E. et al v. United Healthcare Services et al

Filing 67

MEMORANDUM DECISION AND ORDER denying 58 Motion to Dismiss for Failure to State a Claim. Signed by Judge David Nuffer on 11/18/19 (alt)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
PETER E. AND ERIC E.,
Plaintiffs,

MEMORANDUM DECISION
AND ORDER DENYING
DEFENDANT’S MOTION TO DISMISS

v.
UNITED HEALTHCARE SERVICES, INC.,
UNITED BEHAVIORAL HEALTH and the
KEYSIGHT MEDICAL PLAN,

Case No. 2:17-cv-00435-DN
District Judge David Nuffer

Defendants.

This case involves claims under the Employee Retirement Income Security Act of 1974
(“ERISA”) and the Mental Health Parity and Addiction Equity Act (“Parity Act”). These claims
arise from the denial of coverage for Plaintiff Eric E’s treatment at Vista Treatment Center
(“Vista”). 1 Eric E. is insured through his father’s self-funded employee welfare benefits plan
Keysight Medical Plan (the “Plan”), which is underwritten and administered by United
HealthCare Services, Inc. (“UHS”). 2 Defendants filed a Motion to Dismiss Plaintiffs’ Second
Amended Complaint arguing that Plaintiffs failed to plead sufficient facts to state a claim for
violation of the Parity Act. 3 Because Plaintiffs allege sufficient facts to state a plausible claim for
an as-applied violation of the Parity Act, Defendants’ Motion to Dismiss 4 is DENIED.

1

Second Amended Complaint at 11, docket no. 55, filed Aug. 9, 2019.

2

Id. ¶¶ 2, 4 at 1.

3

Defendants’ Motion to Dismiss the Second Cause of Action of Plaintiffs’ Second Amended Complaint (“Motion to
Dismiss”), docket no. 58, filed Sept. 9, 2019.

4

Id.

FACTUAL BACKGROUND
Eric E. suffers from multiple mental health conditions and has a history of substance
abuse. 5 Eric E. entered a California-based treatment camp and was transferred directly to Aspiro,
a Utah wilderness therapy camp in September 2014. 6 Directly after his discharge from Aspiro,
Eric E. entered Vista on December 9, 2014, and remained through August 13, 2015. 7 Vista is a
Utah-based treatment facility for adolescents with mental health and substance abuse
conditions. 8
United Behavioral Health (“UBH”) 9 covered the first two weeks of Eric E.’s treatment at
Vista. On January 22, 2015, Eric E.’s father, Peter E., received a letter from UBH denying
continued coverage of Eric E.’s treatment at Vista. 10 Peter E. received a second denial letter on
August 20, 2015. 11 Peter E. appealed the coverage determination and UBH denied the appeal on
November 11, 2015. 12 UBH’s coverage determinations cited that Eric E. was no longer qualified
for residential treatment because it was not medically necessary—Eric E. was making progress,
was not suffering withdrawal symptoms, and was not a danger to himself or others. 13 An external
review of the coverage determination by Medical Review Institute of America, Inc. upheld
UBH’s coverage determination. 14

5

Second Amended Complaint, supra note 1, ¶ 10 at 3.

6

Id. ¶20-21 at 4.

7

Id. ¶ 25 at 5.

8

Id. ¶ 6 at 2

9

UBH is an affiliate company of USH and administers and processes claims for the Plan. Id. ¶ 5 at 2.

10

Id. ¶ 27 at 5.

11

Id. ¶ 28 at 5.

12

Id. ¶¶ 29, 32-33 at 6.

13

Id. ¶¶ 27-28, 32-33 at 5-6; Motion to Dismiss, supra note 2, at 3-4.

14

Second Amended Complaint, supra note 1, ¶ 34 at 6.

2

Plaintiffs initiated this case on May 19, 2017, 15 and subsequently filed an amended
complaint on November 21, 2018. 16 Plaintiffs’ First Amended Complaint asserted two causes of
action: (1) recovery of Plan benefits pursuant to ERISA 29 U.S.C. § 1132(a)(1)(B); and (2)
violation of the Parity Act. 17 Defendants moved to dismiss Plaintiffs’ First Amended Complaint
for lack of standing and failure to sufficiently plead a Parity Act claim. 18 Defendant’s Motion to
Dismiss was denied as to the standing issue and granted as to the Parity Act claim. 19 And
Plaintiffs were given leave to file a second amended complaint to correct the deficiencies in their
Parity Act claim. 20 Plaintiffs filed their Second Amended Complaint on August 9, 2019. 21 The
Second Amended Complaint asserts two causes of action: (1) recovery of Plan benefits pursuant
to ERISA 29 U.S.C. § 1132(a)(1)(B); and (2) violation of the Parity Act. 22
DISCUSSION
Defendants seek dismissal of Plaintiffs’ claim for violation of the Parity Act pursuant to
Rule 12(b)(6) of the Federal Rules of Civil Procedure. 23 Dismissal is appropriate under Rule
12(b)(6) when the complaint, standing alone, is legally insufficient to state a claim on which
relief may be granted. 24 To adequately state a claim, each cause of action must be supported by

15

Complaint at 7-8, docket no. 2, filed May 19, 2017.

16

Amended Complaint (“First Amended Complaint”), docket no. 45, filed Nov. 21, 2018.

17

Id.

18

Defendants’ Motion to Dismiss Plaintiffs’ Amended Complaint, docket no. 46, filed Dec. 10, 2018.

19

Memorandum Decision and Order Denying in Part and Granting in Part Defendants’ Motion to Dismiss and
Granting Leave to Amend (“Order”), docket no. 54, filed July 19, 2019.

20

Id.

21

Second Amended Complaint, supra note 1.

22

Id.

23

Motion to Dismiss, supra note 2, at 13-21.

24

FED. R. CIV. P. 12(b)(6); Sutton v. Utah State Sch. for the Deaf & Blind, 173 F.3d 1226, 1236 (10th Cir. 1999).

3

sufficient, well-pleaded facts that make the claim plausible on its face. 25 In reviewing a
complaint under Rule 12(b)(6), factual allegations are accepted as true and reasonable inferences
are drawn in a light most favorable to the plaintiff. 26 However, “assertions devoid of factual
allegations” that are nothing more than “conclusory” or “formulaic recitation” of law are
disregarded. 27
Plaintiffs sufficiently state a plausible claim for an as-applied violation of the Parity Act
Defendants argue that Plaintiffs fail to plead the necessary facts to state a claim for
violation of the Parity Act. 28 The Parity Act requires plans to ensure “treatment limitations
applicable to mental health or substance use disorder benefits are no more restrictive than the
predominant treatment limitations applied to substantially all medical and surgical benefits
covered by the plan.” 29 A Parity Act claim may allege a facial violation (an express limitation
written in the plan) or an as-applied violation (a limitation applied through interpretation of the
plan). 30
To sufficiently plead a facial Parity Act violation, the plaintiff must identify an express
treatment limitation in the plan “and compare it to a relevant [medical/surgical] analogue.” 31
Here, Plaintiffs do not allege that the Plan contains an express limitation that would support a
facial Parity Act violation. Plaintiffs do, however, allege an as-applied Parity Act violation. 32

25

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

26

GFF Corp. v. Associated Wholesale Grocers, Inc., 130 F.3d 1381, 1384 (10th Cir. 1997).

27

Ashcroft v. Iqubal, 556 U.S. 662, 678, 681 (2009).

28

Motion to Dismiss, supra note 2, at 13-21.

29

29 U.S.C. § 1185(a)(3)(A)(ii).

30

A.Z. v. Regence Blueshield, No. C17-1292-TSZ, 333 F. Supp. 3d 1069, 1081 (W.D. Wash. 2018); Anne M. v.
United Behavioral Health, No. 18-80773-CIV-MIDDLEBROOKS, 342 F. Supp. 3d 1311, 1319 (S.D. Fla. 2018).

31

A.Z., 333 F. Supp. 3d. at 1079.

32

Second Amended Complaint, supra note 1, at ¶¶ 44-51 at 8-10.

4

To sufficiently plead an as-applied Parity Act violation, the plaintiff must allege “that a
defendant differentially applied a facially neutral plan term.” 33 “[A]t the very least, a plaintiff
must identify” the medical or surgical treatments “that are analogous” to the mental health or
substance abuse treatments “and allege that there is a disparity in their limitation criteria.” 34
Plaintiffs’ allege in their Second Amended Complaint that UBH differentially evaluates
the medical necessity of treatment at mental health treatment facilities like Vista and the medical
necessity of treatment at analogous medical/surgical facilities, i.e. sub-acute inpatient treatment
programs like skilled nursing facilities, inpatient hospice care, and rehabilitation facilities. 35
Unlike Plaintiffs’ First Amended Complaint, Plaintiff’s Second Amended Complaint does not
simply rely on “[t]he conclusory allegation that limitation criteria for medically necessary care of
medical or surgical conditions are not applied ‘in the manner’ that Defendants excluded coverage
for Eric’s treatment[.]” 36 Plaintiffs still generally allege disparity regarding acute and sub-acute
treatments. 37 But they now also allege that the Plan differentially evaluates intermediate level
treatment claims, applying “generally accepted standards of medical practice” in
medical/surgical coverage determinations while applying criteria deviating from generally
accepted standards in mental health coverage determinations. 38 Plaintiffs further allege that this

33

Anne M., 2019 WL 1989644, *2.

34

Peter E. v. United Healthcare Services, Inc., Case No. 2:17-cv-00435-DN, 2019 WL 3253787, *3 (D. Utah. July
19, 2019) (quoting Welp v. Cigna Health & Life Ins. Co., No. 17-80237-CIV-MIDDLEBROOOKS, 2017 WL
3263138 (S.D. Fla. July 20, 2017)).
35

Second Amended Complaint, supra note 1, ¶ 45 at 8.

36

Order, supra note 19, at 8.

37

Second Amended Complaint, supra note 1, ¶¶ 45-48 at 8-9.

38

Id. ¶ 51 at 10.

5

process resulted in a disparity where equivalent mental health benefits were denied when the
analogous levels of medical or surgical benefits would have been paid. 39
Therefore, Plaintiffs have identified medical or surgical treatments that are analogous to
the mental health and substance abuse treatments Eric E. received, and they allege facts showing
that there is a disparity in limitation criteria. Although Plaintiffs’ Second Amended Complaint
includes conclusory and formulaic recitations of the law, Plaintiffs’ factual allegations are
sufficient to state a plausible claim for an as-applied violation of the Parity Act.
ORDER
THEREFORE, IT IS HEREBY ORDERED that Defendants’ Motion to Dismiss 40 is
DENIED.
Signed November 18, 2019.
BY THE COURT

________________________________________
David Nuffer
United States District Judge

39

Id.

40

Docket no. 58, filed Sept. 9, 2019.

6