Lefler v. United Healthcare of Utah

Lefler v. United Healthcare of Utah,
No. 2:95CV-1109-S (D. Utah Sept. 27, 2001)

A group of people who received health insurance ("insureds") from
a Utah health insurer/HMO ("HMO") brought this ERISA action (section
1132(a)(1)(B)) against the HMO, alleging that the HMO’s failure to pass through
to them the financial benefits it secured through negotiated agreements with
its providers violated the terms of its insurance plan. Specifically, the insureds
claimed that the HMO’s practice of charging the insured copayments based upon
contracted providers’ full non-negotiated rates, as opposed to the negotiated
rate, was contrary to a reasonable understanding of the HMO’s definition of
reasonable and customary charges as stated in the HMO’s plan.

The United States District Court for the District of Utah granted the HMO’s
motion for summary judgment, holding that the HMO’s practice of calculating
percentage copayments from a provider’s billed charge, and not from the provider’s
agreed contractual amount, was based upon at least a reasonable interpretation
of the plan language and, therefore, was not arbitrary and capricious. Although
the court did not find the insureds’ understanding of the term "customary
and reasonable" unreasonable, the court recognized that the HMO’s interpretation
of the term should be upheld so long as it was even at the low end of the scale
of reasonableness. Additionally, the court rejected the insureds’ claims that
the HMO violated ERISA’s fiduciary duty requirements (section 1104), summary
plan description (section 1022), and claims procedure (section 1133) because,
when the insureds can state a claim under section 1132(a)(1)(B), regardless
of the outcome, they may not maintain claims under the remaining sections of
ERISA.