On March 5, 2019, Chief Magistrate Judge Joseph C. Spero of the U.S. District Court for the Northern District of California ruled that United Behavioral Health (UBH), a subsidiary of UnitedHealth Group, violated its fiduciary duties and unlawfully denied benefits for mental health and substance abuse treatment under ERISA by developing and implementing clinical policies and coverage guidelines which were inconsistent with generally accepted standards of care. The court’s findings further detailed that UBH developed these unreasonable guidelines with the goal of reducing benefits expenses rather than proper care management and access for its plan members. The court also rejected UBH’s arguments that the guidelines were incorporated into the ERISA plan terms by reference. Finally, the health plan’s arguments about the need for each of the class members to exhaust administrative remedies were rejected on the grounds of excuse and futility given that the case involved a “facial challenge” to UBH’s application of faulty coverage guidelines.
The decision was rendered after an October 2017 bench trial resolving issues of liability in two consolidated class action lawsuits, Wit, et al. v. United Behavioral Health and Alexander, et al. v. United Behavioral Health, brought on behalf of members and beneficiaries of UBH-administered ERISA plans who were denied behavioral health benefits based on UBH’s policies and guidelines.
All of the UBH plans at issue included as a condition of coverage that the requested treatment be consistent with “generally accepted standards of care.” The court found that UBH’s discretion as the plan administrator is limited to interpreting and applying plan terms and making coverage determinations based on those terms. The court held that this discretion did not permit UBH to implement coverage guidelines to amend or restrict plan terms which provided for medical necessity determinations under “generally accepted standards.”
This was held true even where the members’ plans expressly referenced UBH guidelines in the administration of claims for coverage, and expressly excluded services inconsistent with UBH guidelines. The court reasoned that UBH internally developed these guidelines without input from plan sponsors, failing to comply with requirements for amending plan terms as set forth under the respective plan documents and notice requirements under ERISA. Thus, the court held that the references in the plan documents to UBH’s internally-developed policies and guidelines did not convert those guidelines into plan terms or give UBH unfettered discretion to treat its guidelines as if they were changes or additions to plan terms.
Chief Magistrate Spero highlighted ways in which its clinical policies and coverage guidelines ran afoul of standards established by peer-review studies and guidelines from professional organizations such as the American Society of Addiction Medicine (ASAM) and government agencies. For example, the court’s ruling highlighted that UBH’s guidelines placed “an excessive emphasis” on treating immediate acuities and stabilizing crises or “presenting problems,” while improperly discounting and cutting off authorization for the effective treatment of members’ underlying long-term or co-occurring conditions and comorbidities once the acute condition has improved. The court also took issue with the fact that UBH guidelines failed to consider or adopt level-of-care criteria tailored to children or adolescent patients.
In addition to being inconsistent with plan terms, the court held that UBH coverage guidelines failed to comply with state laws in Illinois, Connecticut and Rhode Island which require that insurer guidelines be consistent with ASAM criteria for level of care medical necessity determinations.
Furthermore, the court pointed to trial evidence that UBH developed its guidelines in an effort to keep benefit expenses down and mitigate the financial impact of the Mental Health and Addiction Parity Act of 2008. The court noted that members of UBH’s Finance and Affordability Departments played key roles in the development process of these coverage guidelines, even blocking a clinician-recommended change to bring its guidelines in line with ASAM criteria.
The court’s determination that development of UBH’s guidelines was tainted by this financial interest was crucial to how the court would review UBH’s actions. The court held that “significant skepticism is warranted” in reviewing whether UBH abused its discretion as plan administrator, because this financial incentive created a “structural conflict of interest.” The court applied this skepticism equally whether fully-insured or self-funded plans were involved, reasoning that even with self-funded plans UBH “felt pressure to keep benefit expenses down so that it could offer competitive rates to employers,” and “the conflict of interest affected all members equally, regardless of which type of plan they were insured under, because UBH used a single set of Guidelines to make coverage determinations.”
The court’s determination on damages is expected to be resolved later this year. Only ERISA participants and beneficiaries could be class members in the lawsuit. Non-ERISA insureds who have been denied coverage under these same guidelines deemed unlawful under ERISA may need to rely on separate state laws, agencies and regulators to seek relief.
The cases are Wit, et al. v. United Behavioral Health, Case No. 14-cv-02346-JCS (N.D. Cal.) and Alexander, et al. v. United Behavioral Health, Case No. 14-cv-05337 JCS (N.D. Cal.). Please click here for a copy of the court’s March 5, 2019 opinion.
