Legal Corner: How should California psychologists respond to insurance companies’ requests for records for the new risk adjustment audits?

The Practice Organization and the California Psychological Association provide an updated guidance.

Welcome to the first edition of Legal Corner, a column where you’ll find answers to your questions on the many legal issues associated with practice. This column will appear in PracticeUpdate every other month and feature explanations and tips from Practice Organization staff and guest contributors.



Insurers continue to conduct risk adjustment audits around the country. California’s unique law regarding the release of outpatient psychotherapy records creates special issues for California psychologists responding to these audits.

The Practice Organization recently worked with the California Psychological Association to collaboratively resolve these California issues with Anthem and Aetna. (Those companies use Inovalon and Episource, respectively, as their audit contractors.) Anthem had revised its original request letter two years ago (after discussions with the Practice Organization), and now both Anthem and Aetna have affirmed their commitment to providing greater clarity in their communications with providers regarding specific California notice requirements.

Our recommendations below, however, apply to any risk adjustment audit in California.

Background on risk adjustment (RA) audits

The Affordable Care Act requires certain insurance plans to conduct these audits annually. They relate to the risk adjustment program that transfers substantial funds between plans with healthier populations and those with less healthy populations.  The idea is to level the playing field between these types of plans, and promote the viability of plans that have high costs due to unhealthy populations.

The RA audits are a spot check on the accuracy of the information insurers report in the process. Unlike traditional insurance audits, the focus of RA audits is not on the particular psychologist or his or her patient, but on the overall cost of care for the plan’s population.

When responding to RA audits in California, we recommend* that you:

1. Make sure that you have received the proper notice.


California law requires insurers to notify both the psychologist and the patient of any request for records of outpatient psychotherapy. Specifically, California Civil Code § 56.104 requires such notice to include the following elements: (1) the specific information being requested and a description of its intended uses; (2) the length of time during which the information will be kept before being destroyed or returned; (3) a statement that the information will not be used for any purpose other than its intended use; and (4) a statement that the person or entity requesting the information will destroy or return the information before or immediately after the specified time frame.

(Anthem and Aetna have agreed to include these elements in their notice to psychologists.)

This 56.104 notice should be sent to the psychologist when the insurer/auditor requests records. The law, however, does not require insurers to send that notice to patients until 30 days after the records are received from the psychologist. For further details, see additional information (PDF, 359KB).

2. Determine what records to provide. 


For members who keep separate psychotherapy notes as defined by the Health Insurance Portability and Accountability Act
, we recommend you just produce your separate clinical record. Similarly, members who keep a single lean clinical record with no sensitive therapy details can provide that record.

For members who keep a “combined record” containing sensitive therapy information along with basic clinical information, insurers may be willing to accept either a summary or a partial record. Anthem and Aetna have confirmed that psychologists who keep a combined record can exclude sensitive information and provide only the minimum necessary information to support the audit.

For the full guidance on complying with California law when responding to RA audits, see additional information (PDF, 359KB). That document addresses issues like: what information to extract from a combined record and what to do if your patient objects to releasing records.

Practice Organization members who have questions can contact the Office of Legal and Regulatory Affairs via email or by phone at (202) 336-5886. Members of the California Psychological Association (CPA) who have questions can contact the CPA director of professional affairs, Elizabeth Winkelman, PhD.

*Note: The Practice Organization and CPA cannot give members legal opinions or legal advice. Those seeking legal advice should retain a licensed attorney in their state with appropriate experience.