On June 6, 2018, the Ninth Circuit revived a lawsuit, Danny P. et al. v. Catholic Health Initiatives, No. 16-35609, challenging the denial of a claim for an inpatient stay at a residential mental health treatment facility by a group health plan, taking issue with disparity in the plan’s coverage of room and board costs.
Catholic Health Initiatives (CHI) is a self-funded group health plan (the Plan) that provides coverage for “bed, board, and general nursing care” as well as “ancillary services” at skilled nursing facilities. The Plan also covers mental health services, including coverage for services at residential treatment facilities that relate to “the diagnosis and/or treatment of” a mental illness.
Nicole B., one of the plaintiffs, was covered under CHI’s Plan. She was admitted to the Island View residential treatment program for approximately 11 months for mental health treatment. Her family sought to have the Plan cover her treatment there, including room and board costs. But the Plan denied coverage for room and board. After exhausting the Plan’s administrative remedies, Danny P. filed suit under the Employee Retirement Income Security Act (ERISA), alleging that denial of the benefits violated the Mental Health Parity and Addiction Act (the Parity Act).
In June 2016, a federal district court in Washington granted the Plan’s motion for summary judgment, finding that the Parity Act did not require the CHI Plan’s coverage of stays at inpatient residential treatment facilities to be on par with its coverage of stays at skilled nursing facilities. Nicole B. and her family appealed this decision to the Ninth Circuit Court of Appeals.
The Parity Act, which was passed in 2008, mandates that benefit plans make sure the treatment limitations applicable to mental health benefits be “no more restrictive” than the limitations applicable to medical and surgical benefits covered by the plan.
The interim final regulations of the Parity Act originally issued in 2010 by the U.S. Department of Labor and other agencies did not address whether the Parity Act applied to residential mental health facilities vis-à-vis skilled nursing facilities. The permanent final rules ultimately issued in 2013 do require parity in this context, but the facts at issue in this case occurred when the interim rules were still in effect.
In a precedential ruling, a Ninth Circuit panel reversed the Washington federal court’s grant of summary judgment in favor of CHI, finding that the Plan violated the Parity Act by denying the plaintiffs’ claims for the cost of the inpatient stay at the residential mental health treatment facility.
The Ninth Circuit began its analysis by reviewing the plain language of the Parity Act itself, noting that “it directs that benefits and treatment limitations for mental health problems shall be ‘no more restrictive’ than those for medical and surgical problems.” The Court then concluded that the Parity Act did not allow the Plan to provide room and board reimbursements “at licensed skilled nursing facilities for medical and surgical patients, but  not provide room and board reimbursement at residential treatment facilities for mental health patients.”
The Ninth Circuit next looked to various government agencies’ interpretations of the Parity Act. No agency had directly addressed the issue before the Court, but “[the agencies] did indicate that mental and medical/surgical benefits must be congruent, and that limiting the former while not placing a similar limitation on the latter would be improper.” The Court cited the agencies’ statement in the interim rules that if a plan excluded benefits for a mental health condition within a given “classification” (e.g., outpatient, in-network) for which the plan provided medical surgical benefits, the exclusion would be considered a treatment limitation. “Those statements strongly suggested that a plan cannot allow room and board costs at a skilled nursing facility where one is an inpatient, while denying them at a residential treatment facility where one is an inpatient.”
The Court also found it relevant, though not legally controlling, that the 2013 final rules made it explicit “that coverage at residential treatment facilities must, indeed, be like the coverage at skilled nursing facilities.” Therefore, the Court found no authority contrary to its interpretation and some indirectly supporting it.
The Court also rejected the Plan’s argument that the Parity Act is “so vague” that application of its provisions to the Plan before the effective dates of the Final Rules on the Parity Act was a violation of due process. The Ninth Circuit held that “even if statutes lack perfect clarity until a court or agency speaks, that does not render their application unconstitutional.”
Accordingly, the Ninth Circuit reversed the district court’s ruling, remanding the case back to the lower court for further proceedings. “Were it otherwise, the lack of equity that the Parity Act was designed to repress would have become renascent,” the Ninth Circuit concluded.