How Wit v. United Behavioral Health Could Impact the Future of Behavioral Health Parity

The behavioral health industry awaits a vital federal appeals court decision in a long legal battle between payers and operators.

No matter the decision, the ruling in Wit v. United Behavioral Health will have far-reaching consequences for behavioral health advocates pushing insurers on reimbursement parity.

The class-action lawsuit — originally filed in May 2014 by David Wit, Natasha Wit and Brian Muir — alleged that United Behavioral Health improperly ignored generally accepted medical standards when it developed its rules for determining the medical necessity of behavioral health services.

In 2019, a Northern California district court found that United Behavioral Health violated Employee Retirement Income Security Act (ERISA) and inappropriately denied behavioral health claims, siding with the plaintiffs. In March, the circuit court reversed the district court. Since then, the plaintiffs have been entreating the circuit court to reconsider.

“When that decision came down, it rippled throughout every single state, throughout every single payer,” American Addiction Centers CEO Tom Britton told Behavioral Health Business.

Effectively, he explained, it put payers across the nation on notice, telling them they can’t use financial motivation to make clinical determinations.

The plaintiffs and the behavioral advocates on their side say that the district court’s decision halted the widespread use of medical determination standards that are not consistent with generally accepted medical standards.

The case was brought under the ERISA. And while the case doesn’t directly grapple with federal parity laws, Wit v. United Behavioral Health is considered a vital decision that empowers behavioral health during a widespread mental health pandemic and reigns in payers they contend have too much of a focus on their profit margins.

In its appeal to the 9th U.S. Circuit Court of Appeals, United Behavioral Health said in filings that the plaintiffs failed to establish that the decisions United made caused damages. It also argued that the district court erred when it made interpretations of insurance plan documents and that was out of line with court precedent around law regulating health plans that work with employers.

UnitedHealth Group Inc. (NYSE: UNH) and its subsidiary, UnitedHealthcare, have not responded to a request for comment.

In a brief in the appeals court, the insurance industry group AHIP similarly argues that the district court was wrong to certify a class. It also argued that the district court decision deprives health plans that work with employers of the discretion they deserve to administer health benefits.

“If the Court does not reverse, the lower court’s holdings will have a lasting and detrimental impact on ERISA-covered benefits plans and their administrators and, as a result, on employees’ access to robust and affordable employment-based health care coverage,” the AHIP amicus brief states.

AHIP was joined by the U.S. Chamber Of Commerce in supporting United Behavioral Health.

The case background

The U.S. District Court for the Northern District of California ruled in February 2019 that United Behavioral Health had violated ERISA, the law that governs certain employer health plans. The court found that United Behavioral Health inappropriately denied behavioral health claims based on too-strict internal guidelines.

In November 2020, the district court also ruled that United Behavioral Health must reprocess up to 67,000 claims for about 50,000 enrollees in Connecticut, Illinois, Rhode Island and Texas.

Those guidelines were influenced by and benefited United’s bottom line and didn’t align with generally accepted standards of care, according to an analysis of the case and of the state of parity in the U.S. by the Kaiser Family Foundation.

In March 2022, the three-judge panel at the 9th U.S. Circuit Court of Appeals reversed the district court in a 6-page ruling and a 2-page concurrence.

It ruled the district court misapplied the right standard of review for ERISA cases and didn’t give the appropriate deference to United Behavioral Health to administer benefits.

What the ruling means for Wit v. United Behavioral Health

While the appeals court undid a major judicial win for behavioral health advocates, attorney David Thornton said in an interview that the ruling itself was typical of ERISA cases. Thornton practices with the firm Bass, Berry & Sims PLC.

“In one respect, the [appeals court] said, ‘This is the standard of review: Is this arbitrary and capricious or an abuse of discretion?’” Thornton said, adding that the circuit court effectively came to the answer that “the district court misapplied that standard.”

The plaintiffs in the case have requested that either the panel rehear the case or that the entire circuit court rehear the case.

Appeals to rehear circuit court level decisions usually get denied, Thornton said. However, Wit v. United Behavioral Health appears “ripe” to be reheard given the importance of the controversy and that the appeal court panel didn’t delve into the facts to support the basis of their decision, Thornton said.

Thornton added that since the appeals court didn’t get into the specifics of the case in their decision and that the decision is so general that doesn’t create a useful precedent.

“I think that this case is ripe for the full 9th Circuit to have another set of eyes on it,” Thornton said. “I find it very unusual not to go into the facts.”

En banc hearings — or a hearing with all 9th U.S. Circuit Court of Appeals judges — are rare for practical matters, according to Matthew Wolfe, shareholder and behavioral health co-leader with Baker, Donelson, Bearman, Caldwell & Berkowitz PC.

One reason the appeals court may do so is to correct errors of law or decisions that are out of line with binding precedent of the circuit court or of the Supreme Court. Another reason, Wolfe said, is that the controversy in the case is of significant importance.

“This remains a hotly contested area of law and regardless of whether the 9th Circuit grants the request,” Wolfe said. “There’s going to continue to be litigation in this same vein in other circuits. Ultimately, I suspect that the Supreme Court is going to have to weigh in on these issues.”

The future of behavioral health parity

The 9th U.S. Circuit Court of Appeals has not revealed if it will grant or deny the plaintiff’s motion for the appeals court to rehear the case.

Assuming the status quo remains, health plans can determine whether or not a health service is medically necessary and does not need to align with accepted clinical standards, The Kennedy Forum’s Senior Policy Advisor David Lloyd said.

“We think that this does set a very bad example,” Lloyd said. “What will happen is that you’ll have health plans saying, ‘We don’t believe that this is medically necessary for you even though your clinician has recommended it. We’ve decided this using new criteria that are actively designed with our financial self-interest in mind and you have very little ability to challenge that.’ ”

Lloyd pointed to several legislative efforts at the state and federal levels to strengthen parity in behavioral health reimbursement.

While not directly relevant to Wit v. United Behavioral Health, Congress attempted to address parity through the Mental Health Parity Act of 1996 (MHPA) and the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA).

However, behavioral health operators and advocates have long complained that insurers weren’t complying with these laws and that the executive branch of the federal government didn’t have the teeth to go after violations.

Some data bear out these complaints. A 2019 report by Milliman Inc. found that disparities between behavioral health services and physical health services deepened from 2013 to 2017.

In January, the U.S. departments of labor, health and human services and the treasury released a scathing report saying, in part, that none of the insurers that were investigated in 2021 for compliance with certain MHPAEA standards provided enough information for the federal government to assess them. The KFF analysis states that this report was “evidence of low parity compliance.”

Even if, Wit. v. United Behavioral Health survives the courts, Britton said that “it’s not a silver bullet” and that corresponding state and federal legislation is required to enshrine needed policy changes.

Part of the conversation regarding parity, Britton said, needs to focus on the scientific legitimacy of care, especially in addiction treatment.

“Payers don’t deny hypertensive drugs, ongoing primary care visits, annual echocardiograms and stress tests because they know that that’s legitimate science,” Britton said. “Addiction medicine … is as equally supported in the literature.”

Recently, Congress has signaled that it could take on additional parity measures to strengthen enforcement efforts but hasn’t delivered a major reform.

In 2021, the Consolidated Appropriations Act of 2021 required health plans to document and compare the nonquantitative treatment limitations (NQTLs) that apply to behavioral health and physical health benefits, according to an article by the law firm Ballard Spahr.

The recently passed Inflation Reduction Act originally included bill language that would have established civil monetary penalties for violations of the MHPAEA. However, the version of the bill signed into law on Aug. 16 didn’t contain that language.