BILL ANALYSIS AB 1600 Page 1 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 AB 1600 Page 2 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. AB 1600 Page 3 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 AB 1600 Page 4 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 AB 1600 Page 5 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 AB 1600 Page 6 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 AB 1600 Page 7 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 AB 1600 Page 8 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 AB 1600 Page 9 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 AB 1600 Page 10 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