It’s very difficult to write with any nuance about discretionary review under ERISA plans, or what is more typically referred to as “arbitrary and capricious review.” I believe it is because it’s one of those areas of the law where, even more than most, where you stand depends on where you sit. In other words, if you are a plan administrator or sponsor, or a lawyer representing one, you think it describes a standard of review that should broadly insulate plan decisions from challenge, while if you are a plan participant, or a lawyer who represents plan participants, you think the entire doctrine is a wrong road that the Supreme Court set off down years ago without thinking and from which no one can now exit.
As someone who has represented everyone from plan administrators to plan fiduciaries to pension plan participants to executives entitled to compensation under top hat plans, and everyone in between, I can argue all sides of the question of the appropriate scope of the standard of review in ERISA cases, including what is the right way to apply arbitrary and capricious review. To me, the issue is not black or white, night or day, but all shades of gray (or grey, if one of the parties is English). Applying discretionary review in a given case is or should be, contrary to much argument, a fact and case specific inquiry, shifting with the facts, the plan language, the benefit to the plan sponsor of a particular decision and the interpretive approach taken by the plan administrator in a given case– indeed, with the very epistemology itself of the plan administrator’s approach.
The problem, though, is that in the real world, arbitrary and capricious review is often little more than a shibboleth that precludes, rather than encourages, careful thought over these issues. Too often, it is used simply as a stand in for the very different, and oft unarticulated, assertion that, unless the administrator was transparently and obviously wrong, the decision at issue should be upheld. This is not what arbitrary and capricious review, properly understood, is meant to be, nor what the phrase is meant to convey, which instead should be a nuanced and thoughtful analysis of plan language and facts to determine whether the administrator deserves the benefit of the doubt that is encapsuled within the phrase “arbitrary and capricious review.”
In any event, this is all a long way of introducing a new post by Daniel Aronowitz in the Fid Guru blog, in which he discusses the fact that “United Behavioral Health (UBH) has petitioned the Supreme Court for the right to deny doctor-recommended residential treatment of adolescent patients with serious mental health issues when interpreting what is ‘medically necessary’ under health plan documents.” The post concerns whether UBH was within its rights, under arbitrary and capricious review, to deny treatment, but treats the application of that standard to this dispute in the kind of subtle and detailed way that I suggested above should be the rule, not the exception.