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Ninth Circuit Rules on Mental Health Coverage Under ERISA

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A recent decision of the United States Court of Appeals for the Ninth Circuit (Witt et al. v. United Behavioral Health and Alexander et al. v. United Behavioral Health) illustrates the difficulty of balancing the desire to cover evolving treatments for mental health and addiction disorders with the general power of plan sponsors and insurers over plan design and the administrator’s discretion to interpret the scheme and adjudicating claims. The case involved full or partial denials by United Behavioral Health (“UBH”) of claims related to mental health and addiction treatment.

A federal district court (see here and here) had ordered UBH to restate more than 50,000 claims on the grounds that UBH’s guidelines for determining coverage did not meet generally accepted standards of care (“GASC”) . The district court found that the UBH guidelines improperly applied cost-benefit analysis to reject coverage of more comprehensive treatments. For example, the district court found that the UBH guidelines placed too much emphasis on treating acute symptoms rather than treating underlying conditions and did not inappropriately include criteria for the level of care specifically adapted to children.

Among other things, UBH argued on appeal that: (1) ERISA beneficiaries lacked standing to pursue their claims; and (2) the trial court failed to properly apply the abuse of discretion test in its restatement order.

In an unreported decision, a Ninth Circuit panel rejected UBH’s standing argument, but still rescinded the order to restate the claims, because –

  • Under applicable plans, GASC compliance was required but not sufficient to warrant coverage—e., services could only be covered if they were both within the scope of the GASC and what the plan covered; and

  • The plan administrator’s application of plan standards could only be reviewed for abuse of discretion. This meant that, even if the court disagreed with UBH’s balancing of costs and benefits or with its final decision, the court could not reverse the administrator’s decision unless not be unreasonable.

The Ninth Circuit also ruled that an alleged conflict of interest based on UBH acting as both plan administrator and insurer/payor was not sufficient to alter the outcome on the facts of the case. particular.

The Ninth Circuit’s decision illustrates how claims for coverage, particularly for mental health services, are inherently fact-specific because they require an analysis of the patient’s medical needs, medical necessity and the sufficiency of alternative treatments. Rather than consider the merits of any particular claim, the Ninth Circuit simply concluded that in light of the discretion given to UBH to interpret the plans, it was not appropriate to fire more than 50,000 claims to UBH for mass review.

© 2022 Proskauer Rose LLP. National Law Review, Volume XII, Number 94