Zuckerman Spaeder Delivers $10 Million Settlement with UnitedHealth for Underpayment of Mental Health Claims

On January 9, 2022, the U.S. District Court for the Eastern District of New York ordered final approval of a class action settlement that will provide relief for more than 110,000 mental health patients/insureds represented by Zuckerman Spaeder. The settlement comes as a result of a lawsuit the firm filed in 2017, in which the plaintiffs challenged the “Tiered Reimbursement Policy” used by UnitedHealth Group when administering Employee Retirement and Income Security Act (ERISA) health plans.

According to the lawsuit, United used the reimbursement policy to reduce payments for certain out-of-network behavioral health services provided by psychologists and masters-level counselors and social workers. More specifically, the policy reduced allowed reimbursement amounts by 25 percent for psychotherapy services provided by out-of-network psychologists and by 25 percent or 35 percent for out-of-network masters-level counselors and social workers. The plaintiffs alleged that United’s policy violated ERISA and the federal Mental Health Parity Act.

“For years, United used a Tiered Reimbursement Policy that unfairly reduced benefits when patients obtained psychotherapy from out-of-network behavioral health providers,” said Zuckerman Spaeder partner Andrew N. Goldfarb. “United has not only eliminated this policy, but as a result of our lawsuit and this settlement, it will now pay $10 million to make up for these underpayments.”

In a motion filed on October 27, 2021 in support of the settlement, the plaintiffs said, “The litigation achieved exactly what the Plaintiffs sought—(i) a change in United’s Tiered Reimbursement Policy...and (ii) significant monetary relief for people whose benefit claims were improperly reduced pursuant to this Policy.” Further, the plaintiffs said that, during the course of the litigation, “United stopped applying the Tiered Reimbursement Policy and has committed, as part of this Settlement, not to reinstate it for United and Oxford plans.”

Under the settlement, United will pay $10 million to eligible class members, which equals 55 to 70 percent of the estimated financial impact of the Tiered Reimbursement Policy. This extraordinary result is at the high end of the range of ERISA class action recoveries in health insurance cases. Additionally, United will pay attorneys fees separately, allowing all of the common fund to go directly to eligible patients without them having to do anything.

“This is a tremendously important result that addresses a significant issue in the fight to achieve mental health parity,” said Zuckerman Spaeder partner Jason S. Cowart. “By reducing payments for out-of-network behavioral health services, but not for out-of-network medical/surgical services, United made it far more difficult for behavioral health patients to receive the services they need. For our country to make progress in addressing the ongoing mental health crisis and addiction epidemic, such discriminatory practices must end. We are grateful to the New York Attorney General and U.S. Secretary of Labor, who are committed to mental health parity and worked with us to reach a terrific outcome for our clients.”

The legal team included Zuckerman Spaeder partners Mr. Goldfarb, Mr. Cowart, and D. Brian Hufford and associate Nell Z. Peyser, along with co-counsel Meiram Bendat of Psych-Appeal, Inc. and John W. Leardi, Vincent N. Buttaci, and Paul D. Werner of Buttaci Leardi & Werner LLC.

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Katie Munroe
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