This year has seen a veritable explosion of court rulings relating to insurance coverage for mental health claims. Nor are the courts finished with their work this year.

A new ruling from the 10th U.S. Circuit Court of Appeals, Ian C. v. UnitedHealthcare Insurance Co., 2023 WL 8408199 (10th Cir., Dec. 5), caps off the year by recognizing insurers’ obligation to consider co-morbid behavioral health conditions when rendering coverage determinations.

Like many of these cases, Ian C. involved a tragic situation. A.C. was a covered dependent under a health benefit plan offered by his father’s employer. Sadly, A.C. had experienced a lengthy history of treatment for mental illness, which was first diagnosed when he was only 7 years old. The condition escalated; and while the initial diagnosis was attention-deficit hyperactivity disorder, A.C. was subsequently diagnosed with an anxiety disorder, a depressive disorder, and a substance use disorder.

By high school, A.C. was abusing alcohol and drugs on a daily basis, which his doctors described as a “coping mechanism” for his other mental health challenges.

At age 17, following a drug overdose, A.C. was admitted into a residential behavioral health treatment program. While the admission was initially covered by insurance, after two weeks, United determined that A.C. should be discharged to intensive outpatient therapy based on its mental health guidelines, and further residential treatment was not authorized.

The plaintiff appealed the claim determination but was unsuccessful. Ian C. and his family then brought a lawsuit under the Employee Retirement Income Security Act, which the district court adjudicated under an arbitrary and capricious standard of review, resulting in a finding for the defendant. The plaintiffs appealed, and the 10th Circuit reversed.

The focus of the ruling was on United’s failure to concurrently assess A.C.’s substance use disorder and determine whether the substance abuse was an independent basis for continuing coverage. Citing earlier precedent, the court reaffirmed its prior ruling that an ERISA plan administrator cannot shut its eyes to alternative theories of entitlement to coverage raised by the plan participant or beneficiary. In David P. v. United Healthcare Ins. Co., 77 F.4th 1293, 1308 n.11 (10th Cir. 2023), the same point was reiterated specifically in reference to a co-existing substance use disorder that the insurer had overlooked.

Ian C.’s counsel specifically argued in the pre-litigation claim appeal that the denial was deficient because United failed to review the coverage request under its substance abuse guidelines in addition to reviewing the request for coverage under its mental health guidelines. The record contained numerous treatment notes relating to A.C.’s drug and alcohol abuse, including that A.C. was admitted so he could be treated for alcohol, cannabis, Xanax and cocaine abuse.

Hence, the court concluded, “If an administrator’s decision ignores an independent ground for coverage and there is scant evidence to refute the claimant’s theory, then the decision fails arbitrary-and-capricious review.”

The court serially rejected United’s defenses — United argued the substance use disorder was not the “primary driver” for A.C.’s admission. The court characterized that argument as an “invention of creative lawyering” and pointed out, “Whether substance abuse was a predominant or subordinate factor to A.C.’s admission is irrelevant, so long as it could have served as an independent ground for coverage.” The court also found the “primary driver” argument was misplaced because United’s records documented the “risk for relapse on drugs and alcohol” and further described substance abuse as the “precipitant” for A.C.’s admission.

United’s argument that A.C. was not being treated for substance abuse was also unavailing since the treatment facility’s records documented treatment specific to that condition. Nor did the court agree with United’s assertion that treatment for withdrawal was necessary to justify residential treatment for substance abuse.

Finally, the court flatly rejected United’s contention that the mental health and substance abuse treatment guidelines were nearly identical, so evaluation under one set of guidelines sufficed. The court noted that while both guidelines necessitate consideration of co-morbid health and behavioral health conditions, the substance abuse guidelines necessitate consideration of risk of relapse before approving discharge even if other conditions are stabilizing. The court also pointed to a parent-child conflict in the home as a trigger to A.C.’s substance abuse, along with records showing that he was using drugs with his sister, which further contraindicated discharge to a home-based setting.

Although this opinion shares many similarities with the David P. case, it bolsters a key point — ERISA imposes fiduciary obligations on plan administrators to give both full and fair consideration to benefit claims.

The Supreme Court characterized that duty as requiring the insurer to utilize “higher-than-marketplace quality standards” when adjudicating claims. Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 115 (2008). Claimants have a right to expect no less from the parties administering their claims.

In this instance, an adolescent was clearly in need of treatment, both for his anxiety and depression, as well as for a worsening substance use disorder. It was equally clear to the court that coverage for that treatment was withdrawn prematurely.

No one should expect to be reimbursed for unnecessary medical care expenses; nor should insurance companies be obligated to pay for health care expenses unless the treatment is medically necessary and consistent with generally accepted standards of care. While the court acknowledged that United was vested with discretionary authority to determine benefit eligibility, the 10th Circuit further found that with that discretion comes the responsibility to adjudicate claims fairly and to consider all bases for coverage raised by claimants.

Mental health claims, in particular, have a long history of not receiving the same level of health coverage as other medical claims. For that reason, more than a decade ago, Congress enacted the Mental Health Parity and Addiction Equity Act (MHPAEA), 29 U.S.C. Sec. 1185a, to assure equivalent coverage for all illnesses, regardless of how such illnesses are classified, which includes treatment for substance use disorders. Although Ian C. did not involve a MHPAEA claim, the 10th Circuit’s ruling in the plaintiff’s favor was a step toward fulfillment of the promise made by that law.

Mark DeBofsky is a shareholder at DeBofsky Law Ltd.

This article was first published by Chicago Law Bulletin on December 26, 2023.

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