Sixty-one percent of Americans with employer-sponsored health insurance are in a self-funded plan, in which the employer takes direct financial responsibility for enrollees’ medical claims. Employers that self-fund typically contract with an insurance company to run the plan. Workers then get cards that bear the name of the insurance company and often look just like those from a traditional plan, so many do not even know that they are in a self-funded plan. Most of the time, the distinction makes little difference -- unless the employees are seeking coverage for a family member with autism. The catch is that the state mandates do not apply to self-funded plans. A federal law (the Employee Retirement Income Security Act of 1974, or ERISA) exempts self-funded plans from most state insurance laws, including mandated benefits.
Peter Felsenfeld at JD Supra:
The extent to which a health plan may exclude coverage for mental health treatment modalities has become an active area in ERISA litigation. In Doe v. United Behavioral Health, 2021 U.S. Dist. LEXIS 43146 (N.D. Cal. March 5, 2021), a California federal court held that a plan that covers autism may not exclude specific treatments for the condition.
The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act (the Parity Act) (29 U.S. C. § 1185a), which seeks to eliminate disparities in health insurance coverage for mental health as compared to other medical or surgical conditions, lays the groundwork for this case. The Parity Act requires group health plans to provide the same aggregate benefits for mental healthcare and substance abuse treatment as they do for medical and surgical benefits.
Doe concerned an employer-sponsored and self-funded group health plan governed by ERISA (the Plan). The employer determined the terms of the Plan and, among other things, explicitly covered autism but excluded coverage for "Intensive Behavioral Therapies such as Applied Behavior Analysis for Autism Spectrum Disorders."
First, the court held that Section 1185a(b)(1) allows plans not to cover mental health services at all, but if a plan elects to do so, “the Parity Act prohibits imposing treatment limitations applicable only to mental health benefits.” Thus, the court held, having elected to cover autism, the Plan could not impose a treatment limitation that applied only to that condition. Second, the court held that the “permanent exclusion of all benefits for a particular condition or disorder” language in Section 2590.712(a) means that a plan may exclude coverage for an entire condition (e.g., autism), but not specific treatments within that condition. Accordingly, the court held that the Plan’s exclusion of Applied Behavior Analysis treatments “[o]n its face . . . creates a separate treatment limitation applicable only to services for a mental health condition (Autism). By doing so, the exclusion violates the plain terms of the Parity Act.”