California District Court Finds Lawful Health Plan's Categorical Exclusion of Certain Types of Prosthetic Devices

The United States District Court for the Central District of California denied Plaintiff's motion for summary judgment and granted summary judgment in favor of PacifiCare, on an ERISA claim for benefits for myoelectric prosthetic devices.

Plaintiff sought coverage for replacement of myoelectric prosthetic devices, which PacifiCare denied based on a specific exclusion in the plan for myoelectric devices. Plaintiff argued that California Health & Safety Code § 1367.18 requires that when health plans offer prosthetic coverage, that coverage must include all medically necessary original and replacement devices when prescribed by a qualified medical professional. Plaintiff argued that PacifiCare's categorical exclusion for myoelectric devices violates the statute because it excludes coverage for a medically necessary replacement device prescribed by Plaintiff's physician.

PacifiCare argued that it is permitted to exclude specific types of prosthetics devices or services under the plain language of the statute. The statute authorizes the plan and subscriber, here Plaintiff's employer, to negotiate the "terms and conditions" of its offer of coverage.

The Court agreed with PacifiCare's interpretation of Section 1367.18 based on the statute's plain language, the legislative history, and case law interpreting similar California mandate statutes. The Court held that the statute's plain language does not address the type or quality of the covered prosthetic devices or establish that the physician's prescription supersedes the agreement between a plan and the employer. The Court also found that the legislative history confirms that the statute only dictates particular "terms and conditions"—the amount of coverage and costs—but leaves the scope of coverage to the mutual agreement of the parties. The Court therefore held that PacifiCare's exclusion for myoelectric prosthetic devices was lawful. Plaintiff has filed an appeal of the order and judgment.