In an unpublished memorandum decision, the Ninth Circuit in R.R. v. California Physicians’ Service d/b/a Blue Shield of California, affirmed the insurer and administrator’s denial of benefits for a dependent’s residential mental health treatment under an ERISA‑governed plan. The court applied abuse‑of‑discretion review and concluded that the denial was supported by the plan’s medical‑necessity criteria and the administrative record. The dissent, however, argued that the majority failed to meaningfully account for a structural conflict of interest and for the administrator’s handling of treating‑provider evidence and prior failed lower levels of care.

Background
R.R. was covered under an employer‑sponsored ERISA plan administered and insured by Blue Shield. His son, E.R., was a covered dependent who received care at a residential mental health treatment facility. The administrator denied coverage for E.R.’s residential stay on the ground that the treatment was not “medically necessary” under the plan. The plan delegated to the administrator, Blue Shield, discretionary authority to interpret plan terms and determine eligibility for benefits, and the administrator applied the Magellan Care Guidelines (MCG) to define medical necessity for adolescent residential treatment.

R.R. and E.R. sued under ERISA § 502(a)(1)(B), seeking payment of benefits. The district court for the Northern District of California applied abuse‑of‑discretion review, rejected the challenge to the administrator’s medical‑necessity determination and procedures, and granted judgment to the administrator. The plaintiffs appealed, and the Ninth Circuit affirmed in a 2–1 decision.

Legal Reasoning

Standard of Review

The majority first confirmed that abuse‑of‑discretion review applied because the plan expressly granted the administrator discretion to construe the plan and determine eligibility to receive plan benefits. Under prior case law, such language triggers deferential review of benefit determinations in ERISA cases.

Conflict of Interest

The court then addressed the administrator’s structural conflict of interest, noting that it both decided claims and paid benefits. Although the district court acknowledged but did not analyze the conflict as the plaintiffs never raised the issue, the Ninth Circuit elected to consider it for the first time on appeal.

The record showed that the administrator retained an independent physician to review the appeal, and the appellants offered no evidence that the reviewer was financially dependent on the administrator or that the administrator had a history of biased claim administration. Because the appellants bear the burden to produce evidence warranting heightened skepticism, the majority concluded that the administrator’s conflict carried little, if any, practical weight in the analysis.

Analysis

Turning to the merits, the court focused on the MCG, which the administrator used to define “medically necessary” for residential treatment. For adolescents, the MCG required either danger to self or others due to specified symptoms, or a behavioral health disorder with moderately severe psychiatric, behavioral, or comorbid conditions combined with serious dysfunction in daily living. The majority concluded that the administrator did not abuse its discretion in determining that E.R. did not meet those criteria when he was admitted to residential treatment or at any time during his stay: the treatment records did not show that E.R. satisfied the admission criteria under the MCG, and the independent physician reviewer likewise found that residential treatment was not medically necessary. Under the Ninth Circuit’s abuse‑of‑discretion framework, the court may affirm if the administrator’s decision is grounded in any reasonable basis and is not illogical or implausible in light of the record. The majority held that standard was met.

The appellants made several arguments to the contrary, which the court rejected. First, the appellants argued the administrator improperly relied upon the facility records because they were based on E.R.’s non-credible self-reports. However, the court held it was not an abuse of discretion to rely on such contemporaneous reports.

Second, the appellants argued that the administrator improperly discounted letters from E.R.’s treating psychiatrist, psychologist, and other providers, as well as letters from his parents, all of which they argued supported the medical necessity of residential treatment. Citing to the Supreme Court’s decision in Black & Decker Disability Plan v. Nord, 538 U.S. 822 (2003), the majority held that ERISA does not impose a treating‑physician rule and that administrators need not give special weight to treating providers or explain in detail why they reject their opinions. The treating-provider letters, the majority noted, were prepared after admission, did not reflect contemporaneous evaluations at the decision point, and did not explicitly apply the MCG criteria.

The appellants further contended that the administrator’s denial letters did not substantively respond to the treating‑provider and parental letters and thus failed ERISA’s procedural requirement of a full and fair review. Again citing to Nord, the majority held that ERISA does not impose any obligation to affirmatively respond to a treating provider’s opinion. The majority went on to reiterate that administrators must provide reasons sufficient to permit a meaningful dialogue but are not required to address every piece of evidence or argument. Even if there were minor procedural irregularities, they were not “wholesale and flagrant” violations that would warrant de novo review or alter the outcome under abuse‑of‑discretion review.

Finally, the appellants argued that the administrator improperly advanced a post hoc rationale in litigation by relying on record evidence not cited in its denial letters. The court distinguished between new rationales and additional factual support for an existing rationale. Because the administrator consistently maintained that residential care was not medically necessary under the plan and simply cited additional record evidence in court to support that position, the panel held there was no improper post hoc justification.

Judge Paez dissented. He agreed that abuse‑of‑discretion review applied but argued that the majority failed to give meaningful effect to the conflict of interest and to ERISA procedural expectations. In his view, the administrator’s structural conflict, its failure to substantively engage with highly qualified treating‑physician evidence, and its failure to grapple with evidence of prior unsuccessful lower levels of care all warranted greater skepticism. He emphasized that the treating providers consistently opined that residential treatment was necessary after lower‑intensity interventions had failed, and that their letters were detailed and reliable, even though they post‑dated admission. He also criticized the denial letters for not addressing evidence that partial hospitalization had previously been attempted and unsuccessful, despite the MCG’s requirement to consider whether treatment at a lower level of care is feasible. Applying “some” skepticism warranted under prior case law, Judge Paez concluded that the record showed E.R. met at least the MCG criterion based on serious dysfunction in daily living and would have found an abuse of discretion or, at minimum, remanded for reconsideration under a less deferential application of the standard.

Our Take
Although the decision is unpublished and not precedential, it provides evidence of a possible circuit split on what is required of group health plan administrators in the administrative review process. The Fifth, Sixth, and Tenth Circuits have adopted heightened standards of review, requiring administrators to affirmatively respond to a claimant’s treating provider’s opinion, above and beyond what ERISA claims procedure regulations require. While the Ninth Circuit here does not squarely discuss this growing body of case law in the majority opinion despite the parties’ references to it in briefing, the majority cites to Black & Decker Disability Plan v. Nord, 538 U.S. 822 (2003), a Supreme Court decision that rejected a substantive and procedural treating-provider rule to hold that courts cannot give special weight to treating provider opinions, nor can they require that an administrator explain why it rejected a treating provider opinion. While not an express repudiation of the Fifth, Sixth, and Tenth Circuits’ approaches, we expect this non-precedential decision to carry weight with district courts in the Ninth Circuit in rejecting such arguments.