The federal Mental Health Parity and Addiction Equity Act,[1] which affects health benefits by requiring equal coverage for the treatment of both physiologic conditions and behavioral health disorders, including substance use disorders, has been a growing topic of litigation.
Reimbursement for the treatment of autism spectrum disorder, a developmental disorder,[2] has been the subject of many of those cases.
A Jan. 31 ruling from the U.S. Court of Appeals for the First Circuit, N.R. v. Raytheon Co.,[3] is particularly notable in framing issues under the Parity Act that intersect with the Employee Retirement Income Security Act.
The case involved a child, N.R., diagnosed with autism, who required speech therapy, which United Healthcare refused to reimburse. Although the U.S. District Court for the District of Massachusetts dismissed the case, the court of appeals overturned the dismissal and reinstated the litigation.
Although the plan covered treatment for ASD, it expressly excluded coverage for “[h]abilitative services, which are health care services that help a person keep, learn or improve skills and functioning for daily living, such as non-restorative ABA speech therapy.” That exclusion was claimed to violate the Parity Act.
When United Healthcare denied the claim, N.R.’s parents appealed the denial under ERISA’s prelitigation appeal procedures, questioning the grounds for the denial, and also asserting a violation of the Parity Act.
However, the appeal was denied based on the following rationale articulated by a United medical director:
You are asking for speech therapy. This is for your child. Your child is autistic. Your child does not speak clearly. Your benefit document covers speech therapy if your child lost speech. It is to restore speech that was lost. Your child has not had speech that was lost. Therefore, speech therapy is not covered. The appeal is denied.
That was the only reason given for denying the appeal, and the claimed Parity Act violation was not even addressed.
A second-level appeal met the same fate, which resulted in N.R.’s parents suing for benefits under ERISA.
United Healthcare moved to dismiss the lawsuit, asserting there was no valid claim since the services at issue were plainly excluded. The insurer further maintained there was no Parity Act violation because the nonrestorative exclusion applied to all medical conditions and was not limited to behavioral health claims.
The district court granted the motion. On appeal, the court framed the discussion around whether the plan violated the Parity Act.
The Parity Act requires that any treatment limitations applied to mental health or substance use disorders must be “no more restrictive than the predominant treatment limitations applied to substantially all medical and surgical benefits covered by the plan.”[4]
The plaintiffs argued that a Parity Act violation existed because the plan on its face applied separate treatment limitations to behavioral health conditions, pointing out that the habilitative services exclusion was applicable only as to mental health treatment.
The court agreed, observing that the plan provided coverage for procedures meant “to improve or restore physiologic function for an organ or body part.”[5]
The plan further defined the term “improve” to mean “that the organ or body part is made to work better.” The court found that this language directly conflicted with the exclusion for treatments that improve skills and functioning if the beneficiary were seeking reimbursement for services relating to mental health conditions.
The plaintiffs also argued that their Parity Act claims were supported by language in the denial letters that expressly covered the ASD diagnosis, but did not cover treatment for that condition.
In addition, the plaintiffs pointed to the existence of coverage for other nonrestorative treatments, which included reconstructive surgery and treatment for congenital conditions.
Although the parties differed as to whether the plan covered habilitative services for physical conditions, the court pointed out that it did not have to adjudicate that issue at this stage of the case, since, on a motion to dismiss, it was required to accept the facts pled by the plaintiffs as true.
Thus, the court found the plaintiffs’ allegation of facts — supporting their assertion that the habilitative services exclusion was only applied to treatment for mental health condition — sufficient to state a viable claim.
Although Parity Act violations are generally addressed by ERISA’s catchall remedies provision in Section 502(a)(3) of the statute,[6] since there is no private cause of action enumerated in the Parity Act, the court expanded its ruling to address whether the plaintiffs could also state a claim for benefits due under the terms of the plan despite the benefit plan’s explicit exclusion.
The court found the exclusion would not bar such a claim because the Parity Act’s requirements are read into the plan, and a violation of the Parity Act would therefore be considered inconsistent with the terms of the plan as a matter of law.
The court explained that the ERISA statute provides that “a plan’s terms cannot override ERISA’s requirements.”[7] Thus, as pled, the plan’s exclusions would be unenforceable, thus making coverage available under the terms of the plan.
Notwithstanding the insurance company’s protests, the court recognized that the plan’s exclusions arguably violated the Parity Act.
Many Parity Act claims assert that while the terms of the plan are compliant with the statute, the grounds on which a denial is based present an “as applied” violation of the law, and maintain that the insurer has imposed requirements on claimants seeking reimbursement for certain behavioral health services that would not be applicable for treatment, such as post-surgical rehabilitation or hospice care.
Here, though, since the plan offered coverage for treatment of ASD but contained exclusions that were specific to behavioral health conditions, the court determined the plaintiffs were entitled to the protection of the Parity Act.
The court’s ruling with respect to negating plan terms that conflict with ERISA is the key to this ruling.
The Parity Act is part of the ERISA law, although it also applies to plans not governed by ERISA. The provision of the ERISA statute cited by the court barring the inclusion of terms that conflict with the statute is one of the few provisions of ERISA that impose limitations on plan terms.
In most instances, plan terms may normally be drafted as the plan sponsor sees fit.
Another source of limitations as to permitted plan language are state laws that regulate the content of insurance policies.[8]
ERISA’s savings clause, which saves state laws that regulate insurance from preemption, requires that state-mandated health insurance plan requirements override contrary exclusions or limitations.[9]
Thus, if this case had originated in Illinois, for example, the outcome would have been even clearer, because Illinois statutes mandate coverage for treatment of ASD that includes both habilitative and rehabilitative care.[10]
Another important takeaway from this ruling is that once again, the U.S. District Court for the Northern District of California’s influential 2019 decision in Wit v. United Behavioral Health[11] has proven to be critically important, even though the case was not cited in the opinion.
One of the major findings made in that decision was that habilitative treatment is a generally accepted standard of care for individuals with behavioral health conditions.
The bottom line, though, which the First Circuit clearly recognized, is that coverage for a behavioral health condition is meaningless if the accepted treatment for that condition is excluded.
As the N.R. ruling showed, the Parity Act has been instrumental in giving patients a tool they can use to eliminate such restrictions in order to obtain necessary medical treatment.
Mark DeBofsky is a shareholder at DeBofsky Law.
This article was first published by Law 360 on February 10,2022.
[1] 29 U.S.C. § 1185a.
[2] See, “Autism Spectrum Disorder” at https://www.nimh.nih.gov/health/topics/autism-spectrum-disorders-asd.
[3] N.R. v. Raytheon Co., 2022 U.S. App. LEXIS 2735, 2022 WL 278537 (1st Cir. January 31, 2022).
[4] 29 U.S.C. § 1185a(a)(3)(A)(ii).
[5] (Emphasis removed).
[6] 29 U.S.C. § 1132(a)(3).
[7] Citing 29 U.S.C. § 1104(a)(1)(D) (requiring fiduciaries to discharge duties consistent with plan documents “insofar as such documents and instruments are consistent with the provisions of [ERISA]”); e.g., In re Citigroup ERISA Lit., 662 F.3d 128, 139 (2d Cir. 2011) (holding that ERISA’s requirements supersede a plan’s terms when inconsistent with one another).
[8] 29 U.S.C. § 1144(b)(2)(A).
[9] See. E.g., Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355 (2002) (ruling that Illinois HO law requiring independent review of medical necessity determinations necessitated that ERISA-governed health plan had to comply with that requirement).
[10] 215 ILCS 5/356z.14.
[11] Wit v. United Behavioral Health, 2019 U.S. Dist. LEXIS 35205, 2019 WL 1033730 (N.D. Cal. March 5, 2019).
