The employees had alleged that Illinois' state-sponsored, self-funded health plan improperly denied their children coverage for serious mental health conditions that required residential treatment. Their lawsuit, filed in July 2020, sought class action status.
Magellan Health had rejected the claims using MCG guidelines, which the employees alleged conflict with generally accepted standards of care. But U.S. District Court Judge Manish Shah in Chicago ruled the employees couldn't claim the insurer or the state's health administrators had violated their constitutional rights or sue under mental health parity laws.
According to the opinion, the employees' health plan only covered treatment that met Magellan's medical necessity criteria, not generally accepted standards of care.
Shah said the employees couldn't sue the state because it hadn't worked closely with the insurer, even though Magellan operated the state's employee health plan.
"At most, and as the plaintiffs allege, Illinois deferred to Magellan's use of the MCG guidelines. Mere approval or acquiescence by the state is insufficient to turn private action into state action," the opinion said.
The judge also found that the employees couldn't sue the state's health administrators because neither was personally involved in processing their claims.