1. Case Name: Arce v. Kaiser Foundation Health Plan, Inc., Court of Appeals of California, Second Appellate District, Division 7, January 27, 2010
2. Type of Treatment Services Denied: Behavioral and speech therapy for a 4-year old boy diagnosed with autism
- Counsel for Plaintiff: Scott C. Glovsky, Law Offices of Scott C. Glovsky
- Counsel for Defendant:
- Mark A. Chavez, Nance F. Becker, Chavez & Gertler
- Anna Levine, Katrina Kasey Corbit, Disability Rights Advocates
- William A. Helvestine, Andrew J. Hefty, Lisa Caccavo and Damian D. Capozzola, Epstein Becker & Green
4. Format: Published opinion
- ERISA Claim? No.
- Class Action/or Individual Action: Class action. The proposed class consisted of all CA residents who were policyholders of Defendant and who were wrongfully denied coverage for applied behavioral analysis therapy or speech therapy for an autism spectrum disorder on the grounds that the therapies are “non-health care services,” “academic or educational interventions,” or “custodial care.”
- Defendant: Defendant is the issuer of Plaintiff’s health care plan
- Type of Insurance Plan: Not specified
- Type of Coverage Denial: Administrative denial
- Causes of Action: Plaintiff brings a class action under the unfair competition law (UCL) alleging that the Defendant violated the California Mental Health Parity Act by categorically denying coverage for behavioral and speech therapy for those with autism.
6. Legal Pointer: The Plaintiff’s claims for behavioral and speech therapy for his autism were denied by Defendant because it was a “non-health care service” or “custodial care.” The Plaintiff challenged this interpretation and stated that the Defendant’s actions were a violation of the UCL and the CA Parity Law. The trial court sustained a demurrer because it believed to issue a decision, it would have to consider the question of medical necessity for each individual. The Court here reverses and remands.
7. Legal Issues and Causes of Action: The Plaintiff argues that it is Defendant’s practice to refuse to provide coverage for applied behavior analysis therapy and speech therapy for Autism disorders, and that this constitutes an unlawful business practice in violation of the UCL. Plaintiff also asserts that the conduct is unlawful under the CA Mental Health Parity Law. Plaintiff requests injunctive and declaratory relief on behalf of the class.
- Ruling: The Court finds that the trial court erred in sustaining the demurrer and reverses and remands for further proceedings.
8. Narrative Case Description: Plaintiff is a 4-year-old boy with autism. His health insurance plan, issued by Defendant, contains a categorical exclusion for “custodial care” defined as assistance with activities of daily living or care that can be performed by individuals without a medical license or certificate. After Plaintiff’s diagnosis, Defendant denied coverage for the recommended occupational therapy because it was “behavioral in nature, not medical, and could be provided by the Regional Center.”
Plaintiff appealed the Defendant’s decision with the Department of Managed Health Care (DMHC) and requested an independent medical review. The independent reviewer overturned the decision to deny coverage; this decision was adopted by the DMHC.
The trial court sustained Defendant’s demurrer to the UCL claim without leave to amend. In its decision, the Court stated that the relief sought would require the Court to determine which treatments are medically necessary for each class member. Additionally, the trial court found that Plaintiff could not establish the requisite community of interest for a class action suit. Finally, the court declined to adjudicate the claim based on judicial abstention. Plaintiff filed a motion for reconsideration supported by four letters that, they argued, demonstrate that Defendant categorically denied coverage without considering the question of medical necessity.
In considering the question of community of interest among class members, the Court considers the following three factors: 1) predominant common questions of law or fact, 2) class representatives with claims or defenses typical of the class, and 3) class representatives who can adequately represent the class. The Court also states that it is often premature for a trial court to make determinations pertaining to the suitability of a class on demurrer, and that all that is usually required is that the complaint allege facts to show an ascertainable class of plaintiffs and common questions of law and fact. In this case, the claim presents legal issues common to all class members that do not require the Court to adjudicate individual questions of medical necessity.
The first question addressed by the Court is one of breach of contract. The Court must consider whether the therapy is “health care services” and, if so, whether it is subject to the exclusion of custodial care. The Plaintiff alleges that the requests for coverage were always denied without considering medical necessity. The Defense argues that the trial court would have to consider questions of individual medical needs in determining whether the care was subject to the exclusion. However, when defining the term custodial care, the Defense does not include any considerations of medical necessity but only asks whether the care is performed by individuals with medical licenses or certificates. The Court finds that this allegation is sufficient to state a class action claim.
Next, the Court considers whether the CA Parity Act allows Defendant to exclude the therapy on the grounds that it is a non-health care service, an academic or educational intervention, or custodial care. The Court states that this is a question of statutory interpretation. The trial court had stated that the Parity Act only requires coverage for services that are medically necessary, and thus that the question of medical necessity must be asked for each individual in the class. However, the Court states that this is too narrow of a reading, and that the Plaintiff could prove a statutory violation by showing that Defendant categorically denies coverage for coverage that may, in some cases, be medically necessary without considering the question of medical necessity. The Court finds that the Plaintiff’s complaint sufficiently alleges that Defendant has a policy of categorically denying coverage without determining medical necessity.
The Court then considers whether the trial court should abstain from the suit. Here, the trial court choe to abstain because it believed the relief required it to determine medical necessity for each individual. However, the Court states that it was improper to abstain and that the Court could consider whether Defendant breached its contract by systematically denying coverage for the treatment at issue by interpreting the terms of the contract and determining whether the therapies are covered treatments.
Thus, the Court reverses the order of the trial court and remands for further proceedings.
9. Additional Comments: None.
11. Practical Implications and Lessons Learned: A categorical exclusion of care is once again not upheld.
12. All Legal Theories Presented in Case: Violation of UCL, violation of CA Parity Act
13. Successful Legal Theories in Case: Violation of UCL, violation of CA Parity Act