Mental Health Parity Update: DOL and NY AG Actions Highlight Ongoing Scrutiny of NQTLs

Manatt, Phelps & Phillips, LLP
Contact

Manatt, Phelps & Phillips, LLP

On August 11, 2021, United Healthcare and its affiliates were served with separate enforcement lawsuits by the Department of Labor (DOL) and the New York Attorney General (NY AG) involving mental health parity, among other things:

  • Martin Walsh, Secretary of Labor for the U.S. Department of Labor (the Secretary), filed an action in the U.S. District Court for the Eastern District of New York against United Behavioral Health (UBH) and UnitedHealthcare Insurance Company (UHIC) alleging ERISA violations, including based on alleged violation of the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). Walsh v. United Behavioral Health and UnitedHealthcare Insurance Company, No. 1:21-cv-4519 (E.D.N.Y.) (the DOL Action).
  • That same day, the NY AG Letitia James filed an action in the same court against UBH, UHIC, UnitedHealth Group, Inc., and a number of affiliates alleging violations of, among other things, MHPAEA and New York behavioral health parity laws. People of the State of New York by Letitia James v. UnitedHealth Group Incorporated, et al., No. 1:21-cv-04533 (E.D.N.Y.) (the NY AG Action). 

Both actions challenge two different practices: (1) UBH’s ALERT program, which previously had applied algorithms to claims data to identify clinical risk, utilization and outliers for outpatient mental health treatment but not for medical services, and (2) the defendants’ prior practice of reducing reimbursement for certain out-of-network mental health treatment based on provider licensure but not doing so in the context of medical services.

Notably, these complaints were filed as part of a settlement that resolves ongoing investigations into these practices. The same day the complaints were filed, the parties also filed two different stipulations of settlement resolving these investigations, the related complaints and two additional private class actions pending in the same court.

This article summarizes the overlapping claims in these cases, the terms of the settlements and the implications of the cases for various stakeholders.

The Allegations in the Lawsuits

Utilization Review-Related Claims

Both the DOL Action and the NY AG Action focus on UBH’s ALERT program—a utilization review program for outpatient behavioral health treatment that is alleged to be “broader and more aggressive” than the programs in place for analogous medical/surgical benefits.

The plaintiffs allege that the ALERT system is used to identify “unusual” treatment patterns, like high numbers of visits, and that certain algorithms are focused solely on frequency of visits. For example, they allege that the ALERT system is triggered after a member exceeds 20 psychotherapy visits within a six-month period. The plaintiffs further allege that the ALERT system could lead to denials of coverage. According to the complaints, after an ALERT algorithm is triggered, a care advocate initiates contact with the provider to discuss the case, and if the care advocate determines that the treatment does not meet applicable criteria and the provider will not agree to adjust the treatment plan, the case is then referred to a peer reviewer, who will ultimately make a coverage decision.

The plaintiffs allege that, by contrast, the applicable defendants apply outlier management for only a very limited set of medical and surgical services. The Secretary alleges that outlier management was not applied based on consistent factors.

In addition, the Secretary alleges that UBH’s purported disclosure about its nonquantitative treatment limitations (NQTLs) under MHPAEA, which was made available to client plans for participants and beneficiaries who requested the information, does not provide details on the use of outlier management. The NY AG similarly contends that the defendants fail to provide members in non-ERISA plans with details about ALERT in plan documents or Explanations of Benefits, and that they mislead members by not disclosing that ALERT is a form of utilization management and that its purpose is to identify cases for modification or termination.

Reimbursement-Related Claims

Both the DOL Action and the NY AG Action allege that the defendants improperly reduce the rates for reimbursement for certain out-of-network mental health treatment but do not apply a comparable reduction on reimbursement of out-of-network medical/surgical treatment.

For example, the Secretary and the NY AG allege that the defendants reduce reimbursement rates based on licensure—by 25% for psychologists and 35% for master’s-level counselors—as compared to reimbursement rates for physicians providing the same mental health services. The Secretary alleges that United did not choose to apply the reductions based on any “consistent, articulable factors,” and so they therefore were not comparable.

The NY AG contends that the defendants artificially depress reimbursement rates for nonphysician providers of psychotherapy, despite knowing that these providers provide most of these services. The NY AG also contends that the defendants hid the reimbursement rate reductions from members and providers by failing to mention them in plan documents and Explanations of Benefits, and that the defendants also failed to disclose to members the basis for reducing reimbursement for nonphysicians. The NY AG alleges that the defendants had reportedly modified certain practices, but that it was unclear whether the changes were actually implemented.

The Secretary contends that the reimbursement reduction practice was hidden from ERISA-plan participants and beneficiaries “[u]ntil 2016,” and that the defendants subsequently amended the client plan documents to disclose the policy. But the Secretary alleges that UBH’s purported NQTL disclosure did not provide details on reimbursement rate reduction, and that the defendants did not do so through other means.

The Settlements

As discussed, the parties to the DOL Action and NY AG Action entered into two separate stipulations of settlement to address the challenged practices.

Utilization Review-Related Settlement

In the stipulation of settlement of the utilization review-related claims, the parties agreed to settle the claims and issues raised in the DOL Action and NY AG Action and related investigations, with the exception of claims by the NY AG relating to a reinstitution by the defendants of a concurrent review program for outpatient behavioral health services for utilization management purposes.

The defendants agreed to make settlement payments of $2.5 million into a common fund for the benefit of eligible current and former members in self-insured plans, and $1.1 million into a common fund for the benefit of eligible current and former members in fully insured ERISA and non-ERISA plans in New York (NY eligible members). The defendants also agreed that they would not issue clinical adverse benefit determinations or claim denials resulting from the ALERT program for members of United self-funded ERISA plans and NY eligible members. They further agreed that as to NY eligible members, United would not conduct outreach to providers or members for utilization management purposes in connection with the ALERT program, and that United would not tell members that ALERT program reviews may result in an adverse benefit determination, or that members’ coverage is at risk as part of an ALERT program review.

The settlement also requires the defendants to publish a “prominent” disclosure for at least one year on their websites stating that “ALERT no longer results in partial or full denials for coverage or payment,” which statement will also be included in every settlement payment check sent to an eligible member.

Notably, the settlement “does not prohibit United from, or condone United in, establishing a different concurrent review program for outpatient services that may result in adverse benefit determinations … ” or, as to NY eligible members, outreach to providers or members for utilization management purposes. If, however, United seeks to establish a different program for NY eligible members, it must provide notice and a description of the policy to the NY AG, which will advise United if it has any objection to the policy. United is precluded from implementing such a policy until January 1, 2023, or later.

The settlement also provides that United will pay a $375,000 penalty under ERISA, as well as a $650,000 penalty relating to the claims alleged in the NY AG Action.

Finally, the settlement requires United to ensure that it discloses all NQTLs in a manner consistent with ERISA, and that it will provide the Secretary with sample documentation to allow the Secretary to understand United’s current disclosures.

Reimbursement-Related Settlement

The stipulation of settlement regarding the reimbursement-related claims involves the parties to the DOL Action and the NY AG Action, as well as the parties to two private putative class actions that had been consolidated before Judge Ann L. Donnelly in the U.S. District Court for the Eastern District of New York for purposes of settlement approval proceedings. The parties to the settlement agreed to settle the claims and issues raised in the two putative class actions, the DOL Action, and the NY AG Action and related investigations, with the exception of claims by the NY AG relating to reinstitution in New York of the challenged reimbursement policy following the final approval of the settlement, or application of the replacement reimbursement policy or a similar policy.

The defendants agreed to pay $10 million into a settlement fund to be used to make payments to class members consistent with the plan of allocation. In addition, the defendants agreed not to reinstate the challenged tiered reimbursement policy for Oxford and United plans, representing that they have replaced it with another policy for self- and fully insured Oxford and United plans where applicable, except for fully insured ERISA plans and non-ERISA commercial plans in New York. The defendants also agreed to continue not to apply either the challenged tiered reimbursement policy or the replacement policy to fully insured ERISA Oxford and United plans and non-ERISA commercial Oxford and United plans in New York for a minimum of two years after the final approval of the settlement. After that period, if defendants wish to do so, they must provide notice and a description of the policy to the NY AG, which will advise within 60 days if it has any objection to the policy.

With respect to disclosures, defendants agreed to provide “accessible and comprehensible” language explaining their application of the replacement reimbursement policy on their website.

Finally, this settlement, like the settlement relating to the ALERT program, provides for the assessment of penalties. The settlement states that United will pay a penalty of $409,249.67 under ERISA, as well as a $650,000 penalty relating to the claims alleged in the NY AG Action. The settlement also provides that United will pay the class plaintiffs’ attorneys’ fees and expenses and class representative incentive awards, totaling up to $3.35 million, upon approval by the court of the class plaintiffs’ application.

Analysis

These lawsuits highlight the continued scrutiny by regulators and law enforcement on issues relating to mental health parity, especially with regard to NQTLs. It is possible that regulators and law enforcement may target other payers that engage in similar practices as those alleged in the DOL Action and NY AG Action. As a result, payers should carefully examine their practices relating to outlier management and out-of-network reimbursement for compliance with parity requirements.

Notably, the settlement agreements do not appear to have any effect on other high-profile lawsuits challenging United’s application of different NQTLs. For example, on February 1, 2021, the court in Wit v. United Behavioral Health, No. 3:14-cv-2346 (N.D. Cal.), entered final judgment in an ERISA class action concerning the propriety of certain guidelines previously used by UBH when adjudicating claims for outpatient and residential inpatient behavioral health treatments, which included an order that United reprocess 67,000 claims. The Wit case is currently before the Ninth Circuit Court of Appeal. See Wit v. United Behavioral Health, No. 21-15193 (9th Cir.). In fact, the appeal was argued and submitted the same day as the DOL Action, the NY AG Action, and the stipulated settlements in those actions were filed.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Manatt, Phelps & Phillips, LLP | Attorney Advertising

Written by:

Manatt, Phelps & Phillips, LLP
Contact
more
less

Manatt, Phelps & Phillips, LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.