Ryan S. v. Unitedhealth Group, Inc.
FOR PUBLICATION (2024)
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Rule of Law:
A plaintiff can state a plausible claim for a violation of the Mental Health Parity and Addiction Equity Act (Parity Act) by alleging an insurer uses a more stringent internal review process for mental health or substance use disorder (MH/SUD) claims than for comparable medical/surgical claims. Such a claim does not require allegations of a categorical denial or a direct comparison to the plaintiff's own medical/surgical claims, especially when supported by external evidence like a government agency report.
Facts:
- Ryan S. was a beneficiary of an ERISA group health plan administered by UnitedHealthcare.
- His plan covered outpatient, out-of-network mental health and substance use disorder (MH/SUD) treatment.
- Between 2017 and 2019, Ryan S. received treatment at two different outpatient, out-of-network substance use disorder programs.
- UnitedHealthcare denied coverage for most of the costs of these programs, leaving Ryan S. personally responsible for hundreds of thousands of dollars in charges.
- UnitedHealthcare provided various reasons for the denials, such as 'your plan does not cover the services you received,' 'no documentation was submitted,' and 'the information submitted does not contain sufficient detail.'
- A 2018 report by the California Department of Managed Health Care concluded that a UnitedHealthcare entity violated the Parity Act by using an algorithm (ALERT) to impose a more stringent review process on MH/SUD claims, a process not applied to comparable medical/surgical claims.
Procedural Posture:
- Ryan S. filed a putative class action against UnitedHealth Group in the U.S. District Court for the Central District of California.
- The district court (court of first instance) initially dismissed the complaint for lack of standing.
- Ryan S. (as appellant) appealed to the U.S. Court of Appeals for the Ninth Circuit (intermediate appellate court), which reversed, holding he had standing, and remanded the case.
- On remand, UnitedHealthcare filed a motion to dismiss for failure to state a claim under FRCP 12(b)(6).
- The district court granted UnitedHealthcare's motion to dismiss.
- Ryan S. (as appellant) appealed the dismissal to the U.S. Court of Appeals for the Ninth Circuit, with UnitedHealthcare as the appellee.
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Issue:
Does a complaint plausibly allege a violation of the Mental Health Parity and Addiction Equity Act (Parity Act) by asserting that an insurer applies a more stringent internal review process to outpatient, out-of-network mental health and substance use disorder (MH/SUD) claims than to comparable medical/surgical claims, when supported by the plaintiff's own claim denials and a government agency report?
Opinions:
Majority - Judge Clifton
Yes. A complaint plausibly alleges a Parity Act violation by asserting a more stringent internal process for MH/SUD claims, and a plaintiff is not required to allege a categorical practice or differential treatment for their own specific medical/surgical claims. The court recognized that Parity Act claims can challenge an insurer's internal processes, not just explicit plan terms. In such 'internal process' cases, a plaintiff need not have personal experience with analogous medical/surgical claims to plead a plausible claim, as they would likely lack access to information about how those claims are processed. Here, Ryan S.'s allegations of systematic denials, combined with the California state agency report identifying a specific algorithmic process (ALERT) applied only to MH/SUD claims, plausibly suggest that UnitedHealthcare employed a more restrictive process in violation of the Parity Act. Because the Parity Act claim is plausible, the derivative breach of fiduciary duty claim also survives, as violating an ERISA statute constitutes a breach of such duties. The claim for violation of plan terms was properly dismissed as Ryan S. failed to identify a specific term that was violated.
Analysis:
This decision clarifies the pleading standard for 'internal process' Parity Act claims in the Ninth Circuit, lowering the initial burden on plaintiffs who often lack access to an insurer's internal policies. By validating the use of external evidence like government agency reports to support a plausible inference of discrimination, the court makes it easier for such claims to survive a motion to dismiss. This ruling may encourage more litigation against insurers for alleged Parity Act violations and shifts the focus at the pleading stage from a plaintiff's specific comparative experience to broader allegations of a discriminatory system.
