Increasing awareness of federal requirements for equal health insurance coverage of mental and physical conditions has led to a spate of litigation relating to health insurance denials.

In Christine S. v. Blue Cross Blue Shield of New Mexico, 2019 WL 6974772 (D. Utah, Dec. 19, 2019), the issue was whether the plaintiff pleaded a valid claim for violation of the Mental Health Parity and Addiction Equity Act of 2008, in addition to a claim for wrongful denial of benefits.

The case involved T.A., a minor child of an employee of Los Alamos National Laboratory in New Mexico, who was denied health insurance coverage by Blue Cross Blue Shield of New Mexico, the group insurer for Los Alamos employees.

T.A., who was diagnosed on the autism spectrum, had a history of severe behavioral health problems starting at a young age, which included suicide attempts and other self-harming behavior.

Outpatient treatment was ineffective, and in November 2015, T.A. was admitted to a residential treatment program that specialized in treating individuals on the autism spectrum. After completing that program in April 2016, T.A. was transferred to a therapeutic boarding school, but continued to display self-harming behavior.

Although Blue Cross Blue Shield paid for some of T.A.’s treatment, it denied coverage for the bulk of T.A.’s care, resulting in nearly $250,000 of unpaid expenses. Blue Cross Blue Shield maintained that additional treatment did not meet its care guidelines, claiming T.A. was “not a danger to [himself] or others,” “not noted to be psychotic or manic,” was “medically stable,” was “compliant with [his] medication regime” and was “not violent or aggressive.”

Appeals from that determination were unsuccessful, resulting in T.A.’s parents filing a lawsuit alleging a violation of Section 502(a)(1)(B) of the Employee Retirement Income Security Act for wrongful denial of benefits and a second claim under ERISA Section 502(a)(3) seeking a declaration that Blue Cross Blue Shield failed to comply with the parity act and requesting reformation of the plan to meet parity act requirements and the issuance of an equitable make-whole remedy to cover the unpaid expenses.

The insurer answered the Section 502(a)(1)(B) claim but moved to dismiss the Section 502(a)(3) claim for failure to state a claim, arguing the claim was duplicative of the wrongful denial claim. The court denied that motion.

The court outlined ERISA’s remedial provisions and then turned to the parity act, explaining:

“The Mental Health Parity and Addiction Equity Act of 2008 (‘[p]arity [a]ct’), codified at 29 U.S.C. Section1185a, is an amendment to ERISA. Among other things, the [p]arity [a]ct requires that insurance plans providing for ‘both medical and surgical benefits and mental health or substance use disorder benefits’ must not impose more coverage restrictions on the latter than it imposes on the former. 29 U.S.C. Section 1185a(a)(3)(A). This parity requirement takes two forms: (1) plan administrators may not apply treatment limitations to mental health benefits that are more restrictive than ‘the predominant treatment limitations applied to substantially all medical and surgical benefits’ and (2) plan administrators may not apply ‘separate treatment limitations’ only to mental health benefits. 29 U.S.C. Section 1185a(a)(3)(A)(ii).”

The court added that the parity act’s implementing regulations prohibit “‘treatment limitations’ which include ‘both quantitative treatment limitations, which are expressed numerically (such as 50 outpatient visits per year) and nonquantitative treatment limitations, which otherwise limit the scope or duration of benefits for treatment under a plan or coverage.’ 29 C.F.R. Section 2590.712(a). Nonquantitative treatment limitations on mental health benefits include ‘[m]edical management standards limiting or excluding benefits based on medical necessity or medical appropriateness’ and ‘[r]efusal to pay for higher-cost therapies until it can be shown that a lower-cost therapy is not effective (also known as fail-first policies or step therapy protocols).’ 29 C.F.R. Section 2590.712(c)(4)(ii). The parity act regulations further specify that all ‘processes, strategies, evidentiary standards or other factors used in applying’ nonquantitative treatment limitations are subject to the statute’s parity requirements. 29 C.F.R. Section 2590.712(c)(4)(i).”

While the court acknowledged that Supreme Court precedent promotes a “general remedy preference for awarding adequate monetary relief under Section 502(a)(1)(B) rather than equitable relief pursuant to Section 502(a)(3),” (emphasis in original), it does not bar a plaintiff from pleading two different simultaneous causes of action so long as a double recovery is not sought.

The court determined the duplicative pleading issue was resolved because “[p]laintiffs can only bring their parity act cause of action under Section 502(a)(3).” Since the statutory violation is separate from relief available under the terms of the plan (Section 502(a)(1)(B)), there is no duplication. The court emphasized, “Plaintiffs cannot be said to have ‘repackage[d]’ or ‘dress[ed] … up’ their parity act claims to avoid the strictures of Section 502(a)(1)(B) ‘arbitrary and capricious’ review because it is impossible to enforce the parity act under Section 502(a)(1)(B).”

The court further explained why it was necessary to permit the plaintiff to plead both causes of action:

“Here, for example, the court could rule on the merits that defendants correctly denied benefits to plaintiffs under the terms of the plan, which would require denying recovery under Section 502(a)(1)(B). But consistent with that ruling, the court could still find that the terms of the plan on their face or as-applied by the insurer violate the [p]arity [a]ct by imposing unequal criteria or standards to mental health treatment, which would require granting equitable relief to the plaintiffs under Section 502(a)(3).

“The inverse is also true: [T]he court could find that defendants wrongfully denied plaintiffs’ benefits based on the terms of the plan, but deny the [p]arity [a]ct claim by finding that defendants do not apply unequal criteria to mental health benefits. The court could also find that defendants violated plaintiffs’ rights under both theories, or under neither.”

Accordingly, the court permitted the pleading to stand and refused to dismiss the Section 502(a)(3) claim.

This ruling stands out because of its clear explanation as to how the ERISA law and the parity act work together to protect claimants seeking benefits involving mental health issues. While the law continues to evolve, Christine S. helps clarify pleading requirements and the scope of what the parity act encompasses.

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