(Story updated at 6:03 p.m. ET)
A California-based behavioral health provider is suing Health Net for $55 million, saying the insurer has launched an attack on the industry by refusing to reimburse behavioral health providers for services.
Sovereign Health alleges that Health Net “engaged in a disgraceful scheme to enrich themselves by backtracking on their insurance promises to recovering addicts and the mentally ill at the expense of providers who have devoted their professional lives to helping such individuals,” according to the lawsuit, filed in state court last week.
Sovereign says that Health Net's refusal to reimburse providers threatens many rehabilitation facilities' ability to remain open and continue providing care. Sovereign alleges that Health Net has refused to pay more than 100 other rehabilitation treatment centers throughout California.
Health Net did not immediately respond to a request for comment Friday morning.
Sovereign has therapeutic centers in Arizona, California, Florida and Utah.
California regulators are already investigating Health Net's actions, according to the complaint, which cited a May article in California Healthline. According to that article, California's Department of Managed Health Care is reviewing a complaint signed by executives and owners of 118 for-profit treatment centers. The California Department of Insurance is also looking into the issue, according to the article.
A Department of Managed Health Care spokesman confirmed Friday that it has received letters about the issue and is now reviewing them. The California Department of Insurance spokeswoman Nancy Kincaid said Friday the department is unable to provide details about any specific complaints or requests.
The lawsuit also says, citing the same article, that Health Net sent form letters to dozens of treatment providers in January about its concerns with the providers.
According to that letter, written by Matthew Ciganek, the insurer's director of special investigations, Health Net was concerned about the validity of some providers' claims.
Health Net warned providers that only individuals who live continuously in the defined California service area are eligible under the PPO policies for coverage. The insurer also said that providers who waive deductibles, copayments or coinsurance for patients raise questions about whether those claims are then fraudulent.
Also, the insurer said it had to confirm that billed rates for its members weren't different than rates providers billed for non-Health Net patients. The insurer also said payment may not be appropriate if patients or others received money or other benefits for referrals. Health Net also said it must make sure all services were medically necessary.
In the letter, Health Net requested a number of documents from providers as well as verification that providers hadn't submitted any improper claims.