Mental Health Parity Law in Calif. Signals Shift in Review Industry

A mental health parity law that took effect in California on January 1, 2021, means that independent review organizations (IRO) and utilization review organizations (URO) can expect to work with new care guidelines when assessing coverage standards.

Senate Bill (SB) 855 is one of several pieces of legislation to appear in recent months aimed at improving mental health coverage and addressing perceived disparities in the breadth and extent of coverage. Similar laws, including Illinois House Bill 2595, require that health insurers adhere to standards of care developed by nonprofit organizations, rather than the more traditional commercial standards.

The Illinois bill, for instance, requires that “an insurer shall exclusively apply 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.”

Behind SB 855

The new California law, which mandates the same use of nonprofit-developed generally accepted standards of care (GACS), gained favor among mental health advocates who have long pushed for parity between hospital, medical or surgical services and behavioral health services.

SB 855 and other legislation directed at mental health parity are “creating a mind-shift in how [review organizations] incorporate the different criteria,” says Garry Carneal, JD, MA, president and CEO of Schooner Strategies and senior policy advisor to The Kennedy Forum, a mental health advocacy organization. In December 2020, The Kennedy Forum published a model bill, the Jim Ramstad Model State Parity Legislation, that’s in close accord with California’s SB 855 legislation.

Industry experts expect that other states are likely to pass similar bills in the coming months.

“We’re definitely seeing a lot more [legislation] being introduced in other states related to mental health parity,” says Aja Leichliter, Senior Director, Chief Compliance Officer with Medical Review Institute of America (MRIoA).

As perhaps the most comprehensive mental health parity law in the country, California’s SB 855 prohibits limiting mental health and substance abuse services to short-term or acute treatment, and it also requires that health plans provide coverage for out-of-network services should in-network care be unavailable. Additionally, the law bars insurers from rescinding prior authorizations for mental health and substance use disorder services after they have been provided.

Yet SB 855 is more than a traditional mental health parity law, according to an analysis from ParityTrack developed by Carneal. Instead, the law “functionally outlaws internal and commercial criteria that do not meet generally accepted standards of care,” the analysis states. “It also mandates the disclosure of the utilization review criteria at any point in time (not just during a denial of care and appeal). It promotes the use of guidelines developed by nonprofit clinical specialty associations in the MH/SUD [mental health/substance use disorder] field.”

In practice, the law means that insurers won’t be allowed to limit a patient’s residential addiction treatment services to seven days, for instance, when 30 days is the accepted standard of care. It also significantly expands the type of diagnoses that would make patients eligible for treatment, including services directed at “underlying conditions,” rather than strictly the patient’s current symptoms.

Finding favor, and opposition

While mental health advocates celebrated the passage of SB 855, health insurers argued that it would raise costs across the board and are concerned about the revised definition of “medical necessity.”

“Our concerns were about the bill defining medical necessity in a way that we believe will undermine the ability of providers to determine what is clinically appropriate for their own patients,” said a spokesperson from the California Association of Health Plans, one of the law’s opponents. “The bill also allowed unlicensed providers and facilities to treat those suffering from mental health and substance use disorders, which could place vulnerable patients at risk.”

A separate analysis from the California Health Benefits Review Program projects that SB 855 won’t dramatically increase costs, instead upping premiums and cost-sharing per patient by a fraction of 1 percent. The law also doesn’t cover everyone; it applies solely to state-regulated commercial health plans.

Looking ahead

The main takeaway for IROs and UROs is to be aware that nonprofit guidelines may be part of the case review, depending on location. For instance, reviewers may use guidelines from the American Society of Addiction Medicine or other nonprofit groups, as opposed to the traditional ChangeHealth or MCG guidelines.

“If you’re doing business in California, you have to be using the nonprofit criteria,” Carneal says. “Everyone else has to wait with bated breath to see.”

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