The ERISA Litigation Newsletter - October 2015

Editor's Overview

This month, we review the Second Circuit's ruling in New York State Psychiatric Ass'n, Inc. v. UnitedHealth Grp. wherein the Second Circuit ruled that: (i) a provider association has associational standing to bring suit under the Mental Health Parity and Addiction Equity Act of 2008 for declaratory and injunctive relief on behalf of its members, and (ii) a third-party plan administrator can be sued under ERISA Section 502(a)(1)(B) and 502(a)(3) for violations of the Parity Act. 2015 WL 4940352 (2d Cir. Aug. 20, 2015). The Second Circuit's decision could lead to an increase in litigation between mental health care providers and plan administrators, and increased enforcement of the Parity Act because it opens the door to provider associations seeking to enforce the Act against plan administrators. However, as discussed below, several important issues remain undecided.

As always, please be sure to review the Rulings, Filings, and Settlements where we review issues under the Multiemployer Pension Reform Act, preemption of state law claims for short-term disability benefits, and jurisdictional issues.

Second Circuit Finds Associational Standing for Provider Association to Sue Claims Administrator for Violations of the Mental Health Parity Act: A Look at New York State Psychiatric Association v. United Health Group*

By Benjamin Saper

Plan sponsors and plan administrators should pay close attention to a recent Second Circuit decision that may have important implications for future litigation among mental health care providers, plan administrators and third-party claims administrators under the Mental Health Parity and Addiction Equity Act of 2008 (the "Parity Act"). The Parity Act requires group health insurance issuers to ensure that financial requirements (e.g., copayments, coinsurance, or deductibles) and treatment limitations (e.g., limitations on the frequency of treatment, number of outpatient visits, or amount of days covered for inpatient stays) applicable to mental health benefits be no more restrictive than the requirements and limitations applied to non-mental health medical and surgical benefits covered by the plan or insurance.1 The ruling in New York State Psychiatric Ass'n, Inc. v. UnitedHealth Grp., No. 14-20-CV, 2015 WL 4940352 (2d Cir. Aug. 20, 2015), is noteworthy because it establishes that 1) a provider association has associational standing to bring suit under the Parity Act for declaratory and injunctive relief on behalf of its members because individual proof is not necessarily required; and 2) a third-party plan administrator can be sued under ERISA Section 502(a)(1)(B) and 502(a)(3) for violations of the Parity Act.

This class action was brought by the New York State Psychiatric Association ("NYSPA"); Jonathon Denbo ("Denbo"), an individual health plan participant; and Dr. Shelly Menolascino, an individual mental health care provider. The individual plaintiff, Denbo, sought damages but NYSPA only sought injunctive and declaratory relief. NYSPA is a professional association of psychiatrists practicing in New York, many of whom provided services to patients insured by United Healthcare Group ("United") and were assigned rights by participants in the plan. Plaintiffs sued under ERISA Sections 502(a)(1)(B) and 502(a)(3), alleging that United, as the third-party plan administrator, violated the Parity Act, breached its fiduciary duties under ERISA, and violated the terms of ERISA health insurance plans administered by United by treating mental health claims less favorably than claims for medical or surgical care. The suit was brought on behalf of classes consisting of United-insured patients and their psychiatrists who submitted health insurance claims which were subjected to United's allegedly illegal disparate treatment of mental health claims.

Plaintiffs' allegations centered on United's decision to deny Mr. Denbo's benefits claims for outpatient psychotherapy sessions after United conducted a concurrent review and determined that his treatment plan was not medically necessary. Plaintiffs claimed that United subjected only mental health claims, and not medical or surgical claims, to concurrent review or preauthorization, and applied more restrictive review standards to mental health claims than generally accepted mental health standards and the standards United applied to medical claims under the plan. Plaintiffs' alleged that these practices violated the Parity Act and the terms of the plan itself because they favored medical and surgical claims over mental health claims.

In the District Court, United successfully moved to dismiss the complaint, based principally on the argument that United, as claims administrator, could not be sued for violations of the Parity Act under ERISA Section 502(a)(1)(B). United argued that only a "plan administrator" could be sued under Section 502(a)(1)(B), and as a "claims administrator," United was not a proper defendant. The...