Courts grapple with limits on health insurance coverage for mental health and substance abuse disorders

The Ninth Circuit Court of Appeals recently published a decision in Wit v. United Behavioral Health, 58 F.4th 1090 (2023), a case that could potentially lead to a significant change in ERISA law. In short, the courts are analyzing whether a healthcare administrator can enact more restrictive internal guidelines as to what is medically covered than “generally accepted standards of care.”

The defendant in the case, United Behavioral Health (“UBH”), a subsidiary of healthcare giant United Health Care, administers benefits and processes claims for numerous health benefit plans, including plans governed by ERISA.

The Plaintiffs in the case are beneficiaries of ERISA-governed health benefit plans. They alleged that UBH improperly denied their requests for coverage for treatment of mental health and substance abuse disorders. The Plaintiffs claimed that UBH’s denials were based on internal guidelines that were more restrictive than generally accepted standards of care (“GASC”) or various state laws governing the criteria for making coverage or medical necessity determinations and which deviated from the plans’ rules. The Plaintiffs also alleged that UBH breached its fiduciary duty to act solely in the interest of the plan participants and beneficiaries to develop coverage criteria consistent with GASCs and state law, and that UBH’s internal guidelines were more restrictive than the plans’ criteria for coverage determinations. Lastly, the Plaintiffs alleged that UBH violated ERISA by improperly denying their benefits based on the internal guidelines.

The trial court certified three classes and following a ten-day trial, entered a judgment in favor of the Plaintiff classes, concluding that UBH breached its fiduciary duties by wrongfully denying benefits because the guidelines impermissibly deviated from GASC and state law, and that UBH’s restrictive guidelines failed to comply with the plans’ rules. The court also concluded that UBH’s guidelines were unreasonable and an abuse of discretion. The court ordered UBH to implement new claim-processing guidelines and to reprocess the Plaintiffs’ claims in accordance with the new guidelines.

On appeal, the Ninth Circuit upheld the trial court’s rulings that the Plaintiffs had standing to bring their breach of fiduciary duty and denial of benefits claims and upheld the class certification on the fiduciary breach claims. However, the Ninth Circuit overturned the trial court’s decision to allow class certification for the denial of benefit claims on the grounds that the claim reprocessing remedy sought by the Plaintiffs was too individualized to allow for class-wide relief under ERISA. Further, the Ninth Circuit held that UBH did not abuse its discretion by enacting guidelines that deviated from GASC. Lastly, on the merits, the Ninth Circuit reversed the trial court’s judgment on the denial of benefits claims because it was based on the erroneous interpretation that the plans required UBH to make coverage decisions consistent with GASC.

On March 10, 2023, the Plaintiffs filed a Petition for Rehearing asking the Ninth Circuit to reconsider its ruling, arguing that reprocessing claims is an appropriate remedy when an administrator applies an incorrect standard in denying benefit claims. The Plaintiffs also argue that the Ninth Circuit’s decision creates a split with the Seventh and Tenth Circuits, and that it should have held that UBH is required to follow GASC when processing claims for benefits. According to the Plaintiffs, “this is one of the most important ERISA cases—perhaps the most important ERISA case, of the 21st century.”

This is a developing story.