Gretchen W. (PacificCare)
Gretchen W. was admitted to the hospital for treatment of depression. On two separate occasions, prior to admission, the hospital contacted PacifiCare to verify benefits available under her health plan. The hospital confirmed that benefits for a “Severe Mental Illness” were payable at 60% “usual, reasonable & customary” (URC), up to a $5,000 out of pocket “OOP” maximum and then payable at 100% URC subject to a 120 day limit annually. The hospital was advised that pre-authorization was required for inpatient care and that such should be obtained by contacting PacifiCare.
Total inpatient and “partial hospitalization” (PHP) charges were approximately $48,000. A claim for benefits was timely submitted. The hospital received two Explanation of Benefits (EOB) forms from PacifiCare denying the claim in its entirety. The forms indicated that the entire amount of the charge was “Patient responsibility”. The stated reason for this was, “This service is not covered for benefits available. Please refer to your Certificate, Your Medical Benefits, Outpatient Benefits.” No further explanation was given. No plan provision was cited.
The hospital sent two letters to PacifiCare demanding payment, which PacifiCare described as “requests for reconsideration”. PacifiCare responded by stating that it needed additional medical records in order to process the claim. The requested records were submitted by the hospital.
Five months later, hearing nothing further from PacifiCare, a representative from the hospital called PacifiCare and was told that the claim was “still in reprocessing”.
Another month passed and the hospital contacted PacifiCare again, only to be told that the claim was denied on grounds that it was “not a benefit”. An “appeal” of this decision was then generated telephonically, which was again denied. The hospital then spoke to a PacifiCare supervisor, who said that both the inpatient and PHP claims should be paid and he advised that “the claims department is not reading the supplemental to the policy”. He said he would ask a claims supervisor to review and expedite payment and said the hospital should “ allow 10-15 business days” for payment.
Two more months passed and there was still no payment by PacifiCare. The hospital sent in a written “appeal” letter. PacifiCare responded a month later with a letter, acknowledging the “billing issue” and it stated, “Unfortunately, we do not have enough information to continue researching this issue. We are asking that you send a detailed explanation of your expected reimbursement.” The letter asked that the hospital, “Please submit claim for processing.” The hospital then re-submitted the claim for benefits.
Another month passed and no payment was received. So the hospital re-submitted the claim a third time. Receiving no response, the hospital called PacifiCare and was told that its “appeal” had just been received and that it was “in the system” and that the hospital should “give the appeal a little more time”.
Three more months passed and -- you guessed it – no payment received. The hospital called PacifiCare again and was told that it was unable to find the medical records. So the hospital was asked to send in the medical records yet again. The hospital made a follow-up call to confirm PacifiCare’s receipt of the medical records. Confirmation was indeed given and the hospital was told that it should “allow 30-45 business days for further information” on the appeal.
Approximately a week later, the hospital received a letter from PacifiCare, which said, “This request for reconsideration has been reviewed and we have determined that this claim has been denied correctly as the member's plan doesn't have coverage for inpatient (severe mental illness). No adjustment needed on this claim.”
The letter made no mention of the PHP charges. Therefore, the only explanation of any kind that has ever been given for the non-payment of this claim is that the plan provided no “coverage for inpatient severe mental illness”.
At that point, I was retained. For various reasons, it was not 100% clear if this claim would be governed by ERISA. Although Gretchen W. was not a public employee, her coverage was provided by and/or through the county, so her plan was arguably a “governmental plan”, which would be exempt under ERISA. I took the approach that it appeared ERISA does not apply, but rather plan appeared to be a standard health care service plan, regulated by the California Department of Corporations, under California’s Knox-Keene Act, California Health & Safety Code §1340, et seq. Therefore, the PacifiCare Subscriber Agreement was subject to and governed by the laws of the State of California.
I forwarded a letter to PacifiCare, which called attention to the California Mental Health Insurance Parity Act and I said the exclusion for a “severe mental illness” was in violation of California law. The Mental Health Parity Act, California Health & Safety Code Section 1374.72, provides in part follows: “(a) Every health care service plan contract issued, amended, or renewed on or after July 1, 2000, that provides hospital, medical, or surgical coverage shall provide coverage for the diagnosis and medically necessary treatment of severe mental illnesses of a person of any age, . . . (b) These benefits shall include the following: (1) Outpatient services. (2) Inpatient hospital services. (3) Partial hospital services. . . .”
I demanded payment of the claim within 30 days. Shortly thereafter I received a call from a member of the legal department of PacifiCare. An attempt was made to negotiate down the amount of the claim, but no such negotiation was undertaken.
Result: The denial was reversed and the claim was paid in full, without the necessity for litigation.