Exhausting Administrative Remedies – ERISA

Exhausting administrative remedies is the law when it comes to ERISA claims.  This is again illustrated in a 2017 opinion from the U.S. 5th Circuit.  The opinion is styled, Memorial Hermann Health System v. Southwest LTC, Limited Employee Benefits Plan; Southwest LTC, Limited.

Memorial sued Southwest seeking payment of medical bills incurred by a patient covered by a Southwest health benefits plan.  The district court granted summary judgment in favor of Southwest, concluding that Memorial failed to exhaust administrative remedies.  This appeal followed.

The patient, C.W., was covered by an ERISA governed plan managed by Southwest.  Maritain was the third party administrator.  C.W. incurred over $400,000 in medical bills as a patient at Memorial.  C.W. assigned her insurance benefits to Memorial, who sought collection from Maritain.

In an exchange of multiple letters, Maritain repeatedly informed Memorial that it needed an authorization from C.W. before it could provide documents relating to C.C. and before Memorial could invoke the administrative process.  Memorial never provided an authorization and thus, Maritain did not release the requested documents.

Memorial seeks benefits under 29 U.S.C. Section 1132(a)(1)(B), which permits a plan participant or beneficiary to recover benefits under the plan.  To recover, though, Memorial must have exhausted its available administrative remedies.   Administrative exhaustion is explained in Southwest’s Plan.  It provides: “No action at law or in equity can be brought to recover on this Plan until the appeals procedure has been exhausted as described in this Plan.”  Exhaustion requires that a “Covered Person,” which includes C.W., file a claim for benefits in accordance with the terms of the Plan specific to each type of claim.”  Maritain insisted that Memorial show it was acting on behalf of C.W.  The Plan provides that it is the employee who has the responsibility “to make certain each claim submitted by her or on her behalf includes all information necessary to process the claim.”  If benefits are denied, the appeal also needed to be brought by the “Covered Person.”  Also relevant, Southwest as the Plan Administrator has the exclusive authority to “interpret the Plan” and to “determine all questions arising in the administration, interpretation, and application of the Plan.”

Memorial argues: (1) it provided evidence of exhaustion; (2) even if it did not actually exhaust its remedies, it should be deemed to have exhausted them; and (3) is should be excused from the exhaustion requirement because it was denied “meaningful access” to administrative remedies.  Key to the district court’s rejection of each argument was that Memorial failed to provide Maritain with an authorization form C.C. to evidence that Memorial was a “Covered Person.”

An assignee of a plan participant has derivative standing to bring a cause of action for enforcement under ERISA.  For whatever reason, though, Memorial failed to provide Maritain with proof of an authorization or assignment from C.W.  Consequently, Memorial did not exhaust administrative remedies.  When a Plan Administrator is clearly advising a would be claimant of a valid task it must perform so that a claim may be processed, there is no interference with access.