United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
Honorable Edmond E. Chang United States District Judge.
V. brings this action against Health Care Service Corporation
(HCSC) under the Employee Retirement Income Security Act of
1974 (ERISA), seeking benefits related to her mental health
treatment at a residential treatment center. R. 1,
Compl. HCSC refused to pay for Natalie V.'s
treatment because her group health plan excluded coverage for
residential treatment centers. Id. ¶¶ 10,
12-13. Natalie V. now asserts that this exclusion violated
the Paul Wellstone and Pete Domenici Mental Health Parity and
Addiction Equity Act of 2008 (the Parity Act), which
generally requires group health insurance plans to provide
parity between mental health benefits and medical/surgical
benefits. Id. ¶¶ 1, 11. HCSC now moves to
dismiss the action under Federal Rule of Civil Procedure
12(b)(6) for failure to state a claim. R. 18, Mot. to
Dismiss. For the reasons stated below, the motion to dismiss
purposes of this motion, the Court accepts as true the
factual allegations in Natalie V.'s complaint.
Erickson v. Pardus, 551 U.S. 89, 94 (2007). Natalie
V. is a 23-year-old Illinoisan who suffers from anorexia
nervosa, general anxiety disorder, and major depressive
disorder. Compl. ¶¶ 2, 6. In mid-2014, Natalie V.
spent about three months at a residential treatment center in
California to treat these disorders. Id.
¶¶ 7, 9. Although Natalie V. paid for her treatment
upfront, she promptly submitted claims for reimbursement to
HCSC. Id. ¶¶ 8, 9.
denied Natalie V.'s claims for the entirety of her
treatment. Compl. ¶ 10. Natalie V.'s group health
plan (call it “the Plan, ” for short) only
covered treatment at residential treatment
centers for substance use disorders, not for
EXCLUSIONS - WHAT IS NOT COVERED
Expenses for the following are not covered under your benefit
- Residential Treatment Centers, except for Inpatient
Substance Use Disorders as specifically mentioned in this
18-1, Exh. 1 at 66-68, Health Care Service Corp. Health Care
Benefit Program at 53-55.
HCSC relied on the exclusion to reject coverage, Natalie V.
appealed the denial, asserting that the Parity Act required
the Plan “to cover [her] residential treatment as it
would for treatment of any physical illness.” Compl.
¶ 11. But again HCSC refused to pay for Natalie V.'s
treatment on the grounds that the Plan excluded residential
treatment for mental illness. Id. ¶ 12. After
exhausting all administrative remedies (as required under
ERISA), Natalie V. brought this action against HCSC.
Id. ¶ 15. Natalie V. alleges that HCSC violated
the Parity Act, which requires parity between mental health
and medical/surgical benefits, by denying her claims for
inpatient residential mental health treatment. Id.
¶ 13. Natalie requests relief for all past benefits due
to her under the Plan, plus pre-judgment and post-judgment
interest, as well as the costs and attorney's fees spent
on this case. Id. at ¶¶ 17, 20.
Standard of Review
Federal Rule of Civil Procedure 8(a)(2), a complaint
generally need only include “a short and plain
statement of the claim showing that the pleader is entitled
to relief.” Fed.R.Civ.P. 8(a)(2). This short and plain
statement must “give the defendant fair notice of what
the … claim is and the grounds upon which it
rests.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 555 (2007) (alteration in original) (internal quotation
marks and citation omitted). The Seventh Circuit has
explained that this rule “reflects a liberal notice
pleading regime, which is intended to ‘focus litigation
on the merits of a claim' rather than on technicalities
that might keep plaintiffs out of court.” Brooks v.
Ross, 578 F.3d 574, 580 (7th Cir. 2009) (quoting
Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514
motion under Rule 12(b)(6) challenges the sufficiency of the
complaint to state a claim upon which relief may be
granted.” Hallinan v. Fraternal Order of Police of
Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009).
“[A] complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is
plausible on its face.'” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting
Twombly, 550 U.S. at 570). These allegations
“must be enough to raise a right to relief above the
speculative level.” Twombly, 550 U.S. at 555.
The allegations that are entitled to the assumption of truth
are those that are factual, rather than mere legal
conclusions. Iqbal, 556 U.S. at 678-79.
motion to dismiss boils down to one issue: whether the Parity
Act required HCSC to cover Natalie V.'s residential
treatment for her mental disorders. Analyzing this issue
requires a bit of background on the Parity Act and the two
sets of regulations-the “Interim Final Rules” (an
oxymoron if there ever was one) and the Final Rules-that were
issued to provide guidance to health insurance companies
(like HCSC) on how to comply with the Parity Act. The next
section summarizes the Parity Act, the Interim Final Rules,
and the Final Rules, see Section III.A., and then
the Opinion moves onto analyzing whether Natalie V. has
adequately stated a claim for relief, see Section
effort to increase the scope of coverage for mental illness
treatment, Congress passed the Mental Health Parity Act in
1996. Pub. L. No. 104-204, 110 Stat. 2874 (1996); Coal.
for Parity, Inc. v. Sebelius, 709 F.Supp.2d 10, 13
(D.D.C. 2010). The Act required group health plans to provide
the same aggregate lifetime and annual dollar limits for
mental health benefits and medical/surgical benefits. Mental
Health Parity Act of 1996 § 712.
years later, Congress passed the Paul Wellstone and Pete
Domenici Mental Health Parity and Addiction Equity Act of
2008, which imposed additional parity requirements on group
health plans. Pub. L. No. 110-343, 122 Stat. 3765 (2008)
(codified as 29 U.S.C. § 1185a (ERISA); 42 U.S.C. §
300gg-5 (Public Health Service Act); and 26 U.S.C. §
9812 (Internal Revenue Code)). One important way that the
Parity Act seeks to achieve parity is to mandate parity
between the “treatment limitations” placed on
mental health benefits and on medical/surgical benefits:
In the case of a group health plan … that provides
both medical and surgical benefits and mental health or
substance use disorder benefits,  such plan or coverage shall
(ii) 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 … and there are no
separate treatment limitations that are applicable only with
respect to mental health or substance use disorder benefits.
29 U.S.C. § 1185a(a)(3)(A)(ii) (emphases
added). The Parity Act goes on to define
“treatment limitation” by referring to the scope
and duration of treatment. Specifically, treatment limitation
“includes limits on the frequency of treatment, number
of visits, days of coverage, or other similar limits on the
scope or duration of treatment.” Id. §
Parity Act instructed the Secretaries of Labor, Health and
Human Services, and Treasury (for convenience's sake, the
“Departments”) to issue “guidance and
information” on the Parity Act's requirements. 29
U.S.C. § 1185a(g). Congress directed, however, that the
Act would apply to all plans beginning on or after October 3,
2009, and Congress did not provide for a delay of the Parity
Act even if the Departments had not yet issued the rules.
Pub. L. No. 110-343, 122 Stat. 3765 (2008) (codified as 42
U.S.C. § 300gg-5 (“The amendments made by this
section shall apply with respect to group health plans for
plan years beginning after the date that is 1 year after the
date of enactment of this Act [October 3, 2008] …
.”); see also Preamble, Interim Final Rules
Under the Parity Act, 75 Fed. Reg. 5410-01, 5411 (Feb. 2,
2010) (“The changes made by [the Parity Act] are
generally effective for plan years beginning after October 3,
2009.”); 29 C.F.R. § 2590.712 (amended Jan. 13,
Interim Final Rules
February 2010, four months after the Parity Act took effect,
the Departments published the Interim Final Rules (IFRs).
Preamble, IFRs, 75 Fed. Reg. 5410-01; 29 C.F.R. §
2590.712. The IFRs applied to “plan years beginning on
or after July 1, 2010, ” Preamble, IFRs, 75 Fed. Reg.
at 5410, and remained in effect until the Departments
published the Final Rules in July 2014, see
Preamble, Final Rules Under the Paul Wellstone and Pete
Domenici Mental Health Parity and Addiction Equity Act of
2008 (hereinafter “Final Rules”), 78 Fed. Reg.
68240-01 (Nov. 13, 2013); 29 C.F.R. § 2590.712(i).
IFRs addressed the requirements for achieving parity of
treatment limitations. Specifically, the IFRs explained that
“the parity requirements for … treatment
limitations are applied on a classification-by-classification
basis.” Preamble, IFRs, 75 Fed. Reg. at 5412. As a
premise for the classification-by-classification regulation,
the IFRs established six “classifications of
benefits” for purposes of Parity Act compliance: (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. 29 C.F.R. §
2590.712(c)(2)(ii)(A); Preamble, IFRs, 75 Fed. Reg. at 5413.
The Departments chose these classifications after observing
that many plans already varied treatment limitations
“based on whether a treatment is provided on an
inpatient, outpatient, or emergency basis; whether a provider
is a member of the plan's network; or whether the benefit
is specifically for a prescription drug.” Preamble,
IFRs, 75 ...