BILL ANALYSIS Ó SB 22 Page 1 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 SB 22 Page 2 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 SB 22 Page 3 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 SB 22 Page 4 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 SB 22 Page 5 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; SB 22 Page 6 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 SB 22 Page 7 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 SB 22 Page 8 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 SB 22 Page 9 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 SB 22 Page 10 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