Background of the Case

United Behavioral Health (“UBH”), a subsidiary of UnitedHealth, administers mental health and substance use disorder benefits for welfare benefit plans. As claims administrator, UBH is delegated discretion to interpret the terms of employer-sponsored welfare benefit plans for purposes of coverage, limitations and exclusions in determining whether a particular service for behavioral or substance use disorders is covered. To perform its duties as claims administrator, UBH developed “Level of Care Guidelines” and “Coverage Determination Guidelines” (“Guidelines”) to use in making standardized decisions about coverage.

The plaintiffs in the case were all participants or beneficiaries covered by benefit plans that were insured and/or administered by UBH, who had been denied coverage for residential and/or intensive outpatient treatment for mental health and substance use disorders. The plaintiffs brought two claims against UBH:

• Breach of Fiduciary Duty. Plaintiffs claimed that UBH was a fiduciary under ERISA and breached its fiduciary duty of loyalty by (1) developing guidelines for making coverage determinations that were far more restrictive than the “generally accepted standards of care” required by the plan documents, and (2) prioritizing UBH’s own cost savings over the interests of plan participants and beneficiaries.
• Denial of Benefits. Plaintiffs claimed that UBH’s use of the Guidelines to make coverage determinations and deny benefits was arbitrary and capricious because the Guidelines (1) did not align with the coverage required under the plan documents, and (2) with respect to one of the classes of plaintiffs, violated mental health and substance use coverage requirements mandated by state law.

Court’s Analysis and Conclusions

The bulk of the court’s analysis centered on the content of the Guidelines and the process UBH followed in developing the Guidelines. The court evaluated whether the Guidelines were consistent with the terms of the health plans covering the plaintiffs, which required that coverage decisions for treatment must be consistent with “generally accepted standards of care” for treatment of mental health and substance use disorders. Drawing from several sources to define the “generally accepted standards of care,” the court found by a preponderance of evidence that the Guidelines did not align with these standards, based in large part on the fact that the Guidelines focused on addressing acute symptoms and stabilizing crises, without attending to the effective treatment of participants’ and beneficiaries’ underlying mental health conditions and substance use disorders. Therefore, the court found that the Guidelines resulted in a narrower scope of coverage than was required under the health plans.

The court next looked at the process used to establish the Guidelines and found that while various clinicians and health care professionals generally helped draft and maintain the Guidelines, representatives from UBH’s Finance and Affordability committees had the ultimate authority to approve the Guidelines. The court found that these individuals had a strong financial incentive to keep costs of UBH down and the court found a strong inference that “UBH’s financial interests interfered with the Guideline development process.”

Breach of Fiduciary Duty Claim

As to the breach of fiduciary duty claim, the court found that (1) UBH was a fiduciary under ERISA by virtue of its authority to interpret and apply plan terms for coverage, (2) UBH breached its fiduciary duties of loyalty, due care and compliance with plan terms by adopting Guidelines that were unreasonable and did not reflect generally accepted standards of care. The court further found that UBH’s breach of its fiduciary duties caused harm to plaintiffs by denying them the right to fair adjudication of their claims for coverage under the health plans.

Denial of Benefits Claim

As to the denial of benefits claim, the court found that UBH abused its discretion in denying mental health and substance use disorder claims based on the Guidelines. With respect to the state law mandates, the court found that UBH’s application of the Guidelines violated state laws in Illinois, Connecticut, Rhode Island, and Texas.

Next Phase of the Case

The case will now move to the remedy phase, in which the judge will determine what relief is appropriate for the plaintiffs and what steps UBH will be required to take with respect to its administration of mental health and substance use disorder benefits. The decision (N.D. Cal., No. 3:14-cv-02346-JCS, 3/5/19) consolidates two different lawsuits – Wit v. UnitedHealthcareand Alexander v. United Behavioral Health.