Her son died after insurers resisted covering drug rehab. Now she’s taking them to court.
How health insurance companies helped make US addiction treatment expensive and ineffective.
Nov 22, 2019, 8:00am EST
Photographs by Giovana Schluter Nunes
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Her son died after insurers resisted covering drug rehab. Now she’s taking them to court.
WARREN TOWNSHIP, New Jersey — When Ed Fahy agreed to go to addiction treatment in February 2016, he expected to get into recovery near his home and family in Warren Township, New Jersey.
Nearly seven months later, and a thousand miles away in Palm Beach County, Florida, he would overdose and die at the age of 28. After his health insurance plan repeatedly denied requests to cover inpatient treatment closer to home, he wound up in Florida — at a sober living house that was so bad it was eventually shut down by law enforcement.
Fahy’s mother, Maureen O’Reilly, is clear about whom she blames: the health insurance companies.
Fahy initially tried to get inpatient treatment for his addiction to opioids, cocaine, and alcohol at two different facilities in New Jersey. But his health plan administrator, Horizon Blue Cross and Blue Shield, and its behavioral health benefits manager, Beacon Health Options, repeatedly denied his claims. Fahy’s family, after a desperate search, found treatment that was covered in Florida.
Down south, Fahy got caught in what’s now known as the “Florida shuffle” — a quagmire of low-quality, weakly regulated addiction treatment centers and sober homes. It was at one of these sober homes where Fahy overdosed on fentanyl and cocaine.
O’Reilly said none of it would have happened if Horizon and Beacon approved inpatient treatment in New Jersey, instead of pushing Fahy to Florida. “You can’t be yanked out of this place and that place, and be sent to the worst place in the United States to recover,” she told me, sitting in her kitchen.
O’Reilly is now suing Horizon and Beacon for allegedly denying medically necessary treatment. In the lawsuit, first filed in 2018, O’Reilly alleges that Horizon and Beacon violated their contract, fiduciary duty, and state law, causing Fahy’s “wrongful death.”
Fahy was far from alone in dealing with problems with insurance. In interviews with experts and addiction patients, insurance is commonly cited as one of the biggest barriers to obtaining treatment in the US. As part of Vox’s Rehab Racket project, nearly 900 people have filled out a survey sharing their experiences with addiction care — many of them blaming poor insurance coverage for lack of access and spiraling costs.
Vox has launched The Rehab Racket, an investigation into America’s notoriously opaque addiction treatment industry. We’re crowdsourcing patients and families’ rehab stories, with an emphasis on the cost of treatment and quality of care. If you’d like help our reporting by sharing your story, please fill out this survey.
About 100,000 people in the US in 2018 needed drug addiction treatment but couldn’t get it because their insurance either didn’t cover treatment at all or didn’t cover the full costs, according to an estimate from the National Survey on Drug Use and Health.
Amid an opioid epidemic that has contributed to the more than 700,000 drug overdose deaths in the US since 1999, experts argue poor insurance coverage is leading to more untreated addiction and death.
Insurers’ reluctance to pay for addiction treatment is inextricably linked to the two big problems with American addiction care: high costs and low quality.
The US’s addiction treatment system largely rose up outside of mainstream health care. Addiction was seen as a moral failure, not a medical condition, and care initially came largely from community groups, many of them basing their practices off the 12 steps of Alcoholics Anonymous. Since addiction services weren’t viewed as part of mainstream health care, health insurers by and large refused to cover treatment.
The effects linger to this day. Health insurers still resist covering treatment despite federal and state laws trying to get them to do so. Insurers’ refusal to pay also means they are not consistently providing any form of quality control — something they do in other areas of health care by, for example, ensuring money they’re spending will go to evidence-based practices that actually improve outcomes.
So families might be forced to pay tens of thousands or hundreds of thousands of dollars out of pocket for care, as I’ve reported time and time again for Vox’s Rehab Racket project. Or people seeking help are forced to shuffle from treatment to treatment in a desperate attempt to land on something that insurance will finally pay for. Or they might not get treatment at all.
Meanwhile, insurance companies can get out of paying for treatment that can be expensive and entail costs for months or even years.
Insurers’ behavior is a “purely profit-driven notion,” Ellen Weber, vice president for health initiatives at the Legal Action Center, told me. “There’s some sense [people with addiction] will never get better, some sense that they don’t deserve health care services.”
Horizon said in a statement that “the claims being made in [O’Reilly’s] lawsuit are untrue, unfounded, and unfair.” Beacon declined to comment, citing the ongoing litigation.
After Fahy’s death, O’Reilly has caught herself thinking about what should have been. “It’s just these thoughts that you have,” she explained.
Thoughts like that the check she wrote for Fahy’s funeral should have been for a down payment on his first house. And that the people who gathered there in suits and dresses should have been dressing up for his wedding instead.
He wanted treatment in New Jersey, but his insurance plan wouldn’t pay
Fahy first used heroin when he was 19, according to his mother, as a sophomore at Catholic University of America. After his roommate told her about Fahy’s heroin use, O’Reilly got him to a psychiatrist who prescribed buprenorphine, one of the medications that studies show reduces the mortality rate among opioid addiction patients by half or more. Fahy improved, but would struggle on and off with his opioid, cocaine, and alcohol addictions for years.
By 2015, Fahy had landed a job as a chemist at NatureX, a botanicals company, near New York City. But he started using drugs again, which hurt his performance at work, and he was eventually fired. Then he broke up with his girlfriend, and moved back home in New Jersey. His drug use accelerated.
“He was emaciated,” O’Reilly said. “Before that, he wasn’t heavy, but he wasn’t thin. … I was shocked.”
On February 6, 2016, the family got in an argument in front of Fahy about whether he should get into treatment — and he finally agreed to go. He went to Sunrise Detox, a facility in Stirling, New Jersey, he had previously attended and liked, for inpatient care, signing in around 1 am on February 7.
O’Reilly was “euphoric” after she dropped Fahy off, she said. “I was so elated on the drive home.”
At this point, Fahy was under his mom’s insurance plan through her employment as a public defender. She was paying $700 to $750 a month to keep Fahy on the plan, but believed it would be worth it. “I thought private insurance was the ultimate,” she said.
The plan was self-funded, meaning that O’Reilly’s employer, the state of New Jersey, paid for Fahy’s care. But the state hired the insurance company Horizon to administrate what treatment was approved and what wasn’t. For addiction care, these decisions were largely made by Beacon, Horizon’s behavioral health benefits manager. Although self-funded plans generally face fewer regulations than other kinds of health insurance, the plan was still supposed to cover addiction care.
But two days after dropping her son off, O’Reilly learned that Horizon and Beacon wouldn’t approve coverage for inpatient treatment at Sunrise Detox. For detox and inpatient care, that could cost O’Reilly more than $20,000 a month out of pocket at today’s rates, based on a call to Sunrise Detox’s admissions line.
Following advice from Fahy’s providers at Sunrise Detox, O’Reilly moved her son to another inpatient facility, in Lafayette Township, New Jersey, on the same day: Sunrise House, which has no direct relation to Sunrise Detox. For 11 days, Fahy did well there; medical notes, which O’Reilly obtained after his death, showed he accepted treatment, and O’Reilly found Fahy in better spirits when she attended a family event at Sunrise House.
But by February 20, 2016, it was clear that Horizon and Beacon weren’t going to approve further treatment at Sunrise House. Fahy’s family had to pay out of pocket for the rest of the stay — a full month of inpatient care could cost $15,000 today, based on a call to Sunrise House’s admissions line — or he had to leave.
Searching for a facility that would take Fahy and where coverage would be approved, the family landed on the Transformations Treatment Center in Delray Beach, Florida.
Fahy took the news badly. According to medical records, he didn’t want to leave his family — his primary support network — and complained that he didn’t want to go to a “red state.” But it was the quickest option that Horizon and Beacon would likely approve coverage for, so Fahy went.
In Florida, though, insurance problems would pop up again. Horizon and Beacon wouldn’t agree to cover the full level of inpatient care that Fahy and his providers asked for. Within months, Fahy relapsed twice. When he tried to get into Transformations after the second relapse in July 2016, even intensive outpatient was eventually denied. Later discharged from Transformations despite what his therapist there described in one medical note as a “high risk of relapse,” Fahy was pushed to seek treatment at another outpatient facility — one later shut down by law enforcement.
Horizon and Beacon’s letters denying coverage, provided by O’Reilly, illustrate an opaque process with life-or-death stakes. Horizon and Beacon would deny coverage of treatment Fahy sought, recommending a lower level of care. He’d seek that lower level of treatment instead, and it too would be denied either altogether or after a few days. When coverage was approved, it was often after multiple attempts. Horizon and Beacon would sometimes approve coverage at the same level that was previously rejected with little to no explanation about what, if anything, had changed.
This seems to be a common tactic for insurance companies: deny as much coverage as possible, hoping that patients will give up. Insurers “bank on families and consumers not having the capacity to appeal these decisions,” Weber, of the Legal Action Center, said.
The result: Fahy couldn’t get coverage for the full level of inpatient treatment that he, his providers, and internal and external reviews of Horizon and Beacon’s coverage decisions suggested he needed. As one of Fahy’s doctors wrote in an August 2016 medical note, “Patient is unable to obtain or maintain sobriety as an outpatient and requires inpatient clinical therapy directed to prevent relapse.”
In the last few weeks of his life, Fahy settled for the Living Right sober home and Palm Beach Recovery and Wellness for intensive outpatient — both of which were run by the same owners in Palm Beach County, Florida.
He died at the sober home on September 3, 2016, after using cocaine and fentanyl in one of the house’s bathrooms. No one checked on him for eight hours before he was found dead, O’Reilly said. Both the home and treatment facility were later shut down after their proprietors, who couldn’t be reached for comment, were arrested for patient brokering in 2017.
Until the moment she went to the funeral home to look at Fahy’s body, O’Reilly said she kept hoping it was someone else — that someone, maybe, had stolen Fahy’s identity. “But, of course, it was Ed,” O’Reilly said. “I touched his hair and his face. But he was so stone-cold dead.”
Insurers often don’t know what good or necessary treatment is
Addiction is such a difficult condition to treat, and addiction treatment quality is so inconsistent in the US, that it’s impossible to say for certain how things would have turned out if Fahy’s inpatient treatment in New Jersey was approved.
But experts argue insurers could play a major role in alleviating these problems — by covering care and holding addiction treatments to a higher standard. One problem is that insurers often don’t know what good or necessary treatment is, because they’ve remained outside the field for so long, and so much of what is out there is of uncertain quality.
“Without being able to sort out who does a good job and who doesn’t, it’s very hard to assign responsibility here,” Richard Frank, a health economist at Harvard who studies addiction treatment, told me. But if insurers deny addiction treatment based on quality, he added, “they should also be offering up some place that does the job better.”
In Fahy’s case, that didn’t happen — given that he was over time pushed to a facility that was eventually shut down due to patient brokering. And the first two facilities that Fahy tried to get coverage for, Sunrise Detox and Sunrise House, were actually in-network, yet Horizon and Beacon still rejected coverage for them.
O’Reilly also pointed to several problems with Fahy’s addiction treatment in general.
Fahy did well earlier in his life on the opioid addiction medication buprenorphine, and studies show that medications are generally the most effective treatment for opioid addiction. But buprenorphine was never offered to him throughout 2016 for long-term care.
Fahy also struggled with depression, which O’Reilly said he never got proper care for. In July 2016, according to medical notes from Transformations at the time, he complained he was “feeling worthless, hopeless, and frequent isolation.”
“You can’t be yanked out of this place and that place, and be sent to the worst place in the United States to recover”
As an atheist, Fahy also distrusted the 12 steps due to their demands that he submit to a “higher power.” Yet the 12-steps approach was the addiction treatment modality he was repeatedly offered, including in New Jersey. (It’s used in about 70 percent of treatment facilities in the US, with alternatives often difficult to find.)
The treatment centers aren’t faultless, with their own problems providing evidence-based care. American Addiction Centers, which owns Sunrise House, said it offers treatments for addiction and mental health conditions, trying to match patients’ needs. AAC also claimed to provide medications for opioid addiction if “deemed appropriate by the medical provider evaluating the patient.” But when I called Sunrise House’s admissions line, the receptionist said they would prefer patients not stay on such medications — perpetuating the stigmatizing myth that getting on medications is replacing one drug with another.
Sunrise Detox didn’t respond to multiple requests for comment. Transformations declined to comment, citing O’Reilly’s lawsuit.
Part of reforming addiction care in America will require insurers to reject low-quality addiction treatment, pushing patients to higher-quality services. If insurers “believe there’s a high likelihood that this person is going to get a treatment that is going to run up the bill and not get them better, then [the insurer] is right not to go along with it,” Frank said.
But based on reviews of coverage decisions conducted by one of Beacon’s own doctors and, later, an outside agency, Horizon and Beacon appeared to deny treatment that was medically necessary — another possible sign they didn’t really know what care addiction patients require.
Initially, Beacon denied inpatient and detox treatment at Sunrise Detox from February 7, 2016, and beyond and at Sunrise House from February 9, 2016, and beyond. But in two notes on February 25, 2016, a Beacon staffer identified as Dr. Kho wrote that inpatient and detox treatment should have been covered in both facilities in New Jersey. Kho explained that Fahy had high withdrawal scores and was “at high risk for worsening withdrawals,” among other clinical factors that warranted the level of treatment that he was previously denied.
By the time of the internal review, Fahy had already gone to Florida. O’Reilly said she did not see the review or know of it until after Fahy died, when she requested his medical records.
Separately, a later report by independent clinical review company MCMC, which O’Reilly requested, overturned Horizon and Beacon’s decision to deny coverage for intensive outpatient treatment at Transformations on July 26, 2016, and beyond. It listed several reasons Fahy required continued care, including “low motivation for sobriety.” It added, “If we have overturned the denial, your plan or health insurance issuer will now provide service or payment.”
That review was dated on November 17, 2017, more than a year and two months after Fahy’s death.
Horizon defended its decisions in a statement, claiming “coverage was provided for well more than 100 days of [substance use disorder] treatment.” A spokesperson for Horizon wrote, “Beacon authorized [substance use disorder] treatment, from both in-network and out-of-network providers, consistent with the terms of Mr. Fahy’s health-benefit plan and [American Society of Addiction Medicine] criteria based on the clinical information provided by the treatment facility at the time.”
Asked about the internal and external reviews of coverage decisions, the spokesperson added, “We do not know what additional information, if any, Dr. Kho may have had in performing his retrospective review. It does not appear that MCMC’s review engaged Beacon or Horizon directly in any way nor was it conducted as part of any administrative appeal, so we cannot speak to their process or determinations. Regardless, Mr. Fahy was, at the time of his death, approved for an [intensive outpatient program] through September 6, 2016.”
Still, Horizon and Beacon both seem to be aware of a bigger problem. They, along with several other insurers, have teamed up with the advocacy organization Shatterproof to develop better standards for addiction care.
That, experts say, is what insurers should be doing. “If [insurers] are going to pay for treatments, they’re going to have to look like modern health care,” Frank said. “That raises the bar. That may not raise the bar to the level that we’d like … but I think it pushes us in the right direction.”
Existing laws could improve addiction treatment coverage, but they’re poorly enforced
America’s addiction treatment system is supposed to be a main line of defense against overdose crises like the opioid epidemic. But Fahy’s story conveys where this treatment system and the insurance apparatus that’s supposed to pay for it can fall short, even as federal and state lawmakers say that they now see addiction as a public health problem and rush to boost funding for treatment.
Two federal laws — the Mental Health Parity and Addiction Equity Act, passed in 2008, and the Affordable Care Act, passed in 2010 — are supposed to require parity between physical and mental health care: If an insurer covers physical health services at a certain level, and says that it covers mental health and addiction care too, it should cover mental health and addiction services at the same level as physical health care. Several states, including New Jersey, have passed their own versions of these laws.
Beacon has run into trouble with these laws before. In 2015, the New York attorney general concluded that the company, previously known as ValueOptions, wrongly denied addiction and mental health coverage in the state. A settlement required Beacon, which claims 40 million customers nationwide, to “dramatically reform its claims review process and pay a $900,000 penalty,” according to a statement by the attorney general’s office at the time.
Generally, though, the laws are poorly enforced. A study by consulting company Milliman found insurers in 2015 on average paid over 21 percent more for primary care services than behavioral services, including addiction. Behavioral care was as much as 5.8 times more likely than physical or surgical care to be provided out of network — making it more expensive and harder to access.
About 100,000 people in the US in 2018 needed drug addiction treatment but couldn’t get it because their insurance either didn’t cover treatment at all or didn’t cover the full costs
The White House’s opioid commission dedicated a section in its 2017 report to better enforcement of parity laws, asking that the US Department of Labor get “real authority to regulate the health insurance industry” and that insurers that violate parity laws “be held responsible.”
Insurers do seem to be paying more for addiction care than they used to. According to the Health Care Cost Institute, insurers spent a little more than $17,000 on the average patient with a substance use disorder in 2017, up from nearly $13,500 in 2008. That’s likely due in part to the opioid crisis, but also likely due to the parity laws passed and implemented since 2008, indicating that such measures can make an impact.
The concern is that insurers still aren’t paying enough, given the scale of the opioid crisis, and aren’t paying for the right things. Since insurers have long resisted paying for addiction care, and as a result avoided evaluating the quality of such treatment, they’re cautious that anything they pay for in this area may be an ineffective waste of money. But they can only fix this problem by getting serious about addiction treatment coverage, whether by force of law or by will.
Part of the problem is the laws mandating insurance involvement are genuinely difficult to enforce. They require deciding what’s medically necessary, a concept that is abstract and largely up to interpretation.
It’s also more difficult for regulators to challenge these calls than for insurance companies to make them. Regulators have to request, obtain, and verify medical records and internal reviews, which takes time and resources.
“The problem there is that it’s not like there’s an algorithm for [enforcement]”, Sherry Glied, a health economist and dean of New York University’s Robert F. Wagner Graduate School of Public Service, told me. “You sort of have to go in after the fact and see what is going on. No one has really come up with a good way.”
Some states are trying. New York, for one, has pushed to “go above parity,” Rob Kent, general counsel for the state’s Office of Addiction Services and Supports, told me. New York has escalated its enforcement, requiring insurers to use a standardized tool to decide what level of care addiction patients need and proactively submit information to regulators about how they’re complying with the law. But Kent acknowledged New York still has work to do in building up its staff to better monitor insurance companies.
In New Jersey, Gov. Phil Murphy (D) earlier this year signed an enhanced parity law, which includes a new requirement for insurers to send an annual compliance report to the state’s Department of Banking and Insurance.
The New Jersey Department of Banking and Insurance cited the law in response to a request for comment about O’Reilly’s case, adding that it “takes complaints seriously.”
Still, Weber, of the Legal Action Center, said, “I don’t think there is any state insurance department right now that does [enforcement] well.”
Meanwhile, some families are, like O’Reilly, taking matters into their own hands. In the course of this story, I spoke to several family members of addiction patients who sued insurers — some of whom couldn’t talk on the record, because their settlement deals barred them from doing so.
In March 2019, some of these families won in a big, public case: In Wit v. United Behavioral Health, a federal court found United had illegally denied mental health and addiction treatment coverage to tens of thousands of patients. The ruling will likely be appealed, but if it succeeds, it could set a precedent for the industry.
O’Reilly’s case is still in the early stages. So far, both sides have filed dueling motions about whether the lawsuit should be dismissed. As it progresses, there’s a chance that the threat of trial will lead to a settlement, as has happened in many similar cases in the past.
The lawsuit, she said, is about holding people accountable for Fahy’s death — and sending a broader message about the state of insurance and addiction treatment. “The health insurance industry needs to be reined in,” she said.
As a public defender, O’Reilly has seen many clients mandated to treatment through drug court, paid for by the state. She sometimes wonders if that would have been a better fate for her son. “But then sometimes I’m sitting in court, and they’re handcuffed, and they’re in the prison garb, and I think, ‘Oh, I wouldn’t want that for Ed,’” O’Reilly explained.
She continued, “At the same time, I’d rather see him in jail or even prison alive than dead.”
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Photos by Giovana Schluter Nunes, a photographer based in Brooklyn, New York.