BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  June 25, 2013

                            ASSEMBLY COMMITTEE ON HEALTH
                                 Richard Pan, Chair
                      SB 22 (Beall) - As Amended:  June 14, 2013

           SENATE VOTE  :  38-0
           
          SUBJECT  :  Health care coverage: mental health parity.

           SUMMARY  :  Requires health plans and insurers (collectively,  
          carriers) to submit an annual report to state regulators  
          certifying compliance with state and federal mental health  
          parity laws.  Specifically,  this bill  :  

          1)Requires every health plan that provides hospital, medical, or  
            surgical coverage or any specialized mental health plan that  
            contracts with a health plan to provide mental health services  
            to submit an annual report to the Department of Managed Health  
            Care (DMHC) certifying compliance with state and federal  
            mental health parity laws, as specified.

          2)Requires every health insurer to submit an annual report to  
            the California Department of Insurance (CDI) certifying  
            compliance with state and federal mental health parity laws,  
            as specified.

          3)Requires a report submitted pursuant to 1) or 2) above to be a  
            public record and to be published on DMHC's or CDI's Website.   


          4)Allows DMHC and CDI, at their discretion, to hold public  
            hearings on the reports in 1) or 2) above.

          5)Requires the reports in 1) and 2) above to provide an analysis  
            of the carrier's mental health parity compliance using all of  
            the elements set forth in state and federal mental health  
            parity laws, as well as in standards P-MHP 1, P-MHP 2, and  
            P-MHP 3 of the American Accreditation HealthCare Commission  
            (URAC) Health Plan Accreditation Guide, Version 7, or any  
            subsequent versions.

          6)Requires carriers, as part of the report in 1) or 2) above, to  
            survey enrollees on experiences with mental health and  
            substance use care and to survey providers to collect  








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            responses pertaining to provider experiences with providing  
            mental health and substance use care.  Requires carriers to  
            use compliance criteria from URAC standards to structure the  
            surveys.

           EXISTING LAW  :  

          1)Requires every carrier that provides hospital, medical, or  
            surgical coverage to also provide coverage for diagnosis and  
            medically necessary treatment of severe mental illnesses and  
            of serious emotional disturbances of a child, as specified,  
            under the same terms and conditions applied to other medical  
            conditions.  Exempts Medi-Cal managed care plans from this  
            parity requirement.

          2)Requires the following conditions to be covered under the  
            parity requirement in 1) above: schizophrenia, schizoaffective  
            disorder, bipolar disorder, major depressive disorders, panic  
            disorder, obsessive-compulsive disorder, pervasive  
            developmental disorder or autism, anorexia nervosa, and  
            bulimia nervosa.

          3)Under the federal Patient Protection and Affordable Care Act  
            (ACA), requires carriers to cover essential health benefits  
            (EHBs), which include items and services in 10 benefit  
            categories, one of which is mental health and substance use  
            disorder services including behavioral health treatment.  

          4)Under state law, for purposes of compliance with the  
            requirement in 3) above, defines California's EHBs as the  
            benefits covered under the Kaiser Small Group HMO plan, along  
            with the 10 mandated benefit categories under ACA. 

          5)Under federal law, requires large group carriers that cover  
            mental health or substance use disorders to ensure that  
            financial requirements (such as copays and deductibles) and  
            treatment limitations (such as visit limits) applicable to  
            mental health benefits are no more restrictive than those  
            applied to medical or surgical benefits.  

          6)Provides for the regulation of health insurers by CDI and  
            provides for the regulation of health plans by DMHC.

          7)Requires every carrier that reviews and approves, modifies,  
            delays, or denies services based on medical necessity to have  








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            written policies and procedures establishing the review  
            process.

          8)Requires DMHC to conduct onsite medical surveys of the health  
            delivery system of each plan, including a review of the  
            procedures for obtaining health services, utilization  
            management, peer review mechanisms, quality assurance  
            procedures, and overall performance of the plan in meeting  
            enrollees' health needs.  Requires these surveys to be  
            conducted at least every three years.
           
          9)Establishes the Independent Medical Review System, under which  
            carriers are required to provide patients with the opportunity  
            to seek an independent medical review whenever health care  
            services have been denied, modified, or delayed by the  
            carrier, or by one of its contracting providers, if the  
            decision was based in whole or in part on a finding that the  
            proposed health care services are not medically necessary.  

          10)Requires every carrier to report annually to DMHC or CDI, as  
            appropriate, in a form and manner determined by DMHC in  
            consultation with CDI, the number of enrollees, by product  
            type, as of December 31 of the prior year, that receive health  
            care coverage under a health care service plan contract that  
            covers individuals, small groups, large groups, or  
            administrative services only. 

           FISCAL EFFECT  :  According to the Senate Appropriations  
          Committee, this bill would have: 1) one-time costs of about  
          $190,000 for adoption of regulations by DMHC (Managed Care  
          Fund); 2) potential ongoing costs of about $180,000 for  
          follow-up surveys and enforcement activities by DMHC (Managed  
          Care Fund); 3) one-time costs of $160,000 for the adoption of  
          regulations by CDI (Insurance Fund); and 4) ongoing enforcement  
          costs of $90,000 by CDI (Insurance Fund). 

           COMMENTS  :

           1)PURPOSE OF THIS BILL  .  According to the author, patients  
            complain regularly that they can't get appointments with  
            mental health professionals in a timely way.  In addition,  
            psychiatrists and other mental health service providers and  
            therapists routinely report that they are subject to  
            conditions, criteria, standards, processes, and operations of  
            health plans and insurers which are more stringent than the  








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            comparable conditions, criteria, standards,  processes, and  
            operations of health care service plans and insurers for other  
            health conditions.  The author maintains that this disparity  
            is manifest in less adequate networks; lower reimbursement  
            rates; more stringent credentialing requirements for network  
            participation; more restrictions in formularies seen in drug  
            tiers or such practices as fail first or step therapy; more  
            stringent utilization review; and other conditions.  The  
            author argues that these are discriminatory acts, in violation  
            of both state and federal law, that prevent patients with  
            mental disorders from accessing and receiving medically  
            necessary care to which they are entitled. 

            The author argues that current enforcement consists of  
            regulatory responses to complaints, appeals of health plan  
            decisions to state regulators, independent medical reviews,  
            and, for DMHC-regulated plans, focused medical reviews.  The  
            author states that data from each of these sources has not  
            yielded adequate information to make determinations about  
            whether plans, in contrast to merely having written policies  
            and procedures in binders at headquarters, actually  
            operationalize the parity laws at the point of service  
            delivery.  The author writes that this bill attempts to  
            correct this problem by providing an additional data source  
            for regulators to use to ensure that beneficiaries and  
            patients are receiving mental health and substance use  
            services under conditions that are at parity with services for  
            other health conditions. 

            Moreover, the author argues that a complaint driven  
            enforcement system is inadequate for enforcement of mental  
            health parity laws because people with depression, for  
            instance, are not as likely to complain, appeal, or apply for  
            independent medical review as patients with other health  
            conditions. 

           2)BACKGROUND  .  

              a)   State and Federal Mental Health Parity Laws  .   
               California's mental health parity law, enacted in 1999,  
               requires all carriers (large group, small group, and  
               individual) to cover the diagnosis and medically necessary  
               treatment of severe mental illness of a person of any age,  
               and of serious emotional disturbances of a child.  This  
               coverage is required to be at parity with other medical  








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               conditions:  no differences in maximum lifetime benefits,  
               copayments, deductibles, or cost sharing are permitted. 

               The federal Wellstone-Domenici Mental Health Parity and  
               Addiction Equity Act (Parity Act) of 2008, applies to plans  
               sponsored by private and public sector employers with more  
               than 50 employees.  The federal Parity Act includes parity  
               protections with respect to annual and lifetime limits,  
               financial requirements, and treatment limitations for  
               mental health and substance use disorders.  The federal  
               Parity Act only requires health plans to provide parity if  
               the plan provides both medical and surgical benefits and  
               mental health or substance use disorder benefits.  The  
               federal Departments of Labor, Health and Human Services,  
               and the Treasury collectively promulgated interim final  
               regulations on February 2, 2010, to implement the  
               provisions of the federal Parity Act. Final regulations are  
               anticipated by the end of this year to provide further  
               guidance to clarify requirements.

               Finally, the ACA explicitly includes mental health and  
               substance abuse services, including behavioral health  
               treatment, as one of the 10 categories of service that must  
               be covered as essential health benefits.  Beginning in  
               2014, under the ACA, all new small group and individual  
               market plans will be required to cover these essential  
               health benefit categories and will be required to cover  
               them at parity with medical and surgical benefits. 

              b)   URAC Standards  .  In 2011, URAC released Version 7 of its  
               standards for accreditation of health plans.  These  
               standards incorporate Parity Act and the interim final  
               regulations that govern Parity Act implementation.  To  
               comply with URAC standards, a plan must do the following:

               i)     Conduct a detailed internal audit and analysis to  
                 assure that each medical management intervention applied  
                 to behavioral health treatment is comparable to and no  
                 more stringent than those applied to medical treatments;   


               ii)    Ensure that contractors that provide mental health  
                 or substance abuse services (e.g., a managed behavioral  
                 health organization) are in full compliance with Parity  
                 Act;








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               iii)   Document that the plan has disclosed key aspects of  
                 the behavioral health benefit to consumers and employers,  
                 such as:  how compliance with parity is achieved and any  
                 restrictions or exclusion on the behavioral health  
                 benefit; and,  

               iv)    Document that the plan has provided parity between  
                 medical and behavioral health treatment services in  
                 certain levels and types of care, such as emergency care,  
                 pharmacy, and inpatient and outpatient treatment.

               For health plans that are accredited by URAC, a consumer  
               can make a complaint directly to URAC regarding compliance  
               with parity. 

              c)   DMHC medical surveys  .  DMHC is required to conduct  
               onsite medical surveys of all licensed full-service and  
               specialty plans at least once every three years.  A medical  
               survey is a comprehensive evaluation of a plan's compliance  
               with the law in the following health plan program areas:  
               quality management, grievances and appeals (member  
               complaints), access and availability, and utilization  
               management (referrals and authorizations).  

             In addition to these program areas, the listing of medical  
               surveys on DMHC's website indicates that routine surveys  
               often include data gathered specifically on compliance with  
               mental health parity.  For example, a 2010 routine review  
               of Blue Shield of California included an analysis of the  
               plan's coverage of speech therapy for autism spectrum  
               disorders and found that the plan's policy was potentially  
               too restrictive, as it relied heavily on physical, rather  
               than mental, barriers to speech production.  In 2009, DMHC  
               conducted a routine review of Kaiser Foundation Health Plan  
               and found that the plan's referral system does not provide  
               patients suspected of having a diagnosis of autism timely  
               access and ready referral, in a manner consistent with good  
               professional practice, for the purpose of diagnosis and  
               medically necessary treatment.  In 2013, a routine review  
               of Kaiser's Behavioral Health Services found that the plan  
               did not provide accurate and understandable behavioral  
               health education services, including information regarding  
               the availability and optimal use of mental health care  
               services.  The routine surveys document corrective actions  








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               and compliance efforts of reviewed health plans.

             Under its authority to conduct onsite medical surveys of  
               licensed health plans, DMHC conducted a series of focused  
               medical surveys in 2005 that specifically reviewed  
               compliance with mental health parity laws.  The survey  
               results indicated that plans had established policies and  
               procedures, contracts, and evidence of coverage documents  
               that correctly reflect mental health parity requirements.   
               The results also indicated that the plans had developed  
               programs to expand and improve services, such as continuity  
               and coordination of care for enrollees with mental health  
               parity diagnoses, and to promote access to services for  
               enrollees in minority linguistic and cultural groups.  The  
               focused surveys identified several aspects of compliance  
               with the requirements of the Parity Act that continued to  
               be problematic for the health plans, including payment of  
               emergency room claims, ensuring access to after-hours  
               services, and clear and concise explanations in denial  
               letters. 

              d)   Enforcement Actions  .  In recent years, the Office of  
               Enforcement of DMHC has conducted several enforcement  
               actions against health plans that violated the state's  
               mental health parity laws.  In 2010, DMHC imposed a $75,000  
               penalty on the Kaiser Foundation Health Plan due to an  
               unreasonable delay for formal autism evaluation.  In 2009,  
               DMHC found that Universal Care health plan had improperly  
               denied coverage for speech therapy to treat a diagnosis of  
               autism.  DMHC reached a settlement whereby Universal Care,  
               after reversing the decisions and making appropriate  
               changes to its practices and procedures, made a donation to  
               Mental Health of America of Los Angeles in the amount of  
               $2,500.00.  In 2006, DMHC imposed an administrative penalty  
               of $25,000 after Health Net denied coverage for speech  
               therapy to treat autism.  Also in 2006, Blue Cross was  
               fined $50,000 for denying coverage of nutritional  
               counseling for an enrollee with anorexia nervosa.  

             In July 2011, CDI filed an enforcement action against Blue  
               Shield of California to require Blue Shield to provide  
               coverage for Applied Behavior Analysis (ABA) Therapy, a  
               treatment for autism, in compliance with the state's mental  
               health parity law.  In 2012, CDI reached a settlement  
               agreement with Blue Shield of California to secure  








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               immediate coverage of behavioral therapy for autism as a  
               medical benefit.  According to the terms of the settlement,  
               Blue Shield of California would cease:  i) denying ABA  
               therapy as a non-covered service; ii) challenging the  
               medical necessity of ABA therapy; and iii) requiring  
               Independent Medical Review prior to covering treatment.

           3)SUPPORT  .  In support, the California Psychological Association  
            argues that, due to complex bureaucracy, it is extremely  
            difficult to appeal denials of service and then file a  
            complaint, and that this bill will help proactively identify  
            patterns of non-compliance.  The American Federation of State,  
            County and Municipal Employees writes that this bill will  
            encourage access to mental health and substance abuse  
            services, saving the state money on criminal justice, law  
            enforcement, health and social services, and other state  
            programs.  Also in support, the California Insurance  
            Commissioner writes that, currently, the lack of information  
            available to state officials results in more focus on  
            micro-level complaints, whereas this bill will provide the  
            data necessary to focus regulatory resources on the  
            parity-related issues most in need of attention.

           4)OPPOSITION  .  In opposition, the California Association of  
            Health Plans (CAHP) asserts that this bill is unnecessary, as  
            DMHC currently has the ability to review health plan  
            compliance with state law and suggest operational and other  
            improvements.  CAHP notes that DMHC currently has authority to  
            conduct routine medical surveys that focus on access and  
            availability of services, quality management, utilization  
            management, grievances, and other issues.  CAHP argues that,  
            if those surveys indicate correction is need, DMHC will note  
            deficiencies and issue progress reports on the status of the  
            initial findings.  The Association of California Life and  
            Health Insurance Companies (ACLHIC), also in opposition,  
            maintains that this bill will impose redundant reporting  
            requirements, which is counterproductive to ACLHIC's efforts  
            to reduce administrative costs, make health insurance more  
            affordable, and implement the ACA.

           5)PREVIOUS LEGISLATION  .  

             a)   AB 55 (Migden, Schiff, and Thomson), Chapter 533,  
               Statutes of 1999, establishes an independent medical review  
               system for enrollees to seek an independent review whenever  








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               health care services have been denied, delayed, or  
               otherwise limited by a carrier or one of its contracting  
               providers based on a finding that the service is not  
               medically necessary.

             b)   AB 88 (Thomson), Chapter 534, Statutes of 1999, requires  
               carriers to provide coverage for the diagnosis and  
               medically necessary treatment of severe mental illnesses,  
               as defined, of a person of any age, and of serious  
               emotional disturbances of a child, under the same terms and  
               conditions applied to other medical conditions. 

             c)   AB 154 (Beall) of 2012 would have expanded the mental  
               health parity law to require carriers to provide parity  
               coverage for the diagnosis and medically necessary  
               treatment of any mental disorder defined in the Diagnostic  
               and Statistical Manual of Mental Disorders IV, including  
               substance abuse, but excluding nicotine dependence and  
               specified diagnoses.  AB 154 failed passage in the Senate  
               Health Committee.

             d)   SB 946 (Steinberg), Chapter 650, Statutes of 2011,  
               requires carriers to provide coverage for behavioral health  
               treatment for pervasive developmental disorder or autism  
               until July 1, 2014.

             e)   AB 244 (Beall) of 2009 contained requirements  
               substantially similar to AB 154.  AB 244 was vetoed by  
               Governor Schwarzenegger, whose veto message read, "The  
               addition of a new mandate, especially one of this  
               magnitude, will only serve to significantly increase the  
               overall cost of health care.  This, like other mandates,  
               also increases cost in an environment in which health  
               coverage is increasingly expensive."

           6)POLICY COMMENT  .  This bill requires carriers' reports to  
            include an analysis of compliance with mental health parity  
            requirements using both standards in current law and in URAC  
            accreditation standards.  This bill also requires carriers to  
            structure their surveys of patients and providers using  
            compliance criteria from the URAC standards.  To ensure that  
            the data reported under the requirements in this bill are  
            standardized and intercomparable, and to maintain public  
            control over the reporting standards, the committee may wish  
            to amend this bill to require state regulators to collaborate  








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            with experts and stakeholders to determine the form and manner  
            of the data to be reported by carriers.
           
           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          Insurance Commissioner Dave Jones
          AARP California
          American Academy of Pediatrics, California District IX
          California Board of Behavioral Sciences
          Drug Policy Alliance
          Health Access California
          Latino Coalition for a Healthy California
          National Association of Social Workers, California Chapter
            One individual

           Opposition 
           
          Association of California Life and Health Insurance Companies
                                                                        California Association of Health Plans

           Analysis Prepared by  :    Ben Russell / HEALTH / (916) 319-2097