STATE OF CALIFORNIA
DEPARTMENT OF INSURANCE
45 Fremont Street, 21st Floor
San Francisco, California 94105
REG-2013-00006 November 22, 2013
NOTICE OF PROPOSED RULEMAKING
MENTAL HEALTH PARITY
SUBJECT OF PROPOSED RULEMAKING
The Insurance Commissioner proposes to adopt the regulations described below after considering comments from the public. The Commissioner proposes to add to Title 10, Chapter 5, Subchapter 3 of the California Code of Regulations the new Article 15.2: Mental Health Parity, consisting of new sections 2562.1, 2562.2, 2562.3, and 2562.4. The regulations set forth prohibitions on limits for medically necessary treatments and services, including behavioral health treatment for individuals with autism.
The Commissioner will hold a public hearing to provide all interested persons an opportunity to
present statements or arguments, orally or in writing, with respect to the proposed regulations as
Date and Time: January 8, 2014
Location: San Diego Room
300 Capitol Mall, 2nd Floor
Sacramento, CA 95814
The hearing will continue on the date noted above until all testimony has been submitted or 4:00 p.m., whichever is earlier.
ACCESS TO HEARING ROOMS
The facilities to be used for the public hearing are accessible to persons with mobility impairments. Persons with sight or hearing impairments are requested to notify the contact person in order to make special arrangements, if necessary.
PRESENTATION OF WRITTEN COMMENTS; CONTACT PERSONS
All persons are invited to submit written comments on the proposed regulations during the public
comment period. The public comment period will end at 5:00 p.m. on January 8, 2014. Please direct all written comments to the following contact person:
Lisa Marshall, Attorney
California Department of Insurance
45 Fremont Street, 21st Floor
San Francisco, California 94105
Telephone: (415) 538-4192
Questions regarding procedure, comments, or the substance of the proposed action should be
addressed to the above contact person. In the event the contact person is unavailable, inquiries
regarding the proposed action may be directed to the following backup contact person:
Diane Pinney, Legal Assistant
California Department of Insurance
300 Capitol Mall, 17th Floor
Sacramento, CA 95814
DEADLINE FOR WRITTEN COMMENTS
All written materials must be received by the Insurance Commissioner, addressed to the contact
person at her address listed above, no later than 5:00 p.m. on January 8, 2014. Any written
materials received after that time may not be considered.
COMMENTS TRANSMITTED BY EMAIL OR FACSIMILE
The Commissioner will accept written comments transmitted by email provided they are sent to
the following email address:
Lisa.Marshall@insurance.ca.gov. The Commissioner will also accept
written comments transmitted by facsimile provided they are directed to the attention of Lisa Marshall and sent to the following facsimile number: (415) 904-5490. Comments sent to other e-mail addresses or other facsimile numbers may not be accepted. Comments sent by e-mail or facsimile are subject to the deadline set forth above for written comments.
AUTHORITY AND REFERENCE
The proposed regulations will implement, interpret, and make specific the provisions of
Insurance Code Sections 10144.5 and 10144.51.
Insurance Code Sections 10144.5, 10144.51, 12921, and 12926 provide authority for this rulemaking, as do the following decisions of the California Supreme Court: CalFarm Ins. Co. v. Deukmeijian, 48 Cal.3d 805 (1989); 20th Century Ins. Co. v. Garamendi, 8 Cal.4th 216 (1994).
SUMMARY OF EXISTING LAW
Existing Law Interpreting the Scope of and Insurer Obligations Under the Mental Health Parity Act
California's Mental Health Parity Act (MHPA), codified at Insurance Code 10144.5, requires that every policy that covers hospital, medical, or surgical expenses shall provide coverage for the diagnosis and medically necessary treatment of severe mental illnesses of a person of any age and severe emotional disturbances of a child. Autism is an enumerated severe mental illness to which the law applies. The MHPA lists required categories of benefits, and specifies financial terms and conditions that must be applied equally to all benefits under the policy.
The Department of Managed Heath Care (DMHC) has promulgated Title 28 California Code of Regulations section 1300.74.72 in 2003, interpreting the MHPA, which is also codified in Health & Safety Code section 1374.72. That regulation construes the MHPA as a mandate for all medically necessary treatment required for the diagnosis and treatment of the enumerated conditions. It provides in subsection (a):
The mental health services required for the diagnosis, and treatment of conditions set forth in Health and Safety Code section 1374.72 shall include, when medically necessary, all health care services required under the Act including, but not limited to, basic health care services within the meaning of Health and Safety Code sections 1345(b) and 1367(i), and section 1300.67 of Title 28. These basic health care services shall, at a minimum, include crisis intervention and stabilization, psychiatric, inpatient hospital services, including voluntary psychiatric inpatient services, and services from licensed mental health providers including but not limited to, psychiatrists and psychologists.
Subsection (h) of that regulation further underscores that medical necessity is the test of whether services must be covered and provided. It specifies that "[n]othing in this section shall be construed to mandate coverage of services that are not medically necessary or preclude a plan from performing utilization review in accordance with the Act."
The Department of Insurance (the "Department" hereinafter) has construed the virtually identical statute in Insurance Code section 10144.5 to require all medically necessary treatment be covered for insureds with the listed severe mental conditions, subject only to conditions stated in the proposed regulations.
The Department's interpretation of the MHPA was based on the statutory language, legislative history and a California appellate case holding that the language of the MPHA makes clear that parity is a mandate. Yeager v. Blue Cross of California, 175 Cal. App. 4th 1098 (2009). At issue in Yeager was the interpretation of a provision of the California Health and Safety Code that provides a checklist of benefits that are legally required to be offered by a plan and includes coverage for fertility treatment. In Yeager, the plaintiff's insurance carrier offered infertility coverage that plaintiff challenged as inadequate, alleging that the applicable Health and Safety Code section was a mandate on insurance carriers to offer full coverage for fertility treatment.
Yeager, construing the statutory language and reviewing the legislative intent, held that the statute's wording only required insurers to offer fertility coverage for purchase and not to actually provide full coverage for treating infertility. The court reasoned that if the legislature had wanted to create a mandate for insurers to provide coverage for fertility treatment, they knew how to do so and would have enacted a statute similar to the MHPA. The court described the MHPA as a mandate to provide coverage, not merely to require that coverage be available.
The Ninth Circuit Court of Appeal recently reconsidered and reissued its decision in Harlick v. Blue Shield, 686 F.3d 699 (9th Cir. 2012) on June 12, 2012. The plaintiff sought residential treatment under her ERISA plan for anorexia, one of the severe mental illnesses enumerated in the MHPA. Her plan covered treatment for mental illnesses, including inpatient services, but excluded coverage for residential care. The Ninth Circuit found that the plan did not provide coverage for residential care for anorexia but that the MHPA mandated it, reasoning:
Some medically necessary treatments for severe mental illness have no analogue in treatments for physical illnesses. For example, it makes no sense in a case such as Harlick's to pay for time in a Skilled Nursing Facility - which cannot effectively treat her anorexia nervosa - but not to pay for time in a residential treatment facility that specializes in treating eating disorders.
The court concluded that the MHPA requires that a plan within the scope of the act must pay for all medically necessary residential treatment for anorexia, whether or not such benefits are covered for physical illnesses. The court further concluded that the only limitation on coverage for mental illness permitted under the MHPA is that insurers may impose financial "terms and conditions" on mental illness coverage, which are limited to "monetary conditions, such as copayments and deductibles." The court accordingly required the plan to provide coverage for Harlick's residential treatment for anorexia.
In reaching its conclusion about the scope of the MHPA, the court cited and relied on the DMHC's implementing regulation. That regulation construed the MHPA, as the Department does in the proposed regulations, to require that all medically necessary treatment for parity diagnoses be covered, subject to the stated statutory condition.
SB 946, which became Insurance Code section 10144.51, makes it indisputable that behavioral health treatment must be covered whenever it is medically necessary therapy for autism, subject only to financial terms and conditions applicable to all benefits under the policy. The bill was needed because health plans and insurers had consistently failed to provide and cover medically necessary behavioral health treatment. As the DMHC explained in the documents supporting its 2012 emergency rulemaking, plans and insurers resisted providing such treatment arguing first that it was experimental and investigational, so was not covered. More recently, health plans and insurers have contended that behavioral therapy is educational in nature, rather than medical treatment, so is not covered. Finally, even though California has no license for behavioral therapists, health plans and insurers assert that if the treatment is or could be provided by an unlicensed individual, the treatment is not "medical" so will not be covered.
Insurance Code section 10144.51 expands the definition of qualified autism service provider and mandates that private health plans and insurance companies provide behavioral health treatment for autism spectrum disorders no later than July 1, 2012. It further requires that every health insurer must maintain an adequate network that includes qualified autism service providers, who are defined to include individuals certified by a national entity such as the Behavior Analyst Certification Board, as well as those licensed in California.
However, in July, 2012, a Los Angeles Superior Court Judge sustained a demurrer to a complaint under the MHPA in Rea v. Blue Shield of California declining to follow Harlick and holding that the MHPA requires only equality of benefits between mental and physical conditions and is not a mandate of all medically necessary treatment, subject only to equivalent financial terms and conditions. Although the decision is unpublished, therefore not citable as authority, and is also on appeal, its existence makes it more difficult for the Department to assert that the MHPA may be interpreted in only one way. Hence, the proposed regulations are necessary.
The Department's proposed regulations are consistent with the regulations DMHC promulgated in 2003. Both sets of regulations require that medically necessary treatment be provided and covered for severe mental illnesses and serious emotional disturbances of a child. That interpretation by a sister administrative agency of a parallel statute, which it is charged with implementing, must be given great weight. As the California Supreme Court has concluded, "The Department's interpretation of the Act has presumptive value due to its expertise of related and regulatory issues." Yamaha v. State Board of Equalization, 19 Cal. 4th 1, 11 (1998). Moreover, California appellate courts have repeatedly followed that rule, holding that "[c]onsistent administrative construction of a statute over many years, particularly when it originated with those charged with putting the statutory machinery into effect, is entitled to great weight and will not be overturned unless clearly erroneous." Sara M. v. Superior Court, 36 Cal. 4th 998, 1012 (2005). See also Tidewater Marine Western, Inc. v. Bradshaw, 14 Cal. 4th 557, 568 (1996).
The Department's proposed regulations are also consistent with the interpretation of the MHPA in the Ninth Circuit Court of Appeal's decision in Harlick v. Blue Shield. The consistent interpretation of the MHPA to require that all medically necessary treatment be covered under the MHPA by the Departments of Managed Health Care and Insurance, in accord with the persuasive reasoning of the federal appellate court, is entitled to deference.
Consistency with Other State Laws
The proposed regulations are consistent and compatible with other California laws. Enacted in September 1993, Senate Bill 1085, the California Early Intervention Services Act (IDEA), established a mandate for Regional Centers and local education agencies to provide comprehensive services to infants and toddlers with, or at risk of, developmental delays. The requirements for this program are set forth in Part C of the IDEA, to which the state legislation conforms.
Prior to the passage of the MHPA in 1999, the California Legislature adopted a comprehensive public policy of early intervention for children with autism. It found that "[t]here is a need to provide appropriate early intervention services individually designed for infants and toddlers from birth to two years of age, inclusive, who have disabilities or are at risk of having disabilities, to enhance their development and to minimize the potential for developmental delays." Cal. Gov't. Code § 95001. Indeed, a whole set of cross-referenced laws outline the various processes governing the early intervention services provided by the state including: (1) early education funding and eligibility and plan approval; (2) early education for infants; (3) early intervention centers and system establishment; (4) procedures for identifying, evaluation and assessment of the need for early intervention; (5) instructional planning procedures; and, (6) review and assessment procedures. Cal. Educ. Code § 56429; Cal. Educ. Code § 56426; Cal. Health & Safety Code § 124118.5; Cal. Educ. Code § 56340.1; Cal. Educ. Code § 56382.
The law created a public network of options and resources for individuals with autism and their families. The Department of Developmental Services (DDS), the Departments of Education, Health Care Services, Social Services, and Alcohol and Drug Programs coordinate services to infants and toddlers and their families. These agencies provide a family-centered, comprehensive, multidisciplinary, interagency, community-based, early intervention system for infants and toddlers with disabilities.
The MHPA and Early Intervention Services Act created multiple points of access for California families of all financial means to receive vital early intervention health care services. These statutes embody public policies favoring early intervention and requiring private insurers to provide coverage for those treatments. The Department's proposed regulations interpreting the MHPA are entirely harmonious with these salutary public policies and with statutory law and related regulations.
EFFECT OF PROPOSED ACTION
The effects anticipated from adoption of the proposed regulations for children and families include the cessation of improper denials of medically necessary treatment for autism and the elimination of unreasonable delays in providing these treatments, which are more likely to be successful when they are begun early. Coverage of early intervention through behavioral, speech, and occupational therapy will enable children with autism to improve in intelligence quotient, cognitive ability, receptive and expressive language skills, and adaptive behavior; and will lessen maladaptive, tantrum or self-injurious behaviors. Other anticipated benefits from adoption of the proposed regulation include the expectation that children will receive improved diagnoses from autistic disorder to pervasive developmental disorder (PDD), and a significant minority of children will recover from autism, resulting in lessening their needs for governmental services throughout their lifetimes.
Providing Clear Guidance to Industry, Stakeholders and Consumers on the Requirements of the MHPA
The proposed regulations have the primary objective of helping to bring an end to the pattern of improper insurer delay and denial of medically necessary treatment for individuals with autism. The proposed regulations make clear the obligations of private insurers under the MHPA to provide medically necessary treatment and services, subject to financial terms and conditions applicable to all benefits under the policy. Furthermore, the regulation seeks to provide guidance to industry, stakeholders and consumers about the scope of the MHPA's provisions as they relate to autism treatment specifically.
Establishing Medical Necessity as the Metric of What Services Must Be Covered
While the MHPA applies to several different diagnoses, the proposed regulations are limited to PDD or autism. Substantively, the proposed regulations benefit insurers and enhance fairness and consistency of decision making by clarifying that medical necessity is the test of whether services must be covered - if treatment of services is not medically necessary, neither the proposed regulations nor the MHPA require that the services of treatment be covered. However, it is conceivable that the regulation could be construed to require coverage when the treatment or services is not medically necessary. Therefore, the proposed regulations expressly do not preclude insurers from utilizing case management, utilization review, and similar techniques.
Prohibition on Annual Visit and Dollar Limits for Medically Necessary Treatment
The proposed regulations further seek to ensure that individuals with autism receive speech and occupational therapy as well as behavioral health treatment subject to certain prohibitions on limiting such services. The proposed regulations specifically prohibit annual visit limits, which are not financial terms or conditions as illustrated in subdivision (c) of the MHPA. Additionally, the proposed regulations prohibit annual dollar limits on such treatments and services which are not equally applicable to all benefits under the policy. Thus, the proposed regulations prohibit these two limitations with respect to autism and counteract insurers' continued imposition of unreasonable visit and dollar limits on ABA therapy, speech and occupational therapies and other vital treatments and services necessary to the health of individuals with autism.
Prohibition on Denials of Behavioral Health Treatment (BHT)
The proposed regulations also help ensure that behavioral health treatment for PDD or autism shall be covered in the same manner and subject to the same requirements. The proposed regulations make clear that BHT for PDD or autism is a requirement under both the MHPA and Insurance Code section 10144.51 (SB 946) and further require that coverage for BHT of a patient diagnosed with PDD or autism must be provided if it is medically necessary, subject to only financial terms and conditions that are equally applicable to all benefits under the policy. The proposed regulations specifically prohibit insurers from denying or delaying BHT on the grounds that such treatment is experimental, investigational or educational. Furthermore, a prohibition against conditioning medically necessary BHT on insurer-imposed cognitive, developmental or IQ testing is proposed to ensure that individuals with PDD or autism receive prompt treatment, without unreasonable delays. Such denials and delays of BHT are inconsistent with the MHPA and SB 946 (Insurance Code sections 10144.5 and 10144.51).
Protection of Public Health
The benefits anticipated to result from the adoption of the proposed regulations include the protection of public health as the provision of medically necessary therapies to California consumers with autism will transform the lives of young children and save state government millions of dollars over the lives of these children as they age. Furthermore, parents of individuals with autism will benefit by being more available to take on full- or part-time work as care for autistic children is coordinated and provided by insurers.
COMPARABLE FEDERAL LAW
Federal Mental Health Parity Efforts, 1996 and 2008
In 1996, Congress passed the federal Mental Health Parity Act of 1996 ("FMHPA"), which required that annual or lifetime dollar limits on mental health benefits be no lower than any dollar limits for medical and surgical benefits offered by a group health plan or health insurance issuer offering coverage in connection with a groups health plan. (29 U.S.C. § 1185(a) (1996)). Although insurers had to provide equal annual or lifetime dollar limits for mental health benefits, they could still impose a maximum number of provider visits and caps on the number of days an insurer would cover for inpatient psychiatric hospitalizations. In 2008, Congress enacted the Mental Health Parity and Addiction Equity Act of 2008 ("MHPAEA"), to supplement and close loopholes in the 1996 FMHPA. (Pub. L. No. 110-343, 122 Stat. 3765 (2008).) Under the interim final rules to the 2008 statute, a group health plan or group health insurance issuer generally could no longer impose a financial requirement (such as copayments or coinsurance) or a quantitative treatment limitation (such as a limit on the number of outpatient visits or inpatient days covered) on mental health or substance use disorder benefits exceeding those applicable to medical and surgical benefits. (29 C.F.R. § 2590.)
Federal Health Care Reform and Autism Coverage
On March 23, 2010, President Obama signed the Affordable Care Act (ACA) into law. The ACA significantly reforms the health insurance market. Despite the sweeping extent of the legislative reform, the ACA does not include any reference to autism. Instead, the ACA broadly requires that mental health and substance use disorder services, including behavioral health treatment are mandatory Essential Health Benefits (EHB). (42 USC § 18022(b)(1)(E).) Therefore, the ACA does not specifically require insurance carriers throughout the country, including those participating in the state purchasing exchanges, to cover a package of diagnostic, preventive and therapeutic services and products for individuals with autism. In addition, rather than setting a national EHB package, the federal government let each state choose a "benchmark plan" that it would use to determine the EHB in that state. (See 45 CFR § 156.20.) To the extent a state's benchmark plan covered autism treatment, it is an essential health benefit and therefore a mandatory benefit that must be covered by every individual and small group insurance plan in that state.
The failure of the ACA and subsequent rules to address autism treatment means that there is no national autism coverage mandate and leaves individuals and families largely at the mercy of state insurance mandates and the state EHB package.
California's attempts to implement federal health care reform in the state led to Governor Brown's signing of SB 951, now Insurance Code section 10112.27, which incorporates autism insurance benefits, including ABA therapy coverage, as part of California's EHB package that non-grandfathered individual and small group insurance plans must offer starting in 2014 under the ACA. This includes coverage for benefits required by laws enacted before December 31, 2011, such as Mental Health Parity and SB.946, the autism insurance reform law. However, it does not cover grandfathered plans or self-insured plans which are governed under federal law. (Insurance Code section 10112.27; See 10 CCR 2594.1.)
POLICY STATEMENT OVERVIEW
The specific policy underlying the proposed action is articulated by the following statement by the bill's author:
The author argues that 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 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. (Assem. Com. on Health, Rep. on Assem., Bill No. 88 (1999-2000 Reg. Sess.).)
The Proposed Regulation Will Help Ensure that Autism Is Treated by Effective, Established Therapies
The benefits anticipated from this proposed regulation are the timely provision and coverage of medically necessary treatments that can ameliorate the core deficits of autism, saving the State enormous sums and enhancing the health and wellbeing of children with autism and their families. Behavioral health treatment is particularly useful in improving the condition of individuals with autism. ABA therapy, a type of behavioral health treatment, is defined as "the design, implementation, and evaluation of systemic instructional and environmental modifications to promote positive social behaviors and reduce or ameliorate behaviors which interfere with learning and social interaction."1 The remarkable success of behavioral therapy in substantially increasing IQ scores and improving cognitive ability, receptive and expressive language skills, and adaptive behavior, and enabling some children to achieve recovery from autism. The proposed regulation will enable many more children to receive and benefit from this life-changing therapy.
The Proposed Regulation Will Help Curtail or Eliminate Pervasive and Harmful Insurer Delays and Denials of Treatment
Disputes over whether certain types of treatments are medically necessary or a covered health care service often delay necessary treatment for children with autism. The Department has tracked cases involving delays and denials of behavioral health treatment, as well as speech and occupational therapy, for children with this serious disorder since 2009. During that time, the Department has sent 23 cases related to denials of behavioral health and other autism treatment to external clinicians for IMR. Of those, 19 denials were overturned by the reviewers, finding in favor of the insured child receiving treatment. Another 19 IMR cases are currently open involving denials of behavioral, speech and occupational therapy.
Individual delays in obtaining treatment for 40 closed cases average 5.8 months, nearly half a year; delays currently average 10.33 months, or almost a year, for those cases which are still open. Another 12 of those complaints are either awaiting submission of additional information or are in process. The cumulative total delays on open and closed cases combined total 12,864 days, or 35.2 years. These lengthy delays all involve treatment that experts agree is most effective when provided in early childhood. The benefits anticipated from the proposed regulation include significantly lessening or eliminating these delays and denials of treatment and substantially improving treatment efficacy and outcomes.
The Proposed Regulation Will Benefit Children with Autism As Well As State Entities and Taxpayers
California leads the nation with 72,000 individuals with a form of autism spectrum disorder (ASD).2 As the numbers of individuals with ASD increase, more burdens and financial demands are placed on the State's budget. Early behavioral intervention treatment not only protects children with autism, but reduces demands on limited public resources and thereby lessens the burden on taxpayer-provided healthcare networks and other support services.
At present, those burdens are enormous, because of the immense need for treatment and services. Between 22% and 41% of individuals with ASD need assistance with basic life skills. The 2012 Autism Society of California survey showed that 41% of individuals with ASD need assistance with dressing, 37% need assistance with toileting and 22% need assistance with feeding. Families also reported communication is an area of struggle for many individuals with ASD: 49% cannot indicate when they are sick; 29% cannot request items they need; and 26% cannot request items they want.3
Moreover, those needs are increasingly unmet because of declining access to Regional Center services. The percentage of families accessing services through the DDS has decreased since 2009. In 2009, 77% of California families said they were Regional Center clients, while only 70% were in 2012.4 Navigating the Regional Center service system provides yet another obstacle for parents and children to overcome: 81% of parents rated it moderate to very hard to navigate while 51% gave the medical health insurance system that rating.5
Insurer failures and refusals to provide therapy have exacerbated the public health crisis facing California, worsening the current emergency. Despite the 1999 passage of the MHPA, expressing the California Legislature's purpose to shift ASD therapy costs away from state and local governments to private insurers, health insurers still pay the smallest percentage of overall ASD therapy costs. Parents report that school districts are currently funding 48% of ABA, speech, occupation and physical therapies. Regional Centers pay 22% of the bill - yet another significant cost to the State. Parents pay roughly 17% out-of-pocket for ASD therapies. Finally, health insurance companies, despite the MHPA, are still only paying 9-13%.6
The need for services for autism continues throughout the affected individuals' lives. The percentage of adults with ASD who are employed or attending day programs has decreased from 29% in 2009, to 20% in 2012. The number of employed ASD adults was 42% in 2009 and dropped to 25% in 2012. This means that there is a sharp increase in the number of ASD adults with no employment or day program. The percentage of ASD adults accessing Adult Services has decreased; only 65% of ASD adults reported being a current Regional Center client, compared to 90% of individuals under age 18.
When treatment and services are not effectively and timely provided, still further costs accrue from involvement of ASD individuals with yet other governmental entities. California's justice system is now encountering adults and youths with ASD: 14% of families had interactions with police, including school police; 5% reported severe behavior and interactions with Child Protective Services, neighbors, or school personnel; 3% said the person with ASD had been entered into a behavioral unit or confined under Section 5150; 3% received a warning from Law Enforcement; 1% were arrested; and 1% spent time in jail or a juvenile detention center.7
This crisis is imposing staggering costs on many of California's governmental entities and on its taxpayers. Through a pattern of failing to provide mandated services, insurers have shifted the costs of ASD therapies and services to California's public education system and school districts. Insurer failures to provide services have had devastating fiscal impacts on limited governmental and taxpayer resources, requiring the promulgation of this emergency regulation to rectify.
CONSISTENCY OR COMPATIBILITY WITH STATE REGULATIONS
After conducting a review, the Department has concluded that the proposed regulations are neither inconsistent nor incompatible with existing state regulations.
MANDATE ON LOCAL AGENCIES OR SCHOOL DISTRICTS
The proposed regulations do not impose any mandate on local agencies or school districts. There are no costs to local agencies or school districts for which Part 7 (commencing with Section 17500) of Division 4 of the Government Code would require reimbursement.
COST OR SAVINGS TO STATE AGENCIES, LOCAL AGENCIES OR SCHOOL DISTRICTS, OR IN FEDERAL FUNDING
The Commissioner has determined that the regulations will result in no cost to any state agency, no cost to any local agency or school district that is required to be reimbursed under Part 7 (commencing with Section 17500) of Division 4 of the Government Code, no other nondiscretionary costs imposed on local agencies, and no costs in federal funding to the State.
To the contrary, the regulation confers a substantial financial benefit on both local agencies and school districts through shifting costs, which they are now bearing for special education and services to children with ASD, to private insurers. Substantial cost savings will also be realized by state agencies as their costs are also shifted to private insurers. The Department estimates that the proposed regulations will result in savings to State government of approximately $18 million in the current State Fiscal Year, savings to local government of approximately $9.6 million annually, and savings in federal funding to State programs of approximately $4.4 million in the current State Fiscal Year.
The proposed regulations requiring early intervention with behavioral health treatment and speech and language therapy will generate substantial cost savings to the State in a way that is fully consistent with applicable California law and public policy. Its promulgation will result in young children being better able to be mainstreamed into school and society, thereby lessening the burden on the taxpayer-provided healthcare network and other state-funded special education and support systems as the child matures.
ECONOMIC IMPACT ON BUSINESS AND THE ABILITY OF CALIFORNIA BUSINESS TO COMPETE
The types of businesses that may be affected by the proposed regulations are health insurers. The proposed regulations contain no recording or record-keeping requirements. The compliance requirements are that insurers must cover medically necessary treatment or services for autism or PDD, including BHT, subject only to financial terms and conditions that apply equally to all benefits under the policy.
The Commissioner has made an initial determination that the adoption of the proposed regulations may have a significant, statewide adverse economic impact directly affecting business, including the ability of California businesses to compete with businesses in other states. The Commissioner has not considered proposed alternatives that would lessen any adverse economic impact on business and invites you to submit proposals. Submissions may include the following considerations:
(i) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to businesses.
(ii) Consolidation or simplification of compliance and reporting requirements for businesses.
(iii) The use of performance standards rather than prescriptive standards.
(iv) Exemption or partial exemption from the regulatory requirements for businesses.
POTENTIAL COST IMPACT ON PRIVATE PERSONS OR ENTITIES/BUSINESSES
The agency is not aware of any cost impacts that a representative private person or business would necessarily incur in reasonable compliance with the proposed action.
Since 2011, insurers have been incrementally picking up growing portions of the cost of behavioral therapy while the government sector and taxpayers pay less of the $147.8 million annual tab associated with therapy costs for children insured under policies or plans regulated by the Department ("CDI-covered children") with autism.
The rapidly changing legal environment, including SB 946, the Harlick decision, and Department enforcement actions, caused insurers to begin changing premiums to pay for new coverage obligations over two years. According to a review conducted by the Department's actuarial and health policy staff, insurance companies raised monthly premiums by an average of $1.08 per member in 2012, to offset the costs of the behavioral treatments required by law. By the end of 2013, the Department estimates that 78% of the costs for therapy have been incorporated into rates, copayments and medical offsets for California's health care insurance consumers. As insurers raised premiums to cover mental health treatments, households (policyholders) using the therapy benefits incurred corresponding copayments and deductibles. The Department thus estimates that $7.6 million will have to be picked up in 2014 by parents and other policyholders.
By 2014, the remaining $32 million of the $147.8 million associated with annual therapy costs for CDI-covered children with autism will be transferred in annualized payment responsibilities to insurers ($20.5 million), to policyholders or households ($7.6 million) and to physicians, dentists, hospitals and other providers ($3.9 million), who may lower costs due to medical mainstreaming.
RESULTS OF THE ECONOMIC IMPACT ASSESSMENT
The Commissioner is required to assess any impact the regulations may have on the creation or elimination of jobs within the State of California; the creation of new businesses or the elimination of existing businesses within the State of California; the expansion of businesses currently doing business within the State of California; and the benefits of the regulation to the health and welfare of California residents, worker safety and the state's environment.
The Commissioner has made an initial determination that the adoption of the proposed regulations may result in the addition of one job within the State of California.
The Commissioner has made an initial determination that the adoption of the proposed regulations will not impact the creation of new businesses or the elimination of existing businesses within the State of California, the expansion of businesses currently doing business within the State of California, worker safety, or the state's environment.
The benefits of the proposed regulations to the health and welfare of California residents are as set forth under "Effect of Proposed Action" and "Policy Statement Overview" in the Informative Digest of this notice. These benefits include and result from the timely provision and coverage of medically necessary treatment and services for autism or PDD.
FINDING OF NECESSITY
The Commissioner finds that it is necessary for the health, safety, or welfare of the people of the State that the proposed regulations apply to businesses.
IMPACT ON SMALL BUSINESS
The Commissioner has determined the proposed action will not directly affect small businesses since the regulations only apply to the conduct of insurers doing business in California, and pursuant to Government Code section 11342.610(b)(2), an insurer by definition is not a small business. Providers of treatment or services for autism or PDD that are small businesses will be affected, however, because they may derive a benefit from the enforcement of the regulations.
IMPACT ON HOUSING COSTS
The proposed regulations will have no significant effect on housing costs.
The Commissioner must determine that no reasonable alternative considered by the
Commissioner or that has otherwise been identified and brought to the attention of the
Commissioner would be more effective in carrying out the purpose for which this action is
proposed, would be as effective and less burdensome to affected private persons than the
proposed action, or would be more cost-effective to affected private persons and equally effective in implementing the statutory policy or other provision of law.
TEXT OF REGULATIONS AND STATEMENTS OF REASONS
The Department has prepared an initial statement of reasons that sets forth the reasons for the proposed action. Upon request, the initial statement of reasons will be made available for inspection and copying. Requests for the initial statement of reasons or questions regarding this proceeding should be directed to the contact person listed above. Upon request, the final statement of reasons will be made available for inspection and copying once it has been prepared. Requests for the final statement of reasons should be directed to the contact person listed above.
The file for this proceeding, which includes a copy of the express terms of the proposed
regulations, the statement of reasons, the information upon which the proposed action is based, and any supplemental information, including any reports, documentation and other materials related to the proposed action that is contained in the rulemaking file, is available by appointment for inspection and copying at 300 Capitol Mall, 16th Floor, Sacramento, CA 95814, between the hours of 9:00 a.m. and 4:30 p.m., Monday through Friday.
If the regulations adopted by the Department differ from those which have originally been made available but are sufficiently related to the action proposed, they will be available to the public for at least 15 days prior to the date of adoption. Interested persons should request a copy of these regulations prior to adoption from the contact person listed above.
A copy of this notice, including the informative digest, which contains the general substance of the proposed regulations, will automatically be sent to all persons on the Insurance Commissioner's mailing list.
Documents concerning these proposed regulations are available on the Department's website. To access them, go to
http://www.insurance.ca.gov. Find at the right-hand side of the page the heading 'QUICK LINKS.' The third item in this column under this heading is 'For Insurers'; on the dropdown menu for this item, select 'Legal Information.' When the 'INSURERS: LEGAL INFORMATION' screen appears, click the third item in the list of bulleted items near the top of the page: 'Proposed Regulations.' The 'INSURERS: PROPOSED REGULATIONS' screen will be displayed. Select the only available link: 'Search for Proposed Regulations.' Then, when the 'PROPOSED REGULATIONS ' screen appears, you may choose to find the documents either by conducting a search or by browsing for them by name.
To browse, click on the 'Currently Proposed Regulations' link. A list of the names of regulations for which documents are posted will appear. Find in the list the link to `Mental Health Parity (Permanent)' and click it. Links to the documents associated with these regulations will then be displayed. To search, enter "REG-2013-00006" (the Department's regulation file number for these regulations) in the search field. Alternatively, search by keyword ("mental health parity," for example). Then, click on the 'Submit' button to display links to the various filing documents.
1 Cal. Gov't Code § 95021(d)(1) (West 2012).
2 Autism Soc'y of Cal., Autism in California 2012 Survey (2012), available at https://autismsocietyca.org/uploads/ASC_Survey_April_2012.pdf. Autism Society of California, Autism in California 2012 Survey (April, 2012), https://autismsocietyca.org/
5 Id. at 4.
6 Id. at 5.
7 Id. at 4.
Last Revised - November 20, 2013
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