California sanctions insurer after it cut assisted living coverage to thousands

California regulators ordered Health Net to fix how it’s handling the termination of assisted living services for low-income residents after the insurer’s abrupt decision left patients and providers scrambling. The state’s corrective action plan requires Health Net to extend services for all members until the end of the year, rather than stopping some as soon as October.

Health Net, one of the largest Medicaid insurers in the country, notified providers several months ago that it was ending its assisted living and home care services contracts. The services are optional under Medi-Cal — California’s version of Medicaid — meaning an insurer can decide annually whether it will continue coverage. Providers and family members said they got little or no warning, leaving them confused and panicked about finding other arrangements.

In an August letter to Health Net, the Department of Health Care Services cited eight deficiencies in the insurer’s handling of the change, including failure to submit transition plans for members, failure to move members to other medically appropriate care, and denying services to members. Regulators wrote that violations “jeopardize member safety, disrupt continuity of care, and endanger medically vulnerable members.”

If Health Net does not extend benefits and create individualized transition plans for each affected member, the state may fine them $25,000 per member per day of violation, the letter states.

Advocates and providers estimate about 3,500 Medi-Cal patients rely on Health Net to pay for assisted living costs. Most are elderly, and many have cognitive issues like dementia. Health Net operates Medi-Cal plans in 10 counties: Amador, Calaveras, Fresno, Inyo, Los Angeles, Mono, Sacramento, San Joaquin, Stanislaus and Tulare.

In a statement to CalMatters, Health Net spokesperson Beatriz Lopez said the company still plans to end the services next year, but will now cover all members through the end of the year.

“Health Net and DHCS share a commitment to advancing the health and well-being of Medi-Cal members,” Lopez said.

Health Net has previously told CalMatters the assisted living benefit “has not led to better care” in terms of fewer emergency room visits or days hospitalized. The benefit is part of CalAIM, a broad state initiative to improve Medi-Cal services and save money by stabilizing high-cost users who frequently end up in emergency rooms. Lopez said Health Net would continue analyzing data and supporting services that result in better health outcomes.

Providers confirmed to CalMatters that their contracts would run through the end of the year.

Hagar Dickman, director of long-term services and supports at Justice In Aging, said the state’s corrective action plan resolves the immediate crisis but fails to address the long-term problem: “Thousands of older Californians are still set to lose their housing on January 1st.”

Allowing health insurers to cancel housing-related benefits creates problems, Dickman said, because most assisted living residents have no other home to return to. Additionally, the Department of Health Care Services has stated that if a member moves to another insurer that still covers assisted living, continuity of care protections would no longer apply, meaning the new insurer might not approve the member’s assisted living costs.

“It’s disingenuous to say there are protections and then say the protections don’t apply,” Dickman said. “So the option is skilled nursing or homelessness.”

Pauline Shatara, deputy director of California Advocates for Nursing Home Reform, agreed that state protections are inadequate.

“It doesn’t sound like we found a solution to help pay for these people to remain where they are,” Shatara said.

This story was originally published by CalMatters and distributed through a partnership with The Associated Press.