Case Against Health Insurer for Denial of Substance Abuse Treatment Coverage Survives Motion to Dismiss

On Thursday, Judge Jane Magnus-Stinson of the Southern District of Indiana issued a mixed ruling in a case challenging a benefit denial by defendants Golden Rule Insurance Company, Savvysherpa Administrative Services LLC, and United Healthcare Services Inc. (collectively, Golden Rule). The plaintiff seeks to represent a class of insureds who were denied coverage for urine drug tests because Golden Rule deemed them not “medically necessary” to treat substance abuse.

The court’s opinion explains that on Feb. 1, 2013, the plaintiff, his wife, and son entered into a health insurance contract with Golden Rule. The plaintiff’s son was diagnosed with depression, anxiety, and other disorders, as well as an opiate use disorder at different times in his teenage years.

In late 2017, the son spent four months in an intensive outpatient program (IOP), costing $44,290. As part of the IOP, the son was regularly tested for drug use through urine analysis (UA) tests to enable his treatment providers to accurately assess and monitor his condition. Several dozen UA tests cost the plaintiff just over $1,500 during his son’s treatment. 

In January 2018, the plaintiff’s son overdosed and died. Golden Rule refused to pay for any of the UA tests or IOP services and billed the plaintiff for UA tests months after his son passed away. The plaintiff challenged the denials through Golden Rule’s internal process, which resulted in three decisions affirming the original denials because the treatment was deemed not medically necessary.

The plaintiff then sued Golden Rule for breach of contract and for violations of the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (Parity Act). Golden Rule sought dismissal of two of the four claims and the plaintiff’s bid for prospective injunctive relief.

In its opinion this week, the court surveyed other federal courts’ pleading stage requirements under the Parity Act before determining that the operative question is “whether the plaintiff has plausibly alleged that his health insurance plan applies a separate or more restrictive treatment limitation to mental health and substance abuse services versus medical and surgical services.”

The court held that the plaintiff plausibly alleged that Golden Rule applied the medical necessity requirement to his claims differently than it would to medical or surgical claims. The court pointed to the plaintiff’s inclusion of facts concerning the denial of coverage for costs incurred, and facts suggesting that the denials may have been disingenuous based on the severity of the son’s conditions, which ultimately claimed his life.

As to injunctive relief, the court sided with Golden Rule. It concluded that because the plaintiff’s son had passed away and the policyholder had not otherwise demonstrated that he, himself was at future risk of harm due to Golden Rule’s allegedly unlawful refusal to pay for substance abuse services, the plaintiff lacked standing.

The plaintiff is represented by Crueger Dickinson LLC, DeLaney & DeLaney LLC, Greg Coleman Law PC, Wexler Wallace LLP, and Jordan Lewis P.A. Golden Rule is represented by Faegre Drinker Biddle & Reath LLP and Gibson, Dunn & Crutcher LLP.