FierceHealthcare.com reported last Thursday, August 2nd, that, for the second time in just over a year, California regulators have warned the insurer HealthNet Inc. that it is violating state and federal laws by refusing to pay substance use treatment providers, a warning that could lead to millions of dollars in penalties.

Late last month, California’s Department of Insurance (DOI) formally issued an order to show cause against HealthNet, setting up a hearing to potentially penalize the Centene-owned company with fines that could reach hundreds of millions of dollars.

In June 2017, the agency sent an order to HealthNet’s lawyers after providers began filing complaints over HealthNet withholding payments to addiction recovery facilities. The DOI later withdrew the order after it appeared HealthNet was settling underpaid claims with providers.

The July 2018 Order said the insurer failed to pay inpatient and outpatient claims according to its policy, which resulted in the “underpayment and unfair settlement of claims.” Specifically, the DOI says HealthNet paid claims from residential treatment centers by substituting a bundled per diem Medicare rate “for an entirely different service furnished by an entirely different facility.”

Additionally, the DOI says, beginning in 2016, HealthNet referred all providers that filed complaints to its Special Investigations Unit (SIU) “prior to performing a reasonable review of the claims.” Several lawsuits filed against HealthNet by substance use providers have claimed HealthNet began “robo-signing” medical necessity denials.

“These business practices resulted in illegitimate denials and delayed payment of claims,” the notice states. “Referring claims requests without proper investigation is an unreasonable standard for the investigation and processing of claims.”

The state says HealthNet’s action violated several portions of the California state insurance code as well as the federal Mental Health Parity and Addiction Equity Act of 2008.