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Firms Erred in Special-Education Billing, E.D. Says

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Washington--An insurance-billing firm and an educational cooperative in southern Illinois may have violated federal law protecting the disabled when they asked parents to allow the organizations to bill private insurers for some of their children's special-education costs, the Education Department's office for civil rights has determined.

The finding--written by Sue Gamm, the office's director of elementary and secondary programs--comes in a case involving Flossmoor-tames, a nonprofit company that coordinates such billing arrangements, and the South Metropolitan Association for Low-Incidence Handicapped, an educational cooperative formed to provide special-education services for children with relatively rare handicaps.

But experts said last week that the finding may have implications for increasing numbers of school districts looking to bill third parties for special-education costs. (See Education Week, Jan. 24, 1990.)

While both organizations are currently complying with the law, the May 30 letter from Ms. Gamm said, that was not always the case.

The federal civil-rights official said both organizations in the past had failed to adequately notify parents of the potential financial risks involved in allowing their insurers to be billed for their children's special-education services.

Consent Agreement Reached

An estimated 73 percent of the participants in health-care plans have "lifetime caps" on their policies, according to the letter. The vast majority of those policyholders are limited to no more than $1 million in the amount of claims they may file with their insurer over the course of a lifetime.

Parents who use up some of that coverage for special-education services run the risk one day of not having enough insurance to pay for other medical crises.

In addition, Ms. Gamm noted, many health-insurance policies also limit the amount of mental-health services they will cover.

And parents who use their insurance to pay for psychologically related special-education services may one day be denied coverage if they switch insurers, according to the letter.

Ms. Gamm also said that South Metropolitan, in literature describing third-party billing to parents, did not adequately explain that public schools were required to provide handicapped children with special services, regardless of whether their parents paid for them.

As a result, the federal civil-rights office concluded, the entities violated Section 504 of the Rehabilitation Act of 1975. The regulations for that law require public schools to provide a free, appropriate education to all handicapped children.

Both organizations have denied the charges.

However, as part of a formal consent agreement worked out with the federal agency, the two organizations have pledged to modify their practices to ensure that participating parents are aware of their rights and any risks involved in third-party billing arrangements.

"We're really happy with the ruling," said Robert Van Dyke, executive director of South Metropolitan. "This has been a real cloudy issue, and their finding will help clarify the process we need to use."

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