A federal judge recently ruled that a company administering mental health and substance use disorder benefits for ERISA-covered health benefit plans breached its fiduciary duty when it applied its own flawed medical review guidelines in rejecting plan participants’ claims for behavioral health services. ERISA requires fiduciaries to administer benefit plans solely in the interest of participants and beneficiaries and in accordance with plan documents.
Because the case, Wit v. United Behavioral Health (No. 14-cv-02346-JCS [as well as a related case, No. 14-cv-05337-JCS]), was decided by the U.S. District Court in the Northern District of California, it applies only to the parties involved. An appeal is possible, perhaps after the remedy phase of the case is completed and a final judgment is issued.
The court noted that the administrator abused its discretion when it adopted its guidelines in several ways, such as:
- Having a conflict of interest because a large portion of its revenues came via pressure to keep expenses down
- Not insulating the individuals who developed, revised, and approved the guidelines from financial considerations
- Refusing to adopt generally accepted clinical guidelines despite the recommendations from clinicians to do so and against some states’ requirements stipulating standards of care
A key issue raised by the case was the coverage for behavioral and substance use disorders as chronic, rather than acute, conditions. Thus, the plaintiffs argued, the guidelines limited coverage once a patient’s symptoms subsided and did not cover services needed to stabilize his or her condition over a longer term. Furthermore, the court noted that the 2008 Mental Health Parity and Addiction Equity Act requires coverage of depression or addiction no more restrictively than other medical conditions. And yet, in the court’s opinion, the administrator’s guidelines adopted appropriate standards of care for medical conditions but not for the mental health conditions.
Employers that sponsor healthcare coverage should review the implications of the case and discuss any concerns with their behavioral management administrators.
For additional information about the court’s ruling, please contact your Milliman consultant.