BILL ANALYSIS
SENATE COMMITTEE ON INSURANCE
Senator Jackie Speier, Chair
AB 88 (Thomson) Hearing Date: July 14,
As amended: February 24, 1999
Fiscal: Yes
Urgency: No
Assembly Health: 3/9/99 (10-3)
Assembly Floor: 6/3/99 (59-18)
Senate Health & Human Services: 6/30/99 (5-1)
SUMMARY
Would require a health care service plan contract or
disability (health) insurance policy to provide coverage
for the severe mental illnesses, as defined, of a person of
any age, and for the serious emotional disturbances, as
defined, of a child under the same terms and conditions as
applied to other medical conditions.
DIGEST
Existing law
1. Requires health care service plan contracts or
disability insurance policies covering hospital,
medical or surgical services to cover the diagnosis and
treatment of specified physical conditions.
This bill
1. Would require 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. Would define "severe mental illnesses" as including:
a) Schizophrenia;
b) Schizoaffective disorder;
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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. Would define "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. Would require 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. Would require terms for maximum lifetime benefits,
copayments and deductibles to be applied equally to all
benefits under a plan contract or insurance policy.
6. Would provide 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. Would exempt specialized health plan contracts and
insurance policies, including Medicare supplement
policies, from the requirements of this bill.
8. Would neither prohibit nor limits the use of case
management, managed care or utilization review in the
provision of mental health coverage.
COMMENTS
1. Purpose of the bill . The author indicates 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
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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.
The 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.
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
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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 results in
an increase of less than 1% in total health care costs
during a one-year period.
In the Actuarial Analysis roundtable discussion hosted
by the Senate Insurance Committee and the California
HealthCare Foundation at the Capitol on June 22, 1999,
all participants acknowledged managed care delivery
systems lowered mental health parity costs as opposed
to preferred provider or point of service plans. Cost
estimates for mental health parity ranged from
approximately 1% (including coverage for substance
abuse) in states with managed care delivery systems to
3% to 7% for Preferred Provider Delivery systems. The
ratio of managed care to other types of delivery in
California was estimated to be approximately 70% to 30%
respectively. Participants also cited studies that
indicate general medical costs decrease and offset the
cost of mental health parity coverage. This occurs
because mental health patients typically over-utilize
medical services and when treated appropriately for
mental problems they cease utilize expensive general
medical care. A synopsis report prepared by the
California HealthCare Foundation will be available mid
July 1999.
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.
2. Support . The California Alliance for the Mentally Ill
(CAMI), the sponsor, argues that this bill would
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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 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.
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
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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.
3. Oppose Unless Amended .
The Association of California Life and Health Insurance
Companies (ACLHIC) requests amendments to 1) limit the
mandated coverage to mental disorders that have a
biological cause, such as schizophrenia and exclude those
such as eating and panic disorders that have not been
shown to be biologically-based, 2) limit to thirty the
number of annual hospital inpatient days; 3) allow PPO's
the option of providing copays and deductibles with all
other terms and conditions the same, and 4) exclude small
employers and individuals from the mandate. Trauma
Survivors United requests amendments to remove language
that allows for compulsory drugging or involuntary
hospitalization for persons with mental illness. Trauma
Survivors is a group of survivors of severe childhood
trauma, including incest and physical violence, that
believes many in the group were misdiagnosed by mental
health professionals who attempted to treat the symptoms
with medication rather that the underlying trauma. The
group is concerned that children and adults who are being
sexually and/or physically abused will be drugged and
hospitalized rather than having the abuse halted.
4. Oppose: The Californians for Affordable Health Reform
(CAHR) explains their policy is to oppose all measures
that mandate specific coverages that may increase
premiums and jeopardize the ability for employers and
employees alike to maintain medical insurance. CAHR
cites a 1998 study by The California Wellness Foundation
that found small employers cite financial reasons to
explain why they do not provide health insurance to their
employees. CAHR also notes that CalPERS recently
announced that health care premiums will rise an average
of 9.7% next year without considering the impact of any
current legislation. CAHR cites a Barents Group study
indicating that for every 1% increase in the cost of
health care coverage, at least 40,000 Californians lose
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their coverage. CAHR quotes estimates that this bill
will have a cost impact between .75% and 1.0%. The
California Manufacturers Association echoes the concerns
of the CAHR that the consequent increase in premium rates
would have an adverse effect on an employer's ability to
offer affordable health care to employees.
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)
requires equitable coverage for all mental disorders and
illnesses (excluding substance abuse disorders) and
serious emotional disturbances of a child. SB 468
passed out of Assembly Health Committee with amendments
and was re-referred to the Assembly Committee on
Appropriations.
QUESTION
The increase in premiums expected from mental health
parity is estimated to be 1% in HMO products and 3 -
7% in PPO or POS products. As individuals with mental
disorders have been shown to be high utilizers of
medical services and high utilizers of medical
services are also known to migrate toward an
HMO/managed care product, could the advantages of
mental parity be offered through the HMO product alone
and capture the majority those individuals who need
the service? Might not a "carve out" of the PPO
product limit the increase of the expected premium
while benefiting the target population through the
coverage in the HMO product alone?
POSITIONS
Support
California Alliance for the Mentally Ill (sponsor)
Alliance for the Mentally Ill
Alliance for the Mentally Ill of Orange County
Alliance for the Mentally Ill of Los Angeles
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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
Association of Regional Center Agencies
California Association of Catholic Hospitals
California Healthcare Association
California Medical Association
California Mental Health Directors Association
California Mental Health Planning Council
California Nurses Association
California Professional Firefighters
California Psychological Association (in concept only)
California Psychiatric Association
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 Los Angeles
County of Marin, Department of Health and Human Services
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
Urban Counties Caucus
Several individuals
Oppose
Association of California Life and Health Insurance
Companies (unless amended)
Trauma Survivors United (Unless Amended)
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Californians for Affordable Health Reform
California Manufacturers Association
Allison Reed, Marketing Specialist
Consultant: Sharon Barclay Kime