Denied Mental Health Claims

Common Reasons Mental Health Claims Are Denied by Insurance Companies in San Francisco 

In recent years, mental health insurance claims have become increasingly common, and unfortunately, so have claim denials. Despite growing awareness of the importance of mental health and substance abuse treatment, many insurance companies in San Francisco and throughout California continue to deny coverage for critical care wrongfully. One of the most frequently rejected types of claims involves residential treatment centers (RTCs), which provide structured, intensive care for individuals struggling with severe mental health conditions, eating disorders, or substance use disorders. 

At DL Law Group, we’ve seen a significant rise in denied mental health insurance claims and ERISA mental health claim disputes. These denials often occur at the worst possible time when individuals and families are already in crisis. Understanding the most common reasons insurers deny these claims can help policyholders take proactive steps, preserve their rights, and pursue legal remedies when necessary. 

The Growing Importance of Mental Health Coverage in San Francisco 

San Francisco has always been a forward-thinking city when it comes to healthcare, including behavioral health services. But in the last few years, especially following the COVID-19 pandemic, there has been a marked increase in the demand for mental health and substance abuse treatment. Depression, anxiety, PTSD, eating disorders, and addiction have surged, leading many individuals to seek out residential or intensive outpatient care. 

While California’s Mental Health Parity laws and federal regulations such as the Mental Health Parity and Addiction Equity Act (MHPAEA) were designed to ensure fair coverage for mental health services, insurance companies often find ways to circumvent these protections. As a result, policyholders in San Francisco are still facing denied claims for medically necessary treatment, especially when it comes to higher levels of care like residential treatment centers or partial hospitalization programs (PHPs). 

Common Reasons Insurance Companies Deny Mental Health Claims 

1. Medical Necessity Denials 

The most frequent reason insurance companies deny mental health claims is by stating that the treatment was “not medically necessary.” Insurers use this term to suggest that the care provided, especially in residential treatment settings, was excessive, inappropriate, or could have been managed at a lower level of care, such as outpatient therapy. 

However, the criteria used by insurance companies to assess medical necessity often lack transparency, are overly strict, or do not align with clinical guidelines. In many cases, these determinations are made by non-treating physicians or third-party reviewers who have never met the patient. 

Medical necessity denials are widespread for: 

• Residential Treatment Center (RTC) stays 
• Extended inpatient psychiatric care 
• Substance abuse rehabilitation programs 
• Eating disorder treatment at specialized facilities 
• Continued coverage for long-term therapy or medication management 

These denials often ignore input from treating professionals and fail to consider the full scope of the patient’s diagnosis and risks. 

2. Insufficient Clinical Documentation 

Insurance companies may deny a mental health claim due to “insufficient documentation” of symptoms, progress notes, or diagnoses. Even when a patient is clearly in crisis, the insurer may argue that the records do not support the need for a specific level of care. 

This type of denial often occurs when: 

• The provider did not submit detailed progress notes or assessments 
• The treatment plan was not updated regularly 
• There was a lack of “objective evidence” supporting a specific diagnosis or functional impairment 

Unfortunately, this puts the burden on providers and patients to ensure every detail is documented, which can be an unreasonable expectation, especially during emergencies or inpatient stays. 

3. Level of Care Disputes 

Insurance companies frequently deny residential treatment or inpatient care, claiming the patient could have been treated at a lower level of care, such as outpatient therapy or intensive outpatient programs (IOPs). This is a cost-saving measure that directly conflicts with best medical practices in many cases. 

In San Francisco, where high-quality residential treatment centers are available, we’ve seen a pattern of insurers denying RTC claims, even when: 

• The patient has a history of suicide attempts or self-harm 
• Lower levels of care have already failed 
• The individual cannot function safely at home or in their community 

These denials not only delay recovery, but they can also result in long-term harm. 

4. Retroactive Denials After Initial Authorization 

In some cases, insurance companies will initially approve mental health treatment, only to retroactively deny the claim after services have been rendered. They may claim that new information came to light, or that the treatment no longer met medical necessity after a certain point. 

This tactic is especially common with residential treatment claims. It is devastating for families who have already paid out-of-pocket or committed to extended stays based on the insurer’s initial approval. 

5. Utilization Review Errors or Delays 

Mental health claims are often subject to a process called utilization review, where the insurer reviews clinical records in real-time to decide whether to continue authorizing treatment. Delays, incomplete reviews, or biased assessments can result in premature denials. 

In San Francisco, where mental health care can be costly, even a short delay in authorization can lead to unexpected out-of-pocket costs or treatment disruption. 

6. Policy Exclusions or Limitations 

Some insurance policies contain fine-print exclusions that limit or exclude coverage for specific mental health conditions, certain medications, or residential care. Others cap the number of therapy sessions, inpatient days, or treatment visits allowed per year. 

While California law mandates parity between mental and physical health coverage, not all insurers comply. And even when they do, they may find ways to redefine services or reinterpret plan language to avoid payment. 

How These Denials Impact Patients and Families 

Denied mental health and residential treatment center claims can have devastating consequences: 

•  Treatment interruptions can lead to relapse or hospitalization 
• Financial hardship from out-of-pocket expenses 
• Emotional distress for both patients and their families 
• A loss of trust in the healthcare and insurance system 

For residents of San Francisco, the cost of care is already high. When insurance companies fail to uphold their obligations, the financial and emotional impact is often magnified. 

What to Do if Your Mental Health Claim Is Denied 

If your mental health or residential treatment center claim has been denied, don’t accept the denial as final. You have the legal right to: 

• Request a copy of the denial letter and plan documents 
• File an internal appeal with supporting medical documentation 
• Demand a full explanation of the medical necessity criteria used 

Acting quickly is essential. Under ERISA, you often have only 180 days to file an appeal. Failure to act within that timeframe could prevent you from ever challenging the denial in court. 

You must reach out to DL Law Group as soon as possible. Whether your case involves inpatient psychiatric care, eating disorder treatment, substance abuse rehab, or RTC placement for adolescents or adults, we know how to challenge denials and fight for the benefits you deserve. 

Our legal team can assist you with: 

• Preparing and submitting strong administrative appeals within the tight deadlines imposed by ERISA (often just 180 days) 
• Challenging vague or unsupported medical necessity denials 
• Holding insurers accountable for violations of California’s mental health parity laws 
• Filing litigation in federal or state court if your appeal is denied 
• Navigating complex plan terms, exclusions, and insurance industry tactics 

We understand how devastating it is when critical mental health care is denied, and we know the strategies insurers use to avoid paying valid claims. At DL Law Group, we push back, using the law to force fair treatment and full compliance with both federal and California regulations. 

We work on a contingency fee basis, so you don’t pay anything unless we recover benefits or compensation for you. Our goal is to remove the financial and legal stress so you can focus on what matters most: your health and recovery. 

Get Help Today 

If your insurance company has denied coverage for mental health treatment or residential care, you have options. Contact DL Law Group in San Francisco today for a free consultation. Let us help you protect your rights and secure the care you or your loved one truly needs.