By: Andrew Silverio, Esq.

On March 5, 2021, the northern district of California came down with a decision that is causing some justifiable concern among TPAs in California and beyond.  The root of the dispute is a self-funded plan’s application of its exclusion for Applied Behavioral Analysis (“ABA”) therapy for treatment of autism, but notably, the lawsuit is brought not against the employer or plan, but against United Behavioral Health and United Healthcare Services, the plan’s claims administrator (collectively “United.”)

The interesting conversation here revolves around the question of whether United, by applying the plain language of the plan in enforcing its ABA exclusion, was performing a fiduciary act. The Court cited the appropriate case law, most notably Aetna Health Inc.  v. Davila, 542 U.S. 200, 218-19 (2004), which held that “‘A benefit determination under ERISA . . . is generally a fiduciary act’ and is ‘part and parcel of the ordinary fiduciary responsibilities connected to the administration of a plan.’”  In its analysis, however, the court essentially disregards the myriad of case law outlining that a claims administrator is not exercising discretion and therefore not engaging in a fiduciary act when it acts in a purely ministerial nature.  Discussion often revolves around whether ambiguous or vague plan terms are being interpreted, drawing the distinction between that distinction and the situation here – when the claims administrator is simply applying the clear written terms of the plan as established by the employer.  In essence, the court interpreted a “benefit determination … is generally a fiduciary act” as meaning that a benefit determination is a fiduciary act… period, foreclosing the possibility of all the exceptions that “generally” necessarily invites.  It found that by applying this clear ABA exclusion, United exercised discretion and rendered itself a fiduciary.  The reason for alarm here is clear – under this standard, essentially any claim determination, no matter how routine or how clearly the plan terms dictate the outcome, could subject a TPA to fiduciary liability.

The silver lining, at least at this point, could be that rather than willingly creating new law, the court seems to have simply applied existing law incorrectly.  It would come as a surprise to us if this decision was upheld at the circuit level – but if that happens, TPAs will want to take steps to ensure they are protected from the additional potential liability.