BILL ANALYSIS                                                                                                                                                                                                    


          |SENATE RULES COMMITTEE            |                  SB 1169|
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                                 THIRD READING

          Bill No:  SB 1169
          Author:   Lowenthal (D)
          Amended:  5/28/10
          Vote:     21

           SENATE HEALTH COMMITTEE  :  7-2, 4/14/10
          AYES:  Alquist, Aanestad, Cedillo, Leno, Negrete McLeod,  
            Pavley, Romero
          NOES:  Strickland, Cox

           SENATE APPROPRIATIONS COMMITTEE  :  7-3, 5/27/10
          AYES:  Kehoe, Alquist, Corbett, Leno, Price, Wolk, Yee
          NOES:  Denham, Walters, Wyland
          NO VOTE RECORDED:  Cox

           SUBJECT  :    Health care coverage:  claims: prior  
          authorization:  mental 

            SOURCE  :      California Coalition for Mental Health
                      California Psychiatric Association 

           DIGEST  :    This bill requires health care service plans and  
          health insurers to assign a tracking number to a claim or a  
          provider request for authorization, provide acknowledgment  
          of its receipt, and use the tracking number in subsequent  
          communications.  The bill also clarifies that any form of  
          treatment or benefit limitation for mental health care  
          services be applied under the same terms as other benefits  
          under the plan or policy.


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           ANALYSIS  :    Existing federal law requires health plans and  
          health insurers that offer mental health coverage to cover  
          mental illness and substance abuse disorders on the same  
          terms and conditions as other medical conditions. 

           Existing state law  

          1. Provides for the regulation of health plans by the  
             Department of Managed Health Care (DMHC) and regulation  
             of health insurers by the California Department of  
             Insurance (CDI).

          2. Requires full service health plans licensed by DMHC to  
             provide basic health care services, as defined.

          3. Requires health plans and health insurers to comply with  
             certain administrative requirements, premium  
             requirements, patient protection requirements, fiduciary  
             and financial requirements, provider access  
             requirements, and to provide certain mandated benefits  
             to enrollees.

          4. Requires health plans and health insurers to reimburse  
             uncontested claims within 30 or 45 working days and  
             specifies that a claim is contested if the health plan  
             or health insurer has not received a completed claim and  
             all necessary information to determine payer liability.

          5. Requires health insurers to acknowledge receipt of a  
             claim within fifteen days. 

          6. Requires health plans and health insurers to provide  
             coverage for the diagnosis and medically necessary  
             treatment of certain severe mental illnesses (SMI), as  
             defined, and of serious emotional disturbances (SED) of  
             a child, as defined, under the same terms and conditions  
             applied to other medical conditions.

          This bill:

          1. Requires health care service plans and health insurers  
             to assign a tracking number to a claim or provider  
             request for authorization and provide electronic or  


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             written acknowledgment of its receipt to the provider.   
             In the case of a verbal request, a verbal  
             acknowledgement may be provided. 

          2. Requires the receipt of additional information that may  
             be needed to determine payer liability for a claim or  
             portion thereof to be acknowledged by the health plan  
             and health insurer within three days.  This  
             acknowledgment is to include the tracking number and is  
             to be delivered electronically unless the claimant has  
             requested acknowledgment be transmitted in writing.

          3. Specifies that terms and conditions includes, but are  
             not limited to, any form of treatment limitation, or  
             other action by a plan or insurer that may limit the  
             receipt of the covered benefits described.

          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  
          types of SMI of a person of any age, and of serious  
          emotional disturbances (SED) of a child, as defined, under  
          the same terms and conditions applied to other medical  

          Specifically, the statute defines SMI as including  
          schizophrenia, schizoaffective disorder, bipolar disorder,  
          major depressive disorders, panic disorder,  
          obsessive-compulsive disorder, pervasive developmental  
          disorder or autism, anorexia nervosa, and bulimia nervosa.   
          The statute defines a child with an SED as one who has one  
          or more mental disorders identified in the most recent  
          edition of the Diagnostic and Statistical Manual of Mental  
          Disorders, other than a primary substance use disorder or  
          developmental disorder, which results in behavior that is  
          inappropriate to the child's age, according to expected  
          developmental norms.  
          For covered conditions, the mental health parity statute  
          requires benefits to include outpatient and inpatient  
          services, hospital services, and prescription drugs, if a  


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          plan contract or insurance policy otherwise covers  
          prescription drugs, and requires terms for maximum lifetime  
          benefits, co-payments, and deductibles to be applied  
          equally to all benefits under a plan contract or insurance  

          Existing regulations specify that, in addition to all basic  
          and other health care services required by the Knox-Keene  
          Act, mental health parity provides, at a minimum, for the  
          coverage of 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.  The regulations also  
          require that a plan's referral system shall provide "timely  
          access and ready referral in a manner consistent with good  
          professional practice." 

          Since the parity law was passed, several reports have  
          evaluated the law's implementation. In March, 2005, the  
          Department of Mental Health issued its report, "Mental  
          Health Parity-Barriers and Recommendations," noting "there  
          are a number of barriers at the operational level that keep  
          California from achieving mental health parity.  The  
          largest barrier to full implementation is lack of access.  
          Confusion remains about what parity actually means beyond  
          the fiscal and structural requirements.  Covered diagnoses  
          are clear, but what array of services is covered for  
          individuals with these diagnoses, and for how long, remains  
          inconsistent from plan to plan.  It remains unclear what  
          services are the responsibility of health plans versus the  
          responsibility of public agencies and organizations." 

          In March 2007, DMHC issued a report, "Mental Health Parity  
          in California; Mental Health Parity Focused Survey Project:  
          A Summary of Survey Findings and Observations," based on a  
          "focus survey" it had conducted in 2005 of seven large  
          health plans, covering 85 percent of the commercial managed  
          care population and representing all delivery models of  
          mental health services.  DMHC found that the most common  
          problems were payment of emergency room claims, plans'  
          monitoring of access to after-hours services to ensure  
          timely response to enrollees', and plans' explanations in  
          letters denying treatment requests.  DMHC also found  


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          significant concerns on the part of consumer and industry  
          stakeholders about perceived limitations on, and lack of  
          coordination of, care for children with autism and other  
          pervasive developmental disturbances.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  Yes

          According to the Senate Appropriations Committee analysis:

                          Fiscal Impact (in thousands)

           Major Provisions                2010-11     2011-12     
           2012-13   Fund
          DMHC regulations              up to $130          up to  
          $170           ongoing        Special*
                                                  likely minor

          *Managed Care Fund

           SUPPORT  :   (Verified  5/28/10)

          California Coalition for Mental Health (co-source)
          California Psychiatric Association (co-source)
          California Association of Marriage and Family Therapists
          California Chapter of the American College of Emergency  
          California Hospital Association 
          California Medical Association 
          Mental Health Association in California

           OPPOSITION :    (Verified  5/28/10)

          America's Health Insurance Plans
          American Specialty Health
          Association of California Life and Health Insurance  
          California Association of Health Plans

           ARGUMENTS IN SUPPORT  :    According to the California  
          Coalition for Mental Health (CCMH), sponsor of this bill,  
          all of the various mental health professionals experience  
          regular problems with paperwork submitted to health plans  


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          and insurers for authorizations or claims becoming lost,  
          delayed, forgotten or otherwise untraceable, leading to  
          extraordinary claims on their time and resources to  
          resubmit those claims or authorization requests.  CCMH  
          argues that this affects both clinicians and patients with  
          delays in treatment and reimbursement of treatment, and  
          worse, denials of authorizations and treatment.  CCMH  
          contends that notwithstanding current law, these  
          administrative and/or clerical process interactions between  
          providers and plans or insurers continue to be  
          unnecessarily problematic and that this bill is a modest  
          attempt to fix this problem.  

          The California Medical Association states that this bill  
          will improve the process of health plans and health insurer  
          reviews, make it more difficult for plans and insurers to  
          deny claims based on technicalities never relayed to the  
          requesting provider and ensure prompt and fair resolution  
          and payment of health insurance claims.

           ARGUMENTS IN OPPOSITION  :    The California Association of  
          Health Plans (CAHP) states that this bill imposes  
          unnecessary administrative costs and create complicated,  
          new notifications at a time when health care costs are  
          already making it difficult for Californians to secure  
          health insurance, and that state law and regulations  
          already require a complicated set of timelines and  
          notifications that health plans must meet in handling  
          claims.  CAHP adds that this bill also amends the state's  
          mental health parity law in a manner that has unclear  
          implications for coverage, since current law already  
          requires health plans to provide parity for covered mental  
          health services.  

          America's Health Insurance Plans (AHIP) argues that the  
          administrative changes proposed by this bill will duplicate  
          existing requirements for patient-provider communication,  
          burdening physicians and confusing consumers, and result in  
          additional unnecessary administrative burdens that increase  
          costs for health care providers and health plans.  AHIP  
          adds that the recent federal health care reform legislation  
          will establish administrative simplification processes  
          aimed at standardized claims submission and payment  
          processes that will reduce clerical burdens on both  


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          providers and health insurance plans. 

          CTW:do  5/28/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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