Health insurance plans frequently deny claims by plan members on the basis that the claimed services are not medically necessary.  This limitation is applied even more so in the context of claims for mental health and substance abuse services where plans often seek to limit what type of coverage they provide or how long they will cover such treatment.  The recently-enacted California SB 855 expands the coverage obligations for fully-insured health plans in California for mental health and substance abuse treatment.  Self-insured plans are not impacted.  The law applies to all California health plans and disability insurance policies issued, amended or renewed on or after January 1, 2021.  It  requires that health plans provide coverage for all medically necessary services for mental health issues under the same terms and conditions applied to other medical conditions.  The bill also prohibits a health care plan from limiting benefits or coverage for mental health and substance abuse disorders to short-term or acute treatment and defines covered benefits to include basic health care services, intermediate services and prescription drugs.

The law defines “medically necessary treatment of a mental health or substance abuse disorder” as a service or product addressing the specific needs of a patient for the purpose of preventing, diagnosing, or treating an illness, injury, condition, or its symptoms, including minimizing the progression of such, in a manner that meets all of the following:

1. Is in accordance with generally accepted standards of mental health and substance use disorder care;
2. Is clinically appropriate in terms of type, frequency, extent, site, and duration; and
3. Is 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.

The law prohibits health plans from applying different, additional or conflicting criteria when making medical necessity determinations.  The law also requires that health plans base medical necessity determinations on current generally accepted standards of mental health and substance abuse disorder care and that they apply specified clinical criteria and guidelines in conducting utilization reviews. 

The bill also makes any provision in a health plan that reserves discretionary authority to the plan to determine benefit eligibility, interpret the terms of the plan or provides standards for interpretation that are inconsistent with California law, void and unenforceable.  In addition, the law expands coverage to include medically necessary treatment of all mental health and substance abuse disorders described in the most-recent edition of the International Classification of Diseases or the Diagnostic and Statistical Manual of Mental Disorders.  Lastly, the law provides that if medically necessary treatment of mental health and substance abuse disorders is not available in-network within the geographic and timely access standards, the plan must arrange coverage to ensure medically necessary out-of-network services at the same cost-sharing level that the member would pay for in-network services.

Health plans and insurers that provide coverage in California are already subject to the 1999 California Mental Health Parity Act and the federal Mental Health Parity and Addiction Equity Act of 2008, which, combined, require coverage of medically necessary treatment of severe mental illnesses, serious emotional disturbances of a child, and substance use disorders under the same terms and conditions applied to other medical/surgical conditions.  The California Mental Health Parity Act required mental health parity to nine enumerated severe mental illnesses but did not require parity in the treatment of substance abuse, anxiety, opioid use, alcohol use, and post-traumatic stress disorders.

The overall impact of SB 855 is to expand healthcare plans’ obligations for covered mental health services.  Claimants faced with denied health insurance claims for these services should contact an experienced insurance attorney such as the McKennon Law Group PC who can help guide claimants through these new requirements and ensure that their health plans are providing appropriate coverage.