                United States Court of Appeals
                  FOR THE EIGHTH CIRCUIT


                         No. 97-1712


Pamela E. Armstrong,          *
                              *
         Appellant,           *
                              * Appeal      From   the   United
States
         v.                   * District Court for the
                              * Western     District   of
Missouri.
Aetna Life Insurance Company,
                           *
Aetna Health Plan, Plan Administrator,
                           *
                           *
         Appellees.        *


              Submitted:    September 8, 1997
                             Filed:   November 13, 1997


Before RICHARD S. ARNOLD, Chief Judge, and HEANEY and
BEAM, Circuit   Judges.


HEANEY, Circuit Judge.

    Pamela E. Armstrong appeals the district court’s
grant of summary judgment in favor of Aetna Life
Insurance   Company,   Aetna   Health   Plan,  and   Plan
Administrator (collectively “Aetna”) on Armstrong’s claim
that Aetna wrongfully denied her benefits under a health
plan administered by Aetna and governed by the Employee
Retirement Security Income Act, 29 U.S.C. § 1001
(“ERISA”). We affirm.
I.




2
    In May 1993, Armstrong was diagnosed with leukemia.
She underwent chemotherapy for the disorder after which
the leukemia went into remission in October 1993. At the
time, Armstrong had health-care coverage through a group
health plan administered by Travelers Insurance Company.
On May 1, 1995, Armstrong left her residence in Colorado,
taking a job with a realtor in Kansas City. The realtor
offered Armstrong a group health plan insured by Aetna.
Aetna also administers the plan, and, by the terms of the
health plan agreement, Aetna has the discretion to review
claims. Armstrong transferred her coverage to the Aetna
plan, becoming eligible for benefits under the plan on
June 1, 1995.

    On March 7, 1995, Armstrong visited Dr. Pamela Perry,
a primary care doctor, to “get established with a new
physician.” After Armstrong informed Dr. Perry of her
history of leukemia, Dr. Perry ordered a complete blood
count, which was performed the next day.        The test
indicated a white blood count that Dr. Perry described as
“abnormal” and “ low.”    Based on the test results and
Armstrong’s medical history, Dr. Perry ordered a more
detailed test called a “peripheral smear.” On March 13,
1995, the smear evaluation confirmed that Armstrong’s
white blood cell count was low and showed that her blood
cells were “atypical, but not leukemic.” While Dr. Perry
suggested no immediate action as a result of the test
results, she encouraged Armstrong to return for a “well-
woman examination” in September 1995.

    Armstrong saw Dr. Mark Davidner, an oncologist, on
June 15, 1995, two weeks after her Aetna coverage began.
Dr. Davidner examined Armstrong, finding signs of

                            3
leukemia. A bone marrow aspiration on June 27th resulted
in a definitive diagnosis of leukemia.         Armstrong
subsequently received treatment for leukemia through
chemotherapy and a bone marrow transplant.

    Armstrong sought coverage from Aetna for her leukemia
treatment.   Aetna initially indicated that Armstrong’s
policy covered the treatment but subsequently limited her
coverage based on the “preexisting condition” provision
in the health plan.




                            4
The plan defines a preexisting condition as a condition
that was diagnosed or treated, or for which treatment or
services were received, or prescription drugs or
medicines were prescribed or taken within 180 days of the
date coverage became effective. (Appellant’s App. at 92.)
The plan limits benefits for treatment of a preexisting
condition within the first year of coverage to $4,000.
Armstrong appealed Aetna’s determination that her claim
fell under the preexisting condition limitation. Aetna
reaffirmed its decision because Armstrong had received a
service for leukemia within the previous six months when
Dr. Perry conducted her examination of Armstrong.

    Armstrong appealed Aetna’s determination to the
district court. Armstrong argued that the court should
review Aetna’s decision de novo because Aetna’s role as
both insurer and administrator of the plan created a
conflict of interest.    Moreover, she claimed that the
incentives Aetna provided to its claim evaluators to deny
benefits further justified heightened review by the
court. Armstrong then argued that Missouri law should
apply to her claim and that, under Missouri law, Aetna’s
preexisting condition provision is invalid.     Armstrong
alternatively argued that she did not have a “condition”
within the meaning of the policy. The court determined
that Aetna’s decision was subject to an abuse-of-
discretion standard, Delaware law applied to Armstrong’s
claim, and substantial evidence supported Aetna’s
decision that Armstrong had a preexisting condition.
Armstrong appeals the district court’s ruling and we
affirm.




                            5
                                         II.

A.       Standard of Review

    We review a decision by an ERISA plan administrator
or fiduciary for an abuse of discretion if the plan
specifically gives the administrator or fiduciary the
authority to construe the terms of the plan. Firestone
Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989).
However, where the administrator or fiduciary has a
conflict of interest or acts with an improper motive,
that must be weighed as a “factor in determining whether
there is an abuse of discretion.” Restatement (Second)
of Trusts § 187, Comment d (1959), quoted in Firestone
Tire, 489 U.S. at 115.       We have not addressed the
appropriate standard for review where the insurer of a
health benefits plan is also the plan administrator.1
Other circuits have addressed this specific question. In
Atwood v. Newmont Gold Company, 45 F.3d 1317, 1323 (9th
Cir. 1995), and Brown v. Blue Cross & Blue Shield of
Alabama, Inc., 898 F.2d 1556, 1566-67 (11th Cir. 1990),
the Ninth and Eleventh Circuits adopted a “presumptively


     1
    We have addressed the question of whether a variation of the abuse of discretion
should apply where a “procedural irregularity” occurred in a plan administrator’s
determination of availability of benefits. See Wald v. Southwestern Bell Customcare
Med. Plan, 83 F.3d 1002, 1007 (8th Cir. 1996); Buttram v. Central States S.E. and
S.W. Areas Health & Welfare Fund, 76 F.3d 896, 900 (8th Cir. 1996). In those cases
we held that for a heightened standard to apply, a plaintiff must show that the
procedural irregularity caused the plan trustee to breach a fiduciary duty to the plan’s
beneficiary. Wald, 83 F.3d at 1007; Buttram, 76 F.3d at 900. Armstrong does not
assert the existence of a procedural irregularity. Rather, she contends that Aetna has
a conflict of interest as both the plan insurer and administrator and that Aetna’s claim
evaluators were biased by Aetna’s financial incentives to reject claims.
                                           6
void” test under which a decision rendered by a plan
administrator with such a conflict is presumed to be an
abuse of discretion unless the administrator can
demonstrate that either (1) under de novo review the
result was correct, or (2) the decision was not made to
serve the administrator’s conflicting interest.     The
Fourth, Fifth, Seventh, and Tenth Circuits use




                           7
a “sliding scale” approach, under which the reviewing
court always applies an abuse-of-discretion standard but
decreases the amount of discretion given to the
administrator’s decision in proportion to the seriousness
of the conflict.    See Chambers v. Family Health Plan
Corp., 100 F.3d 818, 824-27 (10th Cir. 1996); Doe v.
Group Hospitalization & Med. Serv., 3 F.3d 80, 87 (4th
Cir. 1993); Wilbur v. ARCO Chem. Co., 974 F. 2d 631, 638-
42 (5th Cir. 1992); Van Boxel v. Journal Co. Employees’
Pension Trust, 836 F.2d 1048, 1052-53 (7th Cir. 1987).

    We hold that the circumstances of this case require
us to review Aetna’s decision to deny benefits de novo.
We are informed by the reasoning of the Eleventh
Circuit’s holding in Brown, which stated that a
relationship that places an ERISA benefits plan
administrator in “perpetual conflict” warrants a higher
level of scrutiny. Brown, 898 F.2d at 1561. Aetna faces
a continuing conflict in playing the dual role of
administrator and insurer of the health benefits plan.
As the insurer, Aetna has an obvious interest in
minimizing its claim payments. Apparently to limit claim
payments, Aetna provides incentives and bonuses to its
claims reviewers based on criteria that include a
category called “claims savings.” (Appellant’s App. at
250-66).    Despite Aetna’s argument that there is no
evidence that Aetna has directed its reviewers to
improperly reject claims, we cannot view the fiduciary
arrangement between Aetna, its claims reviewers, and the
plan beneficiaries as the type ERISA provides as
administered “solely in the interest of the participants
and beneficiaries.” 29 U.S.C. § 1104 (a)(1).

B.   Choice of Law

                            8
    Armstrong argued below that Delaware law applies to
her claim.   She now argues that Missouri law applies.
Although we generally need not consider arguments raised
for the first time on appeal, see Ryder v. Morris, 752
F.2d 327, 332 (8th Cir. 1985), we conclude that the
district court properly determined that Missouri courts
apply the law of the state in which a policy is
delivered. See Miller v. Home Ins. Co., 605 S.W.2d 778,
780   (Mo.  1980).     The   evidence  presented   below
demonstrates that




                           9
Aetna delivered the policy in Delaware.        Therefore,
Delaware law applies.     An examination of the Delaware
statute   governing    the   treatment   of   preexisting
conditions, 18 Del. Code § 3517 (a), reveals that the
statute only applies prospectively from the statute’s
enactment, which occurred after the delivery of the Aetna
health benefits plan, leaving the plan outside of the
statute’s reach. In the absence of a statutory directive
invalidating the Aetna plan’s preexisting conditions
clause, the provision is construed based on its plain
language.

C.   Aetna’s Decision to Deny Benefits

    We now turn to whether Armstrong is entitled to
benefits. Armstrong contends that because her leukemia
was in remission during the 180-day period prior to her
coverage, she did not have a preexisting condition under
the terms of the plan.     Under the terms of the plan,
however, if a plan participant receives treatment or a
service for a condition within the 180 days prior to when
coverage began, the plan limits benefits. Armstrong did
not contest below, nor does she do so now, that the
testing she received was a “service” within the meaning
of the plan. Therefore, we accept that she received such
a service. See Ryder, 752 F.2d at 332. Likewise, the
parties do not dispute whether leukemia is a “condition”
within the meaning of the plan.

    The district court determined that sufficient
evidence supported a finding that Armstrong had leukemia
prior to the commencement of her coverage under the plan.
Because that inquiry is not relevant under the terms of
the plan, we need not consider the propriety of the

                            10
district court’s conclusion.    Under the Aetna plan, a
“preexisting condition” is a condition for which services
or treatment were rendered within the 180-day period
preceding coverage regardless of whether the condition
manifested itself during that period. Armstrong received
a service for leukemia during the 180-day period, and
leukemia is a condition under the terms of the plan. She
therefore is only entitled to benefits for the treatment
of that condition as devised in the plan for a
preexisting condition.




                           11
                                        III.

    For the foregoing reasons, the decision of the
district court to grant Aetna’s motion for summary
judgment and deny Armstrong’s motion for summary judgment
is affirmed.

BEAM, Circuit Judge, concurring and, in part, dissenting.

    I concur in the result reached by the court.      I
disagree, however, with the conclusions reached in Part
IIA of the opinion on the standard of review. Thus, in
part, I dissent.

    The holding "that the circumstances of this case
require us to review Aetna's decision to deny benefits de
novo" is, essentially, obiter dictum. Ante at 5. This
is because under any standard of review the district
court's   decision    must   be   affirmed    given   the
interpretation we place on the words of the employer's
plan insured by Aetna. Accordingly, we are not at all
required to establish a review standard in this case and
we should not do so under these particular circumstances
since the issue appears to be a matter of first
impression in this circuit.

    Even assuming that our decision calls for the
establishment of a standard of review, the de novo
standard adopted is directly contrary to Supreme Court
precedent established in Firestone Tire & Rubber Co. v.
Bruch, 489 U.S. 101 (1989).2 The plan

   2
   The conflict in Firestone Tire resulted from Firestone being both the sole source of
funding for and the administrator of the ERISA plans at issue while in this case Aetna
                                          12
at issue here specifically gives Aetna broad discretion
to construe the terms of the plan. Absent any elements
of a "conflict of interest," any review of Aetna's acts
or decisions would be based upon an unconstrained "abuse
of discretion" standard. Id. at 115. "Of course, if a
benefit plan gives discretion to an administrator or
fiduciary who is operating under a conflict of interest
[as here], that conflict must be weighed as a 'facto[r]
in determining whether there is an abuse of discretion.'"
Id. (second alteration in original) (citation omitted).
It is difficult, if not impossible, to read this language
from Firestone Tire contrary to the "sliding scale"
approach--under which the reviewing court always applies
an abuse of discretion standard but decreases the amount
of discretion given to the administrator's decision in
proportion to the seriousness of the conflict--
established by the Fourth, Fifth, Seventh and Tenth
Circuits. See Chambers v. Family Health Plan Corp., 100
F.3d 818, 824-27 (10th Cir. 1996); Doe v. Group
Hospitalization & Med. Servs., 3 F.3d 80, 87 (4th Cir.
1993); Wildbur v. ARCO Chem. Co., 974 F.2d 631, 638-42
(5th Cir. 1992); Van Boxel v. Journal Co. Employees'
Pension Trust, 836 F.2d 1048, 1052-53 (7th Cir. 1987).

    I can find no other circuit that presently applies a
de novo review under the circumstances of this or any
similar case. In establishing this de novo standard, the
court asserts that it is "informed" by the reasoning of


is both the benefits insurer and the plan administrator. For our purposes in applying
Firestone Tire, this is a distinction without a difference. Indeed, since we know nothing
of the premium arrangement between Armstrong's employer and Aetna, it is possible,
if not likely, that Firestone had a more intense conflict of interest than does Aetna in
this matter.
                                           13
the Eleventh Circuit in Brown v. Blue Cross & Blue
Shield, 898 F.2d 1556, 1561 (11th Cir. 1990). Ante at 5.
It is somewhat difficult to understand how the court has
processed information from Brown since the Eleventh
Circuit said "[w]e therefore hold that the abuse of
discretion, or arbitrary and capricious, standard applies
to cases such as this one, but the application of the
standard is shaped by the circumstances of the inherent
conflict of interest." Brown, 898 F.2d at 1563. Indeed,
the court also stated:

    While de novo review is an attractive avenue for
    controlling the exercise of discretion contrary
    to the interests of the beneficiaries, the
    application of this strict standard would deny
    Blue Cross the benefit of the bargain it made in
    the insurance contract.




                           14
Id. In short, Brown does not support the proposition for
which it is advanced by the court. Indeed, no case that
I have discovered does so.

    Accordingly, while I concur in the result reached by
the court, I disagree with its decision to establish a de
novo standard of review for this circuit in this case of
first impression.

        A true copy.

        Attest.

             CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




                            15
