California Regulator Erred in Issuing Treatment Memo, State Judge Rules

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SACRAMENTO, Calif.—The California Department of Managed Health Care (DMHC) overstepped its constitutional authority in issuing a memorandum to health insurance companies on how to handle consumer complaints about autism treatment, a state judge ruled Dec. 30 (Consumer Watchdog v. California Department of Managed Health Care, Cal. Super. Ct., No. BS121397, 12/30/10).
However, despite what California Superior Court Judge Robert O’Brien of Los Angeles County called an “underground regulation,” he declined to intervene, suggesting the plaintiffs seek a legislative remedy rather than redress through the courts.
O’Brien said the regulator’s March 9, 2009, memo amounted to regulatory promulgation without proper public vetting, violating the California Administrative Procedure Act, which requires state agencies to hold public hearings before adopting rules.
The DMHC memo was challenged by Consumer Watchdog (CW), a Santa Monica, Calif.-based advocacy group with a history of challenging practices in the state’s insurance industry.
CW, which asked the court to intervene in a petition for mandamus, plans to appeal the decision, according to the organization’s attorney, Fredric Woocher, a partner in the Los Angeles public interest law firm Strumwasser & Woocher LLP.

Woocher told BNA Jan. 6 his client plans to seek O’Brien’s reconsideration and possibly submit a motion for a new trial, once the judge’s final judgment is entered.
As for a legislative remedy, he said CW has interest from state legislators, including Senate President Pro Tempore Darrell Steinberg (D), who has long been active in autism-related advocacy.
“We’re also hoping we have a more sympathetic view and understanding of the situation from the new administration,” Woocher said.
Consumer Group’s Allegations

In court papers filed in June 2009, CW alleged DMHC was allowing health insurers to delay coverage for applied behavioral analysis (ABA), an autism treatment that they said can cost up to $70,000 annually.
The group claimed that DMHC was allowing insurers to skirt the California Mental Health Parity Law of 1999 by issuing the memo saying benefits for ABA therapy can be a covered “health care service” only if provided by a California-licensed medical professional.
Codified in California Health & Safety Code Section 1374.72, the law requires health plans to provide coverage for medically necessary treatment of severe mental illnesses, including autism, under the same terms as other medical conditions.
The lawsuit also alleged DMHC redirected related complaints against the health maintenance organizations it regulates to be handled through the agency’s internal grievance system, rather than an independent medical review panel.
For its part, DMHC has insisted the memo instituted a guideline, not a regulation.
“The main message from this ruling in favor of the DMHC is that we are following the correct course to ensure that patients continue to get the services to which they are entitled under their health coverage,” DMHC Director Cindy Ehnes said.
In a statement, CW’s litigation director, Pamela Pressley, called on Gov. Jerry Brown (D) and his administration to ensure that autistic children prescribed ABA are able to have the treatments covered by their health plan.

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