Tenth Circuit Affirms Denial of Residential Treatment Benefits but Reverses Dismissal of Parity Act Claim

In E.W. v. Health Net Life Ins. Co., No. 21-4110, __F.4th__, 2023 WL 8042746 (10th Cir. Nov. 21, 2023), Plaintiff-Appellant appealed the district court’s grant of summary judgment to Health Net on their ERISA benefit claim for residential treatment services provided by Uinta Academy, an adolescent residential treatment center in Utah. Plaintiff also challenged the district court’s dismissal of their second claim alleging that Health Net violated an amendment to ERISA, the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA” or the “Parity Act”), by imposing limitations on coverage for mental health treatment that it did not apply to analogous medical or surgical treatment. The Tenth Circuit affirmed the district court’s grant of summary judgment to Health Net on the ERISA benefit claim but reversed the dismissal of the MHPAEA claim.

Though not specified in the Plan, Health Net uses InterQual Criteria to determine whether remaining at a residential treatment center beyond fifteen days is medically necessary. To be medically necessary, a patient must display symptoms of either an “eating disorder” or “serious emotional disturbance.” On March 1, 2017, Health Net sent a letter to Plaintiffs stating that they would not cover their child’s care for services rendered at Uinta on or after February 23, 2017. Plaintiffs asserted they never received this letter and did not know of the denial until over a year later, at which time they appealed. Health Net denied their appeal based on the InterQual Criteria. Plaintiffs then sought an independent external review and asked the external reviewer to not utilize the InterQual Criteria. The Arizona Department of Insurance engaged MAXIMUS Federal Services to conduct the review. MAXIMUS utilized the InterQual Criteria and recommended upholding Health Net’s determination. Plaintiffs then filed suit alleging a claim for benefits under ERISA § 502(a)(1)(B) and a claim under ERISA § 502(a)(3) for violation of the Parity Act.

The court first addressed the MHPAEA claim and noted that the Tenth Circuit has not addressed in a precedential decision whether MHPAEA provides a separate cause of action. The court did note that the First Circuit has concluded that the right of action exists under ERISA, 29 U.S.C. § 1132(a)(3). Health Net did not challenge Plaintiffs’ ability to pursue a private claim for relief under § 1132(a)(3). For the purposes of this appeal, because the question of the viability of such a claim is uncontested, the court explained that it need not opine on the matter. They resolve the dispute assuming that such a claim is viable.

MHPAEA requires that “a group health plan (or health insurance coverage offered in connection with such a plan) that provides both medical and surgical benefits and mental health or substance use disorder benefits,” ensure that: (1) “treatment limitations applicable to … mental health or substance use disorder benefits are no more restrictive than the predominant treatment limitations applied to substantially all medical and surgical benefits covered by the plan (or coverage)”; and (2) “there are no separate treatment limitations that are applicable only with respect to mental health or substance use disorder benefits.” The court noted that no Circuit has defined the elements of a MHPAEA claim, though district courts within and outside this Circuit have adopted different tests. Under the test to which the parties agreed at oral argument, a plaintiff must:

(1) [p]lausibly allege that the relevant group health plan is subject to MHPAEA;

(2) identify a specific treatment limitation on mental health or substance-use disorder benefits covered by the plan;

(3) identify medical or surgical care covered by the plan that is analogous to the mental health or substance-use disorder care for which the plaintiffs seek benefits; and

(4) plausibly allege a disparity between the treatment limitation on mental health or substance-use disorder benefits as compared to the limitations that defendants would apply to the medical or surgical analog.

Plaintiffs argued they have stated claims for both facial and as-applied MHPAEA challenges, but because the court ultimately concludes that Plaintiffs stated an as-applied MHPAEA claim, it did not reach their facial challenge on this appeal.

Under the four-part test, with respect to the first element, there is no dispute that Plaintiffs have plausibly alleged that the Plan at issue here is subject to MHPAEA. With respect to the remaining three elements, the court concluded that Plaintiffs’ allegations satisfy its pleading standards. As to the second element, Plaintiffs have identified a specific treatment limitation on mental health benefits covered under the Plan where they allege that Defendants required them to satisfy “acute care medical necessity criteria” to receive benefits for treatment in a subacute care setting. “Plaintiffs plausibly alleged that the InterQual Criteria capture acute conditions while residential treatment centers, as defined in the Plan, provide subacute care.” As for the third element, Plaintiffs identified inpatient skilled nursing facilities covered by the Plan that is analogous to the mental health and substance abuse care for which they seek benefits. The court agreed with Plaintiffs that inpatient skilled nursing facilities qualify as a relevant analog. Lastly, the court found that Plaintiffs have plausibly alleged a disparity between the treatment limitations applied to benefits for mental health or substance abuse care compared to those applied to benefits for medical or surgical care. “Plaintiffs plausibly alleged that Health Net applied acute-care medical necessity criteria to benefits for care in a residential treatment center, which is a subacute care setting.” Further, Plaintiffs allege that Health Net does not require individuals receiving care at sub-acute inpatient facilities to satisfy acute medical necessity criteria.

The court rejected Health Net’s argument that Plaintiffs fail to state a claim because applying the InterQual Criteria was ostensibly consistent with MHPAEA regulations. Even if a court were to find that the InterQual Criteria qualify as generally accepted standards, no such finding follows from Plaintiffs’ allegations and Plaintiffs have stated a claim under MHPAEA.

With respect to the denied benefit claim under ERISA § 502(a)(1)(B), the court upheld the district court’s decision. When Plaintiffs appealed Health Net’s decision, they argued that their child’s treatment at Uinta was medically necessary given her history of disordered eating habits and that their child struggled with an eating disorder during their time at Uinta. But Plaintiffs never made the argument to the administrator that they raised in the district court, that is, that Health Net improperly denied benefits by failing to apply the InterQual Criteria related to an eating disorder. Because this argument was not before the administrator, the district court properly declined to consider it for the first time during Plaintiffs’ lawsuit. The court also rejected Plaintiffs’ arguments that Health Net’s decision was based on conclusory statements without any specific citation to the facts in the record. The court held that Health Net did not deny benefits arbitrarily and capriciously. The court reversed the district court’s judgment on Plaintiffs’ MHPAEA claim and remanded the matter to the district court for further proceedings.