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$5 Million Class Action Judgment Against Blue Cross Over Autism Therapy

Two families of children with autism brought suit against Blue Cross Blue Shield of Michigan in federal court on behalf of hundreds of other families who were denied coverage for applied behavior analysis (ABA) therapy. The suit resulted in a landmark class action judgment on behalf of the families.

ABA therapy, through rigorous clinical treatment using concepts of positive and negative reinforcement, enables children with autism spectrum disorder (ASD) to gain independence, to better communicate and learn, and to avoid injurious and negative behaviors. ABA therapy is supported by the U.S. Surgeon General, the National Institutes of Health, the American Academy of Pediatrics, the American Psychological Association, Medicare and Medicaid studies, and hundreds of other medical and scientific authorities. Denying or delaying this therapy forever destroys the potential of these children to live full and independent lives. Further, providing this therapy to children with autism actually saves societal and insurance monies in the long run, as the therapy enables children with ASD to gain their greatest functioning. Despite these realities, Blue Cross has long denied coverage for this life-changing therapy by designating it “experimental.”

After extensive briefing and arguments, the court granted class certification to the families. Blue Cross petitioned the Sixth Circuit Court of Appeals to appeal the order granting class certification and the Sixth Circuit denied the Petition. Blue Cross also moved for summary judgment early on in the case, arguing that Plaintiffs had failed to exhaust their administrative remedies. The Court denied this motion, finding that “BCBS has not identified one instance in which it has voluntarily paid benefits for ABA treatment.”

The court ordered Blue Cross to compile the Administrative Record and held that the case would be decided on cross-motions for judgment based on the Record. Blue Cross loaded the Administrative Record with numerous allegedly supportive documents while simultaneously omitting other documents that appeared to have been part of its “decisional” process in denying coverage for ABA therapy. The Court granted Plaintiffs’ motion to include the additional documents in the Administrative Record.

On March 30, 2013, Hon. Stephen J. Murphy III rendered a class-wide Judgment on the Administrative Record, holding that Blue Cross’ designation of ABA therapy as “experimental” was, and is, arbitrary and capricious and therefore illegal under ERISA. The Court held that, “BCBS’s medical policy [characterizing ABA therapy as ‘experimental’] is internally inconsistent, ambiguous, and most fatally, not supported by the evidence in the record.” The Court granted the families’ motion for judgment, issued declaratory relief by holding that Blue Cross’ policy was “arbitrary and capricious,” overturned Blue Cross’ denials of the families’ claims for ABA coverage, ordered Blue Cross to reprocess the families’ claims, and ordered Blue Cross to provide notice of the court’s ruling to the families at Blue Cross’ expense.

The decision is the first ever to grant a litigated class-action judgment on the merits to children with autism seeking coverage for ABA therapy under ERISA, the federal law that regulates most private employer health plans in the country.

The ruling is expected to confer $5 million in benefits on the approximately 500 individuals in the class. The class included individuals who were covered by a health care plan offered or administered by Blue Cross, and who made a claim for ABA therapy which was denied as experimental under Blue Cross’ 2010 Medical Policy. The court’s declaratory ruling and summary judgment are especially important because the recent Michigan state mandate requiring Blue Cross to cover ABA therapy does not apply to self-funded plans, whereas the court’s ruling does.
Type of action: Claim under ERISA alleging that plan administrator acted arbitrarily and capriciously
Type of Injuries: Denial of insurance benefits
Name of case: Potter v. Blue Cross Blue Shield of Michigan
Court/Case No./Date: Federal District Court for the Eastern District of Michigan; No. 10-cv-14981; March 30, 2013
Tried before: Cross-motions for judgment on the administrative record
Name of judge: Stephen J. Murphy III
Judgment amount: $5 million in reimbursement for denied claims for ABA therapy; declaration that Defendant's exclusion of ABA therapy as experimental is arbitrary and capricious
Attorneys for plaintiffs: Gerard V. Mantese, John J. Conway, Brian M. Saxe
Attorneys for defendant: Dennis Levasseur, Christopher Bernard, Nathan Dupes