Ruling Against UnitedHealth Affirms ERISA’s Power to Hold Insurers Accountable; Strengthens Federal Mental Health Parity Law

In a decision that may significantly impact the availability of insurance coverage for mental health conditions, the Second Circuit Court of Appeals has ruled that third party administrators of employee health plans must adhere to the requirements of the Employee Retirement Income Security Act (ERISA) and can therefore be held accountable under the federal Mental Health Parity and Addiction Equity Act of 2008. The decision is the result of a 2014 lawsuit brought by the New York State Psychiatric Association (NYSPA) and others, represented by Zuckerman Spaeder LLP partners D. Brian HuffordJason S. Cowart, and Conor B. O'Croinin, and co-counsel Meiram Bendat of Psych-Appeal, Inc.

The ruling in favor of the plaintiffs resolves two important questions regarding the responsibilities of a third party administrator of an organizations’ health insurance plan, and re-affirms that associations may bring legal action on behalf of their members.

The decision makes clear that UnitedHealth and other plan administrators can be held liable under ERISA, the law which governs federal benefit plans. In deciding against UnitedHealth, the Second Circuit said, “We ultimately reject United’s argument that it cannot be sued under [ERISA] in its capacity as a claims administrator…Indeed, when a claims administrator exercises total control over claims for benefits under the terms of the plan, that administrator is a logical defendant in the type of suits contemplated by [ERISA]…”

Because third party plan administrators can be held accountable under ERISA, the Court further ruled that UnitedHealth is subject to the requirements of the Mental Health Parity and Addiction Act of 2008. The ruling makes clear that plan administrators can be held legally accountable for actions that violate the law’s provisions, which require insurance coverage for mental health conditions to be equal to that of physical health conditions.

“In ruling that health plan administrators must adhere to the mental health parity act, the court has answered a critical question that has existed since the law’s enactment,” said Mr. Hufford. “The decision gives new legal power to patients who face unfair scrutiny or rejection of their mental health claims. Importantly, the ruling further affirms the fact that United and other companies that administer employer health plans can be held legally accountable under ERISA.”

Finally, the Court’s decision re-affirms the ability of an association to bring legal claims on behalf of its members. The Court rejected United’s argument that the lawsuit should be dismissed based on a claim that NYSPA did not have associational standing to sue on behalf of its members.

Mr. Hufford and Mr. Cowart lead Zuckerman Spaeder’s national practice representing patients and health care providers such as doctors, hospitals, and medical equipment companies in disputes with health insurance companies. Their groundbreaking application of ERISA and other related federal and state laws has resulted in numerous precedent-setting wins, including two of the largest recoveries ever obtained in health insurance class actions.

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Kalie Hardos
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