9th Circuit Won't Rehear Health Care Parity Case

6/4/2012 2:52:00 PM, Tim Hull
     (CN) - The 9th Circuit refused Monday to reconsider a ruling ordering Blue Shield of California to pay for a severely anorexic woman's long stay in a residential treatment facility, despite a strong dissent by one judge.

     A three-judge panel of the San Francisco-based federal appeals panel ruled last year that California's mental-health parity law required Blue Shield to pay for Jeanene Harlick's nine-month stay in Missouri's Castlewood Treatment Center.
     Though a new opinion published Monday largely echoes the previous ruling, one small change led Judge N.R. Smith to conclude that the "lynchpin" that had held that ruling together was no longer present.
     As Smith points out, the new ruling adds the following paragraph:
     "The regulation implementing the Parity Act does not specify whether the 'Act' to which it refers without specification is the Knox-Keene Act or the Parity Act. We are willing to assume, as Blue Shield assumes, that the word 'Act' refers to the Knox-Keene Act. But it does not follow that the coverage for severe mental illnesses mandated by the Mental Health Parity Act is restricted to the coverage for physical illnesses mandated by the Knox-Keene Act."
     In his partial dissent to the denial for rehearing, Smith contends that the majority's new interpretation of the word "act" should have caused the panel to question its original ruling.
     "In our original opinion, we interpreted the word 'act' in the Parity Act's 2003 implementing regulation to refer to the 'Parity Act," Smith wrote. "In my view, this interpretation of the word 'act' provided the lynchpin for our conclusion that the Parity Act was not limited by the provisions of the Knox-Keene Act. Therefore, we determined that the Parity Act mandated coverage for all 'medically necessary' services by medical insurers. However, in Blue Shield's Petition for Rehearing and Petition for Rehearing En Banc, Blue Shield argued for the first time that California's Administrative Code Section defines 'act' to mean 'the Knox-Keene Health Care Service Plan Act of 1975.' After consideration of this argument, the panel now unanimously agrees that we incorrectly interpreted the text of the Parity Act's implementation regulation in our original opinion."
     However, despite admitting the misinterpretation, the majority reached the same conclusion -- that the Parity Act mandates coverage of residential treatment for anorexia.
     Smith added: "The majority's amended opinion reflects our change in interpretation. Yet despite this significant change in our textual interpretation, the majority remains convinced that our original interpretation of the Parity Act was still correct based on conflicting legislative history and 'common sense.' I see it differently and am surprised by the majority's conclusion. Once we agree that the word 'act' is referencing the Knox-Keene Act, the majority's conclusion that 'it does not follow that the coverage for severe mental illnesses mandated by the Mental Health Parity Act is restricted to the coverage for physical illnesses mandated by the Knox-Keene Act,' is a non sequitur. This reference acts as a statutory limit on the type of benefits that insurers are required to cover. Thus, only the interpretation of the Parity Act that adheres to this text is appropriate. Under this interpretation, an insurer need only provide services specifically required under the Parity Act and its implementing regulation, unless the insurer has voluntarily chosen to provide a nonmandated benefit for a physical condition and must therefore offer additional mental health benefits in parity with that coverage. Accordingly, 'medical necessity' is necessary, but not independently sufficient for mental health coverage." Attachment