A lawsuit alleging state regulators allow insurance companies to
deny necessary but expensive treatment for autistic children in
violation of state law has enough merit to proceed to trial, a Los
Angeles Superior Court judge has ruled.

The lawsuit, filed in July by Santa Monica-based Consumer Watchdog,
seeks to compel the California Department of Managed Health Care to
order health plans to cover applied behavioral analysis (ABA) if a
member complains the treatment was denied though it is deemed medically
necessary and is provided by licensed personnel or under the
supervision of licensed personnel.

The state agency filed a motion to toss the complaint for lack of
legal merit. Los Angeles Superior Court Judge James Chalfant disagreed
on Oct. 20.

The dispute hinges, in part, on definitions of health care “providers” in the state HMO and mental health parity laws.

The lawsuit also alleges consumers were able to appeal treatment
denials to an independent medical review system until March — with some
success — but a department memo ordered subsequent complaints to be
handled as coverage issues through the agency’s internal grievance
system. The change, the consumer group alleges, constitutes an illegal,
underground regulation that’s led to fewer treatment reversals.

The stakes are huge because the disputed therapy — which teaches
young children how to eat, play and learn — can cost more than $1,000 a
week. Most health plans consider it educational therapy and don’t cover
it.

“In at least one instance, the department has permitted a plan to
use the fact that ABA providers are not licensed to justify a refusal
to pay for such services,” Chalfant said in court documents. “A refusal
to pay for any ABA services based on the fact that the provider is not
licensed is inconsistent with the intent of parity.”

Chalfant also concluded the lawsuit “states a viable cause of action that memo constitutes an underground regulation.”

Consumer Watchdog heralded the judge’s action as “writing on the wall.”

“The DMHC has to change its practices going forward and the
department should immediately reverse its previous denials,” group
litigation director Pam Pressley said in a news release.

Department spokeswoman Lynne Randolph countered that the judge’s
action simply means the matter will proceed to trial — and the agency
will continue to defend its position that licensure is vital to ensure
safe and effective treatment.

“The Knox Keene Act is a very complex body of law, but it has
answers,” said Drew Brereton, staff counsel on the case. “The
definition of ‘provider’ is an individual licensed by the state to
provide health care services. This is a key issue.”

Some complaints since March handled through the agency’s internal
grievance program have gone on to independent review and been
overturned, Randolph added.

“There are facts specific to each case,” she said. “And there are
ambiguities in the law. They don’t, for example, explicitly spell out
that ABA therapy is a covered benefit.”