Smith v. U.S. Office of Pers. Mgmt.

Decision Date26 February 2014
Docket NumberCivil Action No. 2:13–cv–5235.
Citation80 F.Supp.3d 575
CourtU.S. District Court — Eastern District of Pennsylvania

Gregory B. Heller, Young Ricchiuti Caldwell & Heller LLC, Philadelphia, PA, for Plaintiff.

Gregory B. David, Margaret L. Hutchinson, Mark J. Sherer, U.S. Attorney's Office, Philadelphia, PA, for Defendant.


LEGROME D. DAVIS, District Judge.

AND NOW, this 26th day of February 2014, upon consideration of Plaintiff's Complaint (Doc. No. 1), Defendant's Motion for a Protective Order Staying Discovery and to Quash Subpoena (Doc. No. 14), Plaintiff's responses thereto (Doc. Nos. 16 & 39), and Defendant's Motion to Dismiss or, in the Alternative, for Summary Judgment (Doc. No. 25), Plaintiff's response (Doc. No. 29), Defendant's reply (Doc. No. 32), and Plaintiff's sur-reply (Doc. No. 37), it is hereby ORDERED as follows:

1. Defendant's Motion to Dismiss (Doc. No. 25) is DENIED.
2. Defendant's Motion for a Protective Order Staying Discovery (Doc. No. 14) is GRANTED to the extent that the Clerk of Court is directed to remand this matter to OPM to evaluate Smith's claim for benefits in light of his contention that the Independence Blue Cross plan violates the law and to compile an administrative record related to its contract with Independence Blue Cross, including an explanation of its reasons for approving a plan that excludes residential treatment facilities. Defendant's motion is DENIED in all other respects.
3. The clerk of court is directed to close this matter for statistical purposes.
I. Background
A. Statutory Background

Congress enacted the Federal Employee Health Benefits Act (FEHBA) in 1959 to provide federal employees with subsidized health insurance coverage. 5 U.S.C. §§ 8901 –8914 ; Empire Healthchoice Assur., Inc. v. McVeigh, 547 U.S. 677, 682, 126 S.Ct. 2121, 165 L.Ed.2d 131 (2006). The Act authorizes the Office of Personnel Management ... to contract with private carriers to offer federal employees an array of health-care plans” through the Federal Employee Health Benefits Program (FEHBP). Empire, 547 U.S. at 682, 126 S.Ct. 2121 (citing 5 U.S.C. § 8902(a) ). Under the statute, the U.S. Office of Personnel Management (OPM) has “broad authority” to administer the FEHBP. Dyer v. Blue Cross & Blue Shield Ass'n, Inc., 848 F.2d 201, 203 (D.C.Cir.1988). “Each enrollee, as FEHBA directs, receives a statement of benefits conveying information about the Plan's coverage and conditions.” Empire, 547 U.S. at 684, 126 S.Ct. 2121 (citing 5 U.S.C. § 8907(b) ).

At issue in this case is the relationship between OPM's administration of the FEHBP and the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). 42 U.S.C. § 300gg–26. The MHPAEA applies to health insurance plans that cover “both medical and surgical benefits” and “mental health or substance use disorder benefits.” Id. § 300gg–26(a). Plans that cover both forms of benefits must ensure that:

the treatment limitations applicable to such mental health or substance use disorder benefits are no more restrictive than the predominant treatment limitations applied to substantially all medical and surgical benefits covered by the plan (or coverage) and there are no separate treatment limitations that are applicable only with respect to mental health or substance use disorder benefits.

Id. § 300gg–26(a)(3)(A)(ii). Treatment limitations include: “limits on the frequency of treatment, number of visits, days of coverage, or other similar limits on the scope or duration of treatment.” Id. § 300gg–26(a)(3)(B)(iii).

In April 2010, the Department of the Treasury, the Department of Labor, and the Department of Health and Human Services (the administering agencies) issued Interim Final Rules interpreting the MHPAEA; the regulations divide the types of treatment patients receive into six categories: (1) inpatient, in-network; (2) inpatient, out-of-network; (3) outpatient, in-network; (4) outpatient, out-of-network; (5) emergency care; and (6) prescription drugs. 45 C.F.R. § 146.136(c)(2)(ii)(A)(1)-(6) (2013). The regulations provide that “mental health or substance use disorder benefits must be provided in every classification in which medical/surgical benefits are provided.” Id. § 146.136(c)(2)(ii)(A). “In determining the classification in which a particular benefit belongs, a plan (or health insurance issuer) must apply the same standards to medical/surgical benefits and to mental health or substance use disorder benefits.” Id. Treatment limitations may be quantitative, for example, a limit of two visits, or nonquantitative, such as [m]edical management standards limiting or excluding benefits based on medical necessity or medical appropriateness, or based on whether the treatment is experimental or investigative.” Id. § 146.136(a), (c)(4)(ii).

After this suit was filed, the administering agencies issued Final Rules. 45 C.F.R. § 146.136 (2014). These rules became effective in January 2014 and “appl[y] to group health plans and health insurance issuers offering group health insurance coverage on the first day of the first plan year beginning on or after July 1, 2014.” Id. § 146.136(i). The Final Rules are more comprehensive than the Interim Final Rules. Relevant for this case because of factual similarities, the Final Rules include the following example:

Example 9.(i) Facts. A plan generally covers medically appropriate treatments. The plan automatically excludes coverage for inpatient substance use disorder treatment in any setting outside of a hospital (such as a freestanding or residential treatment center). For inpatient treatment outside of a hospital for other conditions (including freestanding or residential treatment centers prescribed for mental health conditions, as well as for medical/surgical conditions), the plan will provide coverage if the prescribing physician obtains authorization from the plan that the inpatient treatment is medically appropriate for the individual, based on clinically appropriate standards of care.
(ii) Conclusion. In this Example 9, the plan violates the rules of this paragraph (c)(4). Although the same nonquantitative treatment limitation—medical appropriateness—is applied to both mental health and substance use disorder benefits and medical/surgical benefits, the plan's unconditional exclusion of substance use disorder treatment in any setting outside of a hospital is not comparable to the conditional exclusion of inpatient treatment outside of a hospital for other conditions.

45 C.F.R. § 146.136(c)(4)(iii) (emphasis added). This example, or one like it, was not included in the Interim Final Rules.1

B. Factual Background2

Plaintiff John Smith (a pseudonym) is an employee of a federal agency; at the time he filed the Complaint, he was on administrative leave from his job. (Doc. No. 1 (Compl.), at 7, 8.) Smith suffers from addiction. (Id. at 9.) On August 30, 2013, Malvern Institute, an inpatient, non-hospital addiction treatment facility, admitted Smith for detoxification. (Id. ) Smith then transferred to Malvern's residential treatment program on September 5, 2013. (Id. ) Smith's treatment in the residential treatment program was not authorized, and thus not paid for, by his health insurance carrier. (Id. ) Smith's health insurance is provided by the FEHBP. (Id. at 5, 7.) Smith's health insurance, provided by Independence Blue Cross (IBC), does not cover residential treatment facilities, described in the plan brochure as facilities that “may include drug and alcohol treatment, confidence building, military-style discipline, and psychological counseling.” (Id. at 8; Doc. No. 1–5, at 16.) The plan defines residential treatment facilities as “offer[ing] treatment for a variety of addiction, behavioral, and emotional problems.” (Doc. No. 1–5, at 16.)

Before his transfer from the detoxification program to the residential treatment program, Smith's providers requested preauthorization from IBC's mental healthcare subcontractor, Magellan Behavioral Health (Magellan). (Com pl. 8–9.) Magellan denied the request. (Id. at 9.) On September 5, 2013, Smith appealed to IBC and OPM simultaneously. (Id. at 9–10.) On November 8, 2013, OPM issued a final denial of Smith's request for treatment coverage.3 (A.R. OPM00001–3.) In its letter, OPM upheld IBC's two reasons for denial of coverage: (1) the plan does not cover services billed by residential treatment facilities, and (2) Malvern is not a preferred provider. (A.R. OPM00001–2.) In reaching its decision, OPM cited the plan brochure, which states that residential treatment facilities are not covered and that Smith's treatment must normally be provided by a preferred provider. (Id. ) In response to Smith's argument that his plan violates the MHPAEA, OPM stated: “This issue is beyond the scope of the FEHB administrative disputed claims process, which is limited to OPM's review of a FEHB carrier's denial of a health insurance claim and issuance of a final decision as to whether the claim is payable under the terms of the applicable plan brochure.” (A.R. OPM00002.) However, OPM went on to state that Smith's plan does not violate the MHPAEA because [t]he Plan does not impose financial requirements or treatment limitations on covered mental health and substance abuse disorder benefits that are not imposed on covered medical/surgical benefits. Further, a plan exc [l]usion, like the one at issue here for services at residential treatment centers, is not a financial requirement or treatment limitation, and therefore in no way violates the MHPAEA.” (Id. )

Smith brings this action against OPM to challenge its decisions (1) to deny him benefits for a residential addiction treatment program, and (2) to approve federal health insurance plans, including his own, that do not cover non-hospital residential addiction treatment facilities. Count I of the Complaint, challenging the denial of...

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