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The Double-Edged Sword of Discretion: How Even Great Plan Document Language Can Cause Gaps in Coverage

Nearly all Plan Documents have some mention of discretionary authority. The ability to interpret the terms of the plan is necessary to receive deference from the courts, and is needed since not every conceivable scenario can be planned for within the plan document. When it comes to stop-loss, however, open-ended discretion can be a deal-breaker. Particular areas of concern include definitions of Usual and Customary, Medical Necessity, and Experimental/Investigational – and gaps between the Plan Document and the employee handbook are more and more prevalent. When an employer, seeking to exercise blanket discretionary authority, offers to extend coverage to employees on leave, despite the plan document clearly ending coverage well before then, that discretionary authority begins to seem arbitrary and capricious.

Thank you for joining The Phia Group's legal team on April 27, 2017, as they analyzed some of the pros and cons of discretion, what can be done to avoid these difficult situations, and some changes we have made to our own health plan to fix the same issues for our own organization and users of our plan document template.

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