Second Circuit Finds Member Associations Have Standing to Bring Claims on Behalf of Members

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Last month the Second Circuit Court of Appeals reversed the U.S. District Court’s decision to deny the New York State Psychiatric Association (NYSPA) standing in its claim against UnitedHealth Group and related entities (UnitedHealth). In doing so, the court opened the doors for member associations to bring claims on behalf of its members for violations of federal law.

N.Y. State Psychiatric Ass’n v. UnitedHealth Group., No. 14-20-cv (2d Cir. Aug. 20, 2015), concerns claims by the NYSPA, acting on behalf of its members and their patients, alleging that UnitedHealth violated various federal and state laws, including the Mental Health Parity and Addiction Equity Act of 2008 (Parity Act). It did so, the Plaintiff alleges, by subjecting mental health claims to higher scrutiny than medical claims and more burdensome preauthorization requirements, as well as by conducting concurrent review of mental health claims based on the frequency of treatment.

At the trial level, the District Court granted UnitedHealth’s motion to dismiss, finding that the NYSPA lacked associational standing to sue on behalf of its members and finding that, as a claims administrator, UnitedHealth could not be sued under the Parity Act.

In reversing the District Court, the Second Circuit found the NYSPA enjoyed proper standing because, notwithstanding its suit, its members would otherwise enjoy standing individually, the interests the NYSPA seeks to protect are germane to the organization’s purpose, and the nature of the claim and the relief sought does not make the individual participation of each injured party indispensable to proper resolution of the case.

In its decision, the court also found that UnitedHealth is a proper defendant under ERISA, consistent with findings of the Fifth, Sixth, Seventh, Eighth, Ninth and Eleventh Circuits. The court found UnitedHealth is a proper Defendant because it exercised total control over the health plan’s benefit denial process, making it the logical defendant in a claim to recover benefits, enforce rights or clarify rights to future benefits under the terms of a plan. The court declined to provide guidance on whether a claims administrator is a proper defendant where it doesn’t exercise complete control over the benefits denial process.

The case has been remanded for further proceedings. It could have long-standing implications for future member association claims, including an appellant who is currently before the Second Circuit in American Psychiatric Association v. Anthem Health Plans. A copy of the opinion may be found here.

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.

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