State Finds Mentally Ill Improperly Denied Coverage for Treatment Nearly Half the Time

Health plans and insurers defy doctors’ orders and deny coverage of critical mental health treatment because they argue it’s "not medically necessary."

San Jose parents Leslie Kornblum and Roberta Friedman first noticed a change in their teenage daughter at the end of 2014. The conscientious high school student became withdrawn and depressed. She started counting calories and dropping weight. And by last summer they knew their daughter needed real help.

Doctors diagnosed their daughter with anorexia, major depressive disorder and social anxiety disorder. Desperate to get her the help she needed, they followed the recommendations of her medical team and sought intensive therapy. She received 62 days of fulltime treatment at a residential eating disorder facility in Menlo Park and seven months of partial hospital treatment in Los Altos.  

But the family’s health plan, Blue Shield of California, denied coverage, deciding the treatments were not medically necessary. Desperate to keep her in what they considered to be life-saving treatment, Kornblum and Friedman paid the $114,000 that Blue Shield failed to cover.

“I guess what Blue Shield is saying, is we know best even though we have never seen your daughter,” Kornblum said.

The family’s story illustrates the ongoing conflict between the recommendations of treating physicians, and the health plans that disagree with their assessments.

Laws promise equal coverage of physical and mental conditions, but testimony from advocates and a state lawmaker, and a review of state data, show families are still experiencing roadblocks to health coverage for severe mental illnesses. And while the Investigative Unit found regulators continue to police health plans and insurers for compliance, some advocates say the laws haven’t gone far enough to protect vulnerable people in need of critical treatment.

Mental Health Parity Laws Call for Equal Coverage

The California Mental Health Parity Act of 1999 and the Federal Mental Health Parity and Addiction Equity Act of 2008 generally prevent health plans and insurers from providing less favorable benefits to people with mental illnesses than to people who need medical or surgical treatments. Mental health advocates believe the laws have successfully stopped numerical limits on mental health treatment, such as caps on therapy visits and expensive co-pays.

But they say another set of issues has risen, including the use of aggressive internal evaluations to determine whether often expensive and long-term mental health treatment is medically necessary.

“I think the bottom line for them is they are looking for ways to keep costs down and have managed to be effective in doing that,” said Randall Hagar, the current government affairs director for the California Psychiatric Association and former legislative director for the California chapter of the National Alliance on Mental Illness (NAMI).

In a 2015 survey, NAMI found health plans and insurers are denying authorization for mental health care at higher levels than they are for other types of medical care. A third of respondents reported that they or their family members had been denied mental health care on the basis of medical necessity, which is more than twice the percentage who reported being denied general medical care.

‘Medical Necessity’ Evaluations Increase in Importance

Blue Shield first denied coverage of residential treatment for Kornblum and Friedman’s daughter in August 2015. Based on the health plan’s own medical necessity guidelines, a licensed, board-certified Blue Shield psychiatrist found the treatment was “not medically necessary.” The reviewer decided her anorexia could have been handled at a lower level of care, such as a “brief time in partial hospital treatment.”

After their daughter had improved enough to transition into partial hospital treatment, Blue Shield issued another denial letter in Novembers. A Blue Shield psychiatrist determined that level of care was also “not medically necessary.”

“Your clinical condition and weight is not dangerously low and you do not appear to be a serious risk to self or others that would require a partial hospitalization program at this time,” the psychiatrist wrote. Instead, he determined that treatment in an outpatient setting was more appropriate.

“Who the heck is this person?” Kornblum said. “This person has never seen my daughter. How the heck would he know if this is medically necessary or not?”

Blue Shield declined an interview request but sent a statement via email. 

“Our review and appeals process is extensive and includes an in depth assessment from our medical directors as well as an independent medical review by a third party physician,” wrote Molly Weedn, senior corporate communications manager. “Additionally, a second level independent medical review can be requested through California’s Department of Managed Health Care (DMHC) and that evaluation involves a board certified specialist.”

Independent Medical Reviews Overturn Denials

After a number of failed appeals with Blue Shield, the family turned to the state regulator that oversees health plans. The mothers asked DMHC for an independent medical review of the residential eating disorder treatment.

Reviewers partially overturned Blue Shield’s denial, deciding that half the treatment was, in fact, medically necessary. Blue Shield reimbursed the family for part of the treatment.

After the NBC Bay Area Investigative Unit started asking questions, the state’s reviewers took another look and decided the family shouldn’t have had to pay for the rest of the residential treatment, either. Kornblum and Friedman received another check from Blue Shield in early May.

The Investigative Unit analyzed 15 years of department data and found nearly 13,000 people have requested independent medical reviews of coverage decisions based on medical necessity. Data shows reviewers overturned 1,007 denials involving mental health. That’s more than any other type of medical condition. Reviewers found health plans improperly denied coverage in 48 percent of all mental health cases and nearly 56 percent of eating disorder cases, specifically.

Department director Shelley Rouillard says the statistics show her department’s independent medical review process is working.

“The plans have a lot of latitude to determine what is medically necessary,” she said “It’s up to us to evaluate those procedures and check up on them and make sure they are not doing things that are improper. That’s our role as a regulator and we take that seriously.”

Click here for information on how to request an Independent Medical Review through the Department of Managed Health Care. If you need help with your Health Plan, call the DMHC Help Center at 1-888-466-2219.

Regulators Continue to Police for Violations 

Right now, the department is conducting a sweeping review of the 25 major health plans it oversees to ensure compliance with new federal parity rules the feds released in 2014. State law requires the department to conduct a routine survey of every licensed health plan at least once every three years. The department has taken enforcement action after identifying deficiencies in some of the plans’ behavioral health services. 

According to enforcement records reviewed by the Investigative Unit, the department issued 33 violations related to mental health coverage in the past 10 years. The department issued $500,000 in penalties against three health plans, and in 2013 levied a $4 million penalty against Kaiser Foundation Health Plan.

While DMHC regulates health plans, the Department of Insurance regulates health insurers in the state. Insurance commissioner Dave Jones says the department is taking proactive steps to force compliance with parity regulations by reviewing insurers’ policy documents.

His department also runs an independent medical review system. Data show reviewers overturned 53 percent of mental health denials since 2011 when the department started tracking.

“That doesn’t mean health insurers won’t continue to deny people treatment,” Jones said. “But we’re doing everything within the law to try to prevent that from happening.”

Click here for information on how to request an independent medical review with the Department of Insurance. You can call 1-800-927-4357 if you need help.

Mental Health Advocate Calls for Stronger Laws

While both Jones and Rouillard believe California has some of the strongest mental health parity laws in the nation, state senator Jim Beall of Campbell believes the laws don’t go far enough to protect the mentally ill. The longtime advocate authored a series of failed bills to strengthen California’s parity law, though he did successfully secure a bigger enforcement budget for DMHC in recent years.

He’s pushed for greater transparency from health plans and insurers about how often they deny coverage for mental health services. He continues to argue the complaint-based enforcement system isn’t working for people with mental illnesses.

“A lot of people with depression and illnesses like that related to mental health, they don’t bother to complain. And that’s wrong,” Beall said. “We have to have a system that takes care of them adequately without having to complain.”

But the industry believes the laws are fair and enforcement is strong. Clare Krusing, a spokeswoman for America’s Health Insurance Plans (AHIP), said the industry has long supported mental health parity and implementation of parity requirements. 

"Health plans have a unique understanding of the serious challenges facing patients and their families when it comes to managing behavioral health conditions, and we look forward to working with all stakeholders—providers, clinicians, and behavioral health specialists—to make sure patients have affordable access to safe, effective and evidence-based treatments,” Crusing wrote in an email. “Suggesting that coverage decisions drive the mental health challenges we face does a disservice to the ongoing efforts to improve the country’s health system for those who need behavioral health care.”  

Hoping Treatment Sticks

A year and a half after she began battling her mental illness, Kornblum and Friedman say their daughter is on the road to recovery. She graduated from her partial hospital treatment program in April and has continued to make progress. They credit her steady improvement to quality, consistent treatment. 

“When you spend nine months battling—battling this eating disorder, battling the insurance company, just battling—it feels like we’ve been in a war zone practically,” Friedman said. “But there’s a little light at the end of the tunnel. She’s doing good. She’s smiling. She’s happy.”

If you have a tip for the Investigative Unit, email theunit@nbcbayarea.com or call 888-996-TIPS. 

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