Ninth Circuit Won’t Revive Challenge to Blue Shield’s Mental Health Treatment Denial
- January 30, 2026
A divided Ninth Circuit upheld Blue Shield of California’s refusal to cover a teen’s stay at a residential mental-health treatment center as not medically necessary.
In a 2-1 panel decision, the appeals court affirmed summary judgment for Blue Shield in the action under the Employee Retirement Income Security Act (ERISA), finding no abuse of discretion in the lack of medical necessity determination even given its financial conflict as both the administrator that decides claims and the insurer that pays benefits.
“Plaintiffs offer no evidence that Blue Shield’s independent physician was financially dependent on Blue Shield, that Blue Shield has a history of biased claims administration, or any other fact that warrants heightened skepticism,” of its decision under the plan’s widely used coverage guidelines.
According to the appeals court, the facility’s records showed “with near unanimity” that the teen, identified as E.R., did not meet coverage criteria. Blue Shield did not abuse its discretion in relying on those records as they were the most contemporaneous reports of E.R.’s mental state even if they were based on his self-reports.
The appeals court also was not convinced that Blue Shield abused its discretion by reaching the opposite conclusion from E.R.’s treating physicians, who urged that residential treatment was medically necessary. Administrators are not required to follow the opinions of a claimant’s treating physicians. Letters from E.R.’s treating physicians were not based on firsthand evaluations at the time of admission, nor did they refer to the plan’s coverage guidelines, the appeals court noted.
Blue Shield also was not required to credit letters from E.R.’s parents over the evaluations of its own independent experts. “Deciding whether to credit the opinion of a fully informed expert clinician over that of a non-expert parent is a core exercise of the discretion that the Plan gives to Blue Shield.”
In the appeals court’s view, Blue Shield also satisfied ERISA’s procedural obligations to provide plaintiffs with “adequate notice” and the opportunity for “full and fair review” of their claim.” An administrator is not required to explain its entire “interpretative process” but rather must supply sufficient reasons to enable a “meaningful dialogue” with the claimant, a standard the appeals court held was satisfied in this case.
A dissenting opinion argued the majority should have applied a less deferential standard of review. According to the dissent, Blue Shield’s failure to credit the opinions of E.R.’s long-standing treating physicians should have weighed more heavily in determining whether the denial of benefits was an abuse of discretion.
R.R. v. California Physicians’ Serv., No. 24-6337 (9th Cir. Jan. 27, 2026).