Category: Legislation

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.

Washington Court of Appeals Enforces Insurance Protections for Domestic Violence Victims

Since 1998, Washington State has had legislation on the books protecting the rights of domestic violence victims when it comes to insurance. Among other things, the law prohibits insurers from excluding coverage for losses based on intentional or fraudulent acts that result from domestic violence. Intentional acts exclusions are common in insurance.

For example, most homeowner’s insurance would be unlikely to cover a fire intentionally started by the insured. Given the interpersonal dynamic of domestic abuse, restricting the insurance company’s ability to exclude losses from coverage because they arose from an abusive family member’s actions is necessary to prevent domestic abuse from becoming an unfair limitation on insurance coverage.

Washington’s Court of Appeals applied this law in its September 3, 2024 ruling in Welch v. PEMCO Mutual Insurance Company.

In that case, Welch had been married to her husband Morgan and owned a home together. When they divorced, the court awarded the family home to Morgan and the two shared custody of their child.

After the divorce, Morgan attacked Welch when she arrived at the family home to collect their child. During the attack, Morgan set the home on fire. The house was destroyed. A jury later found Morgan guilty of attempted murder and arson.

Welch still owned part of the home at the time of the attack because the couple was still in the process of untangling their assets following the divorce. The home was covered under property insurance issued by PEMCO. Welch and Morgan were both named as insureds.

PEMCO denied coverage. It pointed to the insurance policy’s exclusion for any loss caused by intentional acts, which included Morgan’s arson.

As required by law, the insurance policy stated that the intentional acts exclusion did not apply to losses resulting from acts of domestic violence by family members. But PEMCO claimed that this did not apply. Since Welch and Morgan had been divorced, they were no longer married and not “family.” (The legislature has since amended the law to provide that domestic violence among any intimate partner cannot be excluded from insurance coverage by “intentional acts” exclusions).

The Court of Appeals ruled for Welch. It agreed that the historical definition of “family” did not apply. Welch and Morgan were divorced, and Welch lived with a new partner at the time of the attack.

But the court held that the more modern definition of “family” was more appropriate. Recognizing changing times, modern dictionaries define “family” to include two parents rearing children together even if not married.

Under that definition, the court had little trouble determining that the rule limiting insurance exclusions for domestic violence victims applied, and that PEMCO could not exclude the loss.

The ruling is “unpublished,” meaning it is not binding precedent. But it is a good illustration of the impact of Washington State’s protections for insurance policyholders who are victims of domestic violence.

Washington State Passes Consumer Protections for Pet Insurance

Washington State recently implemented model legislation from the National Association of Insurance Commissioners that regulates pet insurance.

Pet insurance is a relatively new product that has grown in popularity with the increasing prevalence of pet ownership in the United States. Industry statistics reflect an increase of over 2 million in the number of pets insured nationally since 2017.

Unfortunately, this emerging product line has been riddled with complaints of unfair business practices. Policyholders complain of insurers misrepresenting coverages, hiding exclusions, and failing to pay claims. These issues have led to significant regulatory enforcement from Washington’s Office of the Insurance Commissioner.

The new pet insurance statutes are an attempt to fix these problems. The new law establishes clear definitions for pet insurance terms like “chronic condition”, “preexisting condition”, and “veterinarian.” It requires policies using these terms to follow the statutory definition. This helps make sure consumers know what they are getting when they buy pet insurance.

The law also requires disclosure of important exclusions. Policies must state exclusions in specific language. They must explicitly identify limitations based on things like preexisting conditions or hereditary disorders. Agents selling pet insurance must also be appropriately licensed and trained

And the law gives consumers a 15 day “free look period” to change their mind and return the policy to get their money back.

Recertification Proposals Add to Confusion Over WA Long Term Care Payroll Tax Exceptions

We previously blogged about the WA Cares Act, a law creating a public long term care benefit for certain Washington employees. Under the law, employees pay a payroll tax in exchange for access to future long term care payments. Employees could opt out of the law by obtaining private long term care insurance coverage. The deadline to opt out expired December 31, 2022.

A federal court largely dismissed a lawsuit challenging the act in 2022, theoretically clearing the way for the law to go into effect.

But the Washington State legislature put the law on hold while it made some changes. The law softened the requirement that a person have paid the tax for ten years before becoming eligible for benefits. Persons born before January 1, 1968, can access limited benefits as long as they pay the tax for at least one year. This was done to avoid the unfair result of persons within ten years of retirement age the date the Act becomes effective being deprived benefits.

The updates also expand who can opt out of the Act. Now, certain veterans, spouses of military service members, persons who live outside Washington but work in Washington, and persons working temporarily in the United States can opt out of the act. Again, this was intended to avoid the unfair result of persons paying the tax without possibly of receiving the benefit.

These new exceptions are in addition to the existing exceptions for self-employed persons, tribal employees, certain union members, and government workers.

The law is currently scheduled to go into effect on July 1, 2023. Effective that date, employees who have not opted out will have .58% of their wages withheld to pay the payroll tax.

There are also more changes under consideration in the legislature. Probably the most important one relates to the possibility that employees who opted out by purchasing their own long term care insurance re-certify that they continue to maintain that insurance on a regular basis. As written, the Act doesn’t require this.

That means employees who opted out could cancel their private insurance the day after opting out and never pay the Act’s payroll tax despite not maintaining their own insurance. The probability that thousands of Washington workers purchased long term care insurance with the intent of canceling their coverage immediately after opting out from the Act is suspected to have driven insurers’ reluctance to sell these policies in the months leading up to the opt out deadline; insurers lose money if they go through the expense of underwriting and selling coverage that will be canceled almost immediately.

But the legislature is considering changing this. One proposal would require employees to regularly re-certify that they maintain their private coverage to keep their opt out status and avoid paying the payroll tax. Importantly, a proposal requires employees who cancel their private coverage after opting out to not only pay the payroll tax in the future, but pay back taxes for the period after canceling their private coverage—with interest.

This proposal is just a recommendation, for now. But the legislature may be moving in that direction.

As a practical matter, this means that employees who purchased private coverage for purposes of opting out of the Act might want to maintain that coverage until the legislature works out whether and how it will require recertification of private coverage to maintain the opt out.

Insurers’ Ability to Deny Claims “Because We Said So” Limited in Proposed Amendment to ERISA

One question that’s important in deciding an ERISA-governed insurance claim is: who decides? ERISA plans typically provide an employee or beneficiary receives a benefit under certain criteria. For instance, a health plan might provide for payment of medical bills if the treatment was “medically necessary,” a disability benefit plan might pay a portion of an employee’s wages if she can’t perform the “material and substantial” duties of her job, and so on.

Where a dispute arises over whether the plan should have paid these benefits, who decides whether these criteria are satisfied?

Since ERISA provides employees with a right to file a lawsuit in federal court to recover their benefits, you might assume the judge decides. But that’s often not the case.

A 1989 U.S. Supreme Court decision interpreted ERISA as allowing employee benefit plans to provide discretion to the plan’s decision-makers. This means that an employee benefit plan can empower itself or its agents with “discretion” to determine facts and interpret the terms of the plan. Where the plan’s decision-maker has discretion, federal courts often are not allowed to overrule them.

In other worse, these types of discretionary provisions in ERISA plans invite the decision-maker to deny claims for benefits based on little more than “because we said so.” And when the employee sues to get their benefits, the federal court is often not allowed to say that the decision-maker got their facts wrong or misread the benefit criteria. The judge can often do little more than send the case back to the same decision makers for another look.

Because many employee benefits are funded through an insurance policy, the person with this discretion is often an insurance company. Insurance companies, as the late Justice Scalia aptly observed, have a powerful incentive to abuse this discretion because they profit with every claim they reject.

New legislation was recently proposed to change this. The “Employee and Retiree Access to Justice Act of 2022” would amend ERISA to forbid this kind of “discretionary” language in ERISA plans. It would require insurers and other decision-makers who deny claims for benefits under ERISA plans to defend their decisions in court on the merits. They would no longer be able to point to their “discretion” and argue that the judge is forbidden from disagreeing with their decision.