Tenth Circuit Holds United Behavioral Health Abused Its Discretion in Denying Payment for Residential Treatment Services for Minor with Mental Health and Substance Use Disorders

In David P. v. United Healthcare Ins. Co., No. 21-4129, 2023 WL 5209748 (10th Cir. Aug. 15, 2023), a dispute over the payment of ERISA-governed health care benefits for residential treatment services provided to a minor, “L.P.”, who suffered from significant mental health and substance use disorders, the Tenth Circuit Court of Appeals, affirmed the district court’s decision that Defendant United Healthcare Insurance Company, through its affiliate, United Behavioral Health (“UBH”), abused its discretion in denying benefits for most of L.P.’s stay at Summit Achievement and Uinta Academy. The Tenth Circuit parted ways with the district court with respect to the appropriate remedy. The district court granted benefits and attorneys’ fees to the plaintiffs, but the Tenth Circuit held that the appropriate remedy was to remand the claims back to UBH for further and proper consideration. The court also vacated the award of attorneys’ fees, which it explained should be reconsidered after UBH properly decided the claims.

L.P.’s mental health and substance abuse problems began in high school and led to numerous episodes of cutting and other self-harming behavior, driving while drunk, and oppositional behavior at home and in the community. L.P.’s parents admitted her to two residential treatment programs in succession, including Summit Achievement from November 28, 2016 through February 13, 2017 and Uinta Academy from February 13, 2017 through at least November 30, 2017. UBH only paid for one week of L.P.’s treatment at Uinta, where she was admitted following the recommendations made by providers at Summit who believed that L.P. needed a longer-term residential treatment program. L.P.’s father, David P., exhausted the claims and appeals process with UBH, which included two levels of appeal, as well as an external review of UBH’s denial. UBH upheld its decision on the appeals and the external reviewer, AllMed Healthcare Management, affirmed UBH’s decision. The district court granted summary judgment to the plaintiffs after finding that UBH abused its discretion by violating ERISA’s claim-processing requirements.

The Tenth Circuit similarly found that UBH’s deficient claims processing justified reversal of its decision. UBH’s denials were inconsistent. UBH denied coverage for L.P.’s stay at Summit but covered the first week at Uinta. UBH’s denial also contradicted its own guidelines for when coverage was warranted, including that UBH recognized that residential treatment can be warranted when the patient is not in imminent or current risk of harm to herself or others, yet it denied the claim at Summit because L.P. did not want to hurt herself or others. The court also found troubling that UBH failed to address whether L.P.’s treatment for substance abuse provided independent grounds for coverage, which was an argument made by David P. in his appeals. Though UBH asserted several reasons in litigation for why substance abuse treatment was not warranted, the court did not consider the newly asserted reasons because UBH did not disclose these reasons in its correspondence with the plaintiffs. Further, UBH did not properly engage with the opinions of L.P.’s providers who opined that she required residential treatment. UBH claimed there was no clinical information indicating that L.P. needed residential treatment, but it did not address the opinions of several of L.P.’s care givers. UBH also failed to address the “medical necessity” requirement in the plan and did not explain its judgment in denying the claims because of lack of medical necessity. Though UBH cited to its internal notes for the reasoning of its claim denial, the court explained that it cannot consider reasons never conveyed to the claimant. Lastly, the court found that the external review did not preclude reversing UBH’s benefit denials because UBH abused its discretion by inadequately processing the claims.

Finding that UBH abused its discretion in the handling of the plaintiffs’ claims, the court explained that the proper remedy is a remand to UBH to consider all of the evidence. “Our remand, however, does not provide the plan administrator the opportunity to reevaluate a claim based on a rationale not raised in the administrative record, and not previously conveyed to Plaintiffs.” (cleaned up). Because the remand to UBH is not an award of benefits, the court vacated the attorneys’ fee award, which can be reconsidered after UBH properly reconsiders the claims.