Consumers and their attorneys are finding that judges are better understanding the nuances associated with the Federal Parity Law as highlighted through an expanding list of positive court decisions. Although judges did not fully understand the disclosure and transparency rights under the Federal Parity Law initially, judges are now connecting the dots and helping consumers secure the coverage that they deserve under their health insurance policies.
During 2020, The Kennedy Forum identified about 60 published court opinions related to the Federal Parity Law. Two thirds (66%) or about 40 cases involve full or partial favorable rulings. Federal district courts decisions supporting consumer rights were made in nine states (i.e. CA, IL, MA, MT, NY, OH, TX, UT and WI). About 50% of these cases were adjudicated in Utah, in large part due to the number of residential treatment centers (RTC) and outdoor behavioral health programs. The parity legal cases involve full range of MH/SUD conditions and levels of care as detailed below.
Litigation Lessons Learned
- More Disclosure. The Courts have connected the dots that health plans are not disclosing the reasons for a denial of care or details regarding the medical/surgical analogue. This has become more apparent in Federal Parity Law ERISA § 502(a)(3) claims, where courts are acknowledging that plaintiffs need more information to assert “as applied” parity violations. Another important example is the U.S. DOL amicus brief in NR v Raytheon (filed on Oct 7, 2020).
- More Discovery. Prior to 2018, courts often granted defendants’ 12(b) motions to dismiss Federal Parity Law ERISA § 502(a)(3) claims even though plaintiffs were asking for more discovery. This trend has completely reversed over the past year, and the majority of judges are now granting plaintiffs’ more leeway to conduct discovery or amend their complaint to file a parity action. That being said, plaintiffs’ legal counsel cannot go on a fishing expedition regarding potential ERISA claims related to parity violations. Interrogatories must be limited and focused such as asking for specific examples of medical/surgical intermediate care when comparing to MH/SUD RTC.
- Parity Pleading. Many judges in their published opinions articulate the requirement for plaintiffs to draft and file a baseline pleading, which at least covers basic information regarding a “facial” or an “as applied” parity violation regarding the medical/surgical analogue to avoid a summary judgment motion. However, plaintiff’s attorneys still need to plead the basic elements of a parity claim as detailed below. This can sometimes be a challenge depending on the transparency of applicable plan terms or if the health plan has not disclosed information regarding the medical/surgical analogue.
- Parity Claim Elements. Courts have clarified the elements of a parity claim for both a “facial” and “as applied” alleged violation. The elements are:
- Coverage Type. Determine whether the plan is subject to the Federal Parity Law;
- Benefit Scope. Determine if the plan provides both medical/surgical and MH/SUD coverage;
- Limitation. Identify a specific treatment limitation related to the MH/SUD benefits;
- Analogue. Identify medical/surgical care covered by the plan that is analogous to the MH/SUD for which the plaintiffs seek benefits; and
- Disparity. Plausibly allege a disparity between the treatment limitation on MH/SUD benefits as compared to the limitations that defendants would apply to the covered medical/surgical analogue.
- NQTL Insights. With the growing number of successful parity court decisions (mostly to avoid defendant summary judgment motions), the courts are detailing the types of nonquantitative treatment limitations (NQTLs) that may be or are subject to a parity violation. Here are a few examples:
- Cannot interpret MH/SUD guidelines in a more restrictive fashion than the medical/surgical analogue guidelines
- Applying acute MH/SUD standards of care when the medical/surgical analogue uses sub-acute medical/surgical standards of care
- One-sided plan exclusions for non-restorative speech therapy and outdoor behavioral health therapy – among others
- Class Actions. More class actions are being certified and judges are giving some leeway to allow legal counsel to identify members of the class that have plausibly suffered the same injury.
The Wit Echo Effect
- Generally Accepted Standards of Care. Stemming from the Wit decision, the application of “generally accepted standards of care” (GASC) as a common law standard is catching on. Judges are holding a greater number of health plans accountable for failure to apply GASC in support of their UM guidelines and parity applications.
- Move to Nonprofit Specialty Clinical Guidelines. A number of lawsuits are challenging the viability of internal and commercially used UM guidelines regarding whether they meet GASC requirements.
- Medical Necessity Matters. With the Wit decision and growing number of successful parity cases, courts are still looking at whether a particular treatment was medically necessary. Regulators and judges are putting pressure on plans to be more transparent, which in turn is holding health plans to provide medically necessary care based on objective and consistent standards of care.
- UM and Appeal System Broken. The published cases are showcasing how inappropriate denials of care or faulty appeals are generating more parity claims. Another common situation is when a health plan changes the reason for the denial of care during the appeals process.
- Parity is a Standalone ERISA Action. Courts are establishing that an ERISA § 502(a)(1)(B) Recovery of Benefits is not duplicative of an ERISA § 502(a)(3) Parity Equitable Remedies.
- Summary Judgement Motions. Although most parity cases include both an ERISA § 502(a)(1)(B) Recovery of Benefit claims and ERISA § 502(a)(3) Parity Equitable Remedy, the published opinions more frequently address legal issues regarding the parity claims (the latter) and not the breach of fiduciary claims (the former). Defendants’ legal counsel appear to be focusing on challenging the parity violations in most summary judgment motions.
- Standard of Review. Judges typically opt for a “de novo” standard of review when the plan administrator does not have discretion under ERISA to interpret the plan documents; however even when the “arbitrary and capricious” standard of review is used (because the plan administrator has discretion), many courts are finding that the administrator could have abused or did abuse that discretion.
- Named Defendants. In many of these lawsuits for self-funded health plans, both the third-party administrator (TPA) and the employer-sponsor are named defendants. Self-funded employers need to understand that they are liable as well as the TPA that is often committing the parity or ERISA violation. As a general matter, employers have been too passive in their oversight of their plan administration regarding parity compliance. It is likely more legal actions will be holding them accountable in the future.
- Limited State Actions. State-based actions few and far between due to ERISA.
- Limited damages. No punitive damages in ERISA actions.
- Collection of Attorney Fees. Although some of the court cases have addressed the award of attorney fees to the successful plaintiff attorney, courts do not consistently award such fees.