ERISA Class Action Review – 2025

In Medical Society Of The State of New York, et al. v. UnitedHealth Group Inc. , 2024 U.S. App. LEXIS 1051 (2d Cir. Jan. 17, 2024), the plaintiffs were participants in a United-administered health benefits plan. Id. at *2. They filed a class action against United when they were denied payment of facility fees for outpatient surgery venues in New York State. Id. Their payments were denied on the grounds that their plans only covered fees for procedures performed at facilities “licensed” in New York and that these outpatient facilities were not licensed. Id. The district court dismissed the action after a five-day bench trial. Id. On appeal, the Second Circuit affirmed this judgment. Id. at *3. In Medical Society, the plaintiffs first argued that the district court considered evidence outside the administrative record. Id. However, the Second Circuit noted that a district court may exercise its discretion to admit additional evidence for good cause. Id. at *3-4. The Second Circuit held that when the plaintiffs challenge the claims- adjudication process, it is not an abuse of discretion for a district court to admit additional evidence related to that process. Id. at *5. The plaintiffs next challenged the district court’s conclusion that United’s denial of payments was reasonable based on the plan terms. Id. at *7. When reviewing de novo the district court’s legal conclusion that United’s interpretation of the plan was reasonable, the Second Circuit applied an arbitrary-and- capricious standard. Id. at *8. Using this standard, the Second Circuit asserted that the district court’s conclusion was “not without reason.” Id. at *8-9. The district court reasonably considered the fact that United’s construction of the term “license” was consistent with Medicare reimbursement policies and the practices of all major private payers, and so the outpatient facilities in this case were not included within the definition of “licensed” facilities. Id. at *9. As in previous years, a number of cases challenging the denial of benefits involved the application of the Mental Health Parity and Addiction Equity Act (Parity Act), a 2008 law that amended the ERISA by requiring health insurers to treat mental health and substance abuse disorders the same as physical conditions. See 29 U.S.C. § 1185a. In Ryan S., et al. v. UnitedHealth Group, Inc. , 98 F.4th 965 (9th Cir. 2024), the plaintiff brought a putative class action against an insurer for applying a more stringent review process to benefits claims for outpatient, out-of- network mental health and substance use disorder treatment than to otherwise comparable medical/surgical treatment in violation of the Parity Act. Id. at 968. The district court dismissed the plaintiff’s claim, but the Ninth Circuit reversed this dismissal. Id. at 969. The Ninth Circuit explained that an ERISA plan can violate the Parity Act in three different ways, including: (i) by explicitly excluding some form of treatment for mental health and substance abuse disorders that is offered for comparable medical/surgical issues; (ii) by applying a facially neutral plan term in an unequal way between mental health and substance abuse disorders and medical/surgical benefits; or (iii) by applying a more stringent internal process to mental health and substance abuse claims than to medical/surgical claims. Id. at 969. The Ninth Circuit held that the plaintiff sufficiently alleged the third type of violation. The Ninth Circuit clarified that for this type of internal process claim, a plaintiff does not need to allege a “categorical” practice or a uniform denial of his benefits. Id. at 972. Moreover, a plaintiff does not need to identify an analogous category of claims with precision, but rather can define an analogous category quite broadly. Id. Additionally, the plaintiff does not need to specify the different process which allegedly applies to medical/surgical benefits, because a plaintiff would not have any basis to determine this process. Id. Accordingly, it was sufficient for the plaintiff to allege the existence of a procedure used in assessing mental health and substance use disorder benefit claims that is more restrictive than those used in assessing other claims under the same classification – in this case outpatient, out-of-network treatment. Id. at 972-73. The Ninth Circuit clarified that simply alleging a denial of a plaintiff’s claims would not be sufficient to allege the existence of a more restrictive procedure. Id. at 973. However, in this case, the plaintiff also cited to a 2018 report by the California Department of Managed Healthcare concluding that the insurer processed mental health and substance use disorder claims using a different algorithmic process. Id. The Ninth Circuit emphasized that this report was enough to place the plaintiff’s allegations “in a context that raises a suggestion” of wrongdoing. Id. at 974 (citing Twombly , 550 U.S. 544, 557 (2007)). The Ninth Circuit also suggested that a violation of the Parity Act would itself be a breach of fiduciary duty. Id. In Midthun-Hensen, et al. v. Group Health Cooperative Of South Central Wisconsin, Inc. , 110 F.4th 984 (7th Cir.

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