1. Case Name: Rea et al., v. Blue Shield of California, Court of Appeal of California, Second Appellate District, Division One, June 10 2014. 226 Cal. App. 4th 1209

2. Type of Treatment Services Denied: The two Plaintiffs suffer from bulimia and anorexia nervosa. They sought residential treatment for their eating disorders, but their health plans did not provide coverage for this treatment.

3. Lawyers:

  • Counsel for Plaintiff: Lisa S. Kantor, J. David Oswalt and Elizabeth K. Green, Kantor & Kantor
  • Counsel for Defendant: Gregory N. Pimstone, Adam Pines and Joanna S. McCallum, Manatt, Phelps & Phillips

4. Format: Published opinion and order

5. Outline:

  • ERISA Claim? No.
  • Class Action/or Individual Action: Description of whether the plaintiff is a class of people, an individual, or an organization.  Also whether the class is certified, with any other pertinent details.
  • Defendant: Insurer
  • Type of Insurance Plan: Not specified other than that both Plaintiffs are covered by Defendant health plans
  • Type of Coverage Denial: Administrative denial
  • Causes of Action: The Plaintiffs argue that Defendant’s failure to cover residential treatment is a violation of the CA Parity Act. Additionally, Plaintiffs allege claims for breach of contract, breach of the covenant of good faith and fair dealing, declaratory relief, unfair business practices and violations of the Unruh Civil Rights Act.

6. Legal Pointer: Layperson’s explanation of the legal action and the federal and state laws involved.

7. Legal Issues and Causes of Action: The Plaintiffs allege violations of the CA Parity Act and other claims. The trial court found that the Parity Act was part of the Knox-Keene Act, which defined “basic health care services” to include seven enumerated items and declined to follow the holding in Harlick. The trial court granted Defendant’s demurrer and held that the requested residential treatment coverage was not required by the Parity Act.

  • Ruling: The Court reverses the judgment of the trial court and finds that the language and background of the Parity Act require coverage for residential treatment of anorexia and bulimia.

8. Narrative Case Description: The issue here is whether coverage for residential treatment of eating disorders is required by the Parity Act even where the health plan does not provide coverage. The Plaintiffs argue for a broad reading of the Parity Act’s “medically necessary treatment” language that includes residential treatment for anorexia and bulimia because there is no treatment analog for physical illnesses. By not adopting this reading, the Plaintiffs argue that the trial court failed to take into account the legislature’s goal of achieving parity. Defendants disagree with this argument and argue that nothing in the statutory language of the Parity Act demonstrates a legislative intent to cover all treatments, only those that are medically necessary.

Plaintiffs were both enrolled in health plans that cover mental illness, but exclude residential treatment. For both Plaintiffs, residential treatment was deemed medically necessary and residential treatment is widely seen as one of the most effective treatments for eating disorders.

Defendant demurred to the Plaintiff’s complaint and argued that the Plaintiff’s interpretation of the Parity Act would require the provision of services not otherwise mandated under the Knox-Keene Act which would result in a system where broader coverage would be provided for mental illness than physical illness.  In turn, the Plaintiffs argued that the Harlick court correctly found that the Parity Act’s mandated quality of coverage between physical and mental illnesses required the coverage of all medically necessary treatment of the enumerated mental illnesses. This was the correct interpretation because mental illnesses largely cannot be treated the same way as physical illnesses.

The Court begins its analysis by taking judicial notice of several items and then proceeds into its interpretation of the statute. The Court reviews the stated intent of the Parity Act, to address the imbalance in coverage between mental and physical illness, and whether subdivision (b) contains an exclusive list of required treatments. The Court finds that the list is not exhaustive and that the implementing regulation is more specific.

The Court also considers the role of the Knox-Keene Act. The Defendant argues that the Knox-Keene Act requires coverage for basic health care services, and there is no mandate for all care that is medically necessary. The Court again turns back to the implementing regulation which finds that it is not implied that the Knox-Keene Act limits services to the “basic health care services” and that the court in Harlick found that the coverage in the Parity Act includes, but is not limited to, the basic health care services in the Knox-Keene Act. The Court finds the only proper limitation is what care is medically necessary to treat a mental illness.

Finally, the Court considers the legislative history of the Parity Act. The Plaintiffs argue that if the Legislature intended to create an exclusion for residential coverage from the Parity Act that it would have expressly done so. The Defense argues that the failure of the Legislature to expressly exclude the residential services does not mean the services are covered. Ultimately, the Court finds that the language and background of the Parity Act establish that residential treatment for eating disorders must be covered. The Court declines to hold that parity mandates identical coverage for mental and physical illness.

9. Additional Comments: The Court relies heavily upon the decision in Harlick v. Blue Shield of California.

10. Website: https://scholar.google.com/scholar_case?case=10077160895261409935&hl=en&as_sdt=6&as_vis=1&oi=scholarr

11. Practical Implications and Lessons Learned:

12. All Legal Theories Presented in Case: Violation of CA Parity Act

13. Successful Legal Theories in Case: Violation of CA Parity Act

Full Case Access

Go back to view more cases

View More Cases