BILL ANALYSIS AB 244 Page 1 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, AB 244 Page 2 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 Page 3 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 AB 244 Page 4 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 AB 244 Page 5 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 AB 244 Page 6 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 AB 244 Page 7 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 AB 244 Page 8 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 AB 244 Page 9 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