Managed Care Outlook 2023

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The spotlight on behavioral health issues intensified again in 2022 as our society continues to uncover the impact of the pandemic on mental health. This increased awareness has brought mental health issues to the forefront for legislatures and litigants alike. This trend will no doubt continue in 2023, as regulatory agencies have received funds to enforce the Mental Health Parity and Addiction Equity Act (MHPAEA), and individual health plan members feel more emboldened to seek reprieve for their denied mental health claims. Two areas are of particular note for 2023. First, 2023 will likely see further legislative efforts to codify the holding of the Wit v. United Behavioral Health (UBH) matter, even though the decision has been overturned by the Ninth Circuit. Second, this year will bring increased efforts to enforce compliance with MHPAEA, as evidenced by the massive funds earmarked for such efforts.

Legislating medical necessity criteria

Medical necessity criteria is an area of great interest in lawmaking and litigation. In a published decision that was released on January 26, 2023, the Ninth Circuit recently bolstered its 2022 decision overturning the high-profile Wit decision involving a challenge to the propriety of medical necessity guidelines in light of generally accepted standards of care (GASC). The district court had found that UBH breached its fiduciary duties under ERISA to insureds by denying their mental health claims as a result of allegedly flawed medical necessity criteria that the court concluded are not consistent with GASC.

The Ninth Circuit found that the district court had misapplied the abuse of discretion standard of review by substituting its own interpretation of the health plan language at issue for UBH’s interpretation. The Ninth Circuit noted that the plans exclude coverage for treatment inconsistent with GASC but do not require coverage of treatments that are consistent with GASC. As a result, the Ninth Circuit found that UBH’s interpretation did not conflict with the plain language of the plans and reversed the district court’s judgment that UBH had wrongfully denied benefits to the named plaintiffs based on the court’s finding that the guidelines had “impermissibly deviate[d] from GASC.”

Despite that the Ninth Circuit overturned the district court’s ruling, legislatures have wasted no time trying to codify the district court’s holding that medical necessity criteria must be based on GASC. California, Illinois, and others have such laws. Further, in 2022, the Congressional Research Service recommended that Congress go so far as to amend ERISA to require payors and plan administrators to use medical necessity criteria that are based on GASC. Even though the well-known and clinically sound proprietary medical necessity criteria long used by major payors around the country are based on GASC, these legislative efforts have narrowed the criteria payors may use to those developed by certain community organizations. These community organization-developed guidelines include LOCUS, CASII, ASAM and others. Thus, even if Wit remains overturned, these laws and potential other legislative actions may restrict payors to using these community organization-developed guidelines.

Key takeaways
  • Mental health is a compliance and litigation hot-button issue.
  • Even with the overturn of Wit v. UBH, payors feel pressure to switch to non-proprietary medical necessity criteria.
  • Funding for parity compliance increased in 2022, which will expose health plans to parity enforcement actions.
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