Updates from the Wit v. United Behavioral Health ERISA Class Action

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Unprecedented Claims Reprocessing Order Stayed Pending Appeal to the Ninth Circuit

On February 1, 2021, Chief Magistrate Judge Joseph C. Spero entered final judgment in Wit v. United Behavioral Health, No. 3:14-cv-2346 (N.D. Cal.). Wit is an ERISA class action concerning the propriety of certain guidelines previously used by United Behavioral Health (UBH) when adjudicating claims for outpatient and residential inpatient behavioral health treatments. The Wit court appointed a special master to oversee UBH’s compliance with the monumental task of “reprocessing” more than 67,000 claims for mental health treatment, as well as with other detailed declaratory and injunctive remedies. This “Health Update” reviews developments in the Wit litigation and discusses implications of the court’s remedies order for health plans, insurers and attorneys advising those entities.

UBH sought a stay pending appeal of the reprocessing remedy, which the district court denied. But on February 12, 2021, the Ninth Circuit stayed the reprocessing remedy pending UBH’s long-anticipated appeal of the numerous adverse rulings in Wit.

The Wit Findings of Fact and Conclusions of Law

As a reminder, on March 5, 2019, following a ten-day bench trial, the Wit court issued a 106-page Findings of Fact and Conclusions of Law (FFCL) addressing certain specific level of care guidelines used at the time by UBH when assessing the medical necessity of outpatient and residential inpatient mental health and substance use disorder treatment. Based on testimony from two of plaintiffs’ retained experts and UBH’s in-house experts, the court undertook to define eight specific “generally accepted standards of care” and found that UBH’s guidelines fell short of each purported standard. See Wit v. United Behavioral Health, 2019 WL 1033730, at *17-40 (N.D. Cal. Mar. 5, 2019). The Wit FFCL left open the issue of the appropriate remedy in light of UBH’s prior adjudication of tens of thousands of behavioral health claims under the guidelines the court deemed deficient. The court ordered further briefing addressing remedies issues.

The Wit Remedies Order

On November 3, 2020, the Wit court issued a remedies order directing the following categories of sweeping relief against UBH. Wit v. United Behavioral Health, 2020 WL 6479273 (N.D. Cal. Nov. 3, 2020) (Remedies Order).

1. Declaratory judgment

First, the court entered a detailed declaratory judgment stating that (1) the UBH guidelines at issue fell short of all eight generally accepted standards of care articulated in the court’s FFCL; (2) as a result, each of UBH’s adverse benefit determinations at issue in the case was “wrongful and made in violation of plan terms and ERISA”; (3) the UBH guidelines “deviate[d] . . . in a multitude of ways” from criteria published by the American Society for Addiction Medicine (ASAM); (4) UBH violated Illinois, Connecticut, Rhode Island, and Texas state laws through its use of the guidelines over various periods; and (5) UBH violated ERISA fiduciary duties under 29 U.S.C. §§ 1104(a)(1)(A), (a)(1)(B), and (a)(1)(D) “when it developed, revised and applied the Guidelines.” Remedies Order at *48-50.

2. Permanent injunction

The court also issued a permanent injunction strictly governing UBH’s behavioral health coverage determinations over a ten-year period—and in some aspects, apparently indefinitely. The Remedies Order states that the court will retain jurisdiction over the action for the duration of the injunction. Id. at *54-57.

Under the Remedies Order, UBH is permanently enjoined from using any of the specific guidelines judged inadequate in the declaratory judgment when determining whether residential mental health treatment services are consistent with generally accepted standards of care and therefore covered under the plan. Id. at *54. More broadly, UBH is also permanently enjoined from using any guidelines that apply any of a long list of mandatory prerequisites for coverage detailed in a joint “consolidated claims chart” filed in the Wit litigation. See id. These coverage criteria prohibited under the injunction generally fall into the following categories as characterized by the Wit plaintiffs: overemphasis on acuity; failure to consider effective treatment of co-occurring conditions; drive toward lower levels of care rather than “erring on the side of caution”; preclusion of coverage for treatment to maintain a level of function; lack of motivation as grounds for denying coverage; and “overbroad” definitions of custodial care and “overly narrow” views of improvement and active treatment. See Consolidated Claims Chart p. 7, ECF No. 404-2 (Feb. 12, 2018), Wit v. United Behavioral Health, No. 3:14-cv-2346 (N.D. Cal.).

The court further ordered UBH, for a ten-year period, to “make any and all coverage-related determinations under ERISA-governed plans about whether services are consistent with generally accepted standards of care according to criteria that are consistent with generally accepted standards of care, as established in [the court’s] FFCL, and the requirements of any applicable state law.” Remedies Order at *54 (emphasis added). UBH must use specific sets of criteria when adjudicating mental health claims for individuals, based on the individual’s age: specific criteria for adults, for children and adolescents ages 6-18, and for children age 5 or younger. Id. at *55.

The injunction also requires UBH to develop and implement two training programs for care advocates, peer reviewers, external clinical consultants, and other personnel under the supervision of a special master. First, UBH must establish a training program addressing its implementation and application of the newly required coverage criteria. Second, UBH must establish a training program, including for senior and executive management, on UBH’s “duties under ERISA, including what it means to be an ERISA fiduciary and to administer benefit plans solely in the interests of participants and beneficiaries, as well as the need to comply with plan terms.” See id. at *55-56.

3. Reprocessing order

The remedies order also mandates an unprecedented “reprocessing” remand to UBH as claims administrator. Under the order, UBH must reprocess the full scope of over 67,000 benefits determinations for the classes “in a manner consistent with” the court’s FFCL and remedies order, at UBH’s expense. Id. at *51.

The court’s reprocessing order prescribes the processes UBH must apply on remand. UBH must allow for class members and their providers to supplement the administrative record at will with additional clinical and billing information supporting the claim, and must affirmatively contact all class members who do not provide that information within 90 days of notice from the class administrator. UBH must also apply specific level of care criteria on remand, consistent with the permanent injunction. Id. at *51-52.

The reprocessing order also requires that any new determination by UBH to deny coverage in full or in part be considered an initial adverse benefit determination under 29 C.F.R. § 2560.503-1, such that all administrative appeal remedies under the plan will be available. And any adverse determination on remand must include “specific and detailed findings supporting the determination, including citations to the clinical evidence and the specific provisions of the applicable criteria on which UBH’s conclusion is based.” Id. at *53.

Even if UBH approves a claim on remand, it must still provide its “specific and detailed findings” in its notification to the class member. See id. UBH may not offset the benefits that it calculates are due to the class member against any benefits previously paid to the class member or the relevant provider in connection with other services. In calculating the amount of benefit owed, UBH “shall include benefits owed for all services the class member received at the level of care at issue in the [remanded determination] that UBH finds are consistent with the criteria [mandated in the remedies order], regardless of whether the class member [previously] submitted a post-service claim for them. . . .” Id.

Once UBH completes all reprocessing, it must provide a certification and report to the court detailing the total number of reprocessed requests by level of care, the number of class members whose requests were denied on remand, the number reversed on remand, the number receiving a benefit payment following reprocessing, and “the lowest, highest, median, and average amount of the payments, by level of care.” Id. at *54.

4. Special master

Finally, the Remedies Order calls for the appointment of a special master “to serve as an independent monitor to oversee and verify UBH’s compliance with [the Remedies Order].” Id. at *56. On January 27, 2021, the court appointed Douglas R. Young of Farella Braun + Martel LLP as special master. The special master issued his first report on March 29, 2021, addressing the status of UBH’s implementation of the coverage standards and training programs required by the Remedies Order.

The Ninth Circuit Stays Reprocessing Pending Appeal

Immediately after the Remedies Order was issued, UBH moved the district court to stay only the reprocessing remedy pending appeal to the Ninth Circuit. On December 28, 2020, the district court denied even this limited stay. The court observed, however, that neither side had demonstrated any compelling public interest bearing on a stay of the reprocessing remedy; the court also acknowledged that some of its rulings involve issues of first impression and raise “thorny” legal questions.

UBH then moved the Ninth Circuit for a similar stay of the reprocessing remedy. UBH argued, among other things, that a stay was warranted because otherwise UBH would be required to complete reprocessing before any appellate merits review of the novel liability and remedies findings in the district court’s orders. UBH also highlighted that it was not seeking a stay of any forward-looking remedy, such as the injunction governing UBH’s current and future benefit decisions, and that the district court’s award of pre- and post-judgment interest mitigated any impact of delayed recovery of benefits after reprocessing.

On February 1, 2021, the Wit court entered a final judgment incorporating all of the substantive rulings in the Remedies Order. Wit, ECF No. 531. Then, in a concise order entered on February 12, 2021, the Ninth Circuit granted UBH’s motion for a stay of the district court’s reprocessing order pending appeal.

Analysis

The Wit appeal is expected to address, among other matters, important issues bearing on the scope of equitable remedies available under ERISA—particularly the propriety of mandated class-wide “reprocessing.”

No federal appeals court has recognized the type of reprocessing ordered in Wit on a class basis under ERISA. In ordering reprocessing, the Wit court relied on Saffle v. Sierra Pac. Power Co. Bargaining Unit Long Term Disability Income Plan, 85 F.3d 455, 458-60 (9th Cir. 1996). See Remedies Order at *23, *30. In Saffle, the Ninth Circuit ordered remand of only an individual ERISA benefit claim to the administrator for reprocessing. See Saffle, 85 F.3d at 457-58, 460-61. The Wit court’s extrapolation of the individual remedy ordered in Saffle to the diverse class claims at issue in Wit may be a key issue litigated on appeal. While plaintiffs’ attorneys in other actions have sought reprocessing remedies inspired by Wit, to date no court has relied on the Wit Remedies Order as authority for reprocessing.

Courts have, however, addressed efforts by the plaintiffs’ bar to expand into other contexts the Wit court’s finding that certain UBH coverage guidelines deviated from generally accepted standards of care. Several courts have declined to “extend the factual findings of Wit” to other ERISA claims involving other coverage guidelines, where the court “does not have before it the kind of expert testimony and other evidence necessary to decide whether these guidelines, in the context of this Plan, are improper.” See Josef K. v. California Physicians’ Serv., 477 F. Supp. 3d 886, 897 (N.D. Cal. 2020) (emphasis in original); see also Andrew C. v. Oracle Am. Inc. Flexible Benefit Plan, 474 F. Supp. 3d 1066, 1081 (N.D. Cal. 2020); Julie L. v. Excellus Health Plan, Inc., 447 F. Supp. 3d 38, 48 n.4 (W.D.N.Y. 2020). Any reversal or modification of the Wit court’s Findings of Fact and Conclusions of Law as to the UBH coverage guidelines or as to the generally accepted standards of care among practitioners could have wide-ranging effects in other actions challenging behavioral health coverage guidelines.

Conclusion

The Wit Remedies Order and other rulings in the litigation are far-reaching. If upheld, the litigation will likely have significant impacts beyond the parties involved. Practitioners, health plans and health insurers would be wise to track UBH’s long-awaited appeal to the Ninth Circuit of all adverse rulings in Wit.

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