Significant Parity Cases for Benefits Lawyers to Watch

Patients have filed various lawsuits alleging their insurers violated the Parity Act by limiting treatment for mental health and substance use disorders. These lawsuits also involve ERISA claims. Many expect the outcomes of these lawsuits to clarify the standards for a successful parity claim and what remedies plaintiffs can seek under the Parity Act. The following are five parity cases that benefits attorneys and plan sponsors should be watching.

K. et al. v. United Behavioral Health et al., case number 21-4088, in the U.S. Court of Appeals for the Tenth Circuit.

In this lawsuit, parents filed suit alleging that United Behavioral Health, the behavioral health unit of UnitedHealth Group Inc., and the Alcatel-Lucent Medical Expense Plan failed to pay for residential mental health treatment for their child. A federal district court denied summary judgment on the plaintiffs’ Parity Act claim, finding that the insurer and plan were arbitrary and capricious in denying coverage for the patient’s mental health treatment.

The insurer and plan appealed to the U.S. Court of Appeals for the Tenth Circuit. The appeal has sparked the participation of the U.S. Department of Labor (DOL) and ERISA Industry Committee (ERIC), the top lobbying group for large employers operating ERISA-governed benefits plans, as amici. The DOL urged the Tenth Circuit to affirm the lower court’s decision. In contrast, ERIC responded that the DOL was “reframing” its regulations in a manner inconsistent with a plain reading of DOL regulations.

David Wit et al. v. United Behavioral Health and Gary Alexander et al. v. United Behavioral Health, case numbers 21-15193 and 21-15194, U.S. Court of Appeals for the Ninth Circuit

A consolidated class of more than 60,000 plaintiffs has filed a request for rehearing in the U.S. Court of Appeals for the Ninth Circuit after that court reversed two favorable California federal district court orders in March 2022. The class members, who are participants in employee benefit plans, are seeking the reprocessing of claims that they filed with United Behavioral Health for mental health and substance abuse disorder treatments.

The district court rulings, a major win for the class, would have required United to reprocess some 67,000 claims. A three-judge panel of the Ninth Circuit reversed the rulings, finding that the lower court had no basis for overturning the claims, as United’s denial of the claims was reasonable. The Ninth Circuit’s ruling seems to heighten the standard necessary to overturn the determination of a claim by an insurer on parity grounds.

The U.S. Department of Labor (DOL) also filed an amicus brief arguing that the Ninth Circuit should uphold the district court’s reprocessing decision in favor of the class.

RJ et al. v. Cigna Behavioral Health Inc, et al., case number 5:20-cv-02255, U.S. District Court for the Northern District of California

A California federal judge has denied most of the motions to dismiss filed by Cigna Health & Life Insurance Co. and Multiplan Inc. This ruling allows the plaintiffs’ proposed class action alleging violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) and ERISA to move forward. The judge did dismiss the plaintiffs’ RICO claims based on money laundering due to a lack of sufficient evidence.

The plaintiffs claim that the companies conspired to fraudulently underpay their out-of-network mental health and substance abuse disorder treatment claims. According to the proposed class members, the companies were required, under the terms of their employee benefit plans, to reimburse their patients’ claims for treatment, at a composite rate, based on similar provider costs in a given geographic area, known as the “usual, customary, and reasonable,” or UCR rate. Multiplan also allegedly promised to pay benefits at the UCR rate when verifying benefits by phone.

Multiplan allegedly calculated the amounts that CIGNA would pay for the treatment at a rate well below the UCR rate, leaving the patient with tens of thousands of dollars in unanticipated out-of-pocket costs.

L.D. et al. v. United Behavioral Health et al., case number 4:20-cv-02254, U.S. District Court for the Northern District of California

A California federal court magistrate imposed sanctions on United Behavioral Health in another parity-proposed class action lawsuit after the company produced evidence beyond a discovery deadline. The plaintiffs in L.D. allege that United underpaid their out-of-network claims for mental health and substance abuse disorder treatment in violation of RICO and ERISA.

As a result of the sanctions order, United will be unable to use “21,812 documents, 104 audio records, and an Excel spreadsheet listing 2,021 new class member claims.” The court order excluding these records inevitably will make it more challenging for the company to argue against class certification in this case.

The sanctions ruling comes on the heels of a January ruling in the case that denied a motion for summary judgment from the proposed class, without prejudice, and deferred a ruling on the appropriate standard of review.

Ryan S. v. UnitedHealth Group Inc. et al., case number 22-55761, U.S. Court of Appeals for the Ninth Circuit

A parity case stemming from payment for drug addiction treatment is now before the U.S. Court of Appeals for the Ninth Circuit for a second time. Ryan S. is the lead plaintiff for a proposed class of patients accusing UnitedHealth Group Inc. of wrongfully denying treatment for substance abuse disorder. The plaintiffs have appealed the California district court’s recent dismissal of United defendants from the suit and denial of leave to amend the complaint. The federal district court judge ruled that the plaintiffs had failed to plausibly allege that United had violated the Parity Act or that their injuries resulted from a breach of ERISA fiduciary duties.

The most recent dismissal of the Ryan S. case came after the Ninth Circuit revived the case in March 2022, when a three-judge panel reversed the district court’s 2020 dismissal of the case based on a lack of standing.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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