Health Insurer Prevails During Early Stage of Insured’s Denial of Benefits Class Action

On Monday, defendant-administrator Health Care Service Corp. (HCSC) secured the dismissal of a lawsuit brought by the beneficiary of an employer-sponsored health insurance plan. The Northern District of Illinois class-action was filed after HCSC denied coverage for residential treatment that the plaintiff’s daughter received for behavioral health conditions in 2018.

The court explained that pursuant to the plaintiff’s second amended complaint, HCSC’s denial was the consequence of “improperly narrow residential treatment guidelines that HCSC continues to employ in making benefits determinations,” in violation of the Employment Retirement Income Security Act of 1974 (ERISA). The plaintiff seeks to certify a class consisting of “any member of a health plan governed by ERISA whose request for coverage of residential treatment services for a behavioral health disorder was denied by HCSC,” wholly or partly, and based on HCSC’s guidelines.

Though HCSC leveled several arguments in support of its motion for dismissal, the one first argued in its reply brief, that the plaintiff lacks constitutional standing, carried the day. Because the defendant only raised the defense at the conclusion of briefing, the court permitted the plaintiff to file a surreply, which she did.

In its opinion, the court noted that the plaintiff prays for equitable relief from the defendant’s use of its allegedly unlawful guidelines. As such, the court explained that the plaintiff must demonstrate that she is likely to sustain future injury, in other words, that a similar coverage denial would occur again, and that this denial would result in an injury not subject to a remedy at law. 

The court held that neither of the plaintiff’s asserted injuries-in-fact, HCSC’s past denial of benefits and its reduction in coverage, ultimately satisfied the constitutional standing requirements. The opinion reasoned that because the plaintiff expressly disclaimed an award of the past benefits for her daughter’s residential treatment, she “may not forgo an award of damages only to seek less adequate forms of equitable relief for HCSC’s denial of benefits.” The plaintiff’s second asserted injury-in-fact was “a reduction in available coverage,” due to HCSC’s ongoing use of its guidelines to process behavioral health treatment coverage requests.

The court held that in this regard, the plaintiff “fails to tether this abstract injury … one shared equally by each of the ‘more than 16 million’ individuals with a health plan administered by HCSC … to any concrete harm to her underlying interest in the Plan, i.e., her right to receive benefit payments.” Similar to the denial of benefits contention, the court concluded that the plaintiff neither showed that her daughter was improperly denied benefits in the past, nor that she would likely be improperly denied benefits in the future on account of HCSC’s guidelines.

Finally, the court declined the insurer’s request to dismiss the case with prejudice, and permitted the plaintiff to file a “third and final” amended complaint by Mar. 29.

The plaintiff is represented by Miner, Barnhill & Galland P.C., Zuckerman Spaeder LLP, and Psych-Appeal, Inc., and the defendant by Sidley Austin LLP.