Fifth Circuit Orders United Healthcare to Pay for Minor’s Partial-Hospitalization Treatment for Anorexia Nervosa

In Dwyer v. United Healthcare Ins. Co., No. 23-50439, __F.4th__, 2024 WL 4230125 (5th Cir. Sept. 19, 2024), the Fifth Circuit reversed the district court’s judgment in favor of United Healthcare in this nine-year dispute over the payment of partial-hospitalization benefits for a minor who suffered from anorexia nervosa. In so doing, the court described United Healthcare’s arguments against coverage as “a doozy,” “bizarre,” and “irrelevant.” The court concluded that United’s decision was substantively and procedurally deficient under ERISA, and that United must provide coverage under a favorable MultiPlan benefit rate due to its failure to respond to an administrative appeal challenging the rate of coverage.

Plaintiff-Appellant Kelly Dwyer is the father of E.D. E.D. exhibited symptoms of anorexia nervosa as a pre-teen such that in February 2015, at the age of 14, she was 5’2” and 75.8 pounds. She was admitted to Avalon Hills for treatment. Though she made some improvements after a few months, she continued to exhibit problematic eating disorder behaviors that required ongoing care at the partial hospitalization level. Despite her doctors adamantly taking the position that E.D. was not ready to step down to an intensive outpatient program, United nonetheless took the position that she “was better” and refused to pay for more partial hospitalization benefits. Dwyer elected to pay for the treatment out of his own pocket. In addition to denying these benefits, Dwyer and United disagreed over whether Avalon Hills was covered by United’s “MultiPlan benefit.” United only processed some of Avalon Hills’ claims under the MultiPlan rate but paid most of the claims under a less favorable out-of-network provider rate. Dwyer repeatedly asked United to explain the discrepancy in coverage and submitted an appeal challenging the coverage decisions. United never responded.

Dwyer filed suit against United under ERISA alleging that United wrongfully terminated E.D.’s partial-hospitalization benefits and failed to process all her claims under the MultiPlan rate. The district court conducted a bench trial on the claims record and issued a decision nearly four years later in favor of United. Dwyer appealed and the Fifth Circuit sided with Dwyer.

The court first explained United’s obligations under ERISA and its fiduciary duty to act in the interest of participants and beneficiaries. The court must evaluate whether Dwyer was substantively entitled to the claimed benefits under the terms of the plan and whether United employed a full and fair review of his claim as required by law. The court found that United’s denial was both substantively and procedurally deficient and rejected United’s post-denial rationale for justifying its claim decision.

On the substance, the parties disputed whether E.D.’s care met all the requirements for medical necessity, specifically, whether continued partial hospitalization at Avalon Hills was clinically appropriate and whether it was more costly than therapeutically equivalent treatment of partial hospitalization. The court dissected each sentence in United’s denial letter and essentially tore them apart. Contrary to United’s assertions, E.D.’s doctors did not state that E.D. no longer needed the type of care provided by Avalon Hills, she did not achieve 100% of her ideal body weight, she only ate her meals in a strictly controlled environment, there was a risk of relapse for her in a lower level of care, and that she was still very ill.

On the procedure, the court found that United did not provide Dwyer with a full and fair review because it failed to engage in any meaningful dialogue with Dwyer for the reasons for denial. It did not explain the basis for the decision or apply the plan terms to E.D.’s medical circumstances. The court joined “a growing number of decisions rejecting similar denial letters issued by United across the country.” The court rejected United’s post-hoc rationalizations, including that (1) E.D. lost two pounds in three days by menstruating; (2) some of E.D.’s providers thought she could be stepped down to a lower level of treatment in the future; and (3) reversing the denial would mean adoption of a “treating physician” rule which is not permitted in the ERISA context. On this last point, the court explained that United could not just defer to its own doctors without addressing medical opinions that contradict the plan’s reviewing doctors.

Finally, the court found that Dwyer was entitled to the MultiPlan benefits because United never answered his appeal. An administrator must set forth its reasons for denial during the claims process or it forfeits the ability to do so in litigation. “It is a rule that has been reiterated time and again.” The court rejected United’s arguments that Dwyer’s administrative appeal constituted inadmissible hearsay, that Texas law applies, and that the court should now consider United’s interpretation of the plan. In any event, the court found that Dwyer was entitled to the MutliPlan rate based on the terms of the plan. The court held that Dwyer is entitled to judgment and remanded the matter for purses of calculating “compensatory damages, statutory penalties under 29 U.S.C. §§ 1024(b)(4) and 1132(c)(1), attorneys’ fees, and other relief.”