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.