In an unprecedented move, the U.S. Department of Labor (DOL) recently teamed up with an individual state to bring joint enforcement actions under the Mental Health Parity and Addiction Equity Act of 2008 (Federal Parity Law). New York State Attorney General (NYAG) Letitia James and DOL Secretary Marty Walsh simultaneously filed two complaints (see NYAG complaint and DOL complaint) and two settlements to resolve these complaints with a federal court in Brooklyn. In the settlements, United Healthcare (United) agreed to pay more than $18 million in regulatory fines, settlement amounts, and attorneys’ fees over allegations of parity violations.[1]
These settlement agreements, published on August 11th, highlight the expanding trend of governmental enforcement actions and litigation focused on appropriate levels of insurance coverage for mental health and substance use disorder (MH/SUD) treatment services.
In their joint press release, DOL and the NYAG said that United had “unlawfully denied coverage to 20,000 New Yorkers for mental health and substance [use] disorder treatment.” Attorney General Letitia James said the denials put “millions in harm’s way during the darkest of times.” DOL Secretary Marty Walsh, who promised to take aggressive actions to enforce the Federal Parity Law when he joined The Kennedy Forum for a webinar in May 2021, reiterated that “protecting access to mental health and substance use disorder treatment is a priority for the Department of Labor and something I believe in strongly as a person in long-term recovery.”
Unequal Reimbursement of Mental Health Providers
The first settlement is based on what DOL and New York deemed United’s improper tiered reimbursement policy, which reimbursed less for out-of-network MH/SUD health therapy services than for psychologists and master’s level counselors (including social workers). Specifically, United reduced reimbursement rates for psychologists by 25% and for master’s level counselors by 25% or 35% when compared to the reimbursement rates for physicians providing the same mental health services. A similar discounting strategy was not used for medical/surgical providers, in violation of parity requirements. Among other concerns, the allegations state that United plans violated their fiduciary responsibilities under the Employee Retirement Income Security Act (“ERISA”), along with violating New York and the Federal Parity Laws.
As part of the settlement agreement, United has agreed not to reinstate this inequitable provider reimbursement policy and to not apply any tiering policy to certain New York-based plans for two years. In addition, United will pay:
- $10 million into the Tiered Reimbursement Settlement Fund;
- $650,000 in fines to New York; and
- The costs of class notice and settlement administration.
United also has agreed to pay up to $3.35 million for attorneys’ fees and class representative incentive awards.
This first settlement stems from two class action lawsuits — Jane Doe v. UnitedHealth Group and Jane Smith v. UnitedHealthcare Insurance Co. – filed by Zuckerman Spaeder and Psych-Appeal, who also filed the landmark federal class action Wit v. United Behavioral Health. Secretary Walsh and Attorney General James initiated similar legal actions arising from their investigations concerning this issue, and the federal court in the Eastern District of New York consolidated all of the actions for purposes of settlement.
Denials of Care Based on Improper Utilization Review Criteria
In the second settlement agreement, DOL and New York allege United Behavioral Health improperly used an “Alert Program,” which uses specific algorithms for claims data to “identify clinical risk, utilization and outliers for outpatient treatment.” As highlighted in the joint press release:
United employed arbitrary thresholds to trigger utilization review of psychotherapy, which often led to denials of coverage when providers could not justify continued treatment after 20 sessions. Members who received these denials had to choose between figuring out how to pay hundreds, or even thousands, of dollars for continued care, and abruptly ending necessary treatment. United denied thousands of New Yorkers’ psychotherapy claims pursuant to ALERT, even during the COVID-19 pandemic. These denials violated parity laws because United subjected all outpatient behavioral health psychotherapy to outlier management, but it employed this treatment limitation only to a handful of medical/surgical services.
As part of the settlement, United has agreed to stop using the “Alert Program” and has agreed to pay:
- $2.5 million into the Alert Common Fund to cover self-funded eligible members;
- $1.1 million into the Alert Common Fund for distribution to fully-insured and non-ERISA eligible members;
- $650,000 in fines to New York; and
- The costs of class notice and settlement administration.
Non-Financial Requirements
In addition to the financial payments, United also must disclose these settlements on their websites and improve disclosure of applicable non-quantitative treatment limitations (“NQTLs”), comparative analysis, and similar documents.
A growing number of states have been fining health plans by conducting market conduct exams, as highlighted by Parity Track’s Parity Enforcement Action Summary. In addition, DOL, which cannot leverage fines directly (something that would be corrected by H.R. 1364, the Parity Enforcement Act), used its authority under ERISA to seek injunctive relief and penalties in federal court directly against United for its alleged reimbursement and utilization review violations. United’s $18 million settlement is the largest publicly announced assessment against a health plan since the Federal Parity Law was enacted in 2008.
Given that insurance coverage oversight in the U.S. is fragmented between a range of federal and state regulators based on the type of plan (e.g. fully insured commercial plans vs. self-funded plans), it is essential that this type of federal and state cooperation continue. While there are tens of thousands of plans across the country, plan policies and practices share many commonalities, particularly when one company, such as United, insures or administers plans across many jurisdictions. Thus, to make real progress on parity, The Kennedy Forum encourages DOL to continue working closely with state regulators and attorneys general to bring joint actions and address parity violations in a comprehensive way with meaningful financial penalties.
[1] The main United entities involved in the settlement agreements are United Healthcare Insurance Co., United Behavioral Health, and Oxford Health Insurance Inc. (together, “United”). The settlements are based on the following case filed in the U.S. District Court for the Eastern District of New York: Case 1:21-cv-04519-LDH-RLM (which was filed on the same day as the settlement agreements).
