By: HUB’s EB Compliance Team

California Governor Gavin Newsom signed Senate Bill 855 into law on September 25, 2020 which will require California insurers to incorporate new provisions into insurance contracts that are issued or renewed after January 1, 2021.

Overview

California’s SB 855 expands the earlier California Mental Health Parity Act of 1999 by requiring insurers to cover a broader scope of behavioral health conditions. Every health care service plan contract or disability insurance policy issued, amended, or renewed in California on or after January 1, 2021, that provides hospital, medical, or surgical coverage must satisfy these new California requirements. This law impacts California fully-insured health plans and insurers subject to the state’s insurance laws. This state law does not apply to self-insured plans due to ERISA preemption.

However, remember that the federal Mental Health Parity and Addiction Equity Act (MHPAEA) applies to fully-insured and self-insured plans of employers with 50 or more employees. The federal law is not as expansive because it does not require plans to cover Mental Health (MH) and Substance Use Disorder (SUD) benefits, but rather applies to plans that already cover MH and SUD benefits. MHPAEA prohibits plans from imposing more restrictive quantitative (e.g., copayments) and non-quantitative (e.g., prior authorizations) treatment limitations on MH/SUD benefits than on other medical benefits.

Here is a summary of some of the new California law’s key provisions:

Expanded Coverage of Mental Health and Substance Use Disorders

Under California’s SB 855, all medically necessary mental health and substance use disorder treatments must be covered. This includes basic health care services, intermediate services (such as residential treatment, partial hospitalization, intensive outpatient treatment) and prescription drugs (if the plan contract includes coverage for prescription drugs). This is broader than the nine mental illnesses and serious child emotional disturbances that were required under the 1999 California law. SB 855 also prohibits limiting benefits or coverage for mental health and substance use disorders to short-term or acute treatment. Financial requirements imposed on MH/SUD benefits and medical/surgical benefits must be equally applied. These include copayments, coinsurance, deductibles, annual and lifetime limits, and out-of-pocket maximums.

Prohibition on Rescinding Authorizations

SB 855 prohibits a plan from rescinding or modifying an authorization for a specific behavioral health treatment after a provider renders services in good faith reliance on the authorization.

Coverage for Certain Out-of-network Services

When medically necessary mental health or substance use disorder services are not available in-network within the geographic and timely access standards set by law or regulation, the plan must arrange coverage to ensure the delivery of medically necessary out-of-network services and any medically necessary follow-up services that meet those geographic and timely access standards. This includes providing out-of-network options that meet the geographic and timely access standards at a cost that is no higher than the cost-sharing that the participant would pay for the same covered services received from an in-network provider.

Uniform Definition

Additionally, insurers will be required to adopt the definition of “mental health and substance disorders”  provided under SB 855: “a mental health condition or substance use disorder that falls under any of the diagnostic categories listed in the mental and behavioral disorders chapter of the most recent edition of the International Classification of Diseases or that is listed in the most recent version of the Diagnostic and Statistical Manual of Mental Disorders…”.

Medical Necessity Determination or Utilization Review Criteria

Insurers must base any medical necessity determination or utilization review criteria for the treatment of mental health and substance use disorders on current generally accepted standards of mental health and substance use disorder care, applying the criteria and guidelines set forth in the most recent versions of the treatment criteria developed by the nonprofit professional association for the relevant clinical specialty.

No Deferential Review

The law also prohibits “discretionary authority” contract provisions that grant the plan or plan administrators discretion to determine eligibility for benefits and coverage or contract interpretations that are inconsistent with the laws of California. Courts will be able to review plan decisions covered by this law based purely on state law and without any deference to the plan administrator’s interpretation. However, the law does permit plans to include a provision in their contract informing participants that the plan will apply the terms of the contract for making decisions (including determinations regarding eligibility, benefits and claims, or explaining policies, procedures, and processes) as long as the provision could not give rise to a deferential standard of review by a reviewing court.

Potential Penalties

Penalties of up to $5,000 per violation or $10,000 per willful violation may be assessed for violating this new law as well.

What are the next steps?

Employers with fully-insured health plans should reach out to their insurance carriers to see how this new law will impact the terms of their coverage and utilization review processes for behavioral health services beginning in 2021.

If you have any questions, please contact your HUB Advisor. You can also view more compliance articles in our Compliance Directory.

NOTICE OF DISCLAIMER

The information herein is intended to be educational only and is based on information that is generally available. HUB International makes no representation or warranty as to its accuracy and is not obligated to update the information should it change in the future. The information is not intended to be legal or tax advice. Consult your attorney and/or professional advisor as to your organization’s specific circumstances and legal, tax or other requirements.