BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 244
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          Date of Hearing:   April 28, 2009

                            ASSEMBLY COMMITTEE ON HEALTH
                                  Dave Jones, Chair
                  AB 244 (Beall) - As Introduced:  February 10, 2009
           
          SUBJECT  :   Health care coverage: mental health services.

           SUMMARY  :   Requires health plans and health insurers to cover  
          the diagnosis and medically necessary treatment of a mental  
          illness, as defined, of a person of any age, including a child,  
          and not limited to coverage for severe mental illness (SMI) as  
          in existing law.  Specifically,  this bill  :  

          1)Requires health plans and those health insurance policies that  
            provide coverage for hospital, medical, or surgical expenses,  
            to provide coverage for the diagnosis and medically necessary  
            treatment of a mental illness of a person of any age,  
            including a child, under the same terms and conditions applied  
            to other medical conditions, including but not limited to  
            maximum lifetime benefits, copayments, and individual and  
            family deductibles.  Existing law only requires such coverage  
            for SMIs, as defined.

          2)Defines mental illness as a mental disorder classified in the  
            Diagnostic and Statistical Manual IV (DSM IV) and includes  
            coverage for substance abuse.  Requires the benefits provided  
            under this bill to include outpatient services; inpatient  
            hospital services; partial hospital services; and,  
            prescription drugs, if the plan contract already includes  
            coverage for prescription drugs.

          3)Allows a health plan or health insurer to provide coverage for  
            all or part of the mental health coverage required by this  
            bill through a specialized health care service plan or mental  
            health plan and prohibits the health plan or health insurer  
            from being required to obtain an additional or specialized  
            license for this purpose.

          4)Requires a health plan or health insurer to provide the mental  
            health coverage required by this bill in its entire service  
            area and in emergency situations, as specified.

          5)Permits a health plan and health insurer to utilize case  
            management, network providers, utilization review techniques,  








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            prior authorization, copayments, or other share-of-cost  
            requirements, to the extent allowed by law or regulation, in  
            the provision of benefits required by this bill.

          6)Exempts contracts between the Department of Health Care  
            Services and a health plan for enrolled Medi-Cal beneficiaries  
            from the provisions of this bill.

          7)Exempts accident-only, specified disease, hospital indemnity,  
            Medicare supplement, dental-only, or vision-only insurance  
            policies from the provisions of this bill. 

          8)Prohibits a health care benefit plan, contract, or health  
            insurance policy with the Board of Administration of the  
            Public Employees' Retirement System (CalPERS) from applying to  
            this bill unless the board elects to purchase a plan,  
            contract, or policy that provides mental health benefits  
            mandated under this bill.

           EXISTING LAW  :

          1)Establishes the Knox-Keene Health Care Service Plan Act of  
            1975 (Knox-Keene) to regulate and license health plans and  
            specialized health plans by the Department of Managed Health  
            Care (DMHC) and provides for the regulation of health insurers  
            by the California Department of Insurance (CDI).

          2)Requires every health plan contract or health insurance policy  
            issued, amended, or renewed on or after July 1, 2000, that  
            provides hospital, medical, or surgical coverage to provide  
            coverage for the diagnosis and medically necessary treatment  
            of SMIs of a person of any age, and of serious emotional  
            disturbances (SED) of a child, under the same terms and  
            conditions applied to other medical conditions, as specified.

          3)Requires mental health benefits provided pursuant to #3) above  
            to include outpatient services, inpatient hospital services,  
            partial hospital services, and prescription drugs if the plan  
            contract includes coverage for prescription drugs.

          4)Defines a specialized plan contract as a contract for health  
            care services in a single specialized area of health care,  
            including dental care, for subscribers or enrollees, or which  
            pays for or reimburses any part of the cost for those  
            services, in return for a prepaid or periodic charge, paid by  








                                                                  AB 244
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            or on behalf of subscribers or enrollees.

          5)Defines specialized health insurance policy as a policy of  
            health insurance for covered benefits in a single specialized  
            area of health care, including dental-only, vision-only, and  
            behavioral health-only policies.  There is no requirement for  
            health insurers subject to regulation by CDI to cover  
            medically necessary basic services or any specific minimum  
            basic benefits.  

           FISCAL EFFECT  :   This bill has not yet been analyzed by a fiscal  
          committee.

           COMMENTS  :   

           1)PURPOSE OF THIS BILL  .  The author states that this bill  
            corrects a serious discrimination problem that bankrupts  
            families and causes enormous taxpayer expense.  The author  
            notes that many health plans do not provide coverage for  
            mental disorders and those that do, impose stricter limits on  
            mental health care than on other medical care.  The author  
            asserts that a typical plan might cap lifetime mental health  
            treatment at $50,000 as opposed to $1 million for other  
            services.  Individuals struggling with mental illness quickly  
            deplete limited coverage and personal savings and become  
            dependent on taxpayer-supported benefits.  This bill is  
            intended to end the discrimination against patients with  
            mental disorders and substance abuse addictions by requiring  
            treatment and coverage of these illnesses that is equitable to  
            coverage provided for other medical illnesses.

           2)MENTAL HEALTH PARITY IN CALIFORNIA .  In 1999, the Legislature  
            passed and the Governor signed AB 88 (Thomson), Chapter 534,  
            Statutes of 1999, requiring health plans and health insurers  
            to provide coverage for the diagnosis and medically necessary  
            treatment of certain SMIs of a person of any age, and of SEDs  
            of a child, as defined, under the same terms and conditions  
            applied to other medical conditions.  Nine specific diagnoses  
            are considered SMI: schizophrenia; schizoaffective disorder;  
            bipolar disorder; major depressive disorder; panic disorder;  
            obsessive compulsive disorder; pervasive developmental  
            disorders or autism; anorexia nervosa; and, bulimia nervosa.   
            For covered conditions, health plans are required to eliminate  
            benefit limits and share-of-cost requirements that have  
            traditionally rendered mental health benefits less  








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            comprehensive than physical health coverage.  Current law  
            requires mental health parity (MHP) benefits to include  
            outpatient services, inpatient hospital services, partial  
            hospital services, and prescription drugs, if the health plan  
            contract includes coverage for prescription drugs.  DMHC  
            promulgated MHP regulations that took effect in 2003 requiring  
            MHP to provide at least, in addition to all basic and other  
            health care services required by Knox-Keene, coverage for  
            crisis intervention and stabilization, psychiatric inpatient  
            services, including voluntary inpatient services, and services  
            from licensed mental health providers, including but not  
            limited to psychiatrists and psychologists.  Since SMI  
            services are already covered under AB 88, this bill focuses on  
            the incremental effect of extending parity to non-SMI and  
            substance abuse disorders.

           3)MENTAL HEALTH PARITY AND ADDICTION EQUITY ACT  .  The Mental  
            Health Parity and Addiction Equity Act of 2008 (MHPA),  
            enacted in October 2008, requires group health insurance  
            plans to cover mental illness and substance abuse disorders  
            on the same terms and conditions as other illnesses and help  
            to end discrimination against those who seek treatment for  
            mental illness.  Pursuant to MHPA, the federal Departments of  
            Labor, Health and Human Services, and the Treasury are  
            required to issue regulations within one year.  MHPA does not  
            mandate group health plans provide any mental health  
            coverage. However, if a plan does offer mental health  
            coverage, then it requires equity in financial requirements,  
            such as deductibles, co-payments, coinsurance, and  
            out-of-pocket expenses; equity in treatment limits, such as  
            caps on the frequency or number of visits, limits on days of  
            coverage, or other similar limits on the scope and duration  
            of treatment; and, equality in out-of-network coverage.  MHPA  
            applies to all group health plans for plan years beginning  
            after October 3, 2009, and exempts small firms of 50 or fewer  
            employees.  Although this bill defines mental illness as  
            those disorders identified in the DSM-IV, the MHPA does not  
            specify a definition for mental health and substance abuse  
            (MH/SA) disorders.


           4)CALIFORNIA HEALTH BENEFITS REVIEW PROGRAM  .  AB 1996  
            (Thomson), Chapter 795, Statutes of 2002, requests the  
            University of California to assess legislation proposing a  
            mandated benefit or service, and prepare a written analysis  








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            with relevant data on the public health, medical and economic  
            impact of proposed health plan and health insurance benefit  
            mandate legislation.  CHBRP was created in response to AB  
            1996 and extended for four additional years in SB 1704  
            (Kuehl), Chapter 684, Statutes of 2006.  In its analysis of  
            AB 244, CHBRP noted that the impacts described are based on  
            changes in coverage attributable to AB 244 after the  
            implementation of the federal MHPA.  CHBRP reported:


              a)   Medical Effectiveness  .  The literature on all treatments  
               for MH/SA conditions covered by this bill, more than 400  
               diagnoses, could not be reviewed during the 60 days  
               allotted for completion of CHBRP reports.  Instead, the  
               effectiveness review for this bill summarizes the  
               literature on the effects of parity in coverage for MH/SA  
               services.  The findings from studies of parity in coverage  
               for MH/SA services suggest that when parity is implemented  
               in combination with intensive management of MH/SA services  
               and is provided to individuals who already have some level  
               of coverage for these services:

               i)     Consumers' average out-of-pocket costs for MH/SA  
                 services decrease;
               ii)    There is a small decrease in health plans'  
                 expenditures per user of MH/SA services; 
               iii)   Rates of growth in the use and cost of MH/SA  
                 services decrease;
               iv)    Inpatient admissions for MH/SA care per 1,000  
                 members decrease;
               v)     Utilization of MH/SA services increases slightly  
                 among individuals with SA disorders, individuals with  
                 moderate levels of symptoms of mood and anxiety  
                 disorders, and persons employed by moderately small firms  
                 (50-100 employees) who have poor mental health or low  
                 incomes; and,
               vi)    The effect on outpatient MH/SA visits depends on  
                 whether individuals were enrolled in a fee-for-service  
                 plan or a health maintenance organization or HMO prior to  
                 the implementation of parity.

              b)   Utilization, Cost and Coverage Impacts  .  According to  
               CHBRP, roughly 18 million insured individuals would be  
               subject to this bill's mandate.  CHBRP also points out that  
               approximately 64% of individuals in policies subject to  








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               this bill currently have parity coverage for non-SMI  
               disorders and 1% lack coverage; 64% of insured Californians  
               have parity coverage for substance use disorders and 6%  
               have none.  CHBRP estimates that, among individuals in  
               policies affected by this bill, utilization would increase  
               by 9.1 outpatient mental health visits and 1.8 outpatient  
               substance abuse visits per 1,000 members per year.   
               Increased utilization would be the result of elimination of  
               benefit limits, and a reduction in cost sharing because  
               coinsurance rates are currently often higher for MH/SA or  
               behavioral health services than for other health care.   
               Utilization would also increase among insured individuals  
               who previously had no coverage for conditions other than  
               the SMI diagnoses covered under AB 88.  However, CHBRP  
               notes that more stringent management of care would partly  
               offset increases in utilization due to more generous  
               coverage.  

             CHBRP also indicates that, as a result of this bill, total  
               health care expenditures, including total premiums and  
               out-of-pocket expenditures, will increase by $34.6 million  
               or 0.04%.  Slightly more than half of the total increase in  
               health care expenditures is due to services for non-SMI  
               disorders ($24.2 million) and the remainder ($10.4 million)  
               is due to treatment of substance abuse disorders.  This  
               bill is estimated to increase premiums by about $46.4  
               million.  Total premiums paid by all private employers in  
               California would increase by about $21.1 million per year,  
               or 0.04%.  Total premiums for individually purchased  
               insurance would increase by about $22.5 million, or 0.38%.   
               The increase in individual premium costs would be partly  
               offset by a decline in individual out-of-pocket costs of  
               about $12 million (-0.19%).  Enrollee contributions toward  
               premiums for group or public insurance would increase by  
               about $4.7 million, or 0.04%.  State premium expenditures  
               for Med-Cal, including Access for Infants and Mothers and  
               the Major Risk Medical Insurance Program, would decrease by  
               about $2 million (-0.05%), while state premiums for the  
               Healthy Families Program would increase by $104,000  
               (0.02%).  The impact of this bill on per member, per month  
               premiums varies widely across all market segments, with  
               negligible premium increases or even decreases for public  
               programs, modest increases in the DMHC-regulated markets,  
               and larger increases in the CDI-regulated markets.  CHBRP  
               also found that no measurable change in the number of  








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               uninsured is projected to occur as a result of this bill  
               because, on average, premium increases are estimated to  
               increase by less than 1%.

              c)   Public Health Impact  .  The scope of potential outcomes  
               related to MH/SA treatment includes reduced suicides,  
               reduced symptomatic distress, improved quality of life,  
               reduced pregnancy-related complications, reduced injuries,  
               improved medical outcomes, and improved social outcomes,  
               such as a decrease in criminal activity.  Mental and  
               substance abuse disorders are a substantial cause of  
               mortality and disability in the U.S.  Substance abuse, in  
               particular, often results in premature death.  Currently  
               there is no evidence that parity laws like this bill result  
               in a reduction of premature death.  There are sizeable  
               economic costs associated with mental and substance abuse  
               disorders relating to reduced productivity, unemployment,  
               absenteeism, and early retirement; however, the impact of  
               this bill on economic costs cannot be estimated.  Finally,  
               CHBRP found that a potential benefit of this bill is that  
               it would eliminate an insurance coverage disparity in the  
               individual and small-group insurance market between  
               psychological and medical conditions and could therefore  
               help to destigmatize MH/SA treatment.

           5)SUPPORT  .  Disability Rights California states in support of  
            this bill that defining mental illness is necessary to ensure  
            that MHP requirements apply to any diagnosed SMI and this bill  
            will prevent health plans and health insurers from adopting  
            narrow and restrictive definitions of mental illness.   
            Psychiatric Solutions, Inc., the nation's largest provider of  
            acute psychiatric services, writes in support that this bill  
            will make California a full parity state and eliminate the  
            unequal and unfair status that MH/SA treatment has within the  
            treatment of other health conditions.  Drug Policy Alliance  
            notes that addiction and mental illness, which are often  
            co-occurring, are the only conditions, which left untreated,  
            often lead to the incarceration of the sufferer and the parity  
            requirement in this bill will reduce costs to the criminal  
            justice system.  Health Access California points out that  
            children who have had coverage for autism and other conditions  
            that are not covered for adults are now beginning to age out  
            of their current coverage and their families are discovering  
            mental health coverage is lacking for their young adult  
            children.  Health Access California contends that this bill  








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            will have a positive fiscal impact on the health care system  
            through ensuring earlier intervention to prevent, mitigate, or  
            reverse the need for care.

           6)OPPOSITION .  DMHC is opposed to this bill, stating that  
            although the intent of this bill has merit, its implementation  
            would be too costly and complicated to justify its purpose.   
            Additionally, DMHC asserts that, in an effort to pay for the  
            newly broadened coverage required by this bill, health plans  
            would likely further increase the monthly premiums of  
            enrollees, which may lead more individuals to drop existing  
            coverage and further increase the uninsured population.  The  
            Association of California Life and Health Insurance Companies  
            and the California Association of Health Plans also object to  
            this bill, contending that it is an expensive and massive  
            expansion of state and federal laws that will lead to large  
            premium increases and related drops in coverage.  The  
            California Association of Joint Powers Authorities opposes  
            this bill because it provides an unfair advantage to CalPERS  
            by exempting it from complying with the same coverage  
            expansion and costs that are being forced upon other  
            government agencies.  

           7)PRIOR LEGISLATION  .

             a)   AB 1887 (Beall) of 2008 and AB 423 (Beall) of 2007, both  
               of which were nearly identical to this bill, were vetoed by  
               Governor Schwarzenegger.  In his veto messages the Governor  
               shared the author's intent to improve access to MH/SA  
               services but remained concerned that mandates are a  
               significant driver of cost and mean some individuals may  
               lose their coverage and not receive health care at all.

             b)   SB 572 (Perata) of 2005 would have required a health  
               plan and a health insurer to provide coverage for the  
               diagnosis and medically necessary treatment of mental  
               illness.  SB 572 was referred to the Senate Business,  
               Finance and Banking Committee but the hearing was cancelled  
               at the request of the author.

             c)   SB 1192 (Chesbro) of 2004 would have required health  
               plans and health insurers to provide coverage for the  
               medically necessary treatment of substance-related  
               disorders, excluding caffeine and nicotine related  
               disorders, on the same basis coverage is provided for any  








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               other medical condition.  SB 1192 failed in the Assembly  
               Health Committee.

           8)SUGGESTED TECHNICAL AMENDMENT  .  The author may wish to amend  
            this bill to exclude specialized health plans under the Knox  
            Keene Act, except those that provide behavioral health  
            services, from the mandate in this bill.

           9)POLICY COMMENTS  .  

             a)   This bill exempts coverage under CalPERS from the  
               proposed mandate, unless the CalPERS board elects to  
               purchase such coverage.  What is the rationale for  
               excluding state and local public employees from access to  
               MHP?   

             b)   This bill is substantially similar to AB 1887 of 2008  
               and AB 423 of 2007, both of which were vetoed by Governor  
               Schwarzenegger.  The author may wish to address the extent  
               to which he believes that this bill in any way addresses  
               the Governor's concerns.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          California Society for Clinical Social Work
          California Medical Association
          Disability Rights California
          Drug Policy Alliance
          Health Access California
          Psychiatric Solutions, Inc.

           Opposition 
           
          Association of California Life and Health Insurance Companies 
          California Association of Health Plans
          California Association of Joint Powers Authorities
          California Chamber of Commerce
          Department of Managed Health Care
          Health Net
           
          Analysis Prepared by  :    Cassie Rafanan / HEALTH / (916)  
          319-2097