Class Claims of Denied Mental-Health Coverage Headed to Trial

SAN FRANCISCO (CN) – A class of patients who were denied coverage for mental health and substance abuse treatment may take their claims against a benefits administrator to trial, a federal judge ruled Monday.

In a 32-page ruling, U.S. Magistrate Judge Joseph Spero denied United Behavioral Health’s motion for summary judgment against a class of insurance customers, but he also ruled patients may not recover profits the administrator allegedly gained by denying them coverage.

Two groups of patients sued United Behavioral Health, which does business as OptumHealth Behavioral Solutions, in separate class actions filed in May and December 2014. The patients claim the company developed coverage guidelines inconsistent with generally accepted standards, which allowed it to wrongly deny coverage for mental health and substance abuse treatment.

According to the plaintiffs, the guidelines required patients to suffer an “acute crisis” in order to obtain coverage. The guidelines also failed to consider patients’ coexisting medical conditions, required them to “continually progress toward recovery,” excluded coverage for services to prevent deterioration or maintain a level of functioning, and failed to adopt criteria “tailored to the unique needs of children and adolescents,” according to the class.

In September 2016, Spero certified three classes that were denied different types of coverage under the federal Employee Retirement Income Security Act and state laws in Connecticut, Illinois, Rhode Island and Texas during varying timeframes between May 2011 and June 2017.

United Behavioral Health filed a motion for summary judgment in May, arguing the plaintiffs lack standing because they suffered no concrete injury as a result of the alleged wrongful conduct.

But Spero found prior case law has established that plaintiffs can sue to secure their rights under ERISA, and they “need not demonstrate an actual loss to have standing to seek injunctive relief.”

The judge cited the 2003 Ninth Circuit ruling, Shaver v. Operating Engineers Local 428 Pension Trust Fund, which held plaintiffs could sue trustees of a benefits plan for failing to keep adequate records, even if they suffered no tangible harm.

Requiring that plaintiffs suffer a concrete injury in such situations “would be to say that the fiduciaries are free to ignore their duties so long as they do no tangible harm, and that the beneficiaries are powerless to rein in the fiduciaries’ imprudent behavior until some actual damage has been done,” the Ninth Circuit panel wrote in Shaver.

“Under Shaver, plaintiffs may bring an action to enforce UBH’s fiduciary obligations without establishing that the alleged violation has caused an actual loss, such as a denial of benefits,” Spero wrote.

The judge also denied the company’s motion for summary judgment on claims under Texas state law, finding the administrator failed to conclusively prove that it applied a different set of guidelines to those claims. Such a material dispute of fact must be resolved at trial, he ruled.

However, Spero found the plaintiffs could not seek disgorgement based on profits United Behavioral Health made in surcharges for processing denied claims.

“Plaintiffs did not point to any evidence that would allow the court to reasonably determine the amount of UBH’s profits that is attributable to the alleged wrongdoing, namely, applying flawed guidelines to plaintiffs’ claims,” Spero wrote, dismissing the request to recover surcharges with prejudice.

The judge left intact the plaintiffs’ ability to seek an injunction ordering United Behavioral Health to stop using the disputed guidelines, develop new guidelines consistent with generally accepted standards, and make the company reprocess all claims for coverage that were denied, in whole or in part, based on the challenged guidelines.

A bench trial in the case is scheduled to start on Oct. 16.

Class attorney Meiram Bendat and United Behavioral Health’s attorney Christopher Flynn did not immediately return phone calls and emails seeking comment Tuesday afternoon.

Bendat is with Psych-Appeal Inc. in West Hollywood, California. Flynn is with Crowell and Moring in Washington.

 

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