South Carolina 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 Sept. 8 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 treatments,” the report said.
The report is the fourth in a series of OIG audits that have reached similar findings in New York, Kansas and Arizona, where state oversight also failed to ensure Medicaid managed care plans complied with mental health parity rules for prior authorization.
Six notes:
1. The audit examined calendar year 2023 data for three of five insurers in South Carolina with Medicaid contracts, which covered approximately 80% of the state’s Medicaid managed care enrollees. The OIG selected the insurers, which were not named, based on risk factors including prior auth noncompliance identified across multiple benefit categories, number of enrollees served and the use of subcontractors for claims adjudication and denials. In South Carolina, the state itself is responsible for conducting the parity analysis because its managed care plans don’t provide the full scope of mental health and substance use disorder services.
2. All three insurers were unable to provide accurate and complete prior authorization data. For example, one MCO incorrectly identified 169 of 822 prior auth requests as denied when the requests had actually been approved after further internal review or appeal, but its records were never updated to reflect the revised status.
3. Two of the three insurers continued to be noncompliant with parity requirements during the audit period, more than six years after the October 2017 compliance deadline. An external quality review contractor hired by the state found one MCO noncompliant because the insurer didn’t provide the required templates and reports to complete the assessment. The contractor didn’t complete the second MCO’s assessment until December 2024, after the audit period ended. The contractor also noted that both the second and third MCOs denied prior auth requests for mental health services at higher rates than for medical services.
4. The state didn’t review or validate the quarterly service authorization data the insurers submitted and didn’t review the parity assessments that its own contracted external quality review vendor conducted. State officials told auditors they were unaware of the noncompliance and potential noncompliance issues until OIG brought them to the state’s attention.
5. All three MCOs combined mental health and substance use disorder data into a single “behavioral health” category rather than reporting them separately, and their data formats were not standardized across plans. Two of the three MCOs didn’t classify their service authorization data by benefit type (such as inpatient, outpatient or prescription drugs), making it impossible for the state to complete the required parity analyses across those categories. None of the three plans’ quarterly service authorization reports reconciled to the underlying data that OIG obtained directly from the MCOs.
6. The OIG recommended that South Carolina implement policies and procedures for monitoring insurer compliance, including providing clear and uniform guidance to MCOs on maintaining accurate data, reviewing and validating the data that support MCOs’ quarterly reports and addressing noncompliance with corrective action plans. The state agreed with all the recommendations and said it had already begun making changes.
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