BILL ANALYSIS SENATE HEALTH COMMITTEE ANALYSIS Senator Elaine K. Alquist, Chair BILL NO: AB 1600 A AUTHOR: Beall B AMENDED: As Introduced HEARING DATE: June 23, 2010 1 CONSULTANT: 6 Tadeo 0 0 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, instead of limiting coverage only for severe mental illness, as in current law. Requires, 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 Diagnostic and Statistical Manual of Mental Disorders IV (DSM-IV), following publication of each subsequent volume of the DSM. CHANGES TO EXISTING LAW Existing federal law: Under the Mental Health Parity Act of 1996, requires group health plans with over 50 employees to provide parity between mental health benefits and medical/surgical benefits with respect to the application of aggregate lifetime and annual dollar limits. The law does not apply to benefits for substance abuse or chemical dependency. Continued--- STAFF ANALYSIS OF ASSEMBLY BILL 1600 (Beall) Page 2 Under the Mental Health Parity and Addiction Equity Act of 2008 (MHPA), after October 3, 2009, requires a group health insurance plan, with over 50 employees, that offers mental health coverage, to cover mental illness and substance abuse disorders on the same terms and conditions as other illnesses. Existing state law: The Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene), provides for the regulation and licensure of health plans and specialized health plans by the Department of Managed Health Care (DMHC) and health insurers by the California Department of Insurance (CDI). Requires health plans and insurers to cover various health care services, including basic health care services, such as physician services, hospital inpatient and ambulatory care services, diagnostic laboratory services, preventive health services, emergency health care services, and hospice care. Requires health plans and health insurers to provide coverage for the diagnosis and medically necessary treatment of certain severe mental illnesses of a person of any age, and of serious emotional disturbances of a child, as defined, under the same terms and conditions that are applied to other medical conditions (commonly referred to as mental health parity). For covered conditions, existing law requires health plans to eliminate any benefit limits and cost-sharing requirements that make mental health benefits less comprehensive than physical health benefits. These include higher co-payments and deductibles, and limits on the number of outpatient visits or inpatient days covered. Benefits include outpatient services, inpatient hospital services, partial hospital services, and prescription drugs, if the health plan contract includes coverage for prescription drugs. Describes severe mental illness as several conditions, including schizophrenia, schizoaffective disorder, bipolar disorder (sometimes referred to as manic depressive illness), major depressive disorders, panic disorder, obsessive-compulsive disorder, pervasive developmental disorder or autism, anorexia nervosa, and bulimia nervosa. STAFF ANALYSIS OF ASSEMBLY BILL 1600 (Beall) Page 3 Defines a child with serious emotional disturbances, as a child who has one or more mental disorders as identified in the DSM-IV, other than a primary substance use disorder or developmental disorder that results in behavior inappropriate to the child's age, according to expected developmental norms. 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. 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. This bill: Requires health plans and 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, co-payments, and individual and family deductibles. 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. 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 STAFF ANALYSIS OF ASSEMBLY BILL 1600 (Beall) Page 4 of the DSM-IV. Requires any revision to the definition of "mental illness" to be established by regulation promulgated jointly by DMHC and CDI. Allows a health plan or health insurer to provide coverage for all or part of the mental health coverage 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. Requires a health plan or health insurer to provide the mental health coverage in its entire service area and in emergency situations, as specified. Permits a health plan and health insurer to utilize case management, network providers, utilization review techniques, prior authorization, co-payments, or other share-of-cost requirements, to the extent allowed by law or regulation, in the provision of benefits required. Exempts contracts between the Department of Health Care Services and a health plan for enrolled Medi-Cal beneficiaries. Exempts accident-only, specified disease, hospital indemnity, Medicare supplement, dental-only, or vision-only insurance policies. 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. FISCAL IMPACT The Assembly Appropriations Committee analysis of AB 1600 cites the California Health Benefits Review Program (CHBRP) report which estimates annual costs to the Healthy Families program of $691,000 (33 percent General Fund). BACKGROUND AND DISCUSSION STAFF ANALYSIS OF ASSEMBLY BILL 1600 (Beall) Page 5 According to the author, AB 1600 is intended to 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. The author argues 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. The author states that an alarming number of mentally ill persons end up incarcerated because they lack access to appropriate care. The author further states 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 also wind up in hospital emergency rooms and end up receiving county services. The author contends that the 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. The federal Mental Health Parity and Addiction Equity Act of 2008 (MHPA) 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 issued an interim final rule and accompanying guidelines governing implementation of MHPA on February 2, 2010, that included a 90-day public comment period that closed May 3, 2010. The MHPA does not require group health plans to provide mental health coverage. However, if a plan does offer mental STAFF ANALYSIS OF ASSEMBLY BILL 1600 (Beall) Page 6 health coverage, the MHPA 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, equity 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 AB 1600 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 Advocates for Human Potential (AHP), Inc., a research and consulting firm 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 health care organizations that provide substance use disorder or mental health benefits to group health plans. Mental health parity in California Since 1999, health plans and health insurers have been required to provide coverage for the diagnosis and medically necessary treatment of certain severe mental illnesses 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 severe mental illnesses: 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. Mental health STAFF ANALYSIS OF ASSEMBLY BILL 1600 (Beall) Page 7 parity requires benefits to include outpatient services, inpatient hospital services, partial hospital services, and prescription drugs, if the health plan contract includes coverage for prescription drugs. In 2003, DMHC promulgated mental health parity regulations, that require health plans to provide, (in addition to all basic and other health care services required by Knox-Keene), at a minimum, coverage for crisis intervention and stabilization; and psychiatric inpatient services, including voluntary inpatient services and services from licensed mental health providers, including but not limited to psychiatrists and psychologists. California Health Benefits Review Program AB 1996 (Thomson), Chapter 795, Statutes of 2002, requests the University of California to assess bills proposing a mandated benefit or service, and prepare a written analysis with relevant data on the medical, economic, and public health impact of the proposed mandate. The program was extended for four additional years by SB 1704 (Kuehl), Chapter 684, Statutes of 2006. In its analysis of this bill, CHBRP reports: 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 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: Consumers' average out-of-pocket costs for MH/SA services decrease; There is a small decrease in health plans' expenditures per user of MH/SA services; Rates of growth in the use and cost of MH/SA services decrease; 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 STAFF ANALYSIS OF ASSEMBLY BILL 1600 (Beall) Page 8 firms (50 to100 employees) who have poor mental health or low incomes; and, 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. Utilization, Cost, and Coverage Impacts. Roughly 16 million insured individuals would be subject to this bill's mandate. CHBRP points out that approximately 66 percent of individuals in policies subject to this bill currently have parity coverage for non-SMI disorders, 32 percent have less than full parity coverage, and 1 percent have no coverage; 55 percent of insured Californians have parity coverage for substance use disorders, 35 percent have less than full parity coverage, and 10 percent have no coverage. 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 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, would increase by about $44 million or 0.06 percent. 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 percent. Total premiums for individually purchased insurance would increase by about $29 million, or 0.48 percent. The increase in individual premium costs would be partly offset STAFF ANALYSIS OF ASSEMBLY BILL 1600 (Beall) Page 9 by a decline in individual out-of-pocket costs of about $18 million, or 0.31 percent. Enrollee contributions toward premiums for publicly funded group insurance would increase by about $8 million, or 0.06 percent. 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 percent. 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 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. Diagnostic and Statistical Manual of Mental Disorders (DSM) The Diagnostic and Statistical Manual of Mental Disorders (DSM), first published in 1952, is published by the American Psychiatric Association, and is the standard classification of mental disorders used by mental health professionals in the United States. There have been four major revisions. STAFF ANALYSIS OF ASSEMBLY BILL 1600 (Beall) Page 10 The DSM contains a listing of psychiatric disorders and their corresponding diagnostic codes. Each disorder included is accompanied by a set of diagnostic criteria and text containing information about the disorder, such as associated features, prevalence, familial patterns, age, culture, gender-specific features, and differential diagnosis. No information about treatment or presumed etiology is included. The DSM-IV, published in 1994, is the last major revision of the DSM, the next major revision of the DSM, DSM-V, will be published after 2011. Prior legislation 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. 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. The hearing for this bill in the Senate Business, Finance and Banking Committee was cancelled at the request of the author. 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 other medical condition. This bill failed in the Assembly Health Committee. Arguments in support The California Mental Health Directors Association (CMHDA) and the California State Association of Counties (CSAC) state that numerous studies have shown that mental illness is not only treatable, but that appropriate and timely STAFF ANALYSIS OF ASSEMBLY BILL 1600 (Beall) Page 11 treatment reduces costly hospitalizations, incarcerations, homelessness, and most importantly, human suffering. CMHDA and CSAC add that a large percentage of mental health clients also have co-occurring substance abuse disorders and that treating one without treating the other is not cost-effective. Individuals who do not receive appropriate treatment are more likely to self-medicate with drugs and/or alcohol. CMHDA and CSAC contend that AB 1600 would help ensure that private health plans treat individuals with co-occurring disorders in a comprehensive manner, and argue that many health plans fall short of meeting their obligations under California's mental health parity. California Psychological Association states 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. National Alliance on Mental Illness, California states that AB 1600 would fill an important gap in coverage, and adds that families cannot afford the financial and emotional burdens caused by mental illness. Arguments in opposition The California Association of Health Underwriters (CAHU) states that AB 1600 would add a mandate for expanded mental health coverage, and adds that it has a long history of opposition to additional health coverage mandates. CAHU argues that this bill would be counterproductive to making insurance more affordable for Californians. PRIOR ACTIONS Assembly Health: 13-6 Assembly Appropriations:12-5 Assembly Floor: 50-27 POSITIONS Support: American Federation of State, County and Municipal Employees, AFL-CIO California Academy of Family Physicians California Association of Alcohol and Drug Program STAFF ANALYSIS OF ASSEMBLY BILL 1600 (Beall) Page 12 Executives, Inc California Medical Association California Mental Health Directors Association California School Employees Association, AFL-CIO California State Association of Counties California Psychological Association County Alcohol and Drug Program Administrators Association of California Drug Policy Alliance National Alliance on Mental Illness, California National Association of Social Workers - California Chapter Oppose: Association of California Life & Health Insurance Companies California Association of Health Plans California Association of Health Underwriters California Association of Joint Powers Authorities (CAJPA) California Chamber of Commerce (CalChamber) Health Net -- END --