A recently decided US Court of Appeals for the Ninth Circuit case, Ryan S. v. UnitedHealth Group, Inc., offers some useful insights on the enforcement by private litigants of the Mental Health Parity and Addiction Equity Act (MHPAEA). Like other similar cases, the case invites questions about the impact of potential changes under the proposed regulations issued under MHPAEA last year. Despite that the issues at this stage are procedural, the case nevertheless offers some useful insights, which this post explores.
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According to the complaint, the group health plan under which Ryan S. was covered was administered by UnitedHealthcare. The plan covered outpatient, out-of-network mental health and substance use disorder (MH/SUD) benefits at 70% of covered charges and at 100% once the out-of-pocket maximum was met.
Ryan S. completed two different outpatient, out-of-network substance use disorder programs, coverage for which was denied on multiple occasion and for disparate reasons. As the complaint explains, the denials resulted from UnitedHealthcare’s use of an algorithm that assessed patients’ progress and referred cases for additional review. This additional layer of review was not applied to outpatient, out-of-network medical/surgical (M/S) claims. Ryan S. alleges that UnitedHealthcare applied a more stringent review process to benefits claims for outpatient, out-of-network MH/SUD treatment than to otherwise comparable M/S treatment. The complaint states this disparity in applicable review standards violates:
- MHPAEA
- The Employee Retirement Income Security Act (ERISA) fiduciary rules
- The failure to follow the terms of the plan as required by ERISA
The Disposition of the Plaintiffs’ Claims
The district court had dismissed all the claims. The Ninth Circuit reversed on MHPAEA and ERISA fiduciary claims but let stand the district court’s dismissal of the claim related to plan terms.
MHPAEA requires that any limitations on “mental health or substance use disorder benefits” in an ERISA plan be “no more restrictive than the predominant treatment limitations applied to substantially all [covered] medical and surgical benefits.” Thus, said the court, to succeed, a plaintiff must show an ERISA plan that offers both M/S and MH/SUD benefits imposed a more restrictive limitation on MH/SUD treatment than limitations on treatment for M/S issues. The court then identified three situations in which such a violation might occur:
- Facial exclusion cases: A plaintiff can allege that a plan contains an exclusion that is discriminatory on its face.
- “As-applied” cases: A plaintiff can allege that a plan contains a facially neutral term that is discriminatorily applied to MH/SUD treatment.
- Internal process cases: A plaintiff can allege that a plan administrator applies an improper internal process that results in the exclusion of an MH/SUD treatment.
In the court’s view, the complaint raises internal process claims. As such, violations cannot be discerned with reference to the plan document. The court therefore saw no reason to disturb the district court’s dismissal of the claim relating to plan terms.
With respect to the MHPAEA and ERISA fiduciary claims, the court observed that “fiduciaries must discharge their duties solely in the interests of plan beneficiaries and participants in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of” ERISA (emphasis in the original). Thus, said the court, a MHPAEA violation is a breach of fiduciary duty.
Internal Process Cases Under the Proposed MHPAEA Regulation
How would internal process claims be treated under the proposed regulations? An internal process that uses an algorithm to assess a patient’s progress and refer the patient’s file for additional review is a “nonquantitative treatment limitation” (NQTL). An NQTL is simply a limitation on the duration and scope of treatment that is expressed in nonnumeric terms limits, e.g., a criterion to determine whether the treatment or services are medical necessity or appropriate. This contrasts with a “quantitative treatment limitation” (QTL), which, as the name suggests, limits the duration and scope of treatment that is expressed in numeric terms, e.g., days in the hospital.
The proposed rule imposes a new, three-part test under with the internal process would be measured. The test includes a “no more restrictive” requirement, a “design and application” requirement and a “data evaluation” requirement.
- The No More Restrictive Requirement
A faulty internal process applied only to MH/SUD claims would clearly and immediately run afoul of the “no more restrictive” requirement,” which imposes a numerical test similar to that required under current law that applies to QTLs. Under this test, a plan or issuer may not apply any NQTL to MH/SUD benefits in any classification that is more restrictive than the predominant NQTL that applies to substantially all M/S benefits in the same classification. (The classifications for this purpose are inpatient, in-network; inpatient, out-of-network; outpatient, in-network; outpatient, out-of-network; emergency care; and prescription drugs.)
- The Design and Application Requirement
Similarly, an improper internal process would as a matter of definition run afoul of the design and application requirement.
- The Data Evaluation Requirement
Whether an improper internal process would pass muster under the data evaluation requirement will, of course, depend on the data. That said, one might expect that problems in the data would surface on short order.
Less clear is the application of the proposed regulation’s separate “meaningful benefit” test to an improper internal process. This requirement is a restatement of existing law. It affirms that the requirement to provide MH/SUD coverage in each classification in which M/S benefits are provided applies on a condition or disorder basis. If a plan provides MH/SUD benefits in any classification, it must provide “meaningful [MH/SUD] benefits” in each classification in which it provides M/S benefits. On balance, the meaningful benefit requirement does not appear suited to ferreting out faulty internal processes. Once it is determined that a plan administrator applies an improper internal process to only MH/SUD claims, it would appear to trigger a violation of MHPAEA by definition under both existing law and the proposed regulations. The proposed regulation’s no more restrictive requirement appears to do so in a more targeted fashion. If the facts in Ryan S. are established, and if the proposed regulations are adopted in final, then the “substantially all” fraction for the M/S benefits would be zero. One need not bother with the arithmetic to intuit that the internal process in question would unequivocally fail the data evaluation requirement.
