K.M. NDT SETTLEMENT SUBCLASS AND K.M. ABA SETTLEMENT SUBCLASS INFORMATION 

Background     

The K.M. v. Regence lawsuit challenged Regence’s exclusions and/or limitations of neurodevelopmental therapies (“NDT”) and applied behavior analysis therapy (“ABA”) for the treatment of certain mental health conditions, including autism spectrum disorder (“ASD”) and other neurodevelopmental conditions.

Regence was originally sued for violating the Washington State Parity Act in a case filed on January 19, 2012, J.T. v. Regence Blue Shield, No. 12-00090RAJ.   The K.M. case was filed on July 11, 2013 on behalf of K.M. and B.S., children with autism/ASD, and on behalf of similarly situated individuals, after the Court denied B.S.’s request to join as a class representative in the J.T. case.
In K.M. the plaintiffs alleged that Regence failed to comply with both Washington’s Mental Health Parity Act and the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008.  Plaintiffs asserted violations of ERISA, including breach of fiduciary duties, recovery of benefits, clarification of rights under the terms of the plan, and enforcement of plan terms.

Along with the Complaint, the plaintiffs filed for class certification and entry of a preliminary injunction to bar Regence from applying its NDT age exclusion to plaintiffs and the putative class. Plaintiff Disability Rights Washington (DRW), the designated protection and advocacy origination in Washington State, was added as a plaintiff in an amended Complaint filed on July 18, 2013.  A hearing was held on January 22, 2014.  On January 24, 2014, the Court granted plaintiff’s motions (1) certifying a prospective neurodevelopmental subclass related to Regence’s age exclusion for neurodevelopmental therapy to treat mental health conditions, and (2) entering a preliminary injunction barring Regence from excluding coverage of mental health services based on its age exclusion.  Regence appealed this Order to the Ninth Circuit on February 13, 2014.

After the class was certified and an injunction entered, the parties concluded that a global settlement in both O.S.T. and K.M. might be possible.  Class counsel and Regence entered into a detailed agreement to negotiate on February 19, 2014, which set forth the principles upon which the parties would discuss settlement.  As part of that agreement, the parties agreed to exchange damage reports and to engage in targeted discovery in order to create an environment where informed settlement could occur.   The parties jointly moved for a stay of all litigation and proceeded to engage in the discovery and expert-related disclosures required by the agreement to negotiate.

Upon completion of the discovery and depositions, the parties engaged in mediation with Tom Harris on June 4, 2014, but a settlement agreement could not be reached.  However, Mr. Harris recommended that the process continue, so extensions of the stays were requested from the courts.  An additional session was held on July 31, 2014, after the parties exchanged additional material and met face-to-face.  The July 31 session was generally successful, with many of the key deal points resolved.  Additional progress was made the next day, when the parties again meet face-to-face.  By August 14, the parties were confident that the case could settle.  Codifying the understandings into an actual agreement, however, proved difficult.  Protracted exchanges occurred in an attempt to agree on language in the final agreement.  After more than a month of discussions and drafts, the parties finally reached agreement on the language of the proposed Settlement Agreement.  Motions were made for preliminary approval, and the two Courts involved in the cases have granted preliminary approval of the agreement. 

Summary of the Proposed Settlement Agreement

The main points of the agreement are described below.  You are encouraged to review the entire proposed agreement, which is available here .  Both involved Courts must, after final hearings to be held in September of 2015, approve the agreement before it can go into effect.

•    Coverage of Neurodevelopmental Therapy

Under the terms of the Settlement Agreement, Regence will affirmatively and immediately provide coverage of neurodevelopmental therapies to treat individuals with a DSM mental health condition without exclusions, age limitations, or treatment limits.  Settlement Agreement, ¶¶6.1.1, 6.1.2, 6.1.3, 6.1.4.  Any and all blanket exclusions must be eliminated.  Settlement Agreement, ¶6.1.2 (“Blanket exclusions for services, therapy, and supplies related to developmental delay or neurodevelopmental disabilities that are Mental Health Conditions, or other similar exclusions will not be enforced or used to exclude or limit coverage under Defendants’ health insurance plans.”).  Regence must change its policies to reflect these new coverage obligations.  Settlement Agreement, ¶¶ 6.1.2, 6.1.3, 6.1.4 (“Such exclusions shall be removed from Defendants’ certificates of insurance.”). 

•    Coverage of Applied Behavioral Analysis Therapy

Regence also agrees to provide ABA coverage without age or treatment limitations, or any other exclusion that categorically denies ABA coverage.  Settlement Agreement, ¶¶6.2.1, 6.2.2, 6.2.2.1, 6.2.2.2, 6.2.2.3, 6.2.2.4, 6.2.2.5, 6.2.2.6, 6.2.2.7.  The Settlement Agreement specifically prevents Regence from denying coverage for any of the reasons historically raised by other insurers.  Regence must affirmatively provide coverage for ABA under the agreed ABA coverage criteria, creating a clear “path to coverage” for Regence insureds.  Settlement Agreement, ¶ 6.2.1 and App. A.  The ABA coverage criteria follow a “best practices” model for the delivery of ABA informed by experts from the University of Washington’s Autism Clinic and the Seattle Children’s Autism Center.

•    $6,000,000.00 Settlement Fund

The agreement provides for a $6,000,000 settlement fund to pay for unpaid neurodevelopmental therapy and ABA services to treat DSM conditions received since January 1, 2006 for class members in large group plans, and since January 1, 2008 for class members in individual and small group plans, along with attorneys’ fees and costs, claims administration costs and incentive awards.  

•    Claims Process for Unpaid Neurodevelopmental Therapy and ABA Services

A class member (through his or her parents and/or legal guardian) will be eligible for payment from the settlement fund upon submission of a claim form (which is provided, with instructions, as part of this class notice) that contains the following four items: 
1.    the member’s DSM diagnosis, who made the diagnosis, and the date of diagnosis; 
2.    the date(s) of neurodevelopmental therapy treatment (month/year); 
3.    the provider(s) of the treatment; and 
4.    the unreimbursed charges or debt incurred with that treatment. 

Settlement Agreement, ¶¶ 7.4, 7.4.2.1  To be entitled to reimbursement, a class member must have a diagnosis listed in the DSM-IV or DSM-V that required treatment with ABA, or with speech, occupational and/or physical therapies.  In addition, the charges must be documented with some evidence of payment(s) or obligation, such as (but not limited to) cancelled checks, credit card account statements, checking account statements, provider ledgers or signed letters from the provider or the provider’s employer documenting the amount paid or debt incurred (so long as the letter clearly connects payments/debt with neurodevelopmental service dates by at least the month/year).  Settlement Agreement, ¶¶ 7.4.2.2, 7.4.2.2.1, 7.4.2.2.2.  A class member is entitled to reimbursement even if no claim was made to and/or denied by Regence at the time the service was rendered. 

A claims processor will review the claims to confirm that the four requisite items are on the claim form.  Settlement Agreement, ¶ 7.4.3.  The claims processor will also confirm with Regence that the class member was insured under a health plan covered by the agreement at the time the services were received, and that the claimed sums are not duplicative of claims previously paid by Regence.  The claims processor must provide a class member with a deficient claim form an opportunity to cure any problems, and class counsel is empowered to assist the class member in making any claim.  Settlement Agreement, ¶¶ 7.4.3.1, 7.4.3.2.

Class counsel anticipates, but does not guarantee, that the settlement amount will be sufficient to pay all claims at 100%, even after payment of attorneys’ fees, costs, incentive awards and costs of administration.  However, if insufficient funds remain to pay all claimants at 100% after fees, costs, incentive awards and expenses, then all class members will receive a pro rata distribution of their approved claimed amount.  Settlement Agreement, ¶ 7.4.8.  However, class members are guaranteed a minimum payment amount because the Agreement will automatically terminate if the pro rata deduction exceeds 45.14%.  Settlement Agreement, ¶ 9.6.

This threshold level was set to approximate a class member’s net recovery in the event of an individual suit for damages. As the Agreement explains: “The 45.14% figure represents an imputed deduction of 15.6% to approximate the effect of copays/coinsurance/ deductibles that likely would have applied to the claims, plus an imputed deduction of 35% to approximate the amount that a Class Member would be required to pay for continent legal representation and costs in an individual legal case.”  Settlement Agreement, ¶ 9.6.

•    Attorneys’ Fees, Litigation Costs, Costs of Claims Administration and Incentive Awards

Class counsel is permitted to apply for attorneys’ fees under the common fund doctrine/common benefit doctrine in an amount up to, but not exceeding, 35% of the settlement amount, or $2,100,000.  Settlement Agreement, ¶ 11.1.  Litigation costs and claims processing costs will also be paid from the settlement amount.  Settlement Agreement, ¶¶ 11.2, 11.4.  Regence is paying for the cost of sending notice. Finally, up to, but not exceeding, $25,000 in incentive awards for each class representative family and DRW ($175,000 total to all class representatives) may be requested from the settlement amount.  Settlement Agreement, ¶ 11.3.  All of these disbursements are subject to Court review and approval.  Settlement Agreement, ¶¶ 11.1, 11.2, 11.3.

You are permitted to review, object to, support or comment on class counsel’s request for attorneys’ fees and costs.  You may also review, object to, support or comment on the request for incentive awards to the class representative.    Class counsel has posted its fee and cost application on this page, and may be found here.  Alternatively, you may write or email class counsel and request that a copy of the application be sent to you.

•    Excess Funds 

If funds remain after the payment of claims, attorney fees, costs, incentive awards and costs of administration, then those funds shall be attributed 75% to the K.M. litigation and 25% to the O.S.T. case in state court.  (This allocation is driven by the Regence ERISA insured population to the non-ERISA population.)  With respect to the funds allocated to K.M., any residual funds shall be distributed to organizations to assist families with a family member with developmental conditions to provide health care and access health coverage.  Settlement Agreement, ¶ 7.4.6.3.  The parties will attempt to reach agreement on cy pres recipient(s) to present to the Court.    If no agreement can be reached, then class counsel will submit a proposal to the Court for distribution of the cy pres funds.    Regence may object and/or provide an alternative proposal to the Court.  The Court will have the final authority to distribute the cy pres funds.

•    Claims Release 

Class members will release defendants from any and all claims related to neurodevelopmental therapy or ABA therapy that were or could have been brought in the lawsuit.   This means that if you have any claims arising out of defendants’ past failure to provide neurodevelopmental or ABA therapy, then those claims will be resolved as part of the agreement, and your right to payment for any damages related to neurodevelopmental therapy coverage will be governed exclusively by the agreement.

Your Rights in the Process

If you are a member of the class, you have certain legal rights.  These rights include the following:

•    Comment on, Object to, or Support the Proposed Settlement Agreement

You have the right to submit comments or objections to the Court.  You may support, object, or comment on any aspect of the proposed settlement agreement.  You may also support, object to, or comment on class counsel’s request for fees, costs and incentive awards.  You must submit your comments in writing, recieved by August 5, 2015, to: Regence Settlement Claims Processor, P.O. Box 2926, Seattle, WA 98111.

•    File a Claim

You may submit a claim if you paid out of pocket, or have incurred an debt, for neurodevelopmental or ABA therapy to treat a mental health condition since January 1, 2006.  Claims must be received by August 5, 2015.  A claim form, certification page and instructions in filling out and submitting the claim form can be found here .

•    Do Nothing

You do not need to take any action to receive coverage for medically necessary neurodevelopmental therapies and/or applied behavior analysis therapy as described in the settlement agreement.  If you do nothing, however, any claims you have against Regence regarding neurodevelopmental or ABA therapy that could have been brought in these lawsuits will be released.

•    Opt-Out

You have the right to opt out of the class, but only if you are a member of the class.  If you opt out, you will be prohibited from filing a claim and obtaining reimbursement.  You will keep the right to file a separate lawsuit.  You do not need to opt out if you do not have any neurodevelopmental or ABA therapy claims.  To opt out, you need to send in an opt-out form, which can be found here .  Your opt-out form must be received by August 5, 2015.

The K.M. Court will hold a final hearing on September 11, 2015 at 9:00 a.m.  The hearing will be located in the courtroom of the Hon. Richard A. Jones at the United States District Court for the Western District of Washington, 700 Stewart Avenue, 13th Floor, in Seattle.  You are not required to attend the hearing.

Key Court Documents and Filings

A copy of the complaint is here , and Regence’s answer to the complaint is here .

The Court’s Order certifying the K.M. ABA Settlement Subclass and the K.M. NDT Settlement Subclass is here.  This Order, on page 4, contains the full legal definition of each class.

The Court’s Order preliminarily approving the proposed settlement agreement is here .

The motion for attorneys’ fees, costs and incentive awards is here, with supporting documents here.

The motion for final approval is here, and the reply in support of fees, costs and incentive awards is here.

Updates

September 3, 2015: The claims process has concluded and class counsel is pleased to report that there are sufficient funds to pay all approved claims at 100% of the approved amount, assuming both courts issue final approvals to the agreement.

Check back here for updates on the approval and claims process. Class counsel filed a motion for attorneys’ fees, costs and incentive awards, which is posted in “Key Court Documents and Filings, above. Class counsel will also monitor the claims process and provide updates on the volume of claims, and anticipated percentage recovery of neurodevelopmental claims.

More Information

If the information on this page does not answer your questions, then you may contact class counsel for more information at ehamburger@sylaw.com or rspoonemore@sylaw.com.  You may also write to class counsel at Regence Class Action Information, Sirianni Youtz Spoonemore Hamburger, 999 Third Avenue, Suite 3650, Seattle, WA 98104.  You should not call the Court.