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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.
PUBLIC HEARING
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
follows:
Date and Time: January 8, 2014
Location: San Diego Room
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:
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:
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).

INFORMATIVE DIGEST


Consistency with Other State Laws

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.)

POLICY STATEMENT OVERVIEW

CONSISTENCY OR COMPATIBILITY WITH 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:

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.

ALTERNATIVES


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.

MODIFIED LANGUAGE


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.

AUTOMATIC MAILING


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.
WEBSITE POSTINGS
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/

uploads/ASC_Survey_April_2012.pdf.

3 Id.

4 Id.

5 Id. at 4.

6 Id. at 5.

7 Id. at 4.

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Last Revised - November 20, 2013
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