BILL ANALYSIS �
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: AB 154
AUTHOR: Beall
AMENDED: January 23, 2012
HEARING DATE: June 27, 2012
CONSULTANT: Bain
SUBJECT : Health care coverage: mental health services.
SUMMARY : Requires health plans and health insurers that provide
hospital, medical, or surgical coverage 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.
Defines "mental illness" to include substance abuse, but
excludes treatment of specified diagnoses. Exempts health plan
contracts in specified state public health insurance programs
from the provisions of this bill.
Existing law:
1.Requires health plans and health insurers that provide
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 of serious
emotional disturbances of a child under the same terms and
conditions applied to other medical conditions. Requires these
benefits to include outpatient services, inpatient hospital
services, partial hospital services, prescription drugs, if
the plan contract includes coverage for prescription drugs.
2.Lists the following conditions as "severe mental illnesses:"
a. Schizophrenia;
b. Schizoaffective disorder;
c. Bipolar disorder (manic-depressive illness);
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.Requires the terms and conditions applied to the benefits
required to be applied equally to all benefits under the plan
contract, including, but not be limited to, maximum lifetime
Continued---
AB 154 | Page 2
benefits, copayments, individual and family deductibles,
4.Requires, under the federal Patient Protection and Affordable
Care Act (ACA) (Public Law 111-148), as amended by the Health
Care Education and Reconciliation Act of 2010 (Public Law
111-152), the Secretary of the Department of Health and Human
Services (HHS) to define the essential health benefits (EHBs),
except these benefits must include specified general
categories and the items and services covered within specified
categories, one of which is mental health and substance use
disorder services, including behavioral health treatment.
5.Requires, under the federal Mental Health Parity and Addiction
Equity Act (MHPAEA), group health plans and health insurance
issuers that cover mental health or substance use disorders
(MH/SUD) to ensure that financial requirements (such as copays
and deductibles) and treatment limitations (such as visit
limits) applicable to MH/SUD benefits are no more restrictive
than the predominant requirements or limitations applied to
substantially all medical/surgical benefits. Exempts health
insurance policies sold to employers with 50 or fewer
employees and policies sold to individuals.
This bill:
1.Requires health plans and health insurers that provide
hospital, medical, or surgical coverage 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.
2.Defines "mental illness" as a mental disorder defined in the
Diagnostic and Statistical Manual of Mental Disorders (DSM)
IV, published by the American Psychiatric Association (APA),
and includes substance abuse, but excludes 23 specified
diagnoses, including malingering, nicotine addition,
bereavement, relational problems, and academic problem.
3.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 then-current volume of the
manual following the publication of each subsequent volume of
the DSM.
4.Requires any revision to the definition of "mental illness" to
be established by regulation promulgated jointly by the
Department of Managed Health Care (DMHC) and the California
AB 154 | Page
3
Department of Insurance (CDI).
5.Permits plans and insurers to provide coverage for all or part
of the mental health services required by this bill through a
separate specialized health care service plan or mental health
plan and prohibits plans and insurers from being required to
obtain an additional or specialized license for this purpose.
6.Requires plans and insurers to provide the mental health
coverage required by this bill in its entire service area and
in emergency situations, as may be required by applicable laws
and regulations.
7.Permits health plans to utilize case management, network
providers, utilization review techniques, prior authorization,
copayments, or other cost sharing to the extent permitted by
law or regulation.
8.Prohibits this bill from being construed to deny or restrict
in any way DMHC's authority to ensure plan compliance with the
Knox-Keene Act when a plan provides coverage for prescription
drugs.
9.Exempts from the provisions of this bill:
� Medi-Cal contracts entered into between the Department
of Health Care Services (DHCS) and a health plan for
enrolled Medi-Cal beneficiaries;
� Managed Risk Medical Insurance Board (MRMIB) contracts
for the Major Risk Medical Insurance Program (MRMIP) or the
Access for Infants and Mothers Program (AIM);
� A health care benefit plan or contract entered into with
CalPERS unless the board elects to purchase a health care
benefit plan or contract that provides mental health
coverage as described in this bill; and
� Accident-only, specified disease, hospital indemnity,
Medicare supplement, dental-only, or vision-only health
care service plan contracts.
1.Prohibits this bill from being deemed to require a qualified
health plan that participates in the California Health Benefit
Exchange (Exchange) to provide any greater coverage than is
required pursuant to the minimum EHBs package, as set forth in
a specified provision of the ACA.
FISCAL EFFECT : According to the Assembly Appropriations
AB 154 | Page 4
Committee:
1.Annual increased premium costs in the private insurance market
of $60 million. These costs reflect increased premiums by
employers for group insurance and premiums paid in the
individual health insurance market. These increased costs are
partially offset by reduced out-of-pocket costs of $26 million
due to reduced copayments and deductibles.
2.Federal regulations implementing the ACA are likely to reduce
the fiscal impact of this bill beginning in 2014. The ACA
requires mental health and substance abuse treatment to be
covered as a basic benefit in state-run health insurance
exchanges that will provide health coverage to millions of
individuals.
PRIOR VOTES :
Assembly Health: 12- 5
Assembly Appropriations:11- 6
Assembly Floor: 49- 22
COMMENTS :
1.Author's statement. I introduced AB 154 to help the millions
of Californians suffering from mental health and substance
abuse disorders get the treatment they need and deserve. In
November of 2011, the UCLA Center for Health Policy Research
released its findings that among adults in California, half
reported no treatment and half reported some or inadequate
treatment for mental health needs. Left untreated, many will
fall into the counties' indigent health care pools, emergency
rooms, and the state and county jails at taxpayer expense. On
April 25, 2011, the Assembly Select Committee on Alcohol and
Drug Abuse convened a hearing to gather information from
experts who reached a common conclusion: Access to effective
mental health and substance use disorder treatment results in
tremendous savings for business, government, and health
insurers. The costs of untreated mental health and substance
abuse disorders aren't borne solely by government. Employers
pay in lost productivity, higher absenteeism, and increased
health care costs. Employees with untreated mental health and
substance abuse disorders access health care systems more
frequently and suffer poorer health outcomes with higher
annual health care costs compared to employees without mental
health or substance use disorders. AB 154 ends discrimination
against people with mental health and substance use disorders
by requiring health insurers to cover treatment for those
illnesses, equivalent to the coverage provided for all other
AB 154 | Page
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medical conditions. This, in turn, dramatically reduces the
demand for more expensive acute care.
2.State and federal mental health parity law. There are three
separate provisions of law on health plan coverage of mental
health. Under current state law, as enacted by AB 88
(Thomson), Chapter 534, Statutes of 1999, health plans and
insurers are required to cover the diagnosis and medically
necessary treatment of "severe mental illness" (SMI) of a
person of any age, and of "serious emotional disturbances" of
a child. Coverage is required to be at parity, that is, under
the same terms and conditions applied to other medical
conditions. Such terms and conditions include but are not
limited to maximum lifetime benefits, copayments, and
individual and family deductibles. The state law requires
parity with respect to enrollee cost-sharing for covered
benefits. California's current mental health parity law
applies to the large group, small group, and individual
(non-group) markets. It does not require coverage of substance
abuse disorders.
Under the federal MHPAEA of 2008, health plans providing group
coverage that cover MH/SUD must provide coverage that is no
more restrictive than coverage for other medical/surgical
benefits. MHPAEA does not require a plan provide mental health
or substance use disorder benefits. Rather, if a plan provides
medical/surgical and MH/SUD benefits, it must comply with
MHPAEA's parity requirements. This parity provision applies to
financial requirements (for example, deductibles and
copayments) and treatment limitations. The federal law applies
to all group health plans, but small groups with 50 or fewer
employees are exempt.
The ACA, requires the Secretary of HHS to define the EHBs. One
of the categories of services is mental health and substance
use disorder services, including behavioral health treatment,
as described below.
3.EHB and state benefit mandates. Effective January 1, 2014, the
ACA requires Medicaid benchmark and benchmark equivalent
plans, plans sold through the Exchange and the Basic Health
Program (if enacted), and health plans and health insurers
providing coverage to individuals and small employers to
ensure coverage of EHBs, as defined by the Secretary of HHS.
HHS is required to ensure that the scope of EHBs is equal to
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the scope of benefits provided under a typical employer plan,
as determined by the Secretary. Under federal law, EHBs must
include 10 general categories and the items and services
covered within the categories:
� Ambulatory patient services;
� Emergency services;
� Hospitalization;
� Maternity and newborn care;
� Mental health and substance use disorder services,
including behavioral health treatment;
� Prescription drugs;
� Rehabilitative and habilitative services and devices;
� Laboratory services;
� Preventive and wellness services and chronic disease
management; and
� Pediatric services, including oral and vision care.
Health plans and insurers can voluntarily cover benefits above
the EHBs. Additionally, states can require that health plans
offer benefits in addition to EHBs. However, if a state
requires additional benefits, it is also required to defray
the cost of any required additional benefits for people
receiving coverage in the Exchange.
On December 16, 2011, the HHS Center for Consumer Information
and Insurance Oversight released an EHB Bulletin outlining a
regulatory approach that HHS plans to propose to define EHBs.
In the Bulletin, HHS proposed that EHBs be defined using a
benchmark approach. States would have the flexibility to
select a benchmark plan that reflects the scope of services
offered by a "typical employer plan." EHBs would include
coverage of services and items in all 10 statutory categories
above, but states would choose one of the following benchmark
health insurance plans:
� One of the three largest small group plans in the state
by enrollment;
� One of the three largest state employee health plans by
enrollment;
� One of the three largest federal employee health plan
options by enrollment; or
� The largest HMO plan offered in the state's commercial
market by enrollment.
If a state chooses not to select a benchmark, HHS proposed
that the default benchmark will be the small group plan with
the largest enrollment in the state. HHS accepted comments on
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the Bulletin until January 31, 2011.
1.California Health Benefits Review Program (CHBRP). CHBRP was
created by AB 1996 (Thomson), Chapter 795, Statutes of 2002,
which requests the University of California to assess
legislation proposing a mandated benefit or service, and
prepare a written analysis with relevant data on the public
health, medical, and economic impact of proposed health plan
and health insurance benefit mandate legislation. In its
analysis of the introduced version of this bill, CHBRP
reports:
a. 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:
i. Consumers' out-of-pocket costs for MH/SA services
decrease;
ii. There is a small decrease in health plans'
expenditures per user of MH/SA services;
iii. Rates of growth in the use and cost of MH/SA
services decrease;
iv. Utilization of MH/SA services increases slightly
among individuals with moderate levels of symptoms of
mood and anxiety disorders, and among persons employed by
moderately small firms (50 to 100 employees) who have
poor mental health or low incomes; and
v. The effect on outpatient MH/SA visits depends on
whether individuals were enrolled in a fee-for-service
plan or a health maintenance organization (HMO) prior to
the implementation of parity.
b. Utilization, cost, and coverage impacts. Roughly 17
million insured individuals would be subject to this bill's
mandate. Approximately 74 percent of enrollees in plans and
policies subject to this bill currently have parity
coverage for non-SMI mental health services and nearly 64
percent have coverage for substance abuse treatment that is
at parity with their coverage for medical services, even
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with the MHPA in effect. This bill would provide new
covered benefits for non-SMI mental health services for 4.5
million enrollees and substance abuse treatment for 6.3
million enrollees. Among individuals in plans and policies
affected by this bill, utilization would increase by an
estimated 7.4 outpatient mental health visits and 2.3
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 current 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, more stringent management of care would partly
offset increases in utilization due to more generous
coverage.
The impact of the bill would be most extensive in the small
group and individual markets since services for non-SMI
MH/SA treatment would already be covered at parity for
enrollees in large group plans or policies under MHPA. As a
result of this bill, net annual expenditures among
enrollees subject to state regulation are estimated to
increase by about $41 million, or 0.04 percent. Of this
increase, nearly $25 million will be due to increased
coverage for treatment of non-SMI mental health and $17
million will be due to increased coverage for treatment of
substance abuse.
This bill is estimated to increase premiums by about $67
million. Total premium contributions from private employers
who purchase group insurance are estimated to increase by
$28 million per year, or 0.05 percent. Total premiums for
individually purchased insurance would increase by about
$32 million, or 0.47 percent. The increase in individual
premium costs would be partially offset by a decline in
individual out-of-pocket costs of about $26 million (-0.34
percent). Enrollee contributions toward premiums for those
in privately funded group insurance would increase by about
$7 million, or 0.05 percent. The impact of this bill on per
member, per month (PMPM) premiums varies by market segment.
Among DMHC-regulated health plans, total PMPM premiums
would increase by $0.05 in the large-group market, $0.26 in
the small group market, and $0.61 in the individual market.
For CDI-regulated plans, total PMPM premiums would increase
AB 154 | Page
9
by $0.16 in the large-group market, $1.64 in the
small-group market, and $1.62 in the individual market.
CHBRP 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.
c. 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 a reduction in adverse
social outcomes, such as absenteeism, unemployment, and
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 insufficient 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 markets between mental and
medical health conditions and could therefore help to
destigmatize MH/SA treatment.
2.Adult mental health needs and treatment in California. A
November 2011 health policy fact sheet from the UCLA Center
for Health Policy Research estimated nearly two million adults
in California have mental health needs, based on self-reported
symptoms and impairments. Of the privately insured who were in
need of mental health services during the past 12 months, 48
percent received no treatment (classified as an "unmet need"),
29.4 percent received some treatment (unmet need) and 22.6
received at least minimally adequate treatment.
3.Related legislation. SB 951 (Hernandez) and AB 1461 (Monning)
both would designate the Kaiser Small Group Health Maintenance
Organization plan contract as California's EHB benchmark plan
for individual and small employer coverage. SB 951 is pending
before the Assembly Health Committee and AB 1461 is scheduled
AB 154 | Page 10
for hearing in the Senate Health Committee on June 27, 2012.
4.Prior legislation. AB 1600 (Beall) of 2010, AB 244 (Beall) of
2009, AB 1887 (Beall) of 2008, and AB 423 (Beall) of 2007, all
of which were substantively similar to this bill, were vetoed
by Governor Schwarzenegger. In his veto messages the Governor
stated that, in addition to his ongoing concerns regarding the
overall rising cost of health care and lack of affordability
for employers and individuals struggling to keep their
existing coverage, this particular mandate would have required
a higher level of service than contemplated on a federal
level, and, as such, would have mandated California to spend
new General Fund dollars for these benefits when the state is
struggling to provide basic levels of coverage to its most
needy and fragile populations.
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. SB 572 was
referred to the Senate Business, Finance and Banking
Committee, but the hearing was canceled 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. SB 1192
failed passage in the Assembly Health Committee.
5.Support. This bill is supported by health care providers,
mental health and drug treatment organizations and
governmental entities, the Los Angeles County Sheriff's
Department, and labor and consumer groups. Generally,
supporters argue that mental illness and substance abuse are
treatable disorders, and that appropriate and timely treatment
of mental health conditions and disorders reduce the number of
suicides, hospitalizations, incarcerations and homelessness,
and that the lack of coverage leads to bankruptcies and causes
enormous taxpayer expense. Proponents state this bill would
address one of the gaps in insurance coverage and end the
discrimination against patients with mental health and
substance use disorders. Proponents argue any costs associated
with this bill would be more than offset by increased
productivity of workers, the overall reduction of medical
costs, crime and homelessness.
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6.Opposition. This bill is opposed by health plans and the
California Chamber of Commerce and individuals and a group
opposed to psychiatric care. Generally, opponents argue
benefit mandates limit the ability to provide unique benefit
packages and increase the cost of health care coverage for
employers and individuals-cost increases lead to reductions in
access and coverage, and the cumulative impact of benefit
mandates on premiums comes at a time when employers are
struggling in an uncertain economic environment. Additionally,
opponents oppose the exemption for public employers and
programs in this bill as unfairly sparing the government from
the costs of the mandate while private employers are expected
to shoulder the cost instead. Finally, opponents argue the
exemption in this bill for products sold through the Exchange
is contrary to the Exchange implementing legislation that
requires plans to sell all products made available in the
Exchange to individuals purchasing coverage outside of the
Exchange.
7.Amendment. This bill contains uncodified language that
prohibits this bill from being deemed to require a qualified
health plan that participates in the Exchange to provide any
greater coverage than is required pursuant to the minimum EHB
package as set forth the ACA. Staff recommends this language
be included in the relevant portions of the Health and Safety
Code and Insurance Code added by this bill, rather than
uncodified law. The reason for the recommended change is
uncodified law is not found in the Health and Safety Code or
Insurance Code where the provisions of this bill are located,
and an individual looking for this language in this bill would
have to know the bill number or the chapter number of the
legislation to locate this particular provision of law.
8.Policy issues.
a. Nicotine dependence exclusion. This bill defines "mental
illness" as a mental disorder defined in the DSM-IV,
published by the American Psychiatric Association, and
includes substance abuse, but excludes treatment of
specified diagnoses including nicotine dependence. The
author indicates nicotine dependence is a separate issue
from mental health, and is not the focus of this
legislation. Given the health-related impact of tobacco
use, should this exemption be made?
b. Updates to DSM-IV. This bill requires the definition of
AB 154 | Page 12
"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 of the DSM following the
publication of each subsequent volume of the manual. This
bill requires any revision to the definition of "mental
illness" to be established by regulation promulgated
jointly by DMHC and CDI. The update to the DSM has been the
subject of debate, such as whether it should classify
gambling as an addiction, which would increase the number
of people with diagnoses and thus result in increased
health care expenditures. While DMHC and CDI could modify
the definition of mental illness in subsequent editions of
the DSM, should the decision on whether subsequent updates
to the DSM should be adopted, in whole or in part, be
delegated to the regulators or a decision made by the
Legislature through legislation?
SUPPORT AND OPPOSITION :
Support: Alameda County Psychological Association
American Association of Marriage and Family Therapy,
California Division
American Federation of State, County and Municipal
Employees, AFL-CIO
Association of Community Human Services Agencies
Association of Regional Center Agencies
Board of Behavioral Sciences
Bonita House, Inc.
California Academy of Child and Adolescent Psychiatry
California Academy of Family Physicians
California Alliance
California Association for Licensed Professional
Clinical Counselors
California Association of Addiction Recovery Resources
California Association of Marriage and Family
Therapists
California Association of Mental Health Patients'
Rights Advocates
California Association of Alcohol and Drug Program
Executives, Inc.
California Association of Addiction Recovery Resources
California Association of Social Rehabilitation
Agencies
California Commission on Aging
California Communities United Institute
California Council of Community Mental Health Agencies
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13
California Hospital Association
California Mental Health Directors Association
California Mental Health Planning Council
California Nurses Association
California Psychological Association
California Psychological Association Division IV
California Psychological Association Division of
Clinical Psychopharmacology
California School Employees Association
California State Association of Counties
California Treatment Advocacy Foundation
California Youth Empowerment Network
Catholic Charities of Santa Clara County
Central Coast Psychological Association
Community Solutions
Contra Costa Psychological Association
County Alcohol and Drug Program Administrators
Association of California
Crime Victims Action Alliance
Developmental Disabilities Area Board 10 (with
amendments encouraged)
Division I of the California Psychological Association
Disability Rights California
EMQ Families First
Health Access California
Laborers' Locals 777 & 792
Los Angeles County Board of Supervisors
Los Angeles County Democratic Party
Los Angeles County Psychological Association
Los Angeles County Sheriff's Department
Marin County Psychological Association
Mental Health America of Northern California
Mental Health America of the Central Valley
Mental Health Association in California
The Monterey Bay Psychological Association
Napa-Solano Psychological Association
National Alliance on Mental Illness, California
National Association of Social Workers, California
Chapter
A New PATH
Orange County Psychological Association
Pacific Clinics
Pacific-Cascade Psychological Association
Redwood Psychological Association
Regional Council of Rural Counties
AB 154 | Page 14
Sacramento Valley Psychological Association
San Diego Psychological Association
San Fernando Valley Community Mental Health Center,
Inc.
San Francisco Psychological Association
San Gabriel Valley Psychological Association
San Joaquin Valley Psychological Association
San Mateo County Psychological Association
Santa Barbara County Psychological Association
Santa Clara Psychological Association
Santa Clara County Board of Supervisors
Santa Clara County Office of Education
United Advocates for Children and Families
134 individuals
Oppose: Association of California Life and Health Insurance
Companies
America's Health Insurance Plans
California Association of Health Plans
California Chamber of Commerce
Citizens Commission on Human Rights
Health Net
Southwest California Legislative Council
Three individuals
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