In a decision that could give hope to millions of Americans suffering from a substance use disorder or other mental illness, the Second Circuit Court of Appeals ruled recently that a lawsuit alleging violation of the Federal Mental Health Parity and Addiction Equity Act, 29 U.S.C. section 1185a (a)(3) (A) could go forward against United Health Group and its subsidiaries. The Mental Health Parity Act, which was passed in 2008, requires group health plans and health insurance providers to ensure that the financial requirements i.e., deductibles and copays, as well as treatment limitations applied to mental health benefits be no more restrictive than the predominant financial requirements and treatment limitations applied to substantially all medical and surgical benefits covered by the plan or insurance.
The plaintiffs in New York State Psychiatrist Association, Inc. et al. v. United Health Group, et al. alleged numerous violations of the Mental Health Parity Act including United Health Group’s (1) use of vastly different definitions of medical necessity for mental health care than it used for medical/surgical care; (2) requirement for pre-authorization and concurrent reviews for mental health coverage but not for the vast majority of medical/surgical coverage; (3) requirement of step therapy protocols aka “fail first” policies which require the least expensive therapy to fail before the more expensive, but medically necessary, therapy will be approved; (4) disparate financial requirements to mental health and substance use disorders including prohibiting or restricting the use of appropriate evaluation management service codes by psychiatrist; and (5) use of restrictive policies that improperly limit access to psychotherapy for mentally ill patients in favor of drug therapy, thereby interfering with the practitioner’s ability to appropriately treat patients with mental illnesses or substance use disorders.
The ruling establishes two points that may be important in future claims against insurers in this developing area of the law. First, the Second Circuit recognized that the New York State Psychiatric Association (NYSPA) could represent its members and their patients in pursuing a claim under the Mental Health Parity Act through “associational standing.” An association has standing to sue on behalf of its members when (1) its members would otherwise have standing to sue in their own right; (2) the interests it seeks to protect are germane to the purpose of the organization; and (3) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit. The Second Circuit addressed whether the NYSPA plausibly alleged that its claims did not require individual proof. The Second Circuit held that the NYSPA had met that burden by challenging United Health Group’s systemic policies and practices insofar as they violate ERISA and the Mental Health Parity Act and because it was seeking only injunctive and declaratory relief.
Second, the court recognized that United Health Group could be sued even when it acted not as an insurer but as the administrator of a self-insured plan. This means that insurance companies are at risk under the Mental Health Parity Act whenever they exercise discretion in the administration of benefits and employees do not have to sue their employer in order to recover benefits.
The Mental Health Parity Act has been the law since 2008 and insurance companies have made cosmetic changes to their coverage in an attempt to appear to come into compliance. However, if the allegations set forth by the plaintiffs in New York State Psychiatrist Association, Inc. et al. v. United Health Group, et al. are proven to be true, there is still a significant disparity between the insurance coverage provided for those with substance use disorders and other mental illnesses with that provided for regular medical and surgical services. With millions of Americans suffering from these types of illnesses, mental health parity is an issue whose time has come. Hopefully the Second Circuit’s decision will be the beginning of strict enforcement of the Mental Health Parity Act for the benefit of those who suffer from mental illness and their caregivers.