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The ERISA Edit: Ninth Circuit Withdraws and Reissues Opinion in Wit v. UBH, Again

Employee Benefits Alert

Wit Panel Remands Fiduciary Claim After Decertifying Class on Denial of Benefits Claim

On August 22, 2023, the Ninth Circuit issued its third decision in Wit v. United Behavioral Health, Nos. 20-17363, 21-15193 (9th Cir.). This most recent decision clarifies an important legal issue in the case and is largely a win for United Behavioral Health (UBH), although the court did remand the plaintiffs' ERISA fiduciary breach claims back to the district court for further consideration, including whether those claims are "disguised claim[s] for benefits."

In their complaint, the Wit plaintiffs alleged both breach of fiduciary duty and improper denial of benefits on the theory that UBH, as claims administrator, improperly developed and relied on internal guidelines that were inconsistent with the terms of plaintiffs' health plans and state-mandated criteria. They brought denial of benefits and fiduciary breach claims under ERISA sections 502(a)(1)(B) and (a)(3), respectively, and obtained class certification on both claims. The plaintiffs sought as a remedy the reprocessing of their denied benefit claims for outpatient, intensive outpatient, and residential mental health and substance use disorder (MH/SUD) treatment, as well as injunctive and declaratory relief. 

After a 10-day bench trial in 2017, the U.S. District Court for the Northern District of California ruled in favor the plaintiffs and ordered UBH to reprocess thousands of mental health coverage claims it had previously denied. In a decision issued in March 2022, the Ninth Circuit reversed the district court's decision. On rehearing in January 2023, the court vacated that decision and replaced it with a much more expansive one. The plaintiffs sought rehearing again, culminating in this week's decision. 

In this latest decision, the court once more affirmed the district court's holding that the plaintiffs had standing to bring their claims and that class certification was proper on their fiduciary breach claims. The Ninth Circuit, however, rejected the district court's class certification on the plaintiffs' denial of benefits claims, finding that the proposed classes improperly included participants whose claims were denied based on UBH guidelines that the plaintiffs had not challenged or on grounds other than the guidelines altogether. According to the court, a plaintiff would not be eligible for reprocessing as a remedy without "at least some showing that UBH employed an errant portion of the Guidelines that related to his or her claim."  

By clearly allowing for reprocessing of claims as a remedy, in appropriate circumstances, for claims brought under ERISA section 502(a)(1)(B), the court's latest opinion eliminates some confusion created by its January 2023 analysis. That said, the court again concluded that the district court erred in holding that reprocessing of claims is "appropriate equitable relief" for fiduciary breach claims under section 502(a)(3), because it was not relief typically available in equity under analogous circumstances.

On the merits, the Ninth Circuit stated that the district court gave too much weight to UBH's structural conflict of interest from its dual roles of plan administrator and issuer, holding that such an alleged conflict did not excuse the district court from applying an abuse of discretion standard. Applying that standard, the Ninth Circuit found that UBH's interpretation that the plans at issue did not require coverage for all care consistent with generally applicable standards of care (GASC) did not conflict with the plans' language. The court reversed the district court's judgment to the extent it relied on the trial judge's conclusion that the plans required coverage for all care consistent with GASC.

Finally, the Ninth Circuit remanded the case back to the district court to answer a threshold question of whether the plaintiffs' fiduciary duty claim was subject to the plans' administrative exhaustion requirement and, if so, whether the requirement was satisfied by unnamed class members or should otherwise be excused. Although exhaustion is not required for statutory claims in the Ninth Circuit, the court cautioned that "exhaustion is required if a plaintiff's statutory claim is a disguised claim for benefits," noting that the district court did not decide that issue. In combination with the court's express allowance for "[s]ubsequent petitions for rehearing or rehearing en banc, if any," this will almost certainly not be the last we hear of Wit.

Analysis of MHPAEA Proposed Rule and Report of Congress, Part IV

This week, we focus on Technical Release 2023-01P and the July 2023 MHPAEA Comparative Analysis Report to Congress, which were released by the Department of Labor (DOL), Department of Health and Human Services (HHS), and the Department of the Treasury (Treasury) (collectively, the Departments) last month along with the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) proposed rule discussed in Parts I-III. 

Technical Release 2023-01P

The Departments' proposed amendments to the non-quantitative treatment limitation (NQTL) parity regulations focus heavily on two key areas: NQTLs impacting provider network composition and outcomes data on the application of NQTLs in the administration of benefits. As discussed in Part II and Part III, under the proposed rules if adopted, plans and issuers will be required to evaluate outcomes data when assessing parity compliance, address material differences in outcomes revealed by that data, and include their data analyses and any corrective action necessitated by those analyses in their comparative analysis documents. Technical Release 2023-01P provides a roadmap of the Departments' preliminary thinking on how data will be used to assess parity compliance with respect to network composition NQTLs. The Departments seek comments from the regulated community on a far-reaching list of topics including the types of data plans and issuers should be required to collect and analyze and how that data collection and analysis should be done.

The Departments set forth four categories of data plans and issuers may need to collect and analyze as part of their network composition NQTL comparative analyses:

  1. Out-of-network utilization data: The Departments are considering requiring plans and issuers to collect and evaluate relevant out-of-network utilization data for MH/SUD and medical/surgical (M/S) conditions from the two most recent calendar years that ended at least 90 days prior to the start of the plan or policy year during which the comparative analysis was conducted. 
  2. Percentage of in-network providers submitting claims: To address problems with "ghost networks," the Departments are considering requiring plans and issuers to collect and evaluate data on both the percentage of in-network providers who submitted no in-network claims and the percentage of in-network providers who submitted claims for fewer than five participants, beneficiaries, and enrollees during a period, for certain classes of MH/SUD and M/S providers.
  3. Time and distance standards: The Departments are considering requiring the collection and evaluation of data on the percentage of participants, beneficiaries, and enrollees who can access, within a specified time and distance, one (or more) in-network providers within specified MH/SUD provider categories and one (or more) in-network providers within certain M/S provider categories. 
  4. Reimbursement rates: The Departments may also require plans and issuers to collect and evaluate data comparing in-network payments and billed charges for MH/SUD and M/S benefits in the inpatient, in-network and outpatient, in-network classifications (for office visits and all other benefits), as well as the allowed amounts for specific billing codes that are reimbursed to specific types of MH/SUD and M/S providers, comparing them to each other and to Medicare rates or similar benchmarks. 

In addition, the Technical Release describes a potential enforcement safe harbor the Departments are considering for network composition NQTLs. The safe harbor would be available to plans and issuers that meet or exceed specific data-based standards identified in future guidance. States would be permitted, but not required, to adopt a similar enforcement safe harbor with respect to health insurance issuers when the state is the primary regulator of MHPAEA. 

The Departments request feedback on the enforcement safe harbor proposal, the data collection categories and metrics, and a host of other related issues delineated in the Technical Release. Comments on the Technical Release and on the proposed rule are due October 2, 2023.

July 2023 MHPAEA Comparative Analysis Report to Congress

The long-awaited second report to Congress on the Departments' enforcement of the comparative analyses parity requirements added to ERISA by the Consolidated Appropriations Act, 2021 (CAA) was released on July 25, 2023. Not surprisingly, the contents of the report have been somewhat drowned out by the overwhelming amount of information contained in the simultaneously issued proposed rule and Technical Release 2023-01P. Here are some takeaways from the report.

  • Between passage of the CAA and the end of the reporting period (July 2022 for DOL and September 2022 for the Centers for Medicare and Medicaid Services (CMS)), DOL issued 182 letters requesting comparative analyses for more than 450 NQTLs, whereas CMS issued 26 letters requesting comparative analyses for 44 NQTLs.
  • After receiving and reviewing the requested comparative analyses, DOL issued 138 insufficiency letters for over 290 NQTLs and CMS issued 35 insufficiency letters for 44 NQTLs. None of the comparative analyses reviewed by the Departments were deemed sufficient (i.e., compliant), but some plans and issuers resolved compliance problems with the Departments before an insufficiency letter was issued.
  • DOL issued 53 initial determination letters finding violations related to 76 NQTLs, whereas CMS issued 15 initial determinations letters involving violations related to 15 NQTLs. Most of the recipients of these letters resolved the cited issues through voluntary compliance consisting of plan document and claims administration changes and, in many instances, the reprocessing of claims.
  • DOL issued three final determination letters finding plans out of compliance with their parity obligations and CMS issued five such letters. All recipients of these letters gave notice of the Departments' findings to affected participants, beneficiaries, and enrollees as required by statute. 
  • The report lists the most frequently encountered NQTLs, which include exclusions for Applied Behavioral Analysis (ABA) and other autism therapies, prior authorization and concurrent review requirements, provider billing restrictions, and exclusions for medication-assistance treatment (MAT) and nutritional counseling.
  • Common deficiencies encountered with comparative analyses included the lack of a comparative analysis at the time of an agency request, failure to explain how factors were applied when determining which benefits are subject to an NQTL, inadequate definition of and explanation of the sources for factors, and failure to demonstrate a comparable application of factors.
  • The report discusses DOL's strategy of investigating MHPAEA compliance by opening audits of service providers to large numbers of ERISA-covered plans, which the report indicates will continue in the future. During the reporting period, DOL used this approach with over 20 plan service providers.

Upcoming Speaking Engagements 

Joanne Roskey will present, as part of a panel, "What the New Mental Health Parity Guidance Means for You - Part One," an American Benefits Council Benefits Briefing webinar on August 29, 2023.

In the News

Joanne Roskey was quoted in Law360 on a recent decision by a three-judge panel for the Tenth Circuit in a case brought by the Pharmaceutical Care Management Association, finding that federal benefits law preempts an Oklahoma state statute regulating pharmacy benefit managers (PBMs). 

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