BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 154
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          ASSEMBLY THIRD READING
          AB 154 (Beall)
          As Amended January 23, 2012
          Majority vote 

           HEALTH              12-5        APPROPRIATIONS      11-6        
           
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          |Ayes:|Monning, Ammiano, Atkins, |Ayes:|Fuentes, Blumenfield,     |
          |     |Bonilla, Eng, Gordon,     |     |Bradford, Charles         |
          |     |Hayashi,                  |     |Calderon, Campos,         |
          |     |Roger Hernández, Bonnie   |     |Chesbro, Hall, Hill,      |
          |     |Lowenthal, Mitchell, Pan, |     |Ammiano, Mitchell,        |
          |     |Williams                  |     |Solorio                   |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Logue, Garrick, Mansoor,  |Nays:|Harkey, Donnelly, Gatto,  |
          |     |Silva, Knight             |     |Nielsen, Norby, Wagner    |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           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, with specified exceptions, 
          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.









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          3)Excludes treatment of nicotine addiction and certain illnesses 
            under the "V" code designation in the DSM-IV, such as adult 
            antisocial behavior and bereavement, among others, from the 
            definition in 2) above. 

          4)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.

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

          6)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.
          7)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.

          8)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.

          9)Clarifies that nothing in this bill shall be construed to deny 
            or restrict in any way DMHC's authority to ensure a health 
            plan's compliance with this bill when the plan provides 
            prescription drug coverage. 

          10)Clarifies that, with regard to health insurance policies, any 
            action a health insurer takes to implement this bill, 
            including, but not limited to, contracting with preferred 
            provider organizations, shall not be deemed as an action that 
            would otherwise require licensure as a health care service 
            plan, as specified. 









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          11)Exempts contracts between the Department of Health Care 
            Services and a health plan for enrolled Medi-Cal beneficiaries 
            and plans administered by Managed Risk Medical Insurance Board 
            from the provisions of this bill.

          12)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 board elects to purchase a plan, contract, or policy 
            that provides mental health benefits mandated under this bill.

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

          14)Prohibits this bill from being deemed to require a qualified 
            health plan that participates in the California Health Benefit 
            Exchange to provide any greater coverage than is required 
            under the minimum essential benefits package set forth in the 
            federal Patient Protection and Affordable Care Act (PPACA). 

           FISCAL EFFECT  :  According to the Assembly Appropriations 
          Committee:

          1)Annual increased premium costs in the private insurance market 
            of $60 million.  These costs reflect increased premiums by 
            employers for group insurance and premiums paid in the 
            individual health insurance market.  These increased costs are 
            partially offset by reduced out-of-pocket costs of $26 million 
            due to reduced co-payments and deductibles.

          2)Federal regulations implementing the PPACA are likely to 
            reduce the fiscal impact of this bill beginning in 2014.  The 
            PPACA requires mental health and substance abuse treatment to 
            be covered as a basic benefit in state-run health insurance 
            exchanges that will provide health coverage to millions of 
            individuals.   

           COMMENTS  :  According to the author, individuals struggling with 
          mental illness quickly exhaust limited coverage and personal 
          savings and become dependent upon taxpayer-supported benefits.  
          The author notes that annual national costs for mental illness 
          are an estimated $23 billion in lost work days to employers and 








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          another $150 billion in treatment, social services, and lost 
          productivity.  The author maintains that many people in our 
          society with mental illness and substance abuse problems are 
          unable to obtain treatment and, as a result, wind up in 
          counties' indigent health care pool, emergency rooms, and state 
          and county jails.  This bill is intended to end discrimination 
          against patients with mental health/substance abuse (MH/SA) 
          issues by requiring treatment and coverage of these illnesses 
          that is equitable to coverage provided for other medical 
          illnesses.  Since SMI services are already covered under current 
          law, this bill focuses on the incremental effect of extending 
          parity to non-SMI and substance abuse disorders, with certain 
          exceptions.

          On December 16, 2011, the federal Center for Consumer 
          Information and Insurance Oversight (CCIIO) issued a bulletin 
          proposing that essential health benefits (EHBs) be defined using 
          a benchmark approach.  Under the CCIIO intended approach, states 
          would have the flexibility to select a benchmark plan that 
          reflects the scope of services offered by a "typical employer 
          plan."  This approach would give states the flexibility to 
          select a plan that would best meet the needs of their residents. 
           In accordance with the bulletin, the benchmark options include:

          1)One of the three largest small group plans in the state by 
            enrollment.

          2)One of the three largest state employee health plans by 
            enrollment.

          3)One of the three largest federal employee health plan options 
            by enrollment.

          4)The largest HMO plan offered in the state's commercial market 
            by enrollment.

          The benefits and services included in the benchmark plan 
          selected by the state would be the EHB package.


          To meet the EHB coverage standard, a health plan or health 
          insurer would offer benefits that are "substantially equal" to 
          the benchmark plan selected by the state and modified as 
          necessary to reflect the 10 coverage categories.  The bulletin 








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          indicates that states must select their benchmark plan in the 
          third quarter two years prior to the coverage year (by September 
          2012).  The PPACA requires states to defray the cost of any 
          benefits required by state law to be covered by health plans and 
          health insurers beyond the EHBs.  The federal bulletin implies 
          that existing state mandates could be incorporated in EHBs to 
          the extent they are included in a benchmark plan existing in 
          2012.  However, the federal rules are not final or entirely 
          clear on this point.  Comments on the federal bulletin are due 
          by January 31, 2012.  Further evaluation of individual state 
          mandates pending this year will need to be considered in the 
          context of a broader discussion about California's benchmark 
          plan. 

          Supporters, including the California Mental Health Directors 
          Association, the California Hospital Association, the California 
          Medical Association, and the County Alcohol & Drug Program 
          Administrators Association of California, note that numerous 
          studies have shown that mental illness is treatable, and that 
          appropriate and timely treatment of mental health conditions 
          reduces costly hospitalizations, incarcerations, homelessness, 
          and, most importantly, human suffering.  They state that this is 
          a long-overdue bill that aims to end insurance discrimination 
          faced by too many people seeking help and still struggling with 
          mental illness or the disease of addiction to alcohol and other 
          drugs.
          Health plans and health insurers object to this bill, stating 
          that it is the wrong time for the Legislature to consider 
          enacting new benefit mandates since, starting in 2014, many 
          Californians can enroll in health coverage through the state-run 
          health insurance exchanges.  Opponents contend benefit mandates 
          eliminate the ability of health insurers and HMOs to provide 
          unique benefit packages in response to the needs of consumers by 
          requiring individuals and consumers to purchase benefits 
          prescribed by the Legislature, not driven by consumer choice.  
          Lastly, they assert that carving out certain exemptions from 
          this bill unfairly raises costs for employers and individuals in 
          only certain market segments, thereby creating uneven playing 
          fields.  


           Analysis Prepared by  :    Cassie Royce / HEALTH / (916) 319-2097 
                                                                FN: 0003068









                                                                  AB 154
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