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Benefits

Court Allows Fiduciary Duty and Mental Health Parity Claims Against TPA and Plan

EBIA  

EBIA  

Daniel R. v. UMR, 2020 WL 1188144 (D. Utah 2020)

Following the denial of residential mental health treatment benefits for a self-insured health plan participant’s child, the child’s parents sued the plan and the third-party administrator (TPA) that processed the plan’s claims. They asserted that the claim for their child’s sub-acute mental health treatment was processed using acute care criteria, constituting a breach of ERISA fiduciary duty and a violation of the federal mental health parity rules. Seeking dismissal, the TPA argued that it was an improper party to sue, and the TPA and plan both argued that there were insufficient facts to support the mental health parity claim. The court disagreed, allowing the lawsuit to proceed against both parties.

Under ERISA, money judgments are normally enforceable only against the plan—not service providers such as the TPA. Thus, the TPA argued that even if it was a fiduciary, it could not be held liable for a monetary award representing the recovery of unpaid benefits. Acknowledging this general principle, the court nevertheless pointed out that while recovery of unpaid benefits may be the parents’ primary goal, other forms of relief may be available. For example, if the court were to find that the claim was not afforded full and fair review under ERISA’s claims procedure rules, it could order the TPA to reprocess the claim. Because the court could grant relief that would be enforceable against the TPA, it ruled that releasing the TPA from the lawsuit at this point would be premature. As for the mental health parity claim, which requires showing a disparity between coverage of mental health benefits and medical or surgical benefits, the TPA and plan argued that the parents had not identified medical or surgical services analogous to the child’s treatment or facts indicating a disparity in the plan’s treatment limitations. But the court determined that the parents had identified treatment at a skilled nursing or rehabilitation facility as analogous to the child’s sub-acute residential treatment and had asserted that acute treatment standards would not have been applied to sub-acute care in the medical or surgical context. The court concluded that this was “just enough” to support the parents’ mental health parity claim.

EBIA Comment: ERISA’s statutory language does not specify who may be sued, and courts may be reluctant to dismiss TPAs from lawsuits early on, even though their ultimate financial responsibility may be limited. Likewise, as more courts allow mental health parity claims to proceed, health plan sponsors considering residential mental health treatment exclusions or limitations will need to consult their legal advisors to ensure the provisions are carefully drafted to comply with federal and state parity rules. For more information, see EBIA’s Self-Insured Health Plans manual at Section XXVI.B (“Fiduciary Considerations and Consequences of Noncompliance”). See also EBIA’s ERISA Compliance manual at Section XXXVI.H (“Who Can Be Sued in ERISA Benefits Litigation?”) and EBIA’s Group Health Plan Mandates manual at Section IX.E (“Mental Health Parity: Nonquantitative Treatment Limitations”).

Contributing Editors: EBIA Staff.

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