Class Action Challenging Insurer’s Denial of TMS Treatment for Depression Proceeds to Trial

Participants in group health plans administered by the same insurer have filed a class action lawsuit for the insurer’s denial of coverage for Transcranial Magnetic Stimulation (TMS) as a treatment for depression. The participants assert that the insurer improperly developed and implemented a policy to deny TMS coverage as an experimental and investigational treatment. In doing so, the insurer allegedly breached its fiduciary duties of prudence and loyalty under ERISA, and violated the plans’ terms by wrongfully denying claims for TMS benefits. The participants seek retroactive equitable relief, asking the court to order the insurer to reprocess class members’ requests for TMS coverage that were denied over a seven-year period. In response, the insurer asked the court to rule in its favor without a trial, arguing (among other things) that its interpretation of the plans was not arbitrary and capricious.

The court denied the insurer’s request, finding that there were issues of material fact as to whether the denial of TMS benefits was based on an arbitrary and capricious interpretation of the class members’ plans. The insurer had classified TMS as experimental and investigational because its value and effectiveness had not been established through reliable clinical research—a standard closely aligned with the wording in the plan documents. However, testimony by individuals who developed the insurer’s TMS policy indicated that the insurer actually used a “superior effectiveness” standard to classify TMS as experimental and investigational during the relevant time period. Second Circuit precedent previously established that an ERISA administrator acts arbitrarily and capriciously if it requires a treatment to be superior to an existing treatment to avoid exclusion under a plan’s experimental/investigational language when the language itself requires only that the treatment be as effective (not more effective) than alternatives. Finding the testimonial evidence sufficient to raise an issue of material fact as to whether the insurer acted arbitrarily and capriciously by denying TMS benefits based on requirements not found in the class members’ plans, the court denied the insurer’s motion for summary judgment and allowed the case to proceed.

EBIA Comment: Although health plans commonly exclude coverage for experimental or investigational treatments, plan sponsors should draft the exclusions as specifically as possible. Policies and procedures should be included in the plan document, along with a general reservation of authority to exclude other procedures determined to be experimental or investigational under stated, objective criteria. Just as importantly, the procedures and criteria must be followed in operation. Experimental treatment exclusions must also comply with other applicable laws and regulations, including the Americans with Disabilities Act, the federal mental health parity rules, and the health care reform rules regarding coverage of clinical trials. For more information, see EBIA’s Self-Insured Health Plan manual at Section XIII.E.2.b (“Experimental Procedure Exclusions”). See also EBIA’s Group Health Plan Mandates manual at Sections IX.E (“Mental Health Parity: Nonquantitative Treatment Limitations”), XIII.C (“Coverage for Individuals Participating in Clinical Trials”), and XX.E (“Exclusions and Limitations That Raise Potential ADA Issues”).

Contributing Editors: EBIA Staff.