Tenth Circuit Finds United Behavioral Health Arbitrarily and Capriciously Denied Residential Treatment Benefits to Minor with Severe Mental Health Disorders

In D. K. v. United Behav. Health, No. 21-4088, __F.4th__, 2023 WL 3443353 (10th Cir. May 15, 2023), the Tenth Circuit clarified the procedural requirements for medical insurance claims governed by ERISA. Defendant United Behavioral Health denied extended residential treatment coverage for a middle schooler (“A.K”) who had, in a span of 20 months, “spent over 55 total days in inpatient care, over 55 total days in partial hospitalization day programs, and over 235 total days in residential treatment centers.” During this time, “United repeatedly scaled down A.K.’s treatment” and each time, A.K. harmed herself requiring emergency room and inpatient care. Due to her history of self-harming, suicide attempts, and destabilization following her discharges into lower levels of care, her treating providers recommended residential treatment for at least one year so that she could develop the skills to succeed outside of a 24-hour care setting. Notwithstanding the medical support demonstrating A.K.’s need for a longer period of residential treatment, United denied coverage after three months and continued to deny coverage for shifting reasons after the Plaintiffs (A.K.’s parents) submitted multiple appeals. The district court found that United arbitrarily and capriciously denied A.K. medical benefits and rather than remand the claim to United for further review, the district court ordered United to pay the benefits. United appealed. The Tenth Circuit affirmed. The court concluded that “United did act arbitrarily and capriciously in not adequately engaging with the opinions of A.K.’s physicians and in not providing its reasoning for denials to A.K.’s parents. We also conclude the district court did not abuse its discretion by awarding A.K. benefits outright.”

The Court found that United violated multiple ERISA requirements. United claimed that the ERISA requirements differ for medical benefit claims and long-term disability claims, such that they are not required to review A.K.’s treating physician opinions. Based on ERISA caselaw and the regulations, the Court explained that United could not refuse to credit treating physician opinions. Plaintiffs provided United with multiple opinions recommending A.K. stay long-term at a residential treatment facility to have a chance at a full recovery. United was required to engage with these opinions and address them. Because United “shut its eyes” to readily available medical information, it acted arbitrarily and capriciously. The court rejected United’s argument that the ERISA regulations only require an administrator to explain the basis of disagreement with treating physicians with respect to long-term disability claims. See 29 CFR § 2560.503-1 (g)(1)(vii)(A)(i). The court explained that the guidelines clarified the existing requirements for ERISA disability claims, which the Department of Labor believed were already required under ERISA. The detailing of more precise requirements in ERISA disability claims does not absolve United of providing a full and fair review for health benefit claims. Further, ERISA provides minimum guidelines, such that even if the regulations could be read as setting different baseline requirements for medical and disability claims, ERISA holds administrators to their greater fiduciary duty. This includes not only complying with the specific duties imposed by the plan or the minimum standards imposed by the regulations, but engaging in activities that achieve the objective of the plan.

The court also determined that United was required to address A.K.’s physicians’ opinions in the decision letters and the district court was correct to focus its review on the denial letters rather than United’s internal notes. Citing the Ninth Circuit’s opinion in Booton v. Lockheed Medical Benefit Plan, 110 F.3d 1461, 1463 (9th Cir. 1997), United must engage in reasonable meaningful dialogue in their denials. “There is nothing extraordinary about this: it’s how civilized people communicate with each other regarding important matters.” United had A.K’s claim reviewed by five doctors, none of whom addressed the specific reasons given by A.K.’s doctors for the need of a longer stay. By not addressing treating physician opinions which confirmed the need for benefits, United acted arbitrarily and capriciously. The court also found that United acted arbitrarily and capriciously by failing to explain its denial by applying the plan terms to A.K.’s medical records. United’s denial letters only referenced A.K.’s condition minimally and did not include citation to the record or discuss A.K.’s extensive medical history. The reviewers concluded, absent a reasoned analysis, that A.K. could be treated at a lower level of care. The denial letters must include the specific reason for denial and specific reference to the pertinent plan provision.

Lastly, the court determined that the district court did not abuse its discretion by awarding A.K. benefits outright rather than remanding the claim to United for further review. A court may award benefits if the record shows that benefits clearly should have been awarded or if the plan administrator’s actions were clearly arbitrary and capricious. “Considering [United’s] clear and repeated procedural errors in denying this claim, it would be contrary to ERISA fiduciary principles to mandate a remand and provide an additional ‘bite at the apple.’”