Did Smokers Catch a Break? the Eighth Circuit Interprets Exclusions of Tobacco-related Conditions Narrowly in Christianson v. Poly-america Medical Benefit Plan

• Publication year: 2021

85 Nebraska L. Rev. 526. Did Smokers Catch a Break? The Eighth Circuit Interprets Exclusions of Tobacco-Related Conditions Narrowly in Christianson v. Poly-America Medical Benefit Plan

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Did Smokers Catch a Break? The Eighth Circuit Interprets Exclusions of Tobacco-Related Conditions Narrowly in Christianson v. Poly-America Medical Benefit Plan

TABLE OF CONTENTS

I. Introduction
....................................................... 526
II. ERISA Background
.................................................. 528
A. ERISA Preemption and Civil Enforcement
......................... 528
1. ERISA Preemption ............................................ 528
2. Civil Enforcement ........................................... 529
B. Standard of Judicial Review .................................... 531
C. Coverage Exclusions ............................................ 532
III. Christianson v. Poly-America Medical Benefit Plan ................ 532
A. Facts and Background .......................................... 532
B. The Eighth Circuit's Decision ................................. 536
IV. Analysis .......................................................... 538
A. Reducing Costs by Targeting Smokers ............................ 540
B. Problems with Administering Exclusions of Tobacco-
Related Conditions ............................................. 542
V. Conclusion ......................................................... 545

I. INTRODUCTION

According to 2001 U.S. Census data, approximately sixty-three percent of the population receive their health care benefits from employer-sponsored health care plans.(fn1) Recognizing the growing number and economic impact of employee benefit plans, Congress enacted

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the Employee Retirement Income Securities Act (ERISA)(fn2) in 1974 to regulate employee pension benefit plans and employee welfare benefit plans, which include employer-sponsored health care plans. According to ERISA section 2(b), one of the Act's purposes is to protect the interests of heath care plan participants and beneficiaries by requiring the disclosure of information regarding the plan and providing adequate remedies for breaches of the plan.(fn3)

Recently the Eighth Circuit, relying in part on section 2(b)'s stated purpose of protecting plan participants, affirmed a district court's summary judgment against a health plan in Christianson v. Poly-America Med. Benefit Plan.(fn4) The health plan excluded coverage for conditions related to tobacco use. The Eighth Circuit found that, despite the plan participant's tobacco use, his deep-vein thrombosis was not sufficiently "related to" his condition under the plan language.(fn5)

However, despite section 2(b)'s directive to protect plan participants, the Supreme Court's interpretation of ERISA's preemption scheme has allowed self-insured plans to protect themselves against state laws regulating the substantive content of health plans.(fn6) Therefore, many plans are free to completely exclude coverage to groups of individuals or for particular illnesses. Court decisions adverse to plans, such as Christianson, may spur self-insured plans to eliminate coverage completely for certain groups and illnesses rather than to carve out exclusions to general coverage. In addition, plan administrators' decisions are reviewed by courts under an abuse-of-discretion standard, and the most substantial costs plan sponsors could face for wrongfully denying benefits are the costs of the benefits plus attorneys' fees, court costs, and prejudgment interest. The legal system clearly favors health plans over plan participants and beneficiaries.(fn7)

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In Part II, this Note begins with a brief discussion about how ERISA preemption and civil enforcement favor plans over participants. This Note then explains the Christianson decision in Part III, detailing the facts surrounding the case and describing Christianson's victory. The Eighth Circuit held that Poly-America's exclusion of tobacco-related conditions did not apply to Christianson's deep-vein thrombosis despite his tobacco use. Section IV.A discusses reasons why employers may target smoking and ways they will try to exclude smoking-related illnesses from health plans. Employers are not required to offer their employees health coverage, and employers will only be able to keep their plans operating if they are able to control their exposure to rising health care costs. Employers have begun to attempt to save money by limiting the coverage they provide to employees who engage in voluntary, risk-taking behavior such as smoking. Section IV.B demonstrates that, despite these efforts, employers may have a difficult time enforcing these restrictions. This Note concludes by noting that although individual smokers may have a few successes in winning benefits from their health plans, these successes will only encourage health plans to eliminate smokers as a group from any health care coverage. Although ERISA permits the exclusion of tobacco-related conditions from plan coverage, plan administrators will find it too difficult to carry out such exclusions and ultimately will be forced to terminate coverage for smokers altogether.

II. ERISA BACKGROUND

A. ERISA Preemption and Civil Enforcement

1. ERISA Preemption

Congress enacted ERISA to promote and protect the interests of participants and beneficiaries of employee benefit plans.(fn8) In order to provide plan participants and beneficiaries ready access to the federal courts and appropriate remedies,(fn9) ERISA delineated an expansive preemption provision in section 514(a),(fn10) which essentially provides that any and all state laws relating to any employee benefit plan are

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preempted by ERISA.(fn11) The "savings clause" found in section 514(b)(2)(A) saves any state law that regulates insurance from preemption.(fn12) The "deemer clause," under section 514(b)(2)(B), prohibits self-insured plans from being deemed insurance companies that are subject to state insurance laws.(fn13) Thus insured health care plans are subject to state laws regulating insurance, whereas self-insured plans are exempt from those same state laws.(fn14) As a result, plans have a strong incentive to become self-insured--freedom from state regulation. The Supreme Court has given ERISA broad preemptive force through its interpretations of the scope of section 514.(fn15) According to critics, ERISA generally, and section 514(a) specifically, have become "virtually impenetrable shields that insulate plan sponsors from any meaningful liability for negligent or malfeasant acts committed against plan beneficiaries," and the Supreme Court has created "a `regulatory vacuum' in which virtually all state law remedies are preempted but very few federal substitutes are provided."(fn16)

2. Civil Enforcement

Under ERISA, the doctrine of complete preemption requires that the state law claim must not only be preempted by section 514(a) but also that a substitute federal claim must exist under section 502(a) to remove a plaintiff's case to federal court.(fn17) ERISA section 502(a)(1)(B), ERISA's civil enforcement mechanism, allows health

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care plan participants and beneficiaries to bring civil actions against their plan administrators. These civil actions can be brought to recover benefits due under the terms of the plan, to enforce rights under the terms of the plan, or to clarify rights to future benefits under the terms of the plan.(fn18) ERISA section 502(a)(3) limits the relief available; the court can enjoin the HMO from continuing to deny benefits or give other appropriate equitable relief,(fn19) which does not include monetary damages.(fn20) Therefore, section 502 only allows plan participants and beneficiaries to seek the benefits they were contractually entitled to in the first place.(fn21) The participants or beneficiaries also can be awarded attorneys' fees and court costs under section 502(g)(1).(fn22) Some circuits, including the Eighth Circuit, allow participants or beneficiaries to recover prejudgment interest on denied benefits.(fn23)

Because the greatest cost a plan would face if a court ultimately finds that the benefits should not have been denied is simply the costs of the benefits, attorneys' fees, court costs, and prejudgment interest, the plan administrator has strong incentives to deny claims. Therefore, "[a]ny rational [plan administrator] will recognize that if it acts in good faith, it will pay for far more procedures than if it acts otherwise."(fn24) This scheme creates the disagreeable effect that the most profitable plans are those that deny claims most frequently.(fn25)

If a plan administrator denies a claim for benefits under ERISA section 503, the plan administrator must provide the plan participant or beneficiary with adequate notice in writing, "setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant."(fn26) ERISA section 503 also requires that health care plans establish a reasonable procedure to review participants' and beneficiaries' appeals of denied benefits.(fn27) Research indicates that U.S. health plans process approximately 250,000 appeals

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annually.(fn28) Most plans require that a plan participant or beneficiary must exhaust the plan's internal appeal procedures before they can seek external review mechanisms.(fn29) It is imperative that plan participants and beneficiaries understand the internal review process for two reasons. First, courts may dismiss claims with prejudice due to failure to exhaust the plan's administrative appeal procedure.(fn30) Second, judges are generally limited to reviewing the documents that the plan administrators had before them at the time of the benefit denial.(fn31)

B. Standard of Judicial Review

In the landmark Firestone Tire and Rubber Co. v....