Legal & Legislative Reporter: Mental Health Parity Act Violation

Every month, the International Foundation releases the Legal and Legislative Reporter, a compilation of new employee benefits-related case summaries. Below is a summary we thought you’d be interested in. Content provided by Morgan, Lewis & Bockius LLP.

No Mental Health Parity Act Violation Where Facilities Do Not Meet Coverage Requirements

The U.S. District Court for the District of Utah grants the defendant insurance company’s motion to dismiss regarding plaintiffs’ claims for violations of the Mental Health Parity and Addiction Equity Act (Parity Act) and improperly denying benefits.

The plaintiffs include a father and his dependent son who are covered under the father’s employer’s group health plan (plan). The defendant is the insurance company that insures the medical benefits under the plan and acts as the claims administrator and fiduciary. The plan is governed by the Employee Retirement Income Security Act of 1974 (ERISA) and the medical benefits are fully insured.

Among other benefits, the plan provides mental health coverage. The plan also provides for coverage of mental health care at residential treatment centers, which is defined as having 24-hour on-site nursing services. The dependent son was admitted to two different facilities from approximately January 4, 2018 through March 29, 2018. The plaintiffs filed a claim for benefits related to such treatment, which the defendant denied due to being excluded under the plan because the treatment was provided by a wilderness treatment center and not at a residential treatment center. After appealing and exhausting administrative remedies, the plaintiffs filed suit, alleging Parity Act violations and improper denial of benefits.

First, the court reviews the plaintiffs’ claims for improper denial of benefits. The plan specifically provides for coverage for medically necessary treatment of chemical dependency, serious mental illness and mental health and makes clear that any services or supplies not specifically defined as eligible expenses in the plan are excluded. Medically necessary services for mental health care or serious mental illness include those provided in a psychiatric day treatment facility, a crisis stabilization unit or facility, residential treatment center for children and adolescents or a residential treatment center in lieu of hospitalization.

A residential treatment center is defined as a facility setting offering a defined course of therapeutic intervention and special programming in a controlled environment which also offers a degree of security, supervision, structure and is licensed by the appropriate state and local authority to provide such service. The plan clarifies that a residential treatment center does include half-way houses, wilderness programs, supervised living, group homes, boarding houses or other facilities that provide primarily a supportive environment and address long-term social needs, even if counseling is provided in such facilities. In addition, patients at such a facility must be medically monitored with 24-hour medical availability and 24-hour onsite nursing service.

Based on the definitions provided in the plan, the court finds that the plaintiffs have failed to show that either of the facilities that provided treatment to the plaintiff son was a residential treatment center. Neither facility has a 24-hour onsite nursing service, as required by the plan. Further, neither facility qualifies as one of the other types of facilities that are permitted to offer inpatient mental health treatment. Therefore, because the plaintiffs have failed to show that the son receive inpatient mental health treatment at a facility authorized by the plan to provide such care, they have failed to plead a claim for payment of benefits under the terms of the plan.

Next, the court reviews the plaintiffs’ claim for Parity Act violations. The Parity Act requires that treatment limitations applicable to mental health or substance use disorder benefits be no more restrictive than the predominant treatment limitations applied to substantially all medical and surgical benefits covered by the plan. The plan also cannot have separate treatment limitations that are applicable only with respect to mental health or substance use disorder benefits. The Parity Act’s definition of a treatment limitation includes limits on the frequency of treatment, number of visits, days of coverage, or other similar limits on the scope or duration of treatment. Limitations also include nonquantitative treatment limitations such as medical management standards limiting or excluding benefits based on medical necessity or medical appropriateness; or based on whether the treatment is experimental or investigative; and restrictions based on geographic location, facility type, provider specialty, and other criteria that limit the scope or duration of benefits for services provided under the plan or coverage.

In order to state a Parity Act claim, plaintiffs must (1) identify a specific treatment limitation on mental health benefits, (2) identify medical/surgical care covered by the plan that is analogous to the mental health/substance abuse care for which the plaintiffs seek benefits and (3) plausibly allege a disparity between the treatment limitation on mental health/substance abuse benefits as compared to the limitations that defendants would apply to the covered medical/surgical analog.

The plaintiffs argue that the plan imposes more onerous requirements on residential treatment centers for mental health issues than it imposed on similar skilled nursing facilities. However, the court disagrees and finds that this argument is not supported by the terms of the plan. The plan requires that both skilled nursing facilities and residential treatment centers be appropriately licensed and requires that both facilities provide 24-hour nursing service. The plan did not deny coverage for the treatment provided at the two facilities merely because they were designated as wilderness programs. Instead, the plan looked at the fact that neither facility was licensed appropriately or provided the required 24-hour nursing care. Consequently, the court finds that the plaintiffs fail to state a Parity Act claim.

Accordingly, the court grants the defendant’s motion to dismiss.

J.W, et al. v. BlueCross BlueShield of Texas, No. 1:21-cv-00021 (D. Utah, July 22, 2022)

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