Equal Treatment: A Review of Mental Health Parity Enforcement in California SEPTEMBER 2020 AUTHORS JoAnn Volk, MA; Maanasa Kona, JD; Madeline O’Brien, MPA; Christina Lechner Goe, JD; and James Mayhew, JD Contents About the Authors 3Introduction JoAnn Volk, MA, is a research professor; Maanasa Kona, JD, is an assistant research 3Study Approach professor; and Madeline O’Brien, MPA, is a 4The Legal Framework: Parity on Paper research fellow at the Georgetown University Center on Health Insurance Reforms. Christina Parity in Federal Law Lechner Goe, JD, and James Mayhew, JD, Benefit Mandates and Parity in California Law are consultants. Assessing Parity Compliance Under MHPAEA About the Foundation 8The DMHC Compliance Process The California Health Care Foundation is Initial Reviews dedicated to advancing meaningful, measur- Ongoing Oversight able improvements in the way the health care delivery system provides care to the people of 10CDI MHPAEA Compliance Process California, particularly those with low incomes Form Filing and those whose needs are not well served by the status quo. We work to ensure that Enforcement Action people have access to the care they need, when they need it, at a price they can afford. 12Findings from Stakeholder Interviews: Parity in Practice CHCF informs policymakers and industry Stakeholders Noted Progress in Meeting Parity in Financial leaders, invests in ideas and innovations, Requirements and Quantitative Treatment Limitations and connects with changemakers to create Significant Work Remains to Ensure Parity in Non- a more responsive, patient-centered health Quantitative Treatment Limitations care system. 17Considerations for Policymakers and Regulators For more information, visit www.chcf.org. 19 Conclusion 20 Appendix A. Results of MHPAEA Compliance Reviews 24 Endnotes California Health Care Foundation www.chcf.org 2 Introduction Study Approach The Paul Wellstone and Pete Domenici Mental Health This study assesses the effectiveness of mental health Parity and Addiction Equity Act of 2008 (MHPAEA) parity compliance enforcement in California. To inform sought to address the long-standing neglect of men- our study, we conducted research on the federal tal health and substance use disorder coverage under and state laws and regulations governing MHPAEA health insurance and employer-sponsored plans.1 compliance and collected relevant guidance and MHPAEA put care and treatment of mental health and documentation, including compliance worksheets substance use disorders on equal footing with physi- and enforcement reports made publicly available by cal health care, prohibiting insurers and health plans state regulators. Regulation of health benefit plans from imposing greater cost sharing or tighter limits in California that are not self-funded is split between on accessing care for behavioral health. Behavioral two regulatory agencies — the California Department health coverage is essential for the one in five adults of Managed Health Care (DMHC) and the California diagnosed with a mental illness and the almost 8% of Department of Insurance (CDI). The DMHC primarily people age 12 years and older diagnosed with a sub- regulates health maintenance organizations (HMOs) stance use disorder.2 and some preferred provider organizations (PPOs). CDI regulates all other types of health insurance poli- California has been a leader among states enforcing cies, including indemnity plans and most PPO plans. protections under MHPAEA. State regulators were DMHC-regulated plans cover about 14 million lives, ahead of their peers in assessing compliance with whereas CDI-regulated policies cover about 1 million the comprehensive federal law. But representatives lives. For the purposes of this report, we refer to for patients and providers say more recent enforce- “DMHC-regulated plans” and “CDI-regulated policies/ ment efforts are falling short at a time when many insurers” to maintain this distinction.6 Californians who need mental health care report having difficulty getting care.3 Californians have also To understand how California’s mental health par- said ensuring access to mental health care is the top ity compliance processes operate in practice, how health care issue they want state leaders to address they have evolved since MHPAEA and the Patient in 2020.4 Since the start of the COVID-19 pandemic, Protection and Affordable Care Act (ACA) went into mental health needs have become more acute. One in effect, and if there are any potential areas for improve- three people nationwide reports having symptoms of ment, we conducted 22 structured interviews with a depression or anxiety.5 cross-section of stakeholders between November 22, 2019, and February 25, 2020. We interviewed state regulators and officials, health insurers and health plans, representatives for providers and consumers, Since the start of the COVID-19 and mental health parity experts. Neither the study pandemic, mental health needs nor this report includes state regulator activities autho- have become more acute. One rized under the recently adopted 2020 – 21 California state budget. in three people nationwide reports having symptoms of depression or anxiety. Equal Treatment: A Review of Mental Health Parity Enforcement in California www.chcf.org 3 from imposing stricter limitations on MH/SUD benefits The Legal Framework: than the ones they impose on medical/surgical bene- fits with respect to financial requirements, quantitative Parity on Paper treatment limitations (QTLs), and non-quantitative A patchwork of federal and state laws governs the treatment limitations (NQTLs) (see Table 1).7 MHPAEA coverage of mental health and substance use disor- does not actually require the provision of MH/SUD der (MH/SUD) benefits by health care service plans benefits, but only requires any large group plan that and insurers in California. While the state already had chooses to provide MH/SUD benefits to provide them a number of state benefit mandates requiring cov- at parity with medical/surgical benefits. erage of certain specific MH/SUD conditions before MHPAEA went into effect in 2009, the ACA’s essential The ACA, enacted in 2010, further expanded protec- health benefit requirements, which went into effect tions for mental health and substance use disorders. in 2014, further expanded and strengthened cover- The ACA, along with its implementing regulations, age for MH/SUD benefits for the individual and small established minimum coverage standards for non- group markets. Beyond mandates requiring coverage grandfathered individual and small group insurance of MH/SUD conditions, California’s own state parity plans (defined as employers with 2 to 100 employees law, which is limited in scope to nine severe mental under California law),8 requiring these plans (starting illnesses, works in tandem with federal parity law to in 2014) to cover 10 essential health benefit (EHB) cat- require that the coverage for MH/SUD benefits be on egories, including MH/SUD benefits,9 and made those par with the coverage for medical/surgical benefits. plans subject to the parity rules under MHPAEA.10 Individual states select a “benchmark plan” to define the scope of coverage for the 10 EHB categories, and Parity in Federal Law non-grandfathered individual and small group insur- The federal government first addressed the issue of ance plans in the state are required to provide benefits “mental health parity” through the Mental Health that “are substantially equal to the EHB-benchmark Parity Act of 1996 (MHPA). This law prohibited large plan.”11 group health plans from imposing annual or lifetime dollar limits on mental health benefits that are less The ACA EHB requirements that mandate the cover- favorable than any such limits on medical/surgical age of MH/SUD benefits do not apply to large group benefits. Building on this, in 2008, Congress passed plans, self-funded plans, or grandfathered individual MHPAEA, which is the latest and most comprehensive and small group insurance plans; MHPAEA applies to effort by the federal government to ensure parity of these plans only to the extent that they cover MH/SUD MH/SUD coverage. MHPAEA and its implementing benefits. Further, self-funded small employers with 50 regulations go further than the original law to prohibit or fewer employees are exempt from MHPAEA even if large group health plans (defined as employers with they do choose to cover MH/SUD benefits.12 51 or more employees) that provide MH/SUD benefits Table 1. Benefit Limitations Considered Under MHPAEA EXAMPLES Financial requirements Copays, co-insurance, deductibles, out-of-pocket limits Treatment limits $ Quantitative $ Number of visits, days of coverage $ Non-quantitative $ Medical management standards, prior authorization, provider compensation or contracting Source: 29 U.S.C. § 1185a; and 45 C.F.R. § 146.136. California Health Care Foundation www.chcf.org 4 changes made to reflect the latest scientific knowl- Benefit Mandates and Parity in edge, the DSM-5 adds 15 new diagnostic conditions. California Law Several key pieces of legislation shape the require- Individual and small group insurance plans and poli- ments for coverage of mental health and substance cies are required to comply with the ACA’s robust EHB use disorder benefits in California (see Table 2). requirements and the state benchmark plan’s stan- dards for MH/SUD benefits, but EHB requirements MHPAEA encompasses both the MH/SUD diagnostic do not apply to large group plans and policies. Under conditions covered under a plan as well as the ser- state law, fully insured large group plans and policies vices needed to treat those diagnoses. Under the are subject to all of the legislation noted in Table 2 ACA’s essential health benefit requirement, the scope except the 2015 law incorporating the ACA’s EHB of coverage for each benefit category, including the requirements into state law. CDI-regulated group poli- diagnostic conditions covered, must be “substan- cies that cover disorders of the brain are also required tially equal” to that set by the state benchmark plan.13 to cover treatment of certain biologically based severe California’s state benchmark plan defines mental mental disorders “in the same manner.”15 However, health conditions, including substance use disorders, the state-enumerated conditions that apply to fully using the Diagnostic and Statistical Manual of Mental insured large group plans and policies do not require Disorders, Fourth Edition (DSM-IV),14 which is not coverage of substance use disorders. the most current version of the DSM. Among other Table 2. Timeline of Key California Mental Health Legislation 1975 California enacted the Knox-Keene Health Care Service Plan Act, which requires health care plans to cover all medically necessary “basic health care services,” defined as physician services, inpatient services, diagnostic services, home health services, preventive health services, and emergency health care services, including ambulance services.16 1999 Following enactment of the federal Mental Health Parity Act of 1996, California passed the California Mental Health Parity Act,17 requiring all health care plans regulated by the California Department of Managed Health Care (DMHC) and all health insurance policies regulated by the California Department of Insurance (CDI) to cover the diagnosis and medically necessary treatment of nine “severe mental illnesses of a person of any age” and “serious emotional disturbances of a child,” as defined under state law, and to do so under the same terms and conditions applied to other medical conditions. State law defines “severe mental illnesses” to include nine specific mental health conditions: schizophrenia, schizoaffective disorder, bipolar disorder, major depressive disorders, panic disorder, obsessive-compulsive disorder, pervasive develop- mental disorder or autism, anorexia nervosa, and bulimia nervosa. “Serious emotional disturbances of a child” is defined as a child who has one or more mental disorders as identified in the most recent edition of the Diagnostic and Statistical Manual of Mental Disorders other than a primary substance use disorder or developmental disorder.18 2012 All DMHC-regulated plans and CDI-regulated policies are required to cover behavioral health treatment for pervasive developmental disorder or autism.19 2014 All DMHC-regulated plans are required to comply with the federal MHPAEA and all its implementing regulations. 20 2015 After the enactment of the ACA, California enacted a law incorporating the ACA’s essential health benefits requirements into state law. More specifically, the law does the following: 21 $ Codifies the state’s chosen benchmark plan $ Adds the preexisting state benefit mandates to the definition of EHBs $ Reiterates the requirement that plans and policies have to comply with MHPAEA This law only applies to DMHC- and CDI-regulated, non-grandfathered individual and small group plans and policies. 2017 All CDI-regulated policies are required to comply with the federal MHPAEA and all its implementing regulations. 22 Equal Treatment: A Review of Mental Health Parity Enforcement in California www.chcf.org 5 Although state law limits the conditions that must be Assessing Parity Compliance Under covered, either by reference to an outdated DSM or MHPAEA to the enumerated list of conditions under state law, The MHPAEA statute and regulations implement- state regulators may be able to use their authority ing the law outline an approach to assessing parity under state or federal laws to require coverage of an between MH/SUD and medical/surgical benefits in MH/SUD condition that falls outside the scope of the terms of financial requirements, quantitative treatment EHB requirements or state benefit mandates. For indi- limitations, and non-quantitative treatment limita- vidual and small group plans, the state may be able to tions. To begin, issuers and health plans are required require a plan or policy to cover the condition through to ensure that all MH/SUD benefits that fall within any the ACA’s prohibition against discriminatory benefit one of the six classifications below are provided at design23 (see Table 3). parity with the medical/surgical benefits that fall within that same classification. Furthermore, if an MH or SUD The combined effect of federal and state laws is that benefit is covered in any one of six classifications, it parity protections extend to millions of Californians in must be covered in all classifications in which medical/ plans and policies overseen by DMHC or CDI. While surgical benefits are covered. The classifications are MHPAEA only requires those large group plans that as follows:24 cover MH/SUD to do so in parity with medical/surgi- cal benefits, the ACA requires all individual and small $ Inpatient, in-network group plans to cover MH/SUD and to do so in parity $ Inpatient, out-of-network with medical/surgical benefits, and state law requires fully insured large group plans to cover certain condi- $ Outpatient, in-network (can be further tions and services. subclassified into office visits and all other outpatient items and services) Table 3. Key State and Federal Laws Setting Standards for Coverage of MH/SUD FULLY INSURED PLANS TO WHICH THE STATE REGULATOR ENFORCING REQUIREMENT APPLIES THE REQUIREMENT MHPAEA Individual, small group, and large group health DMHC, CDI plans and health insurance policies ACA’s EHB requirement Individual and small group health plans and DMHC, CDI health insurance policies (non-grandfathered) Knox-Keene Health Care Service Plan Act $ Individual, small group, and large group DMHC (requiring coverage of “basic health care services”) health plans $ Individual and small group health insurance CDI policies (non-grandfathered) California Mental Health Parity Act Individual, small group, and large group health DMHC, CDI plans and health insurance policies State law requiring coverage of: $ Behavioral health treatment for pervasive $ Individual, small group, and large group DMHC, CDI developmental disorder or autism health plans and health insurance policies $ Treatment for certain biologically based $ Small group and large group health CDI severe mental disorders if the policy insurance policies covers disorders of the brain Source: Author analysis of state and federal law. California Health Care Foundation www.chcf.org 6 $ Outpatient, out-of-network (can be further Non-Quantitative Treatment Limitations subclassified into office visits and all other A plan must ensure that any nonnumerical limits on the outpatient items and services) scope or duration of benefits — the non-quantitative treatment limitations — for MH/SUD benefits are no $ Emergency care more restrictive than those applied to medical/surgi- $ Prescription drug cal benefits, both as written and in operation. As with financial requirements and quantitative treatment limi- Financial Requirements and Quantitative tations, the assessment of NQTLs is measured within Treatment Limitations each benefit classification to ensure NQTLs are no MHPAEA regulations set out a test, commonly known more stringent than those applied to medical/surgical as the “substantially all / predominant test,” to com- benefits in the same classification. The federal regula- pare financial requirements (FRs), such as copays, tion implementing MHPAEA contains an inexhaustive and quantitative treatment limitations, such as visit list of what classifies as an NQTL:26 limits, within the six classifications described above. $ Medical management standards (such as prior Instead of requiring issuers to compare FRs/QTLs authorization requirements) limiting or excluding between specific MH/SUD and medical/surgical ben- benefits based on medical necessity, or based efits, MHPAEA requires that the FRs/QTLs applicable on whether the treatment is experimental to MH/SUD benefits within each classification be no more restrictive than the predominant level of FR/QTL $ Formulary design for prescription drugs applicable to substantially all medical/surgical ben- $ Scope of services27 efits within that classification.25 $ Network adequacy28 $ Network tier design Applying the Substantially All / $ Standards for provider admission to participate Predominant Test in a network, including reimbursement rates A type of FR/QTL is considered to apply to sub- stantially all medical/surgical benefits within a $ Plan methods for determining usual, customary, classification if it applies to at least two-thirds of all and reasonable charges medical/surgical benefits in that classification. If a type of FR/QTL does not apply to at least two-thirds $ Fail-first policies or step therapy protocols of all medical/surgical benefits within a classification, then that type of FR/QTL cannot be applied to any $ Exclusionsbased on failure to complete a course MH/SUD benefits in that classification. of treatment When a plan applies a type of FR/QTL to substan- $ Restrictions based on geographic location, facil- tially all medical/surgical benefits as described ity type, provider specialty, and other criteria above, the level of the FR/QTL the plan applies to more than half of those medical/surgical benefits that limit the scope or duration of benefits for is considered the predominant level. If there is no services provided under the plan single FR/QTL level that applies to more than half of the benefits as described above, the plan can The standard for NQTLs to comply with MHPAEA is that combine the levels until the combination of levels a plan may not impose an NQTL on MH/SUD benefits applies to more than half of the medical/surgi- in any classification unless, under the terms of the plan cal benefits subject to the FR/QTL, and the least restrictive level within the combination is considered as written and in operation, any processes, strategies, the predominant level of that type within that clas- evidentiary standards, or other factors used in apply- sification. A plan is allowed to combine the least ing the NQTL to MH/SUD benefits in the classification restrictive levels first. are comparable to, and applied no more stringently than, the processes, strategies, evidentiary standards, Equal Treatment: A Review of Mental Health Parity Enforcement in California www.chcf.org 7 or other factors used in applying the limitation to Tables 1– 4: MHPAEA classification and cost-shar- medical/surgical benefits in the same classification. ing worksheet.30 Health care service plans use this Furthermore, MHPAEA specifically requires plans worksheet to report financial requirements (including to cover out-of-network benefits for MH/SUD and deductibles, out-of-pocket maximums, and copay- medical/surgical benefits in a similar manner. While ment and/or co-insurance) for both medical/surgical a plan may be able to demonstrate compliance with and mental health/substance use disorder services in MHPAEA by articulating “comparable and no more each of the following benefit classifications: stringently applied processes, evidentiary standards, $ Inpatient: in-network and out-of-network or other factors” to exclude out-of-network MH/SUD benefits under specific circumstances, it may not $ Outpatient office visit: in-network and “unequivocally exclude” all out-of-network treatment out-of-network for MH/SUD benefits if it allows the use of out-of-net- $ Outpatient other items and services: work providers for medical/surgical services.29 in-network and out-of-network $ Emergency visit The DMHC Compliance $ Prescription drug Process The worksheet includes a table for reporting QTLs for the above services. Health care service plans can Initial Reviews use a separate worksheet to automatically calculate Following the release of the federal MHPAEA final the substantially all / predominant test for financial rules in 2013, DMHC conducted an initial compliance requirements and quantitative treatment limitations review of all 25 commercial health care service plans based on the plan’s data.31 subject to MHPAEA. The compliance review occurred in two phases. Table 5: Non-quantitative treatment limitations (NQTLs). Health care service plans use this to report Phase One on non-quantitative treatment limitations. These During the first phase, which occurred from 2014 to include plan definitions of medical necessity (and how 2015, the DMHC conducted reviews of health plans’ they are used to approve both medical/surgical and benefits and policies to verify whether the plans were MH/SUD treatment), services that use an automatic in compliance with MHPAEA. This included a com- approval process, services for which prior or concur- prehensive review of the plans’ methodologies for rent authorization is required, retrospective review determining MHPAEA compliance in financial require- policies, standards for provider credentialing, and pre- ments, QTLs, and NQTLs in commercial products scription drug formulary design.32 (individual, small group, large group, PPO, and HMO). Table 6: List of exhibits to be filed and supporting To assist with the review process, DMHC issued documentation. For each benefit plan, health care detailed instructions, hosted a webinar and in-person service plans are required to list supporting documents teleconferences to explain the applicable law, and for data reported in Tables 1–5, including methodolo- developed worksheets for health care service plans gies, evidences of coverage, policies and procedures, to submit required documentation for each ben- disclosure forms, applicable contracts, and an attesta- efit design plan. Plans were not required to use the tion executed by a health plan officer that the analyses DMHC-developed worksheets so long as they submit- of the financial requirements and quantitative treat- ted the requisite information. The worksheets and the ment limitations have been calculated in accordance purposes they served are as follows: with MHPAEA regulations. California Health Care Foundation www.chcf.org 8 Phase one submissions were reviewed by the DMHC confirmed that the plan made the required changes Office of Plan Licensing, Office of Financial Review, from phase one and reviewed additional documents, and clinical consultants (a psychologist and a former including evidence of coverage, summary of benefits, medical group manager). During this period, DMHC and utilization management (UM) files, which docu- issued comments to the health care service plan within ment approval, denial, and modifications of requests 30 days of review, and gave the plan up to 30 days for services.33 to respond. This back-and-forth continued until all outstanding issues were resolved and the review was Health care service plans must submit UM files from complete. Upon completion of the phase one review, the primary plan and any delegates performing utiliza- health care service plans were sent a “closing letter,” tion review. However, for plans with a high number of which summarized all of the changes the plan was delegated entities, DMHC took a sample of UM files required to make to its financial requirements, quan- from a subset of delegates with over 1,000 enrollees. titative treatment limitations, and non-quantitative The on-site survey also consisted of interviews with treatment limitations for mental health and substance plan staff, including the medical director, utilization use disorder services. Of the 25 plans reviewed in managers, and credentialing staff — and, if applicable, phase one, 24 were out of compliance for MH/SUD the medical director of the behavioral health plan and financial requirements, 3 were out of compliance for any other delegates under contract. Findings from the MH/SUD day and visit limits, and 12 were out of com- UM review and interviews are summarized in the final pliance for NQTLs. Health care service plans were focused survey. required to notify enrollees of required changes to QTL and NQTL services for the 2016 calendar year. Final Focused Survey The initial compliance review resulted in 24 out of the Based on the results of a review of whether the plan 25 reviewed plans lowering cost sharing for MH/SUD implemented requested changes from phase one, services beginning in the 2016 calendar year. and the documentation and interviews conducted in phase two, DMHC produced a “Final Focused Survey Report” addressing the plan’s approach to non-quan- titative treatment limitations, quantitative treatment The initial compliance review resulted limitations, and overall experience implementing MHPAEA, including delegation oversight and an in 24 out of the 25 reviewed plans assessment of the plan’s ability to maintain parity. lowering cost sharing for MH/SUD These reports were released on a rolling basis in late services beginning in the 2016 2017 and throughout 2018. calendar year. The surveys found 11 plans were MHPAEA compliant, while 14 plans were noncompliant in either NQTLs (seven plans), QTLs (two plans), or both (five plans). Phase Two As a result of the DMHC’s focused compliance review, Beginning in 2016 and continuing through 2017, many health plans were required to update their phase two consisted of on-site surveys (audits) of the policies and procedures and/or revise cost sharing same 25 plans with a focus on non-quantitative treat- for services and treatment. Seven health plans were ment limitations, conducted by the DMHC’s Division required to recalculate cost sharing for enrollees after of Plan Surveys and a clinical consulting team. These the DMHC found the plans had applied cost sharing were referred to as “focused MHPAEA surveys” and for mental health and substance use disorder services are different from the medical surveys that DMHC that were not compliant with MHPAEA. This resulted is required to complete for all medical plans at least in enrollees being reimbursed a total of $517,375. once every three years. During phase two, DMHC Equal Treatment: A Review of Mental Health Parity Enforcement in California www.chcf.org 9 Ongoing Oversight DMHC has prosecuted a number of actions, including a $10,000 penalty for denial of inpatient residen- Targeted Exams tial treatment for a severe mental health condition.36 Since their initial review, DMHC has conducted com- Additionally, DMHC has levied administrative penal- prehensive desk assessments of newly licensed plans’ ties for other mental health violations, including a compliance with MHPAEA and targeted reviews when violation for failure to provide coverage for the diag- plans adopt changes substantial enough to require nosis and medically necessary treatment of severe another review — for example, whenever they offer mental illnesses of a person of any age, and of serious commercial coverage in a new market, add exclu- emotional disturbances of a child, as specified, under sive provider organization or PPO coverage to their the same terms and conditions applied to other medi- previously approved HMO coverage, change their cal conditions, and failure to cover mental illness and behavioral health plan, or make other significant emotional disturbance.37 changes to their license. These “targeted reviews” vary based on the scope of the change being requested; for DMHC recently concluded an investigation of Ventura example, a request to change behavioral health ven- Health Plan that began in 2017 and resulted in MHPAEA- dors would trigger a full NQTL review, while a request related enforcement actions. DMHC issued a Letter of to add PPO coverage would trigger a new analysis of Agreement to Ventura Health Plan in July 2020.38 estimated claims to ensure that the substantially all / predominant test was calculated correctly. In addition to these targeted efforts, the DMHC has CDI MHPAEA incorporated compliance and enforcement of mental Compliance Process health parity in its oversight activities. This includes reviewing compliance during the DMHC’s routine Form Filing medical surveys of health plans and reviewing DMHC CDI integrates mental health parity documentation Help Center complaints. during the form-filing process for individual and small group policies and student health plans, which is con- Enforcement Action ducted annually, as well as for large group plans as they When DMHC finds a violation, the director of DMHC are received.39 These reviews during the form-filing is authorized to take actions, including the assess- process began with policies filed for 2015 coverage. ment of administrative penalties or cease-and-desist Specific filing requirements may change from year to orders.34 Enforcement actions may be initiated by dif- year, based on trends or to target particular areas, but ferent means, including through the DMHC’s surveys plans must submit the following documentation each of health plans, financial solvency and claims payment year: examinations, consumer complaints to the DMHC Help Center, whistleblower reports, and news articles. Mental Health Parity Analysis Workbook.40 For each benefit plan included in the filing, the insurer The DMHC has taken enforcement action under is required to fill out the mental health parity analy- state and federal parity laws. The DMHC completed sis workbook, listing all medical/surgical benefits two prosecutions specific to MHPAEA involving one covered, together with total payments, copays, co- plan that did not implement MHPAEA-compliant cost insurance, and deductibles in the following benefit sharing and another involving a plan that wrongfully categories: denied residential treatment at parity as required by MHPAEA. Both of these enforcement actions included $ Inpatient: in-network and out-of-network corrective action plans and $20,000 penalties paid by $ Outpatient: in-network and out-of-network the plans.35 With respect to the state’s parity law, the California Health Care Foundation www.chcf.org 10 $ Outpatient office visit: in-network and mental health and substance use disorder services out-of-network are covered within each benefit classification. $ Outpatient other items and services: CDI states that they use this initial form filing as a basis in-network and out-of-network to identify potential issues and flag areas of concern. $ Emergency visit Following the submission of form-filing documents, CDI will engage in a back-and-forth with the insurer $ Prescription drug to request additional information and ask specific fol- low-up questions. CDI uses additional tools to collect This information is used to calculate the substantially information on prescription drug formularies, network all / predominant test. Insurers are then required to adequacy reviews, and a separate workbook that eval- separately list cost-sharing levels for in-network and uates MHPAEA compliance for FRs and QTLs. out-of-network MH/SUD services, to demonstrate that they align with the substantially all / predominant test.41 In addition, CDI conducts MHPAEA compliance through its statutorily required market conduct exams, Mental Health Parity Supporting Documentation.42 which must occur once every five years. CDI stated This template consists of three distinct sections, filled that it will conduct additional targeted exams that out for each product and plans within that product focus on a specific company or issue; high volume or being reviewed: trends in consumer complaints were cited as poten- tial triggers for these reviews. Additionally, CDI staff $ MH/SUD non-quantitative treatment limitations stated that they are conducting regularly scheduled (NQTLs). CDI requires plans to list out all MH/ market conduct exams of health insurers, with a focus SUD benefits subject to NQTLs in each category on mental health and substance use disorder claims, of benefits. In contrast to DMHC’s NQTL worksheet though these exams are not yet complete. (Table  5), the CDI worksheet does not require an explanation of processes or evidentiary standards. Enforcement Action $ Explanations of methodology. For each benefit CDI tracks complaints from both consumers and pro- plan being filed, the insurer is required to submit an viders through its consumer services division, which explanation of methodology, demonstrating that addresses these complaints directly with insurers. the plan’s quantitative parity analysis was prepared A high volume of complaints, or a particular trend, in compliance with the federal rule’s methodologi- can prompt CDI to do a targeted review. For repeat cal requirements. This includes a description of the offenders, CDI has the authority to levy financial pen- underlying data used to determine the total pay- alties through the Unfair Insurance Practices Act. It can ments of each benefit in the quantitative analyses, also take administrative enforcement actions, such as and a description of the methodology used to per- issuing an Order to Show Cause to compel a com- form the quantitative mental health parity analysis pany to take action or face a penalty. In severe cases, of each cost-sharing type. the department can revoke certificates of authority or withdraw approval of policy forms, but these are not $ Classification chart. For each benefit plan, an undertaken as a matter of routine. insurer is required to describe how it determines classification of services for each category of ben- CDI recently completed an examination of Aetna efits, including specific factors, standards, and Life Insurance Company, covering a review period criteria used to determine which benefits belong in of February 1, 2016, through January 31, 2017, this classification. The insurer is also required to cre- that included a review of a sample of 90 men- ate side-by-side lists of which medical/surgical and tal health claims. The report of findings was due mid-August 2020.43 Equal Treatment: A Review of Mental Health Parity Enforcement in California www.chcf.org 11 Findings from most part, [been] compliant with the[se] standards.” Patient and provider representatives mostly agreed Stakeholder Interviews: with this assessment. However, health plan and insurer representatives noted challenges that remain. One Parity in Practice payer stated that the whole concept of comparing all Stakeholders were nearly universal in noting that the the services within each classification, as required by DMHC was well ahead of other states in developing MHPAEA, is unworkable in practice. Payers pointed its approach to reviewing plans for MHPAEA com- to the difficulty of comparing hundreds of outpatient pliance, particularly on the NQTLs, and did so soon services on the medical/surgical side to the relatively after federal final regulations were issued in 2013 and few outpatient services on the MH/SUD side, with before the US Department of Labor (DOL) toolkit was implications for cost sharing. For example, a payer released in 2018. One stakeholder said California said they interpret MHPAEA to require that they cover is a “pace car state” that brought attention to the certain expensive MH/SUD benefits, like applied MHPAEA issues and revealed practices that weren’t behavioral analysis for autism, at no cost sharing in compliance. DMHC was also recognized for its because MHPAEA requires the cost sharing to align early collaboration with providers as regulators devel- with that for home health visits on the medical/surgi- oped their enforcement tools for the initial reviews. cal side. Another payer pointed out that the ACA’s However, patient and provider representatives said requirement to cover preventive services without cost that DMHC’s more recent engagement with them, sharing enhances benefits on the medical/surgical including through the Help Line that takes complaints, side and therefore requires a review of all the finan- has been less successful. Of CDI’s efforts, most stake- cial requirements applicable to MH/SUD services to holders said the department, which received a federal ensure compliance with MHPAEA’s standard for finan- grant for MHPAEA enforcement in 2016, has devel- cial requirements. One regulator confirmed that in oped “granular” tools that more closely adhere to the their reviews of MHPAEA compliance documentation, approach taken in the DOL toolkit. In contrast, DMHC they have encountered a “lack of a workable, neutral uses open-ended questions in their worksheets, which standard for subclassifying outpatient benefits, and regulators say they use to inform follow-up discussions inconsistent application of the standard.” with health plans. Both DMHC and CDI are still ahead of most states, Significant Work Remains to said multiple stakeholders with knowledge of enforce- Ensure Parity in Non-Quantitative ment efforts in other states. But interviews reveal Treatment Limitations that some stakeholders are still disappointed with There was universal agreement among representatives California regulators’ enforcement of NQTLs, which of each stakeholder group interviewed that achiev- they believe has allowed health plans and insurers to ing parity with respect to non-quantitative treatment effectively maintain barriers to accessing care. limitations continues to be the dominant challenge in complying with MHPAEA. Patient and provider repre- Stakeholders Noted Progress sentatives expressed frustration over how the lack of compliance with NQTL standards is creating barriers in Meeting Parity in Financial to accessing necessary care and adversely affecting Requirements and Quantitative mental health outcomes, noting that the complexity Treatment Limitations of NQTLs gives insurers flexibility to apply limits that Regulators, health plans, and insurers noted that wouldn’t apply to medical/surgical benefits. Health progress has been made in assessing compliance plans and insurers, on the other hand, expressed a for financial requirements and quantitative treatment need for more concrete guidance from regulators on limitations and that plans and insurers have “for the how to comply with MHPAEA’s NQTL requirements. California Health Care Foundation www.chcf.org 12 As one said of the DOL’s “red flags” guidance for most states, insurers cannot deny payment in cases NQTLs,44 “Where are the green flags?” Most stake- of emergency because of lack of prior authorization. holders primarily raised issues with respect to three However, a patient advocate gave a real-life example types of NQTLs: utilization management, medical of a patient who went to the emergency room with necessity, and network adequacy. an MH/SUD crisis and was told they would not be able to receive treatment until the insurer provided Utilization Management approval. A behavioral health hospital representative Utilization management is the use of techniques like gave the example of an insurer who “routinely denies prior authorization, concurrent review, and retrospec- care” for psychiatric emergencies if authorization is tive review (see box below) to allow plans and insurers not obtained within 24 hours of admission, even if the to review requests for health care services or claims for admission occurs over a weekend when UM staff are services already received for the appropriateness of unavailable. While the provider mentioned that they the care or care setting, the medical necessity of the are able to get these decisions overturned through care, and whether the care meets quality standards. the appeals process, repeatedly having to deal with Health plans and insurers are expected to use evi- situations like these creates undue burden on provid- dence-based criteria and guidelines to develop these ers and patients. techniques. To comply with parity law, these tech- niques must be applied no more strictly to MH/SUD One payer stated that for medical/surgical services, benefits than they are to medical/surgical benefits. hospitals usually rely on diagnostic-related groups (DRGs) to establish in-patient reimbursement rates CDI pointed out ongoing issues with plans and insurers based on long-standing calculations, but because being unable to produce NQTL comparative analyses DRGs do not exist for MH/SUD benefits, payers are demonstrating that application of prior authorization more reliant on utilization management to determine requirements to outpatient MH/SUD benefits com- payment. One provider noted that it would be reason- plies with the NQTL rule. As a result, insurers have, able given the average length of in-patient stays to for the most part, eliminated prior authorization allow for a seven-day hospital stay for mental health for outpatient MH/SUD benefits from policy forms. conditions without prior authorization; however, others However, according to provider and patient represen- expressed the opposite view. A payer said standardiz- tatives, prior authorization continues to be an issue. ing care by imposing minimum stays would remove the Two provider and one patient representative gave incentive to provide individualized care, and a repre- examples of prior authorization being required for sentative of SUD providers said the SUD field is moving emergency behavioral health care. In California, as in away from the “28-day inpatient model” of care. Understanding Utilization Management: Key Terms Prior authorization. When a payer requires a provider to seek authorization for providing a service beforehand. If a payer requires prior authorization for a service and the provider does not obtain it, the payer may deny the pro- vider’s claim for that service. Concurrent review. When a payer requires ongoing review of care currently being provided to determine whether continued services or benefits, such as additional days in a hospital or sessions of therapy, are medically necessary. Retrospective review. When a payer looks at a service that has already been provided to determine whether the service was covered by the patient’s plan and/or is medically necessary. If the payer determines that the service was not covered or not medically necessary, the payer may deny the provider’s claim for that service. Equal Treatment: A Review of Mental Health Parity Enforcement in California www.chcf.org 13 Beyond prior authorization, plans and insurers also administrative denials are currently not reviewed as use concurrent review to evaluate medical necessity part of either regulator’s MHPAEA compliance process. of care on an ongoing basis and require providers to confer with a doctor on the plan or insurer’s staff Multiple stakeholders said health plans’ use of dele- who determines whether additional days of care will gates — entities contracting with the plans to provide be covered. One provider representative expressed care (e.g., large medical groups) or carry out certain worry that when payers deny additional days of service functions (e.g., behavioral health organizations that through their concurrent review process, patients get manage the MH/SUD coverage or conduct utilization discharged too soon only to then be potentially read- review and authorize payment of claims) can exac- mitted later. However, given that the patient might erbate problems with utilization management. Each be readmitted to a facility other than the one that delegate may have its own utilization management provided the initial care, the payer is the only entity program and protocols, and though the health plan is with data on patient relapse as a result of its denial of responsible for ensuring MHPAEA compliance across continued service. Currently, readmission data are not all delegates with which it contracts, coordination and reviewed as part of the MHPAEA compliance process. oversight of utilization management under those del- egates can be difficult. For example, one health plan While denials for care on the basis of prior authoriza- said their delegates may have a practice of subjecting tion requests and concurrent review continue to be a certain providers who have demonstrated effective source of concern, most providers and patients also utilization to less stringent prior authorization for some expressed frustration over the administrative burdens procedures, but that practice is not captured in the that these requirements impose. Providers found that UM policies the plan evaluates for compliance with procedures vary widely, with some plans and insur- MHPAEA. If a similar practice is not applied to MH/ ers approving care day by day and others allowing SUD providers that demonstrate effective utilization, it for three days of care or one to two visits at a time. could be a potential parity violation. Providers’ representatives said a significant amount of their time at work is spent keeping track of the differ- Medical Necessity ent requirements each plan and insurer imposes and The criteria used for assessing medical necessity is going through appeals processes for denials. One an NQTL itself, separate from how these criteria are hospital representative said that they have had to “call applied through utilization management processes. to beg” and haggle over appropriate level of care for When providers reach out to insurers to obtain autho- their patients with the plan or insurer. One provider rization for care, the insurer assesses the medical representative pointed out that these requirements necessity of the treatment or services being requested are particularly burdensome for smaller practices that using generally accepted medical standards. However, do not have the resources to dedicate to these regular as demonstrated by the recent landmark case Wit v. interactions with health plans and insurers, but another United Behavioral Health, insurers and their vendors provider representative said even larger hospitals with can use their own internally developed level-of-care dedicated utilization management departments found and coverage determination guidelines, which can be, it to be a resource-intensive process given the widely as they were in the case of United Behavioral Health, divergent standards set by the different payers. much more restrictive than generally accepted medi- cal standards.45 One patient advocate stated that Furthermore, these heightened administrative bur- “medical necessity is the most significant means by dens produce a higher probability for administrative which insurers deny claims,” with some stakeholders denials — denials based not on the lack of medical saying the Wit decision revealed deficiencies in the necessity but because the provider or patient failed regulators’ approach in California. to meet certain protocols set by the insurer. However, California Health Care Foundation www.chcf.org 14 Medical necessity determinations may include days standard of success is weight gain. On the other hand, and level of care that will be covered. Health plans a hospital representative said it can be difficult to get talked about the need to move away from prescribed approval for post-hospital care in a lower level-of-care minimum days of inpatient care and to instead rely on setting, comparing it to denying someone physical individualized care that may use a lower level-of-care therapy following hip surgery. setting. A behavioral health plan provided the exam- ple of patients with eating disorders who are treated in Most patient and provider representatives said regu- outpatient family therapy programs that are more suc- lators must take a closer look at medical necessity cessful than residential treatment programs when the criteria for potential parity violations, with some saying The Wit Decision and Implications for MHPAEA Wit v. United Behavioral Health is a case brought under the Employee Retirement Income Security Act of 1974 (ERISA), not MHPAEA, and the decision applies to enrollees covered under ERISA plans overseen by the US Depart- ment of Labor. But the issues raised are those that could also be considered violations of MHPAEA. For example, if UnitedHealthcare adopted and applied medical necessity criteria that comply with generally accepted standards of care for medical/surgical benefits and didn’t do that for MH/SUD benefits, that would be a parity violation. Further- more, some of the plaintiffs in the class were enrolled in health plans regulated by states other than California. The case is therefore seen by many as an indicator of insurer practices that are ripe for close review by state regulators. * * * * * In Wit v. United Behavioral Health, No. 14-cv-02346-JCS, 2019 U.S. Dist. LEXIS 35205 (N.D. Cal. Feb. 28, 2019), 11 plaintiffs filed a class action lawsuit on behalf of 50,000 individuals whose claims were denied, alleging that United Behavioral Health (UBH), the entity that manages behavioral health services for UnitedHealthcare and other health insurers, breached its fiduciary duty under ERISA by developing and implementing clinical policies and coverage guidelines that were inconsistent with generally accepted standards of care, and that they prioritized cost savings over members’ interests. UBH claimed that it covered the care that was medically necessary according to generally accepted medical standards. The court took into account the criteria and guidelines published by industry groups and the Centers for Medicare & Medicaid Services (CMS) as well as expert opinions and ruled that UBH’s own level-of-care and coverage deter- mination guidelines were more restrictive than generally accepted medical standards and “infected” by financial incentives. Based on the evidence presented to the court, it additionally identified eight generally accepted standards for treating mental health and substance use disorders: 1. Treatment must address underlying conditions and not be limited to alleviating current symptoms. 2. Treatment should consider and address co-occurring behavioral and medical conditions in a coordinated manner. 3. Treatment should take place at the least intensive and restrictive level of care that is safe and effective. 4. When there is ambiguity, the practitioner should err on the side of caution by placing the patient in a higher level of care. 5. Treatment should include services needed to maintain functioning or prevent deterioration. 6. Appropriate duration of treatment should be based on the individual needs of the patient without specific limits on the duration of such treatment. 7. Unique needs of children and adolescents must be taken into account when making level-of-care decisions. 8. Determination of the appropriate level of care should be made on the basis of a multidimensional assessment. Equal Treatment: A Review of Mental Health Parity Enforcement in California www.chcf.org 15 regulators are not “equipped” to assess medical minimum standards for provider directories, requiring necessity criteria for MH/SUD. A patient advocate said health plans and insurers to reach out to providers regulators do not challenge criteria, including those to verify a variety of information on a quarterly basis. that limit care to addressing acute crises or alleviat- However, one provider representative said his orga- ing symptoms but don’t allow for long-term treatment nization conducted a study of health plan provider and recovery. One provider representative likened directories and found many to include inaccurate list- certain mental health disorders to chronic conditions ings and few mental health providers who could meet like diabetes that require both acute interventions and the time standards for obtaining an appointment. ongoing treatment to maintain health. As with the Inaccurate provider directories also affect patient cost. challenges noted with utilization management, some A recent study found that the prevalence of inaccu- health plans said ensuring parity compliance can be rate provider directories increases the likelihood that more challenging with delegates that may each use patients will use out-of-network mental health care, their own medical necessity criteria. making them four times as likely to receive a surprise bill for the added cost of out-of-network care.48 While some recommended that the state establish a uniform definition, others suggested that regula- The patient and provider representatives we spoke tors require health plans to demonstrate how their to said inadequate networks with respect to MH/SUD guidelines reflect generally accepted medical stan- providers is an area that has largely been overlooked dards. However, one provider representative said by regulators in California. According to provider and that there is no “magic pill,” specifically with respect patient representatives, low reimbursement rates, to treatment guidelines for substance use disorders, onerous health plan processes for authorizing pay- making it more challenging to create and apply ment, and burdensome contracting terms are the treatment criteria. At least one payer we spoke to dominant reasons for the shortage of in-network men- said they use internally developed criteria, but a few tal health providers, all of which are NQTLs subject patient and provider advocates recommend the use to review under MHPAEA. The Milliman report cited of scientifically evaluated criteria like the Level of above also showed significantly lower reimbursement Care Utilization for Psychiatric and Addiction Services rates for in-network services by behavioral providers (LOCUS) developed by the American Association of versus medical/surgical providers, with the gap widen- Community Psychiatrists to guide medical necessity ing over time.49 determinations.46 Provider representatives also expressed concerns Provider Networks related to the administrative burden involved in Patient and provider representatives overwhelmingly processing the paperwork required for utilization cited a dearth of in-network providers as a signifi- management and the appeals processes post-denial. cant barrier to accessing mental health services — an Given how hard it is to get paid for services rendered, issue that is not unique to California. A recent report provider representatives say there is a lack of incentive documenting MH/SUD network problems nation- to join plan and insurer networks. Yet another issue wide found that in California, inpatient behavioral that providers raised was that health plans and insur- health care was 7.8 times more likely to be out-of- ers seem to be tightening credentialing requirements network, and behavioral health office visits were 4.2 for providers. One provider representative stated that times more likely to be out-of-network than medical/ health plans and insurers will repeatedly change their surgical care.47 California’s network adequacy require- credentialing rules, requiring providers to go through ments include standards for plans to ensure enrollees the process multiple times. can obtain services within a reasonable time and dis- tance, and in 2016, the state implemented stringent California Health Care Foundation www.chcf.org 16 The regulation implementing MHPAEA specifically includes standards for provider admission to partici- Considerations for pate in a network, including reimbursement rates, in the Policymakers and list of NQTLs covered by MHPAEA.50 The 21st Century Cures Act enacted in 2016 requires the Department of Regulators Labor, the Department of Health and Human Services, Stakeholders and the regulators we interviewed and the Department of the Treasury to issue clarify- identified opportunities to improve oversight and ing information on the development and application compliance. Some of the recommendations directly of NQTLs such as factors used in provider reimburse- address the areas most frequently cited as recurring ment methodologies. The three agencies issued problems that limit access to behavioral health care guidance stating: “Standards for provider admission — utilization management, medical necessity criteria, to participate in a network, including reimbursement and provider networks. Others would strengthen reg- rates, are an NQTL. . . . Greatly disparate results — for ulators’ authority and processes. example, a network that includes far fewer MH/SUD providers than medical/surgical providers — are a red Improved oversight of utilization management. The flag that a plan or issuer may be imposing an imper- dominant issue identified by stakeholders represent- missible NQTL.”51 While differences in reimbursement ing providers and patients was inadequate oversight rates are not, on their own, a violation of MHPAEA, of insurer and health plan utilization management they are an indication of a potential violation that programs and, more specifically, the medical neces- should prompt a review of a health plan’s or issuer’s sity criteria used to make coverage determinations. reimbursement methodologies. Provider and patient representatives said greater stan- dardization and specificity is needed to ensure patients Another plan standard that affects whether a provider with the same profile aren’t treated differently based joins a network is provider credentialing. Payers claim on how strictly their insurer or health plan applies med- that the proliferation of low-quality providers, partic- ical necessity criteria. Insurers and health plans should ularly related to addiction treatment, is driving their be required to demonstrate that their medical neces- changes to credentialing processes. Representatives sity criteria are consistent with generally accepted for health plans and insurers as well as an addiction standards of care and to use recognized tools such as treatment provider we spoke to expressed concern the American Society of Addiction Medicine (ASAM) about fraud and poor-quality MH and SUD service criteria or LOCUS to identify the level of care most providers, particularly gray-area providers like “sober appropriate for patients given their individual circum- houses.” One provider representative stated that stances. Some states have recently enacted legislation there is lack of oversight, particularly over substance establishing requirements for medical necessity stan- use treatment facilities, and that a number of these dards. New York, for example, requires insurers to use facilities have been involved in poor marketing prac- evidence-based criteria that are approved for use by tices, poor-quality treatment, and balance billing the state Office of Mental Health.52 Other states have (wherein an out-of-network provider bills the patient enacted requirements that medical necessity deter- for an outstanding balance after the insurance com- minations for substance use disorder be consistent pany pays its portion of the bill). The representative with criteria established by ASAM (Illinois, Delaware, called California the “Wild West” for licensure, and and Maryland).53 CDI said stronger legal standards for while it is important for states to step in and standard- medical necessity and additional resources to retain ize licensing processes, this falls outside the purview clinical experts to help with health plan reviews and of regulators who assess parity compliance. insurer exams would help strengthen oversight. Equal Treatment: A Review of Mental Health Parity Enforcement in California www.chcf.org 17 Evaluating provider networks for parity. Stronger market plans subject to the ACA’s EHB requirement. medical necessity standards and improved oversight Furthermore, the state’s law designating the EHB of utilization management would help address some benchmark plan references an outdated version of the of the issues providers identify as reasons for their low DSM. Though regulators did not indicate health plans participation in networks — administrative burdens and insurers were able to use these limits to exclude associated with getting care approved and reim- diagnoses from coverage, regulators confirmed that bursed. However, credentialing requirements and low it would be helpful to have clear authority to require reimbursement rates are other factors that discourage coverage of all diagnoses in the most recent version providers from participating in networks. Regulators of the DSM. in California review provider networks for compliance with regulatory standards regarding timely access to Clearer expectations for insurers and health plans appointments, geographic access, and ratios of pro- that use delegates. Under MHPAEA, health plans viders to enrollees, but they do not currently review and insurers are responsible for ensuring compliance provider networks for compliance with MHPAEA’s with the law, regardless of whether some functions are NQTL requirements. Some insurers and health plans delegated to other entities. California law includes suggested that regulator reviews for network access the same requirement.55 Some insurers and health standards were sufficient and no additional reviews plans indicated that the use of delegates — whether were needed for parity purposes. But federal regula- for medical/surgical or MH/SUD care — complicated tions make clear that provider networks may violate efforts to monitor for compliance. Regulators have NQTL rules, separate from any network adequacy clear authority to place the burden on plans for them requirements. Unjustified differences in reimburse- to ensure compliance across all delegates.56 ment rates and unequal efforts to incentivize network participation — for example, through increased reim- Improved processes for getting input from pro- bursement and an accelerated process for network viders. Providers are in a better position than their participation — are potential parity violations. DMHC patients to see potential parity violations and can be said a comparison of reimbursement rates would key allies to regulators in identifying trends and issues be difficult because of the capitated rates used by that warrant close scrutiny. CDI and DMHC each have the managed care plans they regulate. Regulators a dedicated portal through which providers can bring at DMHC also indicated that they do not have the potential parity violations to the attention of regula- authority to review provider reimbursement rates. tors. DMHC noted that providers have been helpful Their authority to enforce MHPAEA, however, may in identifying potential parity violations, particularly provide inherent authority to review provider reim- when regulators reached out to providers prior to bursement rates for NQTL compliance. Few states conducting their initial reviews of health plans begin- have examined provider networks under MHPAEA, ning in 2014. However, some provider representatives but three recent examples of enforcement actions said they’ve found it more difficult since that early out- based at least in part on disparate reimbursement reach to get issues addressed at DMHC. Regulators practices — in Maryland, Massachusetts, and New could undertake greater outreach to providers to Hampshire — may provide models.54 obtain information that could help inform targeted reviews and exams. For example, Pennsylvania’s insur- Clearer authority to enforce coverage of all diag- ance department, working with other state agencies, noses in the DSM. MHPAEA applies when MH and released a survey to obtain input from providers on SUD benefits are covered under a plan. California barriers to accessing mental health and substance use law requiring coverage of only designated MH condi- disorder services.57 tions in large employer plans is more limited in scope than that applicable to small group and individual California Health Care Foundation www.chcf.org 18 Implementation of DOL’s NQTL analysis. While and treatment limitations, non-quantitative treatment CDI’s documentation requirements seem to align with limitations too often impose substantial barriers to the five-step analysis specified in the DOL compli- obtaining care. ance toolkit, DMHC’s requirements for documentation don’t appear to address how plans use evidentiary California regulators were early leaders in par- standards in developing the NQTL factors and the ity enforcement, and the state is still among a thresholds that trigger the application of an NQTL. relatively small number of states undertaking sub- This information is needed to determine if an NQTL stantive enforcement efforts. But there is growing conforms with the required MHPAEA standard. interest among some states to strengthen their efforts, reflected in a workgroup at the National Association Greater use of claims data. Claims data can be an of Insurance Commissioners to facilitate states and indicator of potential NQTL violations. For example, if experts sharing enforcement tools and resources. the rate of denial is much higher for MH/SUD claims California regulators can build on their early efforts than for medical/surgical claims, it could indicate a and potentially learn from other states to strengthen potential parity violation with the medical necessity their oversight and make progress toward fulfilling the standard. Use of these data can allow regulators to promise of parity. focus their attention and limited resources on poten- tial problem areas. The departments need specific authority to collect claims data on a regular basis to allow for such an analysis. Conclusion Enactment of MHPAEA significantly strengthened the requirements for health plans’ and insurers’ coverage of mental health and substance use disorder illnesses. MHPAEA’s comprehensive approach to coverage rules — requiring coverage on par with medical and sur- gical benefits not just in out-of-pocket costs and visit limits, but also for those plan rules that aren’t as easily measured — promises improved access to essential services. But there are limits to the law. MHPAEA does not guarantee that services and treatments for mental health and substance use disorders will be affordable, easily accessed, or comprehensive. The law merely sets standards for ensuring that coverage is at least as good as the coverage of medical and surgical care. Within the scope of MHPAEA, however, stakeholders identified areas where problems persist and enforce- ment must be strengthened if the law’s promise is to be met for California’s consumers. Though regulators have made considerable progress in ensuring compli- ance with MHPAEA’s rules for financial requirements Equal Treatment: A Review of Mental Health Parity Enforcement in California www.chcf.org 19 Appendix A. Results of MHPAEA Compliance Reviews Following the release of federal regulations imple- Analysis of DMHC Final Focused Surveys menting the Mental Health Parity and Addiction Equity Our analysis of the 25 health care service plans (HCSPs) Act (MHPAEA) in 2014, the California Department included in the DMHC’s initial review of MHPAEA of Managed Health Care (DMHC) conducted an ini- compliance filings showed that 11 plans were in tial compliance review of 25 commercial health care compliance for quantitative treatment limitations service plans. In 2019, the California Department of (QTLs) and the non-quantitative treatment limitations Insurance (CDI) released a report from a market con- (NQTLs) examined in the reviews. Seven plans were duct exam of Blue Shield of California Life and Health out of compliance for NQTLs, 2 were out of compli- Insurance Company. ance for QTLs, and 5 were out of compliance for both NQTLs and QTLs (see Table A1). Below is a summary of the DMHC’s findings, based on our analysis of the final focused survey reports pub- Plans submitted a wide range of utilization manage- lished on the DMHC website from late 2017 through ment (UM) files, covering specific claims for care 201858 and interviews with department staff. The sum- provided in a variety of settings — inpatient, resi- mary of CDI’s exam is based on the report.59 dential treatment / skilled nursing, office visit, other outpatient, and emergency care — for medical/sur- gical (M/S), mental health (MH), and substance use disorder (SUD) services. DMHC asked all plans to pro- duce the same number of UM files, for both MH/SUD Table A1. Compliance with MHPAEA in Initial Review of DMHC Health Care Service Plans (HCSPs) HCSPs IN NONCOMPLIANCE HCSPs IN FULL COMPLIANCE ON NQTLS  ON QTLS  FOR NQTLS AND QTLS  Aetna Health of California Alameda Alliance Chinese Community L.A. Care Health Plan for Health Health Plan Joint Powers Authority Blue Cross of California/ Anthem Blue Cross California’s Physician Kaiser Foundation Health Plan Local Initiative Services / Blue Shield / Kaiser Permanente Health Authority for Cigna Healthcare of California Los Angeles County / of California L.A. Health Care Plan Contra Costa County Community Care Medical Services / Sharp Health Plan Health Plan Contra Costa Health Care  Ventura County Health / Health Net of California San Mateo Ventura County Health Plan MediExcel Health Plan Health Commission / Western Health Advantage Molina Health Care Health Plan of San Mateo of California Santa Cruz / Monterey / San Francisco Merced Managed Medical Health Authority / Care Commission / San Francisco Central California Alliance Health Plan for Health Santa Clara County / Seaside Health Care Valley Health Plan UHC California / Sistemas Medicos Nacionales UnitedHealthcare / SIMSA Health Plan of California Sutter Place Health Source: Author analysis of the final focused survey reports published on the DMHC website from late 2017 through 2018 and interviews with department staff. California Health Care Foundation www.chcf.org 20 and medical/surgical services, in inpatient, outpatient, the reports and in discussion with DMHC. Of the and other services categories. However, the number plans that did not meet the compliance threshold of files documented in each report varied because for NQTLs, eight either delegated UM to a behav- some plans did not have either approval or denial files ioral health vendor (such as HAI/Magellan, Optum to produce for review in the three service categories. Behavioral Services, or Beacon/CHIPA) or used criteria As a result, the total count of files submitted ranged provided by a behavioral health vendor when mak- from 152 UM files for one health care service plan, to ing MH/SUD benefit determinations.63 Five plans that zero UM files submitted by a small plan with few men- delegated UM to a behavioral health vendor met the tal health claims, for which the DMHC cited the plan compliance threshold.64 for a deficiency in UM. DMHC noted that, while they looked at both approval and denial files, state law In several final reports, it was noted that some del- does not require plans to document the reasons for egated medical groups used criteria or practices for a UM approval in the same way they must document assessing utilization management for M/S that were the clinical reasons for a UM denial, which some- different from the criteria or practices used by MH/ times made it difficult to assess plans’ UM approval SUD vendors when making UM decisions. Examples processes. include the following: The reports include information from DMHC’s inter- $ One health care service plan provided documenta- views with health care service plan staff to confirm tion showing that delegated medical groups used processes described in UM files or the phase one auto-authorization lists, policies, and procedures, worksheets, and provide clarification on specific pro- while the plan’s behavioral health vendor confirmed cesses. In some cases, department staff note that an that no mental health / substance use disorder ser- explanation offered was sufficient to show compliance vices were auto-authorized.65 even where documentation wasn’t provided.”60 $ Two reports showed that the health care service Plans reported using a variety of UM criteria, including plans’ delegated behavioral health vendors had internal guidelines, Milliman Care Guidelines (MCG), 24/7 utilization management staff, whereas the del- InterQual, and behavioral health delegate–specific egated medical groups relied on auto-approvals in criteria. lieu of weekend staffing. This resulted in weekend auto-approval processes for M/S services that were As evidenced in Table A1, there was a much lower not provided for MH/SUD services.66 incidence of QTL noncompliance compared to NQTL noncompliance, with only seven total plans demon- $ Several reports showed that health care service strating QTL noncompliance. The reports point to plans delegated M/S services to vendors that specific instances of noncompliance. For example, relied on a wide range of criteria for making UM one health care service plan was cited for a benefit decisions, while the MH/SUD vendor was limited plan that charged a copayment for psychological test- to strict, specific criteria. For example, one report ing when comparable services on the M/S side were states: “Review of M/S Inpatient files from the Plan charged co-insurance.61 Several of the plans cited had and two of its delegates revealed that, in practice, revised their QTL standards prior to the publication of the Plan and its delegates apply a combination of the final report, in response to the “closing letter” sent MCG, InterQual, individual medical group criteria, following the end of phase one.62 and clinical judgment to approve requested M/S services. . . . However, the Department’s review The delegation of medical/surgical and mental health established the Plan strictly relies upon Magellan / substance use disorder utilization management to guidelines to approve MH/SUD services.”67 separate vendors was a frequent thread throughout Equal Treatment: A Review of Mental Health Parity Enforcement in California www.chcf.org 21 For health care service plans that delegate to a purposes of the exam, examiners randomly behavioral health vendor that did meet the compli- selected 160 individual and group disability ance threshold for NQTLs, reports noted that the plan health claim files, 90 individual and group dis- either used the same UM process for M/S and MH/ ability mental health claim files, and 25 pharmacy SUD services, or utilized the same clinical criteria when claim files. making benefit decisions.68 $ CDI market analysis results, as well as any con- Follow-up reports. For plans that did not meet the sumer complaints from the review period. compliance threshold for QTLs or NQTLs, DMHC CDI identified 345 consumer complaints for issued follow-up reports in early 2019, assessing the the review period, and determined 131 were health care service plan’s response to the outstanding justified. noncompliant findings from the final focused survey. Health care service plans submitted both revised $ The company’s response to a CDI questionnaire worksheets and documentation to show evidence of pertaining to company procedures during the corrective action.69 Plans that do not take corrective review period for complying with the California action in the follow-up report are directed to DMHC Mental Health Parity Act and coverage for Office of Enforcement for further investigation.70 essential health benefits pursuant to the Patient Protection and Affordable Care Act. Analysis of CDI Market Conduct Exam of Blue Shield Examples of violations that specifically pertain to men- CDI conducted a market conduct exam71 of Blue Shield tal health include the following: that targeted the plan’s claims-handling practices, with a particular focus on claims handling of mental $ Two instances where providers unintentionally health claims in the individual and group market (see submitted mental health claims directly to the Table A2). The exam report, published in December insurance company, even though mental health 2019, focuses on a yearlong period in 2015 – 16.72 The benefit administration for the plan is delegated examination includes a review of the following: to Magellan Health and providers are instructed to send claims directly to Magellan. These initial $ Guidelines, training programs, forms, and proce- claims were denied, with the providers instructed dures maintained by the plan. to send the claim to Magellan. Claims that were not resubmitted within 90 days of the original $ Sample claims and individual records, to deter- procedure were improperly denied for untimely mine application of plan guidelines. For the filing. Table A2. Summary of Sample Claims Review MEDICAL CLAIMS REVIEW MENTAL HEALTH CLAIMS REVIEW SAMPLE ELECTRONIC SAMPLE ELECTRONIC Total claims 3,659,071 1,775,228 50,978 40,260 Number of claims in sample 185 N/A 90 N/A Number of CDI alleged violations 106 38,498* 71 1,014* *The total number of alleged violations identified in the electronic review also include those alleged violations identified in the actual claim review. Source: Author compilation. California Health Care Foundation www.chcf.org 22 $ One instance where the insurance company wrongly denied mental health services for major depressive disorder, even though the California Mental Health Parity Act requires coverage to be provided for this condition. $ Two instances where the company failed to ensure accurate accounting between them- selves and Magellan, resulting in miscalculation of yearly maximum copayments/co-insurance, insured’s deductibles, and out-of-pocket maxi- mum amounts. $ One instance where an emergency service for a mental health condition was improperly denied for lack of prior authorization; the company stated that the initial denial was an error, and they reminded Magellan that prior authorization was not required for emergency admission. $ There were several examples where confusion regarding diagnostic codes led to denied claims. In one example, the insurance company denied a claim due to invalid diagnosis codes even though the provided codes were correct; the company stated that the Magellan processor did not recognize the code and improperly denied the claim. In another example, the company improperly denied a claim on the premise that charges did not match the diagnosis for which the authorization was issued, even though the company had in fact issued an authorization for the diagnostic code and services rendered. The improper denial was due to a mismatch between actual diagnosis codes and the generic code entered into the Magellan system. $ There was also at least one example of Magellan denying a claim based on failure to obtain prior authorization in a manner that was inconsistent with similar claims for this insurance company. Equal Treatment: A Review of Mental Health Parity Enforcement in California www.chcf.org 23 Endnotes 1.Richard G. Frank, “Reflections on the Mental Health Parity 26.45 C.F.R. § 146.136(c)(4)(ii). and Addiction Equity Act After 10 Years,” The Milbank 27.These NQTLs are discussed in the preamble to the MHPAEA Quarterly 96, no. 4 (December 2018). implementing regulation. 78 Fed. Reg. 68239 (Nov. 13, 2013). Mental Health and Substance Use: State and Federal 2. 28.Ibid. Oversight of Compliance with Parity Requirements Varies (PDF), US Government Accountability Office, December 2019. 29.FAQs About Mental Health and Substance Use Disorder Parity Implementation and the 21st Century Cures Act 3.Eran Ben-Porath et al., “Mental Health Tops Californians’ Part 39 (PDF), CMS, 11, September 5, 2019. Health Care Priorities in Statewide Poll,” California Health Care Foundation, February 13, 2020. 30.“Exhibit J-11-A, Tables 1-4 Classifications,” DMHC, August 2018. Data provided to author upon request. 4.Ben-Porath et al., “Mental Health.” 31.“Exhibit J-11-B FR-QTL Calculation Worksheet,” DMHC, “Mental Health: Household Pulse Survey,” Centers for 5. August 2018. Data provided to author upon request. Disease Control and Prevention, National Center for Health Statistics, July 29, 2020. 32.“Exhibit J-12-A NQTLs (Table 5),” DMHC, August 2018. Data provided to author upon request. 6.See “Enrollment Overview” in 2019 Annual Report (PDF), California Department of Managed Health Care (DMHC); 33.Final Report: Focused Survey of Mental Health Parity and and “Health Insurance Covered Lives Report,” California Addiction Equity Act (MHPAEA) Implementation of Blue Department of Insurance (CDI), 2020. Cross of California DBA Anthem Blue Cross (PDF), DMHC, June 24, 2018. 7.29 U.S.C. § 1185a; and 45 C.F.R. § 146.136. 34.“Enforcement Action Database,” DMHC, accessed 8.Cal. Health & Safety Code § 1357.500. Cal. Ins. Code September 2, 2020. § 10753. 35.Drew Brereton (deputy dir. and chief counsel, Office of 9.42 U.S.C. § 18022; and 45 C.F.R. § 156.100 et seq. Enforcement, DMHC) to Melissa Cook (president/CEO, Sharp 10.ACA implementing regulations: 45 C.F.R. §§ 156.115(a) Health Plan), Letter of Agreement: Enforcement Matter (3), 147.160. MHPAEA implementing regulation: 45 C.F.R. Number: 16-1717 (PDF), January 16, 2019; and Drew Brereton § 146.136. (deputy dir. and chief counsel, Office of Enforcement, DMHC) to Joy O. Higa (reg. VP, UHC of California), Letter 11.Ibid. of Agreement: Enforcement Matter Number: 16-1653 (PDF), 12.“The Mental Health Parity and Addiction Equity Act September 28, 2018. (MHPAEA): Exceptions,” Centers for Medicare & Medicaid 36.Drew Brereton (deputy dir. and chief counsel, Office of Services (CMS), accessed September 2, 2020. Enforcement, DMHC) to William S. Jameson (secretary 13.45 C.F.R. § 156.115. and counsel, Cigna Healthcare of California), Letter of Agreement: Enforcement Matter Number: 15-382 (PDF), 14.Cal. Code Regs. tit. 28, § 1300.67.005. June 19, 2017. 15.Cal. Ins. Code § 10123.15. 37.Drew Brereton (deputy dir. and chief counsel, Office of 16.Cal. Health & Safety Code §§ 1367, 1345(b). Enforcement, DMHC) to Ann Warren (chief regulatory and human resources officer, Community Health Group), Letter of 17.Cal. Health & Safety Code § 1374.72; and Cal. Ins. Code Agreement: Enforcement Matter Number:17-807 (PDF), § 10144.5. March 12, 2018. For additional enforcement actions, consult 18.Ibid. the DMHC Enforcement Action Database. 19.Cal. Health & Safety Code § 1374.73; and Cal. Ins. Code 38.Sonia R. Fernandes (deputy dir. and chief counsel, Office of § 10144.51. Enforcement, DMHC) to Dee Pupa (health plan administrator, Ventura County Health), Letter of Agreement: Enforcement 20.Cal. Health & Safety Code § 1374.76. Matter Number: 18-1157 (PDF), July 17, 2020. 21.Cal. Health & Safety Code § 1367.005; and Cal. Ins. Code 39.Form Filing Instructions for 2021 Non-Grandfathered § 10112.27. Individual and Small Group Health Insurance and Exchange Dental Products (PDF), accessed September 2, 2020. 22.Cal. Ins. Code § 10144.4. 40.“Mental Health Parity Analysis Workbook,” CDI, last updated 23.42 U.S.C. § 18022(b)(4)(B); and 45 C.F.R. § 147.104(e). April 5, 2019. 24.45 C.F.R. § 146.136.(c)(2)(ii); and 29 C.F.R. § 2590.712(c)(2)(ii). 41.“Mental Health Parity Supporting Documentation Template,” 25.42 U.S.C. § 300gg–26; and 45 C.F.R. § 146.136(c)(2)(ii)(A). CDI, last updated April 5, 2019. California Health Care Foundation www.chcf.org 24 42.“Supporting Documentation,” CDI. organizations regarding their provider reimbursement rate–setting practices and inaccurate provider directories. 43.Once published, the report may be found at the following link See “Attorney General’s Office Behavioral Health Parity by entering the insurance company’s name in the search box: Agreements,” Commonwealth of Massachusetts, n.d. The publishing.insurance.ca.gov. Maryland Insurance Administration issued an order against 44.Warning Signs — Plan or Policy Non-Quantitative Treatment UnitedHealthcare for violations of reimbursement rate– Limitations (NQTLs) That Require Additional Analysis to setting practices in their HMO plans. See Maryland Insurance Determine Mental Health Parity Compliance (PDF), US Administration v. Optimum Choice, Inc., UnitedHealthcare Department of Labor and US Department of Health and Ins. Co., and UnitedHealthcare of the Mid-Atlantic, Case Nos. Human Services, accessed September 2, 2020. MIA-2020-04-039, MIA-2020-04-040, and MIA-2020-04-041 (April 2020). 45.Wit v. United Behavioral Health, No. 14-cv-02346-JCS, 2019 U.S. Dist. LEXIS 35205 (N.D. Cal. Feb. 28, 2019). 55.Cal. Health & Safety Code § 1367. 46.C. George, W. Sowers, and K. Thompson, “Level of Care 56.”Final Rules Under the Paul Wellstone and Pete Domenici Utilization System for Psychiatric and Addiction Services Mental Health Parity and Addiction Equity Act of 2008; (LOCUS): A Preliminary Assessment of Reliability and Technical Amendment to External Review for Multi-State Plan Validity,” Community Mental Health Journal 35, no. 6 Program,” 78 Fed. Reg. 68239 (Nov. 13, 2013). (December 1999): 545–63. 57.“Reach Out PA: Wolf Administration Seeks Input from 47.S. Davenport, T.J. Grey, and S.P. Melek, “Addiction and Providers on Barriers to Mental Health and Substance Mental Health vs. Physical Health: Widening Disparities Use Disorder Treatment,” Pennsylvania Pressroom, in Network Use and Provider Reimbursement,” Milliman February 7, 2020. Research Report, November 20, 2019. 58.“Health Plan Compliance/Medical Survey,” DMHC, accessed 48.S. H. Busch and K. A. Kyanko, “Incorrect Provider Directories September 2, 2020. Associated with Out-of-Network Mental Health Care 59.Website Published Report of the Market Conduct and Outpatient Surprise Bills,” Health Affairs 39, no. 6 Examination of the Claims Practices of Blue Shield of (June 2020): 975–83. California Life & Health Insurance Company (PDF), CDI, 49.“Form Filing Instructions,” CDI. December 20, 2019. 50.45 C.F.R. § 146.136(c)(4)(ii). 60.Final Report: Focused Survey of Mental Health Parity and Addiction Equity Act (MHPAEA) Implementation of Molina 51.FAQs About Mental Health, CMS 10. Healthcare of California (PDF), DMHC, October 23, 2017. 52.N.Y. Ins. Law § 4902; N.Y. Pub. Health Law § 4902. New York 61.Final Report: Focused Survey of Mental Health Parity and requires health maintenance organizations and insurers and Addiction Equity Act (MHPAEA) Implementation of Local their contracted utilization review agents to “utilize evidence- Initiative Health Authority for Los Angeles County Plan DBA based and peer reviewed clinical review criteria that are L.A. Care Health Plan (PDF), DMHC, July 18, 2018. appropriate to the age of the patient and which have been deemed appropriate and approved for use in determining 62.Final Report: Focused Survey of Mental Health Parity and health care coverage for the treatment of mental health Addiction Equity Act (MHPAEA) Implementation of Chinese conditions” by the Commissioner of the NYS Office of Mental Community Health Plan (PDF), DMHC, May 2, 2018; and Health, in consultation with the Commissioner of Health and Final Report: Focused Survey of Mental Health Parity and the Superintendent of Financial Services. Addiction Equity Act (MHPAEA) Implementation of Sharp Health Plan (PDF), DMHC, September 24, 2018. 53.H.B. 3249, 101st Leg. Sess., First 2019 Gen. Revisory (Il 2019); H.B. 220, 150th Leg. Sess., Reg. Sess. 2019 63.Health care services plans in this category include Alameda (Dec. 2019); and MD Ins. Art. § 15-802(d)(5) (PDF). Health Care System, California Physician Services, L.A. Care, Sharp, Santa Cruz/Monterey/Merced Managed Medical Care 54.The New Hampshire Department of Insurance conducted Commission, UnitedHealthcare, Ventura County Health Plan, an 18-month market conduct exam of their three health and Western Health Advantage. insurance companies and found two were unable to substantiate documented differences in provider 64.Health care service plans in this category include Aetna, reimbursements. Earlier this year, the department entered Anthem Blue Cross, Cigna, Health Net of California, and agreements with the two carriers and is requiring them Sutter Place Health. to develop and apply a framework for reimbursement 65.Final Report: L.A. Care Health Plan, DMHC. rates that will comply with MHPAEA. See Tyler Brannen, Mental Health Parity Examinations (PDF), New Hampshire 66.Final Report: L.A. Care Health Plan, DMHC; and Final Report: Insurance Dept., February 14, 2020. In February 2020, the Focused Survey of Mental Health Parity and Addiction Equity Massachusetts attorney general reached agreements with Act (MHPAEA) Implementation of Alameda Alliance for five health insurance companies and two behavioral health Health (PDF), DMHC, February 16, 2018. Equal Treatment: A Review of Mental Health Parity Enforcement in California www.chcf.org 25 67.Final Report: Sharp Health Plan, DMHC. 68.Final Report: Focused Survey of Mental Health Parity and Addiction Equity Act (MHPAEA) Implementation of Cigna Health Care of California Inc. (PDF), DMHC, December 26, 2017. 69.Follow-Up Report: Focused Survey of Mental Health Parity and Addiction Equity Act (MHPAEA) Implementation of Western Health Advantage (PDF), DMHC, January 22, 2019. 70.Follow-Up Report: Focused Survey of Mental Health Parity and Addiction Equity Act (MHPAEA) Implementation of Ventura County Health DBA: Ventura County Health Care Plan (PDF), DMHC, January 23, 2019. 71.CDI has conducted targeted health exams for compliance with the California Mental Health Parity Act and autism behavioral health treatment. This report includes a review of the market conduct exam of Blue Shield because it was the most recently published exam report at the time of this study and includes substantial review of MH/SUD claims handling for compliance with MHPAEA. 72.Website Published Report of Blue Shield, CDI. California Health Care Foundation www.chcf.org 26