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Court Certifies Class in ERISA Lawsuit

 

Email Alert

September 28, 2016

By Laura Fryan and David Schweighoefer*

On September 19, the U.S. District Court for the Northern District of California certified a nation-wide Employee Retirement Income Security Act (ERISA) class action against United Behavioral Health (UBH), the country’s largest behavioral health care organization.1 The lawsuit alleged that UBH breached its fiduciary duties of loyalty, prudence, and care to its insureds by developing and applying proprietary medical necessity criteria that were inconsistent with generally accepted standards for outpatient, intensive outpatient, and residential treatment.

The plaintiffs in this case argued that they were improperly denied coverage for both outpatient and intensive outpatient mental health and substance use disorder treatment by UBH. The plaintiffs argued that the denial of benefits was arbitrary and capricious and was a violation of the defendant’s fiduciary duty. The defendant, UBH, made coverage determinations based on a set of guidelines (coverage determination guidelines, or CDG Guidelines, and Level of Care Guidelines, or LOC Guidelines). According to the plaintiffs, these guidelines were far more restrictive than generally accepted standards, and by making coverage determinations based on these guidelines, the defendant had breached its fiduciary responsibility to the plaintiffs. The plaintiffs asked the court for a declaration that the guidelines were developed in violation of the defendant’s fiduciary responsibilities and for an injunction ordering the defendant to stop utilizing the guidelines and instead adopt guidelines consistent with the requirements of state law and generally accepted practices, in addition to other remedies. Further, the plaintiffs argued that the guidelines favor cost savings over the well-being of their covered lives, which was a violation of the defendant’s fiduciary duties.

The court certified the class after considering all of the elements of class certification. In general, the class must have demonstrated that their claims rested upon a common contention such that the court’s decision would resolve each class member’s claim. The defendant argued that this requirement had not been met in that the plaintiffs were members of many different types of insurance plans, many different specific guidelines had been used, and the clinical indication of each class member was different. The court did not find these arguments persuasive because they were not material to the case. The defendant also argued that the classes were not ascertainable because it was not possible to determine which plans were governed by ERISA, which claims were denied under the Guidelines, and which part of the Guidelines was used. The defendants argued that this information could not be obtained by an automated means and would require the review of thousands of records. The court did not find this argument persuasive, as each member was sent a determination letter indicating the basis of the decision and that a database was maintained with data regarding adverse benefit determinations. Ultimately, the court held that the certification of the class was proper. If successful, this case would impact how health plans utilize review criteria to meet generally accepted standards of care.

*We would like to thank Laura Fryan and David Schweighoefer (Brouse McDowell, Akron, OH) for authoring this email alert. We also would like to thank Jeffrey C. Lynne (Beighley Myrick Udell & Lynne, Boca Raton, FL) for reviewing this email alert.


1 Wit v. United Behavioral Health, U.S. District Court for the Northern District of California; Case No. 14-cv-02346 JCS

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