We continue to see an increase in fiduciary litigation involving employer-sponsored group health plans, particularly litigation involving mental health. A recent New York Federal District Court case, Collins et al. v. Anthem, Inc. & Anthem UM Services, Inc., Case No. 1:20-cv-001969, is one example that may have wide-ranging impact. This case caught our attention because of its potential impact on plan design and plan administration of its mental health and substance use disorder (collectively “behavioral health”) benefits.
Health care plans or their administrators can sometimes apply different medical necessity standards and criteria to behavioral health coverage requests than those for medical/surgical coverage. Additionally, behavioral health criteria is more likely to be developed internally, or “home grown,” while medical/surgical medical necessity criteria is often developed by independent third-parties and then sold or licensed to health plan administrators for use by their employer-sponsored group health plans.
On February 24, 2022, Judge Frederic Block of the Eastern District of New York allowed plaintiffs to proceed with their breach of fiduciary duty claim under the Employee Retirement Income Security Act (ERISA) against the defendant health care plans. Judge Block held that the health care plan’s choice to use a “medical necessity” standard to interpret plan documents was not a business decision left to the discretion of the defendant health plans but rather a fiduciary act subject to ERISA. Judge Block’s statement is particularly significant in light of health plans’ use of internally developed medical necessity criteria.
Plaintiffs are members of various health care plans issued by defendant Anthem, Inc. and its wholly owned subsidiaries in the states of Maine, New York, and Texas (collectively “Defendants”). Defendants applied coverage guidelines and clinical utilization management guidelines developed and authorized by an internal medical policy committee. These internally-developed guidelines established the medical necessity criteria used by Defendants’ health care plans nationwide.
Plaintiffs were denied coverage for residential psychiatric treatment based on Defendants’ Psychiatric Disorder Treatment guidelines. Plaintiffs allege, on behalf of themselves and all others similarly situated, that these guidelines are inconsistent with the definition of “medical necessity” as contained in their health care plan contracts. In response, the Defendants filed a motion to dismiss for failure to state a claim for breach of fiduciary duty. They argued that Anthem’s choice to develop and use its own behavioral health medical necessity criteria was a business decision and not one in which Anthem was acting in a fiduciary capacity. Judge Block disagreed and denied Anthem’s motion.
The New York court also denied Defendants’ motion to dismiss with respect to Plaintiffs’ substance use disorder allegations. Although Plaintiffs did not specifically identify Defendants’ substance use disorder guidelines, Plaintiffs allege that substance use and mental health disorders are comorbid and Defendants did not evaluate residential treatment coverage requests in accordance with the “plan’s definition of medical necessity.” Judge Block agreed and allowed discovery to proceed with respect to substance use treatment policies.
While this case is still in its early stages, employer-sponsored group health plans should consider talking with their third-party administrators about the sources and methods used in the development of their behavioral health medical necessity criteria. Although Judge Block did not prohibit Anthem from using internally-developed criteria in this ruling, as this case proceeds, Anthem’s choice of behavioral health medical necessity criteria will be evaluated under the much higher fiduciary standard as opposed to the standard applied to business decisions made by a health care plan.
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