In Ryan S. v. UnitedHealth Grp., Inc., No. 22-55761, __F.4th__, 2024 WL 1561668 (9th Cir. Apr. 11, 2024), Plaintiff-Appellant Ryan S. brought a putative class action against Defendant-Appellee UnitedHealth Group, Inc. and its subsidiaries alleging that the Defendants violated the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (“Parity Act”), 29 U.S.C. § 1185a, and their ERISA fiduciary duties by applying a more stringent review process for outpatient, out-of-network mental health and substance use disorder (MH/SUD) treatment than to comparable medical/surgical treatment. The district court dismissed Plaintiff’s claims for failure to state a claim. The Ninth Circuit held that, as a matter of first impression, Plaintiff sufficiently alleged that Defendants applied an internal process that violates the Parity Act. As such, Plaintiff also sufficiently alleged a breach of fiduciary duty under ERISA. However, Plaintiff did not state a claim for violation of ERISA plan terms. The court reversed the district court’s dismissal of two of Plaintiff’s claims and remanded the matter for further proceedings.
Plaintiff filed this putative class action after his ERISA group health plan denied most of the costs of his outpatient, out-of-network substance use disorder programs. In the operative Third Amended Complaint, Plaintiff alleges that Defendants “violated three of ERISA’s requirements: (1) the Parity Act, codified at 29 U.S.C. § 1185a; (2) the fiduciary duty of loyalty, described in 29 U.S.C. § 1104; and (3) the requirement under § 1104 to follow the contractual terms of a beneficiary’s plan.” Specifically, Plaintiff alleges that Defendants maintain a system that subjects MH/SUD treatment claims to a more stringent review process than other medical/surgical claims and that this violates their ERISA fiduciary duties.
With respect to the Parity Act, the court noted that there is no clear law on how to state a claim for a Parity Act violation, which can occur in a few forms. “Plaintiffs can allege that an ERISA plan contains an exclusion that is discriminatory on its face, that the plan contains a facially neutral term that is discriminatorily applied to MH/SUD treatment, or that the plan administrator applies an improper internal process that results in the exclusion of some MH/SUD treatment.” Here, Plaintiff alleged an internal process violation. He did not need to allege a “categorical” practice or the uniform denial of his benefits. This is because handling MH/SUD treatment claims more stringently violates the Parity Act regardless of whether it leads to the uniform denial of all claims. A plaintiff need not specify the different process that allegedly applies to the analogous category of medical/surgical benefits in order to meet the plausibility pleading standard. Plaintiff needs only to plausibly allege the existence of a procedure used in assessing MH/SUD claims that is more restrictive than those used in assessing other claims. Here, Plaintiff cites to a 2018 report by the California Department of Managed Healthcare that concluded that UHC processed MH/SUD clams differently by applying a process called “Algorithms for Effective Reporting and Treatment (ALERT)” that could trigger a more intensive review process for MH/SUD claims. The court explained that “[a] pleading standard under which such a comprehensive investigation is insufficient would make it inordinately difficult for a plaintiff to challenge an internal process, given the likelihood that an individual claimant’s own administrative record would not shed light on the internal processes to which the claims were subjected. The plausibility pleading standard is not that unreachable.”
Because Plaintiff sufficiently alleged a Parity Act violation, the court found that this was enough to support his ERISA breach of fiduciary duty claim since the language in the statute suggests that violation of the Parity Act is a breach of fiduciary duty. However, the court found that Plaintiff did not sufficiently allege a violation of a specific plan term.
*Please note that this blog is a summary of a reported legal decision and does not constitute legal advice. This blog has not been updated to note any subsequent change in status, including whether a decision is reconsidered or vacated. The case above was handled by other law firms, but if you have questions about how the developing law impacts your ERISA benefit claim, the attorneys at Roberts Disability Law, P.C. may be able to advise you so please contact us.
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