BILL ANALYSIS AB 88 Page 1 Date of Hearing: March 9, 1999 ASSEMBLY COMMITTEE ON HEALTH 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 AB 88 Page 2 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 conditions. FISCAL EFFECT : Unknown COMMENTS : 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 AB 88 Page 3 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 AB 88 Page 4 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. AB 88 Page 5 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 illnesses. 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 AB 88 Page 6 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 providers. REGISTERED SUPPORT / OPPOSITION : Support 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 AB 88 Page 7 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 Novartis 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 Opposition 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 AB 88 Page 8