Arizona failed to ensure that insurers administering its Medicaid program complied with federal requirements prohibiting stricter prior authorization limits on mental health services compared to medical services, an audit report published Aug. 24 by the HHS Office of Inspector General found.
“This may have increased the risk that Medicaid enrollees would encounter delays or barriers to needed MH/SUD treatment,” the report said.
The report is the third in a series of OIG audits that have reached similar findings in New York and Kansas, where state oversight also failed to ensure Medicaid managed care plans complied with mental health parity rules for prior authorization.
Seven notes:
1. The audit examined data from Oct. 1, 2022, through Sept. 30, 2023, for three of nine insurers in Arizona with Medicaid managed care contracts, which covered around 58% of the state’s approximately 1.9 million Medicaid managed care enrollees. The OIG selected the insurers, which were not named, based on risk factors including noncompliance identified in state operational reviews, number of enrollees served and the use of subcontractors. Arizona was selected for the audit based on findings from a prior OIG report that examined parity compliance in eight states and found prior authorization was the most common area of noncompliance.
2. Only one of the three insurers performed the annual parity analysis required by state policy. That analysis found its prior auth limitations for mental health and substance use disorder services were comparable to those applied to medical and surgical services, including both “as written” policy reviews and an “in operation” data analysis comparing denial rates.
3. The remaining two insurers did not perform annual parity analyses and were unable to demonstrate compliance with prior auth parity requirements. Officials from both plans told auditors they believed an analysis wasn’t needed because there had been no material changes to their benefits or prior auth processes. Neither plan had conducted an analysis since the state performed an initial one in 2017 through a contractor.
4. The two noncompliant insurers were also unable to provide reliable prior auth data for the OIG to perform its own “in operation” analysis. Data from one plan included duplicate entries, did not support the insurer’s own calculations and did not clearly identify whether prior auth requests were for mental health or prescription drugs. The OIG did determine that, “as written,” both plans’ prior auth policies for mental health services were comparable to those for medical services.
5. Arizona’s oversight of insurers’ parity compliance was hindered by unclear and contradictory written policies. One section of the state’s contractor operations manual required insurers to annually perform a parity analysis. Another section indicated that insurers only needed to perform and submit one when there were operational changes that may have affected parity compliance, and that an annual attestation of compliance was sufficient when there were no changes. The state also did not require insurers to submit their analyses or supporting data for review, instead relying on the attestations. The state’s operational reviews, conducted every three years, did not always catch the missing analyses. For one insurer, the state conducted reviews in 2020 and 2023 and only flagged the lack of an analysis in 2023. For the other, a 2022 review erroneously indicated the parity analysis had been completed.
6. The OIG recommended that Arizona improve its policies and procedures to clarify that insurers are required to annually perform parity analyses, require insurers to submit those analyses with reliable supporting data for the state’s review, and review the analyses and documentation it receives from insurers.
7. The state agreed to require insurers to submit their analyses and for the state to review them, noting it amended its contracts effective Oct. 1, 2024, to require submission. It also began collecting insurer parity analyses with annual submissions starting in August 2024. Arizona did not agree with the recommendation to clarify that insurers must annually perform analyses, stating its policies already include that requirement. The state said it anticipates issuing a memo to all insurers reinforcing submission requirements by September and updating its contractor operations manual by Oct. 1, 2028.
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