When will Insurers pay for Residential Treatment?

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September 27, 2011

When will Insurers pay for Residential Treatment?

Mental health care insurers find themselves with a large gap in the middle: they will reimburse for outpatient weekly therapy and for psychiatric hospitalization. Unfortunately, there is not much in the middle. Insurers have fought and avoided paying for residential treatment, despite the efficacy and cost-efficiency and overall benefit to the insured battling with a psychological problem.

While insurers will reimburse for specific visits to psychiatrists and psychologists, it is the rare exception that pays for residential services. Many Clients are forced to seek legal remedy and there are now legal services to fight for insurance coverage. A recent case illustrates the issues that are coming to the forefront of mental health service.

Scripps News:  Eating disorder patients battle insurers over care

When Jeanene Harlick’s weight dropped to 65 percent of normal, her doctors recommended the San Mateo, Calif., woman go into an intensive residential treatment facility that specialized in treating anorexia and other eating disorders.

But her health insurer, Blue Shield of California, refused to cover her care — not because it wasn’t considered medically necessary, but because her plan excluded coverage for residential treatment programs. Harlick spent almost 10 months in residential treatment, while her parents went hundreds of thousands of dollars into debt to cover the cost.

Harlick, now 37, later sued the insurer.

Getting treatment covered for eating disorders has long been a struggle for many of the 24 million Americans diagnosed with anorexia, bulimia and binge-eating disorder. Intensive residential treatment for eating disorders typically costs $900 to $1,200 per day.

In a significant ruling for those seeking residential treatment for mental health conditions, the Ninth Circuit Court of Appeals in San Francisco sided with Harlick last month. The three-judge panel ruled Blue Shield’s policy excluding residential treatment violates the state’s 2000 Mental Health Parity Law, which requires certain serious mental health diagnoses, including eating disorders, to be covered at the same level as physical health.

“It’s a landmark victory for those suffering with eating disorders,” said Lara Gregorio, legislative policy program director for the National Eating Disorders Association. “So many families go bankrupt fighting this and still don’t win. It sets a precedent for other states to follow suit.”

But the legal battle is not over. Blue Shield, which is based in San Francisco, has filed a petition for a rehearing in front of the same appellate court panel. A lower court had ruled in favor of the insurer.

Blue Shield spokesman Stephen Shivinsky said the petition is based on “several significant errors in the opinion.” According to court documents filed Friday, the insurer argued that state law does not require coverage for all medically necessary treatments and allows plans to set coverage limits.

Harlick’s attorney, Lisa Kantor, described the appeal as “desperate” and is convinced the appellate court decision will prevail.

“The point of this decision is (insurers) have to provide all medically necessary treatments for severe mental illnesses,” Kantor said. “When you exclude a critical modality of treatment such a residential treatment, you’re not providing parity.”

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