The healthcare bureaucracy must turn square corners

Mirza v. Ins. Adm’r of Am., Inc., No. 13-3535 (3d Cir. Aug. 26, 2015).

Suppose a participant in an employer-provided benefit plan submits a claim for benefits—seeking, say, reimbursement of a medical procedure—and the plan denies it. In such a case, ERISA, the federal law governing employer-provided pensions and benefit plans, requires the plan to explain the denial and to allow the participant to challenge the denial. ERISA also gives the Department of Labor considerable authority to promulgate regulations governing claim-denial procedures. Under that authority, the DOL has required a plan’s claim denial to include a “description of the plan’s review procedures and the time limits applicable to such procedures, including a statement of the claimant’s right” to bring a federal action under ERISA after a claim is finally denied. 

Here, a plan denied Neville Mirza’s claim for medical benefits. The plan gave Mirza one year from when her claim was finally denied to seek judicial review of that denial in federal court. Mirza, however, did not file this suit until 19 months after the final denial. 

Is her suit untimely, then? The Third Circuit says it isn’t, because the plan didn’t comply with the DOL’s claim-denial regulation: the plan’s denial letters never explained that Mirza had one year after the denial to file suit.

Under the DOL’s regulation, a plan must inform a plan participant of “time limits applicable to” the plan’s “review procedures.” And those “review procedures,” the regulation makes clear, “includ[e]” the right to bring a federal lawsuit to recover the denied benefits. So it violated the regulation not to disclose the time limit applicable to Mirza’s federal lawsuit.

The plan’s denial letters didn’t comply with the DOL’s regulation, but does that noncompliance make Mirza’s lawsuit timely? Yes, says the Third Circuit, following the Second and Ninth Circuit and its own precedents. When a claim-denial letter doesn’t explain the plan’s one-year time limit on suit, that limit is set aside in favor of the six-year limitations period that would otherwise apply. Under that limitations period Mirza’s suit is timely, so the Third Circuit vacates the district court’s dismissal of the suit.