A.Z. v. Regence BlueShield et al

Filing 50

ORDER re defendants' 40 Motion to Dismiss; denying defendants' motion to dismiss plaintiff's first claim; granting defendants' motion to dismiss plaintiff's second claim; denying defendants' motion to dismiss plaintiff's third and fourth claims. Signed by Judge Thomas S. Zilly. (SWT)

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

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A. Z., by and through her parents and
guardians, E.Z. and D.Z.,
individually, and on behalf of the
JUNO THERAPEUTICS, INC.,
HEALTH BENEFITS PLAN, and on
behalf of similarly situated individuals
and plans,

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C17-1292 TSZ

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Plaintiff,
ORDER

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v.

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REGENCE BLUESHIELD; and
CAMBRIA HEALTH SOLUTIONS,
INC., f/k/a THE REGENCE GROUP,

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Defendants.

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THIS MATTER comes before the Court on the defendants’ Motion to Dismiss,
docket no. 40 (the “Motion”). 1 Having reviewed all papers filed in support of, and in

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On February 15, 2018, the Court dismissed without prejudice the original complaint, docket no. 1, for
failure to state a claim. See docket no. 33. A.Z. filed the operative amended complaint, docket no. 36
22 (the “Amended Complaint”), on March 16, 2018.

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ORDER - 1

1 opposition to, the Motion, 2 including the notices of supplemental authority submitted by
2 the parties, see docket nos. 47–49, the Court enters the following order.
3 Background
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I.

5

Introduction

Plaintiff A.Z. (“A.Z.”) is a 16-year-old female who was diagnosed with

6 depression. Amended Complaint at ¶¶ 5, 17. Following her doctors’ recommendation,
7 she attended an outdoor residential mental health program in Oregon. Id. at ¶ 19. She
8 sought reimbursement for the costs of the program under her parents’ health benefit plan,
9 but was denied. A.Z., by and through her parents and guardians and on behalf of the
10 Juno Therapeutics, Inc. Health Benefit Plan (the “Plan”), 3 brings this putative class action
11 against defendants Regence Blueshield (“Regence”) and Cambria Health Solutions Inc.
12 (“Cambria” and, collectively with Regence, “Defendants”) 4 seeking remedies under the
13 Employee Retirement Income Security Act of 1974 (“ERISA”) for Regence’s alleged
14 failure to comply with the terms of the Plan and denial of coverage for the services she
15 received at the outdoor mental health program she attended. See Amended Complaint at
16 ¶¶ 1–4.
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Plaintiff’s Opposition to Defendants’ Motion to Dismiss, docket no. 44, is referred to as the

20 “Opposition.” Defendants’ Reply in Support of Motion to Dismiss, docket no. 46, is referred to as the
“Reply.”
3

The Plan is attached to the Amended Complaint at docket no. 36-1.

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“Regence Blueshield is a Washington non-profit corporation and Cambria Health Solutions, Inc., an

22 Oregon non-profit private corporation, is the . . . sole member of Regence Blueshield.” Corporate
Disclosure Statement, docket no. 24.

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ORDER - 2

1

Regence underwrote, insured, and administered the Plan’s health benefits until

2 January 1, 2017. Amended Complaint at ¶ 7. A.Z. is a beneficiary of the Plan whose
3 coverage is through her parent’s employment with Juno Therapeutics, Inc. Id. at ¶ 5.
4 A.Z.’s depression reached a level that “required treatment at a licensed
5 outdoor/wilderness behavioral healthcare program.” Id. at ¶¶ 17–18. Her doctors
6 recommended that she receive behavioral health treatment at “Evoke, an outdoor
7 residential mental health program in Oregon.” Id. at ¶ 19.
8

II.

9

A.Z.’s Requested Coverage

A.Z. sought preauthorization from Regence for the Evoke treatment, but Regence

10 denied her request. Id. at ¶¶ 29–30. Regence explained that A.Z.’s participation in a
11 wilderness program was not subject to preauthorization or eligible for benefits because it
12 was excluded from the Plan. Id. at ¶ 30, Ex. C. Unable to delay her treatment, A.Z.
13 began the Evoke wilderness program and appealed Regence’s denial of coverage. Id. at
14 ¶¶ 34, 38. Regence denied the appeal, reaffirming that the Plan does not cover the
15 requested services and “specifically excludes wilderness therapy programs from
16 coverage.” Id. at ¶¶ 35, 39. By the time she completed her treatment at Evoke, A.Z. had
17 incurred nearly $50,000 in expenses, which Regence refused to reimburse. See Amended
18 Complaint, Exhibit 11 (periodic statements submitted by Evoke).
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III.

The Evoke Wilderness Program
The State of Oregon licenses Evoke as an “outdoor youth program.” Id. at ¶ 20,

21 Exhibit B (“Certificate of Approval to Operate a Child Caring Agency”). Evoke’s
22 licensing certificate confirms that it is authorized to operate its program “under
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ORDER - 3

1 provisions of Oregon Revised Statutes 418.205 to 418.327 and related statutes . . . .” Id.,
2 Exhibit B. Because it is a certified “outdoor youth program,” Evoke is authorized by
3 statute to provide, in an outdoor living setting, services to children who have mental
4 health problems. Id.
5

Consistent with its statutory authority, Evoke’s wilderness program “is a personal

6 intervention that utilizes nature, small-group outdoor living, backpacking, one-on-one
7 therapy, and group therapy.” Evoke Therapy Programs, Wilderness Therapy (March
8 2017), https://evoketherapy.com/assets/Uploads/Wilderness-Therapy-3-17.pdf. Among
9 other services, Evoke’s wilderness program provides therapy from “experienced Master’s
10 or Ph.D. level therapists” who “create customized treatment plans for each participant
11 and their families and offer guidance and support to meet their unique challenges.” Id.
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IV.

A.Z.’s Claims for Relief
A.Z. now brings suit under ERISA, on behalf of a putative class, contending that

14 Defendants have improperly denied benefits under the Plan and breached their fiduciary
15 duties to adjudicate benefits determinations in violation of applicable law, including the
16 Paul Wellstone and Pete Domenici Mental Health Parity and Addition Equity Act, see 29
17 U.S.C. § 1185a (the “Parity Act”), and the Affordable Care Act (the “ACA”), 42 U.S.C. §
18 300gg-5(a); 29 U.S.C. § 1185d. See Amended Complaint at ¶¶ 2–4, 63–73, 98–103.
19

A.Z. asserts four claims. Her first claim alleges that Defendants’ denial of the

20 costs of attending the Evoke wilderness program was improper under ERISA and seeks
21 to recover any benefits due, along with a declaration of rights to coverage. Id. at ¶¶ 84–
22 88. Her second claim asserts that Defendants’ improper denial of coverage was a breach
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ORDER - 4

1 of Defendants’ fiduciary duties imposed by ERISA. Id. at ¶¶ 89–95. Her third claim
2 seeks to enforce the Plan, alleges a violation of the Parity Act and the ACA, and seeks to
3 recover the benefits due to A.Z. under the Plan. Id. at ¶¶ 96–103. Her fourth claim asks
4 for equitable remedies under ERISA for Defendants’ violation of the Parity Act and the
5 ACA. Id. at 104–06.
6

Defendants put forth three primary arguments in support of their Motion seeking

7 dismissal of the Amended Complaint under Federal Rule of Civil Procedure 12(b)(6).
8 First, Defendants argue that A.Z. has failed to allege sufficient facts establishing that the
9 Plan covered the Evoke wilderness program in the first instance, thereby precluding
10 recovery. Motion at 1, 7–11. Second, Defendants contend that the “Counseling in the
11 Absence of Illness” exclusion expressly excludes coverage for the Evoke wilderness
12 program. Id. at 1, 11–12. Third, Defendants argue that A.Z. has failed to adequately
13 plead Parity Act and ACA violations. Id. at 13–21.
14 Discussion
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16

I.

Motion to Dismiss Standard
A complaint challenged by a Rule 12(b)(6) motion to dismiss must offer “more

17 than labels and conclusions” and contain more than a “formulaic recitation of the
18 elements of a cause of action.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
19 The complaint must indicate more than mere speculation of a right to relief. Id. When a
20 complaint fails to adequately state a claim, such deficiency should be “exposed at the
21 point of minimum expenditure of time and money by the parties and the court.” Id. at
22 558. A complaint may be lacking for one of two reasons: (i) absence of a cognizable
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ORDER - 5

1 legal theory, or (ii) insufficient facts under a cognizable legal claim. Robertson v. Dean
2 Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984). In ruling on a motion to
3 dismiss, the Court must assume the truth of the plaintiff’s allegations and draw all
4 reasonable inferences in the plaintiff’s favor. Usher v. City of Los Angeles, 828 F.2d 556,
5 561 (9th Cir. 1987). The question for the Court is whether the facts in the complaint
6 sufficiently state a “plausible” ground for relief. Twombly, 550 U.S. at 570.
7

Plaintiff has attached various documents to the Amended Complaint, including the

8 Plan and documents regarding A.Z.’s appeal of Defendants’ decision to deny coverage.
9 In deciding the Motion, the Court will consider all of these documents attached to the
10 Amended Complaint without converting the Motion to one for summary judgment. See
11 Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). The Court
12 may also consider evidence subject to judicial notice, including Evoke’s website. See
13 United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003); Fed. R. Evid. 201(b).
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II.

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Coverage Under the Plan (First and Second Claims)
A.Z.’s first and second claims hinge on whether the Plan provided coverage for

16 the Evoke wilderness program. If no coverage exists, then A.Z. cannot succeed on her
17 claim to recover benefits or for breach of fiduciary duties for denying such benefits. 5 The
18 Amended Complaint alleges that the Plan provides coverage to A.Z. for “Mental Health
19 Services” which specifically includes “Residential Care” provided by a licensed facility.
20 Amended Complaint at ¶¶ 1, 25–26. The Amended Complaint asserts that Evoke’s
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As discussed below, A.Z. could arguably still succeed on a Parity Act or ACA theory even in the
absence of coverage under the Plan.

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ORDER - 6

1 wilderness program is a covered facility within the corresponding terms of the Plan. Id.
2 at ¶¶ 27–28. Defendants dispute this characterization and argue that the program is not a
3 benefit covered under the Plan.
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A.

The Plan covers Mental Health Services for treatment of Mental
Health Conditions

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The Plan covers “Mental Health Services for treatment of Mental Health
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Conditions.” Plan at Regence 0041. Clarifying this term, the Plan provides the following
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definitions:
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Mental Health Conditions means mental disorders in the most recent
edition of the Diagnostic and Statistical Manual of Mental Disorders
published by the American Psychiatric Association except as otherwise
excluded in this [Plan].

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Mental Health Services means Medically Necessary outpatient services,
Residential Care, partial hospital program or inpatient services provided by
a licensed facility or licensed individuals with the exception of Skilled
Nursing Facility Services . . . .

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Residential Care means care received in an organized program which is
provided by a residential facility or Hospital, or other facility licensed, for
the particular level of care for which reimbursement is being sought, by the
state in which the treatment is provided.

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16 Id. The parties’ coverage dispute centers on these definitions.

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A.Z. argues that Defendants waived any argument that treatment at Evoke is not covered under these
terms of the Plan. Opposition at 1–2, 6–7, 24. In general, a plan administrator cannot raise new reasons
for denying coverage if it did not raise them during the administrative process. Harlick v. Blue Shield of
Cal., 686 F.3d 699, 719–20 (9th Cir. 2012). Under this rule, A.Z. posits that Defendants are restricted to
relying on the Plan’s “Counseling in the Absence of Illness” exclusion, since that was the only reason
Defendants offered in denying coverage prior to this federal court litigation. The Court disagrees. While
the focus of Defendants’ denial was certainly on the “Counseling in the Absence of Illness” exclusion, the
record suggests that Defendants conveyed to A.Z. that they were denying coverage “[a]ccording to the
terms of [the] health care plan” in general. See, e.g., Amended Complaint, Exhibit D (October 17, 2016,
denial letter). Moreover, the exclusion itself extends only to services “not expressly described in this plan
as a Covered Service.” Plan at Regence 55. Thus, out of an abundance of caution, the Court finds it

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ORDER - 7

1
2

1.

Mental Health Condition

The Amended Complaint alleges that “A.Z. has a diagnosed mental illness,

3 depression, which is contained in the most recent edition of the DSM [Diagnostic and
4 Statistical Manual of Mental Disorders].” Amended Complaint at ¶ 24. Thus, A.Z. has
5 alleged that she suffers from a Mental Health Condition expressly covered by the Plan.
6 Plan at Regence 0041. A.Z. alleges that, to treat this condition, her doctors recommended
7 that she attend Evoke’s wilderness program. Amended Complaint at ¶ 19.
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2.

Mental Health Services & Residential Care

Addressing the Plan’s “Residential Care” definition, the parties’ dispute whether

10 the Evoke wilderness program was (1) an organized program (2) provided by a facility
11 that was (3) licensed for the particular level of care for which reimbursement was sought.
12 As to the first issue, the Amended Complaint alleges that “Evoke is, and was while A.Z.
13 received treatment, licensed as an ‘outdoor youth program.’” Amended Complaint at
14 ¶ 20, Exhibit B. Evoke’s licensing certificate expressly authorizes Evoke to operate an
15 “Outdoor Youth Program” pursuant to ORS 418.205 through .327. Id., Exhibit B. ORS
16 418.205(6)(a) defines “outdoor youth program” as “a program that provides, in an
17 outdoor living setting, services to children who have . . . mental health problems . . . .”
18 See also Amended Complaint at ¶ 21 (quoting the statute). The Amended Complaint’s
19 allegations that Evoke’s wilderness program is “an organized program” licensed by the
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21 necessary to determine whether the Amended Complaint has plausibly alleged that the Evoke wilderness
program is covered by the Plan but for the “Counseling in the Absence of Illness” exclusion. For these

22 same reasons, the Court does not reach the issue of whether a procedural violation gave rise to coverage.
See Reply at 1–3.

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ORDER - 8

1 State of Oregon fall squarely within the definition of Residential Care provided by the
2 Plan. Plan at Regence 0041.
3

Concerning whether Evoke is a “facility” within the definition of Residential Care,

4 the Amended Complaint alleges that Evoke is both a “residential facility” and “facility”
5 under the Plan’s definition of Residential Care. Amended Complaint at ¶ 2. The Plan
6 does not define the word “facility,” and Defendants urge the Court to apply the term’s
7 ordinary meaning in arguing that a “facility” should be limited to a “brick and mortar”
8 structure. See Motion at 9.
9

Defendants’ “brick and mortar” argument is unconvincing, as the ordinary

10 meaning of “facility” is not so restrictive. The common dictionary definition of “facility”
11 supplied by Defendants includes “something . . . that is . . . established to serve a
12 particular purpose.” Facility, Merriam-Webster’s Dictionary (11th ed. 2018), available
13 at https://www.merriam-webster.com/dictionary/facility. That same dictionary also
14 provides an alternative definition of facility, which Defendants appear to ignore:
15 “something that makes an action, operation, or course of conduct easier[.]” Id. Drawing
16 all inferences in favor of A.Z., as it must on a motion to dismiss, the Court concludes that
17 Evoke’s wilderness program could plausibly qualify as a “facility” under both definitions.
18 On the one hand, A.Z. alleges that Evoke was established to serve the particular purpose
19 of providing treatment to children suffering from various conditions, including
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ORDER - 9

1 depression. See, e.g., Amended Complaint at ¶¶ 1, 3, 19–21. 7 On the other hand, the
2 Amended Complaint alleges that the Evoke wilderness program is “something” that
3 makes the treatment of mental health disorders in children easier. The Court disagrees
4 with Defendants’ myopic view of what a “wilderness program” is and, for purposes of
5 resolving the instant Motion, concludes that A.Z. has plausibly alleged that Evoke is a
6 facility within the definition of Residential Care. 8
7

Finally, the Court is satisfied that it is at least plausible that Evoke was “licensed

8 for the particular level of care for which the reimbursement is being sought.” Plan at
9 Regence 0041. The Claim Forms attached to the Amended Complaint as Exhibit 11
10 show that Evoke sought reimbursement for “PSYCH-OUTDOOR B/H PROGRAM”
11 using billing code “1001.” See Amended Complaint, Exhibit F (Evoke Claim Forms).
12 This description aligns with the level of care that Evoke is authorized to provide under its
13 license issued by the State of Oregon. See ORS 418.205(6)(a).
14

Ignoring the description Evoke used in seeking reimbursement, Defendants argue

15 that Evoke improperly sought reimbursement using the “1001” code, which should be
16 reserved for “residential treatment.” Motion at 11; Reply at 5–6. Defendants conclude
17 that because Evoke was not licensed to provide residential treatment, it sought
18 reimbursement for a level of care that it was not licensed to provide. Id. Even if
19
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The same conclusion can be drawn by applying the Oxford Dictionary definition, which explains that a

21 “facility” is “[a] place, amenity, or piece of equipment provided for a particular purpose.” Facility,
Oxford English Dictionary (2nd ed. 1989). The Amended Complaint adequately establishes that Evoke
provides its wilderness program as a place where children can be treated for mental disorders.
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The Court therefore need not determine whether Evoke is a “residential facility.”

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ORDER - 10

1 Defendants are correct—an issue that is best left for the discovery phase of this
2 litigation—the competing inference, if any, created by Evoke’s use of the “1001” code
3 must be resolved against Defendants and in A.Z.’s favor. Defendants’ argument is
4 therefore insufficient to warrant dismissal of A.Z.’s first and second claims.
5

Together, the Amended Complaint plausibly alleges that the Evoke wilderness

6 program was an “organized program” and a “facility” licensed for the particular level of
7 care for which reimbursement was sought. Thus, the care that Evoke provided to A.Z.
8 was “Residential Care” falling within the Plan’s definition of “Mental Health Services.”
9 Because A.Z.’s depression is a “Mental Health Condition” under the Plan, the Court is
10 satisfied that the treatment she received at the Evoke wilderness program is plausibly
11 covered by the Plan.
12

B.

13

The Amended Complaint also alleges that Defendants improperly denied coverage

Whether Evoke’s wilderness program is excluded

14 by relying on the Plan’s “Counseling in the Absence of Illness” exclusion. Amended
15 Complaint at ¶¶ 1–4, 44–53, 56, 59–62. Defendants argue that A.Z. “fails to assert
16 plausible assertions that the ‘Counseling in the Absence of Illness’ exclusion does not
17 apply under the plain language of the Plan.” Motion at 11–12. The Plan’s Counseling in
18 the Absence of Illness exclusion provides that:
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Services for counseling in the absence of illness, not expressly described in
this plan as a Covered Service, will not be covered. Examples of noncovered services: educational, social, image, behavioral or recreational
therapy; sensory movement groups; marathon group therapy; sensitivity
training; Employee Assistance Program (EAP) services; [and] wilderness
programs . . . .

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ORDER - 11

1 Id. at Regence 0055. Nowhere else in the Plan are wilderness or outdoor programs
2 mentioned or referenced.
3

On its face, this exclusion only applies in the absence of illness not described in

4 the Plan as Covered Service. The Amended Complaint alleges that A.Z. was diagnosed
5 with an illness (depression) and attended the wilderness program to treat that illness. It
6 makes no difference that the exclusion lists “wilderness programs” as an example of a
7 non-covered service, as that example is only illustrative of situations where wilderness
8 program services are rendered “in the absence of illness.” 9 These allegations are enough
9 to plausibly establish that the Counseling in the Absence of Illness exclusion may not
10 apply. 10 The Court DENIES the Motion to dismiss the first and second claims on this
11 basis. 11
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9

To the extent the exclusion’s reference to “wilderness programs” creates any ambiguity, such ambiguity
15 must be resolved in A.Z.’s favor at this stage of the litigation. Blankenship v. Liberty Life Assur. Co., 486
F.3d 620, 625 (9th Cir. 2007).
10

Defendants suggest that “[i]t is within the grasp of a person of ordinary intelligence and experience to
comprehend that the contract’s exclusion of ‘wilderness programs’ would operate to exclude the Evoke
wilderness program.” Motion at 12. This argument ignores the question presented: whether Defendants
17 improperly applied the exclusion in denying coverage to A.Z. The Court finds that the Amended
Complaint has adequately alleged coverage and that Defendants improperly denied coverage.

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Defendants also argue that A.Z. lacks standing to seek injunctive and declaratory relief under Section
1132(a)(1) because she cannot demonstrate a sufficient likelihood of future injury. Motion at 22–24.
A.Z., on behalf of the putative class, seeks “a declaration of their rights to coverage of medically
necessary mental health treatment in outdoor-wilderness behavioral programs without the application of
Regence’s blanket exclusions and limitations.” Amended Complaint at ¶ 88. Consistent with this
allegation, an ERISA beneficiary may bring a civil action to clarify her rights to future benefits under a
plan and may do so without showing a threat of future harm. A.H. v. Microsoft Corp. Welfare Plan, No.
C17-1889-JCC, 2018 WL 2684387, at *8 (W.D. Wash. June 5, 2018) (Coughenour, J.) (citing Horvath v.
Keystone Health Plan E., Inc., 333 F.3d 450, 456 (3d Cir. 2003)). The Court declines to dismiss A.Z.’s
first claim on this basis.

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ORDER - 12

1

C.

Whether A.Z. has adequately pleaded Plan losses in support of her
second claim for breach of fiduciary duties

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Defendants also argue that the Court should dismiss Plaintiff’s second claim for
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breach of fiduciary duties under 29 U.S.C. § 1132(a)(2) for failing to plead losses to the
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Plan. Motion at 21. A.Z.’s second claim for breach of fiduciary duties merely contains
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the conclusory allegation that A.Z. “seeks recovery on behalf of the Plan for its losses.”
6
A.Z. has not, however, offered any supporting allegations suggesting that the denial of
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coverage for wilderness programs has caused losses to the Plan itself. This allegation is
8
therefore insufficient to state a claim for relief under 29 U.S.C. § 1132(a)(2). A.H., 2018
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WL 2684387, at *8–9 (concluding that a request for “non-monetary equitable relief” does
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not save this deficiency). For this reason, the Court DISMISSES Plaintiff’s second claim
11

with prejudice. 12

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III.

Parity Act Violation (Third and Fourth Claims)

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Finding that the Amended Complaint plausibly alleges coverage under the Plan,
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the Court turns to A.Z.’s third and fourth claims. The gravamen of those claims is
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whether Defendants’ alleged exclusion of benefits violated the Parity Act. Under the
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Parity Act, a group health plan must ensure that (1) the “treatment limitations” applicable
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to mental-health benefits are “no more restrictive than the predominate treatment
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limitations applied to substantially all medical and surgical benefits covered by the plan”
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and (2) “there are no separate treatment limitations that are applicable only with respect
20
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The Court dismissed A.Z.’s original version of this claim with leave to amend on the same basis.

22 Plaintiff has failed to address this issue. See Complaint (Class Action), docket no. 1, at ¶¶ 28–35; docket
no. 33.

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ORDER - 13

1 to mental health or substance use disorder benefits.” 29 U.S.C. § 1185a(a)(3)(A)(ii). The
2 implementing regulations provide that a plan:
3

may not impose a nonquantitative treatment limitation with respect to
mental health . . . benefits in any classification unless, . . . any processes,
strategies, evidentiary standards, or other factors used in applying the
nonquantitative treatment limitation to mental health . . . benefits in the
classification are comparable to, and are applied no more stringently than,
the processes, strategies, evidentiary standards, or other factors used in
applying the limitation with respect to medical surgical/benefits in the
classification.

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7

29 C.F.R. § 2590.712(c)(4)(i). 13 Nonquantitative treatment limitations may include
8
“restrictions based on . . . facility type.” 29 C.F.R. § 2590.712(c)(4)(ii)(H).
9
The pertinent inquiry is whether Defendants’ refusal to cover “wilderness
10
programs” is an exclusion that applies equally to medical/surgical benefits and mental
11
health or substance use disorder benefits. The Amended Complaint alleges that Regence
12
“excludes coverage of outdoor/wilderness behavioral healthcare programs for mental
13
illnesses, even though it covers medical treatment provided in other types of intermediate
14
residential programs, such as skilled nursing care.” Amended Complaint at ¶ 2. “While
15
Regence generally covers medical and surgical services when provided in intermediate
16
settings, it has a practice of excluding wilderness therapy – a form of intermediate
17
therapy to treat mental illnesses. This practice is alleged to occur even when exclusion is
18
not permitted by the Plan’s terms.” Id. at ¶ 67. The Amended Complaint alleges that
19
Regence has “imposed a nonquantitative treatment limitation – a blanket exclusion – on
20
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13

The regulations provide six classifications: inpatient, in-network; inpatient, out-of-network; outpatient,

22 in-network; outpatient, out-of-network; emergency care; and prescription drugs. 29 C.F.R. §
2590.712(c)(2)(ii).

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ORDER - 14

1 the scope of intermediate services it covers – medically necessary treatment at
2 outdoor/wilderness behavioral healthcare programs – that is not in parity with the
3 treatment limitations it imposes on comparable intermediate medical/surgical services,
4 such as skilled nursing facilities and rehabilitation hospitals, which are expressly
5 covered.” Id. at ¶ 68.
6

Defendants argue that A.Z. has (1) misidentified the relevant exclusion by

7 focusing on a “blanket exclusion” not found in the Plan; and (2) failed to allege the
8 relevant “processes, strategies, evidentiary standards, or other factors” Regence employed
9 in deciding to exclude wilderness programs. Motion at 14–19. In making these
10 arguments, Defendants rely heavily on Welp v. Cigna Health & Life Ins. Co., No. 17-cv11 80237, 2017 WL 3263138 (S.D. Fla. July 20, 2017). Motion at 13–18; Reply at 8–10. 14
12 Since completing their briefing, both parties have submitted notices of supplemental
13 authority that provide the Court with additional guidance.
14

A.

Welp does not resolve whether the Amended Complaint sufficiently
alleges a Parity Act violation

15
In Welp, the court granted the plan administrator defendants’ motion to dismiss a
16
complaint for failure to allege a Parity Act violation. 2017 WL 3263138, at *1–3. The
17
plan at issue covered treatment at a “Psychiatric Residential Treatment Facility” or
18
“PRTF,” but excluded coverage for all wilderness programs. Id. at *2. Defendants relied
19
on this exclusion in denying coverage to plaintiff’s son, who had suffered from various
20
mental health issues and attended a therapeutic wilderness program in Utah. Id.
21
22
14

The Court also relied on Welp in dismissing A.Z.’s original complaint. See docket no. 33.

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ORDER - 15

1

The Welp plaintiff alleged that “the Plan’s terms impermissibly create[d] a

2 separate and non-quantitative limitation on specific mental health benefits” in violation of
3 the Parity Act. Id. at *4. The Welp court rejected the plaintiff’s argument that the
4 defendants maintained a “blanket exclusion for services at wilderness treatment centers.”
5 Construing the plan documents, the court concluded that the defendants properly applied
6 the plan’s criteria for determining whether a program is covered. Specifically, the court
7 noted that the reasons defendants gave in denying coverage—including the program’s
8 lack of a multidisciplinary team and consistent supervision of professionals—were
9 legitimate criteria listed in the plan and qualified as non-quantitative treatment limitations
10 under the Parity Act. Id. at *5. In drawing this conclusion, the court reasoned as follows:
11
12
13
14

the denial of coverage for a requested benefit pursuant to a limitation is not
the same thing as an ex ante limitation prohibiting coverage for that benefit.
To properly plead a Parity Act violation resulting from the denial of the
wilderness program’s coverage, the first thing Plaintiff must do is correctly
identify the relevant limitation—here, the distinction between qualifying
and non-qualifying PRTFs. . . . Alternatively, Plaintiff might simply allege
that [the wilderness program] did meet the PRTF criteria.

15 Id. at *5 & n.8. The Welp court thus identified two possible ways to allege a Parity Act
16 violation. A claimant can allege that she was denied coverage pursuant to a limitation,
17 but must correctly identify that limitation and compare it to a relevant analogue. Id. at
18 *5–6 (finding that the plaintiff did not meet this standard). In addition, a claimant can
19 also allege that a wilderness program met the plan’s criteria in situations “where the
20 individual program in question confounds the categorical distinctions.” Id. at *5, n.8.
21 Thus, if a claimant’s wilderness program treatment satisfies the limitations imposed in
22 the claimant’s plan, she might still be entitled to proceed to the merits of her claim to
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ORDER - 16

1 determine (1) what other limitations, if any, the defendant imposed in denying coverage;
2 and (2) whether those limitations violate the Parity Act.
3

Here, A.Z. alleges both theories identified by the court in Welp. Although she

4 alleges that the face of the Plan impermissibly excludes wilderness programs in violation
5 of the Parity Act, she also alleges that the wilderness program satisfied all criteria for
6 coverage under the Plan. In contrast to the pertinent plan provisions at issue in Welp that
7 excluded all wilderness programs that did not qualify as PRTFs, the Plan here merely
8 lists wilderness programs as an example of an excluded service that would not be covered
9 “in the absence of illness.” Without specifying any criteria that could be analogized to
10 the pertinent non-quantitative treatment limitations articulated in the Parity Act,
11 Defendants explained that, under their interpretation of the Plan, wilderness programs are
12 not covered. For example, in their October 17, 2016 denial letter, Defendants stated that
13 “this is not a determination of medical necessity; rather, it is a limitation of your health
14 care contract.” Amended Complaint, Exhibit D.
15

Because the Amended Complaint alleges that the Plan covers the services A.Z.

16 received at the Evoke wilderness program, Welp does not control the outcome of this
17 case. To the contrary, the Welp court tailored its decision to the specific terms of the plan
18 at issue and left open the possibility of alternative avenues for pleading a Parity Act
19 violation. On its face, the decision carefully avoids answering whether a complaint
20 alleging that a wilderness program met the criteria for coverage under a plan is sufficient
21 to state a Parity Act claim. 2017 WL 3263138, at *5, n.8.
22
23
ORDER - 17

1

B.

The post-Welp case law expands on the pleading criteria identified in
Welp

2
A handful of decisions after Welp further guide the Court’s analysis of this issue.
3
In Danny P. v. Catholic Health Initiatives, 891 F.3d 1155 (9th Cir. 2018), the Ninth
4
Circuit reversed the trial court’s dismissal of a Parity Act claim. Id. at 1160. In reaching
5
this conclusion, the panel confirmed that the Parity Act mandates that mental health
6
benefits be “‘no more restrictive’ than those for medical and surgical problems.” Id. at
7
1158. The Court explained as follows:
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22

However, unsurprisingly, it does not specifically address the precise scope
of the Parity Act provisions for the myriad . . . situations that might arise.
That leaves room for interpretation. Put otherwise, it has necessarily left
some room for uncertainty or ambiguity regarding its application to specific
ERISA plan terms and situations.
Id. The Court proceeded to interpret the Parity Act to conclude that a defendant is
precluded from deciding to improperly restrict treatment for mental health patients. Id.
In reversing the district court’s decision to the contrary, the Ninth Circuit noted that
“[w]ere it otherwise, the lack of equity that the Parity Act was designed to repress would
have become renascent.” Id. at 1160. Danny P reaffirms the importance of conducting a
case-by-case inquiry in deciding whether a Parity Act claim has adequately been plead.
Two newer decisions specifically considered whether the denial of “wilderness
program” coverage violated the Parity Act. In A.H., the plaintiff argued that defendants’
blanket exclusion for wilderness programs violated the Parity Act because it imposed
stricter limitations on mental health and substance abuse treatment than it did for medical
and surgical care. A.H., 2018 WL 2684387, at *5–6. The Court rejected this argument
and found that the plaintiff had not stated a plausible Parity Act violation. Id. at *7. The

23
ORDER - 18

1 Court reasoned that although the plaintiff had characterized the exclusion to apply to
2 “wilderness behavioral healthcare programs,” the Plan itself was not that specific. Id. 15
3 Instead, the Court construed the Plan and determined that the wilderness program
4 exclusion applied equally to all medical benefits. Id. Because the plaintiff did not point
5 to anything in the Plan or the administrative record demonstrating that the wilderness
6 program only applied to mental health treatment, the A.H. Court dismissed the Parity Act
7 claim. Id.
8

More recently, the United States District Court for the District of Massachusetts

9 reached a different conclusion. In Vorpahl v. Harvard Pilgrim Health Ins. Co., No. 1710 cv-10844-DJC, 2018 WL 3518511 (D. Mass. July 20, 2018), the court denied a motion to
11 dismiss plaintiffs’ Parity Act claim. The plaintiffs in Vorpahl alleged that the defendant
12 violated the Parity Act by covering “medical/surgical benefits provided in other inpatient
13 treatment settings, such as rehabilitation hospitals and skilled nursing facilities,” but did
14 not cover “wilderness programs,” which plaintiffs argued were equivalent intermediate
15 treatment settings. Id. at *3. The complaint in Vorpahl specifically alleged that
16 defendant “applies a blanket exclusion . . . for all mental health services provided by
17 outdoor/wilderness healthcare programs, without exception . . . [y]et . . . pays for the
18 treatment of medical conditions in other types of residential programs, such as skilled
19 nursing care and rehabilitation hospitals.” Id.
20
21
15

Unlike the exclusion at issue in this case, the exclusion in A.H. expressly excluded coverage for

22 “educational or recreational therapy programs; this includes, but is not limited to boarding schools and
wilderness programs . . . .” Id. at *4.

23
ORDER - 19

1

The Vorpahl court found these allegations sufficient to state a Parity Act claim:

2 “Although it may be a ‘close call,’ it appears sufficient to allege, as Plaintiffs have, ‘that
3 a mental-health treatment is categorically excluded while a corresponding medical
4 treatment is not’ to state a Parity Act claim.” Id. (quoting Bushell v. Unitedhealth Grp.
5 Inc., 17-cv-2021-JPO, 2018 WL 1578167, at *6 (S.D.N.Y. March 27, 2018)). 16
6 Importantly, the Vorpahl court rejected the defendant’s argument that the complaint
7 failed to allege enough facts to establish that the wilderness program exclusion applied
8 equally to medical and surgical care: “Such a contention . . . appears to concern the
9 process and factors by which such nonquantitative treatment limitation could even be
10 applied both to mental health benefits and medical/surgical benefits, a contention that
11 needs to be resolved as the case proceeds after the benefit of discovery.” Id. at *3–4
12 (citing Natalie V., 2016 WL 4765709, at *1, 8; Craft v. Health Care Serv. Corp., No. 14
13 C 5853, 2016 WL1270433, at *1, 10 (N.D. Ill. Mar. 31, 2016)). The Vorpahl court
14 concluded that “[t]o the extent the Plaintiffs contend that the wilderness exclusion
15 differentially treats medical/surgical benefits and mental health benefits in application
16 rather than by its terms, . . . the complaint, read in the light most favorably to Plaintiffs,
17 also suggests that [defendant] differentially applies a facially neutral plan term.” Id. at
18 *4.
19
20
21
16

The court in Bushell also referred to this issue as a “close call,” but concluded that the complaint

22 adequately alleged a Parity Act violation at the motion to dismiss stage. Bushell, 2018 WL 1578167, at
*6.

23
ORDER - 20

1

Although the courts seemed to have reached different outcomes, the holdings in

2 A.H. and Vorpahl are not at odds—and align with the framework identified in Welp.
3 These cases demonstrate that a plaintiff alleging a facial Parity Act violation must
4 properly identify, either in the terms of the plan or the administrative record, the relevant
5 treatment limitation supporting that charge. A.H., 2018 WL 2684387, at *7; Vorpahl,
6 2018 WL 3518511, at *2–3 (analyzing the text of the exclusion); see also Welp, 2017
7 WL 3263138, at *6. To be sure, a claimant cannot mount a facial Parity Act attack out of
8 thin air—she must properly identify the allegedly violative limitation. Vorpahl, however,
9 holds that it is enough to allege a “categorical” mental-health exclusion without
10 specifying the processes and factors used by a defendant to apply that exclusion—facts
11 that would be solely within a defendant’s possession at this stage in the litigation.
12 Vorpahl, 2018 WL 3518511, at *3; see also Welp, 2017 WL 3263138, at *5, n.8. 17
13 Moreover, Vorpahl holds that a plaintiff may, in the alternative, allege an impermissible
14 mental-health exclusion “in application”—as opposed to a facial attack relying solely on
15 the terms of the plan at issue. Vorpahl, 2018 WL 3518511, at *4.
16

C.

A.Z. sufficiently pleads both “categorical” and “as applied” Parity Act
violations

17
A.Z. mounts a facial attack by relying on the terms of the Plan; disputes
18
Defendants’ categorical denial of wilderness program benefits; and challenges
19
Defendants’ practice of excluding wilderness programs—independent of the terms of the
20
21
22

17

For this reason, the Court finds Defendants’ “cross-walking” argument unpersuasive. See Motion at
17–18.

23
ORDER - 21

1 Plan. She succeeds on her second and third theories. On its face, the Plan does not
2 violate the Parity Act because its terms are neutral. A.H., 2018 WL 2684387, at *7;
3 Welp, 2017 WL 3263138, at *5–7. But this does not end the Court’s inquiry. A.Z. also
4 alleges that Regence has categorically denied, in practice, coverage for medically
5 necessary services at outdoor/wilderness behavioral healthcare programs. Amended
6 Complaint at ¶ 99. Such a categorical exclusion is itself a form of “process” falling
7 within 29 C.F.R. § 2590.712(c)(4)(i) that qualifies as a discriminatory limitation. See
8 Bushell, 2018 WL 1578167, at *6; Vorpahl, 2018 WL 3518511, at *3. Drawing all
9 reasonable inferences in A.Z.’s favor, this is enough to state a Parity Act violation for
10 purposes of resisting a motion to dismiss. This makes sense, as requiring A.Z. to specify
11 the exact process by which Defendants reached their decision on outdoor/wilderness
12 behavioral healthcare programs “would likely create a serious obstacle” to an otherwise
13 meritorious Parity Act claim. Bushell, 2018 WL 1578167, at *6.
14

Likewise, A.Z. alleges that “[w]hile Regence generally covers medical and

15 surgical services when provided in intermediate settings, it has a practice of excluding
16 wilderness therapy – a form of intermediate therapy to treat mental illnesses. This
17 practice occurs even when exclusion is not permitted by the plan.” Amended
18 Complaint at ¶ 67 (emphasis added). Put differently, A.Z. contends that the improper
19 exclusion occurs in application rather than by the Plan’s terms. These allegations are also
20 a sufficient, independent basis to allege a Parity Act claim, see Vorpahl, 2018 WL
21 3518511, at *4. Reading these allegations and the Amended Complaint in a light most
22 favorable to A.Z., as the Court must do on a motion to dismiss, the Court concludes the
23
ORDER - 22

1 allegations that Defendants disparately apply an otherwise “facially neutral plan term”
2 are sufficient for purposes of withstanding dismissal at the pleadings stage. Id.
3

In sum, the Court concludes that A.Z. has met the applicable pleading standards in

4 stating a Parity Act violation. This conclusion furthers the equitable concerns articulated
5 by the Ninth Circuit in Danny P. and allows A.Z. to develop her legal theories on the
6 merits. Danny P., 891 F.3d at 1160. This case should proceed to the discovery phase and
7 A.Z. should be permitted to test the processes Defendants employ in denying coverage
8 for outdoor/wilderness behavioral healthcare programs and whether such disparate
9 application of the “Counseling in the Absence of Illness” exclusion in fact exists. The
10 Court DENIES the Motion’s request to dismiss claims three and four for failure to allege
11 a Parity Act violation.
12 IV.

ACA Violation (Third and Fourth Claims)

13

A.Z. further alleges that Regence’s application of the “Counseling in the Absence

14 of Illness” exclusion violates the provider non-discrimination provision of the ACA.
15 Amended Complaint at ¶¶ 3, 70, 98, 102. A.Z. relies on 42 U.S.C. § 300gg-5(a), which
16 provides that “a group health plan and a health insurance issuer offering group or
17 individual health insurance coverage shall not discriminate with respect to participation
18 under the plan or coverage against any health care provider who is acting within the
19 scope of that provider’s license or certification under applicable State law.” Amended
20 Complaint at ¶ 102. But Section 300gg-5 does not create a private right of action.
21 Vorpahl, 2018 WL 3518511, at *5. As such, A.Z. is not entitled to any relief due to any
22
23
ORDER - 23

1 purported ACA violation. 18 To the extent the third and fourth claims rely on an alleged
2 violation of the ACA, they are DISMISSED with prejudice.
3 Conclusion
4

For the foregoing reasons, the Court ORDERS:

5

(1)

Defendants’ motion to dismiss A.Z.’s first claim is DENIED.

6

(2)

Defendants’ motion to dismiss A.Z.’s second claim is GRANTED. A.Z.’s

7

second claim is DISMISSED with prejudice.

8

(3)

Defendants’ motion to dismiss A.Z.’s third and fourth claims is DENIED.

9

(4)

The Clerk is directed to send a copy of this Order to all counsel of record.

10

IT IS SO ORDERED.

11

Dated this 9th day of August, 2018.

12

A

13
14

Thomas S. Zilly
United States District Judge

15
16
17
18
19
20
18

A.Z. argues “that her treatment was an otherwise covered service that was excluded because it was

21 provided by [a] provider whose license permitted it to offer services in the wilderness.” Opposition at
21–22. The Court rejects this argument, as the ACA’s anti-discrimination provision does not require a

22 plan to provide coverage for any treatment simply because it is rendered by a state-licensed provider.
A.H., 2018 WL 2684387, at *8.

23
ORDER - 24