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<ns0:Id>20250AB__201199INT</ns0:Id>
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<ns0:ActionText>INTRODUCED</ns0:ActionText>
<ns0:ActionDate>2026-02-17</ns0:ActionDate>
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<ns0:SessionYear>2025</ns0:SessionYear>
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<ns0:AuthorText authorType="LEAD_AUTHOR">Introduced by Assembly Member Hart</ns0:AuthorText>
<ns0:AuthorText authorType="PRINCIPAL_COAUTHOR_OPPOSITE">(Principal coauthor: Senator Wiener)</ns0:AuthorText>
<ns0:Authors>
<ns0:Legislator>
<ns0:Contribution>LEAD_AUTHOR</ns0:Contribution>
<ns0:House>ASSEMBLY</ns0:House>
<ns0:Name>Hart</ns0:Name>
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<ns0:Legislator>
<ns0:Contribution>PRINCIPAL_COAUTHOR</ns0:Contribution>
<ns0:House>SENATE</ns0:House>
<ns0:Name>Wiener</ns0:Name>
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<ns0:Title> An act to add Section 1374.77 to the Health and Safety Code, and to add Section 10144.43 to the Insurance Code, relating to health care coverage. </ns0:Title>
<ns0:RelatingClause>health care coverage</ns0:RelatingClause>
<ns0:GeneralSubject>
<ns0:Subject>Nonquantitative treatment limitations.</ns0:Subject>
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<html:p>Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care and makes a willful violation of the act a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance.</html:p>
<html:p>Existing federal law, the federal Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA), requires group health plans and health insurance issuers that provide both medical and surgical benefits and mental health or substance use disorder benefits to ensure that financial requirements and treatment limitations applicable to mental health or substance use disorder benefits are no more restrictive than the predominant requirements or limitations applied to substantially all medical and
surgical benefits. Existing state law requires every health care service plan and disability insurance policy issued, amended, or renewed on or after January 1, 2021, that provides hospital, medical, or surgical coverage to provide coverage for medically necessary treatment of mental health and substance use disorders under the same terms and conditions applied to other medical conditions, as specified.</html:p>
<html:p>This bill would prohibit a health care service plan or insurer from relying upon discriminatory factors or evidentiary standards to design a nonquantitative treatment limitation (NQTL) to be imposed on mental health or substance use disorder benefits, as specified. To ensure that an NQTL applicable to mental health or substance use disorder benefits in a classification is no more restrictive than the predominant NQTL applied to substantially all medical/surgical benefits in the classification, the bill would require a health care service plan or insurer to collect
and evaluate relevant data to assess the impact of the NQTL on outcomes related to access to mental health and substance use disorder benefits and medical/surgical benefits. The bill would require specified health care service plans or insurers to perform and document comparative analyses of the design and application of each NQTL applicable to mental health or substance use disorder benefits in accordance with prescribed requirements and submit the analyses to the respective departments by January 1, 2027, and annually thereafter. If the departments make a final determination of noncompliance, the bill would require the health care service plan or insurer to, among other things, notify all enrollees or insureds of its noncompliance with the requirements of parity. If a health care service plan or insurer receives a final determination of noncompliance with these provisions with respect to an NQTL or with the requirements of the MHPAEA, the bill would deem the NQTL to be a violation of parity and authorize
the respective department to direct the plan or insurer not to impose the NQTL, as provided. The bill would define terms for purposes of these provisions and make related findings and declarations. Because a violation of these requirements by a health care service plan would be a crime, the bill would impose a state-mandated local program.</html:p>
<html:p>The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.</html:p>
<html:p>This bill would provide that no reimbursement is required by this act for a specified reason.</html:p>
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<ns0:Election>NO</ns0:Election>
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<ns0:Preamble>The people of the State of California do enact as follows:</ns0:Preamble>
<ns0:BillSection id="id_E8A416C4-FB65-4604-82A9-570AF8F65195">
<ns0:Num>SECTION 1.</ns0:Num>
<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
The Legislature finds and declares all of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Mental health conditions and substance use disorders affect millions of individuals and families across the United States and are among the leading causes of disability, lost productivity, preventable illness, and premature death.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Timely access to effective mental health and substance use disorder treatment is essential to individual well-being, family stability, workforce participation, public safety, and the overall health of communities.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Historically, health insurance coverage for mental health and substance use
disorder benefits has been subject to discriminatory limitations, higher cost sharing, more restrictive utilization management practices, and narrower provider networks than coverage for medical and surgical benefits.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
The federal Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) was enacted to address these inequities by requiring that financial requirements and treatment limitations applicable to mental health and substance use disorder benefits be no more restrictive than those applied to medical and surgical benefits.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
Despite the enactment of the MHPAEA, federal and state enforcement actions, parity compliance reviews, and consumer complaints have consistently demonstrated persistent and systemic noncompliance, particularly with respect to nonquantitative treatment limitations, including prior authorization, medical
necessity standards, network composition, and reimbursement practices.
</html:p>
<html:p>
(6)
<html:span class="EnSpace"/>
Inconsistent interpretation and application of parity requirements have contributed to ongoing barriers to care, including delays in treatment, denials of medically necessary services, provider shortages, and increased out-of-pocket costs for patients and families.
</html:p>
<html:p>
(7)
<html:span class="EnSpace"/>
Following implementation of earlier federal parity regulations, federal agencies identified the need for additional clarification, specificity, and operational guidance to ensure that existing statutory parity requirements were applied consistently and effectively, particularly with respect to nonquantitative treatment limitations.
</html:p>
<html:p>
(8)
<html:span class="EnSpace"/>
In 2024, federal agencies issued final rules interpreting and implementing the MHPAEA that clarified existing statutory obligations, articulated
standards for evaluating parity compliance, and specified documentation, transparency, and analytical requirements necessary for effective enforcement.
</html:p>
<html:p>
(9)
<html:span class="EnSpace"/>
The 2024 federal final rules, as published in the Federal Register Volume 89, Number 184 on September 23, 2024, emphasize that parity compliance must be demonstrated both as written and in operation, including through meaningful analysis of the impact of nonquantitative treatment limitations on access to mental health and substance use disorder benefits.
</html:p>
<html:p>
(10)
<html:span class="EnSpace"/>
Strong parity protections are particularly critical for children and youth, older adults, individuals with disabilities, veterans, communities of color, rural residents, and others who face disproportionate barriers to accessing mental health and substance use disorder services.
</html:p>
<html:p>
(11)
<html:span class="EnSpace"/>
Effective enforcement of
mental health parity laws reduces preventable crises, including avoidable psychiatric hospitalizations, emergency department utilization, homelessness, incarceration, and overdose deaths, while supporting early intervention and recovery-oriented care.
</html:p>
<html:p>
(12)
<html:span class="EnSpace"/>
Recent litigation challenging federal parity regulations has created uncertainty regarding the continued availability and enforceability of the protections articulated in the 2024 federal final rules, notwithstanding the underlying statutory requirements of the MHPAEA.
</html:p>
<html:p>
(13)
<html:span class="EnSpace"/>
Under existing state law, including Section 10144.4 of the Insurance Code and Section 1374.76 of the Health and Safety Code, the Department of Insurance and the Department of Managed Health Care are responsible for enforcing mental health parity requirements and have authority to implement and administer parity laws consistent with their existing regulatory
powers.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
Based on the findings, the Legislature declares all of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Full and faithful implementation of the MHPAEA is a matter of significant public interest and is essential to achieving equity in health care coverage and outcomes.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The 2024 federal final rules reflect authoritative interpretations of existing parity obligations and provide necessary clarity regarding how those obligations are to be evaluated, documented, and enforced.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
It is the intent of the Legislature that the provisions enacted by this act be construed as codifying and preserving existing parity protections, not as establishing new health care benefit mandates or expanding the scope of required covered services.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
It is further the intent of the Legislature to ensure continuity, stability, and enforceability of parity protections under state law in the event of any repeal, amendment, or invalidation of federal parity regulations.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
This act affirms and clarifies the authority of the Department of Insurance and the Department of Managed Health Care, consistent with their existing statutory powers, to issue regulations, guidance, and enforcement actions necessary to implement and enforce mental health parity requirements.
</html:p>
<html:p>
(6)
<html:span class="EnSpace"/>
By codifying these standards in state law, the Legislature seeks to promote transparency, accountability, and effective oversight of parity compliance, while avoiding unnecessary duplication, disruption, or additional administrative burden.
</html:p>
</ns0:Content>
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<ns0:BillSection id="id_DA62DE8C-81A8-4CE6-9F57-A1B76D879D34">
<ns0:Num>SEC. 2.</ns0:Num>
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Section 1374.77 is added to the
<ns0:DocName>Health and Safety Code</ns0:DocName>
,
<ns0:Positioning>immediately following Section 1374.76</ns0:Positioning>
, to read:
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<ns0:Num>1374.77.</ns0:Num>
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<html:p>
(a)
<html:span class="EnSpace"/>
For purposes of this section, the following definitions apply:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
“Medical/surgical benefits” means benefits with respect to items or services for medical conditions or surgical procedures, as defined under the terms of the health care service plan contract and in accordance with applicable federal and state law, but does not include mental health benefits or substance use disorder benefits.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Notwithstanding subparagraph (A), any condition or procedure defined by the health care service plan contract as being or as not being a medical condition or surgical procedure shall be defined consistently with generally recognized independent standards of
current medical practice. To the extent that generally recognized independent standards of current medical practice do not address whether a condition or procedure is a medical condition or surgical procedure, a health care service plan contract may define the condition or procedure in accordance with applicable federal and state law.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
“Mental health benefits” means benefits with respect to items or services for mental health conditions, as defined under the terms of the health care service plan contract and in accordance with applicable federal and state law, but does not include medical/surgical benefits or substance use disorder benefits.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Notwithstanding subparagraph (A), any condition defined by the health care service plan contract as being or as not being a mental health condition shall be defined consistently with generally recognized
independent standards of current medical practice. For purposes of this paragraph, to be consistent with generally recognized independent standards of current medical practice, the definition shall include all conditions covered under the health care service plan contract, except for substance use disorders, that fall under any of the diagnostic categories listed in the mental, behavioral, and neurodevelopmental disorders chapter of the most recent version of the International Classification of Diseases (ICD) or that are listed in the most recent version of the Diagnostic and Statistical Manual of Mental Disorders (DSM).
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
To the extent that generally recognized independent standards of current medical practice do not address whether a condition is a mental health condition, a health care service plan contract may define the condition in accordance with applicable federal and state law.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
“Substance use disorder benefits” means benefits with respect to items or services for substance use disorders, as defined under the terms of the health care service plan contract and in accordance with applicable federal and state law, but does not include medical/surgical benefits or mental health benefits.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Notwithstanding subparagraph (A), any disorder defined by the health care service plan as being or as not being a substance use disorder shall be defined consistently with generally recognized independent standards of current medical practice. For purposes of this paragraph, to be consistent with generally recognized independent standards of current medical practice, the definition shall include all disorders covered under the health care service plan contract that fall under any of the diagnostic categories listed as a mental or behavioral disorder due to psychoactive substance use, or
equivalent category, in the mental, behavioral, and neurodevelopmental disorders chapter, or equivalent chapter, of the most recent version of the ICD or that are listed as a substance-related and addictive disorder, or equivalent category, in the most recent version of the DSM.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
To the extent that generally recognized independent standards of current medical practice do not address whether a disorder is a substance use disorder, a health care service plan contract may define the disorder in accordance with applicable federal and state law.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
For purposes of this section, a nonquantitative treatment limitation (NQTL) includes, but is not limited to, all of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Medical management standards, including, for example, prior authorization, that limit or exclude benefits based on medical necessity or
medical appropriateness, or based on whether the treatment is experimental or investigative.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Formulary design for prescription drugs.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
For health care service plans with multiple network tiers, including, for example, preferred providers and participating providers, network tier design.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
Standards related to network composition, including, but not limited to, standards for provider and facility admission to participate in a network or for continued network participation, including methods for determining reimbursement rates, credentialing standards, and procedures for ensuring the network includes an adequate number of each category of provider and facility to provide services under the plan contract.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
Health care service plan methods for
determining out-of-network rates, including, for example, allowed amounts; usual, customary, and reasonable charges; or application of other external benchmarks for out-of-network rates.
</html:p>
<html:p>
(6)
<html:span class="EnSpace"/>
Refusal to pay for higher cost therapies until it can be shown that a lower cost therapy is not effective, also known as fail-first policies or step therapy protocols.
</html:p>
<html:p>
(7)
<html:span class="EnSpace"/>
Exclusions based on failure to complete a course of treatment.
</html:p>
<html:p>
(8)
<html:span class="EnSpace"/>
Restrictions based on geographic location, facility type, provider specialty, and other criteria that limit the scope or duration of benefits for services provided under the plan contract.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
For purposes of determining comparability and stringency under this section, a health care service plan shall not
rely upon discriminatory factors or evidentiary standards to design an NQTL to be imposed on mental health or substance use disorder benefits. A factor or evidentiary standard is discriminatory if the information, evidence, sources, or standards for the factor or evidentiary standard are biased or not objective in a manner that discriminates against mental health or substance use disorder benefits as compared to medical/surgical benefits.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
For purposes of this subdivision, information, evidence, sources, or standards are considered to be biased or not objective in a manner that discriminates against mental health or substance use disorder benefits as compared to medical/surgical benefits if, based on all of the relevant facts and circumstances, the information, evidence, sources, or standards systematically disfavor access or are specifically designed to disfavor access to mental health or substance use disorder
benefits as compared to medical/surgical benefits.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
For purposes of this paragraph, relevant facts and circumstances include, but are not limited to, all of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
The reliability of the source of the information, evidence, sources, or standards, including any underlying data.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
The independence of the information, evidence, sources, and standards relied upon.
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
The analyses and methodologies employed to select the information and the consistency of their application.
</html:p>
<html:p>
(iv)
<html:span class="EnSpace"/>
Any known safeguards deployed to prevent reliance on skewed data or metrics.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Information, evidence, sources, or standards are not
considered biased or not objective if the health care service plan has taken the steps necessary to correct, cure, or supplement any information, evidence, sources, or standards that would have been biased or not objective in the absence of those steps.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
For purposes of this subdivision, historical plan data or other historical information from a time when the health care service plan was not subject to, or not in compliance with, Section 2726 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-26) is considered to be biased or not objective in a manner that discriminates against mental health or substance use disorder benefits as compared to medical/surgical benefits if the historical plan data or other historical information systematically disfavors access or is specifically designed to disfavor access to mental health or substance use disorder benefits as compared to medical/surgical benefits, and the health care service plan
has not taken the steps necessary to correct, cure, or supplement the data or information.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
To ensure that an NQTL applicable to mental health or substance use disorder benefits in a classification, in operation, is no more restrictive than the predominant NQTL applied to substantially all medical/surgical benefits in the classification, a health care service plan shall collect and evaluate relevant data in a manner reasonably designed to assess the impact of the NQTL on relevant outcomes related to access to mental health and substance use disorder benefits and medical/surgical benefits and carefully consider the impact as part of the plan’s evaluation.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
As part of its evaluation, the health care service plan shall not disregard relevant outcomes data that it knows, or reasonably should know, suggests that an NQTL is associated with material
differences in access to mental health or substance use disorder benefits as compared to medical/surgical benefits. The department may specify in guidance the type, form, and manner of collection and evaluation for the data required under this subdivision.
</html:p>
<html:p>
(e)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
A health care service plan that provides both medical/surgical benefits and mental health or substance use disorder benefits and that imposes any nonquantitative treatment limitations (NQTLs) on mental health or substance use disorder benefits shall perform and document comparative analyses of the design and application of each NQTL applicable to mental health or substance use disorder benefits. Each comparative analysis shall comply with the requirements of this section.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
With respect to each NQTL applicable to a mental health or substance use disorder benefit under a health care service plan
contract, the comparative analysis shall include, at minimum, the information provided under this section. In addition to the comparative analysis for each NQTL limitation, a health care service plan shall also prepare and make available to the department, upon request, a written list of all NQTLs imposed under the plan contract.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Each comparative analysis shall include, with respect to the NQTL that is the subject of the comparative analysis, all of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Identification of the NQTL, including the specific terms of the plan contract or other relevant terms regarding the NQTL, the policies or guidelines in which the NQTL appears or is described, and the applicable sections of any other relevant documents, including provider contracts, that describe the NQTL.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Identification of all mental health or
substance use disorder benefits and medical/surgical benefits to which the NQTL applies, including a list of which benefits are considered mental health or substance benefits, and which benefits are considered medical/surgical benefits.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
A description of which benefits are included in each classification.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
Each comparative analysis shall include, with respect to every factor considered or relied upon to design the NQTL or apply the NQTL to mental health or substance use disorder benefits and medical/surgical benefits, all of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Identification of every factor considered or relied upon, as well as the evidentiary standards considered or relied upon to design or apply each factor and the sources from which each evidentiary standard was derived, in determining which mental health or substance use
disorder benefits and which medical/surgical benefits are subject to the NQTL.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
A definition of each factor that includes all of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
A detailed description of the factor.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
A description of each evidentiary standard used to design or apply each factor, and the source of each evidentiary standard, identified under subparagraph (A).
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
A description of any steps the plan has taken to correct, cure, or supplement any information, evidence, sources, or standards that would otherwise have been considered biased or not objective in the absence of those steps.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
Each comparative analysis shall include a description of how each factor identified under paragraph (4) is
used in the design or application of the NQTL to mental health and substance use disorder benefits and medical/surgical benefits in a classification. The description shall include all of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
A detailed explanation of how each factor identified under paragraph (4) is used to determine which mental health or substance use disorder benefits and which medical/surgical benefits are subject to the NQTL.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
An explanation of the evidentiary standards or other information or sources, if any, considered or relied upon in designing or applying the factors or relied upon in designing and applying the NQTL, including in the determination of whether and how mental health or substance use disorder benefits or medical/surgical benefits are subject to the NQTL.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
If the application of the factor depends on specific
decisions made in the administration of benefits, the description shall include the nature of the decisions, the timing of the decisions, and the professional designations and qualifications of each decisionmaker.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
If more than one factor is identified and defined under paragraph (4), an explanation of all of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
How all of the factors relate to each other.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
The order in which all of the factors are applied, including when they are applied.
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
Whether and how any factors are given more weight than others.
</html:p>
<html:p>
(iv)
<html:span class="EnSpace"/>
The reasons for the ordering and weighting of the factors.
</html:p>
<html:p>
(v)
<html:span class="EnSpace"/>
Any deviations or variations
from a factor, its applicability, or its definition, including the evidentiary standards used to define the factor and the information or sources from which each evidentiary standard was derived. This includes, but is not limited to, how the factor is used differently to apply the NQTL to mental health or substance use disorder benefits as compared to medical/surgical benefits, and a description of how the plan establishes those deviations or variations.
</html:p>
<html:p>
(6)
<html:span class="EnSpace"/>
Each comparative analysis shall evaluate whether, in any classification, under the terms of the plan contract as written, any processes, strategies, evidentiary standards, or other factors used in designing and applying the NQTL to mental health or substance use disorder benefits are comparable to, and applied no more stringently than, the processes, strategies, evidentiary standards, or other factors used in designing and applying the NQTL with respect to medical/surgical benefits. Each
comparative analysis shall include, with respect to the NQTL and the factors used in designing and applying the NQTL, all of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Documentation of each factor identified and defined under paragraph (4) that was applied to determine whether the NQTL applies to mental health or substance use disorder benefits and medical/surgical benefits in a classification, including, as relevant, both the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
Quantitative data, calculations, or other analyses showing whether, in each classification in which the NQTL applies, mental health or substance use disorder benefits and medical/surgical benefits met or did not meet any applicable threshold identified in the relevant evidentiary standard to determine that the NQTL would or would not apply.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
Records maintained by the plan documenting the
consideration and application of all factors and evidentiary standards, as well as the results of their application.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
In each classification in which the NQTL applies to mental health or substance use disorder benefits, a comparison of how the NQTL, as written, is designed and applied to mental health or substance use disorder benefits and to medical/surgical benefits, including the specific provisions of any forms, checklists, procedure manuals, or other documentation used in designing and applying the NQTL or that address the application of the NQTL.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Documentation demonstrating how the factors are comparably applied, as written, to mental health or substance use disorder benefits and medical/surgical benefits in each classification, to determine which benefits are subject to the NQTL.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
An explanation of
the reasons for any deviations or variations in the application of a factor used to apply the NQTL, or the application of the NQTL, to mental health or substance use disorder benefits as compared to medical/surgical benefits, and how the plan establishes those deviations or variations, including any of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
In the definition of the factors, the evidentiary standards used to define the factors, and the sources from which the evidentiary standards were derived.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
In the design of the factors or evidentiary standards.
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
In the application or design of the NQTL.
</html:p>
<html:p>
(7)
<html:span class="EnSpace"/>
Each comparative analysis shall evaluate whether, in any classification, in operation, the processes, strategies, evidentiary standards, or other factors used in designing
and applying the NQTL to mental health or substance use disorder benefits are comparable to, and are applied no more stringently than, the processes, strategies, evidentiary standards, or other factors used in designing and applying the NQTL with respect to medical/surgical benefits. Each comparative analysis shall include, with respect to the NQTL and the factors used in designing and applying the NQTL, all of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
An explanation of any methodology and underlying data used to demonstrate the application of the NQTL in operation.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The sample period, inputs used in any calculations, definitions of terms used, and any criteria used to select the mental health or substance use disorder benefits and medical/surgical benefits to which the NQTL is applicable.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
With respect to an NQTL for which relevant
data is temporarily unavailable, a detailed explanation of the lack of relevant data, the basis for the plan’s conclusion that there is a lack of relevant data, and when and how the data will become available and be collected and analyzed.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
With respect to an NQTL for which no data exists that can reasonably assess any relevant impact of the NQTL on relevant outcomes related to access to mental health and substance use disorder benefits and medical/surgical benefits, a reasoned justification as to the basis for the conclusion that there is no data that can reasonably assess the NQTL’s impact, an explanation of why the nature of the NQTL prevents the plan from reasonably measuring its impact, an explanation of what data was considered and rejected, and documentation of any additional safeguards or protocols used to ensure that the NQTL complies with applicable parity laws.
</html:p>
<html:p>
(E)
<html:span class="EnSpace"/>
Identification of the relevant data collected and evaluated.
</html:p>
<html:p>
(F)
<html:span class="EnSpace"/>
Documentation of the outcomes that resulted from the application of the NQTL to mental health or substance use disorder benefits and medical/surgical benefits, including both of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
The evaluation of relevant data.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
A reasoned justification and analysis that explains why the plan concluded that any differences in the relevant data do or do not suggest the NQTL contributes to material differences in access to mental health or substance use disorder benefits as compared to medical/surgical benefits.
</html:p>
<html:p>
(G)
<html:span class="EnSpace"/>
A detailed explanation of any material differences in access demonstrated by the outcomes evaluated under subparagraph (F), including both of the
following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
A reasoned explanation of any material differences in access that are not attributable to differences in the comparability or relative stringency of the NQTL as applied to mental health or substance use disorder benefits and medical/surgical benefits, including any considerations beyond a plan’s control that contribute to the existence of material differences and a detailed explanation of the bases for concluding that material differences are not attributable to differences in the comparability or relative stringency of the NQTL.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
To the extent differences in access to mental health or substance use disorder benefits are attributable to generally recognized independent professional medical or clinical standards or carefully circumscribed measures reasonably and appropriately designed to detect or prevent and prove fraud and abuse that minimize the negative
impact on access to appropriate mental health and substance use disorder benefits, and those standards or measures are used as the basis for a factor or evidentiary standard used to design or apply an NQTL, documentation explaining how any differences are attributable to those standards or measures.
</html:p>
<html:p>
(H)
<html:span class="EnSpace"/>
A discussion of the actions that have been or are being taken by the plan to address any material differences in access to mental health or substance use disorder benefits as compared to medical/surgical benefits, including the actions the plan has taken or is taking to address material differences to comply with parity laws, including, as applicable, both of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
A reasoned explanation of any material differences in access to mental health or substance use disorder benefits as compared to medical/surgical benefits that persist despite reasonable actions that have
been or are being taken.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
For a plan designing and applying one or more NQTLs related to network composition, a discussion of the actions that have been or are being taken to address material differences in access to in-network mental health and substance use disorder benefits as compared to in-network medical/surgical benefits.
</html:p>
<html:p>
(8)
<html:span class="EnSpace"/>
The comparative analysis shall address the findings and conclusion as to the comparability of the processes, strategies, evidentiary standards, and other factors used in designing and applying the NQTL to mental health or substance use disorder benefits and medical/surgical benefits within each classification, and the relative stringency of their application, both as written and in operation, and include all of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Any findings or conclusions indicating that the plan is
or is not, or might or might not be, in compliance with the requirements of applicable parity laws, including any additional actions the plan has taken or intends to take to address any potential areas of concern or noncompliance.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
A reasoned and detailed discussion of the findings and conclusions described in subparagraph (A).
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Citations to any additional information not otherwise included in the comparative analysis that supports the findings and conclusions described in subparagraph (A).
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
The date the analysis is completed and the title and credentials of all relevant persons who participated in the performance and documentation of the comparative analysis.
</html:p>
<html:p>
(E)
<html:span class="EnSpace"/>
If the comparative analysis relies upon an evaluation by a reviewer or consultant
considered by the plan to be an expert, an assessment of each expert’s qualifications and the extent to which the plan ultimately relied upon each expert’s evaluation in performing and documenting the comparative analysis of the design and application of the NQTL applicable to both mental health or substance use disorder benefits and medical/surgical benefits.
</html:p>
<html:p>
(f)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
In addition to making a comparative analysis available to the department on an annual basis, a health care service plan shall make available a copy of the comparative analysis when requested by either of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Any applicable state authority.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
An enrollee or an enrollee’s authorized representative.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
A health care service plan shall provide the
comparative analysis no later than 30 calendar days after receiving a request under this subdivision.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
A health care service plan shall not withhold any information contained in the comparative analysis, including any information from or developed by third parties.
</html:p>
<html:p>
(g)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
A health care service plan shall submit the comparative analyses to the department by January 1, 2027, and annually thereafter, in the manner required by this section.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
If the department makes a final determination of noncompliance, the health care service plan shall notify all enrollees that the plan has been determined to not be in compliance with the requirements of parity or this section with respect to the plan contract. The notice shall be provided within seven business days of receipt of the final determination of
noncompliance, and the health care service plan shall provide a copy of the notice to the department, any service provider involved in the claims process, and any fiduciary responsible for deciding benefit claims within the same timeframe.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
The notice to enrollees shall be written in a manner calculated to be understood by the average enrollee and shall include, in plain language, the following information in a standalone notice:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
The following statement prominently displayed on the first page, in no less than 14-point font: “Attention! The California Department of Managed Health Care has determined that (insert the name of the health care service plan) is not in compliance with the federal Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008.”
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
A summary of changes the
health care service plan has made as part of its corrective action plan specified to the director following the initial determination of noncompliance, including an explanation of any opportunity for an enrollee to have a claim for benefits submitted or reprocessed.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
A summary of the department’s final determination that the health care service plan is not in compliance with parity or this section, including any provisions or practices identified as being in violation, additional corrective actions identified by the department in the final determination notice, and information on how enrollees may obtain from the health care service plan a copy of the final determination of noncompliance.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
Any additional actions the health care service plan is taking to come into compliance with parity or this section, when the health care service plan will take those actions, and a clear
and accurate statement explaining whether the director has concurred with those actions.
</html:p>
<html:p>
(E)
<html:span class="EnSpace"/>
Contact information for questions and complaints, and a statement explaining how enrollees may obtain more information about the notice, including both of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
The health care service plan’s telephone number and an email or internet website.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
The department’s telephone number and email or internet website.
</html:p>
<html:p>
(F)
<html:span class="EnSpace"/>
The health care service plan shall make the notice available in paper form or electronically, including by email or a posting on its internet website, according to the following requirements:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
The format is readily accessible.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
The notice provided in paper form is free of charge and is provided upon request.
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
If the electronic form is a posting on the health care service plan’s internet website, the health care service plan timely notifies the enrollee in paper form or email that the documents are available on the internet, provides a link to the internet website, includes the statement required in this section, and notifies the enrollee that the documents are available in paper form upon request.
</html:p>
<html:p>
(G)
<html:span class="EnSpace"/>
If a health care service plan receives a final determination from the department that the health care service plan is not in compliance with the comparative analysis requirements with respect to an NQTL, or that the health care service plan is not in compliance with the requirements of the federal Paul Wellstone and Pete Domenici Mental
Health Parity and Addiction Equity Act of 2008 (29 U.S.C. Sec. 1185a), the NQTL shall be deemed a violation of parity and, in addition to the existing penalty authority provided under Section 1390, the department may direct the health care service plan not to impose the NQTL with respect to mental health or substance use disorder benefits in the relevant classification, unless and until the health care service plan demonstrates to the department compliance with the requirements of this section or with federal law or takes appropriate action to remedy the violation.
</html:p>
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</ns0:LawSection>
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</ns0:BillSection>
<ns0:BillSection id="id_F8F9C43F-C970-4D4C-83D3-EEA8192CD3D4">
<ns0:Num>SEC. 3.</ns0:Num>
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Section 10144.43 is added to the
<ns0:DocName>Insurance Code</ns0:DocName>
,
<ns0:Positioning>immediately following Section 10144.4</ns0:Positioning>
, to read:
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<ns0:Fragment>
<ns0:LawSection id="id_9253E33F-BE7B-4E70-A7B4-16FCE60BF388">
<ns0:Num>10144.43.</ns0:Num>
<ns0:LawSectionVersion id="id_67CB3230-BE29-4AF2-A171-25C3EFC0BFCA">
<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
For purposes of this section, the following definitions apply:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
“Medical/surgical benefits” means benefits with respect to items or services for medical conditions or surgical procedures, as defined under the terms of the health insurance policy and in accordance with applicable federal and state law, but does not include mental health benefits or substance use disorder benefits.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Notwithstanding subparagraph (A), any condition or procedure defined by the health insurance policy as being or as not being a medical condition or surgical procedure shall be defined consistently with generally recognized independent standards of current medical
practice. To the extent that generally recognized independent standards of current medical practice do not address whether a condition or procedure is a medical condition or surgical procedure, a health insurance policy may define the condition or procedure in accordance with applicable federal and state law.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
“Mental health benefits” means benefits with respect to items or services for mental health conditions, as defined under the terms of the health insurance policy and in accordance with applicable federal and state law, but does not include medical/surgical benefits or substance use disorder benefits.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Notwithstanding subparagraph (A), any condition defined by the health insurance policy as being or as not being a mental health condition shall be defined consistently with generally recognized independent standards of current medical practice.
For purposes of this paragraph, to be consistent with generally recognized independent standards of current medical practice, the definition shall include all conditions covered under the health insurance policy, except for substance use disorders, that fall under any of the diagnostic categories listed in the mental, behavioral, and neurodevelopmental disorders chapter of the most recent version of the International Classification of Diseases (ICD) or that are listed in the most recent version of the Diagnostic and Statistical Manual of Mental Disorders (DSM).
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
To the extent that generally recognized independent standards of current medical practice do not address whether a condition is a mental health condition, a health insurance policy may define the condition in accordance with applicable federal and state law.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
“Substance use disorder
benefits” means benefits with respect to items or services for substance use disorders, as defined under the terms of the health insurance policy and in accordance with applicable federal and state law, but does not include medical/surgical benefits or mental health benefits.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Notwithstanding subparagraph (A), any disorder defined by the health insurance policy as being or as not being a substance use disorder shall be defined consistently with generally recognized independent standards of current medical practice. For purposes of this paragraph, to be consistent with generally recognized independent standards of current medical practice, the definition shall include all disorders covered under the health insurance policy that fall under any of the diagnostic categories listed as a mental or behavioral disorder due to psychoactive substance use, or equivalent category, in the mental, behavioral, and neurodevelopmental disorders chapter, or
equivalent chapter, of the most recent version of the ICD or that are listed as a substance-related and addictive disorder, or equivalent category, in the most recent version of the DSM.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
To the extent that generally recognized independent standards of current medical practice do not address whether a disorder is a substance use disorder, a health insurance policy may define the disorder in accordance with applicable federal and state law.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
For purposes of this section, a nonquantitative treatment limitation (NQTL) includes, but is not limited to, all of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Medical management standards, including, for example, prior authorization, that limit or exclude benefits based on medical necessity or medical appropriateness, or based on whether the treatment is experimental or investigative.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Formulary design for prescription drugs.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
For insurers with multiple network tiers, including, for example, preferred providers and participating providers, network tier design.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
Standards related to network composition, including, but not limited to, standards for provider and facility admission to participate in a network or for continued network participation, including methods for determining reimbursement rates, credentialing standards, and procedures for ensuring the network includes an adequate number of each category of provider and facility to provide services under the policy.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
Insurer methods for determining out-of-network rates, including, for example, allowed amounts; usual, customary, and reasonable charges; or application of
other external benchmarks for out-of-network rates.
</html:p>
<html:p>
(6)
<html:span class="EnSpace"/>
Refusal to pay for higher cost therapies until it can be shown that a lower cost therapy is not effective, also known as fail-first policies or step therapy protocols.
</html:p>
<html:p>
(7)
<html:span class="EnSpace"/>
Exclusions based on failure to complete a course of treatment.
</html:p>
<html:p>
(8)
<html:span class="EnSpace"/>
Restrictions based on geographic location, facility type, provider specialty, and other criteria that limit the scope or duration of benefits for services provided under the policy.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
For purposes of determining comparability and stringency under this section, an insurer shall not rely upon discriminatory factors or evidentiary standards to design an NQTL to be imposed on mental health or substance use disorder benefits. A factor or
evidentiary standard is discriminatory if the information, evidence, sources, or standards for the factor or evidentiary standard are biased or not objective in a manner that discriminates against mental health or substance use disorder benefits as compared to medical/surgical benefits.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
(A)
<html:span class="EnSpace"/>
For purposes of this subdivision, information, evidence, sources, or standards are considered to be biased or not objective in a manner that discriminates against mental health or substance use disorder benefits as compared to medical/surgical benefits if, based on all of the relevant facts and circumstances, the information, evidence, sources, or standards systematically disfavor access or are specifically designed to disfavor access to mental health or substance use disorder benefits as compared to medical/surgical benefits.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
For purposes of this paragraph,
relevant facts and circumstances include, but are not limited to, all of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
The reliability of the source of the information, evidence, sources, or standards, including any underlying data.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
The independence of the information, evidence, sources, and standards relied upon.
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
The analyses and methodologies employed to select the information and the consistency of their application.
</html:p>
<html:p>
(iv)
<html:span class="EnSpace"/>
Any known safeguards deployed to prevent reliance on skewed data or metrics.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Information, evidence, sources, or standards are not considered biased or not objective if the insurer has taken the steps necessary to correct, cure, or supplement any information, evidence, sources, or
standards that would have been biased or not objective in the absence of those steps.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
For purposes of this subdivision, historical policy data or other historical information from a time when the insurer was not subject to, or not in compliance with, Section 2726 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-26) is considered to be biased or not objective in a manner that discriminates against mental health or substance use disorder benefits as compared to medical/surgical benefits if the historical policy data or other historical information systematically disfavors access or is specifically designed to disfavor access to mental health or substance use disorder benefits as compared to medical/surgical benefits, and the insurer has not taken the steps necessary to correct, cure, or supplement the data or information.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
To ensure
that an NQTL applicable to mental health or substance use disorder benefits in a classification, in operation, is no more restrictive than the predominant NQTL applied to substantially all medical/surgical benefits in the classification, an insurer shall collect and evaluate relevant data in a manner reasonably designed to assess the impact of the NQTL on relevant outcomes related to access to mental health and substance use disorder benefits and medical/surgical benefits and carefully consider the impact as part of the insurer’s evaluation.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
As part of its evaluation, the insurer shall not disregard relevant outcomes data that it knows, or reasonably should know, suggests that an NQTL is associated with material differences in access to mental health or substance use disorder benefits as compared to medical/surgical benefits. The department may specify in guidance the type, form, and manner of collection and evaluation for the data required
under this section.
</html:p>
<html:p>
(e)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
An insurer that provides both medical/surgical benefits and mental health or substance use disorder benefits and that imposes any NQTLs on mental health or substance use disorder benefits shall perform and document comparative analyses of the design and application of each NQTL applicable to mental health or substance use disorder benefits. Each comparative analysis shall comply with the requirements of this section.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
With respect to each NQTL applicable to a mental health or substance use disorder benefit under an insurance policy, the comparative analysis shall include, at minimum, the information provided under this section. In addition to the comparative analysis for each NQTL limitation, an insurer shall also prepare and make available to the department, upon request, a written list of all NQTLs imposed under the
policy.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Each comparative analysis shall include, with respect to the NQTL that is the subject of the comparative analysis, all of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Identification of the NQTL, including the specific terms of the policy or other relevant terms regarding the NQTL, the policies or guidelines in which the NQTL appears or is described, and the applicable sections of any other relevant documents, including provider contracts, that describe the NQTL.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
Identification of all mental health or substance use disorder benefits and medical/surgical benefits to which the NQTL applies, including a list of which benefits are considered mental health or substance benefits, and which benefits are considered medical/surgical benefits.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
A description of which
benefits are included in each classification.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
Each comparative analysis shall include, with respect to every factor considered or relied upon to design the NQTL or apply the NQTL to mental health or substance use disorder benefits and medical/surgical benefits, all of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Identification of every factor considered or relied upon, as well as the evidentiary standards considered or relied upon to design or apply each factor and the sources from which each evidentiary standard was derived, in determining which mental health or substance use disorder benefits and which medical/surgical benefits are subject to the NQTL.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
A definition of each factor that includes all of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
A detailed description of the factor.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
A description of each evidentiary standard used to design or apply each factor, and the source of each evidentiary standard, identified under subparagraph (A).
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
A description of any steps the insurer has taken to correct, cure, or supplement any information, evidence, sources, or standards that would otherwise have been considered biased or not objective in the absence of those steps.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
Each comparative analysis shall include a description of how each factor identified under paragraph (4) is used in the design or application of the NQTL to mental health and substance use disorder benefits and medical/surgical benefits in a classification. The description shall include all of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
A detailed explanation of how each factor
identified under paragraph (4) is used to determine which mental health or substance use disorder benefits and which medical/surgical benefits are subject to the NQTL.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
An explanation of the evidentiary standards or other information or sources, if any, considered or relied upon in designing or applying the factors or relied upon in designing and applying the NQTL, including in the determination of whether and how mental health or substance use disorder benefits or medical/surgical benefits are subject to the NQTL.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
If the application of the factor depends on specific decisions made in the administration of benefits, the description shall include the nature of the decisions, the timing of the decisions, and the professional designations and qualifications of each decisionmaker.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
If more than one factor is
identified and defined under paragraph (4), an explanation of all of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
How all of the factors relate to each other.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
The order in which all of the factors are applied, including when they are applied.
</html:p>
<html:p>
(iii)
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Whether and how any factors are given more weight than others.
</html:p>
<html:p>
(iv)
<html:span class="EnSpace"/>
The reasons for the ordering and weighting of the factors.
</html:p>
<html:p>
(E)
<html:span class="EnSpace"/>
Any deviations or variations from a factor, its applicability, or its definition, including the evidentiary standards used to define the factor and the information or sources from which each evidentiary standard was derived. This includes, but is not limited to, how the factor is used differently to apply the NQTL to mental health or
substance use disorder benefits as compared to medical/surgical benefits, and a description of how the insurer establishes those deviations or variations.
</html:p>
<html:p>
(6)
<html:span class="EnSpace"/>
Each comparative analysis shall evaluate whether, in any classification, under the terms of the policy as written, any processes, strategies, evidentiary standards, or other factors used in designing and applying the NQTL to mental health or substance use disorder benefits are comparable to, and applied no more stringently than, the processes, strategies, evidentiary standards, or other factors used in designing and applying the NQTL with respect to medical/surgical benefits. Each comparative analysis shall include, with respect to the NQTL and the factors used in designing and applying the NQTL, all of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Documentation of each factor identified and defined under paragraph (4) that was applied to determine
whether the NQTL applies to mental health or substance use disorder benefits and medical/surgical benefits in a classification, including, as relevant, both the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
Quantitative data, calculations, or other analyses showing whether, in each classification in which the NQTL applies, mental health or substance use disorder benefits and medical/surgical benefits met or did not meet any applicable threshold identified in the relevant evidentiary standard to determine that the NQTL would or would not apply.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
Records maintained by the insurer documenting the consideration and application of all factors and evidentiary standards, as well as the results of their application.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
In each classification in which the NQTL applies to mental health or substance use disorder benefits, a comparison of how the NQTL,
as written, is designed and applied to mental health or substance use disorder benefits and to medical/surgical benefits, including the specific provisions of any forms, checklists, procedure manuals, or other documentation used in designing and applying the NQTL or that address the application of the NQTL.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Documentation demonstrating how the factors are comparably applied, as written, to mental health or substance use disorder benefits and medical/surgical benefits in each classification, to determine which benefits are subject to the NQTL.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
An explanation of the reasons for any deviations or variations in the application of a factor used to apply the NQTL, or the application of the NQTL, to mental health or substance use disorder benefits as compared to medical/surgical benefits, and how the insurer establishes those deviations or variations, including any of the
following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
In the definition of the factors, the evidentiary standards used to define the factors, and the sources from which the evidentiary standards were derived.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
In the design of the factors or evidentiary standards.
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
In the application or design of the NQTL.
</html:p>
<html:p>
(7)
<html:span class="EnSpace"/>
Each comparative analysis shall evaluate whether, in any classification, in operation, the processes, strategies, evidentiary standards, or other factors used in designing and applying the NQTL to mental health or substance use disorder benefits are comparable to, and are applied no more stringently than, the processes, strategies, evidentiary standards, or other factors used in designing and applying the NQTL with respect to medical/surgical benefits. Each comparative
analysis shall include, with respect to the NQTL and the factors used in designing and applying the NQTL, all of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
An explanation of any methodology and underlying data used to demonstrate the application of the NQTL in operation.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The sample period, inputs used in any calculations, definitions of terms used, and any criteria used to select the mental health or substance use disorder benefits and medical/surgical benefits to which the NQTL is applicable.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
With respect to an NQTL for which relevant data is temporarily unavailable, a detailed explanation of the lack of relevant data, the basis for the insurer’s conclusion that there is a lack of relevant data, and when and how the data will become available and be collected and analyzed.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
With respect to an NQTL for which no data exists that can reasonably assess any relevant impact of the NQTL on relevant outcomes related to access to mental health and substance use disorder benefits and medical/surgical benefits, a reasoned justification as to the basis for the conclusion that there is no data that can reasonably assess the NQTL’s impact, an explanation of why the nature of the NQTL prevents the insurer from reasonably measuring its impact, an explanation of what data was considered and rejected, and documentation of any additional safeguards or protocols used to ensure that the NQTL complies with applicable parity laws.
</html:p>
<html:p>
(E)
<html:span class="EnSpace"/>
Identification of the relevant data collected and evaluated.
</html:p>
<html:p>
(F)
<html:span class="EnSpace"/>
Documentation of the outcomes that resulted from the application of the NQTL to mental health or substance use disorder benefits and medical/surgical benefits,
including both of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
The evaluation of relevant data.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
A reasoned justification and analysis that explains why the insurer concluded that any differences in the relevant data do or do not suggest the NQTL contributes to material differences in access to mental health or substance use disorder benefits as compared to medical/surgical benefits.
</html:p>
<html:p>
(G)
<html:span class="EnSpace"/>
A detailed explanation of any material differences in access demonstrated by the outcomes evaluated under subparagraph (F), including both of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
A reasoned explanation of any material differences in access that are not attributable to differences in the comparability or relative stringency of the NQTL as applied to mental health or substance use disorder benefits and
medical/surgical benefits, including any considerations beyond an insurer’s control that contribute to the existence of material differences and a detailed explanation of the bases for concluding that material differences are not attributable to differences in the comparability or relative stringency of the NQTL.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
To the extent differences in access to mental health or substance use disorder benefits are attributable to generally recognized independent professional medical or clinical standards or carefully circumscribed measures reasonably and appropriately designed to detect or prevent and prove fraud and abuse that minimize the negative impact on access to appropriate mental health and substance use disorder benefits, and those standards or measures are used as the basis for a factor or evidentiary standard used to design or apply an NQTL, documentation explaining how any differences are attributable to those standards or measures.
</html:p>
<html:p>
(H)
<html:span class="EnSpace"/>
A discussion of the actions that have been or are being taken by the insurer to address any material differences in access to mental health or substance use disorder benefits as compared to medical/surgical benefits, including the actions the insurer has taken or is taking to address material differences to comply with parity laws, including, as applicable, both of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
A reasoned explanation of any material differences in access to mental health or substance use disorder benefits as compared to medical/surgical benefits that persist despite reasonable actions that have been or are being taken.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
For an insurer designing and applying one or more NQTLs related to network composition, a discussion of the actions that have been or are being taken to address material differences in access to in-network
mental health and substance use disorder benefits as compared to in-network medical/surgical benefits.
</html:p>
<html:p>
(8)
<html:span class="EnSpace"/>
The comparative analysis shall address the findings and conclusion as to the comparability of the processes, strategies, evidentiary standards, and other factors used in designing and applying the NQTL to mental health or substance use disorder benefits and medical/surgical benefits within each classification, and the relative stringency of their application, both as written and in operation, and include all of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Any findings or conclusions indicating that the insurer is or is not, or might or might not be, in compliance with the requirements of applicable parity laws, including any additional actions the insurer has taken or intends to take to address any potential areas of concern or noncompliance.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
A reasoned and detailed discussion of the findings and conclusions described in subparagraph (A).
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
Citations to any additional information not otherwise included in the comparative analysis that supports the findings and conclusions described in subparagraph (A).
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
The date the analysis is completed and the title and credentials of all relevant persons who participated in the performance and documentation of the comparative analysis.
</html:p>
<html:p>
(E)
<html:span class="EnSpace"/>
If the comparative analysis relies upon an evaluation by a reviewer or consultant considered by the insurer to be an expert, an assessment of each expert’s qualifications and the extent to which the insurer ultimately relied upon each expert’s evaluation in performing and documenting the comparative analysis of the design and application of the NQTL applicable
to both mental health or substance use disorder benefits and medical/surgical benefits.
</html:p>
<html:p>
(f)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
In addition to making a comparative analysis available to the department on an annual basis, an insurer shall make available a copy of the comparative analysis when requested by either of the following:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
Any applicable state authority.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
An insured or an insured’s authorized representative.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
An insurer shall provide the comparative analysis no later than 30 calendar days after receiving a request under this subdivision.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
An insurer shall not withhold any information contained in the comparative analysis, including any information from or developed by third
parties.
</html:p>
<html:p>
(g)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
An insurer shall submit the comparative analyses to the department by January 1, 2027, and annually thereafter, in the manner required by this section.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
If the department makes a final determination of noncompliance, the insurer shall notify all insureds that the insurer has been determined to not be in compliance with the requirements of parity or this section with respect to the policy. The notice shall be provided within seven business days of receipt of the final determination of noncompliance, and the insurer shall provide a copy of the notice to the department, any service provider involved in the claims process, and any fiduciary responsible for deciding benefit claims within the same timeframe.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
The notice to insureds shall be written in a manner calculated to be
understood by the average insured and shall include, in plain language, the following information in a standalone notice:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
The following statement prominently displayed on the first page, in no less than 14-point font: “Attention! The California Department of Insurance has determined that (insert the name of the insurer) is not in compliance with the federal Paul Wellstone and Pete Demonici Mental Health Parity and Addiction Equity Act of 2008.”
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
A summary of changes the insurer has made as part of its corrective action plan specified to the commissioner following the initial determination of noncompliance, including an explanation of any opportunity for an insured to have a claim for benefits submitted or reprocessed.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
A summary of the department’s final determination that the insurer is not in compliance
with parity or this section, including any provisions or practices identified as being in violation, additional corrective actions identified by the department in the final determination notice, and information on how insureds may obtain from the insurer a copy of the final determination of noncompliance.
</html:p>
<html:p>
(D)
<html:span class="EnSpace"/>
Any additional actions the insurer is taking to come into compliance with parity or this section, when the insurer will take those actions, and a clear and accurate statement explaining whether the commissioner has concurred with those actions.
</html:p>
<html:p>
(E)
<html:span class="EnSpace"/>
Contact information for questions and complaints, and a statement explaining how insureds may obtain more information about the notice, including both of the following:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
The insurer’s telephone number and an email or internet website.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
The department’s telephone number and email or internet website.
</html:p>
<html:p>
(F)
<html:span class="EnSpace"/>
The insurer shall make the notice available in paper form or electronically, including by email or a posting on its internet website, according to the following requirements:
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
The format is readily accessible.
</html:p>
<html:p>
(ii)
<html:span class="EnSpace"/>
The notice provided in paper form is free of charge and is provided upon request.
</html:p>
<html:p>
(iii)
<html:span class="EnSpace"/>
If the electronic form is a posting on the insurer’s internet website, the insurer timely notifies the insured in paper form or email that the documents are available on the internet, provides a link to the internet website, includes the statement required in this section, and notifies the insured that the documents are
available in paper form upon request.
</html:p>
<html:p>
(G)
<html:span class="EnSpace"/>
If an insurer receives a final determination from the department that the insurer is not in compliance with the comparative analysis requirements with respect to an NQTL, or that the insurer is not in compliance with the requirements of the federal Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (29 U.S.C. Sec. 1185a), the NQTL shall be deemed a violation of parity and, in addition to the existing penalty authority provided under Sections 10144.5 and 10144.52, the department may direct the insurer not to impose the NQTL with respect to mental health or substance use disorder benefits in the relevant classification, unless and until the insurer demonstrates to the department compliance with the requirements of this section or with federal law or takes appropriate action to remedy the violation.
</html:p>
</ns0:Content>
</ns0:LawSectionVersion>
</ns0:LawSection>
</ns0:Fragment>
</ns0:BillSection>
<ns0:BillSection id="id_7D8C3359-7542-4A57-97D5-A01D7BABB801">
<ns0:Num>SEC. 4.</ns0:Num>
<ns0:Content>
<html:p>
No reimbursement is required by this act pursuant to Section 6 of Article XIII
<html:span class="ThinSpace"/>
B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII
<html:span class="ThinSpace"/>
B of the California Constitution.
</html:p>
</ns0:Content>
</ns0:BillSection>
</ns0:Bill>
</ns0:MeasureDoc>