APPEAL from a judgment (order of dismissal) of the Superior Court for the County of Los Angeles. Reginald A. Dunn, Judge. Reversed and remanded with directions. (Los Angeles County Super. Ct. No. BC372894).
The opinion of the court was delivered by: O'neill, J.*fn8
CERTIFIED FOR PUBLICATION
The claims administrator under a health insurance plan denied coverage to a plan member for a treatment the administrator deemed investigational. The plan permitted the member to request an independent review of denial of coverage for an experimental or investigational therapy (as required by statute); the administrator advised the member of his general appeal rights, but not of his right to an independent review. The member sued the administrator (not the insurer), alleging causes of action for intentional and negligent interference with contract rights, reckless infliction of emotional distress, and negligence, among others. The trial court sustained the administrator‟s demurrers to the member‟s second amended complaint, and the member appealed.
We conclude that (1) the administrator, as the representative of a contracting party (the insurer), may not be held liable for the tort of interfering with its principal‟s contract; and (2) the denial of health insurance benefits, without more, is not the kind of extreme and outrageous conduct necessary to state a claim for intentional infliction of emotional distress. However, (3) the administrator of a health care plan owes a duty to plan members to exercise due care to protect them from physical injury caused by its negligence in making benefit determinations under the plan. Accordingly, we reverse the judgment of dismissal.
FACTUAL AND PROCEDURAL BACKGROUND
Judge David Mintz was a member of PERS Choice, a health insurance plan issued and funded by CalPERS (the California Public Employees‟ Retirement System). The plan‟s "Evidence of Coverage" shows that PERS Choice "is a self-funded health plan established and administered by CalPERS (the plan administrator and insurer) through contracts with third-party administrators: Blue Cross of California and Medco."
Blue Cross of California is responsible for administering medical benefits and providing utilization review services under the plan, under contract with CalPERS. (Utilization review is the evaluation of whether health care services are medically necessary, consistent with acceptable treatment patterns, and so on.) When a claim for benefits is denied, a member has various appeal rights in varying circumstances, including an objection in writing to Blue Cross, a request for reconsideration, a "second-level review" by another physician advisor, and so on. If the member is not satisfied with Blue Cross‟s response, the member may appeal to CalPERS, and various administrative procedures, including an administrative hearing, may occur. A member dissatisfied with the outcome may appeal to the courts, but not until the member has exhausted the appeal process.
The plan, as required by statute, has provisions covering experimental or investigational treatments. It provides that "[a]ny issue as to whether a protocol, procedure, practice, medical theory, or treatment is experimental or investigational will be resolved by Blue Cross, which will have full discretion to make such determination on behalf of the Plan and its participants." If services are denied because Blue Cross determines they are experimental or investigational, an "independent external review" may be requested. This independent review may be requested if (1) the member has a terminal condition; (2) his or her physician certifies that standard therapies have been ineffective or would be inappropriate; and (3) either the member‟s physician certifies in writing that the denied therapy is likely to be more beneficial than standard therapies, or the member or his or her physician has requested a therapy that, based on documented medical and scientific evidence, is likely to be more beneficial than standard therapies. This independent external review of coverage decisions for experimental or investigational therapies is expressly mandated by Health and Safety Code section 1370.4,*fn1 and the plan states that the member will be notified of the opportunity to request this review when services are denied.
On October 19, 2006, Blue Cross denied coverage to Judge Mintz of a lung cancer treatment called radio frequency ablation, on the ground it was investigational. Blue Cross advised Mintz of his right to file an appeal asking for another review, but not specifically of his right to request an independent external review.*fn2
On June 19, 2007, Mintz and his wife sued Blue Cross and Wellpoint, Inc., Blue Cross‟s owner and operator (collectively, Blue Cross). Their second amended complaint alleged causes of action for tortious breach of the implied covenant of good faith and fair dealing, breach of contract, reckless infliction of emotional distress, intentional interference with contract rights, negligent interference with contract rights, and negligence. As relevant to this appeal, Mintz alleged as follows:
In November 2001, he was diagnosed with sarcoma on the lung. He underwent a needle biopsy that month, and a wedge resection of his right lower lung in December 2001. In February 2004 three tumors were found, one on his left lung and two on his right lung. He underwent a wedge resection of the lower right lobe in February, and a lobectomy of the lower left lobe in April. A new metastasis was found in the fall of 2004; chemotherapy from October to December 2004 proved ineffective. His lower right lobe was removed in January 2005.
In February 2006, three more tumors were found; these were inoperable, as Mintz could not afford to lose any more lung tissue. His physicians recommended a procedure known as radio frequency ablation (RFA) followed by a new chemotherapy. Blue Cross approved the RFA, and Mintz received it on March 22, 2006, but the chemotherapy was ineffective and additional tumors were found in June 2006. His physicians decided to perform RFA on the largest of the tumors in July 2006, but the procedure was cancelled as too risky, because of close proximity to a major artery.
In early August 2006, Mintz received a letter from Blue Cross, indicating it had reviewed the RFA procedure that had been done in March 2006 (and which it had approved), and had decided that RFA was experimental, and would not be covered. (Health and Safety Code section 1371.8 prohibits a plan from rescinding an authorization after the provider renders the service in good faith and pursuant to the authorization.)
In late August Mintz was seen at Stanford to explore a form of radiation. The physicians at Stanford thought the method was not appropriate for Mintz, and suggested he consult with Dr. Kee at UCLA, who was more experienced and more aggressive in treating patients than the radiologist at Stanford. On September 7, 2006, Mintz consulted Dr. Kee; Kee believed he could perform the RFA, even though it was somewhat risky for the reasons given by his other doctors, and that without treatment the metastases were fatal.
Blue Cross‟s medical policy, as of August 1, 2006, stated that Blue Cross considers RFA medically necessary for tumors in the liver, but "investigational/not medically necessary" for tumors of the lung, "despite the fact that Blue Cross‟ own medical policy acknowledges that with mean follow-up of six months, RFA fully ablated tumors in 8 out of 12 patients with tumors smaller than 5 cm, compared with 2 out of 6 patients with larger tumors," and "[t]he study Blue Cross cites in its Medical Policy focused on patients that had potentially resectable disease after failing previous nonoperative treatment."
In early October, Dr. Kee again recommended the RFA and radiation, as each had a 70% chance of being effective, and the RFA was scheduled for October 18, 2006. Kee‟s office told Mintz that Blue Cross had approved the RFA, but Dr. Kee‟s office had coded it incorrectly (for the liver). On October 17, Mintz was notified by telephone that Blue Cross denied coverage for the RFA. Mintz was informed of the appeal process; his oral notification to Blue Cross of appeal was noted.
Blue Cross‟s written denial stated that its peer clinical reviewer, Dr. Williams, had determined that RFA of lung tumors "is deemed investigational and not medically necessary for this 47 year old male because studies to date have been of small populations rejected for surgery and with very short follow-up time plus a large incidence of complications. Larger studies preferably in comparative trials are awaited and necessary.... [¶] This decision is based upon the member‟s specific circumstances and upon peer reviewed criteria including Medical Policy.... " However, prior to the denial, neither Dr. Williams nor any other Blue Cross representative ever contacted Mintz or his physicians concerning the medical necessity of the requested treatment.
It was "apparent to [Mintz] when he received Blue Cross‟ denial" that (a) Blue Cross‟s decision was not based on his "specific circumstances," because without the RFA he would die, and (b) Blue Cross had not updated its Medical Policy, because various articles showed RFA to be effective in treatment of lung tumors, including a study published in 2004 indicating that "RFA appears to be a safe, minimally invasive procedure for local pulmonary tumor control with low mortality, little morbidity, short hospital stay and gain in quality of life."
The denial referred in general terms to Mintz‟s right to file an appeal, but did not contain any notice he was entitled to request an independent external review of a denial of experimental or investigational treatment, both under the plan and under Health and Safety Code section 1370.4. The plan did not explain that the plan must provide the experimental or investigational treatment, if the independent reviewers determine the treatment would be better for the patient than the non-experimental treatment available under the plan.
Because Blue Cross refused to permit the RFA treatment recommended by his physicians, and failed to notify him of his contractual and statutory rights to an independent review of the decision to deny RFA, Mintz was unable to have the recommended treatment in conjunction with the radiation and chemotherapy recommended by his physicians.
Blue Cross was compensated by CalPERS on a per capita basis for each plan member, and also received "some type of direct or indirect financial incentives from CalPERS to reduce the Plan costs. Blue Cross can achieve these incentives, in part, by limiting the cost ...