On June 16, 2025, in J.H. et al v. United Behavioral Health et al, the United States District Court for Utah ruled that the defendant insurer’s decision to deny residential treatment benefits for an ERISA plan participant was arbitrary and capricious. The court granted summary judgment to the plaintiffs and remanded the case back to the insurer for reconsideration of the denied claims.
Background
In this case, the plaintiffs are parents of a daughter who was treated in a residential treatment facility for various mental health and substance use disorders during part of 2020 and 2021. They sought reimbursement for their daughter’s treatment through United Behavioral Health (UBH), which insured and administered the father’s ERISA group health plan. UBH denied many of their claims during the plan’s two-level internal appeals process. The parents were dissatisfied with UBH’s coverage decisions and frustrated by the denial letters, which failed to adequately explain the basis for their determinations. As a result, the parents sued UBH, arguing their denial of benefits was arbitrary and capricious, and asked the court to award benefits outright for the 2020 claims. UBH countered that it reasonably evaluated the claims, and its decisions should stand.
ERISA Requirements
An ERISA plan administrator must follow specific procedures to deny a claim for benefits. Importantly, the administrator must provide adequate notice in writing specifying the reasons for the denial, written in a manner calculated to be understood by the participant. The notice must reference the specific plan provisions on which the denial is based and a description of any additional material or information needed to perfect the claim. Essentially, ERISA requires a “full and fair review” of benefit denials, including a meaningful dialogue between the administrator and participant.
The Court’s Analysis
The court found that UBH’s decision to deny benefits was arbitrary and capricious and that UBH “failed to engage in anything resembling a meaningful dialogue in explaining its decisions,” so that no reasonable participant could have been expected to understand its reasoning or decision-making process from its denial letters. After conducting the level one appeal review, the court noted that UBH issued a cursory letter that indicated benefit coverage was partially available for the daughter’s treatment for the period from June 1, 2020, to December 31, 2020, but that for certain claims, the documentation submitted was insufficient or the services were not covered by the plan’s alternative medical treatment policy. However, as the court observed, the letter provided the parents with no practical way of knowing which reason applied to which claims, so they could try to perfect their claims on second appeal.
The defendants asserted that the parents had the opportunity to contact UBH for clarification and could have easily reviewed their daughter’s medical records and figured out which reason was used to deny coverage for which dates. The court rejected this argument outright, explaining that it “essentially tells the parents to pick up United’s slack” and emphasizing that UBH must satisfy its fiduciary obligations to the parents by including these details in their denial letter; a contrary conclusion would “turn ERISA’s principles upside down.”
Similarly, the court found UBH’s denial letter following the level two appeal review grossly deficient, noting that it failed to address specific issues raised by the parents in their appeal letter. For example, the letter did not respond to the parents’ concerns regarding potential MHPAEA violations and their request for a parity analysis or whether a provider was properly identified as out-of-network.
Based on the lack of reasoning, inconsistencies, and erroneous assumptions in the appeal denial letters, the court concluded that UBH’s decision-making was arbitrary and capricious. The court granted summary judgment to the plaintiffs and remanded the case back to the insurer for reconsideration of the denied claims in accordance with the opinion. However, the court warned that if UBH fails again to engage in meaningful dialogue, the parents may return to court, and the court will award all outstanding benefits claims as a sanction for failing to comply with the court order.
Employer Takeaway
Deficiencies with respect to group health plan denial letters are often cited by reviewing courts in ERISA litigation. This court clearly recognized the glaring shortcomings in the defendant insurer’s denial letters and its failure to engage in any meaningful dialogue with the parents.
Plan sponsors should ensure their claims administrators are exercising their discretionary authority carefully when reviewing claims and appeals and communicating their determinations to participants in a comprehensive and understandable manner. This is particularly important for self-insured plan sponsors, who assume greater financial responsibility and a higher level of fiduciary obligations with respect to plan claims. Denial notices should always include information required by ERISA, tailored to the participant’s particular circumstances, and should specify any additional information necessary to perfect the claim. Appeal denial notices should also address issues raised by a participant in their appeal request.
For further information regarding fiduciary obligations and governance, please ask your broker or consultant for a copy of the NFP publication ERISA Fiduciary Governance: A Guide for Employers.