Opinion
Index No. E2019007017
04-21-2023
John Doe and Jane Doe, on their own behalf and on behalf of their beneficiary son, Plaintiffs, v. Excellus Health Plan, Inc. d/b/a Excellus Bluecross Blueshield, Defendant.
For the Plaintiffs: The Maul Firm, P.C. By: Anthony F. Maul, Esq. For the Defendant: Hodgson Russ LLP By: Ryan J. Lucinski, Esq. The Guaranty Building
For the Plaintiffs: The Maul Firm, P.C. By: Anthony F. Maul, Esq.
For the Defendant: Hodgson Russ LLP By: Ryan J. Lucinski, Esq. The Guaranty Building
Christopher S. Ciaccio, J.
Plaintiffs commenced this action for breach of contract, claiming that Excellus, the administrator of their health insurance plan, wrongfully denied payment of the cost of their severely troubled teenage son's stay at two residential treatment centers.
Following extensive discovery and motion practice (in which the court dismissed a cause of action for a violation of New York General Business Law §349), plaintiffs now move to compel further discovery and/or to renew a motion to compel based on new evidence.
Excellus cross-moves for summary judgment dismissing the action in its entirety.
For the reasons below, the motion to compel discovery is denied. The motion to dismiss is denied in part and granted in part.
BACKGROUND
The following facts are not disputed.
At all times relevant to this action, plaintiffs, and their son, "Christopher," were participants in a health benefit plan ("the Plan") operated under Article 47 of the New York State Insurance Law by the Rochester Area School Health Plan II Municipal Cooperative. Excellus was "hired by the Plan to process claims under the Plan and provide other administrative services to the Plan," including claims processing, and the Plan delegated to Excellus "discretionary authority to construe and interpret the [Plan] and to make factual determinations for purposes of processing claims and appeals." This delegation included the authority to" make 'medical necessity' determinations." Excellus is not "the insurer" of the Plan nor has an obligation to advance its own funds to pay claims.
Plaintiffs adopted their son "Christopher" when he was 15 months of age, and since early childhood he has struggled with mental illness, having been diagnosed with persistent depressive disorder, generalized anxiety disorder with social anxiety and intermittent panic, reactive attachment disorder, severe oppositional defiant disorder, parent child relational problem, and various substance abuse disorders. These disorders manifest in violent confrontations, destructive behaviors, and poly substance abuse.
From July 28, 2017, through May 23, 2018, Christopher was a resident at the Ironwood Residential Treatment Center ("Ironwood") located in Maine, and claims totaling $87,590 arising from Christopher's care at Ironwood were submitted to the Plan for payment.
On September 30, 2017, Excellus requested that Ironwood provide "physician/nursing/office notes, letter form of medical necessity and psychological testing report" for purpose of determining the medical necessity of Christopher's metal health residential treatment. Ironwood responded on October 5, 2017.
On October 13, 2017, Excellus denied the claim for the period beginning July 28, 2017, on the grounds that the mental health treatment provided by Ironwood was not medically necessary, as that term is defined by the Plan.
Specifically, Excellus found that "under the Interqual 2016.2 Adolescent and Child Psychiatry criteria, the program offered at Ironwood did not meet the minimum requirements for mental health residential treatment," which, according to Interqual standards, should include several services not offered at Ironwood.
The plaintiffs filed several standard internal appeals pursuant to the terms of the Plan. Excellus issued a Final Adverse Determination(s) on May 11, 2018, on June 11, 208 and September 24, 2018.
Plaintiffs filed an "External Review Request" for an external appeal.
On October 18, 2018, the Medical Care Ombudsman Program ("MCMC"), a New York State-certified entity authorized to provide the independent external appeal requested by the plaintiffs, issued its determination denying the appeal. The conclusion of the reviewer for the period of treatment from July 28, 2017, through December 31, 2017 was that 1) "... the proposed treatment was not medically necessary"; 2) "The current facility did not provide treatment appropriate to this patient's needs"; and 3) "The minimally acceptable standard of psychiatric involvement for residential treatment includes an evaluation within one day of admission and weekly psychiatric evaluations thereafter. The documentation reviewed shows only one psychiatric follow-up note dated 11/07/2017."
The conclusion of the reviewer for the period from January 1, 2018 through to "Current" was that 1) "No, the proposed treatment was not medically necessary"; 2) "For such patients, residential treatment should begin with a thorough psychiatric evaluation and include weekly psychiatric reviews, none of which are evidenced by the documentation"; and 3) "The current facility did not provide treatment appropriate to this patient's needs."
At some point in 2018 Christopher left Ironwood and transferred first to a facility called "Viewpoint" and later to a facility in Utah called "Elevations," where he resided through November 2019.
Excellus denied coverage for Elevation based on a "failure to comply with internal guidelines" for the "Interfacility transfer of a registered inpatient from one acute care facility to another acute care facility."
In late May 2020, Excellus reversed its determination with respect to Elevations and paid the outstanding bill for services there for the period from September 2018 through September 2019. In July 2020 Excellus agreed to pay for services through November 2019.
This action ensued, claiming breach of contract arising out of the denial of payment for services at Ironwood and Elevations. Because the Elevations claim was paid shortly after the action was commenced, the plaintiffs now claim (as was asserted at oral argument in in their submissions) interest for the period of time the claim was unpaid.
DISCUSSION
Motion to Dismiss Claim For Payment Of Services At Ironwood
A defendant seeking summary judgment dismissing an action for breach of contract "bears the initial burden of demonstrating its entitlement to judgment as a matter of law by submitting evidentiary proof in admissible form" (Can Man Carting, LLC v Spiezio, 165 A.D.3d 1029, 1030 [2d Dept 2018] [internal quotations and citations omitted]; see also Wright Wisner Distrib. Corp. v Republic-Franklin Ins. Co., 67 Misc.3d 1237 [A], 2020 NY Slip Op 50777[U], *2 [Sup Ct, Monroe County 2020], citing Zuckerman v City of New York, 49 N.Y.2d 557, 562 [1980]).
In the context of a dispute over insurance coverage, "[C]ourts bear the responsibility of determining the rights or obligations of parties under insurance contracts based on the specific language of the policies" (Sanabria v American Home Assur. Co., 68 N.Y.2d 866, 868 [1986], quoting State of New York v Home Indem. Co., 66 N.Y.2d 669, 671 [1985]) and unambiguous provisions must be given their plain and ordinary meaning (United States Fid. & Guar. Co. v Annunziata, 67 N.Y.2d 229, 232 [1986]).
An insurer on a motion to dismiss a breach of contract claim carries the burden "of establishing that the construction it advances is not only reasonable, but also that it is the only fair construction" (Harrington v Amica Mut. Ins. Co., 223 A.D.2d 222, 228 [4th Dept 1996], lv denied 89 N.Y.2d 808 [1997]) as "viewed through the eyes of the average man on the street (Harrington v Amica Mut. Ins. Co., 223 A.D.2d 222, 228 [4th Dept 1996], citing Lachs v Fidelity & Cas. Co., 306 NY 357, 364, rearg denied 306 NY 941; Venigalla v Penn Mut. Ins. Co., 130 A.D.2d 974, 975 [4th Dept 1987] lv dismissed 70 N.Y.2d 747 [1987]).
Where "a contract is ambiguous, its interpretation remains the exclusive function of the court unless determination of the intent of the parties depends on the credibility of extrinsic evidence or on a choice among reasonable inferences to be drawn from extrinsic evidence" (Wright Wisner Distrib. Corp. v Republic-Franklin Ins. Co., 67 Misc.3d 1237 [A], 2020 NY Slip Op 50777[U], *2 [Sup Ct, Monroe County 2020], citing Ames v County of Monroe, 162 A.D.3d 1724, 1725-1726 [4th Dept 2018]; see also Sutton v E. Riv. Sav. Bank, 55 N.Y.2d 550, 554 [1982] [J. Fuchsberg: "Rooted in ancient history (see Essays in Anglo-Saxon Law, p. 230), this practice continues to be justified, inter alia, by "the judge's superior equipment-his education and legal experience-to interpret written instruments and to give them reliability" citing Patterson, Interpretation and Construction of Contracts, 64 Col.L.Rev. 833, 837]).
"Where the meaning of a policy of insurance is in doubt or is subject to more than one reasonable interpretation, all ambiguity must be resolved in favor of the policyholder and against the company which issued the policy" (Little v Blue Cross, 72 A.D.2d 200, 203 [4th Dept 1980]), a rule even more strictly enforced "when the language at issue purports to limit the company's liability" (Harrington v Amica Mut. Ins. Co., 223 A.D.2d 222, 228 [4th Dept 1996], citing Breed v Insurance Co., 46 N.Y.2d 351 [1978]; Thomas J. Lipton, Inc. v Liberty Mut. Ins. Co., 34 N.Y.2d 356 [1974]; Matter of Hanover Ins. Co. [St. Louis], 119 A.D.2d 529, 532 [1st Dept 1986], appeal dismissed 68 N.Y.2d 751 [1986]).
It must demonstrate that the contract is "a manifestation of mutual assent sufficiently definite to assure that the parties are truly in agreement with respect to all material terms" (Harrington v. Amica Mut. Ins. Co., 223 A.D.2d 222, 228, lv. denied 89 N.Y.2d 808).
Excellus first argues that according to the explicit terms of the Plan, the determinations of the external review agents are binding on the plaintiffs, the Plan participants.
The argument is rejected. It is well-settled that an external review determination does not preclude an insured from seeking redress in the courts, as such argument is "without merit" and "flies in the face of both the statutory scheme and the legislative intent of these provisions" Schulman v Group Health Inc., 39 A.D.3d 223, 224 [1st Dept 2007]; Nenno v Blue Cross & Blue Shield of W. NY, 303 A.D.2d 930, 932 [4th Dept 2003]; Matter of Vellios v IPRO, 1 Misc.3d 468 [Sup Court, New York County 2003]; Sprentall v Beacon Health Options, Inc., 2021 WL 1063392, *9 [SD NY, Mar. 19, 2021, No. 20CV1703 (PGG)]).
Excellus argues that it would be "reasonable" to conclude that this court should give the external review agent's determination "due deference and weight." Why or how much deference is due on a motion for summary judgment, Excellus does not say, and cites no authority for that standard of review.
In any event, the motion to dismiss as premised on the binding nature of the determinations of the external reviews is denied.
Next Excellus argues that there was no breach of contract because its determination was consistent with the clear language of the plan and must be "enforced according to the plain meaning of its terms" (Modugu v Continuum Health Partners, Inc., 3 A.D.3d 422, 423 [1st Dept 2004]).
Excellus's argument fails on two grounds.
One, the contract of insurance, the Plan, is not "complete, clear and unambiguous on its face" (Greenfield v Philles Records, Inc., 98 N.Y.2d 562, 569 [2002]).
Excellus acknowledges (or has not disputed nor can it be) that Christopher suffered from a severe mental disorder; that his needs were "extremely high" and "required 24/7 residential treatment" in a residential treatment facility as that term is defined in the Mental Hygiene Law; that the Plan allows for coverage of treatment at a residential treatment facility for mental health and substance disorders; that Ironwood is an inpatient residential treatment facility for children with mental health disorders and is licensed to provide that level of treatment by the State of Maine, a requirement of coverage under the Plan; and that the State of Maine licensing requirements are comparable to New York's for residential treatment centers serving children.
Yet, the claim for coverage of the cost of Ironwood was denied because a residential stay at Ironwood was deemed not "medically necessary" because the facility did not meet the "criteria" (actually a listing of required services) set forth in the "Interqual Behavioral Health: Child and Adolescent Psychiatry," which required, among other things, psychiatric evaluation within one day of admission and then one time per week, requirements that appear nowhere in the Plan.
The use of the Interqual criteria, Excellus argues, was consistent with the "clear language of the Plan," which allows the Plan administrator discretion to "develop or adopt standards that describe in more detail when the Plan will make or will not make payments under" the Summary Plan Description.
However, in allowing itself discretion to adopt standards not set forth in the Plan, the Plan is ambiguous at best, as the Interqual criteria, nowhere published in the Plan documents and used to disqualify Ironwood as a covered provider of residential treatment, is inconsistent with other language in the Plan that defines when residential treatment is covered.
It is "hornbook" law that the court should seek a "... a practical interpretation of the expressions of the parties to the end that there be a realization of [their] reasonable expectations" (Sutton v E. Riv. Sav. Bank, 55 N.Y.2d 550, 555 [1982], citing 1 Corbin, Contracts, § 1; 4 Williston, Contracts [3d ed], § 600, pp. 284-285; Brown Bros. Elec. Contrs. v Beam Constr. Corp., 41 N.Y.2d 397, 400 [1977] [internal quotations omitted]).
"[L]est form swallow substance" words must be accorded their "fair and reasonable meaning," so that in the "interpretative result... any promises which a reasonable person in the position of the promisee would be justified in understanding were included" (Sutton v E. Riv. Sav. Bank, 55 N.Y.2d 550, 555 [1982] [internal quotations omitted]).
Here, resolving the ambiguity in favor of the policy holder and against the defendant (Little v Blue Cross of W. NY, 72 A.D.2d 200, 203 [4th Dept 1980]) and considering the "reasonable expectations" of the policy beneficiaries, defendant has not met its burden and therefore not established its entitlement to judgment as a matter of law.
Christopher's parents, in interpreting the Plan, could have reasonably concluded that if a facility is licensed as a "residential treatment facility for children" (which Ironwood is, by the State of Maine), under licensing requirements similar to New York's for mental health treatment (which they are); that it is an inpatient psychiatric facility for the treatment of children (which Ironwood is), that it provides "active treatment under the direction of a physician" (which Ironwood does), that the participant child suffers from mental health and substance abuse disorders and is undoubtedly in need of residential treatment for mental health psychiatric and substance abuse disorders (which Excellus acknowledged), and that treatment at such a facility is "medically necessary," that the cost of treatment at Ironwood would be covered.
The applicable provisions in the Plan read as follows (NYSCEF No. 108):
CERTIFICATE RIDER... Mental Health Care and Substance Use Services
A. Mental Health Care Services. 1. Inpatient Services. We Cover inpatient mental health care services relating to the diagnosis and treatment of mental, nervous and emotional disorders comparable to other similar Hospital, medical and surgical coverage...
We also Cover inpatient mental health care services relating to the diagnosis and treatment of mental, nervous and emotional disorders received at Facilities that provide residential treatment, including room and board charges. Coverage for residential treatment services is limited to Facilities defined in New York Mental Hygiene Law Section 1.03(33) and to residential treatment facilities that are part of a comprehensive care center for eating disorders identified pursuant to Article 27-J of the Public Health Law; and, in other states, to Facilities that are licensed or certified to provide the same level of treatment (emphasis added).
"Residential treatment facility for children and youth" shall mean an inpatient psychiatric facility which provides active treatment under the direction of a physician for individuals who are under twenty-one years of age, provided that a person who, during the course of treatment, attains the age of twenty-one may continue to receive services in a residential treatment facility for children and youth until he or she reaches the age of twenty-two... (Mental Hygiene Law § 1.03 [33]).
Nothing in the language above would signal to Christopher's parents that the cost for the stay at Ironwood would not be covered, if his condition were of such severity that he needed residential treatment, in other words, to use the language of the Plan if it were "medically necessary."
In determining whether a service is "medically necessary," Excellus provides that it will "base its decision in part on a review of your medical records. Excellus will also evaluate medical opinions it receives. This could include the medical opinion of a professional society, peer review committee or other groups of physicians."
Additionally, Excellus may also consider:
A. Reports in peer reviewed medical literature;
B. Reports and guidelines published by nationally recognized health care organizations that include supporting scientific data;
C. Professional standards of safety and effectiveness, which are generally recognized in the United State for diagnosis, care or treatment;
D. The opinion of health professionals in the generally recognized health specialty involved;
E. The opinion of the attending Professional Providers, which have credence but do not overrule contrary opinions; and
F. Any other relevant information brought to Excellus's attention.
And, services will be deemed Medically Necessary only if:
A. They are clinically appropriate in terms of type, frequency, extent, site and duration, and considered effective for your illness, injury or disease;
B. They are required for the direct care and treatment or management of that condition;
C. If not provided, your condition would be adversely affected;
D. They are provided in accordance with generally accepted standards of medical practice;...
None of this language is ambiguous. It gives plan participants a reasonable expectation of whether a service will be covered or not. "Medically necessary" is not ambiguous, as measured by the legal standards set forth above (see Jocoy v Blue Cross Blue Shield of Cent. NY, 260 A.D.2d 777, 778 [3d Dept 1999]).
The problem is with the following qualification.
The Plan also discloses that "Excellus may develop or adopt standards that describe in more detail when the Plan will make or will not make payments under" the Summary Plan Description.
This open-ended discretion to adopt standards not set forth in the Plan contradicts language that says that coverage is provided for out of state residential treatment in a licensed facility. On its face, that contradiction creates an ambiguity.
The language quoted above implies that Excellus will publish those standards at some future time, not apply unwritten standards to ongoing treatment initiated before the standards were made available. Otherwise, how would a person, situated as were Christopher's parents, be able to make a reasonable determination in advance whether the cost of the residential treatment would be covered, if the "standards" are not set forth in the Plan or an amendment to the Plan? (see e.g. Little v Blue Cross of W. NY, 72 A.D.2d 200, 203-04 [4th Dept 1980]: "Such interpretation of the paragraph [defining coverage] would render it impossible for an insured to know whether the policy gave him the right to such services except upon certification of need by his doctor, [and the Plan] contains no such precondition;... the reasonable expectation of an insured from his reading of the policy must control (Tonkin v California Ins. Co. of San Francisco, Inc., 294 NY 326, 329" [1945]).
The use of standards not described in the Plan, and which serve to disqualify treatment at a facility that meets all the criteria defined elsewhere in the Plan, defeats the realization of the parties "reasonable expectations..." and changes the definition of eligibility of coverage for treatment at a residential program for children as set forth elsewhere in the Plan (Joseph v Creek & Pines, 217 A.D.2d 534, 535 [2d Dept 1995]; Donohue v Cuomo, 38 N.Y.3d 1, 13 [2022]).
Thus, Excellus has not met its burden of establishing that its construction of the Plan is "the only fair" construction (Venigalla v Penn Mut. Ins. Co., 130 A.D.2d 974, 975 [4th Dept 1987]).
Moreover, Excellus used the ambiguity inherent in the Plan description to its advantage in refusing to pay the cost of Ironwood. Rather than determine "medical necessity" based upon the non-ambiguous criteria set forth in the Plan, Excellus (as the plaintiffs point out, and the court agrees) instead "denied coverage based on its finding that Ironwood's program was insufficiently intense to constitute 'residential care'," and that "Excellus found that because Ironwood did not perform services with the precise frequency recommended by the Interqual Criteria, that meant that Ironwood was not really a residential treatment center (despite being duly licensed as one)."
Excellus does not dispute that the Interqual standards formed the basis for the denial of coverage, for as defense counsel stated in its Affirmation in support of the summary judgment motion, "As a basis for its decision, Excellus relied on Interqual guidelines to conclude that Christopher's treatment was not 'medically necessary'..." (NYSCEF # 80).
In fact, it appears from the reports of reviewers that if even as few as two of the procedures are not provided (here, the 24-hour examination requirement, and the "parenting" session) the patient cannot obtain coverage for the cost of treatment at the licensed, residential treatment facility. Gina M. Nolan, the Excellus "supervisor of advocacy," states in her affidavit that "Utilizing the Interqual review criteria, Excellus found no evidence that Christopher had been evaluated by a psychiatrist at any time during his admission, and that parenting courses were optional and were provided by a third-party."
Ms. Nolan goes on to state that Excellus's "Final Adverse Determination" from Plaintiffs' "Level One Member Appeal," which denied coverage, was based on "Interqual Guideline 2016.2 Behavioral Health: Child and Adolescent Psychiatry."
The court finds, specifically, that the determination as to coverage at every level of review was based on the application of Interqual criteria to the Ironwood facility. There was limited or no articulation of whether residential care at Ironwood would be beneficial for Christopher. There was no determination, beyond the application of the checklist, as to whether the care at Ironwood was "medical necessary" for Christopher. The use of the words "medically necessary" by reviewers was formulaic and did not reflect a reasoned application of the standards that Excellus does explicitly inform its beneficiaries it may use to determine medical necessity.
The reviewing physicians repeatedly refer to "evidence-based guidelines," which signal reliance on the Interqual criteria.
Even more importantly, there is no discussion of Christopher's condition, whether the treatment was beneficial for all or a part of his stay at Ironwood. The court agrees with plaintiffs, that the Plan essentially ruled that "services could never be 'medically necessary' [at Ironwood] regardless of the individual needs of the patient," and that such "is not a genuine 'medical necessity' determination."
An external reviewer stated that treatment at a "residential care facility" is only appropriate for a "patient who has been admitted or is expected to be admitted to a psychiatric residential treatment center." That qualification appears nowhere in any Plan language.
Excellus argues that the validity of the Interqual guidelines, and its use in determining medical necessity, was upheld Judge Elizabeth Wolford in Julie L. v Excellus Health Plan, Inc., 447 F.Supp.3d 38, 43 (WDNY 2020). There the plaintiff sued to reverse a determination by Excellus Health Plan, Inc. that denied coverage for their child at residential treatment center called "Blue Fire," an "outdoor behavioral program for teens and young adults with mental health or substance abuse problems" located in Idaho. Their child had suffered from severe mental disorders since age four. Excellus in denying coverage cited the "InterQual Level of Care Criteria," (id.), which Judge Wolford referenced as "nationally recognized, third-party guidelines." (id. at footnote 3).
Not to take away from Judge Wolford's considerable erudition, but the decision in Julie L does not apply here. First, the claim of the plaintiffs in Julie L. rested on a determination of whether the Excellus Health Plan, Inc.'s denial was "arbitrary and capricious," because the plan in question was governed by ERISA, not whether it had breached a contract, one that was subject to an analysis as to whether it was ambiguous. Secondly, as noted in Judge Wolford's decision, Excellus Health Plan, Inc. did a detailed analysis as to why it denied coverage. It did not in formulaic fashion apply the Interqual criteria and deny coverage. For instance, it noted that "the clinical information did 'not indicate a severe mental health disorder with symptoms,' nor did it indicate "that there was any substance abuse and/or illegal activity, such as arrest" (id) and that "the family was very supportive, and that it was "not clear... that (plaintiff's child) could not have been managed successfully in a less structured level of care, such as mental health partial hospitalization" (id.).
Here defendant concedes that Christopher suffers from severe mental disorder, and that he could not be managed at home. Coverage was denied because Ironwood fulfill Interqual's "checklist," specifically, that it did not provide for "parenting" sessions and a psychiatric evaluation within 24 hours, despite Christopher having been seen prior to his admission by a physician.
Excellus has not met its burden of establishing that its decision to deny coverage was made based on unambiguous provisions in the Plan (i.e., the definition of "medical necessity"). Therefore, on its motion for summary judgment it has not established entitlement to judgment as a matter of law (see Jocoy v Blue Cross Blue Shield of Cent. New York, 260 A.D.2d 777, 778 [3d Dept 1999]).
Excellus's claim that it did not breach the contract fails for one other reason.
In using the Interqual standards to essentially de-classify Ironwood as a "residential care facility," Excellus arguably violated the federal Mental Health Parity and Addiction Equity Act ("MHPAEA"), codified at 29 USC § 1185(a), and its implementing regulations, which require that plans providing coverage for medical treatment at skilled nursing facilities must also cover analogous mental health treatment in residential facilities on substantially the same terms (see e.g. Gallagher v Empire HealthChoice Assurance, Inc., 339 F.Supp.3d 248, 257 [SD NY 2018] [collecting cases]).
In Gallagher the health insurer told its Plan participants, the parents of a teenage girl who struggled with "mental health issues, including depression, low self-esteem, suicidal ideation, panic disorder, and drug use," that the Plan language was interpreted as excluding "wilderness therapy," even though the plan language provided for coverage of "inpatient mental health care services relating to the diagnosis and treatment of mental, nervous and emotional disorders received at Facilities that provide residential treatment, including room and board charges" (Gallagher v Empire HealthChoice Assur., Inc., 339 F.Supp.3d 248, 252 [SD NY 2018]).
The court denied a motion to dismiss, holding that the allegation that a "blanket exclusion for services rendered at wilderness treatment centers is a separate treatment limitation applicable only to mental health benefits" sufficiently states at the pleading stage a violation of the Mental Health Parity Act (Gallagher v Empire HealthChoice Assur., Inc., 339 F.Supp.3d 248, 258-59 [SD NY 2018]).
"Although there is no private right of action under the Parity Act," (Gallagher v Empire Health Choice Assur., Inc., 339 F.Supp.3d 248, 255 [SD NY 2018]) in utilizing the Interqual criteria Excellus created a de facto "blanket exclusion" for less intensive facilities like Ironwood, and arguably violated the Mental Health Parity Act.
At the very least, use of the Interqual criteria, in this instance, is a violation of the Mental Health Parity Act and defeats Excellus's entitlement to judgment as a matter of law. In other words, excise the Interqual criteria from the reasoning that resulted in denying the cost of treatment, and Excellus would have no reason not to pay.
Claim For Interest For Late Payment Of Services At Elevations Residential Treatment Facility
In Count I of the amended complaint plaintiffs claim that Excellus breached its contract because it denied payment for the cost of Christopher's residential treatment not only at the Ironwood facility but also at Elevations, a residential treatment facility in Utah, where Christopher was interned from September 2018 through November 2019. They paid, according to the amended complaint, the costs themselves, and now seek a judgment "A. Awarding Plaintiffs unpaid benefits... plus interest."
The Ironwood claim and the Elevations claim are distinct, however, the plaintiffs have inartfully chosen to plead them in the same "count." The distinctions between the claims were made during oral argument.
In May 2020 Excellus reversed its denial of coverage for all dates of service at Elevations from September 2018 through September 2019, then in July 2020 reversed its denial of coverage for dates of service in October and November 2019. It paid the claims by reimbursing the plaintiffs for the money they paid "out of pocket." It is understood that there are no "unpaid benefits."
Nonetheless, plaintiffs argue (as articulated at oral argument) that they are still owed interest on the payments that should have been made earlier, under either CPLR 5001 ("Interest to verdict, report or decision") or Insurance Law § 3224-a ("Standards for prompt, fair and equitable settlement of claims for health care and payments for health care services"), also known as the New York Prompt Payment Law.
Excellus has moved to dismiss Count I as it applies to the claim for interest on the delayed payment of the Elevations claims.
It first argues that Insurance Law § 3224-a (a) applies only to "insurers," and not to "plan administrators," such as Excellus. That argument is rejected, although little has been written directly addressing the issue (perhaps because the answer is obvious). The statute would have little "teeth" and reach if plan administrators were excluded from its scope (see Neurological Surgery, P.C. v Aetna Health Inc., 511 F.Supp.3d 267, 290 [ED NY 2021] [no issue raised or discussed as to the applicability of the New York Prompt Payment law to defendant, a plan administrator]; Benesowitz v Metropolitan Life Ins. Co., 8 N.Y.3d 661, 665 [2007] [action against plan administrator MetLife for denial of benefits pursuant to Insurance Law § 3234 (a) (2), which references insurers]).
Plaintiffs assert that they are entitled to pre-judgment interest under CPLR 5001 because Excellus had the use of their money for a "specified period of time" (Love v State, 78 N.Y.2d 540, 544 [1991]), and it cites, in addition to Love, to a number of cases, none of which are applicable, because all involve the rendering, as the statute plainly requires in order for the obligation to pay interest arise, of a "verdict, report or decision."
For a judgment awarding the plaintiffs interest on the Elevations claim, they would have to prevail on the breach of contract claim and take a judgment for the full amount owed, which would include interest dating back to the breach, then reduce the judgment by the amount reimbursed. No authority has been cited for the proposition asserted by the plaintiffs that the court can look at Count I as it applies to the Elevations claim and treat it as one for "declaratory judgment" and award interest in the absence of a judgment or verdict. The court declines to make new law on this issue.
With respect to the claim under New York's Prompt Payment Law (Insurance Law 3224-a [a]), that statute provides that an "insurer or organization or corporation licensed or certified pursuant to article forty-three or forty-seven of this chapter or article forty-four of the public health law" shall pay claims submitted to it within 30 days (or 45 days if the claim was submitted on paper). If claims not otherwise excepted because the obligation to pay is not "reasonably clear" are not paid within the 30 days, then "each claim or bill for health care services processed in violation of this section shall constitute a separate violation (emphasis added)," in which case the claim amount shall be paid plus interest.
Plaintiffs argue that their entitlement to have the cost of treatment at Elevations paid was "reasonably clear." Putting that issue aside, no authority has been cited (and none can be found) that supports the right to a distinct and separate cause of action for interest alone under the Prompt Payment Law for late payment of claims.
Moreover, the statute's inclusion of the use of the word "violation" implies a determination, or decision. Interest is surely owed if an action is commenced, and a favorable result is achieved. Interest can be gotten through negotiation as well. The plaintiffs here could have demanded interest before taking payment. Apparently, they did not. As no precedent has been provided to support the continuation of an action on a claim that has already in a sense been settled, simply to secure a judgment for the interest, standing alone, the motion to dismiss the interest-only claim is granted.
A similar statute is Insurance Law § 5106, providing for interest (and attorney fees) on late payment of "no-fault" claims.
Accordingly, Excellus has met its burden of demonstrating entitlement to judgment as a matter of law on that part of Count I relating to the recovery of interest for failure to timely pay the Elevations claim.
The court adds, that if a judgment for interest was under existing case law obtainable, the plaintiffs have established that there is a material issue of fact as to whether the Excellus determination to deny payment for the cost of the stay at Elevations was "reasonably clear." Excellus claims that an "additional 1800 pages of medical records were received and... reviewed in support of the claim," and that based on the new records, the determination was made that the treatment at Elevations was "medically necessary." Plaintiffs have shown that the "new records" consist of records generated after the date of the determination, as well as all of the "old records." In other words, Excellus reversed its coverage position based on records it had at the time it made its initial determination, creating at least a question of fact as to whether the decision to deny was "reasonably clear." But this is a moot point on the interest claim.
Motion to Compel and to Renew
By a prior motion dated July 28, 2021, Plaintiffs sought a response to Interrogatories numbered "4" and "7," and to document requests numbered "6" and "11." The court granted the requests in part, directing defendant (as a response to document request "6,") to turn over 1800 pages of records that the defendant had reviewed as the basis for reversing the Elevations claim, and to make available for deposition its employee Cindy Drexler, (as requested in Interrogatory "4") to "describe the basis of Excellus's reversal of its denial of coverage for care Christopher received at Elevations during the Relevant Period, including how, when and why such decision was made."
The court denied the request for documents in number "11," and the interrogatory numbered "7." The document request and the interrogatory used identical language, seeking information about a "regulatory inquiry or investigations concerning the criteria used by Excellus during the Relevant Period to determine the medical necessity of residential mental health treatment, including but not limited to, the Interqual Behavioral Health Criteria, including Excellus's response thereto."
Subsequently, plaintiffs obtained records from the New York State Office of Mental Health (pursuant to a Freedom of Information request) that demonstrated that the State of New York had reviewed Excellus's "critical review criteria and associated policies and procedures for adult and child mental health services." Counsel for the plaintiffs suggests this means the State "rejected Excellus's use of the Interqual criteria for residential care."
Plaintiffs now move to compel a response (previously denied) to document request number "11" and interrogatory number "7," on the ground that "Plaintiffs are entitled to full discovery regarding the State's assessment and what Excellus has said and done in the wake of that assessment. That information is critical to assessing whether Excellus's reliance on the Interqual criteria was permitted by the Plaintiffs' insurance contract." The motion is also styled as a motion to renew.
The lateness of which is excused given that plaintiffs only received information from the State occurred recently.
The motion is denied. The State did not invalidate the Interqual criteria, in fact, it stated in an email that it was "extending your conditional approval to continue using your current clinical review criteria..." and the extensions were repeated through March 31, 2022. No doubt the State has concerns with the Interqual criteria, namely, that it might be applied "in a manner which is not comparable to and more restrictive than the plan's utilization management approach to medical... treatment," but the extensions do not indicate a wholesale rejection.
It is difficult to discern from the language of the document request and the interrogatory what more could be achieved by granting the requests. The subject materials are not relevant to the substantive issue of whether the contract is ambiguous and whether, read in the light most favorable to the plaintiffs, it was breached. The requests, identical in language, are also overbroad and burdensome, as they seek information not to this case but to the entire range of Excellus's regulatory response and obligations.
Plaintiffs also move to compel a deposition by someone other than Cindy Drexler, who testified that she had no knowledge of why Excellus ultimately paid the Elevations' claim. The request is denied, as the court rules elsewhere in this Decision that there is no viable cause of action for interest on a claim that has been paid that has not gone to verdict or decision.
CONCLUSION
The motion to dismiss the breach of contract claim based on non-payment of the cost of services at Ironwood is DENIED.
The motion to dismiss any claim for interest arising from the delayed payment of services for the cost of treatment at Elevations is GRANTED.
The motion to compel and/or renew is DENIED in its entirety.