Anthem, DMHC Butt Heads Over Big Fine

The health plan in California with by far the most number of regulatory fines appears ready to battle the Department of Managed Health Care over a $200,000 penalty the agency levied late last month.

The fine against Anthem Blue Cross of California was for the plan's apparent disregard for the rules regarding independent medical review, or IMR. That's when an enrollee's request for coverage for a specific procedure is rejected by the plan based on its lack of medical necessity. The enrollee has the right to appeal within the health plan and then to the DMHC for an IMR of their case by a third party if the initial appeal is rejected. They can also request an expedited review based on their medical condition. An IMR will lead to a reversal of the plan's initial decision about 56% of the time, according to DMHC records.

The fine was the second large penalty issued against Anthem by the DMHC in May. It had fined Anthem $415,000 on May 3 for its failure to resolve enrollee grievances in a timely manner. Anthem did not dispute that penalty or fine.

According to a May 27 accusation levied by the DMHC against Anthem Blue Cross, the health plan broke rules regarding 16 of its enrollees in 2014 who had requested and were granted IMRs, particularly regarding regulations as to when medical records and paperwork are due to the agency. Typically, they must be submitted within three business days after the health plan is notified that an enrollee qualified for an IMR.

“In each of the 16 matters, (Anthem) either failed altogether to timely produce the required documents or responded in piecemeal fashion by providing incomplete records on the due date and eventually providing the relevant documents after further requests from the DMHC, the IMR organization, or both,” the agency said in its accusation.

Anthem has not directly commented on the cases, but has indirectly suggested that the DMHC has shifted its regulatory requirements on document production. Anthem enrollees had 709 IMRs resolved in 2014, far more than any other insurer, and representing about 44% of all cases submitted to the agency that year. A total of 217 of those cases were overturned as the result of an IMR.

In three of the 16 IMR cases cited by the DMHC, it said Anthem failed to produce any medical records at all within the statutory deadline, providing them three to six days after the deadline. In 13 other cases, Anthem failed to provide some medical records in a timely fashion, producing them between three to 28 days after the statutory deadline. In three cases, Anthem was more than 20 days late producing documents, the DMHC alleges.

In one case, an enrollee was trying to obtain coverage for an extended time-release painkiller to treat chronic pain connected to an ankle fracture, which Anthem claimed was not in the enrollee's formulary. Anthem was required to submit relevant patient records by May 28, 2014. But the DMHC did not receive the records until July 8, 28 working days and nearly six weeks late. In that case, the DMHC ruled in favor of the enrollee, overturning the formulary restriction.

In another case, a suicidal enrollee was hospitalized in a mental health facility for eight days. Anthem was only willing to pay for five days of hospitalization. Anthem was willing to pay one more day after an internal appeal. But when the enrollee requested an IMR, Anthem's paperwork was submitted six days later. The IMR led to an overturning of Anthem's decision, which then had to reimburse the enrollee more than $2,000. “The delayed production of records had the effect of delaying that payment,” the DMHC said in its formal accusation against Anthem.

But Anthem has apparently dug in its heels in on the agency's accusation, providing written statements to Payers & Providers from two high-powered healthcare attorneys.

“In this case, Anthem Blue Cross complied with the law; DMHC did not. The statute requires Blue Cross to provide all relevant information in response to the application, and DMHC adopted a regulation defining what is 'relevant.’ Anthem Blue Cross provided that information. However, DMHC is unlawfully expanding the definition now, ignoring its own regulation and asserting that Anthem Blue Cross should have provided more information although regulations say none of it was relevant.” said Gene Livingston, a partner with the Greenberg Traurig law firm in Los Angeles. Livingston is a former director of the Office of Administrative Law, which reviews regulation changes submitted by state agencies.

Tony Szabo, a partner with the Daponde Szabo Rowe law firm in Sacramento and a former DMHC enforcement attorney, suggested Anthem would take legal action to fight the penalty and fine.

“The DMHC’s accusation misapplies the intent and requirement of the Independent Medical Review (IMR) regulation,” he said. “Anthem properly interpreted and applied the IMR regulations. I’m convinced that a judge will agree that the DMHC is trying to rewrite the regulation and that Anthem will prevail.”

A DMHC spokesperson said Anthem has not yet responded to its accusation.

Anthem has the option of appealing the fines and penalties in state administrative law court, an often backlogged body that can take years to resolve some cases. An Anthem spokesperson would not confirm whether the insurer would take that route.

Should the fine and penalty stand, it would be the 1,064 levied against Anthem since 2001, when the DMHC was given the authority to mete out such discipline – far more than any other single insurer. To date, the DMHC has issued 2,860 penalties and fines to all of the health, dental and mental health carriers operating in California.