BILL ANALYSIS
SENATE HEALTH AND HUMAN SERVICES
COMMITTEE ANALYSIS
Senator Martha M. Escutia, Chair
BILL NO: AB 88
A
AUTHOR: Thomson
B
AMENDED: February 24, 1999
HEARING DATE: June 30, 1999
8
FISCAL: Insurance/Appropriations
8
CONSULTANT:
McCarthy
SUBJECT
Health care coverage: mental illness
SUMMARY
Requires a health care service plan (health plan) contract
or disability insurance policy to provide coverage for
severe mental illnesses, and for the serious emotional
disturbances of a child.
ABSTRACT
Current 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.
This bill:
1.Requires every 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 diagnosis and medically necessary
treatment of "severe mental illnesses" and for the
"serious emotional disturbances" of a child.
Continued---
STAFF ANALYSIS OF ASSEMBLY BILL 88 (Thomson) Page
2
2.Defines "severe mental illnesses" as including: a)
Schizophrenia; b) Schizoaffective disorder; c) Bipolar
disorder (manic depressive disorder); 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
one or more mental disorders, other than substance abuse
or developmental disability, identified in the Diagnostic
and Statistical Manual of Mental Disorders.
4.4)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 contract or insurance policy.
6.Exempts specialized health plan contracts and insurance
policies, including Medicare supplement policies, and
Medi-Cal contracts from the requirements of this bill.
FISCAL IMPACT
According to the Assembly Appropriations Committee
analysis, the Public Employees Retirement System indicates
a one-half of 1% premium increase that could occur would
result in annual state costs of $1.6 million.
BACKGROUND AND DISCUSSION
1.The author's intent in proposing this bill is to prohibit
discrimination against people with selected
biologically-based mental illnesses, reduce
scientifically unsound distinctions between mental and
physical illnesses, and require more equitable mental
health coverage among health plans and insurers to
prevent adverse risk selection.
2.At least 19 states require equitable coverage for mental
illnesses. Benefits range from all mental illnesses,
plus chemical dependency, to covering only selected
Continued---
STAFF ANALYSIS OF ASSEMBLY BILL 88 (Thomson) Page
3
severe illnesses. This bill requires equitable coverage
for selected severe mental illnesses.
3.Mental health statistics -- According to the National
Institute of Mental Health (NIMH), over the course of a
lifetime, approximately 20% of Americans will experience
a mental disorder or illness. Among the most frequently
experienced mental health disorders are anxiety and
depression. Depression, for example, is estimated by the
National Institute for Mental Health to affect 9.5% of
the population each year; treatment is effective in 80%
of cases. A Rand Corporation study estimated a loss of
$12 billion in missed work days nationally each year due
to depression. In recent years, research increasingly
has demonstrated a biological basis for many mental
disorders, often involving neurological abnormalities of
the brain. If a biological basis for a mental disorder
is established, the recommended treatment typically
consists of prescription medications in addition to
psychological counseling or therapy.
4.Managed care and mental health -- Under managed care, a
trend of reduced coverage for mental health care has been
observed. According to a report prepared for Congress by
the National Advisory Mental Health Council, in 1981 58%
of employees with any health insurance also had coverage
for mental health inpatient care comparable to that for
other illnesses. By 1993, only 16% of employees had such
coverage. This has resulted in higher out-of-pocket
expenses for employees for mental heath care than for
other health care. For example, the report stated that
an acute episode resulting in a week of inpatient care
followed by weekly outpatient therapy would cost $3,892
out of pocket without mental health parity legislation,
versus $866 under parity.
According to the American Psychological Association,
approximately one-half of health plans limit mental
health treatment by:
a) limiting the number of days of coverage to 20 to 60
days;
b) limiting the number of outpatient mental health
counseling or consultation visits to 20 to 30 sessions
annually;
Continued---
STAFF ANALYSIS OF ASSEMBLY BILL 88 (Thomson) Page
4
c) imposing lifetime expenditure caps (for example,
limiting mental health expenditure to $50,000 but
allowing $1 million caps for lifetime other health
expenditures);
d) excluding certain mental health conditions from
coverage.
5.Purpose of parity legislation -- According to the above
mentioned National Advisory Mental Health Council study,
the purpose of parity legislation under debate in
Congress and in a number of states is to address several
goals:
f) overcome discrimination against persons with mental
illness "based on artificial and scientifically
untenable distinctions between mental and physical
disorders;
g) prevent "adverse selection";
h) lessen out of pocket expenses for persons with
mental illness;
i) reduce disability through effective treatment; and
j) increase the economic productivity and social
contributions from persons with mental illness.
5.Costs of lack of coverage -- As with any non-covered
health condition, out-of-pocket costs for treatment,
including medications, can be a severe financial hardship
for families. Also, as with any serious health
condition, lack of insurance coverage can limit the
ability of the affected individual to be regularly
employed and support their families. For example, it was
estimated that a number of persons receiving benefits
under the CalWORKs program would require mental health
services in preparation to becoming employed prior to the
5-year time limit (January 1, 2003 for most current
recipients). Thus, for FY 1999-2000, over $50 million
has been allocated for mental health services for
CalWORKs recipients. The National Council study cites
research indicating that for every dollar spent on
treatment of mood disorders between $3 and $9 could be
realized in net economic returns due to employee
earnings; a one-to-one net economic return was reported
for less common and more severe mental illnesses.
6.Public/private cost shift -- In general, lack of private
health insurance coverage for mental illness shifts the
Continued---
STAFF ANALYSIS OF ASSEMBLY BILL 88 (Thomson) Page
5
cost of treatment for some low income patients to the
public sector, especially state and county government.
Parity legislation is likely to result in an unknown
amount of cost shift from the public to the private
sector, potentially offsetting some of the cost increase
to public employee benefit plans.
7.Federal law and report to Congress: Recent federal
legislation, the Domenici-Wellstone parity amendment to
the federal FY 1997 appropriations bill (H.R. 3666 /P.L.
104-204), requires group health care plans which contain
some mental illness coverage must not impose more limits
on mental health coverage than are imposed for other
health conditions. However, that legislation did not
require health plans to cover mental illness and applied
only to plans serving 50 or more employees. Subsequent
to the legislation, the federal Senate Appropriations
Committee requested the National Advisory Mental Health
Council to report on: (1) the cost of providing
equitable coverage for persons with mental illness and
(2) the National Institute of Mental Health's
investigation of mental health coverage under managed
care.
The Council's initial report to Congress states that mental
health parity, adopted in combination with managed care,
is likely to result in lowered costs and lowered premiums
or, at most, very modest cost increases within the first
year of implementation. The report also notes that while
parity legislation enhances access to mental health
services, under managed care access can still be
restricted if insurers utilize "behavioral health plans"
and aggressive utilization reviews as "gatekeeping"
functions.
8.Cost is a key issue -- Previous debates over legislation
in Congress and in the legislature have prompted
conflicting studies of the cost of providing mental
health coverage. The federal study requested by Congress
in 1997 found that most previous studies failed to
account for the impact of managed care, which can impose
cost controls when parity legislation is enacted.
Supporters of mental health parity point to a recent Price
Waterhouse study, commissioned by the California
Continued---
STAFF ANALYSIS OF ASSEMBLY BILL 88 (Thomson) Page
6
Psychological Association and the American Psychological
Association, that found the cost of a comprehensive
mental health parity requirement (similar to the one
included in SB 468/Polanco) would increase base medical
plan costs by between 1% (for HMOs) and 3% (for
Fee-For-Service plans). Considering the type of plans
and likely employer responses, the Price Waterhouse
actuarial analysis predicted an average, net employer
contribution cost increase of 94 cents per member per
month (an average of $3 per family). In addition, for
small employers, defined as those with 5 employees or
less, the study predicted an increase in cost of $84 per
year.
9.The California Alliance for the Mentally Ill (CAMI), the
sponsor, argues that this bill would benefit employers by
improving worker productivity, reducing homelessness, and
lowering criminal justice costs. The California
Psychiatric Association (CPA) argues that nearly all
health plans discriminate against patients with brain
disorders such as schizophrenia, depression and manic
depression. The California Psychological Association
supports this bill in concept, and is sponsoring SB 468
(Polanco), which would require coverage for all mental
illnesses.
10.The California Association of Health Plans (CAHP)
opposes this bill unless amended. CAHP is urging the
author to exclude individuals and small employers from
the coverage requirements in this bill. The California
Network of Mental Health Clients is opposed to this bill
unless amended to exclude coverage of involuntary
treatment. The Citizens Commission on Human Rights
(CCHR), established by the Church of Scientology to
address psychiatric violations of human rights, argues
this bill will mandate dubious science, increase the
ranks of the uninsured, and provide a gateway to
insurance fraud.
The California Manufacturers Association and the Health
Insurance Association of America opposes AB 88, stating
it would increase health insurance costs and, therefore,
lead to more uninsured Californians. Blue Cross of
California objects to the cost and the lack of
restriction on inpatient or outpatient days.
Continued---
STAFF ANALYSIS OF ASSEMBLY BILL 88 (Thomson) Page
7
11.Protection and Advocacy Inc. has taken a "Support if
amended" position and requested the following amendments:
Amend the bill to ensure broad mental health
coverage by defining outpatient services consistent
with the managed care definitions and clarifying that
the basic health benefits of Section 1367(I) of the
Health and Safety Code apply to mental health
coverage;
Amend the bill to ensure equal access to coverage
for medically necessary treatment for all enrollees,
regardless of diagnosis or severity of condition;
Provide that a person shall not be required to
accept insurance coverage for involuntary mental
health treatment, but allow persons to choose to
authorize reimbursement for such treatment.
5.A key issue policy issue raised by this bill is whether
California should adopt a comprehensive mental health
parity legislation or legislation that explicitly seeks
parity for a limited number of conditions. This
Committee passed on April 7, 1999, SB 468 (Polanco),
which contains comprehensive parity, i.e., parity for all
mental illnesses. AB 88 clearly would provide parity for
selected mental illnesses, but it is unclear what the
impact would be on other disorders. By requiring
coverage for some, but not all mental illness, are
additional inequities inadvertently created?
For example, this bill would require certain anxiety
disorders, such as "panic disorder" and
"obsessive-compulsive disorder" to be covered by health
plans, but not others, such as "posttraumatic stress
disorder". Also, this bill would require coverage of
"pervasive developmental disorder or autism" but it is
unclear whether related conditions, such as "Asperger's
Disorder" or "Rhett's disorder" would be covered.
Similarly, "major depressive disorder" and "bipolar
disorder" would be covered, but it appears "dysthymic
disorder" would not be covered. Examples of other
disorders which may not be covered by this bill would
include developmental disabilities (other than autism and
pervasive developmental disorder), borderline personality
disorder and other personality disorders. The Committee
may wish to inquire what will be the expected impact of
Continued---
STAFF ANALYSIS OF ASSEMBLY BILL 88 (Thomson) Page
8
requiring coverage for the disorders named in this bill
on existing coverage of disorders not named in the bill?
I.e., are insurance plans likely to drop coverage of
other disorders, not named in the bill, if only required
to cover the named disorders? Also, what is the
additional cost of mandatory coverage of all of the
disorders versus selected disorders?
PRIOR ACTIONS
Assembly Floor: 59-18 Pass
Assembly Appropriations: 14- 6 Do Pass
Assembly Health: 10- 0 Do Pass
Continued---
STAFF ANALYSIS OF ASSEMBLY BILL 88 (Thomson) Page
9
POSITIONS
Support: California Alliance for the Mentally Ill
(sponsor)
American Federation of State, County, &
Municipal Employees
Association of Regional Center Agencies
California Healthcare Association
California Healthcare Association's
California Physician
Group's Council
California Mental Health Directors
Association
California Mental Health Planning Council
California Physician Groups Council
California Public Employees' Retirement
System
California Nurses Association
California State Association of Counties
California State Employees Association
California Teachers Association
County Health Executives Association of
California
Friends Committee on Legislation
Jericho
Los Angeles County Board of Supervisors
National Alliance for the Mentally
Ill-Whittier
Pomona Valley Alliance for the Mentally Ill
Protection and Advocacy, Inc. (support, if
amended)
Solano County Board of Supervisors
Union of American Physicians & Dentists
Urban Counties Caucus
1 Individual
Oppose: Association of California Life and Health
Insurance Companies
Blue Cross of California
California Association of Health Plans
(opposed unless amended)
Californians for Affordable Health Reform
California Manufacturer's Association
STAFF ANALYSIS OF ASSEMBLY BILL 88 (Thomson) Page
10
Citizens Commission on Human Rights
Health Insurance Association of America
-- END --