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United Behavioral Health (“UBH”) is one of the nation’s largest managed healthcare organizations. It administers insurance benefits for mental health conditions and substance use disorders for various commercial health benefit plans. In this role, UBH processes coverage requests made by plan members to determine whether the treatment sought is covered under the respective plans. UBH retains discretion to make these coverage determinations “for specific treatment for specific members based on the coverage terms of the member’s plan.”

ERISA is a federal statute designed to regulate “employee benefit plan[s].” 29 U.S.C. § 1003(a). Congress enacted ERISA “to promote the interests of employees and their beneficiaries in employee benefit plans,” 29 U.S.C. § 1132(a) sets forth a comprehensive civil enforcement scheme.

The named Plaintiffs in this class action are all beneficiaries of ERISA-governed health benefit plans for which UBH was the claims administrator. Plaintiffs all submitted coverage requests, which UBH denied. Among the individually named Plaintiffs, there are ten different ERISA plans. Among the class members, there may be as many as 3,000 different plans. The Parties stipulated to a sample class of 106 members, from which they submitted a sample of health insurance plans.

Plaintiffs alleged that the Plans required, as a condition of coverage, that treatment be consistent with generally accepted standards of care (“GASC”) or were governed by state laws specifying certain criteria for making coverage or medical necessity determinations.

UBH employed two different processes to determine whether a requested service was covered. First, where the requested service was subject to a Plan exclusion, UBH issued an administrative denial. Administrative denials did not involve clinical reviews and are not at issue in this appeal. Second, for those claims not administratively denied, UBH conducted a clinical review, by which UBH Peer Reviewers made clinical coverage determinations.

To assist with these clinical coverage determinations, UBH developed internal guidelines used by UBH’s clinicians. The Guidelines applied across Plans and were not customized based on specific plan terms. For this reason, among others, Plaintiffs argue that the Guidelines implemented only the plan exclusion for coverage inconsistent with GASC, which appeared in all plans.

UBH issued new Level of Care Guidelines each year, which contained several parts, some of which Plaintiffs challenge tas more restrictive than GASC,.

The district court entered judgment in Plaintiffs’ favor, concluding that UBH breached its fiduciary duties and wrongfully denied benefits because the Guidelines impermissibly deviated from GASC and state-mandated criteria. The district court also found that financial incentives infected UBH’s Guideline development process, particularly where the Guidelines “were riddled with requirements that provided for narrower coverage than is consistent with” GASC.

Based on these findings, the district court concluded that UBH breached its fiduciary duty to comply with Plan terms and breached its duties of loyalty and care “by adopting Guidelines that are unreasonable and do not reflect” GASC. It also held that UBH improperly denied Plaintiffs benefits by relying on its restrictive Guidelines that were inconsistent with the Plan terms and state law.

The district court issued declaratory and injunctive relief, directed the implementation of court-determined claims processing guidelines, ordered “reprocessing” of all class members’ claims in accordance with the new guidelines, and appointed a special master to oversee compliance for ten years.

UBH appealed and argued that Plaintiffs lacked Article III standing to bring their claims because: (1) Plaintiffs did not suffer concrete injuries; and (2) Plaintiffs did not show proof of benefits denied, and so they cannot show any damages traceable to UBH’s Guidelines. The 9th Circuit disagreed with this argument in the published case of Wit v United Behavioral Health -20-17363 (Aug 2023). However it did find error in other aspects of the trial court orders, and reversed in part.

To establish standing under Article III, a plaintiff must show (i) that he suffered an injury in fact that is concrete, particularized, and actual or imminent; (ii) that the injury was likely caused by the defendant; and (iii) that the injury would likely be redressed by judicial relief. The 9th Circuit ruled that Plaintiffs met all three criteria.

UBH also appealed from the district court’s class certification order. The district court’s class certification decision was reviewed for an abuse of discretion. As to Plaintiffs’ denial of benefits claim, the 9th Circuit agreed, and concluded that the district court erred in granting class certification here based on its determination that the class members were entitled to have their claims reprocessed regardless of the individual circumstances at issue in their claims. It ordered remand for claim reprocessing where a plaintiff has shown that his or her claim was denied based on the wrong standard and that he or she might be entitled to benefits under the proper standard.

UBH further argues that the district court erred by concluding that the Guidelines improperly deviated from GASC, and by failing to apply an appropriate level of deference to UBH’s interpretation of the Plans. It was undisputed that the Plans in this case confer UBH with discretionary authority to interpret the Plan terms.  But where “an administrator has a dual role as plan administrator and plan insurer, there is a structural conflict of interest .”

However, the district court’s findings did not excuse it from applying the abuse of discretion standard. “Abuse of discretion review applies to a discretion-granting plan even if the administrator has a conflict of interest.” In short, while the Plans mandated that a treatment be consistent with GASC, they did not compel UBH to cover all treatment that was consistent with GASC.

Thus the 9th Circuit reversed the district court’s judgment that UBH wrongfully denied benefits to the named Plaintiffs to the extent the district court concluded the Plans require coverage for all care consistent with GASC.