Tenth Circuit Finds Plaintiffs Lack Standing to Bring Parity Act Claim and Affirms Award of ERISA Statutory Penalties Against Health Insurance Company

The Tenth Circuit Court of Appeals recently decided S. v. Premera Blue Cross, No. 22-4056, __F.4th__, 2024 WL 4356319 (10th Cir. Oct. 1, 2024), a case involving claims for mental health treatment benefits under ERISA, alleged violations of the Mental Health Parity and Addiction Equity Act of 2008 (the Parity Act), and statutory penalties for failing to disclose ERISA plan documents as required by 29 U.S.C. §1024(b). The district court had granted summary judgment to Defendants on the ERISA benefits claim, finding that Plaintiffs were not entitled to benefits under the terms of the plan. However, the district court had granted summary judgment to Plaintiffs on the Parity Act and ERISA disclosure claims. In a separate order addressing remedies, the district court concluded that Plaintiffs were not entitled to any remedy under the Parity Act. For failing to produce documents, the district court ordered Defendants to pay over $123,000 in statutory penalties. Due to Plaintiffs’ success on the merits, the district court also ordered Defendants to pay Plaintiffs $69,640 in attorneys’ fees and costs. Defendants appealed those rulings. The Tenth Circuit vacated the grant of summary judgment to Plaintiffs on their Parity Act claim, affirmed the grant of summary judgment in Plaintiffs’ favor on their ERISA disclosure claim, but for only one of two documents that Plaintiffs sought in this litigation, and affirmed the award of fees and costs.

After the appeal was briefed but before oral argument, the Tenth Circuit asked whether Plaintiffs had Article III standing to pursue their Parity Act claim. The court identified a threshold jurisdictional issue concerning the Parity Act claim given the district court’s remedies order, which Plaintiffs did not appeal, where the district court held that Plaintiffs’ alleged loss of benefits was not caused by the Parity Act violation. For Plaintiffs to have Article III standing to assert their claim that Defendants violated the Parity Act, they must show that they (1) suffered an injury in fact that was (2) traceable to Defendants and (3) redressable by a favorable decision.

The parties identified two potential injuries that could confer Article III standing for Plaintiffs to pursue their Parity Act claim: Plaintiffs were denied benefits under the Plan and deprived of notice of how Defendants review claims. The court found neither sufficient to satisfy the requirements of Article III. Though a denial of healthcare benefits is a “concrete and particularized injury” for purposes of establishing Article III standing, here the injury is not traceable to Defendants’ Parity Act violation since the district court found that the denied treatment was not covered under the Plan terms. And assuming—without deciding—Defendants did not provide proper notice of the claim review procedures, Plaintiffs cite no authority suggesting a lack of notice of claim review procedures in violation of ERISA is, without more, an injury in fact.

On the merits of Defendants’ appeal concerning the district court’s grant of summary judgment on Plaintiffs’ ERISA disclosure claim, the court affirmed the district court’s ruling, in part. Plaintiffs alleged a violation under § 1024(b)(4) because Defendants failed to disclose any administrative services agreements and mental health and substance use disorder treatment criteria for skilled nursing facilities. Defendants argued that they were not required to disclose these documents since they are outside the scope of § 1024(b)(4). The court found that Defendants had to disclose the Administrative Services Agreement between the Plan Administrator, Microsoft, and the Claims Administrator, Premera” (the ASA) but that they did not have to disclose the InterQual Criteria for medical/surgical benefits including skilled nursing and inpatient rehabilitation facilities (the Skilled Nursing InterQual Criteria).

At issue here is the phrase “contract … under which the plan is established or operated,” which § 1024(b)(4) does not define. The court found that the ASA is a contract and one under which the Plan is established or operated. “The ASA creates the system requiring Plan beneficiaries to submit benefits claims to Premera (rather than Microsoft directly), thus ‘establish[ing]’ the Plan for beneficiaries. Defendants admit as much, describing the ASA as ‘a contract … that sets forth, among other things, the amount Microsoft will pay Premera and their respective roles.’ And the Plan ‘operate[s]’ according to the terms of Premera’s administration, as delegated by Microsoft to Premera in the ASA. Because the ASA settles the relationship between Microsoft, Premera, and the Plan, the ASA falls within the plain meaning of § 1024(b)(4)’s disclosure requirements.”

The other issue is whether the Skilled Nursing InterQual Criteria are “other instruments under which the plan is established or operated.” 29 U.S.C. § 1024(b)(4). Applying canons of statutory interpretation, including ejusdem generis and noscitur a sociis, the court found that “other instruments” in § 1024(b)(4) means legal documents of the type recited in the preceding list which includes the latest updated summary, plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, and contract. The court found that the Skilled Nursing InterQual Criteria do not establish legal rights or duties but are a set of evaluation criteria Defendants may reference depending on the nature of the benefits claim. As such, Defendants were not required to disclose this document.

Lastly, on the issue for attorneys’ fees, the court found that Plaintiffs still achieved some degree of success on the merits due to its affirmation, in part, of the grant of summary judgment on the ERISA disclosure claim. For this reason, the court affirmed the district court’s award of attorneys’ fees and costs.