Blue Shield to Cover Treatment for Anorexia

September 21, 2011

Daily Journal

On Aug. 26, the 9th U.S. Circuit Court of Appeals held in Harlick v. Blue Shield of California, 2011 DJDAR 13132 that health care plans falling within the scope of California’s Mental Health Parity Act must provide all medically necessary treatment to insureds that suffer from any one of nine specified “severe mental illnesses.” The nine specific severe mental illnesses are listed in subsection (d) of the Act including: schizophrenia, schizoaffective disorder, bipolar disorder (manic-depressive illness), major depressive disorders, panic disorder, obsessive-compulsive disorder, pervasive developmental disorder or autism, anorexia nervosa, and bulimia nervosa.

Jeanene Harlick suffered from anorexia nervosa for more than 20 years. In 2006, Harlick’s personal doctors determined that her condition was so severe that the outpatient treatment covered under her insurance plan was no longer sufficient. Instead, residential treatment at an out-of-state facility that specialized in eating disorders would be the best and most effective treatment for her. As a result, she was enrolled at Castlewood Treatment Center, a residential treatment facility located in Missouri. At the time of her admission, Harlick was 65 percent of her ideal body weight and had to have a feeding tube inserted during her first month at the facility.

Harlick was enrolled in her employer’s health insurance plan through Blue Shield of California. She did not obtain pre-authorization from Blue Shield, as required under its policy, before she entered the out-of-state residential facility. More importantly, however, the facility - which employed only psychologists and did not have medical doctors or nurses on staff - was unqualified as a skilled nursing facility (the only type of facility covered under the policy).

Blue Shield ultimately refused to pay for all but 11 days of Harlick’s nine-month stay at the facility. As to the 11 days it did pay for, Blue Shield determined that the payment was made due to an internal coding error. In fact, the company never intended to pay for any part of Harlick’s stay at the unauthorized facility, determining that it was specifically excluded under her policy.

In a two-part opinion, the 9th Circuit held that a plain reading of Blue Shield’s policy easily demonstrated that residential care facilities, such as Castlewood, were not covered under Harlick’s policy. However, by way of the Mental Health Parity Act, Blue Shield could not exclude the facility from coverage as a matter of law if the treatment provided was medically necessary. The court concluded that Harlick’s residential care was medically necessary because Blue Shield never disputed that Harlick’s treatment at the facility was not medically necessary. Rather, it simply argued that Harlick’s policy expressly prohibited coverage of any treatment at a residential care facility.

Moreover, pursuant to the Act’s legislative history, one of the primary reasons for its enactment was that “most private health insurance policies provided coverage for mental illnesses at levels far below coverage for other physical illnesses” and that the “lack of coverage resulted in inadequate treatment of mental illnesses causing relapse and untold suffering for people with treatable mental illnesses as well as increases in homelessness, increases in crime and significant demands on the state budget.”

While the Harlick opinion is considered to be a major victory for persons who suffer from eating disorders, its scope reaches far beyond anorexia nervosa. What is more, the court observed that sub-section (b) contains the language: “including, but not limited to,” which makes it clear that the list of nine mental illnesses was intended to be illustrative and not exhaustive.

The court’s ruling that the Mental Health Parity Act requires an insurer to provide all medically necessary treatment for eating disorders including residential treatment, even if its insurance policy specifically excludes such treatment, is undoubtedly a landmark ruling for insureds. When taken together with other recently enacted health care reforms, it is clear that in this 21st century, health care insurance companies have yet again taken another sharp blow.

It remains unclear what impact the decision will have on California’s 3.4 million policyholders. In the interim, Blue Shield has announced it will file an appeal with the U.S. Supreme Court. Considering that the 9th Circuit is one of the most frequently reversed circuits, it will be interesting to see if the high court grants certiorari.