U.S. Federal Court Finds UnitedHealthcare Affiliate Illegally Denied Mental Health and Substance Use Coverage in Nationwide Class Action

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  • Landmark Case Challenges the Nation’s Largest Mental Health Insurance Company for Unlawful, Systematic Claims Denials – and Wins
  • Groundbreaking Ruling Affects Certified Classes of Tens of Thousands of Patients, Including Thousands of Children and Teenagers
  • Judge Rules, “At every level of care that is at issue in this case, there is an excessive emphasis on addressing acute symptoms and stabilizing crises while ignoring the effective treatment of members’ underlying conditions.”

In a landmark mental health ruling, a federal court held today that health insurance giant United Behavioral Health (UBH), which serves over 60 million members and is owned by UnitedHealth Group, used flawed internal guidelines to unlawfully deny mental health and substance use treatment for its insureds across the United States. The historic class action was filed by Psych-Appeal and Zuckerman Spaeder LLP, and litigated in the U.S. District Court for the Northern District of California.

The federal court found that, to promote its own bottom line, UBH denied claims based on internally developed medical necessity criteria that were far more restrictive than generally accepted standards for behavioral health care. Specifically, the court found that UBH’s criteria were skewed to cover “acute” treatment, which is short-term or crisis-focused, and disregarded chronic or complex mental health conditions that often require ongoing care.

The court was particularly troubled by UBH’s lack of coverage criteria for children and adolescents, estimated to number in the thousands in the certified classes.

“For far too long, patients and their families have been stretched to the breaking point, both financially and emotionally, as they battle with insurers for the mental health coverage promised by their health plans,” said Meiram Bendat of Psych-Appeal and co-counsel for the plaintiffs who uncovered the guideline flaws. “Now a court has ruled that denying coverage based on defective medical necessity criteria is illegal.”

In its decision, the court also held that UBH misled regulators about its guidelines being consistent with the American Society of Addiction Medicine (ASAM) criteria, which insurers must use in Connecticut, Illinois and Rhode Island. Additionally, the court found that UBH failed to apply Texas-mandated substance use criteria for at least a portion of the class period.

While the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 requires parity for mental health and substance use benefits, insurers are permitted to evaluate claims for medical necessity. However, by using flawed medical necessity criteria, insurers can circumvent parity in favor of financial considerations and prevent patients from receiving the type and amount of care they actually require.

In his decision, Chief Magistrate Judge Joseph Spero concluded that “the record is replete with evidence that UBH’s Guidelines were viewed as an important tool for meeting utilization management targets, ‘mitigating’ the impact of the 2008 Parity Act, and keeping ‘benex’ [benefit expense] down.”

The court’s ruling stems from two consolidated class-action lawsuits, Wit et al. v. United Behavioral Health and Alexander et al. v. United Behavioral Health, brought under the Employee Retirement Income Security Act of 1974 (ERISA) in 2014, certified in 2016 and tried in October 2017. The ruling affects UBH insureds who were denied outpatient, intensive outpatient and residential treatment from 2011 to 2017.

Only ERISA participants and beneficiaries are class members in this lawsuit, requiring non-ERISA insureds, such as government employees, who were denied coverage under the same flawed guidelines to rely on regulators to hold UBH accountable.

“The practice of developing and relying on sub-par medical necessity criteria is endemic in the managed behavioral health care industry,” said Bendat. “More robust safeguards to protect patients are clearly warranted, including legislation mandating exclusive adherence to guidelines developed by nonprofit, clinical specialty organizations, and formal recognition by the American Psychiatric Association that managed care medical directors owe a primary ethical obligation to insureds.”

Psych-Appeal, Inc. and Zuckerman Spaeder LLP were appointed class counsel by the federal court and represent plaintiffs in several class actions against other insurers.