Ninth Circuit Reverses Dismissal of Class Action in MHPAEA Case

On April 11, 2024, in Ryan S. v UnitedHealth Group, Inc., et al., the Ninth Circuit Court of Appeals (Ninth Circuit) filed a decision reversing a Middle District of California District Court dismissal of a class action suit brought under ERISA by a beneficiary (Ryan S.) of a group health plan insured, managed, and administered by UnitedHealthcare (UHC). The lawsuit, which alleged a MHPAEA violation and breach of an ERISA fiduciary duty, was remanded for further proceedings.

Between 2017 and 2019, Ryan S. completed two different outpatient and out-of-network substance use disorder programs. UHC did not cover most of the charges for that treatment, which amounted to hundreds of thousands of dollars. Ryan S. alleged that UHC systematically denied his claims and cited a 2018 California Department of Mental Health Care report that had concluded that certain UnitedHealthcare entities, including UHC, were applying a more stringent internal review process (that included the use of algorithms that added additional levels of review) to such mental health and substance use disorder (MH/SUD) claims than was applied to medical/surgical claims for treatment in violation of MHPAEA. The district court dismissed the case based on its conclusion that Ryan S. had 1) failed to allege that his claims had been “categorically” denied and 2) insufficiently identified analogous medical/surgical claims that he had personally submitted and UHC had processed more favorably.

Relying heavily on the findings and conclusions of the California state agency, the Ninth Circuit concluded that a plaintiff alleging that a defendant applied a more stringent internal process to MH/SUD claims than to medical/surgical claims may be able to allege a plausible claim without having to allege a categorical practice or differential treatment for the plaintiff’s own medical/surgical claims. In other words, it is enough for such a plaintiff to allege the existence of a procedure used in assessing MH/SUD benefit claims that is more restrictive than those used in assessing medical/surgical claims under the same classification if the allegation is adequately pled in the complaint. A plaintiff doesn’t have to allege that they had claims of both types.

Since the district court had dismissed the MHPAEA claim and the breach of fiduciary duty claims for failure to state a violative (claims) process, the Ninth Circuit reversed both of those dismissals and remanded. 

The plaintiff in this case benefited from a recent state study and report that supported their allegations and allowed these claims to survive the motion to dismiss. The case has drawn greater attention to the use of algorithms in the claim review process, particularly with respect to MHPAEA claims. The Ninth Circuit has tried to clarify how to determine what violates the MHPAEA without much clear guidance from the federal agencies yet. Hopefully, the anticipated MHPAEA final rules will provide guidance that will help to clarify the law’s application to various claim review processes.

Ryan S. v. UnitedHealth Group Inc.