California insurance officials are looking into whether Health Net Inc. has improperly withheld payments to addiction treatment centers for months while the company investigates concerns about fraudulent claims.
The California Department of Insurance began an inquiry after receiving numerous complaints from substance-abuse treatment facilities statewide that Health Net had not paid them since at least January, according to providers questioned by the agency. Health Net is California's fourth-largest health insurer, acquired in March for $6 billion by Centene Corp., a St. Louis-based insurer.
Officials at the California Department of Managed Health Care, the state's other insurance regulator, said they are reviewing a May 20 complaint about Health Net's actions signed by executives and owners of 118 for-profit treatment centers.
The treatment providers say they can't afford to accept Health Net patients without reimbursement, and that the insurer is harming its policyholders by limiting their access to treatment. Drug and alcohol treatment centers in Arizona have filed similar complaints about Health Net with insurance officials there.
A Health Net spokesman said "our policy is to not comment on these kinds of inquiries."
All this comes as the country grapples with an opioid epidemic and more people need help getting sober.
"Health Net has stopped payment for services already provided and it's unconscionable," said Stampp Corbin, president of the Addiction Treatment Advocacy Coalition, a nonprofit group in Los Angeles that represents California's for-profit treatment centers. "The net effect is some small facilities may go out of business if they had a high concentration of Health Net clients."
Janice Rocco, the insurance department's deputy commissioner, said she can't comment specifically on complaints that are still under investigation.
"If we receive complaints from a number of providers about the same insurer not paying in a timely fashion, we would take that very seriously," Rocco said. "We do communicate with insurers immediately when we receive these types of complaints."
After confirming the complaints, a spokeswoman for the Department of Managed Health Care said "ensuring consumers have access to mental health services which they are entitled to under the law is a priority for the DMHC."
The current dispute began in January when Health Net's director of special investigations, Matthew Ciganek, sent a letter to numerous treatment facilities in California outlining a "number of potential concerns" about "false and/or fraudulent claims."
In his Jan. 8 letter to providers, Ciganek cited concerns that people who came for treatment from out of state were obtaining benefits for which they were not eligible because they didn't "continually reside in our defined California service area."
The letter also said Health Net was looking into allegations that providers had waived deductibles or copayments to attract patients or had paid kickbacks to brokers, testing labs, physicians or other providers who might give referrals.
The company followed up with similar letters to rehab facilities in March and, in addition, contacted patients for information about their treatment.
The letters to patients asked them to show evidence they had paid their deductibles, copays or coinsurance and to furnish a copy of the state license for the treatment facility they visited.
"This is to notify you there will be a delay in finalization of this claim until the requested information has been received," Health Net said in its March letters to patients.
In the meantime, some Health Net members say finding a treatment center has become more difficult.
Gary Millman of Santa Rosa said his adult son sought help in April for his heroin addiction, and two facilities refused to take him because they had concerns about his Health Net coverage.
"When they found out he had Health Net, they wouldn't touch him," Millman said. "The facilities don't know if Health Net will come through on paying for treatment, yet the insurance company takes your money easy enough."
Millman's son eventually located a rehab center with the help of a family friend.
Health Net's action comes after years of criticism and media coverage faulting health insurers and the state's Medi-Cal program for lax oversight of drug rehab facilities. Some have billed for services never provided or sought to boost revenues by enrolling patients in health plans without their knowledge.
Industry representatives acknowledge that the rehab business has a history of fraud and abuse that warrants close scrutiny, but they say Health Net's audit goes too far.
"There are bad players in every industry, but this dragnet is too broad," said Joan Borsten, a co-founder of the Malibu Beach Recovery Center and vice president of the Addiction Treatment Advocacy Coalition.
She said some treatment centers in the coalition report being owed $1 million or more by Health Net for residential or outpatient care. The total amount billed and left unpaid is unclear, she said.
Treatment providers in Arizona express similar frustrations.
In a recent letter to the Arizona Department of Insurance, the Northern Arizona Recovery Association said Health Net's "sweeping and indiscriminate audit … has caused significant and undue hardship for quality providers, and more importantly, for the individuals who have paid their premiums and are seeking medically necessary services."
A spokesman for the Arizona agency said it doesn't comment on matters that might be under investigation.
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Even before the present standstill over payments, Health Net fell short in ensuring its patients received timely treatment for drug and alcohol problems, data in California show.
Only 25 percent of Health Net's HMO members started treatment within 14 days of being diagnosed with a drug or alcohol addiction, according to 2014 data from the California Office of the Patient Advocate. That was second-to-last among 10 health plans rated. The score for top health plans nationally was 44 percent.
Health Net did only slightly better on its PPO plans. Thirty-one percent received treatment within 14 days of diagnosis, placing Health Net fourth among six insurers that were rated. Nationally, top-performing PPO plans posted a treatment rate of 43 percent.
Health Net had similar below-average results for providing timely follow-up treatment for addicts.
California Insurance Commissioner Dave Jones approved Centene's acquisition of Health Net in March with a number of conditions. One of them is that the new company make efforts to improve Health Net's ratings on the Patient Advocate's report card.
This story was produced by Kaiser Health News, which publishes California Healthline, a service of the California Health Care Foundation.
Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.