Denial Letters – Watch the Details

Yesterday I was looking at a denial letter from a managed care company that denied coverage for residential addiction treatment for a very sick patient.  That letter was wrong in all kinds of ways, and I have a pretty informed hunch that the managed care company will — after a gentle reminder or two — see the error of its ways sooner rather than later.  For today’s post I want to focus on the very first of many errors in the letter.  The patient was requesting coverage for 21 additional residential addiction treatment days, and yet the letter magically reduced that request to a single day.  More precisely, the subject block of the letter — the section that appears before the main text of the letter, and even before the “Dear Patient” line — listed the dates of service as “10/1/2014 to 10/1/2014”.  This was a flat-out lie:  the patient and his treating clinicians were asking for coverage from October 1 to October 21.  I see this kind of calendar sleight-of-hand all the time in denial letters.

This misstatement matters.  It tells us that somewhere in the managed care company’s computer system, this episode is recorded as a dispute about a single treatment day, not 21.  So if a regulator or private attorney were to ask how many days were denied, the answer would come back 1, not 21.  That is a 20-fold decrease in the number of patient days denied!  Multiply this across thousands of patients, and you begin to see how this single bit of legerdemain can almost completely conceal the extent of denials.

So today’s takeaway is this:  read those denial letters carefully, including the block at the top.  And when you demand that the managed care company get its facts straight, be sure to mention any mistakes in the initial block.

This kind of misstatement also has important implications for an insured’s (or a provider’s) ability to seek relief in the Courts through an individual case or a class action.  But that is an issue for another day.

Health insurance bad faith

When health insurance companies break the rules (for example, when they violate MHPAEA), they can often be held responsible for the harm they cause.  In an important way, these claims work as a private enforcement tool.  Click here to take a look at an article that I recently wrote addressing health insurance bad faith claims.

Quantitative and Nonquantitative Treament Limitations: Where to Start

MHPAEA’s rule against discrimination applies to both quantitative treatment limitations and nonquantitative treatment limitations.

A quantitative treatment limitation is something like a cap on the number of visits or days of coverage.  These violations are fairly easy to spot and address.

Nonquantitative treatment limitations are by definition a broader concept — they include, for example, things like criteria and other utilization management tools. They violate MHPAEA if they are applied in a more restrictive manner for behavioral health than they are for physical health.  Discriminatory nonquantitative treatment limitations can be harder to nail down and address, but that does not mean that health insurers can do whatever they want – it just means that patients and providers need to pay careful attention, and maybe do a little more work.

Some medical necessity criteria are discriminatory on their face because they are more restrictive than widely accepted criteria (such as the medical necessity criteria promulgated by the American Society of Addiction Medicine).  A health plan is not allowed to just make up an arbitrarily constrained set of rules (unless, of course, they do the same thing for physical health, which is hopefully never the case).  To identify these violations, families and providers need to obtain criteria, but that is easy to do, because health plans health plans and insurers are required to provide these documents upon request. In fact health plans and insurers are required to provide not just criteria themselves, but also “the processes, strategies, evidentiary standards, and other factors used to apply a nonquantitative treatment limitation.”  29 C.F.R. § 2590.712(d) (3) (this citation is to Department of Labor MHPAEA regulations; identical language is found in the HHS and IRC regulations).  These additional documents can be extremely important — they might include, for example, a flowchart that directs how criteria are to be applied, and does so in a way that means nobody will ever get inpatient behavioral health treatment no matter what the criteria say.  Obtaining these documents is often an important first step in any attempt to identify (and eradicate) unlawful nonquantitative treatment limitations.

More on Stealth Denials

Last week I discussed stealth denials that took the form of an authorization for something less than the patient needed.   Another form of stealth denial involves a denial based on plan design.  Some health insurance companies take the position that no formal denial letter is necessary in this situation.  They are wrong.  The ACA quite clearly provides that a formal denial letter is necessary — and patients and providers are entitled to significant appeal rights — any time a plan or insurer fails to authorize the full amount of care requested.

Health plans and health insurers ignore this rule for a reason.  Without a formal denial, it can be difficult to identify unlawful exclusions and (where appropriate) address them in Court or with regulators. Managed care companies know this, and take advantage of it. In one case we handled, the local Federal Blue Cross plan denied coverage for residential rehabilitation based on plan language that purported to exclude coverage for residential addiction treatment, but initially refused to put the denial in writing.  This exclusion was clearly unlawful:  MHPAEA requires that residential addiction treatment be covered.  See 45 C.F.R. § 146.136(c)(4)(iii), Example 9 (MHPAEA Final Rules).  Getting Blue Cross to put its denial in writing was a crucial first step in taking the issue to Court and addressing this problem.  For another example, a national insurer recently denied coverage for addiction treatment based on policy language that excluded coverage for Court-ordered addiction treatment.  The policy included no similar exclusion for physical health, and this was a clear MHPAEA violation.  Forcing the insurance company to put its denial in writing was an important first step toward getting the issue resolved.

There is a little bit of a silver lining here for patients — when a health plan or health insurer fails to comply with the ACA’s procedural requirements, a family (or a provider) does not need to exhaust administrative remedies, and can go straight to Court.  But that is not an option for every family or every situation, and it hardly excuses health plans and health insurers from their obligation to follow the law.

Watch out for stealth denials

In addition to discussing legal issues, I am also going to try to illustrate some of the managed care behavior that we are seeing out in the field.

One particularly troubling recent development is the use of stealth denials that never generate a denial letter or indeed any formal record at all.  The most common form of stealth denial is a decision that denies reimbursement for needed services but simultaneously authorizes a lower level of care or fewer units of service (for example, a facility calls to request residential addiction treatment, and the managed care company approves an intensive outpatient program).  These stealth denials can be difficult to spot (and even harder for regulators to track), because the written record will indicate only that care was approved.  All too often, facility personnel who are already stretched too thin simply accept the reduced care that is being offered.  To force this managed care stratagem out into the sunlight, treatment facility personnel need to remain singularly patient-focused, and need to ask the managed care company to cover what the patient needs.  Facility personnel also need to carefully document these requests in their records.

Providers should not, however, stop there.  Under the Affordable Care Act, there is a mandatory appeal process for any “adverse benefit determination,” and the term “adverse benefit determination” is a pretty broad one.  Basically, it includes any denial or refusal to authorize or pay for all the treatment that a patient or provider is requesting, and includes managed care decisions that authorize less than the amount of care requested.  It includes, in other words, stealth denials.  Both providers and patients have a right to challenge these stealth denials.  These denials need to be appealed, and appeal efforts need to be carefully documented.

Let’s Get This Law Enforced

Who is going to enforce the Mental Health Parity and Addiction Equity Act (“MHPAEA”)?  This is a pretty big question.

On paper the issue seems clear enough.  States have primary enforcement authority over health insurance issuers, with federal regulators stepping in if a State fails to enforce the law.  The Department of Labor’s Employee Benefits Security Administration (“EBSA”) has primary enforcement authority over the health plans of private employers, and the Department of Health and Human Services (“HHS”) has primary enforcement authority over the health plans of state and local governments.

But allocating enforcement authority between the States, HHS, and EBSA is turning out to be difficult, and with a couple of notable exceptions (most prominently California and New York), most State regulators are still cutting their teeth on MHPAEA enforcement.  The situation is not a whole lot better on the federal level:  we have not seen a lot of proactive activity, and HHS has expressly stated that the federal government may address identified violations by simply asking health plans to comply in the future.  That’s like a speeding ticket that consists of a polite request to not speed again — more a field day for dangerous drivers than a meaningful enforcement mechanism.

We can’t stand by and do nothing while our patients are harmed by unlawful conduct.  This blog will talk about some steps that providers and families can take to address MHPAEA violations and (just as important) protect vulnerable patients from MHPAEA violations.