BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: AB 1600
A
AUTHOR: Beall
B
AMENDED: As Introduced
HEARING DATE: June 23, 2010
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CONSULTANT:
6
Tadeo
0
0
SUBJECT
Health care coverage: mental health services
SUMMARY
Requires health plans and health insurers to cover the
diagnosis and medically necessary treatment of a mental
illness, as defined, of a person of any age, including a
child, instead of limiting coverage only for severe mental
illness, as in current law. Requires, the definition of
mental illness to be subject to revision to conform to, in
whole or in part, the list of mental disorders defined in
the Diagnostic and Statistical Manual of Mental Disorders
IV (DSM-IV), following publication of each subsequent
volume of the DSM.
CHANGES TO EXISTING LAW
Existing federal law:
Under the Mental Health Parity Act of 1996, requires group
health plans with over 50 employees to provide parity
between mental health benefits and medical/surgical
benefits with respect to the application of aggregate
lifetime and annual dollar limits. The law does not apply
to benefits for substance abuse or chemical dependency.
Continued---
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Under the Mental Health Parity and Addiction Equity Act of
2008 (MHPA), after October 3, 2009, requires a group health
insurance plan, with over 50 employees, that offers mental
health coverage, to cover mental illness and substance
abuse disorders on the same terms and conditions as other
illnesses.
Existing state law:
The Knox-Keene Health Care Service Plan Act of 1975
(Knox-Keene), provides for the regulation and licensure of
health plans and specialized health plans by the Department
of Managed Health Care (DMHC) and health insurers by the
California Department of Insurance (CDI).
Requires health plans and insurers to cover various health
care services, including basic health care services, such
as physician services, hospital inpatient and ambulatory
care services, diagnostic laboratory services, preventive
health services, emergency health care services, and
hospice care.
Requires health plans and health insurers to provide
coverage for the diagnosis and medically necessary
treatment of certain severe mental illnesses of a person of
any age, and of serious emotional disturbances of a child,
as defined, under the same terms and conditions that are
applied to other medical conditions (commonly referred to
as mental health parity). For covered conditions, existing
law requires health plans to eliminate any benefit limits
and cost-sharing requirements that make mental health
benefits less comprehensive than physical health benefits.
These include higher co-payments and deductibles, and
limits on the number of outpatient visits or inpatient days
covered. Benefits include outpatient services, inpatient
hospital services, partial hospital services, and
prescription drugs, if the health plan contract includes
coverage for prescription drugs.
Describes severe mental illness as several conditions,
including schizophrenia, schizoaffective disorder, bipolar
disorder (sometimes referred to as manic depressive
illness), major depressive disorders, panic disorder,
obsessive-compulsive disorder, pervasive developmental
disorder or autism, anorexia nervosa, and bulimia nervosa.
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Defines a child with serious emotional disturbances, as a
child who has one or more mental disorders as identified in
the DSM-IV, other than a primary substance use disorder or
developmental disorder that results in behavior
inappropriate to the child's age, according to expected
developmental norms.
Defines a specialized plan contract as a contract for
health care services in a single specialized area of health
care, including dental care, for subscribers or enrollees,
or which pays for, or reimburses any part of, the cost for
those services in return for a prepaid or periodic charge,
paid by, or on behalf of, subscribers or enrollees.
Defines specialized health insurance policy as a policy of
health insurance for covered benefits in a single
specialized area of health care, including dental-only,
vision-only, and behavioral health-only policies. There is
no requirement for health insurers subject to regulation by
CDI to cover medically necessary basic services or any
specific minimum basic benefits.
This bill:
Requires health plans and health insurance policies that
provide coverage for hospital, medical, or surgical
expenses, to provide coverage for the diagnosis and
medically necessary treatment of a mental illness of a
person of any age, including a child, under the same terms
and conditions applied to other medical conditions,
including but not limited to maximum lifetime benefits,
co-payments, and individual and family deductibles.
Defines mental illness as a mental disorder classified in
the Diagnostic and Statistical Manual IV (DSM IV) and
includes coverage for substance abuse. Requires the
benefits provided under this bill to include outpatient
services; inpatient hospital services; partial hospital
services; and, prescription drugs, if the plan contract
already includes coverage for prescription drugs.
Requires, following publication of each subsequent volume
of the DSM-IV, the definition of "mental illness" to be
subject to revision to conform to, in whole or in part, the
list of mental disorders defined in the then-current volume
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of the DSM-IV. Requires any revision to the definition of
"mental illness" to be established by regulation
promulgated jointly by DMHC and CDI.
Allows a health plan or health insurer to provide coverage
for all or part of the mental health coverage through a
specialized health care service plan or mental health plan
and prohibits the health plan or health insurer from being
required to obtain an additional or specialized license for
this purpose.
Requires a health plan or health insurer to provide the
mental health coverage in its entire service area and in
emergency situations, as specified.
Permits a health plan and health insurer to utilize case
management, network providers, utilization review
techniques, prior authorization, co-payments, or other
share-of-cost requirements, to the extent allowed by law or
regulation, in the provision of benefits required.
Exempts contracts between the Department of Health Care
Services and a health plan for enrolled Medi-Cal
beneficiaries.
Exempts accident-only, specified disease, hospital
indemnity, Medicare supplement, dental-only, or vision-only
insurance policies.
Prohibits a health care benefit plan, contract, or health
insurance policy with the Board of Administration of the
Public Employees' Retirement System from applying to this
bill unless the board elects to purchase a plan, contract,
or policy that provides mental health benefits mandated
under this bill.
FISCAL IMPACT
The Assembly Appropriations Committee analysis of AB 1600
cites the California Health Benefits Review Program (CHBRP)
report which estimates annual costs to the Healthy Families
program of $691,000 (33 percent General Fund).
BACKGROUND AND DISCUSSION
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According to the author, AB 1600 is intended to end the
discrimination against patients with biological brain
disorders, such as schizophrenia, depression, and manic
depression, as well as posttraumatic disorders suffered by
victims of crime, abuse or disaster, by requiring treatment
and coverage of these illnesses that is equitable to
coverage provided for other medical illnesses. The author
argues that this bill corrects a serious discrimination
problem that bankrupts families and causes enormous
taxpayer expense. The author notes that, current federal
law 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 medical care. The author
states that an alarming number of mentally ill persons end
up incarcerated because they lack access to appropriate
care. The author further states that inadequate access to
mental health services forces law enforcement officers to
serve as the mental health providers of last resort, and
this misuse of the corrections system costs state taxpayers
roughly $1.8 billion per year. The author adds that an
alarming number of these individuals also wind up in
hospital emergency rooms and end up receiving county
services. The author contends that the shift by the
private insurance market over the last 20 years to exclude
entitled covered enrollees by cherry picking out mental
illness has been borne financially by the state and
counties to the benefit of private insurers.
The federal Mental Health Parity and Addiction Equity Act
of 2008 (MHPA)
The Mental Health Parity and Addiction Equity Act of 2008
(MHPA), enacted in October 2008, requires group health
insurance plans to cover mental illness and substance abuse
disorders on the same terms and conditions as other
illnesses and help to end discrimination against those who
seek treatment for mental illness.
Pursuant to MHPA, the federal Departments of Labor, Health
and Human Services, and the Treasury issued an interim
final rule and accompanying guidelines governing
implementation of MHPA on February 2, 2010, that included a
90-day public comment period that closed May 3, 2010. The
MHPA does not require group health plans to provide mental
health coverage. However, if a plan does offer mental
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health coverage, the MHPA requires equity in financial
requirements, such as deductibles, co-payments,
coinsurance, and out-of-pocket expenses; equity in
treatment limits, such as caps on the frequency or number
of visits, limits on days of coverage, or other similar
limits on the scope and duration of treatment; and, equity
in out-of-network coverage.
The MHPA applies to all group health plans for plan years
beginning after October 3, 2009, and exempts small firms of
50 or fewer employees. Although AB 1600 defines mental
illness as those disorders identified in the DSM-IV, the
MHPA does not specify a definition for mental health and
substance abuse (MH/SA) disorders.
According to a March 2010 report by Advocates for Human
Potential (AHP), Inc., a research and consulting firm that
provides a preliminary operational analysis of the MHPA
interim final rule, the MHPA is expected to affect
approximately 111 million participants in 446,400 federally
regulated group health plans; 29 million participants in
approximately 20,300 state and local government employer
group health plans; 460 health insurers that provide
substance use disorder or mental health benefits in the
group health insurance market; and, 120 managed behavioral
health care organizations that provide substance use
disorder or mental health benefits to group health plans.
Mental health parity in California
Since 1999, health plans and health insurers have been
required to provide coverage for the diagnosis and
medically necessary treatment of certain severe mental
illnesses of a person of any age, and of serious emotional
disturbances of a child, as defined, under the same terms
and conditions applied to other medical conditions. Nine
specific diagnoses are considered severe mental illnesses:
schizophrenia; schizoaffective disorder; bipolar disorder;
major depressive disorder; panic disorder; obsessive
compulsive disorder; pervasive developmental disorders or
autism; anorexia nervosa; and, bulimia nervosa. For
covered conditions, health plans are required to eliminate
benefit limits and share-of-cost requirements that have
traditionally rendered mental health benefits less
comprehensive than physical health coverage. Mental health
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parity requires benefits to include outpatient services,
inpatient hospital services, partial hospital services, and
prescription drugs, if the health plan contract includes
coverage for prescription drugs.
In 2003, DMHC promulgated mental health parity regulations,
that require health plans to provide, (in addition to all
basic and other health care services required by
Knox-Keene), at a minimum, coverage for crisis intervention
and stabilization; and psychiatric inpatient services,
including voluntary inpatient services and services from
licensed mental health providers, including but not limited
to psychiatrists and psychologists.
California Health Benefits Review Program
AB 1996 (Thomson), Chapter 795, Statutes of 2002, requests
the University of California to assess bills proposing a
mandated benefit or service, and prepare a written analysis
with relevant data on the medical, economic, and public
health impact of the proposed mandate. The program was
extended for four additional years by SB 1704 (Kuehl),
Chapter 684, Statutes of 2006. In its analysis of this
bill, CHBRP reports:
Medical Effectiveness. The literature on all treatments
for MH/SA conditions covered by this bill, more than 400
diagnoses, could not be reviewed during the 60 days
allotted for completion of CHBRP reports. Instead, the
effectiveness review for this bill summarizes the
literature on the effects of parity in coverage for MH/SA
services. The findings from studies of parity in coverage
for MH/SA services suggest that when parity is implemented
in combination with a range of techniques for management of
MH/SA services and is provided to individuals who already
have some level of coverage for these services:
Consumers' average out-of-pocket costs for MH/SA
services decrease;
There is a small decrease in health plans'
expenditures per user of MH/SA services;
Rates of growth in the use and cost of MH/SA
services decrease;
Utilization of MH/SA services increases slightly
among individuals with SA disorders, individuals with
moderate levels of symptoms of mood and anxiety
disorders, and persons employed by moderately small
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firms (50 to100 employees) who have poor mental health
or low incomes; and,
The effect on outpatient MH/SA visits depends on
whether individuals were enrolled in a fee-for-service
plan or a health maintenance organization or HMO prior
to the implementation of parity.
Utilization, Cost, and Coverage Impacts. Roughly 16
million insured individuals would be subject to this bill's
mandate. CHBRP points out that approximately 66 percent of
individuals in policies subject to this bill currently have
parity coverage for non-SMI disorders, 32 percent have less
than full parity coverage, and 1 percent have no coverage;
55 percent of insured Californians have parity coverage for
substance use disorders, 35 percent have less than full
parity coverage, and 10 percent have no coverage. CHBRP
estimates that, among individuals in policies affected by
this bill, utilization would increase by 10.5 outpatient
mental health visits and 3.1 outpatient substance abuse
visits per 1,000 members per year.
Increased utilization would be the result of elimination of
benefit limits, and a reduction in cost sharing because
coinsurance rates are often higher for non-SMI MH/SA
treatment than for other health care. Utilization would
also increase among insured individuals who previously had
no coverage for conditions other than the SMI diagnoses
covered under existing state law. However, CHBRP notes
that more stringent management of care would partly offset
increases in utilization due to more generous coverage.
CHBRP also indicates that, as a result of this bill, total
health care expenditures, including total premiums and
out-of-pocket expenditures, would increase by about $44
million or 0.06 percent. More than half of the total
increase in health care expenditures is due to services for
non-SMI disorders ($26.6 million) and the remainder ($18.3
million) is due to treatment of substance abuse disorders.
This bill is estimated to increase premiums by about $63
million. Total premium contributions from private
employers who purchase group insurance are estimated to
increase by $25 million per year, or 0.06 percent. Total
premiums for individually purchased insurance would
increase by about $29 million, or 0.48 percent. The
increase in individual premium costs would be partly offset
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by a decline in individual out-of-pocket costs of about $18
million, or 0.31 percent. Enrollee contributions toward
premiums for publicly funded group insurance would increase
by about $8 million, or 0.06 percent. The impact of this
bill on per member, per month premiums varies widely across
all market segments, with negligible premium increases or
even decreases for public programs, modest increases among
the DMHC-regulated health plan contracts and CDI-regulated
large group health insurance policies, and larger increases
in the CDI-regulated small-group and individual policies.
CHBRP also found that no measurable change in the number of
uninsured is projected to occur as a result of this bill
because, on average, premium increases are estimated to
increase by less than 1 percent.
Public Health Impact. The scope of potential outcomes
related to MH/SA treatment includes reduced suicides,
reduced symptomatic distress, improved quality of life,
reduced pregnancy-related complications, reduced injuries,
improved medical outcomes, and improved social outcomes,
such as a decrease in criminal activity. Mental and
substance abuse disorders are a substantial cause of
mortality and disability in the U.S. Substance abuse, in
particular, often results in premature death. Currently
there is no evidence that parity laws like this bill result
in a reduction of premature death. There are sizeable
economic costs associated with mental and substance abuse
disorders relating to lost productivity. Although it is
likely that this bill would reduce lost productivity for
those who are newly covered for MH/SA benefits, the total
impact of this bill on economic costs cannot be estimated.
Finally, CHBRP found that a potential benefit of this bill
is that it would eliminate a health insurance disparity in
the individual and small-group insurance market between
psychological and non-MH/SA health conditions and could
therefore help to destigmatize MH/SA treatment.
Diagnostic and Statistical Manual of Mental Disorders (DSM)
The Diagnostic and Statistical Manual of Mental Disorders
(DSM), first published in 1952, is published by the
American Psychiatric Association, and is the standard
classification of mental disorders used by mental health
professionals in the United States. There have been four
major revisions.
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The DSM contains a listing of psychiatric disorders and
their corresponding diagnostic codes. Each disorder
included is accompanied by a set of diagnostic criteria and
text containing information about the disorder, such as
associated features, prevalence, familial patterns, age,
culture, gender-specific features, and differential
diagnosis. No information about treatment or presumed
etiology is included.
The DSM-IV, published in 1994, is the last major revision
of the DSM, the next major revision of the DSM, DSM-V, will
be published after 2011.
Prior legislation
AB 244 (Beall) of 2009, AB 1887 (Beall) of 2008, and AB 423
(Beall) of 2007, all of which were substantively identical
to this bill, were vetoed by Governor Schwarzenegger. In
his veto messages the Governor stated that the addition of
a new mandate, especially one of this magnitude, will only
serve to significantly increase the overall cost of health
care and remained concerned about the rising costs of
health care and the need to weigh the potential benefits of
a mandate with the comprehensive costs to the entire
delivery system.
SB 572 (Perata) of 2005 would have required a health plan
and a health insurer to provide coverage for the diagnosis
and medically necessary treatment of mental illness. The
hearing for this bill in the Senate Business, Finance and
Banking Committee was cancelled at the request of the
author.
SB 1192 (Chesbro) of 2004 would have required health plans
and health insurers to provide coverage for the medically
necessary treatment of substance-related disorders,
excluding caffeine and nicotine related disorders, on the
same basis coverage is provided for any other medical
condition. This bill failed in the Assembly Health
Committee.
Arguments in support
The California Mental Health Directors Association (CMHDA)
and the California State Association of Counties (CSAC)
state that numerous studies have shown that mental illness
is not only treatable, but that appropriate and timely
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treatment reduces costly hospitalizations, incarcerations,
homelessness, and most importantly, human suffering.
CMHDA and CSAC add that a large percentage of mental health
clients also have co-occurring substance abuse disorders
and that treating one without treating the other is not
cost-effective. Individuals who do not receive appropriate
treatment are more likely to self-medicate with drugs
and/or alcohol. CMHDA and CSAC contend that AB 1600 would
help ensure that private health plans treat individuals
with co-occurring disorders in a comprehensive manner, and
argue that many health plans fall short of meeting their
obligations under California's mental health parity.
California Psychological Association states that the costs
of increasing coverage to provide full parity for mental
disorders is negligible and likely outweighed significantly
by the costs of non-treatment.
National Alliance on Mental Illness, California states that
AB 1600 would fill an important gap in coverage, and adds
that families cannot afford the financial and emotional
burdens caused by mental illness.
Arguments in opposition
The California Association of Health Underwriters (CAHU)
states that AB 1600 would add a mandate for expanded mental
health coverage, and adds that it has a long history of
opposition to additional health coverage mandates. CAHU
argues that this bill would be counterproductive to making
insurance more affordable for Californians.
PRIOR ACTIONS
Assembly Health: 13-6
Assembly Appropriations:12-5
Assembly Floor: 50-27
POSITIONS
Support: American Federation of State, County and
Municipal Employees, AFL-CIO
California Academy of Family Physicians
California Association of Alcohol and Drug Program
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Executives, Inc
California Medical Association
California Mental Health Directors
Association
California School Employees Association, AFL-CIO
California State Association of Counties
California Psychological Association
County Alcohol and Drug Program Administrators
Association of California
Drug Policy Alliance
National Alliance on Mental Illness, California
National Association of Social Workers - California
Chapter
Oppose: Association of California Life & Health Insurance
Companies
California Association of Health Plans
California Association of Health Underwriters
California Association of Joint Powers Authorities
(CAJPA)
California Chamber of Commerce (CalChamber)
Health Net
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