There have been several important recent developments in how courts are assessing health benefit claims brought under the Employee Retirement Income Security Act.
In Dwyer v. United Healthcare Insurance Co.,[1] a case involving a claim for residential behavior health treatment for an eating disorder, the U.S. Court of Appeals for the Fifth Circuit on Sept. 19 reversed a lower court ruling in favor of the defendant and entered judgment for the plaintiff after finding the insurer improperly denied benefits.
In the U.S. Court of Appeals for the Tenth Circuit, however, in M.S. v. Premera Blue Cross and Microsoft Corp. on Oct. 1,[2] the court overturned a win for a plaintiff in a mental health treatment claim, finding the plaintiff failed to state a claim for a violation of the Mental Health Parity and Addiction Equity Act, but the court did find that the insurer improperly withheld documents from the plaintiff’s purview.
Both cases offer important lessons to litigants.
Those lessons include guidance on how claims are to be evaluated by plan administrators, what documents need to be disclosed to claimants in the claims process, and what plaintiffs need to present in order to sustain a Parity Act violation.
Table of Contents
Dwyer v. United
In Dwyer, the appellate court joined other courts in pointing out that the ERISA claims process requires a meaningful dialogue between the parties.[3]
The Fifth Circuit was critical of United for not engaging in any dialogue and for either misstating relevant evidence, or raising points that may have been true, but were irrelevant to the plaintiff’s current need for treatment, such as that intensity of treatment could be reduced in the future.
The Fifth Circuit also responded to United’s argument that the court should not give deference to the treating doctors by pointing out that there is also no rule under ERISA that requires courts to give favorable treatment to the insurer’s doctors.
The court also reiterated that ERISA prohibits plan administrators from raising new arguments in litigation that had not been made during the claim process.
Finally, the court held that United was obligated to reimburse medical expenses at a rate that had previously been agreed upon with the treatment facility for out-of-network treatment.
Both United and the facility participated in the MultiPlan network, which establishes reimbursement rates for facilities outside of the insurer’s preferred provider network; however, United sought to pay a lower rate. The court rejected those efforts.
M.S. v. Premera
In M.S., Microsoft’s benefit plan refused to provide reimbursement for residential mental health treatment on the ground that the plaintiffs failed to meet the plan’s criteria for what is deemed medically necessary care.
When the plaintiffs tried to appeal the denial, a request was made not only for a copy of the mental health treatment criteria, but for the criteria utilized for reimbursement of skilled nursing care as well, along with a copy of the administrative services agreements between Microsoft and Premera, which was acting as a third-party administrator for Microsoft’s plan.
Only the mental health treatment criteria were provided, though, and the prelitigation appeal was denied, which led to litigation.
The U.S. District Court for the District of Utah determined that the plaintiffs were unable to prove the medical necessity of treatment under the terms of the plan. However, the court found the plan committed a Parity Act violation because the criteria used to determine medical necessity for residential behavioral health treatment were more restrictive than the criteria used for skilled nursing treatment.
Such treatment was considered analogous to residential treatment and an appropriate comparator under the Parity Act. The district court also ruled that Premera committed a disclosure violation under ERISA by not providing the administrative services agreement and skilled nursing criteria and imposed penalties under Title 29 of the U.S. Code, Section 1132(c), along with awarding attorney fees.
The Tenth Circuit concluded that the plaintiffs lacked standing to assert a Parity Act violation because the treatment at issue was found to not have been medically necessary under the terms of the plan, a finding that was not appealed. Therefore, the plaintiffs could not show they suffered an injury attributable to the Parity Act violation. Absent a concrete injury, the court found that plaintiffs lacked standing.
Turning to the disclosure violation, the court of appeals upheld the district court’s finding that the administrative services agreement was a relevant document that needed to be produced, but overturned the district court’s determination that the criteria for skilled nursing facilities also needed to be provided.
According to Section 104(b)(4) of ERISA, plan participants are entitled to receive upon request “a copy of the latest updated summary plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated.”[4]
While the Tenth Circuit had not previously had occasion to determine whether an administrative services agreement fits within that provision, it concluded that the administrative services agreement was both a contract as well as a contract under which the plan is operated.
The court also found support in a 2009 ruling from the U.S. Court of Appeals for the Seventh Circuit in Mondry v. American Family Mutual Insurance Co.,[5] which had come to the same conclusion that an administrative services agreement is a document which must be provided upon request.
The plaintiffs did not fare as well with respect to the skilled nursing criteria. The district court relied on a Parity Act regulation,[6] which stated:
[i]nstruments under which the plan is established or operated include documents with information on medical necessity criteria for both medical/surgical benefits and mental health and substance abuse disorder benefits, as well as the processes, strategies, evidentiary standards, and other factors used to apply a nonquantitative treatment limitation with respect to medical/surgical benefits and mental health or substance use disorder benefits under the plan.
The Tenth Circuit determined that the regulation conflicted with ERISA Section 104(b)(4) because it did not consider the skilled nursing criteria to be an “instrument under which the plan is established or operated.”
The court did, however, suggest in footnotes that such criteria might possibly be required to be produced either under the regulations promulgated by the secretary of labor[7] to enforce ERISA’s full and fair review requirement[8] or in accordance with the statutory text of the Parity Act.[9] Nonetheless, the court upheld the district court’s penalty award and its fee award.
Takeaways
These two cases shed a great deal of light on how courts are looking at health insurance denials. The Dwyer case reinforces that the claims process is to be conducted in a manner that assures claimants are given a full and fair review of their claims.
Insurers that have upheld claim denials are subject to having their decisions overturned unless they can show that they engaged in a meaningful dialogue with claimants and considered the opinions of the treating doctors.
Courts are also looking for logical connection between the evidence presented, and the determination reached and are unaccepting of rubber stamps or conclusory denials.
The M.S. case also focused on the claims process, but from a different angle. The court ruled that claimants are entitled to documentation that permits them to better understand the basis of the denial so they can address the underlying reasons for the denial.
To reinforce claimants’ right to receive, review and comment upon relevant evidence, the Tenth Circuit reminded plan administrators that their noncompliance will result in penalties and fee awards.
However, the Tenth Circuit’s approach to the Parity Act claim has disturbing implications.
The court’s analysis of the standing issue may make it nearly impossible for claimants to address “as applied” violations of the Parity Act, i.e., those violations that appear facially neutral but may involve disparate treatment of mental health and medical or surgical claims. The outcome reached by the Tenth Circuit may be related to the procedural posture in which the case reached the court of appeals. However, the absence of any mention of as-applied Parity Act violations and whether behavioral health claims were treated differently than analogous medical and surgical claims will pose problems for future Parity Act claimants if they are unable to obtain criteria that may show disparate evaluation of skilled nursing treatment.
Again, in view of the court’s footnotes, the issue may have come out the way it did due to the procedural posture of the case.
However, if plaintiffs are unable to gain access to guidelines applicable to medical or surgical treatment analogous to mental health treatment, they lack the ability to provide a Parity Act violation.
The recent issuance of new regulations relating to the Parity Act[10] may help clarify some of these issues, but until then, the impact of Dwyer and M.S. will shape the future course of health insurance litigation.
Mark DeBofsky is a shareholder at DeBofsky Law Ltd.
This article was first published by Law 360 on October 9, 2024.
[1] Dwyer v. United Healthcare Insurance Company , 2018 U.S. App. LEXIS 23866, 2024 WL 4230125 (5th Cir. September 19, 2024).
[2] M.S. v. Premera Blue Cross , 2024 U.S. App. LEXIS 24816, 2024 WL 356319 (10th Cir. October 1, 2024).
[3] Citing David P. v. United Healthcare Ins. Co. , 77 F.4th 1293, 1311-13 (10th Cir. 2023) (same); D. K. v. United Behav. Health , 67 F.4th 1224, 1243 (10th Cir. 2023).
[4] 29 U.S.C. § 1024(b)(4).
[5] Mondry v. Am. Fam. Mut. Ins. Co. , 557 F.3d 781 (7th Cir. 2009).
[6] 29 C.F.R. § 2590.712(d)(3).
[7] 29 C.F.R. § 2560.503-1.
[8] 29 U.S.C. § 1133.
[9] 29 U.S.C. § 1185a(a)(4).
[10] 89 Fed. Reg. 77566 (September 23, 2024).