## Facts

- John Doe, covered under his law firm’s ERISA employee welfare benefit plan insured and administered by Blue Cross, was diagnosed with multiple myeloma.
- Doe’s physician prescribed initial chemotherapy and, if responsive, high-dose chemotherapy and radiation followed by an autologous bone marrow transplant; estimated cost was about $100,000.
- Blue Cross sent a November 30, 1990 letter to group contract holders stating coverage changes, including an exclusion for bone marrow transplants for specified conditions (including multiple myeloma) and for “related services and supplies.”
- Blue Cross denied coverage for the transplant and also denied coverage for the associated high-dose chemotherapy and radiation, treating them as excluded “related” services.
- Doe and his firm contended the amendment and notice were defective under the contract and ERISA and that, in any event, chemotherapy and radiation remained covered benefits.

## Issues

1. Whether the group contract was validly amended under ERISA and the contract’s amendment procedures to exclude bone marrow transplants (and “related” services) for multiple myeloma.
2. Whether the transplant exclusion and “related services and supplies” language permitted denial of coverage for high-dose chemotherapy and radiation therapy associated with an excluded transplant.
3. What judicial review standard applies when the plan administrator has discretionary authority but also insures the plan, creating a conflict of interest.

## Decision

- The Fourth Circuit applied abuse-of-discretion review, but with reduced deference because Blue Cross both administered and insured the plan.
- The court affirmed the denial of coverage for the autologous bone marrow transplant procedure (and related excluded components within the exclusion’s proper scope).
- The court reversed the denial of benefits for chemotherapy and radiation therapy, holding Blue Cross’s interpretation of “related services and supplies” was overbroad as applied to those treatments.
- The case was remanded for further proceedings consistent with the ruling requiring coverage for chemotherapy and radiation.

## Legal Principles

- When an ERISA plan grants discretionary interpretive authority, courts generally review benefit denials for abuse of discretion.
- A structural conflict exists when the same entity both decides claims and pays benefits; that conflict reduces the deference accorded to the administrator’s interpretation.
- Coverage exclusions in ERISA-governed insurance arrangements are construed narrowly, particularly where the drafter-administerer has a financial conflict.
- An exclusion for a specialized procedure (bone marrow transplant) does not, without clear language, justify denying coverage for otherwise-covered standard therapies (chemotherapy and radiation) merely because they are part of a broader treatment plan that includes an excluded procedure.
- “Related services and supplies” language cannot be interpreted to swallow general medical benefits absent a textually supported limitation.

## Conclusion

The Fourth Circuit held that, although the plan could exclude coverage for an autologous bone marrow transplant for multiple myeloma, Blue Cross could not extend that exclusion to deny coverage for chemotherapy and radiation therapy, and the court evaluated the denial with reduced deference due to Blue Cross’s administrator-insurer conflict.


Doe v. Grp. Hosp. & Med. Servs., 3 F.3d 80 (4th Cir. 1993)