On Aug. 22, the U.S. Court of Appeals for the Ninth Circuit issued its third opinion in Wit v. United Behavioral Health, vacating its January opinion, which itself replaced an earlier memorandum disposition.[1]
The January opinion superseded an earlier, heavily criticized memorandum disposition that had overturned the plaintiffs’ sweeping victory in the U.S. District Court for the Northern District of California. The hugely significant case involves benefits coverage for mental health treatment.[2]
Upon issuance, the Ninth Circuit’s replacement opinion also drew significant criticism — the plaintiffs filed a petition for rehearing, which was joined by a host of amici curiae representing the U.S. Department of Labor, several states, and numerous medical and behavioral health organizations who saw their resounding victory in the district court eviscerated.
While the latest ruling is somewhat more favorable to the plaintiffs than the prior rulings, the victory they won in the district court was significantly curtailed. And overall, the opinion seems to ignore what was at stake in the litigation.
The case, which was a class action suit brought on behalf of three separate classes,[3] presented allegations that United Behavioral Health, or UBH, which administers behavioral health claims for millions of Americans, had improperly denied claims for reimbursement of mental health treatment.
The plaintiffs maintained that UBH’s claim denials were based on internally developed guidelines for a number of behavioral health conditions including substance use disorders that were inconsistent with both generally accepted standards of care with respect to covered services and mandated care guidelines adopted by Texas, Rhode Island, Illinois and Connecticut.
Following a 10-day bench trial held in 2017, the plaintiffs won a groundbreaking victory in 2019. However, UBH appealed and the Ninth Circuit mostly overturned the plaintiffs’ win.
In its most recent opinion, the Ninth Circuit began its discussion of the merits of the case by pointing out that the Employee Retirement Income Security Act does not require any employer to establish benefit plans; nor does the law impose any specific benefit coverage terms.
However, following the establishment of a plan, ERISA imposes fiduciary standards on the administrators of those plans that require them to act “solely in the interest of the participants and beneficiaries … with … care, skill, prudence, and diligence,” and “in accordance with the documents and instruments governing the plan.”[4]
The gravamen of the plaintiffs’ claims was that UBH administered benefit plans in accordance with “financial self-interest and in conflict with plan terms,” which was inconsistent with fiduciary obligations.
The court of appeals agreed in part with the plaintiffs’ fiduciary breach claims and upheld the district court’s finding that UBH “had a financial conflict because it was incentivized to keep benefit expenses down.”
However, the appellate ruling did not fully open the door to the plaintiffs’ claims because it found the lower court failed to give appropriate deference to UBH’s benefit determinations, explaining that UBH’s conflict of interest was merely a factor to consider and did not direct an outcome favoring the plaintiffs.
Moreover, the court concluded that the plaintiffs’ denial-of-benefits claims failed because the lower court’s ruling granted plaintiffs’ rights beyond what ERISA allows, which made the lower court’s ruling inconsistent with the Rules Enabling Act.[5]
The Rules Enabling Act forbids courts from granting class relief that would “abridge, enlarge or modify any substantive right.”[6] The Ninth Circuit did rule, though, that since UBH did not appeal from the district court’s finding that its guidelines conflicted with state-mandated criteria, that portion of the district court’s ruling was affirmed.
Further, the Ninth Circuit found that while the plaintiffs had stated claims for breach of fiduciary duty, the remedy was unclear since the plaintiffs are limited to seeking appropriate equitable relief under ERISA, Section 502(a)(3).[7]
That left an open question for consideration on remand as to whether reprocessing of claims that had previously been denied constituted an appropriate form of equitable relief. The court of appeals also left open a possibility that the district court could dismiss the fiduciary breach claims on remand if it finds such claims were no more than disguised claims for benefits.
It is difficult to ascertain how much of the sweeping ruling issued by the district court has survived. What is especially frustrating about the latest ruling is that the Ninth Circuit focused on process and procedure, but essentially ignored the importance of the underlying issues pertaining to health insurance coverage for mental illness treatment.
For example, nothing was mentioned in the opinion about the exceptionally high rate of claim denials for persons suffering from mental illness. Accord to a survey conducted by the National Alliance on Mental Illness, patients needing mental health care were twice as likely to have their claims denied as patients seeking care for physical conditions.[8]
Additionally, there was no mention in the Ninth Circuit’s ruling of how few claim denials are appealed, which is why a class action was needed. Studies issued by the Kaiser Family Foundation show that consumers appeal fewer than 0.2% of benefit denials.[9]
Anecdotal reports from the American Psychological Association as to the low rate of claim denial appeals found that mental illness impedes patients’ ability to participate in an appeals process that appears complex and daunting.[10]
What is especially concerning about the Ninth Circuit’s opinion is the court’s assertion that the district court’s ruling may be read to stand for the proposition that so long as a treatment was generally accepted, it had to be covered.
However, that is not what the district court found. The heart of the district court’s ruling was its finding — made after hearing evidence for 10 days of trial — that the UBH guidelines were used to deny medically necessary services covered by the benefit plans that met generally accepted standards of care.
The Ninth Circuit framed the issue as whether UBH had the discretion to determine whether covered services met generally accepted standards of care. However, after the district court found UBH’s guidelines were developed based on financial considerations, nothing further was needed to prove an abuse of discretion by UBH since the insurer allowed its financial interest to govern claim approvals, rather than the application of generally accepted standards of care developed by leading experts and based on consensus agreement.
In essence, the Ninth Circuit failed to ask the most critical question: What is the point of even having insurance if the insurer can override recommendations for medically necessary covered treatment that are based on expert consensus opinions, and that are made by medical professionals who have first-hand knowledge of their patients’ needs? Moreover, guidelines are not rules, and should not be used as a substitute for medical judgments specific to each patient’s needs and circumstances.
The Ninth Circuit’s affirmance of the judgment in favor of one of the classes — referred to as the state mandate class — also reveals a glaring inconsistency in the recently issued panel decision.
The state mandates utilize criteria developed by expert bodies such as the American Society of Addiction Medicine, the American Academy of Child and Adolescent Psychiatry, and the American Association of Community Psychiatrists. If such guidelines have sufficiently recognized authority to be mandated by several states, why would it not be an abuse of discretion for UBH to apply inferior guidelines to make benefit determinations in all 50 states?
Mental health is a critical issue in the U.S. Statistics show that less than half of tens of millions of Americans with mental health conditions receive treatment.[11] Giving insurers broad license to deny lifesaving treatment will likely only exacerbate the problem.
This was no ordinary case. The district court’s initial findings following trial were characterized by mental health advocate and former Rep. Patrick Kennedy as the “Brown v. Board of Education for the mental health movement.”[12]
What the Ninth Circuit did in its most recent ruling was to elevate an insurer’s discretionary authority over the medically necessary needs of individual patients. How can law or logic sanction such a result?
Mark DeBofsky is a shareholder at DeBofsky Law Ltd.
This article was first published by Law 360 on September 7, 2023.
[1] Wit v. United Behavioral Health, 2023 U.S. App. LEXIS 22122, 2023 WL 5356640 (9th Cir. August 22, 2023) replaced the earlier decision reported at 58 F.4th `080 (9th Cir. 2023).
[2] 2022 U.S. App. LEXIS 7514.
[3] The three classes consisted of one group of patients who challenged denials of residential behavioral health treatment, one group who challenged denials of outpatient mental health treatment, and a third group who challenged denials based on UBH’s usage of guidelines that were inconsistent with state-mandated behavioral health treatment guidelines in Texas, Illinois, Connecticut and Rhode Island.
[4] 29 U.S.C. § 1104(a).
[5] 28 U.S.C. § 2072(b)).
[6] Citing Wal-Mart Stores Inc. v. Dukes, 564 U.S. 338, 367, 131 S.Ct. 2541, 180 L.Ed.2d 374 (2011).
[7] 29 U.S.C. § 1132(a)(3).
[8] National Alliance on Mental Illness (NAMI). (2015). A Long Road Ahead: Achieving True Parity in Mental Health and Substance Use Care. https://www.nami.org/About-NAMI/Publications-Reports/Public-Policy-Reports/A-Long-Road-Ahead/2015-ALongRoadAhead.pdf.
[9] Karen Pollitz, Justin Lo, Rayna Wallace, and Salem Mengistu, Claims Denials and Appeals in ACA Marketplace Plans in 2021, Kaiser Family Foundation (Feb. 9, 2023), https://www.kff.org/private-insurance/issue-brief/claims-denials-and-appeals-in-aca-marketplace-plans/; Karen Pollitz, Consumer Appeal in Private Health Coverage, Kaiser Family Foundation (Dec. 10, 2021)(“Consumer Claims”), https://www.kff.org/private-insurance/issue-brief/consumer-appeal-rights-in-private-health-coverage/. The data for both Kaiser Family Foundation studies is from Affordable Care Act (ACA) marketplace plans. The Consumer Claims article explains that, unlike employer-sponsored plans, marketplace plans required under the ACA to report data on denials and appeals. We have no reason to believe that appeal rates would be significantly different if that data were available for employer-sponsored ERISA plans that are at issue in this case.
[10] See, Clark, “I Set Out to create a Simple Map for How to Appeal Your Insurance Denial. Instead, I Found a Mind-Boggling Labyrinth,” ProPublica (August 31, 2023); available at https://www.propublica.org/article/how-to-appeal-insurance-denials-too-complicated.
[11] Substance Abuse and Mental Health Services Administration (SAMHSA). (2017). Key substance use and mental health indicators in the United States: Results from the 2016 National Survey on Drug Use and Health (HHS Publication No. SMA 17-5044, NSDUH Series H-52). https://www.samhsa.gov/data/sites/default/files/NSDUH-FFR1-2016/NSDUH-FFR1-2016.pdf.
[12] Kennedy Forum, “After Major Parity Ruling Against Top Insurer, Letters to Key Stakeholders Demand Change” March 13, 2019; available at https://www.thekennedyforum.org/blog/after-major-parity-ruling-against-top-insurer-letters-to-key-stakeholders-demand-change/.
