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March 21, 2019

Federal Court Finds United Behavioral Health Violated ERISA When Denying Coverage for Mental Health and Addiction Treatment

This Bulletin is brought to you by AHLA’s Behavioral Health Task Force.
  • March 21, 2019
  • Kelly J. Epperson , Rosecrance
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On March 5, 2019, Chief Magistrate Judge Joseph C. Spero of the U.S. District Court for the Northern District of California filed Findings of Fact and Conclusions of Law following a 10-day bench trial in a class action suit filed on behalf of over 50,000 patients whose claims were denied by the defendant, United Behavioral Health (UBH).1 The court’s detailed analysis of UBH’s coverage determination criteria provides insight into the process used to develop that criteria, how that criteria compare to accepted treatment principles, and whether UBH’s actions as plan administrator complied with the Employee Retirement Income Security Act of 1974 (ERISA). A brief summary of the key findings is set forth below.

In this class action, plaintiffs asserted two ERISA claims: (1) breach of fiduciary duty (Breach of Fiduciary Duty Claim) and (2) arbitrary and capricious denial of benefits (Denial of Benefits Claim).2 The Breach of Fiduciary Duty Claim alleged that UBH breached its fiduciary duties by: (1) developing guidelines for making coverage determinations that were more restrictive than generally accepted standards of care; and (2) prioritizing UBH’s financial interests over plaintiffs’ interests. The Denial of Benefits Claim alleged UBH improperly denied coverage by using flawed guidelines.

At issue were UBH’s Level of Care Guidelines and Coverage Determination Guidelines for residential care, intensive outpatient treatment, and outpatient treatment for various mental health and substance use disorders (collectively, Guidelines). Plaintiffs challenged the Guidelines on the grounds that (1) plaintiffs’ health insurance plans required coverage consistent with generally accepted standards of care but the Guidelines were more restrictive; and (2) some claims were subject to state laws that mandated the use of clinical criteria issued by the American Society of Addiction Medicine (ASAM) or the Texas Department of Insurance (TDI). Plaintiffs stipulated at the class certification stage that they did not seek coverage determinations; instead they only raised facial challenges to the Guidelines.

The Guidelines Fail to Conform to Standards of Care

To determine whether the Guidelines conformed to generally accepted standards of care the court first made factual determinations based on expert medical testimony and several clinical standards including consensus guidelines from professional organizations and government agencies.3 Based on these sources, the court summarized the following generally accepted standards of care for behavioral health treatment:

  • Treatment should address the patient’s underlying condition and not only the patient’s acute symptoms;
  • Treatment should address co-occurring conditions in a coordinated manner and clinicians should consider the interactions of all conditions when determining the appropriate level of care;
  • Patients should receive treatment at the least intensive and restrictive level of care that is both safe and effective;
  • Providers should err on the side of caution by placing the patient in a higher level of care if there is any uncertainty about the appropriate level of care;
  • Covered treatment should include services needed to maintain functioning or prevent deterioration;
  • Level of care determinations need to consider the unique needs of children and adolescents; and
  • Decisions about the appropriate level of care and treatment duration should be individualized and based on a multidimensional assessment of the patient.

The court compared UBH’s Guidelines to the above generally accepted standards of care and found that the Guidelines were inconsistent with these principles in several ways. The Guidelines placed an excessive emphasis on addressing acute symptoms and stabilizing crises while ignoring the effective treatment of the patient’s underlying conditions. This resulted in a narrower scope of coverage than what is consistent with generally accepted standards of care, the court found.

The Guidelines also deviated from generally accepted standards of care by failing to address the effective treatment of co-occurring conditions. The Guidelines omitted any evaluation of whether a patient’s co-occurring condition could be effectively treated at the requested level of care and instead only asked whether the co-occurring condition could be safely treated. According to the court, the Guidelines did not require an evaluation of whether co-occurring conditions complicated or aggravated a patient’s presentation such that a more intensive level of care was appropriate.

In addition, the Guidelines pushed patients to the least restrictive level of care that was safe, even if treatment at a lower level of care would have been less effective, deviating from accepted medical principles by failing to consider whether a lower level of care would have been both effective and safe. The Guidelines should have instructed clinicians to consider both safety and effectiveness when deciding whether to move a patient to a lower level of care, the court said. The Guidelines also used language instructing UBH clinicians to err on the side of moving members to lower levels of care even where there was uncertainty about whether such a move was safe.

The court found that UBH Guidelines deviated from generally accepted standards of care by precluding coverage for treatment to maintain the patient’s current level of function and instead focused solely on improvement. The court further found UBH’s Guidelines flawed because they did not allow for adequate consideration of all information from a multidimensional assessment of the patient. Finally, the court stated that “one of the most troubling aspects” of UBH’s Guidelines was that they failed to address the different standards that apply to children and adolescents because UBH did not adopt separate criteria for children and adolescents.

The court additionally found that UBH violated Illinois, Connecticut, and Rhode Island state laws mandating the use of ASAM criteria for substance use disorder medical necessity determinations. UBH Guidelines were more restrictive than ASAM criteria and did not provide coverage for all ASAM levels of care. Furthermore, the court held that UBH violated a Texas law requiring insurance companies to apply criteria issued by the Texas Department of Insurance because UBH used its own Guidelines instead.

The Guidelines were “Infused with Financial Considerations”

Before moving to the legal analysis, the court made several findings of fact related to the process by which UBH developed its Guidelines. The court did so because, under ERISA, plan administrator decisions are reviewed under an abuse of discretion standard; however, this standard can vary depending on whether the decision was affected by a conflict of interest. To determine the degree of deference to be used, the court analyzed the process by which UBH developed its Guidelines and whether the process was impacted by any conflicts of interest. The court concluded that UBH’s Guideline development process was infused with financial considerations in the following ways:

  • UBH placed financial representatives in key roles during the Guideline development process;
  • The UBH committee with authority to approve the Guidelines (Guidelines Committee) include representatives from the Finance and Affordability Departments;
  • Representatives from the Guidelines Committee received detailed financial information about “utilization,” including whether utilization targets were being met;
  • The Guidelines Committee received financial briefings regarding the impact of proposed Guideline changes; and
  • UBH viewed its Guidelines as a tool for meeting utilization management targets and keeping benefit expenses down.

Separate from the Guideline development process, the court also recognized UBH had an inherent structural conflict of interest because a portion of its revenues came from fully insured plans where it was financially incentivized to deny coverage. Even as to the self-funded plans, UBH sought to keep benefit expenses down so it could offer competitive rates to employers.

The court found that these financial considerations resulted in actual impact to the Guideline development process with the court citing coverage for transcranial magnetic stimulation and applied behavioral analysis as examples. The most glaring example of the conflict of interest, however, related to the adoption of ASAM Criteria for coverage determinations. Overriding the recommendation of its clinical staff, UBH declined to adopt ASAM Criteria solely because UBH’s Finance Department did not approve the change.

The court therefore reviewed UBH’s decisions with less deference and with significant skepticism due to the conflicts of interest it found.

UBH Breached its Fiduciary Duties and Wrongfully Denied Benefits Claims

After making the above findings of fact, the court concluded that UBH was liable under both the breach of fiduciary duty and denial of benefits claims. First, UBH breached its fiduciary duty by violating its duty of loyalty, its duty of due care, and its duty to comply with plan terms by adopting Guidelines that were “unreasonable” and that did not reflect generally accepted standards of care. Furthermore, UBH was liable under the denial of benefits claim because it denied plaintiffs’ requests for coverage based on faulty Guidelines.

The court did not address remedies in its decision; however, it previously granted summary judgment in UBH’s favor on plaintiffs’ request for a surcharge as restitution based on a disgorgement theory.4 Therefore, plaintiffs’ remaining remedies include requests for an injunction ordering UBH to stop utilizing the Guidelines; an order requiring UBH to develop new Guidelines consistent with generally accepted standards of care and state law; and an order requiring UBH to reprocess claims that were denied under the Guidelines. The remedy phase of the trial has not yet been scheduled as of the date of this article.

The court’s decision represents a significant development in the legal analysis of how payers develop criteria and guidelines for making coverage determinations for behavioral health care treatment. Both payers and providers should note the sources cited by the court along with its articulated principles applicable to making level of care determinations. Payers should also note the court’s analysis regarding the process used to develop coverage criteria and level of care guidelines because the degree to which that process is influenced by financial considerations will impact the deference under which the plan administrator’s decisions are reviewed.

AHLA thanks Christianna L. Finnern (Winthrop & Weinstine PA, Minneapolis, MN, for editing this Bulletin.

1 Wit v. United Behavioral Health, No. 14-CV-02346-JCS (N.D. Cal. Mar. 5, 2019).
2 The breach of fiduciary claims arise under 29 U.S.C. § 1132(a)(1)(B) and 29 U.S.C. § 1132(a)(3)(A). The denial of benefits claims arise under 29 U.S.C. § 1132(a)(1)(B) and 29 U.S.C. § 1132(a)(3)(B).
3 The resources that reflected generally accepted standards of care included the following: (1) the American Society of Addiction Medicine Criteria (ASAM Criteria); (2) the American Association of Community Psychiatrist’s (AACP) Level of Care Utilization System (LOCUS); (3) the Child and Adolescent Level of Care Utilization System (CALOCUS) developed by AACP and the American Academy of Child and Adolescent Psychiatry (AACAP), and the Child and Adolescent Service Intensity Instrument (CASII), which was developed by AACAP in 2001 as a refinement of CALOCUS; and (4) the Medicare benefit policy manual issued by the Centers for Medicare and Medicaid Services (CMS Manual).
4 Wit v. United Behavioral Health, No. 14-CV-02346-JCS (N.D. Cal. Aug. 14, 2017) (Order Granting in Part and Denying in Part United Behavioral Health’s Motion for Summary Judgment).

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