In Butler v. United Healthcare of Tennessee, Inc., — F.3d –, 2014 WL 4116478 (6th Cir. Aug. 22, 2014), the court addressed what appeared to be a relatively straightforward health care benefit question, complicated by what the court described as a severely recalcitrant claim administrator.

The case involved the question whether plaintiff’s wife, Janie, qualified for a residential substance-abuse program under the terms of her husband’s health plan. United denied the claim based on one criterion in the plan; but on administrative appeal, only considered “criteria less relevant to her situation.”

Janie’s husband sued, and the district court granted summary judgment and remanded to United to conduct a full and fair review. The Sixth Circuit noted that “United’s ‘full and fair’ review was neither full nor fair.”  After that first remand, the district court “admonished United for attempting to relitigate whether its procedures for review had been defective rather than following the order to conduct a full and fair review afresh.” It remanded again, issuing specific orders regarding what United should do. As the Sixth Circuit observed, “[h]aving failed to take the hint, United now failed to take the directive.” After the second remand, “[t]he district court was not amused. Treating this third try as a third strike,” the district court found that United had not provided a full and fair review, determined that another remand would be futile, and awarded benefits to the plaintiff.

United appealed, and the Sixth Circuit affirmed. It held that “United’s refusal to give Janie’s benefits claim a fair review not once, not twice, but three times—in spite of clear instructions from the district court—casts a pall over United’s handling of the claim from the start. Through it all, through three chances to get it right (indeed through three chances just to engage in a nonarbitrary decision-making process), United failed the Butlers in multiple ways.” Among the arguments the court rejected was that United’s decision could not be arbitrary and capricious because five reviewing physicians agreed with it. But, as the court noted, those physicians’ reviews either considered the wrong standard or disregarded important evidence. Also, the court stated: “This argument, too, proves too much. If a decision to deny benefits could never be arbitrary and capricious when backed by the insurer’s reviewing physicians, court review would be for naught. The insurer would invariably prevail so long as the insurer had physicians on its staff willing to confirm its coverage rulings. That also does not make sense.”

In a minor win for United, the court reversed the district court’s award of statutory penalties, holding that 29 U.S.C. § 1132(c)(1)(B) permits a penalty only against a plan administrator; that United was not a plan administrator; and that its reference to itself as “administrator” in various briefs did not estop United from denying that it was plan administrator. The court found that United’s references to  itself as an “administrator” were “a shorthand way to indicate that it was the claims administrator[.]”