U.S. Magistrate Judge Joseph Spero, Northern District of California

A federal judge in San Francisco has found that an affiliate of UnitedHealthcare, the nation's largest health insurer, breached its fiduciary duty to policyholders by following guidelines that emphasized cost-savings and addressing acute problems rather than treating underlying mental health and substance abuse issues.

U.S. Magistrate Judge Joseph Spero of the Northern District of California issued a 106-page ruling Tuesday finding that the guidelines that United Behavioral Health used when making coverage decisions in cases of mental illness and substance abuse didn't provide for generally accepted standards of care outlined in the plaintiffs' policies.

"In every version of the Guidelines in the class period, and at every level of care that is at issue in this case, there is an excessive emphasis on addressing acute symptoms and stabilizing crises while ignoring the effective treatment of members' underlying conditions," Spero wrote. Although the specific guidelines used to make a coverage decision varied within the class period from 2012 to 2017, Spero concluded that emphasis was "pervasive and result[ed] in a significantly narrower scope of coverage than is consistent with generally accepted standards of care."

The decision is a major victory for lawyers at Zuckerman Spaeder and Psych-Appeal Inc., a law firm based in West Hollywood, California, that focuses on mental health insurance coverage.

United Healthcare is represented by a team at Crowell & Moring. Partner Jennifer Romano passed along a request for comment to a company spokeswoman.

"We look forward to demonstrating in the next phase of this case how our members received appropriate care," said UnitedHealtcare communications director Maria Gordon Shydlo. "We remain committed to providing our members with access to the right care for the treatment of mental health conditions and substance use disorders."

Spero's decision comes after he held a 10-day bench trial in October 2017 to determine whether UBH's coverage guidelines led to coverage determinations that were more restrictive than those generally accepted. Spero found that the evidence at trial showed UBH's emphasis on cost-cutting "tainted the process, causing UBH to make decisions about Guidelines based as much or more on its own bottom line as on the interests of the plan members, to whom it owes a fiduciary duty."

In particular, the judge pointed out that the company decided against adopting the widely used clinical criteria issued by the American Society of Addiction Medicine even though all of the company's own clinicians recommended adoption. "The only reason UBH declined to adopt the ASAM Criteria was that its Finance Department wouldn't sign off on the change," Spero wrote. "This evidence establishes that UBH has a conflict of interest that has had a significant impact on decision-making as to the development of the Guidelines."

Meiram Bendat of Psych-Appeal, who aside from being a lawyer is a clinician with a background in mental health, said the case will now move from the liability phase to the remedy phase. He and his co-counsel at Zuckerman Spaeder were still analyzing the court's decision and considering the next step Tuesday afternoon.

"Up until this lawsuit, UBH denied patients access to care on the false premise that crisis should be the benchmark for coverage," Bendat said. "The ruling today sends a clear message that insurers need to adhere to the generally accepted professional standards when making coverage decisions."

In a statement, Zuckerman Spaeder partner D. Brian Hufford, who heads the firm's health care practice, called the decision "a monumental win for mental health patients."

"For the first time, an insurer was forced to stand trial for denying thousands of mental health and substance use disorder claims, and the court delivered a strong message: what you're doing is harmful and illegal, and it must end," he said.

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UnitedHealth's mental health coverage guidelines overly restrictive, judge rules

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