## Facts

- Penny Jo Bechtold, a Magnavox employee and plan participant, was diagnosed with breast cancer in October 1991 and underwent a modified radical mastectomy showing significant lymph node involvement.
- After standard chemotherapy and radiation, her oncologist recommended high-dose chemotherapy with autologous bone marrow transplantation (HDC/ABMT) and referred her to the Cleveland Clinic.
- Physicians Health Plan of Northern Indiana, Inc. (PHP) administered Magnavox’s ERISA-governed employee welfare benefit plan and informed Bechtold that HDC/ABMT was not covered.
- The plan excluded services considered experimental or investigational.
- Bechtold pursued the plan’s internal appeal process, received a hearing before a PHP-selected committee, and the committee upheld the denial.
- Bechtold sued under ERISA § 502(a)(1)(B) seeking benefits; the parties stipulated to material facts, and a magistrate judge granted summary judgment to PHP and denied Bechtold’s motion.

## Issues

1. Whether the plan’s language conferred discretionary authority on PHP such that a court must review PHP’s benefits denial under an arbitrary-and-capricious (abuse-of-discretion) standard rather than de novo.
2. Whether PHP acted arbitrarily or capriciously in determining that HDC/ABMT for Bechtold’s breast cancer was experimental and therefore excluded from coverage.

## Decision

- The Seventh Circuit affirmed summary judgment for PHP.
- The court applied arbitrary-and-capricious (abuse-of-discretion) review because the plan granted PHP discretion to interpret plan terms and determine eligibility for benefits.
- PHP’s structural conflict (acting as both decision-maker and payor) was treated as a factor in evaluating reasonableness, not as a basis to apply de novo review.
- Under deferential review, PHP’s classification of HDC/ABMT as experimental and denial of benefits had rational support in the record and was consistent with the plan’s exclusion.

## Legal Principles

- When an ERISA plan grants the administrator discretionary authority to interpret the plan and decide eligibility, courts review benefit determinations for arbitrariness and caprice (abuse of discretion), not de novo.
- An administrator’s financial or structural conflict of interest does not eliminate deference; it is weighed in assessing whether the decision was reasonable on the record.
- A benefits denial is upheld under deferential review if it is supported by substantial information and is not irrational, even where medical opinions conflict.
- Experimental-or-investigational exclusions may be enforced when the administrator reasonably concludes, based on available medical materials and accepted criteria, that the procedure lacked general acceptance as standard therapy at the relevant time.
- In reviewing medical coverage disputes under discretionary plans, courts do not reweigh competing medical evidence; they ask only whether the administrator’s decision had rational support and conformed to plan terms.

## Conclusion

The Seventh Circuit held that the ERISA plan conferred discretionary authority on PHP, requiring deferential review, and that PHP reasonably denied coverage for HDC/ABMT as an excluded experimental treatment, so Bechtold was not entitled to benefits for the procedure.


Bechtold v. Physicians Health Plan of N. Ind., Inc., 19 F.3d 322 (7th Cir. 1994)