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UnitedHealth Plan Holders Win Class Certification in ERISA Lawsuit

May 3, 2016 | Nathan Leming

The District Court for the Northern District of California recently granted certain members of UnitedHealth health plans class certification in their suit alleging improper denial of benefits.  Plaintiffs in the putative classes in David Wit, et al. v. United Behavioral Health allege that they were improperly denied coverage for mental health and substance use disorder treatment by United Behavioral Health (“UBH”), which administers mental health and substance use disorder benefits under their health insurance plans.

The named Plaintiffs in the action sought coverage for mental health or substance use disorder treatment under ten different health insurance plans.  Based on electronic data produced by UBH, however, the Court concluded that coverage may have been denied to putative class members under as many as 3,000 different health insurance plans.

In the operative complaints, Plaintiffs asserted two claims: 1) breach of fiduciary duty; and, 2) arbitrary and capricious denial of benefits.  The breach of fiduciary duty claim is based on the theory that UBH is an ERISA fiduciary under 29 U.S.C. § 1104(a), and therefore owes a duty to discharge its duties with care, skill, prudence, and diligence, and solely in the interest of the participants and beneficiaries. According to Plaintiffs, UBH violated this duty by developing guidelines that are far more restrictive than those that are generally accepted, even though Plaintiffs’ health insurance plans provided for coverage of treatment that is consistent with generally accepted standards of care.  Additionally, Plaintiffs alleged UBH prioritized cost savings over members’ recovery of benefits.

The arbitrary and capricious denial of benefits claim is based on the theory that UBH improperly adjudicated and denied Plaintiffs’ requests for coverage by, inter alia, relying on the overly restrictive coverage guidelines.

A class action may be maintained under Rule 23 of the Federal Rules of Civil Procedure if all of the requirements of Rule 23(a) are satisfied and the plaintiff demonstrates that one of the requirements of Rule 23(b) is met. Rule 23(a) requires that a plaintiff seeking to assert claims on behalf of a class demonstrate: 1) numerosity; 2) commonality; 3) typicality; and 4) fair and adequate representation of the interests of the class (“adequacy”). Fed. R. Civ. P. 23(a).

In addition to the explicit requirements of Rule 23, all federal circuit courts have read into an ascertainability requirement into the rule.  However, there is a split among the circuits on the definition of ascertainability.  The majority, including the 9th Circuit which encompasses the Northern District of California, use a heightened ascertainability standard requiring:

1) whether the class can be ascertained by reference to objective criteria;

2) whether the class includes members who are not entitled to recovery; and

3) whether the putative named plaintiff can show that he will be able to locate absent class members once a class is certified.

The 8th Circuit, where the majority of our firm’s ERISA cases are litigated, recently adopted a less rigorous ascertainability standard in Sandusky Wellness Ctr., LLC v. Medtox Scientific, Inc., No. 15-1317, 2016 U.S. App. LEXIS 7992 (8th Cir. May 3, 2016), requiring only that the class be defined in reference to objective criteria.

The parties in Wit did not dispute that the numerosity, adequacy, and typicality requirements were met, leaving only the commonality and ascertainability requirements to be considered by the Court.

In opposition to Plaintiff’s claim of commonality, UBH argued that the commonality requirement is not met because Plaintiffs’ claims turned on: 1) thousands of different insurance plans, 2) 169 different coverage guidelines, and 3) the unique clinical presentation of each class member.  The Court disagreed and found that the resolution of the claims will turn on several common legal and factual questions sufficient to satisfy the requirements of Rule 23, including:

  • whether UBH was acting as an ERISA fiduciary;
  • when UBH developed the guidelines at issue and adopted a policy of applying them to all coverage determinations;
  • whether the guidelines are consistent with generally accepted standards;
  • whether UBH breached its fiduciary duty by using its guidelines to adjudicate claims for coverage;
  • what remedies are available to the classes.

In finding for Plaintiffs’ on the ascertainability requirement, the Court rejected UBH’s contention that the proposed classes are not ascertainable because it is not administratively feasible to determine which UBH benefits plans are governed by ERISA, which claims were denied under the guidelines, and what specific aspects of the guidelines were relied upon in denying the claim.  The Court concluded that information regarding the reason for individual claim denials, including the guidelines used in the determination, stored on at least one UBH database, would be sufficient to identify individuals who were denied coverage for purposes of ascertaining class membership.

U.S. District Court for the Northern District of California case number: 3:14-cv-02346

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The BSCR Insurance Blog examines topics and developments of interest to insurance carriers, with a particular focus on Missouri and Kansas law. Learn more about the editor, Angela M. Higgins, and our Insurance practice.

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