Amended  IN  Senate  June 18, 2020
Amended  IN  Senate  May 19, 2020
Amended  IN  Senate  May 05, 2020

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 855

Introduced by Senator Wiener
(Principal coauthor: Senator Beall)
(Principal coauthors: Assembly Members Aguiar-Curry and Chiu)
(Coauthors: Senators Glazer, Hill, and Hurtado)
(Coauthors: Assembly Members Maienschein and Wicks)

January 14, 2020

An act to add Sections 1367.045 and 1374.75 1374.721 to, and to repeal and add Section 1374.72 of, the Health and Safety Code, and to add Section 10144.52 to, and to repeal and add Section 10144.5 of, the Insurance Code, relating to health coverage.


LEGISLATIVE COUNSEL'S DIGEST


SB 855, as amended, Wiener. Health coverage: mental health or substance abuse disorders.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care and makes a willful violation of the act a crime. Existing law also provides for the regulation of disability insurers by the Department of Insurance.
Existing law, known as the California Mental Health Parity Act, requires every health care service plan contract or disability insurance policy issued, amended, or renewed on or after July 1, 2000, that provides hospital, medical, or surgical coverage to provide coverage for the diagnosis and medically necessary treatment of severe mental illnesses of a person of any age, and of serious emotional disturbances of a child under the same terms and conditions applied to other medical conditions, as specified. Existing law requires those benefits to include, among other things, outpatient services, inpatient hospital services, partial hospital services, and prescription drugs, if the plan contract or policy includes coverage for prescription drugs.
This bill would revise and recast those provisions, and would instead require a health care service plan contract or disability insurance policy issued, amended, or renewed on or after January 1, 2021, to provide coverage for medically necessary treatment of mental health and substance use disorders, as defined, under the same terms and conditions applied to other medical conditions. The bill would prohibit a health care service plan or disability insurer from limiting benefits or coverage for mental health and substance use disorders to short-term or acute treatment. The bill would revise the covered benefits to include basic health care services, as defined, intermediate services, and prescription drugs.
This bill would require a health care service plan or disability insurer that provides hospital, medical, or surgical coverage to base medical necessity determinations and the utilization review criteria the plan or insurer, and any entity acting on the plan’s or insurer’s behalf, applies to determine the medical necessity of health care services and benefits for the diagnosis, prevention, and treatment of mental health and substance use disorders, on current generally accepted standards of medical and behavioral health care practice. mental health and substance use disorder care. The bill would require the health care service plan or insurer to apply specified clinical criteria and guidelines in conducting utilization review of the covered health care services and benefits and would prohibit the plan or insurer from applying different, additional, or conflicting criteria than the criteria and guidelines in the specified sources. The bill would authorize the Director of the Department of Managed Heath Care or the Insurance Commissioner, as applicable, to assess administrative penalties or civil penalties, as specified, for violation of the requirements relating to utilization review. The bill would make any provision in a health care service plan issued, delivered, amended, or renewed on or after January 1, 2021, that reserves discretionary authority to the plan, or an agent of the plan, to determine eligibility for benefits or coverage, interprets the terms of the contract, or provides standards of interpretation or review that are inconsistent with California law, void and unenforceable, as specified. The bill would declare that its provisions are severable.
Because a willful violation of these requirements with respect to health care service plans would be a crime, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

The people of the State of California do enact as follows:


SECTION 1.

 The Legislature finds and declares all of the following:
(a) The California Mental Health Parity Act (Section 1374.72 of the Health and Safety Code and Section 10144.5 of the Insurance Code) was enacted in 1999 to require coverage of all diagnosis and medically necessary treatment of nine listed severe mental illnesses, as well as serious emotional disturbances of a child. However, this list of nine severe mental illnesses is not only incomplete and out-of-date, but also fails to encompass the range of mental health and substance use disorders whose complex interactions are contributing to overdose deaths from opioids and methamphetamines, the increase in suicides, and other so-called deaths of despair.
(b) Following the California Mental Health Parity Act, the federal Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 put in place even more robust mental health parity protections, which also applied to substance use disorders, making the most important provision of the California Mental Health Parity Act its coverage requirement for medically necessary treatment for severe mental illnesses and serious emotional disturbances of a child.
(c) The federal Affordable Care Act (ACA) includes mental health and addiction coverage as one of the 10 essential health benefits, but it does not contain a definition for medical necessity, and despite the ACA, needed mental health and addiction coverage can be denied through overly restrictive medical necessity determinations.
(d) With one in five adults in the United States experiencing a mental health disorder and 1 in 13 individuals 12 years of age or older experiencing a substance use disorder, it is critical for the California Mental Health Parity Act to be expanded to apply to all mental health and substance use disorders, as defined by preeminent national and international bodies.
(e) The conditions currently listed in the California Mental Health Parity Act, including autism, are all included in the broader definition of mental health and substance use disorders.
(f) When medically necessary mental health and substance use disorder care is not covered, individuals with mental health and substance use disorders often have their conditions worsen, ending up on Medicaid, in the criminal justice system, or on the streets, resulting in harm to individuals and communities, and higher costs to taxpayers.
(g) In 2016, approximately 6,000,000 veterans in the United States had private health care coverage, making it critical to ensure that the veterans’ private health plans cover all medically necessary treatment for the invisible wounds of war.
(h) Expansion of the California Mental Health Parity Act will help address the following manifestations of the ongoing mental health and addiction crises in California:
(1) Between 2012 and 2017, California’s rate of fatal overdoses for all opioids increased 22 percent, while fatal overdose rates increased 85 percent for heroin and 425 percent for fentanyl.
(2) Suicide rates in California increased by 14.8 percent between 1999 and 2016, with the suicide rate from 1991 to 2017, inclusive, for children 10 to 14 years of age, inclusive, increasing by 225 percent.
(3) Thirty-seven percent of students with a mental health condition 14 years of age and older drop out of school, and mental illness has the highest dropout rate of any disability group.
(4) The correlation between untreated mental illness, substance use disorders, and incarceration is substantial, as three in four individuals in jail have been diagnosed with both a mental illness and a substance use disorder.
(5) Untreated mental health and substance use disorders are an enormous problem with incarcerated youth, with 70 percent of youth arrested each year having a mental health disorder.
(6) As many as one-third of the 130,000 individuals who are homeless living on the streets in California have a mental health condition.
(i) In two court decisions, Harlick v. Blue Shield of California, 686 F.3d 699 (9th Cir. 2011), cert. denied, 133 S.Ct. 1492 (2013), and Rea v. Blue Shield of California, 226 Cal.App.4th 1209, 1227 (2014), the California Mental Health Parity Act was interpreted to require coverage of medically necessary residential treatment.
(j) Coverage of intermediate levels of care such as residential treatment, which are essential components of the level of care continuum called for by nonprofit, and clinical specialty associations such as the American Society of Addiction Medicine (ASAM), are often denied through overly restrictive medical necessity determinations.
(k) In March 2019, the United States District Court of the Northern District of California ruled in Wit v. United Behavioral Health, 2019 WL 1033730 (Wit; N.D.CA Mar. 5, 2019), that United Behavioral Health created flawed level of care placement criteria that were inconsistent with generally accepted standards of mental health and substance use disorder care in order to “mitigate” the requirements of the federal Mental Health Parity and Addiction Equity Act of 2008.
(l) As described by the federal court in Wit, the eight generally accepted standards of mental health and substance use disorder care require all of the following:
(1) Effective treatment of underlying conditions, rather than mere amelioration of current symptoms, such as suicidality or psychosis.
(2) Treatment of cooccurring behavioral health disorders or medical conditions in a coordinated manner.
(3) Treatment at the least intensive and restrictive level of care that is safe and effective; a lower level or less intensive care is appropriate only if it safe and just as effective as treatment at a higher level or service intensity.
(4) Erring on the side of caution, by placing patients in higher levels of care when there is ambiguity as to the appropriate level of care, or when the recommended level of care is not available.
(5) Treatment to maintain functioning or prevent deterioration.
(6) Treatment of mental health and substance use disorders for an appropriate duration based on individual patient needs rather than on specific time limits.
(7) Accounting for the unique needs of children and adolescents when making level of care decisions.
(8) Applying multidimensional assessments of patient needs when making determinations regarding the appropriate level of care.
(m) The court in Wit found that all parties’ expert witnesses regarded the ASAM criteria for substance use disorders and Level of Care Utilization System, Child and Adolescent Level of Care Utilization System, Child and Adolescent Service Intensity Instrument, and Early Childhood Service Intensity Instrument (LOCUS/CALOCUS and CASII/ECSII) criteria for mental health disorders as prime examples of level of care criteria that are fully consistent with generally accepted standards of mental health and substance use care.

SEC. 2.

 Section 1367.045 is added to the Health and Safety Code, to read:

1367.045.
 (a) If a health care service plan contract offered, issued, delivered, amended, or renewed on or after January 1, 2021, contains a provision that reserves discretionary authority to the plan, or an agent of the plan, to determine eligibility for benefits or coverage, to interpret the terms of the contract, or to provide standards of interpretation or review that are inconsistent with the laws of this state, that provision is void and unenforceable.
(b) For purposes of this section, the term “discretionary authority” means a contract provision that has the effect of conferring discretion on a health care service plan or other claims administrator to determine entitlement to benefits or interpret contract language that, in turn, could lead to a deferential standard of review by a reviewing court.
(c) This section does not prohibit a health care service plan from including a provision in a contract that informs an enrollee that, as part of its routine operations, the plan applies the terms of its contracts for making decisions, including making determinations regarding eligibility, receipt of benefits and claims, or explaining policies, procedures, and processes, so long as the provision could not give rise to a deferential standard of review by a reviewing court.
(d) This section applies to both group and individual health care service plan contracts.

SEC. 3.

 Section 1374.72 of the Health and Safety Code is repealed.

SEC. 4.

 Section 1374.72 is added to the Health and Safety Code, to read:

1374.72.
 (a) (1) Every health care service plan contract issued, amended, or renewed on or after January 1, 2021, shall provide coverage for medically necessary treatment of mental health and substance use disorders, under the same terms and conditions applied to other medical conditions as specified in subdivision (c).
(2) For purposes of this section, “mental health and substance use disorders” means 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. Changes in terminology, organization, or classification of mental health and substance use disorders in future versions of the American Psychiatric Association’s Diagnostic and Statistical Manual of Mental Disorders or the World Health Organization’s International Statistical Classification of Diseases and Related Health Problems shall not affect the conditions covered by this section as long as a condition is commonly understood to be a substance use disorder or mental and behavioral health condition mental health or substance use disorder by health care providers practicing in relevant clinical specialties.
(3) For purposes of this section, “medically necessary treatment of a mental health or substance use disorder” means a service or product prescribed, ordered, or provided by a treating physician or other health care provider for the specific needs of that patient, for the purpose of preventing, diagnosing, or treating an illness, injury, condition, or its symptoms, including minimizing the progression of that illness, injury, condition, or its symptoms, in a manner that is all of the following:
(A) In accordance with the generally accepted standards of practice. mental health and substance abuse disorder care.
(B) Clinically appropriate in terms of type, frequency, extent, site, and duration.
(C) Not primarily for the economic benefit of the health care service plan and subscribers or for the convenience of the patient, treating physician, or other health care provider.
(4) For purposes of this section, “health care provider” means any of the following:
(A) A person who is licensed under Division 2 (commencing with Section 500) of the Business and Professions Code.
(B) An associate marriage and family therapist or marriage and family therapist trainee functioning pursuant to Section 4980.43.3 of the Business and Professions Code.
(C) A qualified autism service provider or qualified autism service professional certified by a national entity pursuant to Section 10144.51 of the Insurance Code and Section 1374.73.
(5) For purposes of this section, “generally accepted standards of mental health and substance use disorder care” has the same meaning as defined in paragraph (1) of subdivision (f) of Section 1374.721.

(5)

(6) A health care service plan shall not limit benefits or coverage for mental health and substance use disorders to short-term or acute treatment.

(6)

(7) All medical necessity determinations by the health care service plan concerning service intensity, level of care placement, continued stay, and transfer or discharge of enrollees diagnosed with mental health and substance use disorders shall be conducted in accordance with the requirements of Section 1374.75. 1374.721. This paragraph does not deprive an enrollee of the other protections of this article, including, but not limited to, grievances, appeals, independent medical review, discharge, transfer, and continuity of care.

(7)

(8) A health care service plan that authorizes a specific type of treatment by a provider pursuant to this section shall not rescind or modify the authorization after the provider renders the health care service in good faith and pursuant to this authorization for any reason, including, but not limited to, the plan’s subsequent rescission, cancellation, or modification of the enrollee’s or subscriber’s contract, or the plan’s subsequent determination that it did not make an accurate determination of the enrollee’s or subscriber’s eligibility. This section shall not be construed to expand or alter the benefits available to the enrollee or subscriber under a plan.
(b) These benefits shall include, but not be limited to, the following:
(1) Basic health care services, as defined in subdivision (b) of Section 1345.
(2) Intermediate services, including the full range of levels of care, including, but not limited to, residential treatment, partial hospitalization, and intensive outpatient treatment.
(3) Prescription drugs, if the plan contract includes coverage for prescription drugs.
(c) The terms and conditions applied to the benefits required by this section, that shall be applied equally to all benefits under the plan contract, shall include, but not be limited to, all of the following patient financial responsibilities:
(1) Maximum annual and lifetime benefits, if not prohibited by applicable law.
(2) Copayments and coinsurance.
(3) Individual and family deductibles.
(4) Out-of-pocket maximums.
(d) If any of the medically necessary services enumerated in subdivision (b) are not available in network within the geographic and timeliness standards set by law or regulation, the health care service plan shall immediately cover out-of-network services, whether secured by the patient or the health care service plan. The enrollee shall pay no more than the same cost-sharing that the enrollee would pay for the same covered services received from an in-network provider. A health care service plan shall not interrupt a course of treatment initiated out of network due to network inadequacy if in-network services subsequently become available, unless the course of treatment exceeds 24 months and the plan is able to demonstrate, to the satisfaction of the department, that care may be safely and appropriately transitioned to an in-network provider.
(e) (1) This section shall not apply to contracts entered into pursuant to Chapter 7 (commencing with Section 14000) or Chapter 8 (commencing with Section 14200) of Part 3 of Division 9 of the Welfare and Institutions Code, between the State Department of Health Care Services and a health care service plan for enrolled Medi-Cal beneficiaries.
(2) This section does not apply to specialized health care service plans that provide only dental or vision services.
(f) (1) For the purpose of compliance with this section, a health care service plan may provide coverage for all or part of the mental health and substance use disorder services required by this section through a separate specialized health care service plan or mental health plan, and shall not be required to obtain an additional or specialized license for this purpose. This paragraph shall not apply to health care service plans that are subject to Section 1367.005.
(2) A health care service plan shall provide the mental health and substance use disorder coverage required by this section in its entire service area and in emergency situations as may be required by applicable laws and regulations.  For purposes of this section, health care service plan contracts that provide benefits to enrollees through preferred provider contracting arrangements are not precluded from requiring enrollees who reside or work in geographic areas served by specialized health care service plans or mental health plans to secure all or part of their mental health services within those geographic areas served by specialized health care service plans or mental health plans, provided that all appropriate mental health or substance use disorder services are actually available within those geographic service areas within timeliness standards.
(3) Notwithstanding any other law, in the provision of benefits required by this section, a health care service plan may utilize case management, network providers, utilization review techniques, prior authorization, copayments, or other cost sharing, provided that these practices are consistent with Section 1374.76 of this code, and Section 2052 of the Business and Professions Code.
(g) This section shall not be construed to deny or restrict in any way the department’s authority to ensure plan compliance with this chapter when a health care service plan provides coverage for prescription drugs.
(h) A health care service plan shall not limit benefits or coverage for medically necessary services on the basis that those services should be or could be covered by a public entitlement program, including, but not limited to, special education or an individualized education program, Medicaid, Medicare, Supplemental Security Income, or Social Security Disability Insurance, and shall not include or enforce a contract term that excludes otherwise covered benefits on the basis that those services should be or could be covered by a public entitlement program.
(i) A health care service plan shall not adopt, impose, or enforce additional terms in its plan contracts or provider agreements, in writing or in operation, that undermine, alter, or conflict with the requirements of this section.

SEC. 5.Section 1374.75 is added to the Health and Safety Code, to read:
1374.75.

SEC. 5.

 Section 1374.721 is added to the Health and Safety Code, to read:

1374.721.
 (a) A health care service plan shall base any medical necessity determination or the utilization review criteria that the plan, and any entity acting on the plan’s behalf, applies to determine the medical necessity of health care services and benefits for the diagnosis, prevention, and treatment of mental health and substance use disorders on current generally accepted standards of medical and behavioral health care practice. Current generally accepted standards of medical and behavioral health care practice are evidence-based sources of standards of care and clinical practice that are generally accepted by health care providers practicing in relevant clinical specialties, including peer-reviewed scientific studies and medical literature, clinical practice guidelines and recommendations of health care provider professional associations, and specialty societies and federal government agencies, and drug labeling approved by the United States Food and Drug Administration. mental health and substance abuse disorder care.
(b) In conducting utilization review of all covered health care services and benefits for the diagnosis, prevention, and treatment of substance use disorders and mental and behavioral health conditions mental health and substance abuse disorders in children, adolescents adolescents, and adults, a health care service plan shall apply the criteria and guidelines set forth in the most recent versions of treatment criteria developed by the nonprofit professional association for the relevant clinical specialty.
(c) In conducting utilization review involving level of care placement decisions or any other patient care decisions that are within the scope of the sources specified in subdivision (b), a health care service plan shall not apply different, additional, conflicting, or more restrictive utilization review criteria than the criteria and guidelines set forth in those sources. This subdivision does not prohibit a health care service plan from applying utilization review criteria to health care services and benefits for substance use disorders and mental and behavioral health conditions mental health and substance use disorders that meet either of the following criteria:
(1) Are outside the scope of the criteria and guidelines set forth in the sources specified in subdivision (b), provided the utilization review criteria were developed in accordance with subdivision (a).
(2) Relate to advancements in technology or types of care that are not covered in the most recent versions of the sources specified in subdivision (b), provided that the utilization review criteria were developed in accordance with subdivision (a).
(d) If a health care service plan purchases or licenses utilization review criteria pursuant to paragraph (1) or (2) of subdivision (c), the plan shall verify and document before use that the criteria was developed in accordance with subdivision (a).
(e) To ensure the proper use of the criteria described in subdivision (b), every health care service plan shall do all of the following:
(1) Sponsor a formal education program by nonprofit clinical specialty associations to educate the health care service plan’s staff, including any third parties contracted with the health care service plan to review claims, conduct utilization reviews, or make medical necessity determinations about the clinical review criteria.
(2) Make the education program available to other stakeholders, including the health care service plan’s participating providers and covered lives. Participating providers shall not be required to participate in the education program.
(3) Provide the clinical review criteria and any training material or resources to providers and health care service plan patients.
(4) Track, identify, and analyze how the clinical review criteria are used to certify care, deny care, and support the appeals process.
(5) Conduct interrater reliability testing to ensure consistency in utilization review decisionmaking covering how medical necessity decisions are made. This assessment shall cover all aspects of utilization review as defined in paragraph (3).
(6) Run interrater reliability reports about how the clinical guidelines are used in conjunction with the utilization management process and parity compliance activities.
(7) Achieve interrater reliability pass rates of at least 90 percent and, if this threshold is not met, immediately provide for the remediation of poor interrater reliability and interrater reliability testing for all new staff before they can conduct utilization review without supervision.
(f) The following definitions apply for purposes of this section:
(1) “Generally accepted standards of medical and behavioral health care practice” mental health and substance use disorder care” means standards of care and clinical practice that are generally recognized by health care providers practicing in relevant clinical specialties such as psychiatry, psychology, clinical sociology, and addiction medicine and counseling. Valid, evidence-based sources establishing generally accepted standards of mental health and substance use disorder care include peer-reviewed scientific studies and medical literature, clinical practice guidelines and recommendations of nonprofit health care provider professional associations, specialty societies and federal government agencies, and drug labeling approved by the United States Food and Drug Administration.
(2) “Mental health and substance use disorders” has the same meaning as defined in paragraph (2) of subdivision (a) in of Section 1374.72.
(3) “Utilization review” means either of the following:
(A) Prospectively, retrospectively, or concurrently reviewing and approving, modifying, delaying, or denying, based in whole or in part on medical necessity, requests by health care providers, enrollees, or their authorized representatives for coverage of health care services prior to, retrospectively or concurrent with the provision of health care services to enrollees.
(B) Evaluating the medical necessity, appropriateness, level of care, service intensity, efficacy, or efficiency of health care services, benefits, procedures, or settings, under any circumstances, to determine whether a health care service or benefit subject to a medical necessity coverage requirement in a health care service plan is covered as medically necessary for an enrollee.
(4) “Utilization review criteria” means any criteria, standards, protocols, or guidelines used by a health care service plan to conduct utilization review.
(g) Changes in terminology, organization, or classification of substance use disorders or mental and behavioral health conditions mental health or substance use disorders in future versions of the American Psychiatric Association’s Diagnostic and Statistical Manual of Mental Disorders or the World Health Organization’s International Statistical Classification of Diseases and Related Health Problems shall not affect the conditions covered by this section as long as a condition is commonly understood to be a substance use disorder or mental and behavioral health condition mental health or substance use disorder by health care providers practicing in relevant clinical specialties.
(h) This section applies to all health care services and benefits for the diagnosis, prevention, and treatment of substance use disorders and mental and behavioral health conditions mental health or substance use disorders covered by a health care service plan contract, including prescription drugs.
(i) This section applies to a health care service plan that covers hospital, medical, or surgical expenses and conducts utilization review as defined in this section, and any entity or contracting provider that performs utilization review or utilization management functions on an enrollee’s behalf.
(j) The director may assess administrative penalties for violations of this section as provided for in Section 1368.04, in addition to any other remedies permitted by law.
(k) A health care service plan shall not adopt, impose, or enforce additional terms in its plan contracts or provider agreements, in writing or in operation, that undermine, alter, or conflict with the requirements of this section.
(l) (1) This section shall not apply to contracts entered into pursuant to Chapter 7 (commencing with Section 14000) or Chapter 8 (commencing with Section 14200) of Part 3 of Division 9 of the Welfare and Institutions Code, between the State Department of Health Care Services and a health care service plan for enrolled Medi-Cal beneficiaries.
(2) This section does not apply to specialized health care service plans that provide only dental or vision services.

SEC. 6.

 Section 10144.5 of the Insurance Code is repealed.

SEC. 7.

 Section 10144.5 is added to the Insurance Code, to read:

10144.5.
 (a) (1) Every disability insurance policy issued, amended, or renewed on or after January 1, 2021, that provides hospital, medical, or surgical coverage shall provide coverage for medically necessary treatment of mental health and substance use disorders, under the same terms and conditions applied to other medical conditions as specified in subdivision (c).
(2) For purposes of this section, “mental health and substance use disorders” means 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 World Health Organization’s International Statistical Classification of Diseases and Related Health Problems, or that is listed in the most recent version of the American Psychiatric Association’s Diagnostic and Statistical Manual of Mental Disorders. Changes in terminology, organization, or classification of mental health and substance use disorders in future versions of the American Psychiatric Association’s Diagnostic and Statistical Manual of Mental Disorders or the World Health Organization’s International Statistical Classification of Diseases and Related Health Problems shall not affect the conditions covered by this section as long as a condition is commonly understood to be a substance use disorder or mental and behavioral health condition mental health or substance use disorder by health care providers practicing in relevant clinical specialties.
(3)  For purposes of this section, “medically necessary treatment of a mental health or substance use disorder” means a service or product prescribed, ordered, or provided by a treating physician or other health care provider for the specific needs of that patient, for the purpose of preventing, diagnosing, or treating an illness, injury, condition, or its symptoms, including minimizing the progression of an illness, injury, condition, or its symptoms, in a manner that is all of the following:
(A) In accordance with the generally accepted standards of practice.
(B) Clinically appropriate in terms of type, frequency, extent, site, and duration.
(C) Not primarily for the economic benefit of the disability insurance policy and insureds or for the convenience of the patient, treating physician, or other health care provider.
(4) “Health care provider” means any of the following:
(A) A person who is licensed under Division 2 (commencing with Section 500) of the Business and Professions Code.
(B) An associate marriage and family therapist or marriage and family therapist trainee functioning pursuant to Section 4980.43.3 of the Business and Professions Code.
(C) A qualified autism service provider or qualified autism service professional certified by a national entity pursuant to Section 1374.73 of the Health and Safety Code and Section 10144.51.
(5) For purposes of this section, “generally accepted standards of mental health and substance use disorder care” has the same meaning as defined in paragraph (1) of subdivision (f) of Section 10144.52.

(5)

(6) A disability insurer shall not limit benefits or coverage for mental health and substance use disorders to short-term or acute treatment.

(6)

(7) All medical necessity determinations made by the disability insurer concerning service intensity, level of care placement, continued stay, and transfer or discharge of insureds diagnosed with mental health and substance use disorders shall be conducted in accordance with the requirements of Section 10144.52.

(7)

(8) A disability insurer that authorizes a specific type of treatment by a provider pursuant to this section shall not rescind or modify the authorization after the provider renders the health care service in good faith and pursuant to this authorization for any reason, including, but not limited to, the insurer’s subsequent rescission, cancellation, or modification of the insured’s or policyholder’s contract, or the insurer’s subsequent determination that it did not make an accurate determination of the insured’s or policyholder’s eligibility. This section shall not be construed to expand or alter the benefits available to the insured or policyholder under an insurance policy.
(b) These benefits shall include, but not be limited to, the following:
(1) Basic health care services, as defined in subdivision (b) of Section 1345 of the Health and Safety Code.
(2) Intermediate services, including the full range of levels of care, including, but not limited to, residential treatment, partial hospitalization, and intensive outpatient treatment.
(3) Prescription drugs, if the policy or contract includes coverage for prescription drugs.
(c) The terms and conditions applied to the benefits required by this section, that shall be applied equally to all benefits under the disability insurance policy shall include, but not be limited to, all of the following patient financial responsibilities:
(1) Maximum and annual lifetime benefits, if not prohibited by applicable law.
(2) Copayments and coinsurance.
(3) Individual and family deductibles.
(4) Out-of-pocket maximums.
(d) If any of the medically necessary services enumerated in subdivision (b) are not available in network within the geographic and timeliness standards set by law or regulation, the disability insurer shall immediately cover out-of-network services, whether secured by the patient or the disability insurer. The insured shall pay no more than the same cost-sharing that the insured would pay for the same covered services received from an in-network provider. A disability insurer shall not interrupt a course of treatment initiated out of network due to network inadequacy if in-network services subsequently become available unless the course of treatment exceeds 24 months and the disability insurer is able to demonstrate, to the satisfaction of the department, that care may be safely and appropriately transitioned to an in-network provider.
(e) This section shall not apply to accident-only, specified disease, hospital indemnity, Medicare supplement, dental-only, or vision-only insurance policies.
(f) (1) For the purpose of compliance with this section, a disability insurer may provide coverage for all or part of the mental health and substance use disorder services required by this section through a separate specialized health insurance policy or mental health policy. This paragraph shall not apply to policies that are subject to Section 10112.27.
(2) A disability insurer shall provide the mental health and substance use disorder coverage required by this section in its entire service area and in emergency situations as may be required by applicable laws and regulations.  For purposes of this section, disability insurance policies that provide benefits to insureds through preferred provider contracting arrangements are not precluded from requiring insureds who reside or work in geographic areas served by specialized health insurance policies or mental health insurance policies to secure all or part of their mental health services within those geographic areas served by specialized health insurance policies or mental health insurance policies, provided that all appropriate mental health or substance use disorder services are actually available within those geographic service areas within timeliness standards.
(3) Notwithstanding any other law, in the provision of benefits required by this section, a disability insurer may utilize case management, network providers, utilization review techniques, prior authorization, copayments, or other cost sharing, provided that these practices are consistent with Section 10144.4 of this code, and Section 2052 of the Business and Professions Code.
(g) This section shall not be construed to deny or restrict in any way the department’s authority to ensure a disability insurer’s compliance with this code when a disability insurer provides coverage for prescription drugs.
(h) A disability insurer shall not limit benefits or coverage for medically necessary services on the basis that those services should be or could be covered by a public entitlement program, including, but not limited to, special education or an individualized education program, Medicaid, Medicare, Supplemental Security Income, or Social Security Disability Insurance, and shall not include or enforce a contract term that excludes otherwise covered benefits on the basis that those services should be or could be covered by a public entitlement program.
(i) A disability insurer shall not adopt, impose, or enforce additional terms in its policies or provider agreements, in writing or in operation, that undermine, alter, or conflict with the requirements of this section.

(j)Compliance with the requirements of this section shall be enforced in the same manner as Section 790.03, including through Sections 790.035 and 790.05.

(j) If the commissioner determines that a disability insurer has violated this section, the commissioner may, after appropriate notice and opportunity for hearing in accordance with the Administrative Procedure Act (Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code), by order, assess a civil penalty not to exceed five thousand dollars ($5,000) for each violation, or, if a violation was willful, a civil penalty not to exceed ten thousand dollars ($10,000) for each violation.

SEC. 8.

 Section 10144.52 is added to the Insurance Code, to read:

10144.52.
 (a) A disability insurer that provides hospital, medical, or surgical coverage shall base any medical necessity determination or the utilization review criteria that the insurer, and any entity acting on the insurer’s behalf, applies to determine the medical necessity of health care services and benefits for the diagnosis, prevention, and treatment of mental health and substance use disorders on current generally accepted standards of medical and behavioral health care practice. Current generally accepted standards of medical and behavioral health care practice are evidence-based sources of standards of care and clinical practice that are generally accepted by health care providers practicing in relevant clinical specialties, including peer-reviewed scientific studies and medical literature, clinical practice guidelines and recommendations of health care provider professional associations, and specialty societies and federal government agencies, and drug labeling approved by the United States Food and Drug Administration. mental health and substance use disorder care.
(b) In conducting utilization review of all covered health care services and benefits for the diagnosis, prevention, and treatment of substance use disorders and mental and behavioral health conditions mental health and substance use disorders in children, adolescents, and adults, a disability insurer shall 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.
(c) In conducting utilization review involving level of care placement decisions or any other patient care decisions that are within the scope of the sources specified in subdivision (b), a disability insurer shall not apply different, additional, conflicting, or more restrictive utilization review criteria than the criteria and guidelines set forth in those sources. This subdivision does not prohibit a disability insurer from applying utilization review criteria to health care services and benefits for substance use disorders and mental and behavioral health conditions mental health and substance use disorders that meet either of the following criteria:
(1) Are outside the scope of the criteria and guidelines set forth in the sources specified in subdivision (b), provided the utilization review criteria was developed in accordance with subdivision (a).
(2) Relate to advancements in technology or types of care that are not covered in the most recent versions of the sources specified in subdivision (b), provided that the utilization review criteria was developed in accordance with subdivision (a).
(d) If a disability insurer purchases or licenses utilization review criteria pursuant to paragraph (1) or (2) of subdivision (c), the insurer shall verify and document before use that the criteria were developed in accordance with subdivision (a).
(e) To ensure the proper use of the criteria described in subdivision (b), every disability insurer shall do all of the following:
(1) Sponsor a formal education program by nonprofit clinical specialty associations to educate the disability insurer’s staff, including any third parties contracted with the disability insurer to review claims, conduct utilization reviews, or make medical necessity determinations about the clinical review criteria.
(2) Make the education program available to other stakeholders, including the insurer’s participating providers and covered lives.
(3) Provide the clinical review criteria and any training material or resources to providers and insured patients.
(4) Track, identify, and analyze how the clinical review criteria are used to certify care, deny care, and support the appeals process.
(5) Conduct interrater reliability testing to ensure consistency in utilization review decisionmaking covering how medical necessity decisions are made. This assessment shall cover all aspects of utilization review as defined in paragraph (3).
(6) Run interrater reliability reports about how the clinical guidelines are used in conjunction with the utilization management process and parity compliance activities.
(7) Achieve interrater reliability pass rates of at least 90 percent and, if this threshold is not met, immediately provide for the remediation of poor interrater reliability and interrater reliability testing for all new staff before they can conduct utilization review without supervision.
(f) The following definitions apply for purposes of this section:
(1) “Generally accepted standards of medical and behavioral health care practice” mental health and substance use disorder care” means standards of care and clinical practice that are generally recognized by health care providers practicing in relevant clinical specialties such as psychiatry, psychology, clinical sociology, and addiction medicine and counseling. Valid, evidence-based sources establishing generally accepted standards of mental health and substance use disorder care include peer-reviewed scientific studies and medical literature, clinical practice guidelines and recommendations of nonprofit health care provider professional associations, specialty societies and federal government agencies, and drug labeling approved by the United States Food and Drug Administration.
(2) “Mental health and substance use disorders” has the same meaning as defined in paragraph (2) of subdivision (a) of Section 10144.5.
(3) “Utilization review” means either of the following:
(A) Prospectively, retrospectively, or concurrently reviewing and approving, modifying, delaying, or denying, based in whole or in part on medical necessity, requests by health care providers, insureds, or their authorized representatives for coverage of health care services prior to, retrospectively or concurrent with the provision of health care services to insureds.
(B) Evaluating the medical necessity, appropriateness, level of care, service intensity, efficacy, or efficiency of health care services, benefits, procedures, or settings, under any circumstances, to determine whether a health care service or benefit subject to a medical necessity coverage requirement in a disability insurance policy is covered as medically necessary for an insured.
(4) “Utilization review criteria” means any criteria, standards, protocols, or guidelines used by a disability insurer to conduct utilization review.
(g) Changes in terminology, organization, or classification of substance use disorders or mental and behavioral health conditions mental health or substance use disorders in future versions of the American Psychiatric Association’s Diagnostic and Statistical Manual of Mental Disorders or the World Health Organization’s International Statistical Classification of Diseases and Related Health Problems shall not affect the conditions covered by this section as long as a condition is commonly understood to be a substance use disorder or mental and behavioral health condition mental health or substance use disorder by health care providers practicing in relevant clinical specialties.
(h) This section applies to all health care services and benefits for the diagnosis, prevention, and treatment of substance use disorders and mental and behavioral health conditions mental health or substance use disorders covered by a disability insurance policy, including prescription drugs.
(i) This section applies to a disability insurer that covers hospital, medical, or surgical expenses and conducts utilization review as defined in this section, and any entity or contracting provider that performs utilization review or utilization management functions on an insurer’s behalf.

(j)The commissioner may assess administrative penalties for violations of this section as provided for in Section 10123.135, in addition to any other remedies permitted by law.

(j) If the commissioner determines that a disability insurer has violated this section, the commissioner may, after appropriate notice and opportunity for hearing in accordance with the Administrative Procedure Act (Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code), by order, assess a civil penalty not to exceed five thousand dollars ($5,000) for each violation, or, if a violation was willful, a civil penalty not to exceed ten thousand dollars ($10,000) for each violation.
(k) A disability insurer shall not adopt, impose, or enforce additional terms in its policies or provider agreements, in writing or in operation, that undermine, alter, or conflict with the requirements of this section.

(l)Compliance with the requirements of this section shall be enforced in the same manner as Section 790.03, including through Sections 790.035 and 790.05.

(m)

(l) This section does not apply to accident-only, specified disease, hospital indemnity, Medicare supplement, dental-only, or vision-only insurance policies.

SEC. 9.

 The provisions of this act are severable. If any provision of this act or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

SEC. 10.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.