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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.
Understanding your rights and responsibilities with regard to third party reimbursement and the nuances of when you are and are not reimbursed can be daunting for the therapist who has never navigated these waters. This article provides you with an overview.
by: Mary Riemersma, Former Executive Director
Updated July 2010 by Ann Tran, JD, Staff Attorney, CAMFT
Understanding your rights and responsibilities with regard to third party reimbursement and the nuances of when you are and are not reimbursed can be daunting for the therapist who has never navigated these waters. This article is intended to provide an overview of third party reimbursement and the exceptions to reimbursement. We trust that this information will assist in therapists being better informed about matters regarding reimbursement. However, if the article does not address your particular question or if you need further clarification, CAMFT is only as far away as the phone and we are ready to assist you with your questions. Additionally, CAMFT has available, the Insurance Compensation Manual. This recently updated manual has relevant information and sample letters to assist the practitioner in being knowledgeable about insurance reimbursement and in contesting claim denials. The Manual may be accessed in the Members Only Area of the CAMFT website.
Freedom of Choice
California Law with regard to insurance reimbursement, referred to as "Freedom of Choice," mandates that insurance companies are to reimburse California licensed marriage and family therapists, in addition to other named mental health professionals. Insurance Code Section 10176 provides, among other things that, "Nor shall any such policy prohibit the insured, upon referral by a physician and surgeon licensed under Section 2050 of the Business and Professions Code, from selecting. . .any marriage and family therapist who is the holder of a license under Section 4980.50 of the Business and Professions Code. . ." Insurance Code Section 10176.7 provides, among other things that, "Disability insurance [which means health insurance] where the insurer is licensed to do business in this state and which provides coverage under a contract of insurance which includes California residents but which may be written or issued for delivery outside of California where benefits are provided within the scope of practice of . . . a marriage and family therapist who is the holder of a license. . .shall not be deemed to prohibit persons covered under the contract from selecting those licensees in California to perform the services in California which are within the terms of the contract even though the licensees are not licensed in the state where the contract is written or issued for delivery. It is the intent of the Legislature in amending this section. . .that persons covered by the insurance and those providers of health care specified in this section who are licensed in California should be entitled to the benefits provided by the insurance for services of those providers rendered to those persons."
Generally speaking, when an insurance company does not reimburse, the therapist should appeal the denial, citing one of these two sections of law. However, while the law states that marriage and family therapists are to be reimbursed, the law is not absolute. There are numerous exceptions to the law, which results in marriage and family therapists not necessarily being reimbursed in every situation.
Insurance Code Section 10176, among other things, mandates that insurance companies that are located within the state of California reimburse marriage and family therapists. Insurance Code Section 10176.7, among other things, mandates that insurance companies that are located outside of the state of California, yet writing coverage within the state of California, reimburse marriage and family therapists. In either case, in order to get reimbursed, the law requires that marriage and family therapists first have a physician referral. The physician referral is rarely enforced these days, however, if the insurer requests that there be a physician referral, the therapist must comply if he/she wishes to rely upon the law for reimbursement. The physician's referral is generally quite simple to obtain and can be done by telephone. Passage of freedom of choice legislation was a major coupe for the profession in California that was accomplished by legislation sponsored by CAMFT in 1980 and 1984.
Diagnosis and Treatment of Mental Disorder Only
Insurance companies generally only reimburse for the diagnosis and treatment of mental disorder. If there is no diagnosed mental disorder, the therapist is likely ineligible for reimbursement for his/her services. While some plans may cover such services, such coverage is unusual. An example of such a case would be the therapist providing marriage counseling, where there is no diagnosed mental disorder being treated. See the article on "What is Insurance Fraud?" for guidance if you may be inclined to over-state or create a diagnosis for the sole purpose of achieving reimbursement for your client.
Managed care companies generally reimburse marriage and family therapists under similar circumstances as insurance companies. They too generally only reimburse for the medically necessary diagnosis and treatment of mental disorder. Dealing with managed care, however, has its only unique complexities.
Most often managed care companies only reimburse practitioners who are on their panels of providers. This process requires an application and selection process with each managed care plan on which the therapist wishes to become a provider. Often, these panels are filled at the time of initial application. Therapists who are persistent and who provide regular follow-up will have a better chance of being accepted. Also, therapists who have unique skills will have a better shot at being accepted, e.g., therapists who speaks one or more foreign languages, therapists who are knowledgeable and sensitive to cultural diversity, and therapists who work with unique populations. Getting on a managed care panel is just the beginning, however. Once on the panel, one has to agree to the terms of the contract with the managed care company. The provisions are usually unalterable, however, when terms are objectionable, the therapist should be reluctant to sign the contract and/or should attempt to negotiate the objectionable terms. Remember: even though difficult, everything is negotiable. Signing a managed care contract obligates the therapist to accept the terms and conditions of the managed care plan. Such terms can include: rates of reimbursement, billing and recordkeeping requirements, 24 hour availability, reporting requirements, office location limitations, termination protocols, etc. The therapist is often expected to provide substantial documentation to the managed care company for which he/she is not compensated and is required to take significantly reduced fees. Many seasoned practitioners who were once heavily into managed care have opted out of managed care primarily due to excessive limitations on the duration of therapy, reduced fees, and extensive report-writing requirements. More information on managed care can be found in previously published issues of the Therapist or on CAMFT's Website in the Members Only Area.
Exceptions to Reimbursement
We are often asked, "why don't you just provide us with a list of all of the insurance companies and managed care companies that reimburse LMFTs?" Unfortunately, it is not that simple. Every plan pays and every plan does not pay depending upon the particular circumstances. Within every insurance company, there are a multitude of plans. Plans are often developed to address the specific needs and wishes of a particular employer. For example, some employers may not offer mental health benefits. Some plans may offer more extensive benefits than do other plans; some plans include mental health as part of a primary plan; some "carve out" the mental health portion to managed care; some employer's plans may include only "parity" coverage. For more information about "mental health parity," see the article in the November/December 2001 issue of The Therapist entitled, "What Does Parity Really Mean." You will also find this article in the Members Only Area of CAMFT’s website.
Self Insured Welfare Benefit Plans
While Self Insured Welfare Benefits Plans are addressed in California's Freedom of Choice Laws, Federal law preempts California Law, and thus such self-insured plans are not obligated to abide by California law. The pertinent Federal law is the Employee Retirement Income Security Act, passed in 1974, with the intent to protect employee pension benefits. However, rather than protecting employee health and welfare coverage, it offered employers opportunities to avoid being bound by state law and opportunities to avoid providing employees certain normally covered and desired benefits. Self-funding permits employers to structure the plan in a way that protects the interests of employers, with little or no state control. Consequently, there continues to be an escalating number of employers who are going "self-insured" or "self-funded."
Therefore, an LMFT cannot rely upon California's Freedom of Choice Law to assist in garnering reimbursement when the plan is self-insured. There are, nevertheless, supporting arguments that one can make to try to convince the plan to reimburse. Such plans may pay marriage and family therapists, and some do, e.g., United Airlines. In the case where the LMFT is not reimbursed and a claim is denied, it may be worthwhile to appeal the denial. In some cases, it is not worthwhile, e.g., IBM Corporation. It may be worthwhile if the plan is written ambiguously, e.g., the plan's language indicates that it generically reimburses "licensed physicians," yet you know it reimburses psychologists and clinical social workers. In this case, you can argue that the "licensed physician" has been interpreted broadly to mean a "licensed practitioner of the healing arts." Since you are a licensed practitioner of the healing arts as defined by California law, and since they intended a broad definition by the fact that they reimburse mental health professionals other than physicians, clearly they should reimburse LMFTs as well. Some plans actually define a "doctor" or "physician" as a licensed practitioner of the healing arts. Some policies define a "doctor" or "physician" as "any person licensed under appropriate state law to perform services for which benefits are payable under the policy, and who is operating within the scope of such license." Without a doubt, LMFTs are included in these definitions.
In some cases, the third party payer may pay for a period of time and then discontinue treatment or even demand that the reimbursement be returned. In such a case an LMFT may wish to appeal the denial using the argument of estoppel. Estoppel is a theory from common law. Since they have paid and they, not you, are responsible for determining the terms and conditions of the contract, you have a reasonable argument. You should argue that by their reimbursement they have determined the terms and conditions of the contract upon which you and your patient have relied. Thus, they are estopped, or barred from discontinuing payment. If they are going to continue to operate in good faith, they will continue to pay for the duration of needed treatment and/or the duration of treatment permitted by the contract.
It is sometimes possible to argue that LMFTs should be reimbursed based upon the plan's reimbursement of another discipline with similar or lesser credentials. While there is no legal basis for such an argument, it may be persuasive, and at a minimum, alerts them to the fact that LMFTs exist, are licensed professionals who diagnose and treat mental, emotional and nervous disorders, and LMFTs meet challenging requirements for licensure.
It is also possible, in a limited number of situations, to elicit the help of the patient/employee. If he or she is willing to get involved (most, however, will not want their employers to know they are receiving mental health treatment--since the expense of reimbursement comes directly from the employer's resources), he/she can sometimes be instrumental in encouraging the employer to reimburse a provider who is appropriately licensed. There is no greater cost to the employer, and employee satisfaction is often important to the employer. Again, remember, the self-insured employer can do whatever it wants, it is the employer's plan and the employer maintains full control.
Finally, the main argument you or your patients have is that state law supports the right to reimbursement for your psychotherapy services.
Remember, these plans often look like insurance, as they are sometimes administered by insurance companies. When they are not administered by insurance companies, either employers or third party administrators administer the programs on the employer's behalf. What one should look for is distinguishing language that will appear early in the plan document that will reveal that the plan is a "self-insured welfare benefit plan governed by the Employee Retirement Income Security Act."
Out of State Insurers
Out of state insurers that are writing coverage to be delivered in California are expected to be licensed to do business in California and are likewise expected to abide by California law. Thus, such plans are obligated to reimburse marriage and family therapists according to Section 10176.7 (above) of the Insurance Code. However, in some cases, the insurance is written for delivery in another state. In such a case, the company is under no duty to provide coverage according to California law if the insured is just coincidentally in California. Examples of such circumstances would be: the patient is seeking services while vacationing or temporarily working in California; the employer, headquartered out of state, has an office in California; or the patient is working in California even though the employer is located elsewhere. Even if the insurance company denies and even though the law is not on your side in such a case, it may still be worth appealing. The insurance company should be informed that, if they are acting in good faith, they should be seeking ways to provide coverage rather than seeking ways to deny coverage. An argument could be made that "the patient is making progress with me and would have to start over with a new therapist, for which the insurance company will, if you refer, be required to provide reimbursement, possibly at a higher rate than they would reimburse me." An argument can also be made that coverage should be provided according to California law, since the services are being sought in the state of California. The employer may even have an office in California, the patient is currently located in California, and is seeking treatment from a professional in California, therefore, California law should prevail. The insurance company should be interested in seeing that the insured receives his/her reasonable expectations under the policy, especially given that any ambiguities in the contract are to be resolved in favor of the insured, since the insured does not have an opportunity to alter or negotiate the contract.
Federal Employee Plans
California's Freedom of Choice laws do not impact insurers when writing coverage for federal employees. Likewise, plans covering Federal employees are not mandated to reimburse marriage and family therapists. However, they may reimburse. In fact, Federal law was recently changed in 1998 authorizing, but not mandating, plans that cover Federal employees to reimburse any qualified state licensed health care practitioner. Currently, in California, there are approximately thirty plans that cover Federal employees. CAMFT is currently working to convince more such plans to reimburse LMFTs. These plans look the same as insurance companies and health care service plans and are often written by the same insurers that write other coverage.
In an effort to gain information about what occurs in California, CAMFT has corresponded with all such plans and has been attempting to persuade these plans to also reimburse LMFTs. As one might expect, this is an arduous process. There are currently about seven of the thirty plans that reimburse LMFTs.
Services Provided by Interns
Mental health services provided by Interns are not mandated to be reimbursed by California law. However, there are arguments that can be made in support of reimbursement and it is often worth the trouble to appeal, if the claim is initially denied. It can be argued on appeal, especially in the case where the intern is working in private practice, that the intern is actually working on behalf of the licensee/employer, that the licensee/employer has determined that the intern has the competence to provide the therapy to the client, that the intern is regularly receiving supervision for the work with the client, that the fees paid to the intern are likely more economical than the supervisor's fees, which should be beneficial to the insurer, and this situation is much the same as the nurse practitioner who provides services on behalf of a physician. In that case the physician is reimbursed for the services provided by the nurse practitioner. Typically, however, interns services are not reimbursed by managed care companies.
Treatment provided to couples may or may not be reimbursed. Sometimes insurance companies deny coverage under appropriate circumstances, e.g., the treatment was not curing or relieving a diagnosable mental disorder. Sometimes insurance companies deny coverage for inappropriate reasons, e.g., they assert you are doing "marriage counseling" when you were using conjoint therapy to address the identified patient's diagnosed mental condition. When you are denied reimbursement in the latter case, it is well worth appealing the denial asserting that conjoint therapy is, in your opinion, the most effective means to treat the identified patient's mental disorder. Again, take a look at the article, "What is Insurance Fraud?" before you are inclined to misrepresent a diagnosis merely to attain reimbursement for the patient.
Medicare does not reimburse LMFTs, however, we and AAMFT have been pursuing the passage of Federal legislation to include LMFTs in Medicare. As previously reported in The California Therapist, this is an arduous, costly and long-term effort, that is necessary for the profession to achieve full parity with other mental health disciplines. However, even though LMFTs are generally not reimbursed by Medicare, there are circumstances where MFTs may be reimbursed. the settings within which some persons work may be reimbursed for the services provided by LMFTs. Such a circumstance is when the services are provided "incident to" the services of a physician or a psychologist in a partial hospitalization facility or when employed in a physician's practice.
Marriage and family therapists, in most counties, may be MediCal providers insofar as fee-for-service MediCal is available within the county where the therapist practices. Discretion is left to the county to determine whether fee-for-service MediCal is available as well as to determine who may be providers within the local county system. LMFTs, like other mental health professionals, must apply and qualify to become MediCal providers. Typically all providers must be licensed to practice independently and must be credentialed by the Local Mental Health Plan. Generally such providers must meet and adhere to certain prescribed criteria, (e.g., have graduated from an accredited school and carry malpractice insurance) and must be regularly re-credentialed. Applications for provider status can be obtained from the County Department of Mental Health in a given area.
Marriage and Family Therapists may be reimbursed for treatment in the Workers Compensation system. As a result of legislation CAMFT sponsored some years ago, Section 3209.8 of the Labor Code provides that LMFTs may be reimbursed as long as the patient has been referred by a physician and has the approval of the employer. Again, the physician referral need only be a telephone referral. Approval of the employer usually means receiving an "okay" from the insurance company representing the employer. The insurance company, if they believe that therapy is justified and they are prepared to reimburse, will typically not object to the therapist being an LMFT. However, they could object on the basis that the therapist is an LMFT, and require the patient to be seen by a licensed psychologist, for example. What the employer/insurer is most likely to object to is the fact that they do not believe that therapy is warranted. In such a case, the insurer will deny coverage, which may result in the case being handled on a "lien" basis. This will result in the therapist not receiving reimbursement until the case is settled or tried, and it could result in the therapist never being paid. Therefore, therapists should be judicious, cautious and knowledgeable about the Workers Compensation system before embarking into this uncharted territory. While there are often no classes on how to navigate the Workers Compensation system, a novice is advised to seek consultation or supervision from another therapist who is knowledgeable in this unique area of practice. Finally, keep in mind that LMFTs may treat in the Workers Compensation system, they may not determine the extent of disability or "rate" the disability.
Procedural Codes-Current Procedural Terminology
For a listing of Current Procedural Terminology, visit the Members Only Area of the CAMFT Website, under “Point of Service Codes.” You will need your log in ID and password, which you can get by calling CAMFT’s Membership Services at 858-292-2638.
Complaints About Third Party Payers
The Department of Insurance licenses insurance companies in California. The key intent of the Department is to protect policy holders and not necessarily providers. However, anyone may file a complaint. Before submitting a complaint to the Department of Insurance, it is important to carefully review the policy to determine whether the services you provided are covered by the policy. The consumer hotline number for the Department of Insurance is 1-800-927-4357.
The Department of Managed Health Care is the government body that licenses and oversees health care service plans/managed care companies. The consumer hotline number for the Department of Managed Health Care is 1-888-466-2219.
This article appeared in the March/April 2001 issue of The Therapist, the publication of the California Association of Marriage and Family Therapists, headquartered in San Diego, California. This article is intended to provide guidelines for addressing difficult legal dilemmas. It is not intended to address every situation that could potentially arise, nor is it intended to be a substitute for independent legal advice or consultation. When using such information as a guide, be aware that laws, regulations and technical standards change over time, and thus one should verify and update any references or information contained herein.