First Circuit Revives ERISA Claims Against Health Benefit Plan for Alleged Violation of Mental Health Parity Act

Yesterday, the First Circuit Court of Appeals decided N.R. v. Raytheon Company, et al., No. 20-1639, __F.4th__, 2022 WL 278537 (1st Cir. Jan. 31, 2022). Plaintiffs S.R. and T.R., on behalf of their minor child, N.R., who has Autism Spectrum Disorder (“ASD”), brought four ERISA claims against the Defendants, Raytheon Company, its health benefits plan administered by United Healthcare (“the Plan”), and Raytheon’s plan administrator, William Bull related to the Plan’s denial of N.R.’s speech therapy. The Plan denied the claim on the basis that habilitative services, such as non-restorative ABA speech therapy, are excluded under the Plan. The district court dismissed N.R.’s case in its entirety for failure to state a claim. The First Circuit noted that one question predominates the analysis: Does the Plan violate the Mental Health Parity and Addiction Equity Act (the “Parity Act”) by excluding treatment for N.R.’s ASD where the Parity Act forbids “applying ‘separate treatment limitations’ only to mental health or substance use disorder benefits.” 29 U.S.C. § 1185a(a)(3)(A)(ii).

First, the court determined that N.R. successfully plead a Parity Act claim where he alleges that “the Plan defines habilitative services as mental health services and accordingly only applies the habilitative services exclusion to the treatment of mental health ailments.” The court found that this was a plausible reading of the text of the Plan and could make for a successful Parity Act claim. Though Defendants represented that the Plan does not function as N.R. alleges, this does not change the court’s analysis of a motion to dismiss. The district court erred by agreeing with Defendants’ representation of how the Plan works but that was premature at this stage of the process. N.R. alleged that Defendants denied his coverage based solely on his ASD diagnosis but if his diagnosis was based on a purely physical illness, the Plan would have covered the treatment. The court found that this was enough to get discovery to find out whether he is correct. The court further explained that the Parity Act arguments inform all of N.R.’s claims but the district court held that Count 3, a claim for equitable relief per 29 U.S.C. § 1132(a)(3), was the only proper cause of action for which N.R. could bring his case and dismissed the claim. The First Circuit reversed the district court’s dismissal of Count 3.

The court affirmed dismissal of N.R.’s fiduciary breach claim brought under 29 U.S.C. § 1132(a)(2) because N.R.’s claim does not allege plan asset mismanagement and does not seek a remedy that will inure to the Plan as a whole. The only alleged losses are benefits which were not paid out to N.R. and putative class members but these are not losses to the Plan itself.

The court reversed the dismissal of N.R.’s benefit claim under 29 U.S.C. § 1132(a)(1)(B). This claim “breaks down into two steps: (1) the Parity Act’s requirements are incorporated as ‘the terms of the plan’ and (2) the Plan’s Habilitative Services Exclusion violates the Parity Act, so it is inconsistent with a ‘term of the plan.’” The district court erred when it dismissed this claim on the basis that the Parity Act’s requirement is not a term of the Plan. The court explained that a plan’s terms cannot override ERISA’s requirements. N.R. plausibly pled a Parity Act violation and properly pled that the exclusion is trumped by ERISA. Without the exclusion in force, N.R. has a reasonable argument that he is owed benefits due to him under the terms of the Plan.

Lastly, the court reversed the dismissal of N.R.’s claim under 29 U.S.C. § 1132(a)(1)(A) against the plan administrator related to the administrator’s failure to respond to Plaintiffs’ request for the list of “non-mental health conditions to which the Plan applies the ‘nonrestorative’ speech therapy exclusion,” “the medical necessity criteria” for applying the non-restorative speech therapy exclusion to medical or mental health benefits, and the “processes, strategies, evidentiary standards, and other factors” used to apply the exclusion. The court rejected Defendants’ argument that Plaintiffs do not have a right to the documents they claim to seek. The court distinguished this case from Doe v. Travelers Ins. Co., 167 F.3d 53 (1st Cir. 1999), where the court held that failure to disclose mental health guidelines was not a violation of ERISA’s disclosure requirements because they did not qualify as of the plan’s “instruments.” Here, N.R. requested mandatory plan terms that governed the decision of N.R.’s claim.