Plan Administrator and Claims Administrator Liable for Mental Health Parity and ERISA Disclosure Violations

A self-insured health plan denied coverage for a minor child’s residential mental health treatment, finding that the treatment was not medically necessary. The child’s family sued the plan, plan administrator, and claims administrator for (1) denial of benefits under the terms of the plan, (2) violation of the Mental Health Parity and Addiction Equity Act (MHPAEA), and (3) violation of ERISA’s disclosure requirements.

The court ruled that there had been no denial of benefits covered under the plan in violation of ERISA because the administrators followed the plan’s terms—including its criteria for medical necessity—throughout the claims and appeal process. However, the court found that the criteria administrators used to determine medical necessity for mental health benefits was more stringent than that used for medical/surgical benefits. For medical/surgical benefits in the same classification (residential treatment centers), the administrators relied solely on plan language to determine medical necessity. But for comparable mental health benefits, the administrators required satisfaction of both the plan language and the “InterQual Criteria,” an additional screening tool. Thus, the court explained, claimants seeking medical/surgical benefits had “one less hurdle to clear.” Finding a mental health parity violation, the court directed the parties to submit further arguments as to the appropriate remedy. The court also determined that the administrator had violated ERISA’s disclosure requirements by ignoring the family’s requests for the “instruments under which the plan operated”—specifically, the InterQual Criteria used to deny the claim and the administrative services agreement between the plan administrator and the claims administrator. For this failure, the court imposed statutory penalties of $100 per day for the delay in providing the documents—a total penalty of $123,100.

EBIA Comment: In processing claims for mental health or substance use disorder benefits, administrators must not only comply with the mental health parity rules but also with ERISA’s requirements to follow the terms of the plan document, to disclose certain documents upon request, and to follow stringent claims and appeals procedures. Courts generally give a great deal of deference to plan decisions but are less inclined to do so when proper procedures are not followed (see, for example, our Checkpoint article). In addition, courts have discretion when granting penalties for failure to furnish requested information. The imposition of a penalty very near the $110-per-day maximum would seem to indicate that the court viewed this issue quite seriously. For more information, see EBIA’s Group Health Plan Mandates manual at Sections IX.E (“Mental Health Parity: Nonquantitative Treatment Limitations”) and IX.G (“Disclosure of Criteria for Medical Necessity Determinations, Claims Denials, and Other Document Requests”) and EBIA’s ERISA Compliance manual at Section XXV (“Participant Requests and Other Disclosures”). See also EBIA’s Self-Insured Health Plans manual at Section XXVI (“Claims and Appeals”).

Contributing Editors: EBIA Staff.