AGG’S CLASS ACTION AGAINST UNITEDHEALTH GROUP REVIVED BY APPEALS COURT, ALLEGING VIOLATIONS OF FEDERAL MENTAL HEALTH PARITY LAW

AGG’S CLASS ACTION AGAINST UNITEDHEALTH GROUP REVIVED BY APPEALS COURT, ALLEGING VIOLATIONS OF FEDERAL MENTAL HEALTH PARITY LAW

In a recent and significant development, the United States Court of Appeals for the Ninth Circuit delivered a significant ruling in a class-action lawsuit brought by AGG against UnitedHealthcare. The lawsuit alleges violations of federal laws, including the Employee Retirement Income Security Act of 1974 (ERISA) and the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act (Parity Act), pertaining to the denial of mental health and substance use disorder treatments.

On April 11, 2024, the Ninth Circuit delivered a crucial decision, overturning a portion of the lower court’s ruling and opening the way for the lawsuit to progress further. Ryan S. v. UnitedHealth Grp., No. 22-55761 (9th Cir. Apr. 11, 2024)

The appellate court’s decision was anchored in assertions that UnitedHealthcare’s internal procedures systematically differentiated between substance use disorder claims and medical or surgical claims, constituting an alleged breach of the Parity Act. Specifically, the lawsuit pointed to a 2018 report[1] by the California Department of Managed Healthcare, which underscored UnitedHealthcare’s utilization of the Algorithms for Effective Reporting and Treatment (ALERT) process. This mechanism purportedly exacerbated the rejection rates for mental health and substance use disorder treatment coverage.

An ERISA plan can violate the Parity Act in different ways, such as: the Act can explicitly exclude some form of treatment for mental health and substance use disorder (MH/SUD) issues that is offered for comparable medical/surgical issues; it can apply a facially neutral plan term in an unequal way between MH/SUD and medical/surgical benefits; or it can apply a more stringent internal process to MH/SUD claims than to medical/surgical claims.

The Ninth Circuit concluded that Plaintiff adequately stated a claim for a violation of the Parity Act. Plaintiff alleged a violation, claiming that UnitedHealthcare applied a more restrictive review process to his outpatient, out-of-network MH/SUD claims. Having said that, he may be able to allege a plausible claim without having to allege a categorical practice or differential treatment for his or her medical/surgical claims. It is enough for such a plaintiff to allege the existence of a procedure used in assessing MH/SUD benefit claims that is more restrictive than those used in assessing medical/surgical claims under the same classification, as long as the allegation is adequately pled. Id. at 5-6.

The foreseeable next steps in this legal battle involve a return to the district court, where procedural milestones such as scheduling conferences and discovery processes will unfold. Both AGG and UnitedHealthcare are expected to vigorously pursue the certification of a class comprising plan members adversely affected by the alleged violations. Within the ambit of the lawsuit, remedial requests span a declaratory judgment affirming ERISA and Parity Act infringements by UnitedHealthcare, an injunction mandating the reassessment of all affected claims, and the disgorgement of profits derived from the alleged wrongful conduct. This ongoing legal battle underscores the paramount importance of upholding legislative measures like the Parity Act to ensure equitable access to mental health and substance use disorder treatments within healthcare plans. As the litigation proceeds, its broader implications on healthcare coverage equity and the fundamental rights of plan members across the nation will remain a subject of intense

[1] CAL. DEP’T MANAGED HEALTH CARE, OFF. PLAN MONITORING, FINAL REPORT: FOCUSED SURVEY OF MENTAL HEALTH PARITY AND ADDICTION EQUITY ACT (MHPAEA) IMPLEMENTATION 15-16 (July 18, 2018), https://www.dmhc.ca.gov/desktopmodules/dmhc/medsurveys/surveys/355_r_MHPAEA_071818.pdf (last visited May 3, 2024).