A federal trial judge has certified a class action filed against Blue Shield of California and Magellan Health Inc. for systematically restricting insurance coverage for mental health and substance abuse treatment.

Certification means the case can proceed; if it weren't certified, it would be dismissed.

In her June 15 order, U.S. District Judge Lucy Koh of the Northern District of California granted class certification for Employment Retirement Income Security Act group plan members whose claims for residential and intensive outpatient mental health and substance abuse treatment were rejected by insurer Blue Shield and health care provider Magellan based on the companies’ “medical necessity criteria guidelines” from Jan. 1, 2012, to the present.

It’s the latest victory in a niche market dominated by a handful of health care plaintiffs lawyers who go after insurers for disparate treatment of behavioral health issues in violation of ERISA and depending on the case, the Mental Health Parity and Addiction Equity Act of 2008.

This most recent suit alleges that the criteria Blue Shield and Magellan used to restrict coverage for this type of care “are inconsistent with the terms of the relevant insurance plans and generally accepted professional standards in the mental health and substance abuse disorder treatment community.”

Magellan declined to comment on the case. A Blue Shield spokesman declined to comment on the specifics of the pending litigation but said that, “We disagree with the allegations in the lawsuit and the court’s certification of a class in this case. We intend to continue to defend the case vigorously.”

Another class action that was certified by a federal judge in Connecticut last month alleges Aetna Inc. systematically denied insurance coverage for transcranial magnetic stimulation to treat severe depression.

Representing the plaintiffs in both cases are Zuckerman Spaeder and Psych-Appeal Inc., a West Hollywood, California, law firm devoted to mental health insurance law.

The two firms have successfully collaborated on around six cases of this kind since they teamed up a few years ago. LeClairRyan is co-counsel in the Aetna case, and Grant & Eisenhofer is co-counsel in the Blue Shield and Magellan matter.

“The cases have been successful because they speak to systematic abuses that are relatable, and the remedies we are seeking are just intrinsically fair,” said Meiram Bendat, president of Psych-Appeal, who is both a psychotherapist and a lawyer. “They’re requiring the insurers to essentially conform their practices to the proper standard of care.”

Zuckerman partner D. Brian Hufford agreed that much of the success is due, at least in the California case, to what the plaintiffs are asking for.

“We’re not directly saying, ‘You’ve got to reward benefits,’” he explained. “We’re saying: ‘You used the wrong standard or applied the wrong decision and, therefore, you need to go back and use the proper guidelines.’ … This area is complex, but we’ve been able to come up with, after years of development, strong legal theories.”

So where do those years of development start?

For Hufford, it began in the 1990s with a personal matter — a son who had a highly unusual skin condition that was difficult to diagnose.

An interest in health care law that stemmed from that experience evolved into a specialty many years later, when Hufford, then at Pomerantz Grossman Hufford Dahlstrom & Gross, negotiated a $350 million settlement with UnitedHealth Group Inc. for misusing an Ingenix database to set “usual, customary and reasonable” rates for out-of-network health services.

The majority of Hufford’s health care work now deals with behavioral health, he said.

Bendat’s story also began with a child. Or lots of them. After representing children and families in the Los Angeles child welfare system and treating patients, Bendat founded Psych-Appeal in 2011. And when he went looking for a health care attorney with class action success to work with him on mental health insurance issues, Hufford’s reputation was well known.

In their first big case together, the U.S. Court of Appeals for the Second Circuit in 2015 held that third-party benefits administrators can be sued under ERISA for violating the Parity Act’s requirement of equal coverage for mental health treatment. Zuckerman partner Jason Cowart, Hufford’s co-counsel in these cases, called it a “watershed case” at the time.

And there’s much more work to be done to advocate for parity in behavioral health benefits, Bendat said.

“To date, there’s been very little enforcement of both the parity and mental health access protection in large part due to a lack of prioritization and sophistication on the part of regulators,” he said. “But we have been able to detect and unravel the systemic abuses that have haunted and plagued the industry for so long.”

Instant Insights /

Lawyers battle insurers' disparate treatment of mental health claims

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