Appeals Court Revives AGG Class Action Against UnitedHealth Group for Federal Mental Health Parity Law Violations

The United States Court of Appeals for the Ninth Circuit ruled on April 11, 2024, that AGG’s class action lawsuit against UnitedHealth Group and its subsidiaries for the wrongful and systematic denial of mental health and substance use disorder treatment claims should be decided on the merits. In an 18-page published opinion, the Ninth Circuit reversed in part the district court’s order dismissing AGG’s class action on behalf of client Ryan S. and remanded the case to the district court for further proceedings.

The lawsuit alleges that UnitedHealthcare violated the Employee Retirement Income Security Act of 1974 (“ERISA”) by breaching its fiduciary duty owed to its health plan members and by violating the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act (“Parity Act”), which is codified in ERISA and mandates that health insurers not impose any limitations on “mental health or substance use disorder benefits” in an ERISA health plan that is “more restrictive than the . . . limitations applied to . . . medical and surgical benefits.”¹ Ryan also brought a claim under ERISA for UnitedHealthcare’s breach of his plan terms. Reversing the district court, the Ninth Circuit concluded that Ryan adequately stated a claim for violation of the Parity Act with factual allegations that UnitedHealthcare applied a more rigorous review process for mental health and substance use disorder treatment claims than for analogous medical and surgical claims. The Ninth Circuit, however, affirmed the district court’s dismissal of Ryan’s claim for breach of his health plan because there were no facts that UnitedHealthcare’s health plan actually requires coverage for mental health and substance use disorder benefits to be on par with medical and surgical benefits.

The Parity Act violation centers on UnitedHealthcare’s internal process that impacts substance use disorder claims in a way that does not similarly apply to analogous medical and surgical claims. While the Ninth Circuit noted that Ryan does not have to prove that UnitedHealthcare’s practice was categorical, its opinion concluded that the lawsuit alleges more than an isolated incident in Ryan’s case. The court pointed to allegations relating to a 2018 report by the California Department of Managed Healthcare that concluded UnitedHealthcare was processing mental health and substance use disorder claims differently by subjecting them to an algorithmic process — the Algorithms for Effective Reporting and Treatment (“ALERT”) — that would trigger additional levels of review and increase the likelihood of coverage denials. The court pointed out the temporal nexus with the state agency’s probe and report occurring simultaneously with the rejection of Ryan’s claims.

AGG anticipates that upon remand, the district court will set a scheduling conference, the parties will proceed with the discovery process, and the district court will be asked to certify a class of UnitedHealthcare plan members whose claims were impacted by UnitedHealthcare’s Parity Act violation and fiduciary duty breach. The lawsuit seeks a declaratory judgment that UnitedHealthcare’s practices violated ERISA and the Parity Act, an injunction requiring UnitedHealthcare to re-evaluate all claims for substance use disorder and related laboratory services subjected to the unlawful internal process, and the disgorgement of UnitedHealthcare’s profits derived from its wrongful conduct.

For more information about this article, ERISA healthcare claims, the Parity Act, payor/provider disputes, or healthcare reimbursement litigation in general, please contact AGG Healthcare Litigation partners Rich Collins or Damon Eisenbrey.

[1] 29 U.S.C. § 1185(a)(3)(A)(ii).