In a long-running class action dispute, the Ninth Circuit has once again reversed a district court's ruling that a health insurer violated ERISA by using claims processing guidelines that were more restrictive than generally accepted standards of care (GASC)—and inconsistent with state law requirements—to adjudicate mental health and substance use disorder (MH/SUD) claims (Wit v. United Behav. Health, (9th Cir. Jan. 26, 2023)). The district court had required the insurer to reprocess 67,000 claims. The Ninth Circuit concluded, however, that claims reprocessing is not a stand-alone remedy available under ERISA, and therefore could not support the district court's class certification determination.

The Ninth Circuit's January 2023 ruling withdraws and replaces an earlier Ninth Circuit decision in this litigation from March 2022 ( (9th Cir. Mar. 22, 2022); see Legal Update, Ninth Circuit Reverses Ruling on Mental Health and Substance Use Disorder (MH/SUD) Guidelines). For more information on MH/SUD compliance and litigation, see:

The health insurer/defendant in this case administered benefits for behavioral health services, including to diagnose and treat MH/SUDs, for ERISA health plans. In doing so, the insurer developed "level of care" guidelines for making coverage determinations that the participant/plaintiffs in this case challenged under ERISA. Among the individually named participants, there were ten different ERISA health plans administered by the insurer. However, the named participants received certification to bring ERISA claims on behalf of three broader classes of participants who collectively implicated up to 3,000 different plans.

In their ERISA benefits claim, the participants asserted that they were improperly denied MH/SUD treatments because the insurer's guidelines were overly restrictive and (as to certain of the class participants) inconsistent with:

The participants also claimed that the insurer breached ERISA's fiduciary duties by not developing guidelines that were consistent with GASC. (For more information, see Practice Note, ERISA Litigation: Causes of Action and Remedies Under ERISA Section 502 for Benefit and Fiduciary Breach Claims and ERISA Litigation Toolkit.)

In a March 2019 ruling, the district court found that:

(Wit v. United Behav. Health, (N.D. Cal. Mar. 5, 2019).)

In a later ruling, the district court ordered the insurer:

(Wit v. United Behav. Health, (N.D. Cal. Nov. 3, 2020).)

The insurer appealed.

In its March 2022 order, the Ninth Circuit rejected the insurer's argument that the district court erred in certifying a class that required individualized claims determinations. The Ninth Circuit concluded that the participants' claims could be resolved on a class-wide basis. The Ninth Circuit reversed the district court on the merits, however, concluding that the insurer's interpretation—that is, that the applicable plans did not require consistency with GASC—was not unreasonable.

In a ruling that replaces the Ninth Circuit's March 2022 order, the Ninth Circuit concluded in its January 2023 ruling that the district court improperly permitted the participants to proceed—on a class-wide basis—with their benefits denial claim under a "reprocessing" remedy.

The insurer argued that the district court incorrectly certified a class regarding the participants' benefits claims by concluding that claims reprocessing was a class-wide remedy. The insurer asserted that federal law (the Rules Enabling Act and Federal Rules of Civil Procedure (FRCP)) generally prohibit using class action procedures to expand or change substantive rights (28 U.S.C. § 2072(b)). The insurer therefore contended that permitting a remedy of reprocessing the participants' claims improperly expanded the participants' substantive rights under ERISA, in violation of the Rules Enabling Act and FRCP.

Agreeing with the insurer, the Ninth Circuit concluded that claims reprocessing is not a stand-alone remedy available under ERISA. The Ninth Circuit rejected the district court's determination that reprocessing could be a remedy for a benefits denial claim under ERISA (see Practice Note, ERISA Litigation: Causes of Action and Remedies Under ERISA Section 502 for Benefit and Fiduciary Breach Claims: Claims for Benefits Under Plan Terms (ERISA Section 502(a)(1)(B))).

According to the Ninth Circuit, reprocessing was "a means to the ultimate remedy" of obtaining benefits. The court observed that available remedies (under ERISA Section 502(a)(1)(B)) include recovery of benefits, enforcement of rights, or clarification of rights to future benefits under the plan terms (29 U.S.C. § 502(a)(1)(B)). However, whether the participants were entitled to benefits would involve several individualized questions—because of how the varying guidelines applied to the participants' claims and unique medical circumstances. The Ninth Circuit noted that the participants had declined to make individualized showings that they would likely be entitled to benefits if their claims were reprocessed. As a result, they "expressly disclaimed the actual remedy available to them" under ERISA.

The Ninth Circuit also disagreed that claim reprocessing is an available remedy under ERISA's equitable catchall provision (ERISA § 502(a)(3) (29 U.S.C. § 1132(a)(3)); see Practice Note, ERISA Litigation: Appropriate Equitable Relief Under ERISA Section 502(a)(3) (Catch-All Remedy Provision)). In reaching this conclusion, the Ninth Circuit reasoned that the participants did not show that reprocessing was a remedy that was traditionally available in the courts of equity, as required to be "appropriate" relief under ERISA's catchall provision.

On the merits, the Ninth Circuit held that the insurer's interpretation—that is, that the applicable plans did not require consistency with GASC—was not unreasonable. The Ninth Circuit reasoned that although the plans excluded coverage for treatment that was inconsistent with GASC, the participants failed to show that the plans required coverage for all treatment that is consistent with the GASC.

Although the Ninth Circuit agreed with the district court that the insurer had a conflict of interest (due to serving as claims administrator and insurer for fully insured plans that were its primary source of revenue), it concluded that the insurer's interpretation was still owed deference. According to the Ninth Circuit, the insurer's conflict of interest was merely one factor to weigh when reviewing the reasonableness of the insurer's interpretation. Applying the deferential standard of review, the Ninth Circuit held that the insurer's interpretation—which was consistent with the plan language—was reasonable (see Practice Note, ERISA Litigation: Standard of Review: Conflict of Interest and Standard of Review).

The Ninth Circuit also held that the district court erred by excusing some participants' failure to exhaust administrative claims procedures before filing suit in federal court (see Practice Note, ERISA Litigation: Exhaustion of Plan Claims Procedures). Here, the Ninth Circuit reasoned that:

As a result, the Ninth Circuit reversed the district court on the participants' ERISA benefits denial claim. To the extent the district court's judgment on the participants' ERISA fiduciary breach claim was based on its erroneous interpretation of the plans, the Ninth Circuit also reversed that judgment. The Ninth Circuit remanded for further proceedings.

Claims reprocessing is a remedy we sometimes see plaintiffs ask for in litigated ERISA disputes, so it will be interesting to see whether the Ninth Circuit's conclusions in this case take hold elsewhere—or if other courts instead reach different outcomes on this question. For more information, see Practice Note, Mental Health Parity: Exemptions, Plan Disclosures, and Other Issues.

In August 2023, this case reached the Ninth Circuit for a third time. Once again, the Ninth Circuit reversed and remanded to the district court (Wit v. United Behav. Health, (9th Cir. Aug. 22, 2023)).

The Ninth Circuit reversed the district court's certification of the denial of benefits classes. According to the Ninth Circuit, by failing to limit the classes to claimants with claims denied based on one of the guidelines challenged in the litigation, the district court improperly expanded the claimants' substantive rights under ERISA.

On the merits of the benefits denial claim, the Ninth Circuit again concluded that the district court erred by interpreting the plan terms as requiring coverage of all care consistent with GASC. Regarding the breach of fiduciary duty claim, the Ninth Circuit reversed the district court's judgment to the extent that judgment was based on the district court's erroneous plan interpretation. The Ninth Circuit also remanded for the district court to determine whether the claimants had to exhaust administrative remedies before filing the fiduciary breach claim.