On Jan. 26, the U.S. Court of Appeals for the Ninth Circuit withdrew its prior memorandum disposition in Wit v. United Behavioral Health and replaced it with an entirely new opinion.[1]

Although more detailed than the initial disposition of the appeal, the new ruling is still a major disappointment to mental health advocates and behavioral health providers, and raises numerous questions about the future of Employee Retirement Income Security Act class actions that will be addressed below.

The initial 2019 U.S. District Court for the Northern District of California decision issued in the class action brought against United Behavioral Health was easily the most significant health insurance ruling of the last decade.

Following a lengthy bench trial, the district court handed down a sweeping ruling in favor of three classes of plaintiffs containing over 100 pages of findings of fact and conclusions of law.[2]

The court specifically found that guidelines developed by United used to determine reimbursement of claims relating to psychiatric conditions were noncompliant with generally accepted standards of care and treatment. A year later, the same court issued a final judgment that ordered United to reprocess over 50,000 claims it had initially denied.[3]

However, a cursory unpublished appellate memorandum disposition[4] issued in 2022 by the Ninth Circuit completely undid the work of Chief U.S. Magistrate Judge Joseph Spero, the trial judge in the Wit district court case.

A petition for rehearing was filed by the plaintiffs soon thereafter, along with a host of amicus briefs submitted by several states, a number of the most prominent U.S. medical groups and numerous associations representing health care providers. However, with the issuance of the most recent decision, the pending petition for rehearing was rendered moot.

The new opinion, like the prior memorandum, rejected the defendant’s argument that the plaintiffs lacked standing to pursue their claims and upheld the district court’s ruling on that issue.

However, the Ninth Circuit overturned the district court’s class certification order. In order to circumvent the need for the court to individually evaluate each class member’s claim, which would have been grounds to preclude class certification, the plaintiffs sought an order requiring United to reprocess claims utilizing standards in compliance with generally accepted standards of care, or GASC.

The district court approved that remedy as a means of providing class relief; however, the Ninth Circuit held the lower court abused its discretion, asserting that reprocessing of claims is not a remedy enumerated in Title 29 of the U.S. Code, Section 1132(a) and would
therefore expand claimants’ statutory rights beyond the scope of the ERISA law.

The court of appeals also held that claims reprocessing was not an available remedy under ERISA’s catchall remedy enumerated in Section 1132(a)(3).

The court reasoned that such remedial provisions would only be available in situations where no other remedy exists, which was not the case in this matter since the court determined the plaintiffs had an adequate remedy under the statutory provision allowing plan participants and their beneficiaries to seek benefits due under the terms of their benefit plan.[5]

The Ninth Circuit further observed that claim reprocessing is not a typical claim that could be brought in a court of equity.

The court did, however, leave intact that portion of the district court’s ruling that found the guidelines utilized by United deviated from statemandated criteria applicable in several states since United never appealed from that portion of the lower court’s ruling.

Turning to the merits of the dispute, the Ninth Circuit began by pointing out that since ERISA does not interfere with an employer’s choice of the benefits it provides:

The question then is not whether ERISA mandates consistency with GASC it does not but whether UBH properly administered the Plans pursuant to the Plan terms.

The court added that United possessed discretionary authority to interpret the terms of the plans it administered despite United’s structural conflict of interest triggered by its dual role as both the decision maker and the funding source for the benefits. The reviewing court maintained that such conflicts of interest are only a factor to be weighed, but do not eliminate the plan administrator’s discretionary authority.

Moreover, although the plans provided that they excluded treatments that were inconsistent with GASC, they did not mandate that all treatments consistent with GASC were included.

The court further pronounced, “Nor does the exclusion or any other provision in the Plans require UBH to develop Guidelines that mirror GASC.” That pronouncement resulted in the appellate court’s conclusion that the district court erred by substituting its “interpretation of the Plans for UBH’s interpretation.”

Finally, the Ninth Circuit also ruled the lower court erroneously excused unnamed class members from demonstrating they had exhausted presuit appeals. Since a requirement of the plans was that plaintiffs were required to exhaust prelitigation appeals before filing suit, by excusing exhaustion, the court abridged United’s right to seek dismissal of claims that failed to meet a required precondition to filing suit.

This ruling is a huge disappointment to mental health advocates and to behavioral health providers. The district court’s initial ruling painstakingly laid out a series of generally accepted standards of behavioral health treatment.

Judge Spero’s findings were especially pertinent in emphasizing the need for treatment directed at producing a sustained improvement in the patient’s condition rather than merely covering crisis management. The district court also addressed the need for treatment to address comorbid impairments such as a patient suffering both from depression and a substance use disorder.

Further, although the Mental Health Parity and Addiction Equity Act[6] and its impact on insurance coverage for mental health and substance use disorders was critical to the lower court decision, the Ninth Circuit made no mention whatsoever of the Parity Act in its opinion.

Given the high cost of medical care, most people cannot afford to pay out of pocket for the care they receive and must rely on insurance to help defray their medical expenses. The Ninth Circuit failed to consider the impact its ruling could have on the availability and accessibility of needed mental health treatment.

Instead of focusing on patients’ rights, the appellate court was overly protective of United and made no mention of ERISA’s fiduciary obligations imposed on insurers such as United to act exclusively in the interest of plan participants and their beneficiaries.[7]

The preamble to the ERISA statute also emphasizes the law was enacted to establish standards of conduct, responsibility and obligation for fiduciaries of employee benefit plans, and provide for appropriate remedies, sanctions and ready access to the federal courts.[8]

The Ninth Circuit used the issue of deference to sidestep these policy issues. While it may seem anomalous that a statute as paternalistic as ERISA would even allow for such a regime,[9] the U.S. Supreme Court sanctioned the discretionary review standard in its 1989 Firestone Tire v. Bruch[10] decision.

Nevertheless, one has to question the point of having insurance if the policy does not cover medically necessary treatment provided in accordance with generally accepted standards of care. And letting insurers off the hook for denying such treatment based on their discretionary authority is incongruous with ERISA’s primary purpose of assuring deliverance of promised benefits.

The Ninth Circuit‘s Wit ruling is also troubling with respect to other issues that are unique to ERISA litigation.

First, while the requirement of exhaustion of prelitigation appeals was incorporated in United’s plans, it is based on a judicially created doctrine of administrative exhaustion of ERISA claims that has recently been called into question since the doctrine is extrastatutory.[11]

The putative class members who failed to challenge claim denials may have not been able to find or afford a lawyer who could take their cases, or simply gave up. They may also have been impeded in challenging their denials by the nature of their behavioral health conditions.

Moreover, the court’s findings concerning the claims reprocessing ordered by the district court is especially puzzling.

Although there is no statutory provision allowing for remands of ERISA cases,[12] when courts overturn ERISA benefit denials, they routinely remand ERISA cases for the purpose of having the claims reprocessed. What is sauce for the goose ought to be sauce for the
gander as well, or the practice of remanding ERISA cases needs to end.

Finally, the decision offers little guidance on future individual plaintiff cases that might involve similar issues, especially if the cases are adjudicated under the de novo standard of judicial review under ERISA[13] or under state law.

All the points made in the district court’s rulings would still be relevant grounds to challenge claim denials involving mental health and substance use disorder claims.

For that reason alone, the inadequacy of the Ninth Circuit’s replacement Wit decision should compel the Ninth Circuit to give serious consideration to rehearing the case en banc.


Mark DeBofsky is a shareholder at DeBofsky Law.

This article was first published by Law 360 on January 31, 2023

[1] Wit v. United Behavioral Health, 2023 U.S.App.LEXIS 2039, 2023 WL 411441 (9th Cir. January 26, 2023)

[2] Wit v. United Behavioral Health, 2019 U.S. Dist. LEXIS 35205, 2019 WL 1033730 (N.D. Cal. March 5, 2019)

[3] Wit v. United Behavioral Health, 2020 U.S. Dist. LEXIS 205435, 2020 WL 6479273 (N.D. Cal. November 3, 2020); DeBofsky, “UnitedHealth ERISA Ruling Exposes Faults in Health Coverage,” Law360 (November 25, 2020)

[4] Wit v. United Behavioral Health, 2022 U.S. App. LEXIS 7514, 2022 WL 850647 (9th Cir. March 22, 2022); DeBofsky, “9th Circ.’s Hasty UnitedHealth Reversal is Disappointing,” Law360 (March 28, 2022)

[5] 29 U.S.C. § 1132(a)(1)(B)

[6] 29 U.S.C. § 1985a

[7] 29 U.S.C. § 1104(a)(1)

[8] 29 U.S.C. § 1001(b)

[9] See, Van Boxel v. Journal Employees’ Pension Trust, 836 F.2d 1048 (7th Cir. 1987) (questioning basis for ERISA deference)

[10] Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989)

[11] See, Wallace v. Oakwood Healthcare, Inc., 954 F.3d 879 (6th Cir. 2020) (Thapar, J., concurring) (questioning basis for ERISA’s judicially created administrative exhaustion requirement)

[12] See, Card v. Principal Life Ins. Co., 17 F.4th 620 (6th Cir. 2021) (Murphy, J., concurring) (questioning ERISA remands)

[13] Since the Wit case was brought In California, Cal. Insur. Code § 10110.6 prohibits discretionary clauses in health, life, and disability insurance policies covering California residents, which means the de novo standard of judicial review would apply to the adjudication of individual cases brought by California residents.

 

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