Insurers are getting hit with more class actions regarding the denial of medical treatments, like behavioral therapy treatments for autism spectrum disorders. These can be expensive: In May 2015 ConAgra Foods Inc. and Blue Cross Blue Shield were sued in a proposed class action in California, accused of denying behavioral therapy treatments for autism spectrum disorders in violation of the Employment Retirement Income Security Act (ERISA) and state and federal mental health laws.  One insurer completed a $2.4 million settlement involving an estimated 350 to 400 class members.

The enforceability of arbitration agreements and the class action waiver. Just two weeks ago the United States Supreme Court once again held that class action waivers contained in arbitration agreements are enforceable under the Federal Arbitration Act (FAA) and cannot be invalidated on state law grounds inapplicable to any other contract. DIRECTV, Inc. v. Imburgia, No. 14-462, 577 U.S. ___, 2015 WL 8546242 (2015).

So, what does this all mean for ERISA plans?  Can ERISA plans include arbitration provisions?  YES!

Consider adding an arbitration provision with a class action waiver.

Here’s a case from last week that highlights the point: Sanzone-Ortiz v Aetna Health of California, Inc., 2015 WL 9303993 (N. D. Cal. December 22, 2015) (PDF).

FACTS:  This is a class action involving arbitration of ERISA health benefits. Ortiz, a plan participant under an ERISA-governed health benefit plan insured by Aetna, has a son diagnosed with autism.  Aetna authorized 20 hours per week of Applied Behavior Analysis treatment for her son, but the treating physician prescribed 36 hours per week of the treatment. Aetna moved to compel arbitration based upon an arbitration agreement contained in the enrollment form for the health plan membership. The arbitration agreement incorporated the Federal Arbitration Act.

ISSUES:

  1. Does the arbitration provision violate ERISA? NO.
  2. Can Aetna enforce an arbitration agreement if it is not a party to the arbitration agreement? YES.

DISTRICT COURT HELD:

  1. “A plain reading of 29 C.F.R. § 2560.503-1(c)(4) indicates that the limitations on arbitrability apply only to ‘claims procedures’….” Op. at 4.
  2. “The Department of Labor explains that ‘a plan may require arbitration as one or both of the permitted levels of review of a denied claim.’” Op. at 4.
  3. “The Ninth Circuit recognized that ‘in the past, [the U.S. Supreme Court] expressed skepticism about the arbitrability of ERISA claims, but those doubts seem to have been put to rest by the Supreme Court’s decisions[…]” Op. at 6 (citations omitted).
  4. Aetna could move to enforce arbitration because it met the definition of “Interested Party” provided in the “Evidence of Coverage” documents. Op. at 10.

KEY TAKE AWAY:  Empirical studies indicate arbitrations can result in “faster, fewer, cheaper” resolution of claims.  See, e.g., Colvin Study (link).  The key is to incorporate the FAA into the arbitration agreement, and a very mainstream arbitration agreement which contains a class action waiver is recommended.