Blue Shield Class Action Says Mental Health Treatment Denied

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California Physicians’ Service d/b/a Blue Shield of California, Human Affairs International of California and Magellan Health Services of California Inc. – Employer Services have been hit with a class action lawsuit accusing them of improperly restricting the scope of their health insurance coverage for certain types of mental health treatment.

According to the mental health coverage class action lawsuit, an estimated 26 percent of American adults are affected by some type of mental health condition. Eleven percent of adolescents reportedly have a depressive disorder by the time they reach the age of 18.

This statistic is particularly concerning because suicide is currently ranked as the third leading cause of death for people between the ages of 15 and 24, the class action lawsuit says.

Between 2007 and 2010, around 38 percent of Americans aged 12 or older who needed substance abuse treatment lacked insurance coverage for the treatment and could not afford the cost of treatment without insurance coverage.

The defendants adjudicate mental health and substance abuse claims for thousands of Californians. However, the class action lawsuit alleges that they “are violating legal and fiduciary duties they owe to health insurance plan participants and beneficiaries by improperly restricting the scope of their insurance coverage for residential and intensive outpatient mental health and substance abuse treatment.”

These restrictions constitute a breach of fiduciary duty to health insurance policyholders and are inconsistent with generally accepted professional standards in the mental health and substance abuse disorder treatment community, the health insurance class action lawsuit alleges.

Blue Shield has elected to use Magellan as its Mental Health Service Administrator (MHSA) that is responsible for determining coverage for mental health and substance abuse treatment claims. Magellan has implemented guidelines for its adjudication of all mental health and substance abuse treatment claims under plans issued by Blue Shield.

However, the class action lawsuit alleges that Magellan’s guidelines, which Blue Shield has adopted, are more restrictive than the generally accepted professional standards for mental health and substance abuse treatment. As such, the defendants allegedly deny treatment that would be considered medically necessary according to generally accepted professional standards for substance abuse and mental health treatment in order to cut costs.

According to the mental health coverage class action lawsuit, the plaintiffs are insured by an employer-sponsored health insurance plan that is governed by the Employee Retirement Income Security Act of 1974 (ERISA).

Plaintiff R.D., a minor, was reportedly admitted to a residential rehabilitation treatment center in 2015 due to substance abuse, major depression and severe emotional disturbance of a child. He was reportedly denied coverage by Blue Shield based on the insurer’s determination that the treatment was not medically necessary according to Magellan’s guidelines. The class action lawsuit asserts that Blue Shield and Magellan ignored generally accepted professional standards when denying coverage for R.D.’s treatment.

The plaintiffs seek to represent a Class that includes: “All participants or beneficiaries in an insurance plan governed by ERISA, for which Blue Shield and/or Magellan make coverage decisions with respect to claims for mental health and substance abuse-related treatment, who sought and were denied coverage for all or a portion of residential treatment for mental health or substance use disorders, or intensive outpatient treatment for mental health or substance use disorders, within the applicable statute of limitations.”

Des Roches is represented by Meiram Bendat of Psych-Appeal Inc.; Daniel L. Berger, Kyle J. McGee and Rebecca A. Musarra of Grant & Eisenhofer PA; and Jason S. Cowart of Zuckerman Spaeder LLP.

The Blue Shield Mental Health Coverage Class Action Lawsuit is Charles Des Roches, et al. v. California Physicians’ Service d/b/a Blue Shield of California, et al., Case No. 5:16-cv-02848, in the U.S. District Court for the Northern District of California, San Jose Division.

UPDATE: On Jan. 15, 2018, Blue Shield of California agreed to pay $7 million to settle a class action lawsuit alleging improper restrictions on coverage for mental health treatments.