The Second Circuit Court of Appeals has ruled that third-party administrators of employee health plans must follow certain federal requirements and are accountable under the federal Mental Health Parity and Addiction Equity Act of 2008. The decision is related to a 2014 lawsuit filed by the New York State Psychiatric Assn. (NYSPA) and others against UnitedHealth Group and its subsidiaries, including United Behavioral Health, for violation of the federal parity law.
When an employer decides to put its own money at risk in paying for employee healthcare, it’s know as a “self-insured” plan. The administrative tasks of managing claims, building a provider network, etc., are always handled by entities known as “third-party administrators.” Such administrators also ensure that private health information about employees is kept private. Often, a health insurer that already has the core capabilities of plan management acts as an employer’s third-party administrator. The employer essentially pays the plan to just do the paperwork.
The policies that govern the self-insured plans are contained within the Employee Retirement Income Security Act (ERISA).
What does the recent court ruling mean?
It means the 2014 parity case against UnitedHealth Group and United Behavioral Health can go forward. United had raised objections to the case, but this ruling dismisses its objections. The federal court said that United could in fact be sued for parity violations even when it acted as an administrator (rather than an insurer) and is responsible under ERISA. The actual parity violations have yet to be judged.
“In ruling that health plan administrators must adhere to the mental health parity act, the court has answered a critical question that has existed since the law’s enactment,” said D. Brian Hufford, partner with Zuckerman Spaeder LLP, in a statement. “The decision gives new legal power to patients who face unfair scrutiny or rejection of their mental health claims. Importantly, the ruling further affirms the fact that United and other companies that administer employer health plans can be held legally accountable under ERISA.”
What did the court say about NYSPA?
The court also rejected United’s claim that the lawsuit should be dismissed because NYSPA cannot sue on behalf of its members. It can.
According to Seth Stein, J.D., executive director of NYSPA, in Psychiatric News, the ruling removes a technicality that plan administrators might raise to avoid being responsible for parity.