Appellate Court Reinstates Class Action Lawsuit for Plan’s Denial of Speech Therapy for Autism Spectrum Disorder

The minor beneficiary of an employer-sponsored group health plan, with his parents, sued the employer, the plan administrator, and the claims administrator, alleging that the plan’s exclusion of non-restorative speech therapy for autism spectrum disorder (ASD) violated the Mental Health Parity and Addiction Equity Act (MHPAEA). The child’s physician had submitted claims for speech therapy services to treat the child’s ASD, but the plan denied the claims, pointing to the plan’s exclusion of “habilitative services,” such as non-restorative speech therapy. Responding to two levels of administrative appeal, two separate plan medical directors explained that the plan covered speech therapy only to restore lost speech, not for a child who had never spoken. The employer and the claims administrator did not respond to the parents’ request for documentation of the processes, strategies, and other factors used to apply the exclusion and the communications and notes that supported the denial. The family then filed a class action lawsuit alleging MHPAEA violations and breach of fiduciary duty. Accepting without question the administrator’s assertion that the plan complied with MHPAEA because the non-restorative exclusion applied to both medical and mental health conditions, the trial court dismissed the case.

On appeal, the First Circuit emphasized that a court considering a motion to dismiss must analyze the evidence in the kindest light to the non-moving party (in this case, the child and his parents). The court found the family’s claim that the plan defined “habilitative services” as mental health services and only applied the habilitative services exclusion to the treatment of mental health conditions as an “entirely plausible reading” of the plan that could support a successful MHPAEA claim. Similarly, the assertion that the plan’s administrators denied coverage of speech therapy “as soon as they saw the child’s ASD diagnosis,” whereas a different diagnosis would have yielded a different result, was sufficient to survive a motion to dismiss. Concluding that the plan “may” violate the MHPAEA, the court reversed the dismissal and sent the case back to the trial court for further proceedings. The court also allowed a claim against the plan administrator for failure to respond to the parents’ request for information. As to the fiduciary breach claim, however, the court affirmed the trial court’s dismissal, explaining that the ERISA provision under which the fiduciary breach claim was brought requires financial harm to the plan rather than to an individual.

EBIA Comment: MHPAEA compliance is a hot topic—both in the courts (see, e.g., our Checkpoint article) and with government agencies. The DOL, HHS, and IRS recently reported to Congress about the widespread lack of MHPAEA compliance among group health plans and insurers (see our Checkpoint article) and reiterated the agencies’ commitment to enforcement—particularly with respect to nonquantitative treatment limitations such as the plan exclusion in this case. For more information, see EBIA’s Group Health Plan Mandates manual at Sections IX.E (“Mental Health Parity: Nonquantitative Treatment Limitations”), IX.H (Mental Health Parity Reporting Requirements”), and IX.J (“Mental Health Parity Enforcement”). See also EBIA’s Self-Insured Health Plans manual at Section XIII.E (“Coverage Limitations and Exclusions”) and EBIA’s ERISA Compliance manual at Section XXVIII.I (“Fiduciary Liability and Litigation”).

Contributing Editors: EBIA Staff.