• Filing. Filed in U.S. District Court for the District of Utah, Central Division on March 12, 2020 (Case no. 2:19-cv-00069).
  • Backgroun Plaintiff’s dependent “IM” received care at a residential treatment center for several mental health conditions (Note:  it is not clear in the opinion what the specific mental health issues were because the parties disagreed on the specifics).  The plan representatives determined IM was not suicidal, homicidal or psychotic, nor did IM have any medical or substance abuse issues.  After not being reimbursed for IM’s care, Plaintiffs filed two UM appeals and one external appeal.  The adverse benefit determination was upheld at all three levels based on the rationale that the medical necessity criteria for treatment was not met.  UMR and the external review agency said IM’s recovery could have continued at a lower level of care.  Plaintiffs of course disagreed.

The primary Defendants are the health plan and the third-party administrator, UMR.  Two counts were filed: 1) an ERISA breach of fiduciary duty claim; and 2) a Parity violation claim.  Plaintiffs assert that the Defendants improperly applied the medical necessity criteria meant for acute inpatient mental health treatment to subacute care in part because no valid psychiatric criteria would prescribe subacute residential treatment for individuals in need of acute care.  UMR filed a motion to dismiss both counts, and the health plan joined the motion.

  • Holding. The Court denied the dismissal motion by both Defendants.
  • Analysis. The Court reaffirmed that UMR should be a party to the current proceeding.  Even though they are not liable to pay benefits under the plan as a TPA, UMR could be liable for other relief such as repricing IM’s claims if UMR breached its fiduciary duties under ERISA.

The Court re-affirmed the basic tenants of a Parity violation claim when it wrote:

Parity Act violations can be alleged in the form of facial challenges or as-applied challenges. A facial challenge is based on the express terms of the plan, while an as-applied challenge is based on the plan administrator’s application of the plan.

To succeed on a Parity Act claim, a plaintiff must show: “(1) the relevant group health plan is subject to the Parity Act; (2) the plan provides both medical/surgical benefits and mental health or substance use disorder benefits; (3) the plan includes a treatment limitation for mental health or substance use disorder benefits that is more restrictive than medical/surgical benefits; and (4) the mental health or substance use disorder benefit being limited is in the same classification as the medical/surgical benefit to which it is being compared.” Generally speaking, the third and fourth prongs of this test present a more substantial pleading challenge for parties than the first two prongs. Accordingly, some courts have distilled the four-prong test into a two-part test: “To survive the dismissal of a Parity Act claim, a plaintiff must allege a medical or surgical analogue that the plan treats differently than the disputed mental health or substance abuse services.”

The Court noted that the Plaintiffs adequately assert an “as applied” parity challenge because they allege: 1)  IM’s subacute residential treatment is analogous to medical/surgical treatment at a skilled nursing or rehab facility; and 2) Defendants applied acute treatment limitation – at least in part — to evaluate IM’s subacute MH/SUD residential treatment.  Further, Plaintiffs allege such acute limitations would not be applied to subacute care at a skilled nursing or rehab facility.