## Facts

- Russell Jones, an Eastman Kodak employee, participated in the Kodak Medical Assistance Plan (the Plan), and his wife, Susan Jones, was covered as a beneficiary.
- The Plan’s summary required precertification for all mental-health and substance-abuse treatment and warned that failure to obtain precertification could result in reduced or denied benefits.
- The Plan excluded coverage for services deemed “medically unnecessary” and gave the Plan Administrator full discretionary authority to interpret the Plan, establish coverage criteria, and determine eligibility for benefits.
- The Plan was self-funded, with benefits paid from Kodak’s revenues, and it used American PsychManagement (APM) to conduct utilization review and assess medical appropriateness.
- In March 1993, the Joneses sought inpatient alcohol-abuse treatment for Susan at Sierra Tucson Hospital in Arizona; the hospital contacted APM to request precertification.
- APM denied precertification, concluding Susan did not meet the Plan’s criteria for medically necessary inpatient treatment and also noting the treatment program was out of state.
- Susan’s condition worsened, and the Joneses pursued an internal appeal of the denial.
- During the appeal, the Plan Administrator consulted an independent reviewer; the reviewer agreed Susan did not meet the criteria at the time of the request but commented that the criteria were “too strict.”
- The Plan Administrator reaffirmed the denial of precertification and benefits.
- The Joneses sued under ERISA in federal district court, alleging the denial was arbitrary and capricious and arguing ERISA required disclosure of the utilization review criteria used to evaluate medical necessity.
- The district court granted summary judgment to the Plan, holding the denial was not arbitrary and capricious, ERISA did not require disclosure of the criteria, and the court lacked authority to review the substance of the criteria. The Joneses appealed.

## Issues

1. Whether the Plan Administrator’s role as a Kodak employee administering a self-funded plan required a less deferential standard than arbitrary-and-capricious review.
2. Whether ERISA required the Plan to disclose the internal medical-necessity/utilization-review criteria used to decide precertification and benefits for inpatient substance-abuse treatment.
3. Whether the denial of precertification and benefits for Susan Jones’s requested inpatient treatment was arbitrary and capricious on the administrative record.

## Decision

- The Tenth Circuit affirmed the district court’s summary judgment for the Plan.
- Because the Plan granted the Administrator discretionary authority to interpret Plan terms and determine eligibility, the court applied arbitrary-and-capricious review.
- The court treated the Administrator’s conflict (the employer both funded the Plan and decided claims) as a factor within arbitrary-and-capricious review, not a basis to replace that standard on this record.
- The court agreed that the utilization review criteria functioned as part of the Administrator’s delegated decisionmaking process for applying the Plan’s medical-necessity limitation, and the court would not invalidate the criteria merely because an independent reviewer thought they were “too strict.”
- The court held ERISA did not require the Plan to provide participants every internal guideline used in making benefit determinations where the Plan summary already disclosed the medical-necessity limit and the precertification requirement.
- On the record, the denial was reasonable: APM and an independent reviewer both concluded Susan did not meet the inpatient-treatment criteria at the relevant time, and the Administrator relied on that information in reaffirming the denial.

## Legal Principles

- When an ERISA plan grants the administrator discretionary authority to interpret the plan and determine eligibility, judicial review is for abuse of discretion (arbitrary and capricious).
- When the entity deciding claims also pays benefits, the resulting conflict is weighed as a factor in determining whether the decision was reasonable under arbitrary-and-capricious review.
- Under arbitrary-and-capricious review, a court asks whether the administrator’s decision was reasonable and supported by substantial evidence in the administrative record, not whether the court would have made the same decision.
- ERISA’s disclosure duties do not necessarily require production of internal utilization-review or medical-necessity criteria used to apply disclosed plan limits, so long as participants receive required plan information such as the relevant coverage exclusions and procedures.
- Courts generally review the reasonableness of an administrator’s application of plan terms and delegated criteria to the claimant’s situation, rather than substituting their own medical judgment or rewriting the plan’s coverage standards.

## Conclusion

In Jones v. The Kodak Medical Assistance Plan, the Tenth Circuit affirmed summary judgment for the Plan, holding that because the Plan gave the Administrator discretionary authority, the denial of precertification and benefits for Susan Jones’s requested inpatient alcohol-abuse treatment was reviewed for arbitrariness and caprice and was reasonable on the record; the court also rejected claims that ERISA required disclosure of the Plan’s internal utilization-review criteria or allowed a court to reweigh the strictness of those criteria.


Jones v. The Kodak Medical Assistance Plan, 169 F.3d 1287 (1999)