Although mental health parity claims have been proliferating in federal courts for more than a decade, it wasn’t until last year that a federal appeals court laid out pleading standards for mental health parity cases.[1] Another appellate decision has now joined the chorus.
In Ryan S. v. UnitedHealth Group Inc.,[2] the U.S. Court of Appeals for the Ninth Circuit overturned a dismissal this month from the U.S. District Court for the Central District of California and reinstated the plaintiffs’ claim under the Mental Health Parity and Addiction Equity Act, or MHPAEA.[3] It upheld the lower court’s dismissal of the benefits claim, though.
The Ryan S. case was brought as a putative class action suit that maintained United Health and its subsidiaries applied a different and more stringent review process to outpatient claims involving mental health and substance use disorders, or MH/SUD, than it applied to claims for medical and surgical treatment.
The court held that a pleading is sufficient so long as a plaintiff alleges “the existence of a procedure used in assessing MH/SUD benefit claims that is more restrictive than those used in assessing medical/surgical claims under the same classification.”
The MHPAEA claim was able to pass muster because it referenced a California agency’s finding that UnitedHealth entities were utilizing a more stringent review process to assess MH/SUD claims.
The California Department of Managed Health Care issued a report in 2018 that found UnitedHealthcare of California had violated the MHPAEA by imposing a more stringent review process on MH/SUD claims.[4]
Based on the violations found by the state, the plaintiffs were allowed to proceed on their MHPAEA and breach of fiduciary duty claims. However, because the plaintiffs failed to identify any plan terms that had been violated, the Ninth Circuit upheld the dismissal of their claim for benefits due under the terms of the plan.
The portion of the complaint it upheld alleged Employee Retirement Income Security Act claims, maintaining that ERISA’s fiduciary requirements mandate that MH/SUD and medical and surgical claims be processed equally. It also held that the disparate treatment of MH/SUD claims violated ERISA’s fiduciary duty of loyalty.
The court pointed out that MHPAEA claims present a challenge because there is no specific private right of action that can be brought by an aggrieved individual, nor are there any specific provisions of ERISA that address this situation.
As a result, the law leaves uncertainty as to how to state a violation of the MHPAEA in a complaint, which has led to some complaints being dismissed while others that contain similar allegations have survived dismissal.
Making the issue even more complex are the different types of MHPAEA violations. A facial violation of the law occurs when a plan explicitly excludes treatments for MH/SUD conditions that are covered for analogous medical and surgical conditions.[5]
An “as applied” violation occurs if the plan terms are facially neutral but are applied disparately to exclude coverage for MH/SUD services.
In Ryan S., the allegations related to a third type of MHPAEA violation — that MH/SUD claims were evaluated more stringently than medical and surgical claims. For such a violation, the Ninth Circuit concluded a plaintiff would not be required to allege a categorical denial of benefits, just the disparate evaluation of MH/SUD claims.
The court further determined that a plaintiff pleading disparate processing would not have to precisely identify analogous medical and surgical claims that were not processed as stringently. Plaintiffs only need to show that claims within the same classification received disparate treatment. It is not enough, though, to simply allege a denial of behavioral health claims.
The court ruled that Ryan S.’s complaint was sufficient due to the California Department of Managed Health Care report that identified a process UnitedHealth called Algorithms for Effective Reporting and Treatment, or ALERT, which examined different metrics to make claim determinations for MH/SUD claims. The same process was not used for outpatient medical and surgical treatment, however.
Although UnitedHealth argued the report’s findings were not applicable to Ryan S.’s claims, the court found it was enough that the denial of his claims occurred during the same period the report analyzed.
Moreover, the court observed the report “directly analyzes UnitedHealthcare’s review process for MH/SUD claims and compares it to the plan’s review process for other claims in the same classification.”
The court then pivoted to ERISA. While ERISA’s fiduciary duties[6] require adherence to plan terms, the statute contains qualifying language requiring that plan instruments “are consistent with the provisions of [ERISA].”[7] The court interpreted that language as suggesting that an MHPAEA violation is also a breach of fiduciary duty.
The Ryan S. ruling puts teeth into the Mental Health Parity and Addiction Equity Act. The court’s observations on how to plead a Parity Act violation offer clear guidance on what complaints need to include.
Plaintiffs’ difficulties in pleading MHPAEA violations due to the absence of clear guidance from the courts has finally been significantly remedied by the Ninth Circuit’s ruling in Ryan S. and the 2023 ruling from the U.S. Court of Appeals for the Tenth Circuit in E.W. v. Health Net Life Insurance Co.
Not every plaintiff will be fortunate enough to benefit from having a governmental report as the basis of their complaint. However, state insurance departments conduct periodic market conduct investigations of insurers, which may also reveal disparate treatment of MH/SUD claims.
In addition, the U.S. Department of Labor has made mental health parity a priority and regularly investigates MHPAEA compliance.
The Ninth Circuit also sent a message to prospective plaintiffs that bare-bones allegations of an MHPAEA violation would be insufficient to sustain a claim.
At the same time, the court removed a significant hurdle plaintiffs have faced when alleging a Parity Act violation — the need to identify specific analogous medical and surgical treatments for which claims are processed more leniently.
Insurers that have been lax in complying with the MHPAEA now have even more incentive to do so. Inferior or more strenuous treatment of MH/SUD claims is likely to result in a class action complaint such as the Ryan S. case. This case therefore represents a step forward toward achieving the goal of mental health parity in healthcare.
Mark DeBofsky is a shareholder at DeBofsky Law Ltd.
This article was first published by Law 360 on April 23, 2024.
[1] E.W. v. Health Net Life Ins. Co., 86 F.4th 1265 (10th Cir. 2023); See, DeBofsky, “How Mental Health Ruling Paves Road for Equal Coverage,” Law360 (November 29, 2023), available at https://www.law360.com/articles/1770204/how-mental-health-ruling-paves-road-for-equal-coverage.
[2] Ryan S. v. UnitedHealth Grp., Inc., et al., 2024 U.S. App. LEXIS 8729, 2024 WL 1561668 (9th Cir. April 11, 2024).
[3] 29 U.S.C. §1985a.
[4] Cal. Dep’t Managed Health Care, Off. Plan Monitoring, Final Report: Focused Survey of Mental Health Parity and Addiction Equity Act (MHPAEA) Implementation 15-16 (July 18, 2018), available at https://www.dmhc.ca.gov/desktopmodules/dmhc/medsurveys/surveys/126_r_MHPAEA_0 71818.pdf.
[5] An example would be if a plan covered physical therapy but excluded psychotherapy.
[6] 29 U.S.C. § 1104(a)(1).
[7] 29 U.S.C. § 1104(a)(1)(D).
