Health Care Service Inks $5.25M Deal in Mental Health Spat

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

Health Care Service Corp. agreed to pay $5.25 million to resolve a lawsuit challenging how it covers residential treatments for patients with mental illnesses ( Craft v. Health Care Serv. Corp. , N.D. Ill., No. 1:14-cv-05853, motion for preliminary settlement approval filed 8/18/17 ).

The proposed settlement, announced in court papers filed Aug. 18, creates a $5.25 million common fund for 313 patients whose residential mental health treatments weren’t covered by Health Care Service Corp. The lawsuit challenged the insurer’s alleged use of a blanket exclusion for residential treatment coverage in certain health plans, and its adoption and application of Milliman Care Guidelines criteria to deny coverage in other plans. These actions violated federal mental health parity law and the Employee Retirement Income Security Act, the lawsuit claimed.

Earlier this month, a proposed class action raising similar arguments against United Behavioral Health was allowed to proceed over the insurer’s motion to dismiss. Blue Shield of California, Kaiser Foundation Health Plan Inc., and Community Insurance Co.—which operates in Ohio as Anthem Blue Cross—are defending similar allegations.

In this case, the settlement terms don’t require Health Care Service Corp. to change its business practices going forward. According to the settlement paperwork, the insurer already stopped enforcing exclusions for residential treatment coverage in accordance with regulations issued under the federal mental health parity act.

The settlement proceeds will be distributed to patients based primarily on the length of their stays in residential treatment centers, court papers say. The deal allows the patients’ lawyers to seek up to 30 percent of the settlement fund—nearly $1.6 million—as attorneys’ fees.

The agreement must receive court approval before becoming final. The case is pending before Judge Virginia M. Kendall of the U.S. District Court for the Northern District of Illinois.

Zuckerman Spaeder LLP, Miner Barnhill & Galland P.C., and Psych-Appeal Inc. represent the patients. Kirkland & Ellis LLP represents the insurer.

To contact the reporter on this story: Jacklyn Wille in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Pension & Benefits Daily