The Ninth Circuit Court of Appeals recently reversed the Northern District of California’s landmark decision against UnitedHealth Group Inc.’s behavioral health unit, United Behavioral Health (“UBH”), under which UBH had been ordered to reprocess tens of thousands of behavioral health claims. Under the Ninth Circuit decision, the insurance giant avoids significant liability in the class action case.

The case arrived at the Ninth Circuit on appeal from a consolidated class action, David Wit, et al. v. United Behavioral Health and Gary Alexander, et al. v. United Behavioral Health, filed against UBH. In these suits, patients and providers of substance abuse-related healthcare services alleged that UBH breached its duties and standards of care by developing guidelines restricting coverage and prioritizing UBH’s cost savings over members’ interests. The district court held that the preponderance of the evidence showed that the only reason UBH declined to adopt coverage criteria following generally accepted standards of care, despite a clear consensus among UBH’s addiction specialists that those generally accepted standards of care criteria were preferable to UBH’s Guidelines, was financially motivated—UBH’s Finance Department would not sign off on the change. The judge held that UBH violated the Employee Retirement Income Security Act (“ERISA”) by creating and adopting coverage criteria for residential treatment of mental illness or substance use disorders that were more both more restrictive than generally accepted standards of care and inconsistent with the terms of the class members’ insurance plans.

In November 2020, the district court ordered UBH to adopt and use guidelines consistent with generally accepted standards of care and to reprocess 67,000 behavioral health claims using the revised guidelines and mandated that UBH adopt protocols to train its employees and executives on the new guidelines and UBH’s duties under ERISA. The judge appointed a special master to oversee and verify UBH’s compliance with the ordered declaratory and injunctive relief.

On appeal, the Ninth Circuit held that the plaintiffs did have standing, but it reversed the lower court decision, concluding that UBH did not act inconsistently with its duties under ERISA. The majority held that while the district court identified the appropriate “abuse of discretion” standard to review UBH’s decisions, it then “misapplied this standard by substituting its interpretation of the Plans for UBH’s.” The court held that UBH’s interpretation—that the plans do not require consistency with generally accepted standards of care—“was not unreasonable.” In her partial concurrence, Judge Forrest also went a step further, stating that the “district court abused its discretion in accepting that reprocessing is a remedy that justifies class treatment.”

The Ninth Circuit decision means that UBH no longer has to reprocess the tens of thousands of claims; however, before the ruling, the special master had already confirmed that UBH completed clinical guideline training and ERISA fiduciary duty training in compliance with the declaratory and injunctive relief previously ordered by the district court. UBH was still adjusting its criteria and guidelines at the time of the Ninth Circuit’s decision. It is not clear whether UBS will now “walk back” its revised criteria to make it harder for members to get behavioral health treatment covered.

This decision signifies great latitude for plan administrators and seems to mark a deviation from an otherwise broad national movement toward enforcement of mental health parity laws, as evidenced by the $15.6 million settlements paid by UnitedHealth in New York in August 2021 to resolve similar allegations by the New York Attorney General, US Department of Labor, and patients, who were supported by the Biden administration, Congress, and other state governments.