As Health Insurance Denial Rates Spike, Senator Wiener Introduces Legislation to Hold Insurance Companies Accountable For Senseless Denials

SAN FRANCISCO – Senator Scott Wiener (D-San Francisco) announced SB 363, the Health Insurance Accountability Act. As healthcare denials continue to increase, many Californians are wrongfully being denied care they are owed. Insurance companies disclose little about their denial decisions and currently face few if any consequences for issuing wrongful denials. SB 363 provides critical transparency and accountability for health insurance companies for baseless denials of coverage for medically necessary care. Specifically, the bill fines insurance companies for excessive rates of coverage denials being overturned on appeal, and requires insurance companies to disclose key data about their coverage denials.

“Accountability is critical when insurance companies wrongfully deny Californians health care coverage,” said Senator Wiener. “The facts are alarming. Over 70% of mental health denials that make it all the way through the appeals process are overturned. This suggests insurers are engaging in widespread violations of state law and wrongfully denying urgently needed healthcare, potentially in a widespread way. We must gain a clearer picture of what is happening with coverage decisions and hold health plans accountable for unwarranted denials.”

Healthcare providers are raising the alarm that insurance companies are denying more claims for healthcare in recent years. Between 2022 and 2023, care denials increased an average of 20.2% for commercial claims. In 2024, nearly 3 in 4 providers said denials have gone up in the past 2 years. 

Denials are particularly a challenge in the mental health space, where many Californians report challenges accessing care. More than half of Californians who try report having trouble finding a mental health provider who takes their insurance. In 2020, Senator Wiener authored SB 855 to require health plans to cover more mental health treatments, but some data indicate health plans are not fully complying with the law.

The problem is also especially acute for children and youth. California ranked 51st (out of 50 states & D.C) for parents reporting it was not possible to obtain mental health care for their child. 

Health plans and insurers do not publicly disclose how they make many treatment denials or modifications, which makes it difficult to ensure that patients are receiving the care to which they are entitled. 

Families seeking care are often told these services will not be covered by their health plan after a provider has already approved treatment. When this happens, a patient must first file a grievance/complaint and participate in a 30-day process with their plan. 

If the issue is not resolved, the patient may file an Independent Medical Review (IMR) complaint with the Department of Managed Health Care (DMHC) or the Department of Insurance (CDI).  Providers who are not affiliated with the health plan then review the case and determine whether the service should be provided. Health plans must abide by the decision of IMR providers who uphold or overturn the original decision.

Nearly 72% of health plan denials that reach IMR are overturned. These reversals represent medically necessary care that was wrongfully denied to patients, and the high rate of reversals is alarming. Yet health plans and insurers currently face no consequences for wrongfully denying patients care that was recommended by their provider.

Without penalties for false denials, plans make denials that are superfluous and likely to be overturned -  and the scope of the problem is unclear and potentially very large. Only a small fraction of denials advance to the IMR process: Many patients don’t know that they have the right to pursue IMR, many are unwilling to engage in a time-intensive process, and some face serious language barriers because IMRs are typically provided only in English and Spanish.

In other instances where timely care is denied, such as failure to ensure an adequate provider network for enrollees or excessively long wait times for appointments, DMHC has the authority to issue fines and violations. In 2023 alone, more than $53 million in fines were levied against the plans, but there is no such incentive to ensure care is properly given when it comes to cases that go before the IMR process. 

SB 363 requires health plans and insurers to report to the Department of Managed Health Care (DMHC) and Department of Insurance (CDI) denials and modifications made to provider-recommended care. The agencies will then publish the information publicly in their annual reports.

Plans and insurers will be fined for violations under SB 363. Plans and insurers will be assessed under 3 categories of care: medical, behavioral, and surgical. In each category, if over 50% of IMRs are overturned, the plan or insurer will incur a fine for each additional case in that category that is overturned above the 50% threshold. Failure to report the required data would also incur a fine.

The fines would be:

• For the first violation, at least $50,000
• For the second violation, between $100,000 and $400,000
• For each subsequent violation, no less than $1,000,000.

The funds raised from these fines will be reinvested to provide healthcare services to Californians.

“With nearly half of California's parents reporting difficulty obtaining mental health care for their kids, it's more important than ever for the state to hold health plans accountable for the care they have promised families,” said Ted Lempert, President, Children Now. “This bill seeks to empower our state agencies with the information and funds needed to ensure better health outcomes for our children and youth.  We are proud co-sponsors of this Pro-Kid bill.”

“In California, psychiatric reasons have remained the number one cause of hospital admissions among youth for the last few years,” said Ijeoma Ijeaku M.D., President of the California Academy of Child and Adolescent Psychiatry. “Addressing this youth mental health crisis requires prompt access to appropriate, adequate, comprehensive and individualized mental health care when needed. This bill will hold the payers accountable and will act as a great start in ensuring that our youth receive the care that they need when they need it.”

SB 363 is sponsored by Children Now and the California Academy of Child and Adolescent Psychiatry.

"Denials of coverage for care cause harmful delays and disruptions in care. Many patients are then forced to pay out of pocket for needed care risking medical debt, if they get care at all," said Katie Van Deynze, Senior Policy and Legislative Advocate for Health Access CA. "But when patients appeal these denials through independent medical review, many are overturned. SB 363 will shine a light on the scope of denials of coverage by health plans and insurers, and incentivize health plans to not deny care for services likely to be overturned. We thank Senator Wiener for championing this bill and his steadfast leadership on ensuring Californians can access the care they need."

###