BILL ANALYSIS
AB 88
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Date of Hearing: March 24, 1999
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Carole Migden, Chairwoman
AB 88 (Thomson) - As Amended: 2/24/99
Policy Committee: HealthVote:10 - 3
Urgency: No State Mandated Local
Program:YesReimbursable: No
SUMMARY :
This bill requires health insurers to provide coverage for
severe mental illnesses and for the serious emotional
disturbances of a child. Specifically, the bill requires mental
illness benefits to include outpatient and hospital services,
and prescription drugs if a plan otherwise covers prescription
drugs. In addition, the bill requires terms for maximum
lifetime benefits, co-payments and deductibles to be applied
equally to all benefits under a plan contract or insurance
policy.
The bill exempts health plans covering Medi-Cal beneficiaries
and other specialized health plans, such as Medicare supplement
policies. The bill does not prohibit the use of case
management, managed care, or utilization review in the provision
of mental health coverage.
FISCAL EFFECT :
1)The bill's coverage requirements will increase the cost of
health insurance premiums to employers and individuals. As a
purchaser of health insurance for state employees, a portion
of these costs will accrue to the state. The extent of these
costs will be determined through negotiations with individual
plans. Although there are various estimates on the likely
cost of achieving full mental health parity (discussed below),
information provided by the Public Employees Retirement System
indicates a one-half of one-percent increase would result in
annual state costs of $1.6 million.
2)A 1998 report by the US Department of Health and Human
Services estimates full mental health insurance parity would
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increase managed care plan premiums by less than one percent,
including for substance abuse coverage. The report estimates
an average 3.6 percent increase would result across all types
of insurance, including fee-for-service coverage . Similarly,
the National Advisory mental Health Council reviewed the
effect of parity laws on premiums in five states. The council
concluded that in states where managed care is prevalent, such
as in California, full mental health parity would result in
premium increases of less than one percent.
In contrast to these estimates, a 1996 study by the
Congressional Budget Office (CBO) projected premium increases
of between three and four percent, depending on whether the
coverage includes substance abuse treatment. However, the CBO
estimate was disputed by a subsequent RAND Corporation study
published in the Journal of the American Medical Association.
RAND concluded the CBO estimates "overestimate the cost
effects of parity legislation" because they did not
distinguish between managed care and fee-for-service based
insurance.
COMMENTS :
1)Purpose of the Bill . This bill is intended to prohibit
discrimination against people with biologically-based mental
illnesses, and require equitable mental health coverage among
all health insurers to prevent risk selection ("cherry
picking") by 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 treatment for
mental illness is costly both to mentally ill individuals and
society, including state and local governments.
2)Related Legislation . SB 468 (Polanco) requires equitable
coverage for all mental disorders and illnesses, and serious
emotional disturbances of a child. It is before the Senate
Insurance Committee.
3)Federal Law . The federal Mental Health Parity Act, effective
last year, prohibits health plans from setting annual or
lifetime dollar limits on an enrollee's mental health benefits
that are lower than such limits on other medical care. The
federal requirement does not apply to insurance purchased by
employers with fewer than 50 employees.
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4)Legislation In Other States . At least 19 states have laws
requiring equitable coverage for mental illnesses. These
benefits range from covering all mental illnesses, including
for substance abuse, to only a selected number of severe or
biologically based illnesses. This bill requires equitable
coverage for the more serious mental illnesses.
5)Support Arguments . The California Alliance for the Mentally
Ill (CAMI), the sponsor contends that this bill would benefit
employers by improving worker productivity, reducing
homelessness, and lowering criminal justice system costs.
CAMI also believes that increased private coverage will reduce
costs for the state and counties.
The California Psychiatric Association contends that nearly all
health plans discriminate against patients with genetic
biological brain disorders such as schizophrenia, depression
and manic depression by imposing higher co-payments, and
covering fewer inpatient days and doctor visits. The
Association argues these practices stem from earlier beliefs
that serious mental illnesses are not medical problems. The
Association notes, however, that an abundance of research,
including brain scans, demonstrate clear differences between
the brains of healthy individuals and those of patients with
serious mental illnesses.
The California Psychological Association supports this bill "in
concept," but argues the bill should not be limited only to
more serious forms of mental illnesses. The Association is
sponsoring SB 468 (Polanco) to require coverage for all forms
of mental illness.
6)Opposition Arguments . The California Association of Health
Plans (CAHP) is opposed to this bill unless amended. CAHP
urges an exclusion from the bill's coverage requirement for
insurance purchased by individuals and small employers because
they are most adversely affected by premium cost increases.
CAHP cites a Barents Group study estimating that a 1 percent
increase in the cost of health insurance results in 40,000
Californians losing coverage. CAHP member plans estimate that
this bill would increase the cost of average of 1.5 to 6.5
percent, depending upon the type of plan.
The California Network of Mental Health Clients is opposed to
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bill unless it is amended to exclude coverage of involuntary
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 Citizens Commission on Human Rights, established by the
Church of Scientology, argues this bill will mandate dubious
science, among other objections. The Scientologists believe
the bill may promote over-drugging of children, and question
the existence of Attention Deficit Hyperactivity Disorder
(ADHD). In addition, the group argues that mental health
coverage is not cost-effective because there are difficulties
in diagnosis, disputes over what constitutes effective
treatment, and that results are not measured.
Analysis Prepared by : Bill Wehrle / APPR. / (916) 319-2081