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A three-judge federal appeals court on Tuesday unanimously reversed a landmark trial court ruling that required the nation’s biggest behavioral health insurer to use generally accepted standards of care when evaluating claims for benefits, a major blow to efforts to require health insurers to cover care for mental health and substance use in ways that are broadly equivalent to that for medical care.

A trial judge in the Northern California district ruled in 2019 and 2020 that UnitedHealthcare’s behavioral health unit engaged in an “abuse of discretion” when it used its own guidelines for deciding which claims were medically necessary, effectively limiting coverage to acute episodes while ignoring chronic and underlying conditions that would be covered under standards used by medical societies.

In his original decisions in the class action case Wit v. United Behavioral Health (UBH) , Joseph C. Spero, the trial judge, had ruled that the internal guidelines were “infected” by financial incentives intended to restrict access to care and save the company money. He ordered the insurer to reprocess 60,000 claims involving more than 50,000 patients, half of them children and adolescents, using medical society guidelines. 

The reversal’s impact “could be quite devastating,” said David Lloyd, a senior policy adviser at The Kennedy Forum, a nonprofit that advocates for better mental health coverage. If the decision stands, insurers would be able to return to designing guidelines that “artificially limit coverage” to benefit the company rather than the patient, he said. The ruling “makes a mockery” of the 2008 federal law that requires parity between coverage of behavioral health care and medical care, he added.

UnitedHealthcare spokesperson Maria Gordon Shydlo said in a statement that the company was “pleased” with the ruling and will “continue to support our members with the mental health care services they need, when they need it.”

Attorneys for the plaintiffs declined to comment. 

In an interview two months ago, plaintiffs’ attorney Brian Hufford expressed optimism that even an appeals court ruling against his clients would leave critical parts of Judge Spero’s decision in place because United did not appeal the lower court’s finding that its internal guidelines were overly restrictive and violated the widely accepted standards.

In fact, it appears that the appeals panel reversed Spero’s decisions entirely. The members of the Ninth Circuit Court of Appeals ruled that United was not required to use generally accepted standards of care and that even if the insurer’s more limited guidelines constituted a conflict of interest, the lower court’s remedy – to reprocess all the claims using the higher standard – was wrong.

The full impact of the ruling – which used just seven pages to reverse opinions totaling more than 200 pages – was unclear. The circuit court wrote that its decision could not be used as precedent, although any judge handling a similar case would read it. The court neither dismissed the case nor sent it back to the lower court for reconsideration.

UnitedHealthcare changed its behavioral health guidelines following the lower court’s rulings. In theory, it could now reinstate its own criteria for deciding whether covered treatments are medically necessary.

The plaintiffs have 14 days to request review by the full Ninth Circuit Court of Appeals.

In a brief analysis of the decision, Troutman Pepper law firm attorneys Virginia Bell Flynn, Chad Fuller and Tina Salfi Felahi, who typically represent insurance companies, concluded it was “a big win” for insurers.

The American Psychiatric Association, one of several medical groups that filed briefs supporting the lower court decision, said in a statement that it was “extremely disappointed” in the ruling and urged Congress and the states to write key parts of the lower court decision into law. The Biden administration had embraced the decision and prioritized enforcement of federal parity laws,

Former Rep. Patrick Kennedy, who led the fight in Congress for parity legislation that passed in 2008 and later founded The Kennedy Forum, said that the appeals court got basic facts of the case wrong and that the decision means “business as usual” for United. 

“Thousands of Americans with mental health and substance use disorders will continue to face discriminatory practices that limit their access to often lifesaving care,” he wrote in a lengthy post

(Kennedy, who founded The Kennedy Forum after leaving Congress in 2011, is a member of the MindSite News Editorial Advisory Board.)

Don Sapatkin

Don Sapatkin is an independent journalist who reports on science and health care. His primary focus for nearly two decades has been public health, especially policy, access to care, health disparities...