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The Legal Department articles are not intended to serve as legal advice and are offered for educational purposes only. The information provided should not be used as a substitute for independent legal advice and it is not intended to address every situation that could potentially arise. Please be aware that laws, regulations and technical standards change over time. As a result, it is important to verify and update any reference or information that is provided in the article.
An informative FAQ about managed health care in California, with suggestions on how to address provider grievances with managed care plans or insurers.
By: Catherine L. Atkins, JD, Staff Attorney
Reviewed by Ann Tran-Lien, JD (Managing Director, Legal Affairs)
Have you ever felt frustrated when attempting to get reimbursed by a managed care company? We know the answer is “yes.” Navigating the policies, procedures, contracts and laws surrounding health plans and insurers can be time consuming and exasperating. The best way to protect oneself, and ensure proper payment for services rendered, is to be educated and savvy on the laws and regulations that surround the managed care system. Only then can you properly address the situation with the plan or insurer to hopefully resolve it in a mutually agreeable fashion. Provided below is a list of commonly asked questions, answers1, and suggestions as to how to address your grievances with the plan or insurer.
1. Who regulates the plans and the insurers?
The Department of Managed Health Care (“DMHC”) oversees most health care service plans (including Kaiser Permanente), health maintenance organizations (“HMOs”) incorporated in California, as well as California Blue Cross and Blue Shield participating provider organizations (“PPOs”). The Department of Insurance (“DOI”) oversees most other insurance companies and their PPOs in California.2 If you are unsure whether you are working with a plan or an insurer, below are telephone numbers to the two regulatory agencies: DMHC: 1-888-466-2219 DOI: 1-800-927-4357.
2. How do I communicate with the insurers/plans?
Communicating with insurers/plans can be a stressful act. However, a provider can take steps to minimize the red-tape and frustration:
3. Is there a time frame that insurers/plans must reimburse claims?
Yes. Insurers/plans must reimburse uncontested claims no later than 30 working days after you have submitted your claim. HMOs have 45 working days.3 Failure to reimburse in a timely fashion results in the requirement to pay interest on the claim. Insurers must pay the greater of $15 per year or at the rate of 10 percent interest per annum, while plans and HMOs must pay 15 percent. (Per annum, beginning with the first calendar day after the 30/45 day period.)
Things needed to be discussed in dispute for payment to the insurer/plan:
4. The insurer/plan wants more information about the treatment to make a determination of claim reimbursement. Is that legal?
Insurers/plans will occasionally need additional information about the treatment provided to determine if it was medically necessary and/or if the claim is reimbursable. An insurer/plan has up to 30 working days,4 after receipt of the claim, to request additional reasonable relevant information. The request must include clear and specific reasoning for the additional information sought. The provider must provide the insurer the reasonable relevant information within 15 working days (10 working days for plans) of receipt of a written request from the insurer/plan. If, as a result of reviewing the new information, the insurer/plan still requires further information, the insurer/plan shall have an additional 15 working days after receipt of new information to request the further information. The provider then again has 15 days for insurers or 10 days for plans to provide the additional information. At that time the claim will be deemed complete and the insurer has 30 days to reimburse or contest the completed claim.5
If the insurer/plan seems to be abusing this process and/or demanding irrelevant information and/or losing the information forwarded by the provider, it would be wise to submit a grievance to the insurer/plan.
Things needed to be discussed in your grievance:
5. My claim was denied, but I don’t know why.
Insurers/plans shall, upon rejecting a claim for reimbursement from a health care provider, and upon the provider’s demand, disclose the specific rationale used in determining why the claim was rejected.6 Although many insurers/plans include the reasoning behind a claim rejection in their denial, not all do. If you receive a rejected claim that does not include any specific rationale, and believe the claim should have been paid, first call up the insurer/plan and ask for an explanation. If you are not given a specific or meaningful reason, forward a letter to the insurer/plan requesting a reason.
Things needed to be discussed in your demand to the insurer/plan:
6. My claim was denied based on “lack of medical necessity” but I don’t agree. What do I do?
There is no statutory definition of “medical necessity.” However, generally it can be viewed as what is reasonable and necessary for the diagnosis or treatment of a mental illness or to improve the functionality of an individual. If you believe that the treatment you were providing your client was medically necessary, and the claim was denied, you should appeal the denial. The law expects you to advocate for your client in such circumstances. Additionally, the CAMFT Code of Ethics Section 1.12 provides, in pertinent part, that, “[w]hen appropriate, marriage and family therapists advocate for mental health care they believe will benefit their patients. In appropriate circumstances, they challenge denials of case, or denials of payment for care, by managed care organizations, insurers, or other payers.”
Things needed to discuss in your appeal to the insurer/plan:
7. The insurer/plan denied my claim because I am an LMFT. Is that legal?
LMFTs are specifically named in California’s “freedom of choice” laws giving patients the right to choose the mental health provider of their choice.7 LMFTs are granted provider status with most managed care companies including HMOs, PPOs, EAPs, etc. Plans must abide by “freedom of choice” laws unless they are operating under an exception to that law. Such an exception might be: plans written outside of California that are not issued for delivery in California; self insured plans (ERISA plans), or a plan of the Federal Employers Health Benefits Program.8
Things needed to be discussed in your dispute for payment to the insurer/plan:
8. The insurer/plan denied my claim because I put in the wrong CPT (procedure) code or incorrect ICD-10 (diagnostic) code. What do I do?
If your claim is rejected due to an incorrect CPT code orICD-10 code, double check your work. If you incorrectly submitted the wrong code, correct the claim form and resubmit with an explanation. If you are unsure of which code to use, it is helpful to call the insurer/plan and hope for a sympathetic claim’s representative who can walk you through the proper code selection. If this is not feasible, it is wise to collaborate with colleagues on the various CPT and ICD-10 codes to determine which is most suitable for your client’s situation. For more information on the use of the ICD-10, see "Making the Transition to ICD-10" (The Therapist, September/October 2015)
9. What is the deadline for turning in claims for reimbursement?
An insurer/plan cannot impose a deadline less than 90 days for contracted providers, or 180 days for non- contracted providers, after the date of service.10 If you turned your claim in on time and were denied payment, submit an appeal or grievance to the insurer/plan.
Things needed to be discussed in your appeal to the insurer/plan:
10. I did not turn my claim reimbursement in on time. Can I still collect the money?
An insurer/plan that denies a claim because it was filed beyond the claim filing deadline, shall, upon provider’s submission of a provider dispute and the demonstration of “good cause” for the delay, accept and adjudicate the claim.11
11. What if the insurer/plan denies reimbursement after I already treated the patient based on the authorization given to me by the insurer/plan?
A health plan or insurer cannot deny payment and/or modify an authorization for services after the provider renders the services in good faith and pursuant to the previous authorization by the plan or insurer.12 Meaning, if you called the insurer/ plan and received authorization to treat the patient, the insurer/plan cannot later retract or modify that authorization.
The argument that insurer/plan’s error, or employee’s error, does not constitute valid reason to deny reimbursement
12. Help! The insurer/plan wants a refund for the claim they already paid. What do I do?
An insurer/plan has up to 365 days to notify a provider that they are requesting reimbursement for the overpayment of a claim.13 In order for the insurer/plan to request reimbursement they must send a written request identifying: the claim, the name of the patient, the date of service and a clear explanation of the basis upon which the insurer/plan believes the amount paid on the claim was in excess of the amount due. If the insurer/plan fails to provide the appropriate notice (i.e., claims, dates, patients, and a clear explanation of the basis for reimbursement) then the insurer/plan may be subject to a cease and desist order. 14
If the provider contests the insurer’s/plan’s request for reimbursement, the provider (within 30 working days of the receipt of the notice of overpayment of a claim), shall send written notice to the insurer/plan stating the basis upon which the provider believes that the claim was not overpaid.15
Things needed to discuss in your grievance or appeal:
Note: If the provider does not contest the insurer’s/plan’s request for refund of overpayment, the provider shall reimburse the plan within 30 working days of the receipt by the provider of the notice of overpayment of a claim.16
13. If I don’t repay the over-payment back to the insurer/plan, can the plan offset the amount in other claims?
Plans may offset if the provider fails to reimburse the insurer/plan within the requisite time frame and the provider has entered into a written contract specifically authorizing the plan to offset an uncontested notice of overpayment of a claim from the contracted provider’s current claim submissions. In the event that an overpayment of a claim or claims is offset against a provider’s current claim, the plan must give the provider a detailed written explanation identifying the specific overpayment or payments that have been offset against the specific current claim or claims.17
Insurers may offset only if: the overpayment was erroneous under the provisions of the policy, the error is not a mistake of law, the insurer notifies the insured within six (6) months of the date of error, and the notice states clearly the cause of overpayment and amount due.18
14. How long do I have to file a dispute against the insurer/plan for rejecting my claim?
A provider has 365 days from date of receipt of contested/rejected claim to file a dispute against an insurer/plan.19
15. When I dispute a denied claim reimbursement, how long before I find out the resolution?
Insurers/plans must resolve disputes and send a written determination of the resolution within 45 working days after receipt of the provider dispute.20 If the determination favors the provider, the insurer must pay any outstanding monies determined to be due, as well as any interest or penalties, within five (5) working days of the issuance of the written determination.
16. I am not contracted with this insurer/plan but yet they are demanding I take a lowered reimbursement rate. What do I do?
Providers do not have to abide by the rules or rates of insurers/plans they have not contracted with. Just because you saw that particular insurer’s/plan’s enrollee, does not mean you have to accept their specified rates if you are not a contracted provider. When providing services to patients who belong to insurers/plans that you do not contract with, it is not unusual for providers to receive letters asking them to accept lowered rates. Of course it is your option, however, it is not necessary or required. If the non- contracted insurer/plan only pays a percentage of the forwarded claim you may either: 1) file a grievance with the insurer/ plan to request the additional monies (see arguments above); or, 2) forward the balance of the bill to the client. Depending on the terms of the patient/enrollee’s health coverage, the patient or the plan may be responsible for the remainder.
17. What if the employer changes insurers/plans in the middle of a course of treatment?
All insurers/plans must have a continuity of care policy in place for serious, acute or chronic conditions.21 Meaning, if an employer changes insurers/plans mid-treatment of a serious, acute or chronic condition, the new insurer/plan must allow the enrollee a reasonable transition period to continue his/her course of treatment with the non-participating provider. However, the insurer/plan can require the non- participating provider, whose services are being continued, to agree in writing to the same contractual rate as participating providers.
18. The rates that I’m reimbursed are so low. Why isn’t CAMFT doing anything about managed care rates?
There are clear, legal reasons why CAMFT, and every other professional association, is prohibited from attempting to negotiate fee reimbursement with managed care companies. The Sherman Antitrust Act (1890), among other anti-trust laws, prohibits restraint on free trade punishable by felony conviction, imprisonment, and fines against corporations and each individual. Typically, antitrust issues arise when groups of individuals (association members) aggregate and engage in discussions about or attempt to fix prices, set fees and/ or engage in boycotts of managed care organizations. For more information on this issue please see “Why Does CAMFT Not Eradicate Managed Care?” (The Therapist, March/April 2005) and “Avoiding Antitrust Problems in Practice” (The Therapist, September/October 2012).
While there can be no concerted effort to effect the rate reimbursements by managed care, it ultimately becomes a “supply and demand” and access issue. The more disgruntled individual providers become with managed care, the more they will be inclined to leave managed care. When there are insufficient numbers of providers to fill panels, it becomes a patient access issue. When there is insufficient access for clients, managed care companies will be forced to raise reimbursement rates to encourage more providers to contract. Frankly, we are getting to that place now with panels largely compiled of “phantom” professionals––names listed with no availability to provide services.
19. I was terminated from my contract with the insurer/plan. Is that legal?
Well it depends. Why were you terminated? Most insurers/plans indicate you can be terminated “without cause” (meaning for any reason assuming it does not violate the law). Make sure to look at your contract with the insurer/plan to determine if your termination was within the boundaries of the contracted language. If the termination violates the contract terms, it is likely unenforceable, and you can challenge your termination.
Also, some terminations can be unlawful. Terminations can be unenforceable if they violate the law or due process. For example, providers cannot be terminated for advocating on their client’s behalf, appealing a denial, filing a dispute, or filing a grievance with the DOI or DMHC.
If you feel you were terminated unlawfully or outside the boundaries of your contract, you can challenge your termination. Note, however, that if you were terminated “without cause” and fight that termination, you may be forcing the insurer/plan to pick a reason for termination––which very well may have a negative connotation on your next panel application. Terminations with or without cause can be a double- edged sword. Without cause: you are left in the dark but it has no serious negative impact on you. With cause: you may be placed in the position of mandatory disclosure of the termination to other plans with whom you may be contracting or renewing your contract.
If you feel you have been wrongly terminated, and choose to fight the termination, here are things to discuss in your appeal:
20. What do I do if the insurer or plan ignores my grievance, unjustly rejects my appeal/grievance, or continues the behavior of unfair business practices?
In situations wherein you feel that you and/or your patient have been harmed by the unfair business practices of a plan or insurer, or the matter was not resolved in a just manner, you may lodge your complaint with the California State Department that regulates and licenses the plans and insurers. CAMFT also requests that when you are filing a grievance with the departments listed below that you carbon copy (“cc”) your letter to CAMFT at email@example.com (please redact confidential information).
21. I’m so frustrated by the scenarios and situations addressed above. What can I do to change the system?
You can do things both personally and globally. To assist in your experience with the plans and insurers personally, CAMFT suggests: reading and understanding the contracts you sign with plans or insurers; documenting the date, time, name of the insurer and plan agent who provided you with information or answers and, length of call; keeping copies of letters, emails, and faxes (including fax logs), sent to/received from the plans or insurers; and, becoming knowledgeable and informed about the laws surrounding managed health care to protect your rights and those of your patients. Globally, CAMFT suggests: informing the California Departments, who regulate and license the insurers and plans, about your unresolved appeals/grievances; and of course, answering to the call of duty when CAMFT asks for your support on bills surrounding the issues of managed health care, even when the issues addressed are not your most “burning” concerns.
1 The questions and answers submitted in this article are general managed care principals and are intended to be an overview of the law. Unique circumstances or fact patterns could potentially alter the steps taken with the insurer/plan in question.
2 Most laws which regulate the health care service plans and insurance companies are succinct, but attention has been noted when there are differences.
3 H&S Code §§1371 and 1371.35, and Ins. Code §10123.13.
4 45 days for HMOs.
5 Ins. Code §10123.147, and H&S Code §1371.35.
6 H&S Code §1399.55 and Ins. Code §10123.13.
7 H&S Code §1373, and Ins. Code §§10176, 10176.7, 10177, and 10177.8.
8 Although they often include LMFTs, and Federal law states that they may pay any licensed professional.
9 The plans/insurers operating under an exception to the “freedom of choice” laws are not obligated to follow this California law, but it does not hurt to ask.
10 28 C.C.R. §1300.71 and Ins. Code §10113.66.
12 H&S Code §1371.8, and Ins. Code §796.04.
13 Ins. Code §10113.66, 10 C.C.R. §2695.11, and 28 C.C.R. §1300.71.38.
14 On November 22, 2013, in the Matter of the Cease and Desist Order Against Blue Cross of California, (OAH No. 2012080513 and Enforcement Matter No. 11-366), the California DMHC affirmed a previously issued Cease and Desist Order against Blue Cross of California (“Blue Cross”). In that matter, Blue Cross, through its Clinical Investigation Unit, sent letters to providers for reimbursement for overpaid claims based on general assertions including that Blue Cross had audited and overpaid the provider. Blue Cross contended that a mere “technical failure” to follow the law should not preclude it from seeking overpayment due to fraud and misrepresentation. See Matter of the Cease and Desist order Against Blue Cross of California, supra at 5. The DMHC, however, noted that, “…a plan cannot meet the basic requirements of Subdivision (b)(5) [California Code of Regulations, title 28, section 1300.71(b)(5)] without complying with Subdivision (d)(3) [California Code of Regulations, title 28, section 1300.71(d)(3)] and providing the appropriate notice –including the claims, dates, patients, and a clear explanation of the basis for reimbursement—to the provider when the plan commences its reimbursement efforts.” Id. at 9.
15 Ins. Code §10123.145, 28 C.C.R. §1300.71, H&S Code §§1371, and 1371.1.
17 28 C.C.R. §1300.71.
18 10 C.C.R. §2695.11.
19 28 C.C.R. §1300.18.38, and Ins. Code §10113.66.
20 H&S Code §1371.38, 28 C.C.R. 1300.71.38, and Ins. Code §10123.137.
21 H&S Code §1373.95.