Department of Insurance Notifies Insurance Companies of Obligation to Abide by New Mental Health and Substance Abuse Law

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By Hannah Ohman

On December 10, 2020, Department of Insurance Commissioner Ricardo Lara released a notice to all health insurance companies informing them of their responsibility to follow a new mental health and substance abuse parity law. The bill requires health insurance policies to cover health care services that are medically necessary to diagnose, prevent, and treat all mental health conditions, substance use disorders, and other medical conditions.

In previous years, members of the California legislature tried and failed to expand mental health coverage and enforcement. The insurance industry blocked attempts to change the law, saying it would increase consumer costs.

On January 1, 2021, SB 855 (Wiener) (Chapter 151, Statutes of 2020) took effect. This bill adds Insurance Code section 10144.5(a)(1), and provides that “[e]very disability insurance policy issued, amended, or renewed on or after January 1, 2021, that provides hospital, medical, or surgical coverage shall provide coverage for medically necessary treatment of mental health and substance use disorders, under the same terms and conditions applied to other medical conditions.” The law requires insurers to cover all mental health conditions and substance abuse disorders listed in the recent edition of the Diagnostic and Statistical Manual of Mental Health Disorders.

In a press release issued on December 9, 2020, Commissioner Lara stated, “[t]he pandemic is exposing a greater need for mental health services and substance use continues to rise. My department will guarantee insurance companies provide fair and equal access to coverage for Californians who need this vital care.” Sacramento Mayor Darrell Steinberg and co-sponsor of SB 855 noted that this law is essential in light of Californians’ mental health challenges, which have been compounded by a pandemic, high unemployment, and anxiety about fires, and racial injustice.

In an effort to ensure compliance with this new law, Commissioner Lara directed all health insurers to review their medical necessity criteria and utilization review policies and procedures and implement any changes necessary to ensure they are consistent and compliant with SB 855 by January 1, 2021. By this date, health insurers must submit to the Department amended insurance forms showing compliance with the new law.

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