As noted in a recent prior blog, the U.S. Court of Appeals for the Ninth Circuit has permitted a class action lawsuit under the Mental Health Parity and Addiction Equity Act (MHPAEA) and ERISA to proceed. Ruling on procedural grounds, the court found that it was sufficient for plaintiff Ryan S. to allege that United Health Group was applying an algorithm to mental health/substance use disorder (MH/SUD) claims that resulted in a stricter review for MH/SUD claims than for medical/surgical (M/S) claims. The plaintiff’s claim was adequate to overcome the insurer’s motion to dismiss, and thus, the case will return to the trial court for further proceedings. The case is Ryan S. v. UnitedHealth Grp., Inc., 2024 WL 1561668 (9th Cir. 2024).
This court ruling has important implications for treating internal process claims under the proposed MHPAEA rules, which the Internal Revenue Service, Employee Benefits Security Administration, and Health and Human Services Department issued in July 2023. Under those regulations, if United Health Group’s internal process uses an algorithm to assess patient progress and refer the case for additional review, it is a nonquantitative treatment limitation (NQTL). That is, the algorithm represents a limitation on duration and scope of treatment that is not based on numbers but on nonquantitative criteria.
Under the proposed rules, United Health Group’s internal process utilizing the algorithm would be subject to a three-part test, including the following three components:
- The No More Restrictive Requirement
An internal process such as United Health Group’s algorithm only applied to MD/SUD claims violates this requirement. Under this component of the test, an insurer cannot apply an NQTL to any classification of MH/SUD benefits that is more restrictive than that applied to substantially all M/S benefits within the same classification.
- The Design and Application Requirement
Similarly, United Health Group’s internal process would violate this requirement, which requires a showing that any NQTL that an insurer applies to MH/SUD benefits is not based on criteria or standards that discriminate against MH/SUD conditions.
- The Data Evaluation Requirement
Whether United Health Group’s internal process would violate the data evaluation requirement depends on the data. Still, given the circumstances, the data from United Health Group’s internal process will likely be problematic. The insurer must provide “meaningful” MH/SUD benefits in each classification in which M/S benefits are provided. However, if the court in Ryan S. determines that the insurer has applied a faulty process under MHPAEA only to MH/SUD claims, then the “meaningful” MH/SUD benefits provided, by definition, would be zero. As a result, while this requirement does not specifically target internal processes’ validity, its analysis appears to agree with the outcome of the previous two tests.
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