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New Jersey Appellate Court Says Decision Denying Home Health Benefits Was Arbitrary And Capricious


HLD, v. 33, n. 3 (March 2005)

New Jersey Appellate Court Says Decision Denying Home Health Benefits Was Arbitrary And Capricious

Steven and Deborah Green (plaintiffs) had medical coverage through Steven's employer with the State Health Benefits Program under its SHBP Traditional Plan (Plan). In 1976, Deborah was diagnosed with multiple sclerosis and her condition deteriorated through 1994, when she was hospitalized. After Deborah was released from the hospital, Steven arranged for a home health aide for eight hours each day, and skilled nursing care three times each day. Plaintiffs filed a claim for reimbursement with the claims administrator Prudential. Prudential covered the home health services on an exception basis for five years. In 1999, Horizon Blue Cross Blue Shield of New Jersey (Horizon) became the claims administrator and notified plaintiffs that the home health services were not covered because the services were "custodial." In 2002, plaintiffs appealed the denial of benefits with supporting evaluations by Deborah's doctor and a social worker. In March 2003, Horizon denied the appeal, and plaintiffs requested an administrative hearing with the State Health Benefits Commission (SHBC). The SHBC denied the appeal and issued a final determination. Plaintiffs appealed the SHBC's final determination to the state court.

The Superior Court of New Jersey, Appellate Division, reversed the SHBC's decision on the grounds it was arbitrary and capricious because the SHBC failed to explain why the exception to the exclusion of coverage no longer applied, and remanded the case for an administrative hearing. The court found that the decision to stop paying the benefits came after five years of the services being covered under the Plan without an explanation of the change that had occurred that resulted in the services no longer being covered. The court noted that the Plan has an exception for home health services for a patient with a catastrophic health condition, and it appeared plaintiffs' claim was originally approved under the exception. Because there is evidence the claims administrator has the authority to grant an exception, and the exception was granted in the past, the decision to deny the home health services without explanation renders SHBC's decision arbitrary and capricious.

The court rejected SHBC's conclusion that plaintiffs were not entitled to the administrative hearing they requested because there were no adjudicative facts to be determined, and concluded that a hearing would allow plaintiffs to adequately present their claims. Accordingly, the court reversed the SHBC's decision and remanded the case to the agency for a hearing.

Green v. State Health Benefits Comm'n, 861 A.2d 867, 373 N.J. Super. 408 (N.J. Super. Ct. Dec. 9, 2004). To read the case, go to


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