Recent Decisions Addressing Mental Health Coverage in the ERISA Context

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Mental healthcare coverage issues, particularly those related to federal and state mental health parity statutes, feature prominently in recent litigation arising under the Employee Retirement Income Security Act (ERISA). In the article below, originally published in the DRI ERISA Report (December 30, 2019), Manatt discusses several district court decisions from 2019 that involve mental health treatment claims, including recent cases addressing the interaction between ERISA and mental health parity statutes.

Emch v. Community Insurance Company

In Emch v. Community Insurance Company d/b/a Anthem Blue Cross and Blue Shield, No. 1:17-CV-00856, 2019 WL 5538196 (S.D. Ohio Oct. 25, 2019), the plaintiff filed a putative class action alleging that an employer-sponsored health insurance plan improperly denied claims for residential mental health services for the plaintiff’s minor son. Notably, the plaintiff alleged that Ohio Rev. Code § 3923.281 (the Ohio Parity Act), a mental health parity statute in Ohio state law, was incorporated into the terms of the plan through a “Conformity with Law” clause, empowering him to seek relief through ERISA for alleged violations of the Ohio Parity Act.

The court denied the defendant’s motion to dismiss the complaint, holding that the plaintiff had stated plausible claims for relief under 29 U.S.C. § 1132(a)(1)(B) and 29 U.S.C. § 1132(a)(3) because the plan incorporated the Ohio Parity Act’s requirement that plans cover the “diagnosis and treatment of biologically based mental illnesses on the same terms and conditions as, and … provide benefits no less extensive than, those provided under the policy of sickness and accident insurance for the treatment and diagnosis of all other physical diseases and disorders ….” Ohio Rev. Code § 3923.281(B); see Emch, 2019 WL 5538196, at *3.

The court analyzed two prior district court cases where plaintiffs had argued that state mental health parity laws were incorporated into their plans: Bushell v. Unitedhealth Group, Inc., No. 17-CV-2021, 2018 WL 1578167 (S.D.N.Y. Mar. 27, 2018), and A.F. ex rel. Legaard v. Providence Health Plan, 35 F. Supp. 3d 1298 (D. Or. 2014). The defense urged the court to follow the reasoning in Bushell that rejected a similar claim and cautioned that it would improperly expand the scope of relief available under ERISA. See Bushell, 2018 WL 1578167 at *4 (holding that the plaintiff “cannot enforce” a New York mental health parity law “under the guise of an ERISA claim” and noting that a contrary conclusion “would mean that this one provision allows suit for violation of any state or federal law”). But the court followed the reasoning in Legaard that a plaintiff has standing to enforce provisions of state statutes incorporated into her plan through ERISA. See Legaard, 35 F. Supp. 3d at 1305 (holding that plaintiff had stated a cause of action under 29 U.S.C. § 1132(a)(3) for violation of the Oregon mental health parity statute, and that “ERISA provides courts with the power to enjoin violations of state law regulating insurance that have become part of the terms of the plan”). The Emch litigation continues following the court’s denial of the motion to dismiss.

Kerry W. v. Anthem Blue Cross and Blue Shield

In Kerry W. v. Anthem Blue Cross and Blue Shield, No. 2:19-CV-67, 2019 WL 2393802 (D. Utah June 5, 2019), a parent and minor child alleged that the defendant improperly denied claims for a portion of the child’s lengthy treatment at a residential center serving adolescents with mental health, behavioral and substance abuse issues. In addition to a claim for recovery of plan benefits under 29 U.S.C. § 1132(a)(1)(B), the plaintiffs advanced a second claim under 29 U.S.C. § 1132(a)(3) alleging violations of the federal mental health parity statute, the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). The plaintiffs invoked provisions of MHPAEA that require health plans providing “both medical and surgical benefits and mental health or substance abuse disorder benefits” to ensure that “the treatment limitations applicable to such mental health or substance use disorder benefits are no more restrictive than the predominant treatment limitations applied to substantially all medical and surgical benefits covered by the plan (or coverage)” and that “there are no separate treatment limitations that are applicable only with respect to mental health or substance use disorder benefits.” See 29 U.S.C. § 1185a(a)(3)(A).

In granting the defendant’s motion to dismiss, the court held that the plaintiffs’ MHPAEA allegations were fatally deficient due to their failure to tie their allegations to any analogous treatment in the medical or surgical setting. The court found that, while the plaintiffs had alleged flaws in the defendant’s claims handling, they had not sufficiently alleged there was any illegal disparity in the way that the defendant had handled, processed or evaluated the claim in comparison to the defendant’s disposition of claims for allegedly analogous medical treatment, such as treatment at a skilled nursing facility. Kerry W., 2019 WL 2393802, at *4-5.

Halberg v. United Behavioral Health

In Halberg v. United Behavioral Health, No. 16-CV-6622, 2019 WL 4784571 (E.D.N.Y. Nov. 5, 2019), a case challenging a denial of benefits for nearly 18 months of residential mental health treatment for the plaintiff’s minor child, the district court adopted the magistrate judge’s Report and Recommendations granting the defendant’s motion for summary judgment. Finding that the plan in question granted discretionary authority to the defendant to interpret the plan and determine eligibility for benefits, the court held that the defendant’s denial should be examined under a “highly deferential” arbitrary and capricious standard of review. See id. at *16-17.

Applying this standard, the court agreed with the defendant that further residential treatment beyond an initial period of several months was not medically necessary under the terms of the plan. Record evidence showed that, while the child had indisputably suffered a mental health crisis in the later part of 2011, by January 2012 her immediate crisis had passed, and substantial evidence supported the defendant’s conclusion that residential treatment was no longer medically necessary. Medical records revealed that she presented as cheerful and goal-oriented, was planning for the future, responded to medication, socialized well with others, left the facility on day passes, and was able to work and go to school. See id. *19. The court also noted that an independent and external reviewer had upheld the defendant’s decision, further demonstrating that the defendant had acted reasonably.

Rejecting arguments that the defendant should have afforded more deference to the opinions of the child’s treating providers, the court explained that while it was sympathetic to the plaintiffs’ arguments, they had “not demonstrated that under the applicable deferential standard, Defendant’s denials were unsupported by evidence that a reasonable mind might accept as adequate to support the conclusion reached by the administrator.” See id. at *20 (citation omitted).

S.B. v. Oxford Health Insurance, Inc.

In S.B. v. Oxford Health Insurance, Inc., No. 3:17-CV-1485, 2019 WL 5726901 (D. Conn. Nov. 5, 2019), by contrast, the court held that the defendant had improperly denied claims for residential mental health treatment for the plaintiff’s eating disorder, even when applying a deferential arbitrary and capricious standard of review.

The plaintiff, a minor at the time of the treatment at issue, had suffered from an eating disorder since 2013. She had undergone substantial treatment at the outpatient and intensive outpatient levels from 2013 until her admission to a residential treatment center on February 11, 2015. The defendant initially denied, and then agreed to cover, the first weeks of residential treatment. The defendant then denied coverage from February 27, 2015, forward and upheld its decision through two levels of administrative appeal on the basis that the plaintiff had not shown that continued residential treatment was medically necessary.

The court ordered the denial decision remanded for the defendant to reconsider the evidence and apply what the court considered to be the appropriate definition of “medical necessity” as stated in the plan. The court held that the defendant strayed beyond its discretion under the terms of the plan by applying admission criteria in the UBH 2015 Level of Care Guidelines (UBH Guidelines) that conflicted with the plan’s definition of medical necessity. Relying in part on the American Psychiatric Association Practice Guidelines for the Treatment of Patients with Eating Disorders, submitted into the record by the plaintiff, the court found that the defendant had improperly weighed “why now” factors in the UBH Guidelines, such as “changes in the member’s signs and symptoms, psychosocial and environmental factors, or level of functioning” that “precipitated admission.” See id. at *12. The court found that the definition of medical necessity in the plan focused the inquiry instead on the treatment necessary to address a patient’s underlying mental health condition, rather than their acute symptoms. Id. at *13. The court explained that, on remand, the defendant’s coverage decision and rationale “must be rationally related to whether residential treatment was necessary to treat Plaintiff’s eating disorder, and not just manage her acute symptoms.” Id. at *17 (emphasis in original).

Conclusion

These recent decisions illustrate legal issues that courts are confronting as they continue to address mental health coverage litigation in the ERISA context. They add to a growing body of law addressing the interaction between ERISA, MHPAEA and state mental health parity statutes, as well as the proper level of scrutiny to apply under deferential standards of review.