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.