BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 1600
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          Date of Hearing:   April 6, 2010

                            ASSEMBLY COMMITTEE ON HEALTH
                              William W. Monning, Chair
                  AB 1600 (Beall) - As Introduced:  January 4, 2010
           
          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)Requires, following publication of each subsequent volume of  
            the DSM-IV, the definition of "mental illness" to be subject  
            to revision to conform to, in whole or in part, the list of  
            mental disorders defined in the then-current volume of the  
            DSM-IV.

          4)Requires any revision to the definition of "mental illness"  
            pursuant to 3) above to be established by regulation  
            promulgated jointly by the Department of Managed Health Care  
            (DMHC) and the Department of Insurance (CDI).

          5)Allows a health plan or health insurer to provide coverage for  
            all or part of the mental health coverage required by this  








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            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.

          6)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.

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

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

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

          10)Prohibits a health care benefit plan, contract, or health  
            insurance policy with the Board of Administration of the  
            Public Employees' Retirement System 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 DMHC and provides for the  
            regulation of health insurers by 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 of a child, under the same terms and conditions  
            applied to other medical conditions, as specified.









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          3)Requires mental health benefits provided pursuant to 2) 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  
            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 current federal law prohibits health plans from  
            setting annual or lifetime dollar limits on an enrollee's  
            mental health benefits that are lower than any such limits on  
            medical care.  According to the author, an alarming number of  
            mentally ill persons end up incarcerated because they lack  
            access to appropriate care.  The author maintains that  
            inadequate access to mental health services forces law  
            enforcement officers to serve as the mental health providers  
            of last resort, and this misuse of the corrections system  
            costs state taxpayers roughly $1.8 billion per year.  The  
            author adds that an alarming number of these individuals wind  
            up in hospital emergency rooms and end up receiving services  
            from the counties.  The author asserts that this shift by the  
            private insurance market over the last 20 years to exclude  
            entitled covered enrollees by cherry picking out "mental  
            illness" has been borne financially by the state and counties  
            to the benefit of private insurers.  This bill is intended to  








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            end the discrimination against patients with biological brain  
            disorders, such as schizophrenia, depression, and manic  
            depression, as well as posttraumatic disorders suffered by  
            victims of crime, abuse or disaster, 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  
            serious emotional disturbances 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 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  








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            Labor, Health and Human Services, and the Treasury issued an  
            interim final rule and accompanying guidelines governing  
            implementation of MHPA on February 2, 2010, that includes a  
            90-day public comment period that closes May 3, 2010.  The  
            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.  The  
            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.  According to a March 2010 report by  
            AHP Healthcare Solutions that provides a preliminary  
            operational analysis of the MHPA interim final rule, the MHPA  
            is expected to affect approximately 111 million participants  
            in 446,400 federally-regulated group health plans; 29 million  
            participants in approximately 20,300 state and local  
            government employer group health plans; 460 health insurers  
            that provide substance use disorder or mental health benefits  
            in the group health insurance market; and, 120 managed  
            behavioral healthcare organizations that provide substance  
            use disorder or mental health benefits to group health plans.  
              


           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  
            with relevant data on the public health, medical, and  
            economic impact of proposed health plan and health insurance  
            benefit mandate legislation.  The California Health Benefits  
            Review Program (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 this bill,  
            CHBRP reports:


              a)   Medical Effectiveness  .  The literature on all treatments  








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               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 a range of techniques for 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)    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,

               v)     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 16 million insured individuals would be  
               subject to this bill's mandate.  CHBRP also points out that  
               approximately 66% of individuals in policies subject to  
               this bill currently have parity coverage for non-SMI  
               disorders and 1% lack coverage; 55% of insured Californians  
               have parity coverage for substance use disorders and 10%  
               have none.  CHBRP estimates that, among individuals in  
               policies affected by this bill, utilization would increase  
               by 10.5 outpatient mental health visits and 3.1 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  








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               coinsurance rates are often higher for non-SMI MH/SA  
               treatment 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 existing state law.  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 about $44  
               million or 0.06%.  More than half of the total increase in  
               health care expenditures is due to services for non-SMI  
               disorders ($26.6 million) and the remainder ($18.3 million)  
               is due to treatment of substance abuse disorders.  This  
               bill is estimated to increase premiums by about $63  
               million.  Total premium contributions from private  
               employers who purchase group insurance are estimated to  
               increase by $25 million per year, or 0.06%.  Total premiums  
               for individually purchased insurance would increase by  
               about $29 million, or 0.48%.  The increase in individual  
               premium costs would be partly offset by a decline in  
               individual out-of-pocket costs of about $18 million  
               (-0.31%).  Enrollee contributions toward premiums for  
               publicly funded group insurance would increase by about $8  
               million, or 0.06%.  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 among the  
               DMHC-regulated health plan contracts and CDI-regulated  
               large group health insurance policies, and larger increases  
               in the CDI-regulated small-group and individual policies.   
               CHBRP also found that no measurable change in the number of  
               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  








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               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 lost productivity.  Although it is  
               likely that this bill would reduce lost productivity for  
               those who are newly covered for MH/SA benefits, the total  
               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 a health insurance disparity in  
               the individual and small-group insurance market between  
               psychological and non-MH/SA health conditions and could  
               therefore help to destigmatize MH/SA treatment.

           5)SUPPORT  .  The California Psychiatric Association (CPA) writes  
            in support of this bill that it would require coverage of the  
            full range of mental disorders and provide for their treatment  
            when medically necessary on the same terms and conditions as  
            other health conditions.  CPA notes that mental disorders,  
            when untreated, cause significant suffering, disability, and  
            lost productivity and, unlike most other health conditions,  
            may also result in arrest, incarceration, and homelessness in  
            addition to costly hospitalizations and all too often death.   
            CPA contends that the costs of increasing coverage to provide  
            full parity for mental disorders is negligible and likely  
            outweighed significantly by the costs of non-treatment.  The  
            National Alliance on Mental Illness (NAMI) adds in support  
            that mental illnesses are known to be biologically based brain  
            disorders and it is just, equitable, and practical to provide  
            insurance coverage equal to that for other physical illnesses.  
             NAMI states that people with mental illnesses or their  
            families pay premiums so parity in insurance is also just and  
            equitable.  Crestwood Behavioral Health, Inc. writes in  
            support that this bill will end discrimination by health plans  
            and insurers against individuals with mental illness and  
            eliminate an enormous taxpayer expense that is generated when  
            individuals struggling with mental illness quickly deplete  
            limited coverage and become dependent on taxpayer-supported  
            benefits.  The California Academy of Family Physicians adds  
            that by supporting this bill, not only will Californians have  
            greater access to mental health services, California as a  
            state will save money and lives through preventive medical  
            care.

          6)OPPOSITION  .  Health Net objects to this bill because it  








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            greatly expands the types of mental health services that  
            health plans and insurers would be required to cover and  
            employers would have no choice but to purchase.  Health Net  
            states that while some employers might choose to purchase  
            extensive mental health coverage, it would be rare for a  
            benefit plan to include all items in the DSM IV, such as  
            caffeine addiction.  Health Net argues that coverage mandates,  
            such as coverage for the non-serious mental health conditions  
            required under this bill, take away freedom for employers to  
            decide how much behavioral health coverage they want to buy.   
            Opponents contend that, in this era of escalating medical  
            costs and significant premium increases, mandating additional  
            new benefits into all health insurance policies, while  
            well-intended, is counterproductive to their efforts to make  
            health insurance more affordable and available to all  
            Californians.  The California Association of Joint Powers  
            Authorities adds in opposition that this bill imposes an  
            unreimbursed mandate on local public entities for costs  
            associated with the expansion and utilization of coverage  
            benefits.

           7)PRIOR LEGISLATION  .

             a)   AB 244 (Beall) of 2009, AB 1887 (Beall) of 2008, and AB  
               423 (Beall) of 2007, all of which were substantively  
               identical to this bill, were vetoed by Governor  
               Schwarzenegger.  In his veto messages the Governor stated  
               that the addition of a new mandate, especially one of this  
               magnitude, will only serve to significantly increase the  
               overall cost of health care and remained concerned about  
               the rising costs of health care and the need to weigh the  
               potential benefits of a mandate with the comprehensive  
               costs to the entire delivery system.

             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  
                                                                  







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               disorders, on the same basis coverage is provided for any  
               other medical condition.  SB 1192 failed in the Assembly  
               Health Committee.

           8)POLICY COMMENT  .  Given the pending comment period for the  
            recently issued interim regulations governing implementation  
            of the MHPA and the recent passage of health reform at the  
            federal level, the author may wish to address the extent to  
            which this bill is affected by these developments.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          American Federation of State, County and Municipal Employees,  
          AFL-CIO
          California Academy of Family Physicians
          California Academy of Physician Assistants
          California Psychiatric Association
          County Alcohol and Drug Program Administrators Association of  
          California
          Crestwood Behavioral Health, Inc.
          National Alliance on Mental Illness California
          San Bernardino County Board of Supervisors

           Opposition 
           
          Anthem Blue Cross
          Association of California Life and Health Insurance Companies
          California Association of Health Underwriters 
          California Association of Joint Powers Authorities
          Citizens Commission on Human Rights
          Health Net
           

          Analysis Prepared by  :    Cassie Rafanan / HEALTH / (916)  
          319-2097