Blue Shield Settles ERISA Class Action Over Lumbar Disc Surgery

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Carmen Castro-Pagan

Blue Shield of California settled a class action by health plan participants challenging its exclusion of coverage for artificial disc replacement surgery ( Escalante v. Cal. Physicians’ Serv. , C.D. Cal., No. 2:14-cv-03021, motion for preliminary approval of settlement 3/10/17 ).

Blue Shield agreed to revise and implement a medical policy that will no longer exclude coverage for lumbar ADR surgery as “investigational,” according to settlement documents filed March 10 in federal court in California. The insurer also agreed to allow its members whose requests for lumbar ADR surgery were previously denied to seek reimbursement.

If approved, the settlement will end a three-year litigation and allow class counsel to seek up to $1.75 million in attorneys’ fees.

In July 2016, Judge Dean D. Pregerson of the U.S. District Court for the Central District of California denied in part Blue Shield’s motion for summary judgment, holding that certain issues of fact remained and he was in no position to decide whether the insurer had abused its discretion. The settlement was reached two months before the scheduled trial. According to the participants’ attorney, it achieves the relief sought in the lawsuit, so “a victory at trial for the class would provide no additional benefit.”

In the past year, Blue Shield has been no stranger to litigation under the Employee Retirement Income Security Act over exclusion of coverage, according to company data in Bloomberg Law Litigation Analytics. In March 2016, a federal judge in California held that the insurer had to pay more than $419,252 in damages and fees for refusing to cover a beneficiary’s in-patient psychiatric treatment. Blue Shield fared better in a lawsuit challenging its failure to cover hepatitis C drug Harvoni when a federal judge dismissed the participants’ allegations in December 2016.

Gianelli & Morris ALC represents the class. Manatt Phelps & Phillips LLP represents Blue Shield.

To contact the reporter on this story: Carmen Castro-Pagan in Washington at ccastro-pagan@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

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