BILL ANALYSIS                                                                                                                                                                                                    Ó


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                                    THIRD READING

          Bill No:  AB 402
          Author:   Ammiano (D), et al.
          Amended:  6/27/13 in Senate
          Vote:     21

           SENATE INSURANCE COMMITTEE  :  7-2, 6/26/13
          AYES:  Calderon, Gaines, Corbett, Correa, Lieu, Roth, Torres
          NOES:  Knight, Nielsen

           ASSEMBLY FLOOR  :  57-12, 5/2/13 - See last page for vote

           SUBJECT :    Disability income insurance

           SOURCE  :     Author

           DIGEST  :    This bill requires every policy, that is of a  
          short-term limited duration of two years or less, of disability  
          income insurance that is issued, amended, or reviewed on or  
          after July1, 2014, and that provides disability income benefits,  
          to provide coverage for disability caused by severe mental  
          illnesses, as defined.

           ANALYSIS  :    Existing law defines "disability income insurance"  
          as insurance against loss of occupational earning capacity  
          arising from injury, sickness, or disablement.
          This bill:

          1.Requires every disability income insurance policy issued,  
            amended, or renewed on or after July 1, 2014, that is of a  


                                                                     AB 402

            short-term limited duration of two years or less, to provide  
            coverage for disability resulting from severe mental illness.

          2.Defines "severe mental illness" to include:
             A.   Schizophrenia.
             B.   Schizoaffective disorder.
             C.   Bipolar disorder (manic-depressive illness).
             D.   Major depressive disorders, including postpartum  
             E.   Panic disorder.
             F.   Obsessive-compulsive disorder.
             G.   Pervasive developmental disorder or autism.
             H.   Anorexia nervosa.
             I.   Bulimia nervosa.

           Disability Income Insurance  .  Disability income insurance  
          provides benefits on account of the insured's inability, as a  
          result of covered accident or sickness, to perform certain  
          activities as defined in the policy.  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.  
           (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.

           Permissible exclusions from coverage  .  Disability income  
          policies must be submitted to the Insurance Commissioner for  
          review.  The Commissioner may disapprove the policy for a  
          variety of reasons, including if the policy is "economically  
          unsound" for the consumer.  Current regulations deem disability  
          policies of "real economic value" despite exclusions for "mental  
          or emotional disorders or functional nervous disorders."  In  
          practice, policies vary in regard to exclusions for severe  
          mental illness.



                                                                     AB 402

           Mental health parity in health coverage  .  AB 88 (Thomson,  
          Chapter 534, Statutes of 1999) required health care service plan  
          contracts and health insurance policies to provide coverage for  
          severe mental illnesses.  The definition of "severe mental  
          illness" in this bill is borrowed from AB 88, except that AB 88  
          specifically provides that the category of "major depressive  
          disorders" specifically includes postpartum depression.

           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 class in any manner  
          whatsoever with relation to such insurance" a misdemeanor).  The  
          Senate Insurance Committee staff has confirmed with the  
          Department of Insurance that this bill does not create a new  

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

           SUPPORT  :   (Verified  6/27/13)

          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

           ARGUMENTS IN SUPPORT  :    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  



                                                                     AB 402

          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.

           ASSEMBLY FLOOR  :  57-12, 5/2/13
          AYES:  Achadjian, Ammiano, Bigelow, Bloom, Blumenfield,  
            Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian  
            Calderon, Campos, Chau, Chávez, Chesbro, Cooley, Daly,  
            Dickinson, Eggman, Fong, Frazier, Garcia, Gatto, Gomez,  
            Gordon, Gray, Hagman, Roger Hernández, Holden, Jones-Sawyer,  
            Levine, Linder, Lowenthal, Maienschein, Medina, Mitchell,  
            Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan, Perea, V.  
            Manuel Pérez, Quirk, Quirk-Silva, Rendon, Salas, Skinner,  
            Stone, Ting, Torres, Weber, Wieckowski, Wilk, Yamada
          NOES:  Allen, Dahle, Donnelly, Beth Gaines, Grove, Logue,  
            Mansoor, Melendez, Morrell, Patterson, Wagner, Waldron
          NO VOTE RECORDED:  Alejo, Atkins, Conway, Fox, Gorell, Hall,  
            Harkey, Jones, Williams, John A. Pérez, Vacancy

          AL:ej  6/27/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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