United Class Action Suit Ruling Puts Insurers on Notice

A ruling handed down against a subsidiary of the nation’s largest health insurance company earlier this month could have long-lasting implications for coverage of behavioral healthcare by the insurance industry overall.

A California federal court found that United Behavioral Health, a subsidiary of UnitedHealthcare, wrongfully denied coverage of outpatient, intensive outpatient and residential treatment services to policyholders based on internal guidelines that failed to comply with generally accepted standards of care.

The class-action suit was filed on behalf of United policyholders under the Employee Retirement Income Security Act (ERISA) based on the insurer’s denial of coverage between 2011 and 2017.

The 106-page ruling of U.S. Chief Magistrate Judge Joseph C. Spero was “incredibly thought-out and incredibly thorough,” Aviva Morady, an attorney for Nelson Hardiman, tells Behavioral Healthcare Executive.

“At the very least, it’s going to send the message to insurers that your guidelines are subject to judicial review, and if you adopt these internal guidelines that aren’t in line with generally accepted standards, you might get a similar ruling,” says Morady, who serves in Nelson Hardiman’s regulatory compliance group. “I do hope we see all of the health plans take a closer look at their coverage determination guidelines.

Recognizing American Society of Addiction Medicine Criteria (ASAM Criteria), American Association of Community Psychiatrists’ (AACP) Level of Care Utilization System (LOCUS), and the Centers for Medicare and Medicaid’s Medicare benefit policy manual (CMS Manual) as generally accepted standards of care, the Northern District of California court found that United’s process for developing its internal guidelines was fundamentally flawed and unduly influenced by financial self-interest.

Among the areas United was found to have failed to meet generally accepted standards of care:

• Placing an excessive emphasis on acuity and crisis stabilization, while ignoring treatment of underlying conditions
• Failing to address co-occurring conditions
• Failing to err on the side of caution in favor of higher levels of care by pushing patients to lower levels of care where possible, even in situations where lower levels of care are likely to be less effective
• Precluding coverage for treatment to maintain a level of function
• Precluding care based on members demonstrating a lack of motivation
• Failing to address the unique needs of children and adolescents
• Using an overly broad definition of custodial care and an overly narrow definition of active treatment and improvement
• Imposing mandatory prerequisites instead of a multidimensional approach

Given the scope of the ruling, Patrick Kennedy, the former U.S. representative and longtime mental health advocate, called it “the Brown v. Board of Education of the mental health movement.”

Remedy in the United case, in which the judge will determine punishment for the insurer, is expected to be ruled on in the coming months.