Consumer Watchdog Calls on Governor Brown to Replace DMHC Leadership After Regulators Misrepresent Autism Settlement to Legislature

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In a letter this week, Consumer Watchdog called on Governor Brown to replace Schwarzenegger-era regulators at the Department of Managed Health Care (DMHC) after DMHC officials misrepresented the details of an autism settlement with Blue Shield at a legislative hearing last week, and then signed a similar settlement with Blue Cross. Ten of eleven top DMHC officials were either appointed by Governor Schwarzenegger or joined the DMHC during the Schwarzenegger administration. (See the chart below). Download the letter here:

The DMHC misrepresented the settlement over Blue Shield’s denial of coverage for a key autism treatment, Applied Behavioral Analysis (ABA), assuring legislators that the deal would provide autistic children the care they need. However, the fine print of the settlement reveals that the settlement is in reality “a sham that provides no solution and continues to allow Blue Shield to violate the law, ” according to the letter to Governor Brown from parents of autistic children and consumer advocates. The groups urged Governor Brown to block any additional settlements. However, yesterday the DMHC announced it had signed a similar deal with Blue Cross.

In the letter, Consumer Watchdog, the Alliance of California Autism Organizations, Autism Deserves Equal Coverage, the Special Needs Network, Inc., Autism Health Advocates, Autism Health Insurance Project, and Sally Brammell, the mother of an autistic child enrolled in a Blue Cross policy regulated by the DMHC, wrote:

“Remarkably, the agreement appears to have been entered into without discussion or consultation with the Department of Insurance (CDI) or the autism providers or advocacy community, and was misleadingly portrayed in a positive light by DMHC officials at a legislative hearing last week held to review DMHC practices. The same DMHC regulators who folded on access to ABA under the pressure of insurance company lobbyists during the Schwarzenegger administration appear to be responsible for negotiating the settlement with Blue Shield. As Consumer Watchdog warned your staff months ago, the governor’s office must be directly involved in establishing the state’s autism policy going forward, and needs to replace the current leadership at the DMHC as soon as possible.”



Under pressure from the insurance industry, during the Schwarzenegger administration the DMHC made a policy change to allow insurance companies it regulates to refuse to pay for ABA on the grounds that ABA is “educational” and not “medically effective,” and paradoxically on the grounds that ABA providers are not “licensed” even though no such state license exists. The policy change was lobbied for by the health insurance industry, which gave Governor Schwarzenegger $1,349,850 campaign contributions.

The CDI, led by Insurance Commissioner Dave Jones and enforcing the same state law as the DMHC – the Mental Health Parity Act – unequivocally requires health insurers it regulates to pay for ABA, citing overwhelming medical literature that ABA is the most effective medical treatment for autism, and finding that ABA providers are not required to be licensed as a condition for coverage under insurance contracts.

Consumer Watchdog and co-counsel Strumwasser & Woocher sued the DMHC, in part, over its requirement that ABA providers must be licensed as a condition to be covered under insurance contracts. Consumer Watchdog said the fact that the DMHC continues to fight that lawsuit underscores its refusal to embrace a systemic fix.

As detailed in the letter, the settlement is impermissibly flawed because it:

1. Imposes “licensure” of ABA providers and supervisors not required by state law, which leaves autistic children without coverage for ABA services by the most qualified providers, and likely means parents will be unable to find providers at all. There is no California license for ABA providers. Licensed Marriage and Family Therapists and social workers, for example, rarely possess the special training necessary to oversee ABA treatments. Nationally certified ABA specialists are not allowed to supervise ABA under the settlement. The settlement relieves Blue Shield of any obligation to pay for ABA if a licensed supervisor cannot be found – which is virtually guaranteed given the nonexistence of a state license for ABA.

2. Does not require insurers to provide either an ABA provider network or access to services. The settlement waives state laws and regulations requiring Blue Shield to have an adequate network of providers.

3. Gives Blue Shield an unilateral escape clause to cancel the agreement. Blue Shield is allowed to ignore the settlement as long as it merely asserts that the law has changed.

4. Reasserts incorrect interpretations of the state Knox Keene Act, giving the green light to other insurers to deny ABA services. The DMHC continues to hold that ABA providers must be licensed, even though no ABA-specific license exists.

5. Includes an overbroad release from prior violations of the Knox Keene Act, letting Blue Shield off the hook for any past denials of autism treatments. Under the settlement, parents and regulators will be barred from pursuing any claims regarding autism treatment, even if they are not related to the settlement or ABA.

6. Fails to compensate thousands of families for past denials. The settlement lets Blue Shield off the hook from compensating parents for tens of thousands of dollars that parents have paid out of pocket for ABA while awaiting the DMHC to take action.

7. Allows unreasonably frequent challenges of “medical necessity.” The settlement allows Blue Shield to challenge continuing ABA coverage every six months, placing a huge burden on parents caring for autistic children.

8. Will likely allow lapses in coverage of ABA with harmful consequences for children.  Delays in care put health and safety of autistic children at risk.

In the letter, the groups wrote:

“Solving the autism coverage debacle is not only important to families of autistic children: When private insurance companies refuse to pay for an autistic child’s care, the financial burden ultimately falls on the public, either through the state Department of Developmental Services Regional Centers or through the school districts.”

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Consumer Watchdog is a non-partisan and non-profit public interest organization with offices in Washington D.C. and Santa Monica. For more information, go to:

Jerry Flanagan
Jerry Flanagan
Jerry Flanagan is Consumer Watchdog's Litigation Director. Flanagan leads Consumer Watchdog’s litigation efforts in the areas of health insurance coverage and access to treatments. He has over 20 years experience working in public interest and health care policy, legislation and litigation.

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