In CHCF’s last two statewide health policy polls, Californians said their chief health concern was “making sure people with mental health problems can get the treatment they need.” Nearly 9 in 10 also favored enforcing rules requiring health insurance companies to provide mental health care at the same level as physical health care — at parity. CHCF commissioned a review of mental health parity enforcement in California, written by JoAnn Volk, author of this blog. The paper is part of CHCF’s broader work to advance behavioral health care in California.

On September 25, California Governor Gavin Newsom signed a law strengthening the state’s mental health parity protections for Californians. It’s the culmination of years of legislative proposals to improve access to mental health and substance use disorder (MH/SUD) services. The new law strengthens existing protections by requiring state-regulated health plans and insurers to cover all mental health conditions and substance use disorders listed in the most recent edition of the Diagnostic and Statistical Manual of Mental Health Disorders (DSM), the authoritative compendium of all MH/SUD diagnoses. Previous state law required coverage for specific mental health conditions listed in statute and diagnoses listed in an outdated version of the DSM. The new law also requires insurers to meet certain standards in defining “medical necessity,” the criteria by which insurers and health plans make individual coverage decisions.

Both issues were shortcomings we identified in a report released last month assessing the state’s enforcement of state and federal laws that attempt to ensure access to MH/SUD services comparable to access to other medical services. The report, Equal Treatment: A Review of Mental Health Parity Enforcement in California, produced with support from CHCF, is based on interviews with representatives for health insurers, health plans, providers and consumers, and mental health parity experts, as well as regulators with the two state agencies tasked with overseeing health plans and insurers, the Department of Managed Health Care, and the California Department of Insurance. This diverse set of stakeholders offered insights on the state’s progress in enforcing protections under the federal Mental Health Parity and Addiction Equity Act and state law. The federal law requires health plans and insurers that provide coverage of MH/SUD to ensure that coverage does not come with higher out-of-pocket costs or stricter limits on getting care than are applied to other medical conditions.

Here’s what we heard:

• California was an early leader in the enforcement of the federal parity law; state regulators have been ahead of most other states in reviewing health plans for compliance with its financial requirements (e.g., copays and co-insurance), quantitative treatment limits (e.g., visit or day limits on coverage) and non-quantitative treatments (e.g., prior authorization). Stakeholders agreed the state has made progress in assessing compliance for financial requirements and quantitative treatment limits. However, achieving parity for non-quantitative treatment limits (NQTLs) continues to be the dominant challenge in compliance with the federal law. Stakeholders identified utilization management (PDF), medical necessity criteria, and network adequacy as areas where compliance with non-quantitative treatment limits often falls short and impedes access to needed services.
• Stakeholders representing providers said utilization management procedures vary widely across health insurers and plans, resulting in denials for some patients and administrative burdens for providers seeking to obtain approvals under the varying requirements.
• Insurers and their vendors, including behavioral health organizations that manage MH/SUD coverage, can use their own internally developed medical necessity guidelines to make determinations about the appropriateness of level of care or treatment recommended by providers for their patients. As a result, these guidelines can be more restrictive than generally accepted medical standards.
• Patient and provider representatives overwhelmingly cited a dearth of in-network providers as a significant barrier to accessing health services. They said low reimbursement rates, onerous health plan processes for authorizing payment, and burdensome contracting terms are the dominant reasons for the shortage, all of which are non-quantitative treatment limits that are subject to review under the federal law.

Opportunities for Improvement

Based on these views, our report identified opportunities for policymakers and regulators to improve standards for and oversight of health plans’ federal compliance. One of our recommendations — to strengthen oversight of utilization management — was adopted in the newly enacted legislation. Greater standardization and specificity of utilization management can help ensure patients with the same profile aren’t treated differently based on how strictly their insurer or health plan applies medical necessity criteria. The new state law defines medically necessary care to be that which is consistent with evidence-based and expert-recognized standards of care and guidelines. The new state law also takes up another of our recommendations: to establish clearer authority for regulators to enforce coverage of all diagnoses in the DSM. The new law defines mental health and substance use disorders to be consistent with the most recent edition of the DSM.

However, there are other recommendations in our report that will fall to regulators to implement. In this area, our primary recommendation is for state regulators to evaluate provider networks for parity. California has among the strongest network adequacy standards, and the new law codifies those and applies them to health insurers regulated by the state’s department of insurance. However, meeting network adequacy requirements does not automatically guarantee that a plan provides enrollees with access to in-network MH/SUD providers comparable to other medical providers. A recent report from Milliman documents the disparities in network access and provider reimbursement in California, where inpatient behavioral health care was 7.8 times more likely to be out-of-network and behavioral health visits were 4.2 times more likely to be out-of-network than other medical care. The report also showed significantly lower reimbursement rates for in-network services by behavioral health providers. Federal parity regulations make clear that unjustified differences in reimbursement rates and unequal efforts to incentivize network participation, for example, through increased reimbursement and an accelerated process for network participation, are potential parity violations. Three states have recently taken enforcement actions under the federal law based at least in part on disparate reimbursement practices. Given the extent of problems reported by stakeholders and documented in the Milliman report, California regulators have reason and authority to take a closer look at plans’ networks with a parity lens.

Other recommendations that remain for regulators to implement:

• Establish clearer expectations for insurers and health plans that use delegates. Multiple stakeholders said health plans’ use of delegates — entities contracting with plans to provide care (e.g., large medical groups) or carry out certain functions (e.g., behavioral health organizations that managed MH/SUD coverage) — can exacerbate problems with utilization management. Under federal and state law, health plans and insurers are responsible for ensuring compliance with the federal parity law, regardless of whether some functions are delegated to other entities.
• Improve processes for getting input from providers. Providers are in a better position than their patients to see potential parity violations and can be key allies to regulators in identifying trends and issues that warrant close scrutiny. Each state agency overseeing parity compliance has a dedicated portal through which providers can bring potential parity violations to the attention of regulators. Yet both agencies could undertake greater outreach to providers to obtain information that could help inform targeted reviews and exams.
• Implement the US Department of Labor’s non-quantitative treatment analysis. While the California Department of Insurance documentation requirements seem to align with the five-step analysis specified in the federal compliance toolkit, the state Department of Managed Health Care’s requirements for documentation don’t appear to account for how plans utilize evidentiary standards in developing the NQTL factors and the thresholds that trigger the application of an NQTL. This information is needed to determine if an NQTL conforms with the required federal parity law standard.
• Expand Use of Claims Data. Claims data can be an indicator of potential NQTL violations. For example, if the rate of denial is much higher for MH/SUD claims than for medical/surgical claims, it could indicate a potential parity violation with the medical necessity standard. Use of this data can allow regulators to focus their attention and limited resources on potential problem areas. The departments need specific authority to collect claims data on a regular basis to allow for such an analysis.

This article first appeared on CHIRblog on October 2, 2020, and is reprinted with permission of the Georgetown University Center on Health Insurance Reforms. Copyright © 2020. All rights reserved. 

JoAnn Volk

JoAnn Volk is a research professor at the Georgetown University Center on Health Insurance Reforms. There she directs research, authors papers, and provides technical assistance on state and federal regulation and legislation governing private health insurance, including health insurance marketplaces under the Affordable Care Act. Read More