BILL ANALYSIS �
SENATE INSURANCE COMMITTEE
Senator Ronald Calderon, Chair
AB 402 (Ammiano) Hearing Date: June 26, 2013
As Amended:June 4, 2013
Fiscal: No
Urgency: No
VOTES: Asm. Floor(05/02/13)57-12/Pass
Asm. Ins. (04/24/13)12-01/Pass
SUMMARY: Would, commencing July 1, 2014, require disability
income insurance policies to cover disability caused by severe
mental illness.
DIGEST
Existing law
Defines disability income insurance as insurance against loss of
occupational earning capacity arising from injury, sickness, or
disablement.
This bill
1. Would require every disability income insurance policy
issued, amended, or renewed on or after July 1, 2014, to
provide coverage for disability resulting from severe mental
illness.
2. Would define "severe mental illness" to include:
A. Schizophrenia.
B. Schizoaffective disorder.
C. Bipolar disorder (manic-depressive illness).
D. Major depressive disorders, including postpartum
depression.
E. Panic disorder.
F. Obsessive-compulsive disorder.
G. Pervasive developmental disorder or autism.
H. Anorexia nervosa.
I. Bulimia nervosa.
AB 402 (Ammiano), Page 2
COMMENTS
1. Purpose of the bill . According to the author, mental health
parity laws require health care plans to cover severe mental
illness in the same manner as physical injury or illness.
State disability insurance provides partial wage replacement
to eligible workers who are unable to work because of a
mental or physical illness or injury which prevents a worker
from performing his or her regular or customary work. These
mental health parity laws do not currently extend to short
term disability income insurance policies that provide
temporary income replacement, and often explicitly exclude
the coverage of severe mental illness.
Research demonstrates that mental health care provides
support and treatment to optimize a person's emotional and
psychological well-being. Under California law, treatment
for severe mental illness, like major depression or panic
disorders, must be covered by your health plan. However,
there is nothing preventing short term disability income
insurers from excluding certain or all severe mental
illnesses, even for a person who has a physician's
certification and qualifies for California State Disability
Insurance, the Federal Family and Medical Leave Act, or the
California Family Rights Act.
Allowing individuals to utilize their short term income
replacement insurance to make ends meet while they are under
the care of a medical professional for treatment of a severe
mental illness and unable to work ensures the best possible
outcome for the individual, their family, and a healthy
return to employment.
Removing the ability to exclude mental health illness or
injury in short term disability income insurance is a
benefit to employers, employees, and their communities.
2. Background
A. Disability Income Insurance. Disability income
insurance provides benefits on account of the insured's
inability, as a result of covered accident or sickness,
AB 402 (Ammiano), Page 3
to perform certain activities as defined in the policy.
(10 CCR 2540.5.) Occupational policies cover the duties
of a particular occupation; non-occupational policies
indemnify the insured against a disability which
prevents the insured from performing the work of any
occupation. (See Erreca v. West. States Life Ins. Co.
(1942) 19 Cal.2d 388, 393.) Disability policies may
also be described as long or short-term. Short-term
policies may pay benefits for less than a year but
typically no more than two. Long-term policies pay
benefits for a much longer period and may pay for up to
a defined period (up to five years), up to an age (such
as age 65), for the remainder of the insured's life,
etc. Disability income policies may be purchased as a
member of a group (like those provided by the employer)
or individually.
B. Permissible Exclusions from Coverage. Disability
income policies must be submitted to the Insurance
Commissioner for review. (Ins. Code � 10290.) The
Commissioner may disapprove the policy for a variety of
reasons, including if the policy is "economically
unsound" for the consumer. (Ins. Code �� 10291 and
10291.5(a)(1).) Current regulations deem disability
policies of "real economic value" despite exclusions for
"mental or emotional disorders or functional nervous
disorders." (10 CCR � 2220.8.) In practice, policies
vary in regards to exclusions for severe mental illness.
C. Mental Health Parity in Health Coverage. AB 88
(Thomson), Chap. 534, Statutes of 1999, requires health
care service plan contracts and health insurance
policies to provide coverage for severe mental
illnesses. (Ins. � 10144.5.) The definition of "severe
mental illness" in this bill is borrowed from AB 88,
except that this bill specifically provides that the
category of "major depressive disorders" specifically
includes postpartum depression.
D. No New Criminal Penalties. Concerns were raised
that a violation of the provisions of this bill might be
read as a violation of Insurance Code Section 10401
(making "any discrimination between insureds of the same
AB 402 (Ammiano), Page 4
class in any manner whatsoever with relation to such
insurance" a misdemeanor). Committee staff has
confirmed with the Department of Insurance that this
bill does not create a new crime.
1. Arguments in Support
A. The author states that according to the 2010 United
States census, approximately 1.2 million adults live
with serious mental illness. Most of these adults
continue to work right through their mental illness
utilizing sick days on occasion when symptoms are
severe. Occasionally, employees may need a longer period
of time to adequately recover from a severe mental
illness or transition onto a new medication. California
State Disability Insurance can pay for a portion of an
employee's salary, but to keep the employee's income
whole, many rely on short term disability income
insurance to make up the remaining lost wages and allow
an injured person to continue paying mortgage, rent,
tuition and car payments, as well as help cover expenses
for food, child care and utilities. When these policies
exclude coverage for mental illness or injury, these
families are left with the decision of working against
their doctor's orders and placing employers and fellow
employees at risk or facing often unmanageable financial
burdens.
B. The author also explains that workplace mental
health is a critical factor when building and
maintaining a successful business. A healthy workforce
impacts productivity and employee retention.
Additionally, a well-balanced employee benefit plan is
very attractive to most employees, especially one that
contains an option to receive or purchase short-term
disability income insurance to cover basic living costs
if the employee gets sick or injured.
AB 402 (Ammiano), Page 5
1. Arguments in Opposition
No registered opposition.
2. Suggested Amendments
A. Short-term Disability Income Coverage. According
to the Department of Insurance, the Commissioner has
approved policies that limit coverage for serious mental
illness benefits for up to two years. As written, this
bill would create mandatory coverage for long and
short-term polices and eliminate currently permissible
limitations. Committee staff has confirmed that it is
the intent of the author that the bill applies to
short-term policies only. Accordingly, committee staff
recommends amendments that limit application of the bill
to policies providing benefits for two-years or less
(there currently is no statutory distinction between
short and long-term policies).
B. Chaptering Problem. Both this bill and SB 22
(Beall) add Insurance Code Section 10144.53. Committee
staff recommends amendments that change the section
number to avoid a chaptering problem.
POSITIONS
Support
The Arc and United Cerebral Palsy California Collaboration
California Communities United Institute
California Pan-Ethnic Health Network
California Psychological Association
Mental Health America of California
National Association of Social Workers, CA Chapter
Opposition
No registered opposition.
AB 402 (Ammiano), Page 6
Consultant: Hugh Slayden, (916) 651-4773