A third-party claims administrator may not be sued for violating the Mental Health Parity and Addiction Equity Act because the law by its terms applies only to group health plans and their insurers, a federal district court ruled. Related ERISA claims against the TPA were also dismissed because the company was not the “plan administrator” for ERISA purposes. The case is N.Y. State Psychiatric Ass’n v. UnitedHealth Group, No. 13 Civ. 1599 CM (S.D.N.Y., Oct. 31, 2013).
Facts of the Case
The case’s principal plaintiffs were three beneficiaries of different employers’ self-funded group health plans whose claims were administered by UnitedHealth Group.
Denbo
Jonathan Denbo, an employee of CBS Sports Network, received psychotherapy for depressive and anxiety disorders and submitted the claims to UHG, which processed them through subsidiaries UnitedHealthcare Insurance Company and United Behavioral Health. UHG subjected his claims to concurrent and prospective review, rather than strictly retrospective review as called for by the terms of the CBS Medical Plan, Denbo alleged.
UHG allegedly informed Denbo and his therapist that it would no longer cover their sessions because the ongoing treatment plan “does not meet UBH criteria for benefit coverage at this time,” given Denbo’s “adequate reduction/resolution in clinical symptoms.” Denbo and his provider appealed this decision to no avail. Denbo then sued UHG, alleging that the company had violated the CBS plan’s terms by conducting prospective and concurrent reviews and refusing to grant him a second level of appeal.
Smith
Brad Smith, an employee of SYSCO Corp., has a son who has been treated for severe mental illness since 2005. UBH terminated coverage for “Daniel’s” inpatient residential treatment, explaining that “treatment could be safely and effectively delivered” on an outpatient basis. According to Brad Smith, however, no such outpatient treatment is available in their community, and UBH later denied coverage for Daniel’s outpatient treatment as well.
UBH violated MHPAEA, Brad Smith alleged, by assessing mental health claims with a definition of “medical necessity” that gives it “far greater discretion to deny care” than the definition used by the claims administrator of SYSCO’s medical/surgical benefits. UBH also allegedly imposed a “fail-first” policy under which it refused to reimburse for a particular level of mental health care unless less intensive levels were tried first, and failed.
Olin
Jordan Olin, an employee of Oracle Corp., also has a son who was treated for severe mental illness. UHIC allegedly refused to authorize coverage for “Sean’s” residential treatment, based on its determination that he “could be treated safely and effectively at the mental health/dual diagnosis partial hospital level of care.” After Jordan Olin’s initial appeal was denied, UHG referred his second-level appeal to an external “independent review organization,” but this entity allegedly delayed its review and gave the plan’s original decision too much deference.
In Jordan Olin’s lawsuit, he alleged that these procedural shortcoming violated plan terms and federal law, and that UHIC violated MHPAEA by applying strict treatment limits like fail-first to mental health claims that it did not apply to medical claims.
Plaintiffs’ Legal Theories
Denbo, Smith and Olin alleged that UHG violated its ERISA fiduciary duty by:
- imposing financial requirements and treatment limitations on mental health coverage that violated MHPAEA;
- violating the plans’ own terms by improperly reviewing and under-reimbursing mental health claims; and
- failing to provide an appeals process that complies with the Patient Protection and Affordable Care Act.
MHPAEA
The court acknowledged that the conduct alleged by the plaintiffs would violate MHPAEA, but dismissed their claim “because, in its capacity as a claims administrator of self-insured ERISA plans, United is not a party to which the Parity Act applies.”
By its terms, MHPAEA applies to a “group health plan (or health insurance coverage offered in connection with such a plan),” the court noted. “An entity that is processing claims and making coverage determinations that will be paid with someone else’s money is not an entity that is ‘offering’ coverage ‘in connection with’ that Plan.”
Therefore, the court dismissed the claim that UHG breached its fiduciary duty under ERISA Section 404(a)(1) to abide by “the documents and instruments governing the plan.” And while this claim could also be characterized as a claim for violating plan terms under Section 502(a)(1)(B), “any such claim would have to be brought against a proper §502(a)(1)(B) defendant — the Plans, Plan trustees, or their designated §1002(16)(A) Plan Administrators,” Judge McMahon wrote in the court’s opinion. “United cannot be sued on such a claim.”
Plan Terms
Denbo, Smith and Olin also sued under the plan terms, alleging that UHG had denied them benefits due under their respective plans and breached its fiduciary duty to follow plan terms. Again, however, the court ruled they were “suing the wrong party” because UHG was not an ERISA plan, plan trustee or plan administrator.