Two of three large Medicaid managed-care plans in South Carolina were still out of compliance with federal mental-health parity rules in 2023, more than six years after the rules took effect, and two of the plans denied prior-authorization requests for mental-health and substance-use treatment at higher rates than requests for comparable medical care, federal auditors said. The findings come from an audit by the U.S. Department of Health and Human Services Office of Inspector General released Sept. 3. The inspector general concluded that the South Carolina Department of Health and Human Services did not ensure the plans followed the law, which bars coverage limits that fall harder on behavioral health than on physical health.
What the auditors found inside three Medicaid plans
The inspector general’s audit examined three of the five managed-care organizations that coordinated care for South Carolina Medicaid members in calendar year 2023. Together those three plans covered about 80 percent of the state’s Medicaid managed-care enrollees. The audit did not name the companies.
States and their Medicaid plans were required to comply with federal mental-health and substance-use-disorder parity rules by Oct. 2, 2017. The inspector general found that two of the three selected plans “continued to be noncompliant” during 2023. For one plan, the state’s outside reviewer, an external quality review organization, found it noncompliant with parity rules on prior-authorization denials because the plan did not hand over the templates and reports needed to complete the assessment. For a second plan, the required parity assessment was not finished until December 2024, well after the audit period.
The state’s reviewer also noted that two of the plans denied prior-authorization requests for mental-health and substance-use services at a higher rate than requests for medical and surgical services, in one case specifically for inpatient care. The inspector general cautioned that a higher denial rate is not by itself proof of a parity violation, but described it as a possible warning sign. State officials told auditors they were unaware of the problems because they had not reviewed the reviewer’s parity assessments, and so no corrective action plans were developed.
When a plan says no. A prior-authorization denial arrives as one more letter among many Medicaid notices, and keeping it alongside renewal dates and requested documents is the job of the renewal document checklist and reporting calendar in The SNAP & Medicaid Renewal Organizer.
Data too flawed to check whether care was treated fairly
A central problem, according to the audit, was that none of the three plans could give auditors accurate and complete data on which mental-health and medical services required prior authorization. The examples were specific. One plan labeled 169 of 822 prior-authorization requests as denied even though its own payment system showed them as paid, because the plan had later approved them on internal review or appeal without updating its reports. Another plan classified 616 of 103,128 outpatient authorization requests as medical or surgical services even though the primary diagnosis code pointed to a mental or behavioral disorder.
A third plan did not identify the specific drug or service for any of the 18,647 pharmacy prior-authorization requests it denied, and 4,639 of those denials lacked the information needed to tell whether they involved a mental-health condition or a physical one. All three plans lumped mental-health and substance-use services into a single “behavioral health” category, and their underlying data did not reconcile with the quarterly reports they sent to the state.
The state, for its part, collected those quarterly reports but did not review or validate the data behind them, and did not compare denial rates for behavioral and medical services. Without that work, the inspector general said, South Carolina could not determine whether plans were denying mental-health care more often than physical care, which “may have increased the risk that Medicaid enrollees would encounter delays or barriers to needed MH/SUD treatments.”
What parity law requires of Medicaid plans
The requirements trace to the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 and a 2016 federal rule applying it to Medicaid managed care. Plans may not impose limits on mental-health or addiction benefits that are more restrictive than those on medical and surgical benefits in the same category, whether inpatient, outpatient, prescription drugs or emergency care.
Many of those limits are not simple visit caps. Prior authorization, the practice of requiring a plan’s advance approval before a service is covered, is one of the most common “nonquantitative treatment limitations,” and the inspector general’s office found in a March 2024 audit of eight states that it was the most frequent area of noncompliance. The auditors noted that all three South Carolina plans’ written policies complied with parity rules; the failures showed up in how those policies worked in practice and in the state’s oversight.
How South Carolina says it is responding
The inspector general recommended that the state require uniform, accurate data from its plans, review and validate that data, and work with plans on corrective action plans when problems surface. In an Aug. 17 letter included in the audit, Eunice Medina, director of the South Carolina Department of Health and Human Services, said the agency agreed.
Medina wrote that in July 2024 the department added fields to its service-authorization reporting templates, required each plan to list its authorization requirements by benefit type, and added contract language spelling out plans’ data-reporting duties. The new reporting separates approvals and denials into behavioral-health and medical categories, she said, and has given the agency “the regulatory capability to fully address MH/SUD disparities.” The state also said it had worked with federal Medicaid officials on a parity compliance timeline that ran through December 2024.
For South Carolina Medicaid members, including older adults and people with disabilities who rely on the program for counseling, psychiatric care or addiction treatment, the practical takeaway is that a denial can be challenged. Members who receive an adverse prior-authorization decision can ask their plan for an appeal and, if that fails, seek a state fair hearing through the South Carolina Department of Health and Human Services.
Keeping coverage steady while the state fixes its oversight
An audit can prompt new reporting rules for plans, but it does nothing to keep an individual member’s coverage active. Missing a renewal deadline or a document request can cut off care faster than any authorization dispute.
The SNAP & Medicaid Renewal Organizer includes 51 state packs, a renewal and reporting calendar, and guidance on the 90-day window after coverage is dropped, so the dates that keep Medicaid in force stay in view.
Set up those dates with The SNAP & Medicaid Renewal Organizer.
This article was prepared with AI assistance and reviewed against the linked official sources.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
