BILL ANALYSIS                                                                                                                                                                                                    

                                                          AB 88
                                                          Page  1

Date of Hearing:  March 9, 1999

                     Martin Gallegos, Chair
         AB 88 (Thomson) - As Amended:  February 24, 1999
SUBJECT  :   Health care coverage: mental illness.

  SUMMARY  :   Requires a health care service plan contract or  
disability insurance policy to provide coverage for the severe  
mental illnesses of a person of any age, and for the serious  
emotional disturbances of a child.  Specifically,  this bill  : 

1)   Requires every health care service plan (health plan) or  
     disability insurer contract issued, amended, or renewed on  
     or after January 1, 2000, that provides hospital, medical,  
     or surgical coverage, to provide coverage for the diagnosis  
     and medically necessary treatment of severe mental  
     illnesses of a person of any age, and for the serious  
     emotional disturbances of a child.  

2)   Defines "severe mental illnesses" as including:

     a)        Schizophrenia;
     b)        Schizoaffective disorder;
     c)        Bipolar disorder (manic depressiveness);
     d)        Major depressive disorders;
     e)        Panic disorder;
     f)        Obsessive-compulsive disorder;
     g)        Pervasive developmental disorder or autism;
     h)        Anorexia nervosa; and
     i)        Bulimia nervosa.

3)Defines "serious emotional disturbances of a child" as a child  
  who has one or more mental disorders, other than substance  
  abuse or developmental disability, identified in the  
  Diagnostic and Statistical Manual of Mental Disorders.

4)Requires severe mental illness benefits to include outpatient  
  and inpatient services, hospital services, and prescription  
  drugs if a plan contract or insurance policy otherwise covers  
  prescription drugs.

5)Requires terms for maximum lifetime benefits, copayments and  
  deductibles to be applied equally to all benefits under a plan  


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  contract or insurance policy.

6)Provides that the requirements of this bill do not apply to a  
  contract between the Department of Health Services and a  
  health plan for Medi-Cal beneficiaries.

7)Exempts specialized health plan contracts and insurance  
  policies, including Medicare supplement policies, from the  
  requirements of this bill.

8)Neither prohibits nor limits the use of case management,  
  managed care or utilization review in the provision of mental  
  health coverage 
EXISTING LAW  requires a health plan contract or disability  
insurance policy covering hospital, medical or surgical services  
to cover the diagnosis and treatment of specified physical  
  FISCAL EFFECT  :  Unknown


  1)PURPOSE OF THIS BILL  .  The author argues that this bill will  
  prohibit discrimination against people with biologically-based  
  mental illnesses, dispel artificial and scientifically unsound  
  distinctions between mental and physical illnesses, and  
  require equitable mental health coverage among all health  
  plans and insurers to prevent adverse risk selection by health  
  plans and insurers.  The author stresses that mental illness  
  is treatable in a cost-effective manner and that the failure  
  of the health care system to provide adequate treatment for  
  persons with mental illness has been costly not only to  
  mentally ill individuals and their families, but to society as  
  a whole and particularly to state and local governments.

  2)RELATED LEGISLATION  .  This bill is substantially similar to AB  
  1100 (Thomson) of 1998, which was vetoed last year by the  
  Governor.  In his veto message, Governor Wilson argued that  
  mandating mental health coverage would lead to increased  
  insurance costs, and thereby result in reduced access to  
  health insurance for many Californians.  SB 468 (Polanco) has  
  also been introduced this session to require equitable  
  coverage for  all  mental disorders and illnesses, and serious  
  emotional disturbances of a child.  SB 468 is awaiting  


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  referral to a policy committee in the Senate.

  3)FEDERAL MENTAL HEALTH PARITY ACT  .  The federal Mental Health  
  Parity Act (P.L. No. 104-204), which went into effect on  
  January 1, 1998, prohibits health plans from setting annual or  
  lifetime dollar limits on an enrollee's mental health benefits  
  that are lower than any such limits on other medical care.   
  The federal requirement does not apply to employers with fewer  
  than 50 employees.  A recent  New York Times  article reports  
  that some health plans have responded to the prohibition on  
  monetary limits by instituting limits on patient visits,  
  treatment sessions, and hospital lengths of stay.

  4)THE COST OF MENTAL HEALTH COVERAGE  .  In April 1998, the U.S.  
  Department of Health and Human Services released a report,  
  "The Costs and Effects of Parity for Mental Health and  
  Substance Abuse Insurance Benefits."   The report estimates  
  that full parity for mental health and substance abuse  
  services in managed care health plans would increase family  
  insurance premiums less than 1%.  The premium increase  
  projected for a composite of health plans and insurers,  
  including fee for service reimbursement, is an average of  
  3.6%.  The study further specifies that the projected premium  
  increase, for full parity of mental illness and substance  
  abuse, in a health maintenance organization (HMO), is .6%.  

  In a 1996 study, the Congressional Budget Office (CBO)  
  projected premium increases of 3.2% would result from  
  implementation of mental health parity, and increases of 4%  
  would result from full parity including chemical dependency  
  coverage.  However, these findings are disputed in a November  
  12, 1997, RAND study published in the Journal of the American  
  Medical Association.  RAND notes that the CBO projections "did  
  not incorporate any cost distinction between managed care or  
  fee-for-service care and relied on a 1986 report from the  
  National Institute of Mental Health for practice patterns" and  
  further concluded that the CBO projections were "likely to  
  overestimate the cost effects of parity legislation . . . ."

  In its 1998 report, "The Costs and Effects of Parity for  
  Mental Health and Substance Abuse Insurance Benefits," the  
  National Advisory Mental Health Council (NAMHC) reviewed state  
  parity laws, and the effect of such laws on premium increases  
  in five states.  The NAMHC concluded that in systems already  
  using managed care, implementing full mental health parity  


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  results in an increase of less than 1% in total health care  
  costs during a one-year period.     

5)SIMILAR LAWS IN OTHER STATES  .  At least 19 states have laws  
  requiring equitable coverage for mental illnesses.  These  
  benefits range from covering all mental illnesses, plus  
  chemical dependency, to only a selected number of severe or  
  biologically based illnesses.  This bill requires equitable  
  coverage for selected severe mental illnesses.

  6)SUPPORT  .  The California Alliance for the Mentally Ill (CAMI),  
  the sponsor, argues that this bill would benefit employers by  
  improving worker productivity, would reduce homelessness, and  
  significantly lower costs to the criminal justice system.   
  CAMI also argues that increased private coverage will reduce  
  costs for the state and counties.  The Orange County Coalition  
  for Mental Health notes that Californians diagnosed with  
  mental illnesses quickly discover that their health insurance  
  coverage for psychiatric treatment is limited.  Strictly  
  limited inpatient days and inadequate outpatient allowances  
  become exhausted, forcing them to pay out of pocket and  
  eventually to rely on Medi-Cal or programs for indigents.  

  The California Psychiatric Association (CPA) argues that  
  nearly all health plans discriminate against patients with  
  genetic biological brain disorders such as schizophrenia,  
  depression and manic depression. This discrimination takes the  
  form of higher co-payments, fewer allowable inpatient days,  
  and caps on doctor visits.  CPA states that this  
  discrimination began when it was believed that these disorders  
  were not medical problems.  Research now shows that the severe  
  mental illnesses covered by this bill are analogous to  
  diabetes and heart disease.  Brain scans show clear  
  differences between normal brains and the brains of patients  
  with schizophrenia, manic depression, depression, bulimia,  
  anorexia and obsessive-compulsive disorder.  CPA argues that  
  with managed care, controls are in place to assure that  
  services required to be covered in this bill are limited to  
  those that are medically necessary.  CPA further notes that  
  depression is second only to heart disease in causing absence  
  from work.  Nearly 20% of disability in women is caused by  
  depression, and 4 of the 5 leading causes of disability of  
  women are brain disorders required to be covered under the  
  provisions of this bill.  


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  The California Nurses Association reports that many patients  
  and families are paying significant out of pocket expenses for  
  basic treatment and medication for mental illnesses that  
  should have been covered by health plans.  Without coverage,  
  many patients cannot afford medication and therapy associated  
  with a disease, and they suffer needlessly.  The National  
  Association for the Mentally Ill Sacramento contends that due  
  to the high market penetration of managed care in California,  
  there is no danger of frivolous and unchecked utilization of  
  services or that costs will spiral out of control.  
  While the California Psychological Association supports this  
  bill in concept, the Psychological Association argues that all  
  mental illnesses should be covered equitably, along with other  
  physical illnesses.  The Psychological Association is  
  concerned that patients who do not suffer from one of the  
  disorders specified in this bill will nevertheless be labeled  
  with one of those diagnoses in an effort to gain third party  
  payment. The Psychological Association is sponsoring SB 468  
  (Polanco), which would require coverage for all mental  

  7)OPPOSE UNLESS AMENDED  .  The California Association of Health  
  Plans (CAHP) is opposed to this bill unless amended.  CAHP is  
  urging the author to exclude individuals and small employers  
  from the coverage requirements in this bill because they are  
  harder hit by cost increases than are larger group purchasers.  
   CAHP cites a Barents Group study indicating that for every 1%  
  increase in the cost of health care coverage, at least 40,000  
  Californians lose their coverage.  CAHP member plans estimate  
  that this bill would increase the cost of coverage by 1.5 to  
  6.5%, depending upon the type of health plan (HMO or preferred  
  provider organization, for example).  CAHP also argues that  
  employers already have access to mental health coverage, since  
  most health plans offer this benefit to employers who wish to  
  purchase it.  Federally qualified HMOs must cover 20  
  outpatient visits per year for crisis intervention and  
  substance abuse, and the Health Insurance Plan of California  
  (HIPC) offers a mental health benefit of 10 inpatient days and  
  20 outpatient visits.  Finally, CAHP argues that this bill  
  provides coverage for mental disorders, such as autism, that  
  lack accepted guidelines for treatment. 
   The California Network of Mental Health Clients is opposed to  
  bill unless it is amended to exclude coverage of involuntary  


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  treatment.  The Network argues that although the aim of this  
  bill is to reduce discrimination, involuntary treatment in  
  health care coverage for persons with psychiatric disabilities  
  enhances discrimination. The Network contends that this bill  
  perpetuates a double standard, reinforcing prejudicial views  
  of mental health clients as childlike and incompetent.  The  
  California Association of Mental Health Patients' Rights  
  Advocates (CAMHPRA) makes similar arguments, and contends that  
  coverage for involuntary inpatient treatment will create an  
  incentive for hospitals to keep detained patients for longer  
  periods of time than are therapeutically necessary.

  8)OPPOSITION  .  The Citizens Commission on Human Rights (CCHR),  
  established by the Church of Scientology to address  
  psychiatric violations of human rights, argues that this bill  
  will mandate dubious science, increase the ranks of the  
  uninsured, and provide a gateway to insurance fraud.  CCHR is  
  concerned about over-drugging of children, and questions the  
  existence of Attention Deficit Hyperactivity Disorder (ADHD)  
  in particular.  CCHR argues that mental health coverage is not  
  cost-effective because there are difficulties in diagnosis,  
  disputes over what constitutes effective treatment, a lack of  
  results measurement, and unnecessary care.  CCHR contends that  
  since the diagnosis and treatment of mental illness is murky,  
  there are more opportunities for fraudulent billing in  
  psychiatric care versus other medical treatments.  According  
  to CCHR, 79% of penalties collected for healthcare fraud and  
  abuse in 1994 was attributable to fraud by psychiatric  



California Alliance for the Mentally Ill (sponsor)
Alliance for the Mentally Ill
Alliance for the Mentally Ill of San Mateo County
Alliance for the Mentally Ill of Santa Clara County
Alliance for the Mentally Ill of Shasta County
California Association of Catholic Hospitals
California Nurses Association
California Professional Firefighters
California Psychological Association (in concept only)
California Psychiatric Association


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California School Employees Association
California Society of Industrial Medicine and Surgery
California State Association of Counties
California State Employees Association
California Teachers Association
County Health Executives Association of California
County of Sacramento
Family Service Council of California
League of Women Voters
Many Individuals
Mount San Jacinto Alliance for the Mentally Ill
NAMI Inland Valley
National Alliance for the Mentally Ill, Sacramento Chapter
National Association of Social Workers
Older Women's League of California
Orange County Coalition for Mental Health
Pharmacia and Upjohn
San Diego Alliance for the Mentally Ill
San Gabriel Valley AMI INC.
Santa Clara County Board of Supervisors
Solano County Board of Supervisors
Union of American Physicians & Dentists


Apple Valley Chamber of Commerce
Association of California Life and Health Insurance Companies  
(unless amended)
Basic Life Institute 
Blue Cross of California (unless amended)
California Association of Mental Health Patients' Rights  
Advocates (unless amended)
California Manufacturers Association
California Network of Mental Health Clients (unless amended)
Citizens Commission on Human Rights
Law Offices of Michele Ball
Numerous individuals
Picture Publishing
Precision Systems, Inc.
Printing Industries of California
Quality Equipment Rentals
Renaissance Academy
Analysis Prepared by  :  Ann Blackwood / HEALTH / (916)319-2097 


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