Keenan Briefings


SB 855: Bill Expands the California Health Parity Law for Fully-Insured Plans

September 30, 2020

On September 25, 2020, Governor Gavin Newsom signed into law SB 855, a bill which expands the California Mental Health Parity law for fully-insured health insurance plans. Self-insured plans will not be impacted.

The new law will make the following changes for fully-insured health plans issued, amended or renewed on or after January 1, 2021.

  • It will require plans to provide coverage for the medically necessary treatment of all MH/SUDs described in the most-recent edition of the International Classification of Diseases and Related Health Problems (ICD) and the most-recent version of the Diagnostic and Statistical Manual of Mental Disorders (DSM) under the same terms and conditions applied to other medical conditions. While this is an expansion of the coverage required under California law, the vast majority of plans in California already meet this criteria.
  • It will define medical necessity and medically necessary treatment for purposes of mental health and substance use disorders (MH/SUDs) by reference to generally accepted standards set by the nonprofit professional associations for the relevant clinical specialties. Current state law does not have a definition of these terms.
  • It prohibits a plan from limiting benefits or coverage for MH/SUD to short-term or acute treatment and defines covered benefits to include basic health care services, intermediate services and prescription drugs.
  • If medically necessary treatment of a MH/SUD is not available in-network within the geographic and timely access standards set by law or regulation, the new law will require the plan to arrange coverage to ensure the delivery of medically necessary out-of-network services and any medically necessary follow up services at the same cost-sharing level that the enrollee would pay for in-network services.
  • The law provides that any provision in a health plan that reserves discretionary authority to the plan to determine eligibility for benefits or coverage, interprets the terms of the contract, or provides standards of interpretation or review that are inconsistent with California law are void and unenforceable.

An analysis of the bill completed by the California Health Benefits Review Program (CHBRP) in March of this year found that 99.8% of insureds in California currently have coverage for all MH/SUD treatments required to be covered by the bill. The analysis found that the 0.2% of the population subject to SB 855 who do not have benefit coverage for MH/SUD at parity are a segment of the grandfathered individual market.

For health insurance carriers, the changes in the bill that are more significant are those that define medical necessity, require out-of-network care at in-network cost-sharing and dictate utilization review criteria, but it is not anticipated that those changes will have much if any impact on premiums. They will, however, result in a more robust mental health benefit for participants in fully-insured plans.

Keenan & Associates is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Clients are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the clients’ business activities.