Federal court: TennCare illegally terminated health coverage for thousands

Tennessee is one of only 10 states that have not accepted Medicaid expansion, leaving 300,000 Tennesseans without health insurance. (Photo by Justin Sullivan/Getty Images)

Tennessee’s Medicaid safety net program unlawfully terminated coverage for thousands of Tennessee families, running afoul of the Constitution, federal Medicaid law and protections for people with disabilities, a federal court ruled Monday.

TennCare — which provides health coverage for about 1.5 million Tennesseans — failed to properly evaluate the eligibility of thousands of families, intentionally withheld information those families needed to have their coverage reinstated, and “sat on its hands for months before it fixed system-wide errors that … resulted in wrongful terminations of disabled individuals,” according to U.S. District Judge Waverly D. Crenshaw’s ruling.

A class of 35 children and adults who had been terminated from TennCare filed the class-action suit in 2020, alleging that flaws in TennCare’s eligibility determination process caused around 250,000 children to lose coverage because of paperwork issues.

As Tennessee’s Medicaid program, TennCare is the main health coverage provider for people in rural areas, people with disabilities, children and the elderly, according to the Tennessee Justice Center, a nonprofit that is among the attorneys representing the plaintiffs.

“Poor, disabled and otherwise disadvantaged Tennesseans should not require luck, perseverance, or zealous lawyering to receive healthcare benefits they are entitled to under the law,” the ruling states. Those who lacked those “apparent prerequisites” and have not yet had their coverage reinstated and backdated “more likely than not faced both financial hardships and adverse health outcomes on account of TennCare’s unlawful actions.”

Reached via email Monday, TennCare Communications Director Amy Lawrence said TennCare is “still reviewing the lengthy opinion and determining what our next steps will be,” but declined to comment further on a pending legal matter.

After its initial filing in 2020, the case was put on hold during the coronavirus pandemic, when federal law required the state to maintain health coverage for almost everyone enrolled. The case continued to pick up plaintiffs in the meantime, including a rural Middle Tennessee family who lost coverage for three years for failing to respond to crucial paperwork that they never received; TennCare had mistakenly mailed it to a horse pasture in a clerical error. The case went to trial in November 2023.

The unreliability of TennCare’s eligibility determination system has been criticized for years. In 2019, a Tennessean investigation found at least 220,000 Tennessee children were unenrolled or at risk of being cut from TennCare insurance thanks to a system that was heavily dependent on mailed paper forms.

TennCare has made attempts to improve the system, but was largely “lethargic” in its response, the opinion states.

TennCare Director Stephen Smith, who was appointed in March 2020 by Gov. Bill Lee, said eligibility errors were due to the computerized system “receiving inaccurate data, worker error, or some other systems defect,” the ruling states. The court, however, found that TennCare is ultimately responsible for errors made by both the system and its employees. TennCare could have added questions to its questionnaires to give enrollees a chance to submit information the system “struggled to recognize,” the ruling states.

TennCare does have a system in place for granting “reasonable accommodations,” but the court found it “requires revision” and its lack of staff and organization “all but guarantees that disabled enrollees slip through the cracks.”

The court has not yet ruled on the plaintiffs’ request for an injunction that would reinstate coverage for those who lost it and to bar further cuts until TennCare establishes a redetermination process that complies with the Medicaid Act, the Due Process Clause and the Americans with Disabilities Act.

Before an injunction is considered, the court requires the state and the parties representing the plaintiffs, including the Tennessee Justice Center, the National Health Law Program, National Center for Law and Economic Justice and law firm Selendy Gay PLLC, make “two earnest, in-person attempts at mediation with an agreed-upon mediator.”

The plaintiffs and the state have 30 days to select a mediator, and will then have up to four months to shape a plan to rectify TennCare’s issues, according to Tennessee Justice Center Executive Director Michele Johnson.

“This is a tremendous win for the plaintiffs and all TennCare members who have lost their vital health coverage due to TennCare’s unlawful policies and practices,” Johnson said in a Monday news release. “We are proud to have stood with the courageous families that brought the case in order to protect the health coverage of many thousands of their neighbors across the state. We will continue to fight as this case moves forward.”

The state could also choose to appeal the court’s ruling.