Under the Employee Retirement Income Security Act of 1974 (“ERISA”), a health benefit plan participant who believes her insurer wrongfully denied coverage for services or benefits may bring a Section 502(a)(1)(B) claim to enforce the plan terms and require the plan administrator to provide benefits in accordance with the plan. With certain types of healthcare services, the denial of benefits is based upon a health insurance company’s internal policies and guidelines. These instances may also give rise to a Section 502(a)(3) claim by plan participants, typically as a class action, to enjoin a practice that violates ERISA or a plan’s terms. The United Behavioral Health (“UBH”) plan participants in Wit et al. v. United Behavioral Health and Alexander et al. v. United Behavioral Health, case numbers 20-17363, 20-17364, 21-15193, and 21-15194 (“Wit”), sued under both provisions and prevailed with a 2017 trial court victory that was heralded a turning point for those suffering with mental health and substance use disorders and the providers who treat them.
The district court in Wit found at trial that UBH’s internal coverage and level of care guidelines for mental health and substance use disorder treatment violated ERISA and California state laws that essentially require coverage for diseases of the brain to be on par with coverage for diseases of the body, holding UBH liable for breach of its fiduciary duties and denial of benefits under ERISA. As a remedy for UBH’s conduct, the court ordered UBH to get rid of its internal guidelines, issue guidelines that are consistent with generally accepted standards of care, and to reprocess the plaintiffs’ 67,000 claims under the new guidelines. UBH appealed to the United States Court of Appeals for the Ninth Circuit.
In March 2022, the Ninth Circuit issued its opinion, reversing the district court’s judgment and three years of progress in expanding access to mental health treatment since the trial. The plaintiffs then petitioned the Ninth Circuit for rehearing of their appeal. While the court agreed to rehear the matter, its opinion issued on January 26, 2023, sent shock waves through the healthcare litigation community. Litigants with cases pending in federal district courts across the country were faced with questions about the ruling’s impact on their cases, and many were forced to consider a shift in strategy.
The court upheld the district court’s finding that UBH’s guidelines impermissibly deviated from generally accepted standards of care and conflicted with state criteria, and that UBH was financially motivated in drafting those guidelines. However, it refused to substitute its own interpretations of the health plan terms and deferred to UBH’s plan interpretations. The court also decertified the class action. Even though the court agreed that UBH had processed 67,000 claims under the same erroneous guidelines, it held that requiring UBH to reprocess those claims under valid guidelines is not a remedy provided under ERISA for the denial of benefits. Instead, the ERISA remedy is payment of benefits that were denied. And while reprocessing wrongfully denied claims may be the means to obtaining that remedy, the Wit plaintiffs declined to seek the ultimate determination of their entitlement to benefits. Why would they not have done so? Because proving entitlement to benefits requires an examination of the patient’s chart as applied to the plan terms and guidelines, which would most certainly frustrate the “commonality” requirement for class certification. It would also require proof, according to the Wit opinion, that each plaintiff class member complied with each step of the appeal process drafted by their insurer into the health plan; that they each exhausted their administrative remedies before filing suit. This is where the court’s opinion may particularly impact providers seeking reimbursement for treating an insurance company’s plan member.
The Ninth Circuit’s opinion would make it impractical if not impossible to bring an ERISA benefits denial claim on a class-wide basis, and it is economically unfeasible to bring thousands of individual claims against multi-billion-dollar insurance companies where the only remedy is payment of the benefits that should have been paid in the first place. As it is, just one-tenth of 1% of patients appeal health insurance denials, and when they do appeal, insurance companies uphold their denials about 63% of the time. The Wit opinion will likely further deter patients and their lawyers from pursuing litigation, leaving healthcare providers to carry that burden if they wish to be reimbursed for their services.
Litigating provider reimbursement actions under ERISA involves navigating a virtual minefield of insurer defenses, including exhaustion of administrative remedies. As the Wit opinion makes clear, it is critical to be familiar with and to follow every aspect of the health plan appeal process. A failure to do so could jeopardize the provider’s rights. It is also imperative for providers to make note of any plan terms that set time limitations for appeals and for filing suit. Missing a deadline could forfeit the provider’s rights. Providers also need to review their patient financial agreements and disclosures, including assignment of benefits forms. If the assignment does not clearly confer to the provider her patient’s right to receive benefits from the insurer, including the right to pursue that insurer in court, if necessary, the insurer will argue the provider lacks standing to sue. Knowing that the court will defer to the insurance company’s interpretation of plan terms and conditions, it is also vital for the provider to document all appeals with records, tests, notes, etc. supporting the requested service or treatment.
Two weeks ago, the plaintiffs in Wit again petitioned the Ninth Circuit for rehearing. While a number of amicus briefs have been filed in support of the petition and many people on the sidelines are rooting for its success, providers should be prepared for the potential impact on their revenue cycle and their rights to pursue insurer reimbursements under ERISA if the court denies the petition.
For more information about this article or healthcare reimbursement litigation in general, please contact AGG Healthcare Litigation attorneys Rich Collins or Landen Benson.