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The ERISA Edit: Tenth Circuit Defines Elements of a MHPAEA Claim

Employee Benefits Alert

Allegations That Acute Care InterQual Criteria Disparately Applied to Residential Treatment Sufficient to State a MHPAEA Violation

On November 21, 2023, the U.S. Court of Appeals for the Tenth Circuit issued its decision in E.W. v. Health Net Life Insurance Company, No. 21-04110, --- F.4th ----, 2023 U.S. App. LEXIS 30879 (Nov. 21, 2023), becoming the first federal court of appeals to define the elements of a claim under the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA), 29 U.S.C. § 1185a et seq. MHPAEA is intended to prevent health plans that provide mental health and substance use disorder (MH/SUD) benefits from imposing treatment limitations on those benefits that are less favorable than those imposed on medical and surgical (M/S) benefits. 

According to the decision, Health Net Insurance Company and Health Net of Arizona, Inc. (collectively, Health Net) denied plaintiff I.W., a minor, benefits coverage for mental health and eating disorder treatment at an adolescent residential treatment center on the basis that it was no longer medically necessary. When it assessed whether to continue I.W.'s coverage, Health Net applied the McKesson InterQual Behavioral Health 2016.3 Child and Adolescent Psychiatry Criteria (InterQual Criteria), pursuant to which the patient must satisfy at least one of the relevant criteria during the previous week for residential mental healthcare to be deemed medically necessary. Health Net determined that I.W. did not satisfy the InterQual Criteria. 

After exhausting their administrative remedies, I.W. and her father, E.W., brought suit in the U.S. District Court for the District of Utah and asserted that Health Net violated ERISA's MHPAEA provisions, 29 U.S.C. § 1185a(a)(3)(A)(ii), by imposing medical necessity criteria for mental health benefits that were more stringent than those for M/S benefits, and further violated ERISA by failing in its fiduciary obligations to act solely in I.W.'s interest as a beneficiary and to provide a full and fair review of I.W.'s claims. The district court dismissed the MHPAEA claim under Federal Rule of Civil Procedure 12(b)(6) and granted summary judgment to Health Net on the remaining claims.

On appeal, the Tenth Circuit reversed as to the MHPAEA claim, holding that the plaintiffs had adequately stated a claim under the statute, but affirmed the district court's grant of summary judgment to Health Net on the other claims. The court began its analysis by setting out the elements of a MHPAEA claim, reviewed the tests applied by district courts, and adopted the elements to which the parties had consented at oral argument. It said that to state a claim under MHPAEA, a plaintiff must:

  1. Plausibly allege that the relevant group health plan is subject to MHPAEA
  2. Identify a specific treatment limitation applied to MH/SUD benefits covered by the plan
  3. Identify M/S benefits covered by the plan that are analogous to the MH/SUD care for which the plaintiff seeks benefits
  4. Plausibly allege a disparity between the treatment limitation on the MH/SUD benefits as compared to those placed upon the analogous M/S benefits

The court then turned to the plaintiffs' as-applied MHPAEA claim. Examining the plaintiffs' complaint, the court concluded that plaintiffs plausibly stated a claim under MHPAEA. First, there was no dispute I.W.'s health plan was subject to MHPAEA. Second, the plaintiffs identified in their complaint "a specific treatment limitation on mental health benefits covered under the Plan": they alleged that Health Net required them to satisfy "acute care medical necessity criteria" (i.e., the InterQual Criteria) to receive benefits for treatment in a subacute care setting (i.e., the residential treatment center). Third, pointing to the MHPAEA final rules issued in 2013, the court agreed that the plaintiffs alleged that inpatient skilled nursing facilities qualify as a relevant M/S analog to I.W.'s mental healthcare. Fourth, the plaintiffs alleged the requisite disparity: Health Net applied acute-care medical necessity criteria to mental health benefits for care in a subacute care setting (again, the residential treatment center), but did not "require individuals receiving treatment at sub-acute inpatient facilities for medical/surgical conditions," such as "skilled nursing facilities," to satisfy "acute medical necessity criteria." Notably, the Tenth Circuit held that Health Net's refusal to provide the medical necessity criteria plaintiffs requested "further support[ed] [the court's] conclusion that plaintiffs plausibly alleged a disparity." 

The Tenth Circuit also rebuffed Health Net's argument that the plaintiffs could not state a claim using their "acuity theory" because the InterQual Criteria were ostensibly consistent with MHPAEA regulations. The court found Health Net's position to be "untenable" because it would require the court to find on a motion to dismiss "that the InterQual Criteria qualify as generally accepted standards of care," which would "impermissibly move beyond [p]laintiffs' allegations and view the facts in the light most favorable to Health Net." 

As for the other claims, the court held that the district court did not err in refusing to address the plaintiffs' argument that Health Net failed to consider whether I.W. met the InterQual Criteria pertaining to eating disorders because the plaintiffs had never raised that argument before the plan administrator and therefore failed to exhaust the argument administratively. The court also concluded that Health Net had not arbitrarily and capriciously denied benefits to I.W. Contrary to the plaintiffs' assertions, "Health Net's denial letters demonstrate that it did in fact consider all criteria relevant to a serious emotional disturbance even if it did not recite each criterion verbatim," and the denial letters did not "suffer from the same deficiencies that amounted to unreasoned denials" in the court's decision in D.K. v. United Behavioral Health, 67 F.4th 1224 (10th Cir. 2023), previously discussed here. Unlike in D.K., where United Behavioral Health failed to "provide analysis or citations to the medical record in its denial letters," the Tenth Circuit concluded that "Health Net's letters cited to the specific diagnostic criteria that it considers when determining whether to continue coverage for care at a residential treatment center." 

The district court will reassess the plaintiffs' MHPAEA claim on remand, with the benefit of the Tenth Circuit's framework. This decision is significant because it is the first time a federal appellate court has set forth the elements of private right of action under MHPAEA. In addition, the court rejected application of the InterQual Criteria, relied upon by many plans and issuers when making level of care coverage determinations, when assessing medical necessity of residential treatment for MH/SUD benefits. 

Tri-Agencies Issue FAQs on No Surprises Act IDR Batching and 2023 CLAS Guidance

The U.S. Departments of Labor, Health and Human Services, and the Treasury (collectively, the Departments) issued guidance this week relating to criteria under which multiple No Surprises Act (NSA) items and services may be considered jointly as part of one payment determination (batching) in an NSA independent dispute resolution (IDR) proceeding. This guidance, Federal Independent Dispute Resolution (IDR) Process Batching and Fair Ambulance FAQs (November 2023) (November 2023 FAQs) and FAQs about Affordable Care Act and Consolidated Appropriations Act, 2021 Implementation Part 63 (FAQs Part 63), was issued in response to court decisions in Texas Medical Association v. U.S. Department of Health and Human Services, No. 6:23-cv-59-JDK (E.D. Tex. Aug. 3, 2023) (TMA IV) and Texas Medical Association v. U.S. Department of Health and Human Services, No. 6:22-cv-450-JDK (E.D. Tex. Aug. 24, 2023) (TMA III), that vacated certain batching criteria contained in 2021 interim final rules and subsequent technical guidance. At issue in TMA IV was whether the interim final rules conflicted with the NSA statutory text that stated batching can only occur for items and services "related to the treatment of a similar condition." According to FAQs Part 63 issued on November 28, 2023, the governing statutory text and the subsections of the interim final rules that were not vacated, 29 CFR 2590.716- 8(c)(3)(i)(A), (B), and (D), shall guide whether qualified IDR items and services may appropriately be batched together, until such time as the Departments engage in formal rulemaking on what it means for items and services to be "related to the treatment of a similar condition." This guidance applies to payment disputes eligible for IDR on after August 3, 2023, the date of the TMA IV decision. In response to TMA III, which vacated technical guidance limiting the batching of air ambulance items and services from a single air ambulance transport, FAQs Part 63 state that air ambulance services for a single air ambulance transport, including an air ambulance mileage code and base rate code, may be submitted as a batched dispute, so long as all non-vacated provisions of the batching statute and regulations are satisfied.

The November 2023 FAQs, also issued on November 28, 2023, contain guidance to IDR entities for how to process batched disputes initiated before August 3, 2023, and disputes involving improperly batched items and services. In the latter scenario, the IDR entity is instructed when notifying the disputing parties of an improperly batched dispute to provide an explanation in writing detailing why the items and services are improperly batched, including, if applicable, the certified IDR entity's reason(s) for determining whether the items and services are or are not related to the treatment of a similar condition. 

Additionally, the November 2023 FAQs explain that due to ongoing system updates, the IDR portal is not yet open to process these disputes and that the Departments are releasing the FAQs now to give certified IDR entities and disputing parties time to review them in advance of the portal reopening. The Departments state that when the IDR portal reopens, which will occur "as soon as possible," they will grant extensions to the applicable IDR deadlines for the initiation of new batched disputes and new disputes involving air ambulance services, as well as for resubmission of disputes determined by certified IDR entities to be improperly batched and the selection or reselection of a certified IDR entity. 

FAQs Part 63 also contain 2023 Culturally and Linguistically Appropriate Services (CLAS) guidance and county data, which should be used by plans and issuers to comply with the culturally and linguistically appropriate notice and service requirements set forth in Public Health Services (PSA) Act section 2719 and its implementing regulations.

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