A recent decision by the U.S. Court of Appeals for the Ninth Circuit (Wit et al. v. United Behavioral Health and Alexander et al. v. United Behavioral Health) exemplifies the challenge in balancing a desire to cover evolving treatments for mental health and substance abuse disorders against plan sponsors’ and insurers’ general authority over plan design and the administrator’s discretion to interpret the plan and decide claims.  The case involved United Behavioral Health’s (“UBH”) complete or partial denials of claims related to treatment for mental health and substance abuse.

A federal district court (see here and here) had ordered UBH to reprocess over 50,000 claims on the ground that UBH’s guidelines for making coverage determinations did not comport with generally accepted standards of care (“GASC”).  The district court concluded that UBH’s guidelines improperly applied cost-benefit analysis to reject coverage for more comprehensive treatments.  For example, the district court concluded that UBH’s guidelines overly emphasized treatment of acute symptoms over treatment of underlying conditions and inappropriately did not include level-of-care criteria specifically tailored to children.

Among other things, UBH argued on appeal that: (1) the ERISA beneficiaries lacked standing to pursue their claims; and (2) the trial court had failed to correctly apply the abuse of discretion standard in connection with its reprocessing order.

In an unpublished decision, a Ninth Circuit panel rejected UBH’s standing argument, but still reversed the order to reprocess claims, because—

• Under the applicable plans, compliance with GASC was required but not sufficient to justify coverage—e., services could be covered only if they were within the scope of both GASC and what the plan covered; and

• The plan administrator’s application of the plan’s standards could be reviewed only for abuse of discretion. This meant that, even if the court disagreed with UBH’s balancing of costs and benefits or its final decision, the court could not overturn the administrator’s decision unless it was unreasonable.

The Ninth Circuit also held that an alleged conflict of interest based on UBH serving as both plan administrator and insurer/payer was not sufficient to change the outcome on the facts of the particular case.

The Ninth Circuit’s decision illustrates how claims for coverage, especially for mental health services, are inherently fact-specific because they require analysis of the patient’s medical needs, medical necessity, and sufficiency of alternative treatments.  Rather than address the merits of any particular claim, the Ninth Circuit simply concluded that in light of the discretion conferred to UBH to interpret the plans, it was not appropriate to send over 50,000 claims back to UBH for review en masse.