduondo, 2013 WL
1769718, at *2 (quoting AR 248). However, in light of Cigna Corp. v. Amara, 131 S.Ct. 1866(2011) the Court doubted whether it could rely on the SPD alone in the absence of the actual plan
document. Zalduondo, 2013 WL 1769718, at *14 (observing that the Court in Amara rejected
enforcement of the terms of SPDs as part of the the terms of the Plan itself). Consequently, it
deferred judgment on whether the arbitrary and capricious standard applied until Aetna could
demonstrate that the Plan documents did not conflict with the SPD. Id.Having reviewed the Plan documents, the Court and both parties now agree that the SPD
is incorporated within the Plan. The Plan states “[t]he benefits offered under the Plan may be
described in and subject to . . . summary plan descriptions . . . which are . . . incorporated in the
Plan by reference.” Thus, the SPD’s grant of discretion to Aetna will be considered part of the
Plan for the purposes of our analysis and we will only review Aetna’s denial of coverage under
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an arbitrary and capricious standard. See Pettaway v. Teachers Ins. & Annuity Ass’n of Am., 644
F.3d 427, 433–34 (D.C. Cir. 2011) (looking, post-Amara, to both the SPD and the Plan document
to determine the level of deference owed to the claims adjudicator).
B. Reduced Coverage of Dr. Wolff’s Services at the Out-Of-Network Rate
The evidence supporting Aetna’s decision not to cover Dr. Wolff’s services at the in-
network rate is substantial enough to meet the reasonableness test required by our circuit. Aetna
based its determination that Zalduondo could have had her surgery performed by in-network
doctors on a review of its DocFind directory. When Aetna chose not to cover Dr. Wolff’s
services at the in-network rate, it had not yet been informed that all three of the orthopedic
surgeons it previously recommended based on DocFind were not actually options. Zalduondo
did not supply this information until her first appeal, after the surgery was complete. If Aetna,
when it reviewed this appeal, had again simply assumed that any orthopedic surgeon listed on
DocFind could have performed her surgery, Aetna’s decision at this stage might have been
unreasonable. Aetna relied on more, however. The administrative record indicates that two
people in the Zawadsky and Evans office told Aetna that the doctors performed hip arthroscopies
with labral repairs.4 Such evidence rises above a “scintilla,” and thus makes Aetna’s decision
reasonable.
Aetna’s second-level appeal review also satisfies this test. While it may have been
unreasonable to construe Zalduondo’s January 8 letter as her actual appeal and not a request for
an extension, Aetna was under no obligation grant the requested extension, even if it had so
4
The truth of this information is not for the Court to decide. The Court must only ask whether Aetna had substantial
evidence when it determined that Drs. Zawadsky and Evans could have performed the surgery. At the time, Aetna
had no evidence contradicting this information.
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construed it. By the time Zalduondo’s counsel sent the actual second-level appeal on February 4,
the 60-day window to file the appeal had already expired. Thus, Aetna was under no obligation
to even conduct this second review and could have simply denied the appeal after letting the time
limit lapse.5 The Court cannot review the information presented in the letter from Zalduondo’s
counsel for these purposes because it was not before Aetna at the time it made its second-level
appeal decision and was sent after the 60-day window had expired. Consequently, Aetna’s
decision to deny coverage of Dr. Wolff’s services at the in-network rate was not arbitrary or
capricious because it was based on substantial evidence.
C. Denial of Coverage for the Labral Repairs as “Experimental or Not Medically
Necessary”
Finally, Zalduondo challenges Aetna’s refusal to cover any of the labral repair costs
because it deemed them to be “experimental or not medically necessary.” Aetna objects that she
has not exhausted administrative remedies with regard to this claim because her formal appeals
only concerned the reduced coverage of Dr. Wolff’s services at the out-of-network rate.
Zalduondo claims that she has constructively exhausted her administrative remedies because she
sought an appeal of this determination in the February 4 letter from Zalduondo’s counsel and
received in response a letter stating that all appeal rights had been exhausted.
While ERISA does not explicitly require exhaustion of administrative remedies, it is well
established that plaintiffs seeking to recover benefits under ERISA plans must exhaust available
5
The evidence before Aetna at the time it conducted this second review was not materially different from the
evidence before it during the first review. Zalduondo had not yet informed Aetna that Zawadsky and Evans’ office
told her they could not perform the surgery. Aetna did not have this information until Zalduondo’s attorney supplied
it after Aetna’s second-level review was complete. The information is therefore outside the scope of our review.
Thus, even if the decision to conduct the review based on Zalduondo’s letter was unreasonable, the review itself
would not have been unreasonable.
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administrative remedies under those plans before bringing a lawsuit in federal Court. Commc’ns
Workers of Am. v. Am. Tel. & Tel. Co., 40 F.3d 426, 431–32 (D.C. Cir. 1994). The exhaustion
requirement “prevents premature or unnecessary judicial interference with plan administrators.”
Cox v. Graphic Commc’n Conference of Int’l Bd. of Teamsters, 603 F.Supp. 2d 23, 29 (D.D.C.
2009). Furthermore, requiring plan participants to exhaust their administrative remedies enables
plan administrators or fiduciaries to manage plans efficiently, correct their errors outside of
court, interpret applicable plan provisions, and assemble a factual record that would assist a
reviewing court in evaluating their actions. Makar v. Health Care Corp. of Mid-Atlantic (Care
First), 872 F.2d 80, 83 (4th Cir. 1989). Participants who request a review and do not receive a
response are deemed to have constructively exhausted their administrative remedies and can
proceed directly to court for a determination of their claim on the merits. Heller v. Fortis
Benefits Ins. Co., 142 F.3d 487, 492 (D.C. Cir. 1998); see also 29 C.F.R. § 2560.503-1(l)
(allowing constructive exhaustion of administrative remedies when there has been a failure to
follow reasonable claims procedures).
The Court agrees with Aetna that the letter from Zalduondo’s counsel does not suffice as
a separate appeal of the determination that the procedure was experimental. The title of this
letter was “Second Level Appeal of the Denial of In-Network Preferred Benefit Level,” making
no reference to the refusal to cover the labral repairs in their entirety. That objection was only
raised in a single paragraph toward the end of the letter. To consider paragraphs enmeshed in
letters about other topics to be a separate appeal––as the plaintiff asks we do here––would place
an unreasonable burden on claims adjudicators. Under such a framework, Aetna would need to
initiate a brand new appeal procedure sua sponte every time an appellant raises a collateral
argument in an appeal letter to avoid waiving the defense of exhaustion of administrative
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remedies. If Zalduondo wanted to raise a separate appeal, she needed to be much more explicit
about her intent. Consequently, Zalduondo has not exhausted administrative remedies with
respect to this question.
IV. CONCLUSION
In summary, because Aetna’s refusal to cover Dr. Wolff’s services as “in-network” was
not unreasonable and because Zalduondo has not exhausted her administrative remedies with
respect to the determination that her labral repairs were experiemental, the Court must grant
Aetna’s motion for summary judgment and dismiss this case with prejudice.
A separate Order consistent with this Memorandum Opinion shall issue this date.
Signed by Royce C. Lamberth, Chief Judge, on July 10, 2013.
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