Category: Health Insurance

Washington Legislature Passes New Protections for Mental Health Insurance Coverage

We’ve often discussed how difficult it is to get insurance companies to cover intensive mental health treatment. Insurers often find reasons to deny this treatment given it can be expensive and protracted. There are existing mental health parity rules intended to combat this problem, but they have been interpreted extremely narrowly by courts.

The Washington State Legislature is attempting to change that. In 2025, the legislature passed important amendments to our state’s mental health insurance parity laws. These amendments make several important changes to protect patients’ access to mental health coverage and treatment.

First, the legislature expressly declares that: “Access to mental health and substance use disorder treatment is critical to the health and well-being of individuals with these conditions.” It further declares that “access to appropriate care is important to reducing preventable emergency department visits [and] hospitalizations.” This recognizes that untreated mental health conditions can escalate and become emergencies.

The legislature also recognizes that health insurance coverage is “essential” to access to mental health care.

Therefore, the amendments declare that the legislature intends to increase acces to mental health treatment by removing certain roadblocks that insurers have placed to coverage for this treatment.

Second, the legislature addresses some of these roadblocks. One battle in procuring mental health treatment coverage concerns the phrase “medically necessary.” Virtually all health plans cover treatment that is medically necessary. This is often a ground for the insurance company to deny coverage.

One big problem for patients is that insurers often deny that treatment is medically necessary using secret and Byzantine internal guidelines.

These disputes often look like this:

Patient: Please cover this treatment. My doctor says I need it to manage my symptoms. Without it, my condition could get worse. I might not be able to keep working. In an extreme worst-case scenario, I might have to be hospitalized.

Insurance Company: Sorry, that’s not “medically necessary.”

Patient: How can it be not medically necessary? My doctor says I need it!

Insurance Company: We don’t really care what your doctor says. We have our own checklist for what’s medically necessary. And our checklist says we don’t have to pay for your treatment. Sorry!

Patient: Will you show me the checklist, so I can review it with my doctor and find out how to get my treatment covered?

Insurance Company: The checklist is secret. Have a great day!

Part of the new law aims to fix this problem. It requires that medical necessity decisions for certain mental health treatment must be made based on “criteria from nonprofit professional associations.” In other words, insurers now have to decide medical necessity for these kinds of treatment based on objective critera from doctors or providers with real-world experience. They can’t simply make up their own criteria.

Further, it requires insurers to disclose meaningful information about coverage denials for medical necessity. The carrier must provide “full details” about “the relevant criteria” used in the decision to the patient and their health care provider.

Additionally, the new law empowers Washington State’s Insurance Commissioner to review any internal criteria health insurance companies use to decide whether to pay for the treatment at issue.

Insurance coverage for mental health treatment will probably be a battle for many years. But these amendments should be a step in the right direction.

Health Plan Must Pay For Child’s Medically Necessary Mental Health Treatment, Says Ninth Circuit

Health insurance coverage for mental health treatment is contentious. Insurers historically resist covering these diganoses. Their treatment can be expensive and protracted. Legislation here in Washington State and federally has tried to push back on this, but the problem of getting insurers to cover mental health treatment remains.

A recent Washington Supreme Court ruling compounded the problem by limiting claimants’ ability to rely on legislation that was intended to improve access to coverage for mental health treatment. There’s still a lot of work to be done legislatively to give people tangible, systemic protections for mental health coverage.

Until that happens, most people faced with their health plan’s denial of critical mental health treatment will have no choice but to go to court. That’s what happened to the family of a nine-year-old child known in court filings as “R.C.” (Court filings typically use initials, rather than full names, in cases involving minor children in order to protect the family’s privacy).

In a May 14, 2025 decision, the Ninth Circuit Court of Appeals upheld R.C.’s success in a lawsuit against his health insurance plan.

R.C.’s parents sued their health plan after it denied coverage for his residential mental health treatment. R.C. had serious behavioral health problems. He threatened to hurt or kill others. He wielded objects like weapons. It’s easy to imagine that his parents wanted to provide him with effective treatment.

But the health plan claimed residential treatment wasn’t “medically necessary.” The court had two problems with this claim.

First, the court found that the treatment was “medically necessary” under the health plan’s own criteria. This boiled down to the plan’s claim that R.C. wasn’t a danger to himself or others. The court listed examples, including: stabbing his own mouth, threatening to kill other children, describing in detail how he intended to use household objects to murder others, and starting fistfights.

Second, the court found that the health plan failed to tell R.C.’s parents what they had to prove in order for the plan to cover residential treatment. Before the court, the plan claimed that R.C.’s parents failed to prove that outpatient treatment had been tried and failed, but the plan never told R.C.’s parents that this was a requirement when it was handling the claim.

In other words, the plan’s denial was wrong on the merits (R.C.’s treatment really was medically necessary) and procedurally unfair (the plan didn’t give the parents a fair shake at proving the treatment was needed). So the parents won. The health plan will have to pay for R.C.’s treatment. That’s a win, right?

Not exactly. The tail of the Ninth Circuit’s ruling declined to award R.C.’s parents any relief beyond the belated reimbursement for his treatment. The court ruled that R.C. could not force the plan to change its practices to make sure that the erroneous denial of benefits wasn’t repeated with other people with similar health claims.

This underscores the systemic problem. It took R.C.’s parents almost five years to get this ruling. During that time, they presumably had to pay for R.C.’s treatment out of pocket. And they had to hire lawyers and deal with the emotional rollercoaster of litigation. They received no compensation for this. It’s easy to imagine that many people with health insurance claims won’t have that kind of time or resources.

Unfortunately, absent sytemic reform, health insurance plans will remain incentivized to wrongfully deny claims with little reprecussion.

Washington Supreme Court Upholds Narrow Interpretation of Mental Health Parity Laws

We’ve previously blogged about the Mental Health Parity Act. This law forbids insurers from discriminating against mental health and substance addiction by covering treatment for those conditions less favorably than other medical treatment. A 2022 report noted insurers continue to violate this law.

A new Washington Supreme Court ruling restricts individuals’ ability to enforce this law. On December 21, 2023, the court ruled in P.E.L. v. Premera Blue Cross that the plaintiffs could not sue their health insurer for excluding certain mental health treatment.

In that case, two parents sued Premera Blue Cross for failing to cover their child’s mental health and substance abuse treatment. The child’s symptoms were so severe they required inpatient hospitalization. The child spent two months at a “wilderness therapy” program before transitioning to long-term treatment.

Premera denied coverage for the wilderness therapy program. The insurance policy generally covered “residential treatment” for mental health conditions. But it specifically excluded any kind of “wilderness” or similar therapy.

The parents alleged that exclusion violated the Mental Health Parity Act and its Washington State counterpart. The Washington Supreme Court disagreed.

The court acknowledged that mental health parity laws aim to fix a long history of discrimination against people diagnosed with mental health disorders which has manifested in the insurance industry. Insurance policies historically singled out these diagnoses for worse coverage. They charged higher premiums and provided lower benefits for them.

These laws began in 1996 with the federal Mental Health Parity Act and continued through Congress’ enactment of the Affordable Care Act in 2016, which included protections for mental health coverage. Washington State also enacted similar legislation in 2005.

The court found that the plaintiffs could not sue for violations of the federal laws. Congress decided not to include a private right of action with that legislation. So the plaintiffs could not pursue violations of those laws by alleging they became part of their insurance policy contracts.

The court also found the parents could not sue for violation of the Washington State version of these laws. Washington State’s mental health parity laws require insurance to cover mental health services equally. That means insurance must provide equal copays, out of pocket limits, deductibles, and similar provisions to mental health diagnoses as they do to other conditions.

In particular, the state law says that insurers cannot impose special exclusions for medically necessary mental health treatment. The parents argued Premera violated that rule when it refused to cover their child’s wilderness therapy without deciding it wasn’t medically necessary.

The problem for the parents is that the state parity law excludes “residential treatment” from these protections. Since “wilderness” therapy is a form of residential treatment, the parity law didn’t apply.

Insurers Still Breaking Mental Health Coverage Rules Says Department of Labor

The 2022 report to Congress from the Department of Labor (DoL) on compliance by group health plans with the federal mental health parity laws identifies numerous instances of continued discrimination in coverage for treatment of mental health diagnoses.

Federal law generally prohibits insurers from discriminating against people who need coverage for treatment of mental health conditions. Basically, health insurers cannot have limitations that are more restrictive of treatment for a mental health condition than for other conditions. These rules have only become more important since the COVID-19 pandemic contributed to mental health issues for many Americans; for instance, the CDC noted a 30% increase of overdose deaths since the pandemic.

In large part for this reason, DoL has made enforcement of the mental health parity rules a priority in recent years. One new enforcement tool is a 2021 rule passed by Congress requiring health plans to provide DoL with a comparative analysis of treatment limitations for mental health conditions to help DoL ensure these practices follow the law.

DoL’s report identified many problems with health plans’ reporting about mental health parity. For instance:

  • Failure to document comparisons of treatment limitations for mental health limitations before implementing those limitations;
  • Lack of evidence or explanation for their assertions; and
  • Failure to identify the specific benefits affected by mental health limitations.

DoL also noted that enforcing these reporting rules had led to the removal of several widespread insurer practices that violated the mental health parity rules.

For example, one major insurer was found to routinely deny certain behavioral health treatment for children with Autism Spectrum Disorder. This resulted in denying early intervention that could have lifelong results for autistic children. DoL found over 18,000 insureds affected by this exclusion.

Another example involved the systemic denial of treatment used in combatting the opioid epidemic. New research has found that combining therapy with medication can be more effective for treating opioid addiction than medication alone. DoL found a large health plan excluded coverage for this therapy in violation of the mental health parity rules.

Other treatments DoL’s report identified as being denied on a widespread basis in violation of the law included counseling to treat eating disorders, drug testing to treat addiction, and burdensome pre-certification requirements for mental health benefits.

DoL’s report is a reminder that discrimination on the basis of mental health related disabilities remains a part of the insurance business despite years of federal legislation to the contrary.

Ninth Circuit Confirms ERISA Plans Cannot Assert New Rationales for Denying Benefits After They Get Sued

I’ve previously blogged about cases in which insurers were limited from raising new reasons to deny coverage after the fact. Whether an insurer can do so is a complex question that depends on the facts of the specific case. It also depends on what law applies. A recent ruling from the Ninth Circuit Court of Appeals confirms that, if ERISA applies, the rule is clear: ERISA-governed benefit plans cannot raise new reasons for denying benefits after they get sued.

In Beverly Oaks v. Blue Cross & Blue Shield, doctors at the Beverly Oaks clinic sued Blue Cross & Blue Shield (BCBS) claiming that BCBS should have paid for the treatment of certain patients of the clinic who had health insurance coverage from BCBS under their ERISA plans. The doctors relied on agreements the patients signed promising that the doctors could sue the insurance plan directly to pay their treatment bills. These agreements are known as an “assignment of benefits.’

No one disputed that the ERISA plans at issue banned the patients from signing the “assignment of benefits” forms. The plan documents repeatedly stated that benefits could not be assigned to third parties like the doctors.

But BCBS failed to invoke the assignment ban in response to the doctors’ claims. Instead, BCBS processed the claims on the merits, mostly denying them for reasons unrelated to the assignment of benefits. At the end of the day, BCBS paid the doctors only $130,000 out of $1.4 million in medical bills.

BCBS raised the ban on assigning benefits only after the doctors filed a lawsuit under ERISA seeking to overturn BCBS’ denial of the claims on the merits. BCBS told the federal District Court that the doctors had no right to sue on behalf of their patients because the assignment of benefits agreements were not allowed under the terms of the ERISA plans. The District Court agreed and dismissed the case.

But the Ninth Circuit reversed and allowed the doctors’ suit to proceed. That court emphasized that ERISA requires employee benefit plans (including their agents like BCBS) to state all of the reasons for denying a claim in the first instance. Allowing plan administrators to keep arguments for denying claims in their proverbial “back pockets” until litigation invites abuses and cuts against claimants’ right to respond to the basis for any claim denials:

“ERISA and its implementing regulations are undermined where plan administrators have available sufficient information to assert a basis for denial of benefits, but choose to hold that basis in reserve rather than communicate it to the beneficiary.”

The Court of Appeals also relied on the fact that BCBS representatives repeatedly told the doctors that they could seek reimbursement for medical bills on their patients’ behalf–before the doctors provided treatment–without mentioning the ban on assignments of benefits.