Schwarzenegger Administration Sued for Allowing Health Insurance Companies to Deny Autism Care

July 1, 2009

The mother of an autistic child joined Consumer Watchdog and its attorneys today to announce a lawsuit against the California Department of Managed Health Care ("DMHC"), the Schwarzenegger Administration agency responsible for regulating many of California's health insurers. The suit alleges that the DMHC has wrongfully allowed insurance companies to refuse to pay for autism treatments, resulting in the denial of critically needed, medically necessary treatment for autistic children.

The suit, filed by Consumer Watchdog and Strumwasser & Woocher LLP, alleges that the DMHC, and its Director Cindy Ehnes, recently changed the state agency's policy to permit insurers to deny coverage for Applied Behavioral Analysis ("ABA"), an essential treatment for autism, in plain violation of the California Mental Health Parity Act. That law requires health insurers to cover and pay for all medically necessary treatments for autism, including ABA. If successful, the suit would require the DMHC to bar insurers from refusing to cover medically necessary ABA treatments. The suit also seeks to compel the DMHC to turn over records that would expose the full extent of the DMHC's violations of the California Mental Health Parity Act and the Knox-Keene Act.

"Californians, including those stricken by autism, and their parents and caregivers, expect regulators to enforce the law, not to side with insurance companies seeking to boost their profits by denying patients the care they need," said Harvey Rosenfield, founder of the non-profit advocacy group Consumer Watchdog and author of the landmark insurance reform initiative Proposition 103. "Governor Schwarzenegger, a longtime and vocal supporter of the Special Olympics and developmentally disabled children, will now have to explain in court why his administration is allowing health insurers to evade state mental health laws and shift health care costs to already beleaguered taxpayers."

Governor Schwarzenegger, who appointed the current Director of the DMHC, has received $711,200 in campaign contributions from Blue Cross, Kaiser and Blue Shield -- three health insurers regulated by the DMHC that commonly deny coverage for autism treatments.

The DMHC's actions upholding heath insurance denials for medically necessary autism treatment puts children at risk by forcing parents to seek treatment through over-stretched taxpayer-funded programs, or to forgo treatment altogether.

"HMOs and health insurers are denying autistic children the most effective medical treatment that is available, with severe consequences for them, their families, and the state's taxpayers," said Fredric D. Woocher, lead counsel in the suit. "Insurance companies are blatantly violating California law. Yet the Department of Managed Health Care is not only standing by and doing nothing to prevent these violations; it is actually supporting the insurers as they abandon autistic children and their families."

Insurer's New Tactic in the Battle to Avoid Paying for Autism

ABA is a form of behavioral therapy that has been scientifically proven to improve brain function in autistic children. For years, insurance companies refused to pay for ABA on the grounds that it was "experimental" and that there was insufficient medical evidence to show that it was an effective treatment for autism. But the evidence supporting the efficacy of ABA is now overwhelming. The Centers for Disease Control and Prevention, the National Institute of Mental Health, and the United States Surgeon General all agree that behavioral interventions, such as ABA, are a critical component of any comprehensive autism treatment program.

According to the lawsuit, until March of this year, health care consumers were able to appeal an insurer's denial of ABA through the DMHC's Independent Medical Review ("IMR") system, in which a treatment denial is reviewed by a team of doctors that is unaffiliated with the insurance company that denied the treatment and independent of the DMHC.

The suit alleges that as the IMR doctors increasingly overturned insurer treatment denials, compelling the insurers to pay for ABA, insurers privately urged the DMHC to change its procedures and process the treatment denials through the DMHC's own internal grievance review system. Unlike the IMR system, in which independent doctors evaluate whether a treatment should be provided on the basis of whether it is medically necessary and effective, the grievance system is conducted by DMHC staff, who are not doctors and who simply defer to the insurers' determination of whether the claim is even covered by their health care policies.

"Health insurers want to re-write the law to benefit their bottom line and the regulators are holding the pen," said Pam Pressley, Consumer Watchdog's Litigation Director. "California's mental health laws are clear: doctors get to decide whether care is needed, not insurance company bureaucrats or government lawyers."

Consumer Watchdog has learned that the health insurance industry mounted a lobbying campaign to convince the Schwarzenegger Administration that ABA is an "educational" program not covered by health insurance policies. On March 9, 2009, the DMHC issued a memo indicating that the agency would review ABA and other autism treatment denials through the DMHC's internal grievance system as urged by insurers.

Consumer Watchdog has evidence that the DMHC has in fact upheld the insurers' denials of ABA on coverage grounds in violation of the Mental Health Parity Act. That law requires insurers to pay for any "medically necessary" and effective autism treatment -- a decision that must be made by independent doctors, not by insurance company bureaucrats or government lawyers.

Kristie Sepulveda Burchit, mother of Aidan who suffers from autism, joined the group to announce the lawsuit. Kristie's insurer, Blue Cross, first refused to provide ABA in 2008 on the ground that it was not medically effective as a treatment for autism. Kristie requested an IMR and the independent physicians who reviewed her appeal overturned the Blue Cross denial. Then, in 2009, shortly after the DMHC issued its March 9 memo, Blue Cross again refused to pay for Burchit's continued ABA autism treatment, this time on the basis that it supposedly was "not covered" by Kristie's health insurance policy because ABA is an "educational service." Burchit has now appealed the denial to the DMHC through the grievance system and is awaiting a decision from the regulator. Consumer Watchdog said that if it wins the lawsuit, the DMHC would have to order Blue Cross to provide ABA treatment for Aidan.

The suit also alleges that the DMHC and its Director Cindy Ehnes:

• Illegally instituted a policy of denying ABA treatment on the ground that providers were inadequately licensed, despite the fact that the law clearly requires health insurers to cover all medically necessary treatments for autism, including ABA, whenever such services are either provided or supervised by a licensed or certified professional.
• Illegally withheld public documents properly requested under the California Public Records Act, which would expose how the DMHC conducts its "grievance system" and would reveal the full extent of the DMHC's violations of the mental health parity law.

Nearly 1 out of every 150 children born in the United States is diagnosed with autism. As of December 2007, the California Department of Developmental Services provided care to nearly 37,000 Californians with autism.

SOURCE Consumer Watchdog