86 F.4th 1265
10th Cir.2023Background
- E.W.’s daughter I.W. received residential mental-health treatment at Uinta from Sept. 2016–Dec. 2017; Health Net began covering her care under an ERISA plan on Jan. 1, 2017.
- Health Net applied the McKesson InterQual Behavioral Health (2016) criteria and determined on Feb. 23, 2017 that I.W.’s continued residential care was not medically necessary (InterQual requires certain acute symptoms within the prior week).
- Health Net sent a March 1, 2017 denial letter (which Plaintiffs contend they did not receive); Health Net’s internal and external reviewers upheld the denial on administrative appeal; MAXIMUS also upheld the denial in an independent external review.
- Plaintiffs sued in federal court asserting (1) ERISA fiduciary/claim-review violations (failure to act solely in beneficiary’s interest and failure to provide a full and fair review) and (2) an MHPAEA (Parity Act) violation, arguing InterQual imposed acute-level criteria on subacute residential care while comparable medical/surgical subacute settings (e.g., skilled nursing) were not held to the same acuity standard.
- The district court dismissed the MHPAEA claim and granted summary judgment to Health Net on ERISA; the Tenth Circuit affirmed the ERISA ruling but reversed dismissal of the MHPAEA claim and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs stated an as-applied MHPAEA claim | Health Net applied acute-focused InterQual NQTLs to subacute residential care and did not apply comparable acute criteria to analogous medical/surgical subacute care (e.g., skilled nursing) | Plaintiffs failed to plead the medical/surgical criteria Health Net uses; InterQual reflects generally accepted standards and Example 4 of the regs permits differing outcomes if standards are evidence-based | Reversed dismissal: plaintiffs adequately pleaded an as-applied MHPAEA claim (alleged a specific NQTL, a medical/surgical analogue, and a plausible disparity); discovery to follow |
| Whether InterQual qualifies as generally accepted standards so Example 4 defeats the MHPAEA claim at pleading stage | InterQual deviates from generally accepted standards (alleged) | InterQual is industry standard and thus Example 4 shows compliance | Court rejected resolution on 12(b)(6): cannot decide factual issue (whether InterQual meets the Example 4 safe-harbor) at pleading stage |
| Whether Health Net’s denial of benefits violated ERISA (arbitrary & capricious review) | Denial lacked reasoned analysis and cherry-picked InterQual criteria; failed to consider eating-disorder criteria | Reviewers applied InterQual in a reasoned manner, considered records, and concluded lower level of care appropriate | Affirmed summary judgment for Health Net: review was reasoned and not arbitrary or capricious; denial letters adequately explained basis |
| Whether plaintiffs exhausted administrative argument that Health Net failed to apply InterQual eating-disorder criteria | Plaintiffs contend they presented eating-disorder evidence and Health Net ignored that criteria | Plaintiffs did not explicitly raise the specific argument (failure to apply eating-disorder InterQual criteria) during appeal | Court agreed with district court: plaintiffs did not exhaust that specific argument, so district court properly refused to consider it on judicial review |
Key Cases Cited
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (U.S. 1989) (standard of judicial review for ERISA benefit denials)
- Metro. Life Ins. Co. v. Glenn, 554 U.S. 105 (U.S. 2008) (administrator acts as fiduciary; potential conflict of interest in benefit decisions)
- D.K. v. United Behavioral Health, 67 F.4th 1224 (10th Cir. 2023) (full-and-fair-review and adequacy of denial-letter analysis in residential-treatment denials)
- Sandoval v. Aetna Life & Cas. Ins. Co., 967 F.2d 377 (10th Cir. 1992) (administrative record limits district‑court review; exhaustion implications)
- LaAsmar v. Phelps Dodge Corp., 605 F.3d 789 (10th Cir. 2010) (deferential arbitrary-and-capricious standard when plan grants discretion)
- Adamson v. Unum Life Ins. Co. of Am., 455 F.3d 1209 (10th Cir. 2006) (benefit-denial must be predicated on a reasoned basis)
- McGraw v. Prudential Ins. Co. of Am., 137 F.3d 1253 (10th Cir. 1998) (misapplication of plan terms can be arbitrary and capricious)
- Owings v. United of Omaha Life Ins. Co., 873 F.3d 1206 (10th Cir. 2017) (administrator arbitrary when it misreads plan definition)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility pleading standard)