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RI Investigation Yields Sanctions Against Managed Care Company


by Ron Honberg, NAMI Legal Affairs

The investigation of a private, for-profit company responsible for managing mental health services to subscribers of a large health insurance plan in Rhode Island has resulted in the imposition of severe sanctions against that company. These sanctions are apparently the most drastic penalties ever imposed by a state against a managed behavioral health care company.

The investigation was conducted by the Rhode Island Department of Health after numerous complaints were filed by consumers, family members, and advocates about the practices of United Behavioral Systems (UBS), a subsidiary corporation of United Health Plans of New England. These complaints specifically articulated concerns about arbitrary restrictions imposed on inpatient and outpatient care and treatment for severe brain disorders such as schizophrenia, manic-depressive illness, and major depression as well as other mental health and substance abuse disorders. Upon completion of its investigation, the Department of Health issued a lengthy report detailing improper practices and recommending revocation of UBS' right to operate in the state.

According to the Providence Journal, the report cited numerous deficiencies and improper practices by UBS, including denial of medically necessary treatment based on inadequate information, bonus payments to UBS' medical and executive directors for denying care, decisions to deny care by non-physicians, withholding of information about appeals procedures from patients whose requests for care were denied, and inconsistent application of "medical necessity" criteria. Many of these practices were direct violations of state law. Consumers, family members, and advocates praised the report, stating that it highlighted UBS' practice of erecting bureaucratic roadblocks for vulnerable individuals with critical treatment needs and thereby discouraging all but the most assertive individuals from pursuing their rights under their health insurance policies.

The health department's investigation was conducted under the authority of a state law regulating utilization review practices in Rhode Island. That law requires the certification of all companies and agents conducting utilization review in Rhode Island and sets forth certain requirements for certification. The law also authorizes the health department to impose sanctions, including monetary penalties and revocation of certification, for failure to comply with the standards in the statute and implementing regulations.

In July 1995, UBS entered into a consent agreement with the Department of Health. Under the terms of this agreement, UBS may continue to provide services in Rhode Island on a one-year, probationary basis. In return, UBS agreed to pay $100,000 in fines to the health department, $50,000 of which has gone into a study to ascertain "best practices" for providing managed mental health and substance abuse services. Additionally, UBS agreed to terminate the contracts of their medical and executive directors.

According to Bill Emmet, executive director of the AMI of Rhode Island, the investigation and resulting sanctions have facilitated more cooperative, patient-oriented attitudes on the part of UBS. However, Emmet is quick to note that the rest of the managed care industry in the state has not necessarily gotten the message. "UBS seems to understand that it needs to be accountable to the consumers it serves. However, this is not necessarily true for the entire managed care industry in Rhode Island."

Following issuance of its report, the health department held public hearings on managed mental health and substance abuse care in Rhode Island with the intent to ascertain how best to regulate this industry. Most of the speakers at this hearing were consumers, family members, and treatment providers. According to the Providence Journal, treatment providers have "shied away" from criticizing insurance companies. However, the health department's report and recommended penalties encouraged many of these providers to come forward and articulate their concerns about managed care practices.

Interestingly, a number of speakers at the hearing expressed their belief that a 1994 law that requires coverage of severe brain disorders in health insurance policies equal to that of other physical disorders prohibits utilization review practices by managed care providers that single out people with severe brain disorders for discriminatory or inequitable treatment. According to Bill Emmet, this highlights the value of insurance parity laws as anti-discrimination measures. "It is now evident to most people in this state that the managed care companies have indeed treated people with mental illnesses unfairly, and as they look for ways to rectify that situation, many are citing the parity law." (See article on New Hampshire and Rhode Island parity bills in the July/August 1994 Advocate.)

The sanctions imposed on UBS in Rhode Island illustrate the importance of laws that regulate the way managed care companies conduct their activities. According to the Intergovernmental Health Policy Project, a number of states have enacted laws regulating certain aspects of managed care practices during the past few years. For example, in 1995 at least three states--Maryland, Arizona, and Indiana--enacted laws regulating utilization review practices. These were added to similar laws passed in four states--Kansas, Vermont, Maine, and California--in 1994. The 1994 Vermont law was enacted specifically to address mental health services in managed care plans.

Additionally, legislation addressing protections for patients in managed care plans was considered in twenty states in 1995 and enacted in two of these states, New Hampshire and Maryland. These laws, modeled after legislation developed by the American Medical Association, address issues such as certification requirements for managed care plans, managed care standards, notification and appeals procedures, and other aspects of patient rights. A patient protection act was also passed in 1995 by the Texas legislature, but was subsequently vetoed by Governor George Bush, Jr.


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