Mental Health Parity Ruling Called ‘Watershed Case'


The decision by the U.S. Court of Appeals for the Second Circuit to vacate and remand dismissal of claims under the Mental Health Parity and Addiction Equity Act will have wide-ranging effects in litigation between psychiatric care providers and benefit plan administrators, practitioners said.

Attorneys representing both providers and insurers agreed in comments to Bloomberg BNA that the ruling by the Second Circuit in N.Y. State Psychiatric Ass'n v. UnitedHealth Grp., 2015 BL 268088, 2d Cir., No. 14-20-cv, 8/20/15 changed the landscape by allowing provider associations to bring claims against third-party plan administrators for alleged violations of the parity act through an action under Section 502 of the Employee Retirement Income Security Act.

“This is really a watershed case,” said Jason S. Cowart, a partner at Zuckerman Spaeder in New York, who represented the New York State Psychiatric Association before the Second Circuit. “One of the reasons is that there is a large market participant, the third-party plan administrator, that is making all the relevant decisions in regard to mental health benefits and there has been a high degree of uncertainty as to whether they could even be sued under the parity act.”

“Hopefully this will open the door to better enforcement of the parity act,” he added.

Robert Rachal, a senior counsel at Proskauer Rose in New Orleans, who wasn't involved in the case but whose practice includes extensive ERISA class action defense work, agreed, said the decision “will make it easier for participants and medical providers with valid assignments to enforce claims for benefits.”

However, Rachal cautioned, “I think it is too soon to tell whether associations will be able to bring systematic claims seeking to change how insurers process mental health benefits.”

“I expect there will be some real battles here on whether parity act claims can be proven at the global level,” Rachal added, “or whether they will require detailed analysis of how each plan treats and pays its medical and mental health benefits at a plan-by-plan, benefit-by-benefit level.”

“The key thing to understand is the incredible power that the third-party administrators have in the market here,” Cowart said. “They have all the discretion when it comes to approving or denying benefit claims. This makes them plan fiduciaries, meaning they owe heightened duties to plan participants and they are required to conform their conduct to all federal and state laws, including the parity act.”

Second Circuit Decision

The decision by the Second Circuit vacated in part a ruling by the U.S. District Court for the Southern District of New York, which had dismissed claims against UnitedHealth Group alleging that the insurer breached the parity act by denying mental health coverage to individuals covered by self-funded group health plans.

In the opinion, the Second Circuit found that the trial court erred in denying the standing of the New York State Psychiatric Association to bring the claims on behalf of its members, mental health-care providers who had obtained assignments of benefits from their patients.   

Commenting on the court's opinion, a UnitedHealth spokeswoman said, “We consistently help people access proven mental health and substance abuse treatments to ensure they get the right care at the right time in the right setting. While we are still reviewing the decision, we believe this opinion is inconsistent with the way this court has addressed similar cases in the past, so we are evaluating our options for further action.”