AB 2011: Nonquantitative treatment limitations.
- Session Year: 2025-2026
- House: Assembly
- Latest Version Date: 2026-09-30
Current Status:
Passed
(2026-09-30: Chaptered by Secretary of State - Chapter 915, Statutes of 2026.)
Introduced
In Committee
Awaiting First Chamber Vote
Passed First Chamber
In Committee
Awaiting Second Chamber Vote
Passed Second Chamber
Enacted
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.
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 an individual, small group, or large group health care service plan contract or health insurance policy to provide covered mental health and substance use disorder benefits in compliance with the MHPAEA and specified federal rules, regulations, and guidance.
This bill would require the above-described contracts and policies to provide covered mental health and substance use disorder benefits in compliance with specified federal rules, regulations, and guidance as they existed on January 1, 2025. 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. The bill would also require the departments to review provisions of the bill that conflict with or materially differ from federal regulations and collaborate with each other to issue guidance on compliance.
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.
This bill would provide that no reimbursement is required by this act for a specified reason.
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.
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 an individual, small group, or large group health care service plan contract or health insurance policy to provide covered mental health and substance use disorder benefits in compliance with the MHPAEA and specified federal rules, regulations, and guidance.
This bill would require the above-described contracts and policies to provide covered mental health and substance use disorder benefits in compliance with specified federal rules, regulations, and guidance as they existed on January 1, 2025. 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. The bill would also require the departments to review provisions of the bill that conflict with or materially differ from federal regulations and collaborate with each other to issue guidance on compliance.
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.
This bill would provide that no reimbursement is required by this act for a specified reason.
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.
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 an individual, small group, or large group health care service plan and disability contract or health 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 to provide covered mental health and substance use disorders under the same terms and conditions applied to other medical conditions, as specified. disorder benefits in compliance with the MHPAEA and specified federal rules, regulations, and guidance.
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 upon request. 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.This bill would require the above-described contracts and policies to provide covered mental health and substance use disorder benefits in compliance with specified federal rules, regulations, and guidance as they existed on January 1, 2025. 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. The bill would also require the departments to review provisions of the bill that conflict with or materially differ from federal regulations and collaborate with each other to issue guidance on compliance.
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.
This bill would provide that no reimbursement is required by this act for a specified reason.
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.
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.
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. upon request. 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.
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.
This bill would provide that no reimbursement is required by this act for a specified reason.
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.
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.
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.
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.
This bill would provide that no reimbursement is required by this act for a specified reason.
(a)The Legislature finds and declares all of the following:
(1)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.
(2)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.
(3)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.
(4)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.
(5)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.
(6)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.
(7)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.
(8)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.
(9)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.
(10)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.
(11)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.
(12)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.
(13)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.
(b)Based on the findings, the Legislature declares all of the following:
(1)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.
(2)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.
(3)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.
(4)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.
(5)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.
(6)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.
SEC. 2.Section 1374.76 of the Health and Safety Code is amended to read:1374.76.(a)A large group health care service plan contract shall provide all covered mental health and substance use disorder benefits in compliance with the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (Public Law 110-343) and all rules, regulations, and guidance issued pursuant to Section 2726 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-26), as those rules, regulations, and guidance existed on January 1, 2025.
(b)An individual or small group health care service plan contract shall provide all covered mental health and substance use disorder benefits in compliance with the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (Public Law 110-343), all rules, regulations, and guidance issued pursuant to Section 2726 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-26), as those rules, regulations, and guidance existed on January 1, 2025, and Section 1367.005.(c)(1)To the extent that a provision of this section is determined to impose requirements that conflict with or materially differ from federal regulations, that provision shall be reviewed by the department. In collaboration with the Department of Insurance, the department shall issue guidance to health care service plans on compliance with this section based on the conflict or material difference.
(2)Any guidance issued by the department pursuant to paragraph (1) shall not be subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).
(d)This section may be implemented utilizing existing resources of the department or upon appropriation of sufficient funds in the annual Budget Act or another measure providing funding.
SEC. 3.Section 10144.4 of the Insurance Code is amended to read:10144.4.(a)A large group health insurance policy shall provide all covered mental health and substance use disorder benefits in compliance with the federal Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (Public Law 110-343) and all rules, regulations, and guidance issued pursuant to Section 2726 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-26), as those rules, regulations, and guidance existed on January 1, 2025.
(b)An individual or small group health insurance policy shall provide all covered mental health and substance use disorder benefits in compliance with the federal Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (Public Law 110-343), all rules, regulations, and guidance issued pursuant to Section 2726 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-26), as those rules, regulations, and guidance existed on January 1, 2025, and Section 10112.27.
(c)(1)To the extent that a provision of this section is determined to impose requirements that conflict with or materially differ from federal regulations, that provision shall be reviewed by the department. In collaboration with the Department of Managed Health Care, the department shall issue guidance to insurers on compliance with this section based on the conflict or material difference.
(2)Any guidance issued by the department pursuant to paragraph (1) shall not be subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).
(d)This section may be implemented utilizing existing resources of the department or upon appropriation of sufficient funds in the annual Budget Act or another measure providing funding.
SEC. 4.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB 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 XIIIB of the California Constitution.
(a)The Legislature finds and declares all of the following:
(1)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.
(2)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.
(3)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.
(4)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.
(5)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.
(6)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.
(7)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.
(8)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.
(9)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.
(10)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.
(11)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.
(12)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.
(13)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.
(b)Based on the findings, the Legislature declares all of the following:
(1)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.
(2)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.
(3)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.
(4)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.
(5)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.
(6)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.
SEC. 2.Section 1374.76 of the Health and Safety Code is amended to read:1374.76.(a)A large group health care service plan contract shall provide all covered mental health and substance use disorder benefits in compliance with the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (Public Law 110-343) and all rules, regulations, and guidance issued pursuant to Section 2726 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-26), as those rules, regulations, and guidance existed on January 1, 2025.
(b)An individual or small group health care service plan contract shall provide all covered mental health and substance use disorder benefits in compliance with the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (Public Law 110-343), all rules, regulations, and guidance issued pursuant to Section 2726 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-26), as those rules, regulations, and guidance existed on January 1, 2025, and Section 1367.005.(c)(1)To the extent that a provision of this section is determined to impose requirements that conflict with or materially differ from federal regulations, that provision shall be reviewed by the department. In collaboration with the Department of Insurance, the department shall issue guidance to health care service plans on compliance with this section based on the conflict or material difference.
(2)Any guidance issued by the department pursuant to paragraph (1) shall not be subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).
(d)This section may be implemented utilizing existing resources of the department or upon appropriation of sufficient funds in the annual Budget Act or another measure providing funding.
SEC. 3.Section 10144.4 of the Insurance Code is amended to read:10144.4.(a)A large group health insurance policy shall provide all covered mental health and substance use disorder benefits in compliance with the federal Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (Public Law 110-343) and all rules, regulations, and guidance issued pursuant to Section 2726 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-26), as those rules, regulations, and guidance existed on January 1, 2025.
(b)An individual or small group health insurance policy shall provide all covered mental health and substance use disorder benefits in compliance with the federal Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (Public Law 110-343), all rules, regulations, and guidance issued pursuant to Section 2726 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-26), as those rules, regulations, and guidance existed on January 1, 2025, and Section 10112.27.
(c)(1)To the extent that a provision of this section is determined to impose requirements that conflict with or materially differ from federal regulations, that provision shall be reviewed by the department. In collaboration with the Department of Managed Health Care, the department shall issue guidance to insurers on compliance with this section based on the conflict or material difference.
(2)Any guidance issued by the department pursuant to paragraph (1) shall not be subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).
(d)This section may be implemented utilizing existing resources of the department or upon appropriation of sufficient funds in the annual Budget Act or another measure providing funding.
SEC. 4.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB 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 XIIIB of the California Constitution.
(a)The Legislature finds and declares all of the following:
(1)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.
(2)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.
(3)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.
(4)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.
(5)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.
(6)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.
(7)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.
(8)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.
(9)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.
(10)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.
(11)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.
(12)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.
(13)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.
(b)Based on the findings, the Legislature declares all of the following:
(1)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.
(2)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.
(3)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.
(4)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.
(5)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.
(6)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.
SEC. 2.Section 1374.77 is added to the Health and Safety Code, immediately following Section 1374.76, to read:1374.77.(a)For purposes of this section, the following definitions apply:(1)(A)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.(B)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.(2)(A)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.(B)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).(C)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.(3)(A)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.(B)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.(C)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.(b)For purposes of this section, a nonquantitative treatment limitation (NQTL) includes, but is not limited to, all of the following:(1)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.(2)Formulary design for prescription drugs.(3)For health care service plans with multiple network tiers, including, for example, preferred providers and participating providers, network tier design.(4)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.(5)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.(6)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.(7)Exclusions based on failure to complete a course of treatment.(8)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.(c)(1)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.(2)(A)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.(B)For purposes of this paragraph, relevant facts and circumstances include, but are not limited to, all of the following:(i)The reliability of the source of the information, evidence, sources, or standards, including any underlying data.(ii)The independence of the information, evidence, sources, and standards relied upon.(iii)The analyses and methodologies employed to select the information and the consistency of their application.(iv)Any known safeguards deployed to prevent reliance on skewed data or metrics.(C)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.(3)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.(d)(1)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 plans evaluation.(2)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.(e)(1)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.(2)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.(3)Each comparative analysis shall include, with respect to the NQTL that is the subject of the comparative analysis, all of the following:(A)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.(B)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.(C)A description of which benefits are included in each classification.(4)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:(A)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.(B)A definition of each factor that includes all of the following:(i)A detailed description of the factor.(ii)A description of each evidentiary standard used to design or apply each factor, and the source of each evidentiary standard, identified under subparagraph (A).(iii)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.(5)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:(A)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.(B)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.(C)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.(D)If more than one factor is identified and defined under paragraph (4), an explanation of all of the following:(i)How all of the factors relate to each other.(ii)The order in which all of the factors are applied, including when they are applied.(iii)Whether and how any factors are given more weight than others.(iv)The reasons for the ordering and weighting of the factors.(v)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.(6)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:(A)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:(i)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.(ii)Records maintained by the plan documenting the consideration and application of all factors and evidentiary standards, as well as the results of their application.(B)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.(C)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.(D)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:(i)In the definition of the factors, the evidentiary standards used to define the factors, and the sources from which the evidentiary standards were derived.(ii)In the design of the factors or evidentiary standards.(iii)In the application or design of the NQTL.(7)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:(A)An explanation of any methodology and underlying data used to demonstrate the application of the NQTL in operation.(B)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.(C)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 plans conclusion that there is a lack of relevant data, and when and how the data will become available and be collected and analyzed.(D)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 NQTLs 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.(E)Identification of the relevant data collected and evaluated.(F)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:(i)The evaluation of relevant data.(ii)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.(G)A detailed explanation of any material differences in access demonstrated by the outcomes evaluated under subparagraph (F), including both of the following:(i)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 plans 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.(ii)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.(H)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:(i)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.(ii)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.(8)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:(A)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.(B)A reasoned and detailed discussion of the findings and conclusions described in subparagraph (A).(C)Citations to any additional information not otherwise included in the comparative analysis that supports the findings and conclusions described in subparagraph (A).(D)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.(E)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 experts qualifications and the extent to which the plan ultimately relied upon each experts 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.(f)(1)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:(A)Any applicable state authority.(B)An enrollee or an enrollees authorized representative.(2)A health care service plan shall provide the comparative analysis no later than 30 calendar days after receiving a request under this subdivision.(3)A health care service plan shall not withhold any information contained in the comparative analysis, including any information from or developed by third parties.(g)(1)A health care service plan shall submit the comparative analyses to the department upon request in the manner required by this section.(2)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.(3)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:(A)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.(B)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.(C)A summary of the departments 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.(D)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.(E)Contact information for questions and complaints, and a statement explaining how enrollees may obtain more information about the notice, including both of the following:(i)The health care service plans telephone number and an email or internet website.(ii)The departments telephone number and email or internet website.(F)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:(i)The format is readily accessible.(ii)The notice provided in paper form is free of charge and is provided upon request.(iii)If the electronic form is a posting on the health care service plans 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.(G)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.(h)(1)To the extent that a provision of this section is determined to impose requirements that conflict with or materially differ from federal regulations, that provision shall be reviewed by the department. In collaboration with the Department of Insurance, the department shall issue guidance to health care service plans on compliance with this section based on the conflict or material difference.(2)The departments review and issuance of guidance pursuant to this subdivision shall not affect the enforceability of any provision of this section.SEC. 3.Section 10144.43 is added to the Insurance Code, immediately following Section 10144.4, to read:10144.43.(a)For purposes of this section, the following definitions apply:(1)(A)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.(B)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.(2)(A)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.(B)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).(C)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.(3)(A)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.(B)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.(C)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.(b)For purposes of this section, a nonquantitative treatment limitation (NQTL) includes, but is not limited to, all of the following:(1)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.(2)Formulary design for prescription drugs.(3)For insurers with multiple network tiers, including, for example, preferred providers and participating providers, network tier design.(4)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.(5)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.(6)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.(7)Exclusions based on failure to complete a course of treatment.(8)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.(c)(1)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.(2)(A)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.(B)For purposes of this paragraph, relevant facts and circumstances include, but are not limited to, all of the following:(i)The reliability of the source of the information, evidence, sources, or standards, including any underlying data.(ii)The independence of the information, evidence, sources, and standards relied upon.(iii)The analyses and methodologies employed to select the information and the consistency of their application.(iv)Any known safeguards deployed to prevent reliance on skewed data or metrics.(C)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.(3)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.(d)(1)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 insurers evaluation.(2)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.(e)(1)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.(2)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.(3)Each comparative analysis shall include, with respect to the NQTL that is the subject of the comparative analysis, all of the following:(A)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.(B)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.(C)A description of which benefits are included in each classification.(4)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:(A)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.(B)A definition of each factor that includes all of the following:(i)A detailed description of the factor.(ii)A description of each evidentiary standard used to design or apply each factor, and the source of each evidentiary standard, identified under subparagraph (A).(iii)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.(5)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:(A)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.(B)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.(C)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.(D)If more than one factor is identified and defined under paragraph (4), an explanation of all of the following:(i)How all of the factors relate to each other.(ii)The order in which all of the factors are applied, including when they are applied.(iii)Whether and how any factors are given more weight than others.(iv)The reasons for the ordering and weighting of the factors.(E)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.(6)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:(A)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:(i)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.(ii)Records maintained by the insurer documenting the consideration and application of all factors and evidentiary standards, as well as the results of their application.(B)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.(C)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.(D)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:(i)In the definition of the factors, the evidentiary standards used to define the factors, and the sources from which the evidentiary standards were derived.(ii)In the design of the factors or evidentiary standards.(iii)In the application or design of the NQTL.(7)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:(A)An explanation of any methodology and underlying data used to demonstrate the application of the NQTL in operation.(B)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.(C)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 insurers conclusion that there is a lack of relevant data, and when and how the data will become available and be collected and analyzed.(D)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 NQTLs 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.(E)Identification of the relevant data collected and evaluated.(F)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:(i)The evaluation of relevant data.(ii)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.(G)A detailed explanation of any material differences in access demonstrated by the outcomes evaluated under subparagraph (F), including both of the following:(i)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 insurers 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.(ii)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.(H)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:(i)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.(ii)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.(8)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:(A)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.(B)A reasoned and detailed discussion of the findings and conclusions described in subparagraph (A).(C)Citations to any additional information not otherwise included in the comparative analysis that supports the findings and conclusions described in subparagraph (A).(D)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.(E)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 experts qualifications and the extent to which the insurer ultimately relied upon each experts 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.(f)(1)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:(A)Any applicable state authority.(B)An insured or an insureds authorized representative.(2)An insurer shall provide the comparative analysis no later than 30 calendar days after receiving a request under this subdivision.(3)An insurer shall not withhold any information contained in the comparative analysis, including any information from or developed by third parties.(g)(1)An insurer shall submit the comparative analyses to the department upon request in the manner required by this section.(2)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.(3)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:(A)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 Domenici Mental Health Parity and Addiction Equity Act of 2008.(B)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.(C)A summary of the departments 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.(D)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.(E)Contact information for questions and complaints, and a statement explaining how insureds may obtain more information about the notice, including both of the following:(i)The insurers telephone number and an email or internet website.(ii)The departments telephone number and email or internet website.(F)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:(i)The format is readily accessible.(ii)The notice provided in paper form is free of charge and is provided upon request.(iii)If the electronic form is a posting on the insurers 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.(G)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.(h)(1)To the extent that a provision of this section is determined to impose requirements that conflict with or materially differ from federal regulations, that provision shall be reviewed by the department. In collaboration with the Department of Managed Health Care, the department shall issue guidance to insurers on compliance with this section based on the conflict or material difference.(2)The departments review and issuance of guidance pursuant to this subdivision shall not affect the enforceability of any provision of this section.SEC. 2.Section 1374.76 of the Health and Safety Code is amended to read:1374.76.(a)No later than January 1, 2015, a A large group health care service plan contract shall provide all covered mental health and substance use disorder benefits in compliance with the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (Public Law 110-343) and all rules, regulations, and guidance issued pursuant to Section 2726 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-26). 300gg-26), as those rules, regulations, and guidance existed on January 1, 2025.
(b)No later than January 1, 2015, an An individual or small group health care service plan contract shall provide all covered mental health and substance use disorder benefits in compliance with the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (Public Law 110-343), all rules, regulations, and guidance issued pursuant to Section 2726 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-26), as those rules, regulations, and guidance existed on January 1, 2025, and Section 1367.005.(c)Until January 1, 2016, the director may issue guidance to health care service plans regarding compliance with this section. This guidance shall not be subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code). Any guidance issued pursuant to this subdivision shall be effective only until the director adopts regulations pursuant to the Administrative Procedure Act. The department shall consult with the Department of Insurance in issuing guidance under this subdivision.(c)(1)To the extent that a provision of this section is determined to impose requirements that conflict with or materially differ from federal regulations, that provision shall be reviewed by the department. In collaboration with the Department of Insurance, the department shall issue guidance to health care service plans on compliance with this section based on the conflict or material difference.
(2)Any guidance issued by the department pursuant to paragraph (1) shall not be subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).
(d)This section may be implemented utilizing existing resources of the department or upon appropriation of sufficient funds in the annual Budget Act or another measure providing funding.
SEC. 3.Section 10144.4 of the Insurance Code is amended to read:10144.4.(a)A large group health insurance policy shall provide all covered mental health and substance use disorder benefits in compliance with the federal Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (Public Law 110-343) and all rules, regulations, and guidance issued pursuant to Section 2726 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-26). 300gg-26), as those rules, regulations, and guidance existed on January 1, 2025.
(b)An individual or small group health insurance policy shall provide all covered mental health and substance use disorder benefits in compliance with the federal Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (Public Law 110-343), all rules, regulations, and guidance issued pursuant to Section 2726 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-26), as those rules, regulations, and guidance existed on January 1, 2025, and Section 10112.27.
(c)(1)To the extent that a provision of this section is determined to impose requirements that conflict with or materially differ from federal regulations, that provision shall be reviewed by the department. In collaboration with the Department of Managed Health Care, the department shall issue guidance to insurers on compliance with this section based on the conflict or material difference.
(2)Any guidance issued by the department pursuant to paragraph (1) shall not be subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).
(d)This section may be implemented utilizing existing resources of the department or upon appropriation of sufficient funds in the annual Budget Act or another measure providing funding.
SEC. 4.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB 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 XIIIB of the California Constitution.
(a)The Legislature finds and declares all of the following:
(1)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.
(2)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.
(3)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.
(4)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.
(5)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.
(6)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.
(7)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.
(8)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.
(9)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.
(10)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.
(11)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.
(12)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.
(13)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.
(b)Based on the findings, the Legislature declares all of the following:
(1)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.
(2)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.
(3)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.
(4)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.
(5)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.
(6)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.
SEC. 2.Section 1374.77 is added to the Health and Safety Code, immediately following Section 1374.76, to read:1374.77.(a)For purposes of this section, the following definitions apply:
(1)(A)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.
(B)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.
(2)(A)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.
(B)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).
(C)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.
(3)(A)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.
(B)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.
(C)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.
(b)For purposes of this section, a nonquantitative treatment limitation (NQTL) includes, but is not limited to, all of the following:
(1)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.
(2)Formulary design for prescription drugs.
(3)For health care service plans with multiple network tiers, including, for example, preferred providers and participating providers, network tier design.
(4)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.
(5)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.
(6)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.
(7)Exclusions based on failure to complete a course of treatment.
(8)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.
(c)(1)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.
(2)(A)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.
(B)For purposes of this paragraph, relevant facts and circumstances include, but are not limited to, all of the following:
(i)The reliability of the source of the information, evidence, sources, or standards, including any underlying data.
(ii)The independence of the information, evidence, sources, and standards relied upon.
(iii)The analyses and methodologies employed to select the information and the consistency of their application.
(iv)Any known safeguards deployed to prevent reliance on skewed data or metrics.
(C)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.
(3)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.
(d)(1)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 plans evaluation.
(2)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.
(e)(1)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.
(2)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.
(3)Each comparative analysis shall include, with respect to the NQTL that is the subject of the comparative analysis, all of the following:
(A)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.
(B)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.
(C)A description of which benefits are included in each classification.
(4)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:
(A)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.
(B)A definition of each factor that includes all of the following:
(i)A detailed description of the factor.
(ii)A description of each evidentiary standard used to design or apply each factor, and the source of each evidentiary standard, identified under subparagraph (A).
(iii)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.
(5)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:
(A)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.
(B)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.
(C)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.
(D)If more than one factor is identified and defined under paragraph (4), an explanation of all of the following:
(i)How all of the factors relate to each other.
(ii)The order in which all of the factors are applied, including when they are applied.
(iii)Whether and how any factors are given more weight than others.
(iv)The reasons for the ordering and weighting of the factors.
(v)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.
(6)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:
(A)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:
(i)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.
(ii)Records maintained by the plan documenting the consideration and application of all factors and evidentiary standards, as well as the results of their application.
(B)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.
(C)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.
(D)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:
(i)In the definition of the factors, the evidentiary standards used to define the factors, and the sources from which the evidentiary standards were derived.
(ii)In the design of the factors or evidentiary standards.
(iii)In the application or design of the NQTL.
(7)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:
(A)An explanation of any methodology and underlying data used to demonstrate the application of the NQTL in operation.
(B)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.
(C)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 plans conclusion that there is a lack of relevant data, and when and how the data will become available and be collected and analyzed.
(D)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 NQTLs 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.
(E)Identification of the relevant data collected and evaluated.
(F)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:
(i)The evaluation of relevant data.
(ii)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.
(G)A detailed explanation of any material differences in access demonstrated by the outcomes evaluated under subparagraph (F), including both of the following:
(i)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 plans 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.
(ii)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.
(H)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:
(i)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.
(ii)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.
(8)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:
(A)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.
(B)A reasoned and detailed discussion of the findings and conclusions described in subparagraph (A).
(C)Citations to any additional information not otherwise included in the comparative analysis that supports the findings and conclusions described in subparagraph (A).
(D)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.
(E)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 experts qualifications and the extent to which the plan ultimately relied upon each experts 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.
(f)(1)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:
(A)Any applicable state authority.
(B)An enrollee or an enrollees authorized representative.
(2)A health care service plan shall provide the comparative analysis no later than 30 calendar days after receiving a request under this subdivision.
(3)A health care service plan shall not withhold any information contained in the comparative analysis, including any information from or developed by third parties.
(g)(1)A health care service plan shall submit the comparative analyses to the department by January 1, 2027, and annually thereafter, upon request in the manner required by this section.
(2)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.
(3)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:
(A)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.
(B)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.
(C)A summary of the departments 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.
(D)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.
(E)Contact information for questions and complaints, and a statement explaining how enrollees may obtain more information about the notice, including both of the following:
(i)The health care service plans telephone number and an email or internet website.
(ii)The departments telephone number and email or internet website.
(F)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:
(i)The format is readily accessible.
(ii)The notice provided in paper form is free of charge and is provided upon request.
(iii)If the electronic form is a posting on the health care service plans 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.
(G)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.
(h)(1)To the extent that a provision of this section is determined to impose requirements that conflict with or materially differ from federal regulations, that provision shall be reviewed by the department. In collaboration with the Department of Insurance, the department shall issue guidance to health care service plans on compliance with this section based on the conflict or material difference.
(2)The departments review and issuance of guidance pursuant to this subdivision shall not affect the enforceability of any provision of this section.
SEC. 3.Section 10144.43 is added to the Insurance Code, immediately following Section 10144.4, to read:10144.43.(a)For purposes of this section, the following definitions apply:
(1)(A)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.
(B)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.
(2)(A)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.
(B)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).
(C)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.
(3)(A)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.
(B)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.
(C)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.
(b)For purposes of this section, a nonquantitative treatment limitation (NQTL) includes, but is not limited to, all of the following:
(1)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.
(2)Formulary design for prescription drugs.
(3)For insurers with multiple network tiers, including, for example, preferred providers and participating providers, network tier design.
(4)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.
(5)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.
(6)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.
(7)Exclusions based on failure to complete a course of treatment.
(8)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.
(c)(1)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.
(2)(A)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.
(B)For purposes of this paragraph, relevant facts and circumstances include, but are not limited to, all of the following:
(i)The reliability of the source of the information, evidence, sources, or standards, including any underlying data.
(ii)The independence of the information, evidence, sources, and standards relied upon.
(iii)The analyses and methodologies employed to select the information and the consistency of their application.
(iv)Any known safeguards deployed to prevent reliance on skewed data or metrics.
(C)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.
(3)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.
(d)(1)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 insurers evaluation.
(2)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.
(e)(1)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.
(2)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.
(3)Each comparative analysis shall include, with respect to the NQTL that is the subject of the comparative analysis, all of the following:
(A)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.
(B)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.
(C)A description of which benefits are included in each classification.
(4)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:
(A)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.
(B)A definition of each factor that includes all of the following:
(i)A detailed description of the factor.
(ii)A description of each evidentiary standard used to design or apply each factor, and the source of each evidentiary standard, identified under subparagraph (A).
(iii)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.
(5)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:
(A)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.
(B)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.
(C)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.
(D)If more than one factor is identified and defined under paragraph (4), an explanation of all of the following:
(i)How all of the factors relate to each other.
(ii)The order in which all of the factors are applied, including when they are applied.
(iii)Whether and how any factors are given more weight than others.
(iv)The reasons for the ordering and weighting of the factors.
(E)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.
(6)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:
(A)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:
(i)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.
(ii)Records maintained by the insurer documenting the consideration and application of all factors and evidentiary standards, as well as the results of their application.
(B)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.
(C)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.
(D)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:
(i)In the definition of the factors, the evidentiary standards used to define the factors, and the sources from which the evidentiary standards were derived.
(ii)In the design of the factors or evidentiary standards.
(iii)In the application or design of the NQTL.
(7)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:
(A)An explanation of any methodology and underlying data used to demonstrate the application of the NQTL in operation.
(B)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.
(C)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 insurers conclusion that there is a lack of relevant data, and when and how the data will become available and be collected and analyzed.
(D)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 NQTLs 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.
(E)Identification of the relevant data collected and evaluated.
(F)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:
(i)The evaluation of relevant data.
(ii)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.
(G)A detailed explanation of any material differences in access demonstrated by the outcomes evaluated under subparagraph (F), including both of the following:
(i)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 insurers 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.
(ii)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.
(H)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:
(i)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.
(ii)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.
(8)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:
(A)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.
(B)A reasoned and detailed discussion of the findings and conclusions described in subparagraph (A).
(C)Citations to any additional information not otherwise included in the comparative analysis that supports the findings and conclusions described in subparagraph (A).
(D)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.
(E)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 experts qualifications and the extent to which the insurer ultimately relied upon each experts 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.
(f)(1)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:
(A)Any applicable state authority.
(B)An insured or an insureds authorized representative.
(2)An insurer shall provide the comparative analysis no later than 30 calendar days after receiving a request under this subdivision.
(3)An insurer shall not withhold any information contained in the comparative analysis, including any information from or developed by third parties.
(g)(1)An insurer shall submit the comparative analyses to the department by January 1, 2027, and annually thereafter, upon request in the manner required by this section.
(2)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.
(3)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:
(A)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 Domenici Mental Health Parity and Addiction Equity Act of 2008.
(B)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.
(C)A summary of the departments 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.
(D)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.
(E)Contact information for questions and complaints, and a statement explaining how insureds may obtain more information about the notice, including both of the following:
(i)The insurers telephone number and an email or internet website.
(ii)The departments telephone number and email or internet website.
(F)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:
(i)The format is readily accessible.
(ii)The notice provided in paper form is free of charge and is provided upon request.
(iii)If the electronic form is a posting on the insurers 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.
(G)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.
(h)(1)To the extent that a provision of this section is determined to impose requirements that conflict with or materially differ from federal regulations, that provision shall be reviewed by the department. In collaboration with the Department of Managed Health Care, the department shall issue guidance to insurers on compliance with this section based on the conflict or material difference.
(2)The departments review and issuance of guidance pursuant to this subdivision shall not affect the enforceability of any provision of this section.
SEC. 4.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB 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 XIIIB of the California Constitution.
(a)The Legislature finds and declares all of the following:
(1)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.
(2)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.
(3)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.
(4)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.
(5)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.
(6)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.
(7)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.
(8)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.
(9)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.
(10)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.
(11)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.
(12)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.
(13)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.
(b)Based on the findings, the Legislature declares all of the following:
(1)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.
(2)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.
(3)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.
(4)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.
(5)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.
(6)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.
SEC. 2.Section 1374.77 is added to the Health and Safety Code, immediately following Section 1374.76, to read:1374.77.(a)For purposes of this section, the following definitions apply:
(1)(A)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.
(B)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.
(2)(A)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.
(B)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).
(C)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.
(3)(A)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.
(B)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.
(C)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.
(b)For purposes of this section, a nonquantitative treatment limitation (NQTL) includes, but is not limited to, all of the following:
(1)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.
(2)Formulary design for prescription drugs.
(3)For health care service plans with multiple network tiers, including, for example, preferred providers and participating providers, network tier design.
(4)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.
(5)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.
(6)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.
(7)Exclusions based on failure to complete a course of treatment.
(8)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.
(c)(1)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.
(2)(A)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.
(B)For purposes of this paragraph, relevant facts and circumstances include, but are not limited to, all of the following:
(i)The reliability of the source of the information, evidence, sources, or standards, including any underlying data.
(ii)The independence of the information, evidence, sources, and standards relied upon.
(iii)The analyses and methodologies employed to select the information and the consistency of their application.
(iv)Any known safeguards deployed to prevent reliance on skewed data or metrics.
(C)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.
(3)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.
(d)(1)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 plans evaluation.
(2)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.
(e)(1)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.
(2)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.
(3)Each comparative analysis shall include, with respect to the NQTL that is the subject of the comparative analysis, all of the following:
(A)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.
(B)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.
(C)A description of which benefits are included in each classification.
(4)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:
(A)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.
(B)A definition of each factor that includes all of the following:
(i)A detailed description of the factor.
(ii)A description of each evidentiary standard used to design or apply each factor, and the source of each evidentiary standard, identified under subparagraph (A).
(iii)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.
(5)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:
(A)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.
(B)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.
(C)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.
(D)If more than one factor is identified and defined under paragraph (4), an explanation of all of the following:
(i)How all of the factors relate to each other.
(ii)The order in which all of the factors are applied, including when they are applied.
(iii)Whether and how any factors are given more weight than others.
(iv)The reasons for the ordering and weighting of the factors.
(v)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.
(6)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:
(A)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:
(i)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.
(ii)Records maintained by the plan documenting the consideration and application of all factors and evidentiary standards, as well as the results of their application.
(B)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.
(C)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.
(D)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:
(i)In the definition of the factors, the evidentiary standards used to define the factors, and the sources from which the evidentiary standards were derived.
(ii)In the design of the factors or evidentiary standards.
(iii)In the application or design of the NQTL.
(7)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:
(A)An explanation of any methodology and underlying data used to demonstrate the application of the NQTL in operation.
(B)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.
(C)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 plans conclusion that there is a lack of relevant data, and when and how the data will become available and be collected and analyzed.
(D)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 NQTLs 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.
(E)Identification of the relevant data collected and evaluated.
(F)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:
(i)The evaluation of relevant data.
(ii)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.
(G)A detailed explanation of any material differences in access demonstrated by the outcomes evaluated under subparagraph (F), including both of the following:
(i)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 plans 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.
(ii)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.
(H)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:
(i)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.
(ii)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.
(8)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:
(A)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.
(B)A reasoned and detailed discussion of the findings and conclusions described in subparagraph (A).
(C)Citations to any additional information not otherwise included in the comparative analysis that supports the findings and conclusions described in subparagraph (A).
(D)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.
(E)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 experts qualifications and the extent to which the plan ultimately relied upon each experts 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.
(f)(1)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:
(A)Any applicable state authority.
(B)An enrollee or an enrollees authorized representative.
(2)A health care service plan shall provide the comparative analysis no later than 30 calendar days after receiving a request under this subdivision.
(3)A health care service plan shall not withhold any information contained in the comparative analysis, including any information from or developed by third parties.
(g)(1)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.
(2)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.
(3)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:
(A)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.
(B)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.
(C)A summary of the departments 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.
(D)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.
(E)Contact information for questions and complaints, and a statement explaining how enrollees may obtain more information about the notice, including both of the following:
(i)The health care service plans telephone number and an email or internet website.
(ii)The departments telephone number and email or internet website.
(F)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:
(i)The format is readily accessible.
(ii)The notice provided in paper form is free of charge and is provided upon request.
(iii)If the electronic form is a posting on the health care service plans 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.
(G)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.
SEC. 3.Section 10144.43 is added to the Insurance Code, immediately following Section 10144.4, to read:10144.43.(a)For purposes of this section, the following definitions apply:
(1)(A)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.
(B)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.
(2)(A)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.
(B)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).
(C)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.
(3)(A)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.
(B)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.
(C)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.
(b)For purposes of this section, a nonquantitative treatment limitation (NQTL) includes, but is not limited to, all of the following:
(1)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.
(2)Formulary design for prescription drugs.
(3)For insurers with multiple network tiers, including, for example, preferred providers and participating providers, network tier design.
(4)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.
(5)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.
(6)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.
(7)Exclusions based on failure to complete a course of treatment.
(8)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.
(c)(1)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.
(2)(A)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.
(B)For purposes of this paragraph, relevant facts and circumstances include, but are not limited to, all of the following:
(i)The reliability of the source of the information, evidence, sources, or standards, including any underlying data.
(ii)The independence of the information, evidence, sources, and standards relied upon.
(iii)The analyses and methodologies employed to select the information and the consistency of their application.
(iv)Any known safeguards deployed to prevent reliance on skewed data or metrics.
(C)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.
(3)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.
(d)(1)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 insurers evaluation.
(2)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.
(e)(1)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.
(2)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.
(3)Each comparative analysis shall include, with respect to the NQTL that is the subject of the comparative analysis, all of the following:
(A)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.
(B)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.
(C)A description of which benefits are included in each classification.
(4)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:
(A)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.
(B)A definition of each factor that includes all of the following:
(i)A detailed description of the factor.
(ii)A description of each evidentiary standard used to design or apply each factor, and the source of each evidentiary standard, identified under subparagraph (A).
(iii)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.
(5)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:
(A)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.
(B)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.
(C)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.
(D)If more than one factor is identified and defined under paragraph (4), an explanation of all of the following:
(i)How all of the factors relate to each other.
(ii)The order in which all of the factors are applied, including when they are applied.
(iii)Whether and how any factors are given more weight than others.
(iv)The reasons for the ordering and weighting of the factors.
(E)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.
(6)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:
(A)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:
(i)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.
(ii)Records maintained by the insurer documenting the consideration and application of all factors and evidentiary standards, as well as the results of their application.
(B)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.
(C)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.
(D)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:
(i)In the definition of the factors, the evidentiary standards used to define the factors, and the sources from which the evidentiary standards were derived.
(ii)In the design of the factors or evidentiary standards.
(iii)In the application or design of the NQTL.
(7)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:
(A)An explanation of any methodology and underlying data used to demonstrate the application of the NQTL in operation.
(B)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.
(C)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 insurers conclusion that there is a lack of relevant data, and when and how the data will become available and be collected and analyzed.
(D)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 NQTLs 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.
(E)Identification of the relevant data collected and evaluated.
(F)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:
(i)The evaluation of relevant data.
(ii)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.
(G)A detailed explanation of any material differences in access demonstrated by the outcomes evaluated under subparagraph (F), including both of the following:
(i)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 insurers 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.
(ii)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.
(H)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:
(i)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.
(ii)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.
(8)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:
(A)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.
(B)A reasoned and detailed discussion of the findings and conclusions described in subparagraph (A).
(C)Citations to any additional information not otherwise included in the comparative analysis that supports the findings and conclusions described in subparagraph (A).
(D)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.
(E)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 experts qualifications and the extent to which the insurer ultimately relied upon each experts 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.
(f)(1)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:
(A)Any applicable state authority.
(B)An insured or an insureds authorized representative.
(2)An insurer shall provide the comparative analysis no later than 30 calendar days after receiving a request under this subdivision.
(3)An insurer shall not withhold any information contained in the comparative analysis, including any information from or developed by third parties.
(g)(1)An insurer shall submit the comparative analyses to the department by January 1, 2027, and annually thereafter, in the manner required by this section.
(2)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.
(3)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:
(A)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.
(B)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.
(C)A summary of the departments 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.
(D)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.
(E)Contact information for questions and complaints, and a statement explaining how insureds may obtain more information about the notice, including both of the following:
(i)The insurers telephone number and an email or internet website.
(ii)The departments telephone number and email or internet website.
(F)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:
(i)The format is readily accessible.
(ii)The notice provided in paper form is free of charge and is provided upon request.
(iii)If the electronic form is a posting on the insurers 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.
(G)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.
SEC. 4.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB 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 XIIIB of the California Constitution.
|
Date
|
Status
|
|---|---|
| Sep 30, 2026 | Chaptered by Secretary of State - Chapter 915, Statutes of 2026. |
| Sep 30, 2026 | Approved by the Governor. |
| Aug 28, 2026 | Enrolled and presented to the Governor at 3:30 p.m. |
| Aug 24, 2026 | Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 61. Noes 13.). |
| Aug 24, 2026 | Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 61. Noes 13. Page 6407.). |
| Aug 24, 2026 | Senate amendments concurred in. To Engrossing and Enrolling. |
| Aug 20, 2026 | In Assembly. Concurrence in Senate amendments pending. |
| Aug 20, 2026 | Read third time. Passed. Ordered to the Assembly. (Ayes 28. Noes 10.). |
| Aug 20, 2026 | Read third time. Passed. Ordered to the Assembly. (Ayes 28. Noes 10. Page 5585.). |
| Aug 17, 2026 | Read second time. Ordered to third reading. |
| Aug 13, 2026 | Read second time and amended. Ordered returned to second reading. |
| Aug 13, 2026 | From committee: Amend, and do pass as amended. (Ayes 5. Noes 2.) (August 13). |
| Jun 22, 2026 | In committee: Referred to APPR. suspense file. |
| Jun 15, 2026 | Read second time and amended. Re-referred to Com. on APPR. |
| Jun 11, 2026 | From committee: Amend, and do pass as amended and re-refer to Com. on APPR. (Ayes 8. Noes 2.) (June 10). |
| May 6, 2026 | Referred to Com. on HEALTH. |
| Apr 28, 2026 | In Senate. Read first time. To Com. on RLS. for assignment. |
| Apr 27, 2026 | Read third time. Passed. Ordered to the Senate. (Ayes 54. Noes 10.) |
| Apr 27, 2026 | Read third time. Passed. Ordered to the Senate. (Ayes 54. Noes 10. Page 4834.) |
| Apr 9, 2026 | Read second time. Ordered to third reading. |
| Apr 8, 2026 | From committee: Do pass. (Ayes 10. Noes 4.) (April 8). |
| Mar 25, 2026 | From committee: Do pass and re-refer to Com. on APPR. (Ayes 13. Noes 2.) (March 24). Re-referred to Com. on APPR. |
| Mar 2, 2026 | Referred to Com. on HEALTH. |
| Feb 18, 2026 | From printer. May be heard in committee March 20. |
| Feb 17, 2026 | Read first time. To print. |
|
Date
|
Description
|
Location
|
Votes
|
|
|---|---|---|---|---|
| Aug 24, 2026 | AB 2011 Hart Concurrence in Senate Amendments | Assembly Floor |
Passed |
|
| Aug 20, 2026 | Assembly 3rd Reading AB2011 Hart et al. By Wiener | Senate Floor |
Passed |
|
| Aug 13, 2026 | Do pass as amended | Senate Standing Committee on Appropriations |
Passed |
|
| Jun 22, 2026 | Placed on suspense file | Senate Standing Committee on Appropriations |
Passed |
|
| Jun 10, 2026 | Do pass as amended, but first amend, and re-refer to the Committee on [Appropriations] | Senate Standing Committee on Health |
Passed |
|
| Apr 27, 2026 | AB 2011 Hart Assembly Third Reading | Assembly Floor |
Passed |
|
| Apr 8, 2026 | Do pass. | Assembly Standing Committee on Appropriations |
Passed |
|
| Mar 24, 2026 | Do pass and be re-referred to the Committee on [Appropriations] | Assembly Standing Committee on Health |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
|
Organization
|
Position
|
Date
|
|---|---|---|
| aclhic | ** Against | |
| America'S Health Insurance Plans | ** Against | |
| Association for Behavioral Health and Wellness | ** Against | |
| Association for Behavioral Health and Wellness (ABHW) | ** Against | |
| Association Of California Life & Health Insurance Companies | ** Against | |
| Association of California Life & Health Insurance Companies (ACLHIC) | ** Against | |
| Board of Behavioral Sciences | ** Support | |
| California Academy of Child & Adolescent Psychiatry | ** Support | |
| California Academy Of Family Physicians | ** Support | |
| California Agents And Health Insurance Professionals | ** Support | |
| California Alliance Of Child And Family Services | ** Support | |
| California Association For Behavior Analysis | ** Support | |
| California Association Of Alcohol And Drug Program Executives, Inc. | ** Support | |
| California Association Of Health Plans | ** Against | |
| California Behavioral Health Association | ** Support | |
| California Chapter of the American College of Emergency Physicians | ** Support | |
| California Children'S Hospital Association | ** Support | |
| California Chronic Care Coalition | ** Support | |
| California Coalition for Behavioral Health | ** Support | |
| California Consortium of Addiction Programs and Professionals | ** Support | |
| California Department of Insurance | ** Support | |
| California Medical Association | ** Support | |
| California Peer Watch | ** Support | |
| California Psychological Association | ** Support | |
| California State Association of Psychiatrists | ** Support | |
| Coalition for Developmental Approaches | ** Support | |
| County Behavioral Health Directors Association | ** Support | |
| Greenhouse Therapy Center | ** Support | |
| Health Access California | ** Support | |
| Inseparable | ** Support | |
| Insurance Commissioner Ricardo Lara | ** Support | |
| Mcg Health | ** Support | |
| Mental Health America of California | ** Support | |
| Milliman Care Guidelines Health | ** Support | |
| National Alliance on Mental Illness | ** Support | |
| National Health Law Program | ** Support | |
| National Union Of Healthcare Workers | ** Support | |
| Rural County Representatives of California | ** Support | |
| Steinberg Institute | ** Support | |
| The California Association of Local Behavioral Health Boards and Commissions | ** Support | |
| The Kennedy Forum | ** Support | |
| Urban Counties of California | ** Support |
CONCURRENCE IN SENATE AMENDMENTS
CSA1 Bill Id:AB 2011
Author:(Hart)
As Amended Ver:August 13, 2026
Majority vote
SUMMARY
Codifies federal Mental Health Parity and Addiction Equity Act (MHPAEA) regulations into state law.
Senate Amendments
Strike detailed provisions and instead codify by reference the federal mental health (MH) and substance use disorder (SUD) parity rules, regulations, and guidance that were in place on January 1, 2025, regarding nonquantitative treatment limitations (NQTL) on MH and SUD benefits in comparison to medical and surgical benefits.
COMMENTS
MH Parity. Federal MH Parity laws require if a health plan includes services for mental health and substance use disorders as part of their benefits that those services must be covered under the same terms and conditions as other medical services. The Affordable Care Act (ACA) also specifies coverage of the ten essential health benefits, including MH and SUD treatment services. The ACA went beyond existing federal law by mandating coverage instead of requiring parity only if coverage is provided.
SB 855 (Wiener), Chapter 151, Statutes of 2020, requires commercial health plans and insurers in California to provide full coverage for the treatment of all MH conditions and SUDs. SB 855 also establishes specific standards for what constitutes medically necessary treatment and criteria for the use of clinical guidelines. SB 855 applies to all state-regulated health plans and insurers that provide hospital, medical, or surgical coverage, and to any entity acting on the plan or insurer's behalf. A health plan cannot limit benefits or coverage for MH or SUD treatments or services when medically necessary.
2024 MHPAEA Regulations. In September 2024, the federal Departments of Labor, Health and Human Services, and Treasury released updated MHPAEA regulations to implement provisions of the Consolidated Appropriations Act of 2021 and update 2013 regulations that implemented the law. The final rule strengthens standards for demonstrating parity in coverage. It clarifies critical terminology, requires that NQTLs be comparable in both design and application between MH/SUD and medical/surgical benefits, prohibits the use discriminatory factors or standards that systematically disadvantage MH/SUD care, and mandates a data-drive comparative analysis to monitor compliance. In 2025, the Employment Retirement Income Security Act (ERISA) Industry Committee (ERIC) filed a complaint against the federal government seeking to invalidate the 2024 rules, the federal administration subsequently announced that it would not enforce key requirements.
In November 2025 the Association of California Life & Health Insurance Companies (ACLHIC) filed suit against the California Department of Insurance (CDI) and the Insurance Commissioner, seeking to invalidate state regulations that incorporate the 2024 rule. The legal complaint relies heavily on the federal non-enforcement announcement. However, states, as the primary enforcers of health insurance standards, are still able to enforce the 2024 federal rule and additional protections in their respective laws. According to the Commonwealth Fund, a few states have moved to adopt the 2024 federal MHPAEA rule into state law. Washington enacted legislation that requires insurers to comply with the federal rule as published in 2024. Colorado similarly leveraged the 2024 federal rule to add state protections through legislation. This bill similarly aims to codify the 2024 federal rule into California law to clarify its application and ensure it remains in place regardless of action at the federal level.
According to the Author
This bill addresses a serious risk patients face when seeking MH or SUD care. The author argues that access to care is at risk for millions of Californians because the Trump administration has recklessly decided to stop enforcing federal protections that require insurers provide equal access to MH care as they do with traditional medical treatment. The author continues that this bill will enshrine protections in state law, ensuring that state regulators can continue to enforce these parity requirements on insurers, regardless of the changes that occur at the federal level. The author concludes that at a time when our state is working to expand behavioral health, this bill ensures that the promise of equal access becomes a reality for Californians.
Arguments in Support
The Kennedy Forum, Steinberg Institute, California State Association of Psychiatrists, and California Academy of Child & Adolescent Psychiatry are co-sponsoring this bill. The sponsors state that in 2024, federal regulators issued final MHPAEA regulations that clarify how existing statutory parity obligations must be evaluated and enforced, including standards for demonstrating compliance both as written and in operation. The sponsors continue that these regulations did not create new parity requirements; rather, they provided needed clarity to support consistent enforcement of existing law. The sponsors argue that this bill codifies those federal standards into California statute to ensure continuity and enforceability, regardless of future federal administrative or judicial actions. The sponsors note that California has taken this approach before, including during the first Trump administration when the state codified key provisions of the ACA to protect Californians from federal rollbacks. The sponsors continue that this bill does not create new benefit mandates, expand coverage, or impose new obligations on state regulators. The sponsors state that regulators are already enforcing parity consistent with these standards under existing authority and this bill simply affirms and preserves those practices in state law. The sponsors conclude that this bill reaffirms California's commitment to strong, enforceable parity protections and preserving the progress achieved.
Arguments in Opposition
The California Association of Health Plans and the Association of California Life & Health Insurance Companies are opposed to this bill, stating that they have significant concerns that codifying the existing federal rule, which is currently under review, rather than adhering to longstanding statutory framework, would introduce legal and operational uncertainty. The opposition continues that this bill references the federal MHPAEA Final Rules issued in September 2024, which, in May 2025, the U.S. Department of Justice announced that it would not enforce while the Administration considers whether to modify or rescind. The opposition argues that by embedding these requirements into state law now, this bill risks locking California carriers into conflicting and potentially irreconcilable obligations without clear evidence of improved access or quality for patients. The opposition believes there are more targeted, effective approaches California can pursue to expand access to MH/SUD services, such as investments that directly increase the availability of care, such as improving access to high-quality, affordable, and evidence-based behavioral health services for children and adolescents.
FISCAL COMMENTS
According to the Senate Appropriations Committee, unknown costs, likely minor for Department of Managed Health Care and CDI for state administration.
VOTES:
ASM HEALTH: 13-2-1
YES: Bonta, Addis, Aguiar-Curry, Pacheco, Caloza, Carrillo, Mark González, Patel, Rogers, Sanchez, Schiavo, Sharp-Collins, Stefani
NO: Chen, Johnson
ABS, ABST OR NV: Patterson
ASM APPROPRIATIONS: 10-4-1
YES: Wicks, Arambula, Caloza, Fong, Mark González, Krell, Muratsuchi, Pacheco, Pellerin, Solache
NO: Hoover, Dixon, Ta, Tangipa
ABS, ABST OR NV: Calderon
ASSEMBLY FLOOR: 54-10-16
YES: Addis, Aguiar-Curry, Ahrens, Alvarez, Arambula, Ávila Farías, Bauer-Kahan, Bennett, Berman, Calderon, Caloza, Carrillo, Castillo, Connolly, Elhawary, Fong, Garcia, Gipson, Mark González, Haney, Harabedian, Hart, Irwin, Jackson, Kalra, Krell, Lee, Lowenthal, McKinnor, Muratsuchi, Nguyen, Ortega, Pacheco, Papan, Patel, Pellerin, Quirk-Silva, Ramos, Ransom, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Solache, Soria, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas
NO: Davies, DeMaio, Dixon, Jeff Gonzalez, Hadwick, Hoover, Johnson, Lackey, Ta, Tangipa
ABS, ABST OR NV: Alanis, Bains, Boerner, Bonta, Bryan, Chen, Ellis, Flora, Gabriel, Gallagher, Macedo, Patterson, Petrie-Norris, Celeste Rodriguez, Sharp-Collins, Stefani
SENATE FLOOR: 28-10-2
YES: Allen, Archuleta, Arreguín, Ashby, Becker, Blakespear, Cabaldon, Caballero, Cervantes, Cortese, Durazo, Gonzalez, Grayson, Hurtado, Laird, Limón, McGuire, McNerney, Menjivar, Pérez, Richardson, Rubio, Smallwood-Cuevas, Stern, Umberg, Wahab, Weber Pierson, Wiener
NO: Alvarado-Gil, Choi, Dahle, Grove, Jones, Niello, Ochoa Bogh, Seyarto, Strickland, Valladares
ABS, ABST OR NV: Padilla, Reyes
UPDATED
VERSION: August 13, 2026
CONSULTANT: Riana King / HEALTH / (916) 319-2097 FN: 0003885
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-4171 | AB 2011 |
THIRD READING
Bill No: AB 2011
Author: Hart (D), et al.
Amended: 8/13/26 in Senate
Vote: 21
SENATE HEALTH COMMITTEE: 8-2, 6/10/26
AYES: Weber Pierson, Caballero, Durazo, Menjivar, Padilla, Pérez, Rubio, Smallwood-Cuevas
NOES: Valladares, Grove
NO VOTE RECORDED: Gonzalez
SENATE APPROPRIATIONS COMMITTEE: 5-2, 8/13/26
AYES: Cervantes, Cabaldon, Grayson, Richardson, Wahab
NOES: Seyarto, Dahle
ASSEMBLY FLOOR: 54-10, 4/27/26 - See last page for vote
SUBJECT: Nonquantitative treatment limitations
SOURCE: Insurance Commissioner Ricardo Lara / California Department of Insurance
California Academy of Child and Adolescent Psychiatry
State Association of Psychiatrists
Steinberg Institute
The Kennedy Forum
DIGEST:
This bill codifies by reference federal mental health and substance use disorder parity rules, regulations, and guidance that were in place on January 1, 2025, regarding nonquantitative treatment limitations (NQTL) on mental health and substance use disorder benefits in comparison to medical and surgical benefits.
ANALYSIS:
Existing federal law:
- Establishes the Mental Health Parity and Addiction Equity Act (MHPAEA), which prohibits commercial health plans and issuers that offer mental health and substance use disorder benefits from placing limits on those benefits that are less favorable than the limits placed on medical and surgical benefits. Requires health plans and issuers to ensure that financial requirements, such as copayments, coinsurance, and deductibles, and treatment limitations, such as the number and frequency of visits that are applied to mental health and substance use disorder benefits are not more restrictive than the predominant requirements applied to most of the medical and surgical benefits. Prohibits health plans and insurers from imposing NQTLs such as medical necessity and utilization management on mental health and substance use disorder benefits that apply more restrictively than are applied to medical and surgical benefits. [42 U.S.C. Section 300gg-26]
- Establishes the Consolidated Appropriations Act of 2021 (CAA), which among other provisions, amends MHPAEA to require group health plans and issuers that provide both medical and surgical benefits, and mental health or substance use disorder benefits, to perform and document comparative analyses of the design and application of NQTLs that apply to mental health or substance use disorder benefits. Requires plans and issuers to make their analyses available to the Department of Treasury, Department of Labor, and the Department of Health and Human Services (HHS) [Departments] or applicable State authorities, upon request, effective February 10, 2021. Sets forth a process by which the Departments must evaluate the requested NQTL comparative analyses and enforce the comparative analyses requirements and requires the Departments to submit annually to Congress and make publicly available a report summarizing the comparative analyses requested for review by the Departments. [42 U.S.C. Section 300gg-26 (a)(8)(A)-(C)]
Existing state law:
- Establishes the Department of Managed Health Care (DMHC) to regulate health plans under the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act) and the California Department of Insurance (CDI) to regulate health insurers under the Insurance Code. [Health and Safety Code (HSC) §1340, et seq. and Insurance Code (INS) §106, et seq.]
- Requires a health plan contract to provide all covered mental health and substance use disorder benefits in compliance with MHPAEA and all rules, regulations and guidance issued pursuant to MHPAEA. [HSC §1374.76 and INS §10144.4]
This bill:
- Requires large, small, and individual health plan contracts and insurance policies to comply with MHPAEA rules, regulations, and guidance that existed on January 1, 2025.
- Requires, to the extent that a provision of this section is determined to impose requirements that conflict with or materially differ from federal regulations, the provision to be reviewed by DMHC or CDI, and in collaboration with each other, DMHC and CDI to issue guidance on compliance with the conflict or material difference.
- Exempts guidance issued pursuant to this bill from specified provisions of the Administrative Procedures Act.
- Authorizes this bill to be implemented utilizing existing resources or upon appropriation of sufficient funds in the annual Budget Act or another measure providing funding.
Background
CAA Final Rules. The 2024 Final Rules amended the 2013 Final Rules, and added additional NQTL comparative analyses requirements and emphasize that plans must not design or apply financial requirements and treatment limitations that impose greater burden on access that are more restrictive to mental health and substance use disorder benefits than are imposed on access to medical and surgical benefits in the same classification of benefits. The 2024 Final Rules add new definitions for evidentiary standards, factors, processes and strategies. The 2024 Final Rules require coverage to provide meaningful benefits for the condition or disorder in every classification in which meaningful medical and surgical benefits are provided. The 2024 Final Rules require six content elements for comparative analysis.
2024 Final Rules Process. Under the 2024 Final Rules, the process for reviews, requires after an initial request for comparative analysis, the plan or issuer must submit it to the relevant Secretary within 10 business days, if it is determined insufficient additional information will be requested which must be provided within 10 business days. If there is an initial determination of noncompliance, the plan or issuer has 45 calendar days to specify if it will take action to comply and provide additional comparative analysis. If the Secretary makes a final determination of noncompliance, the plan or issuer must notify all participants, and enrollees not later than seven business days after the determination. Plans and insurers must make a copy of the comparative analysis available when requested by any applicable state authority, a participant, beneficiary, or enrollee who has received an adverse benefit determination related to mental health and substance use disorder benefits, and participants and beneficiaries in Employment Retirement Income Security Act (ERISA) plans at any time.
2024 Final Rules challenged. On January 17, 2025, an association of employers (ERISA Industry Committee [ERIC]) filed suit in the U.S. District Court for the District of Columbia challenging provisions of the 2024 Final Rules on multiple issues including vague and undefined terms, onerous and unclear requirements and that the rule is contrary to law. On May 15, 2025, the Departments issued a statement that the ERIC litigation be held in abeyance while the Departments reconsider the 2024 Final Rules, including whether to rescind or modify the regulation. The Departments will not enforce the 2024 Final Rules or pursue enforcement actions, based on failure to comply prior to a final decision in the litigation and 18 months after the litigation is resolved. This enforcement relief applies only with respect to those portions of the 2024 Final Rules that are new in relation to the 2013 Final Rules. The Departments indicate that MHPAEA’s statutory obligations, as amended by the CAA, continue to be in effect. HHS encourages states that are the primary enforcers of MHPAEA with respect to issuers to adopt a similar approach to enforcement. HHS will not consider a state to be failing to substantially enforce MHPAEA, as amended, because the state adopts such an approach.
Comments
According to the author of this bill:
This bill addresses a serious risk patients face when seeking mental health or substance use disorder care. Access to care is at risk for millions of Californians because the Trump administration has recklessly decided to stop enforcing federal protections that require insurers provide equal access to mental health care as they do with traditional medical treatment. This bill will enshrine protections in state law, ensuring that state regulators can continue to enforce these parity requirements on insurers, regardless of the changes that occur at the federal level. At a time when our state is working to expand behavioral health, this bill ensures that the promise of equal access becomes a reality for Californians.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes
According to the Senate Appropriations Committee, unknown costs, likely minor for DMHC and CDI for state administration.
SUPPORT: (Verified 8/14/26)
Insurance Commissioner Ricardo Lara / California Department of Insurance (co-source)
California Academy of Child and Adolescent Psychiatry (co-source)
California State Association of Psychiatrists (co-source)
Steinberg Institute (co-source)
The Kennedy Forum (co-source)
Board of Behavioral Sciences
California Academy of Family Physicians
California Agents and Health Insurance Professionals
California Alliance of Child and Family Services
California Association of Alcohol and Drug Program Executives, INC.
California Association for Behavior Analysis
California Behavioral Health Association
California Chapter of the American College of Emergency Physicians
California Children's Hospital Association
California Chronic Care Coalition
California Coalition for Behavioral Health
California Consortium of Addiction Programs and Professionals
California Medical Association
California Peer Watch
California Psychological Association
Coalition for Developmental Approaches
County Behavioral Health Directors Association
Greenhouse Therapy Center
Health Access California
Inseparable
Milliman Care Guidelines Health
Mental Health America of California
National Alliance on Mental Illness
National Health Law Program
National Union of Healthcare Workers
Rural County Representatives of California
The California Association of Local Behavioral Health Boards and Commissions
Urban Counties of California
OPPOSITION: (Verified 8/14/26)
America’s Health Insurance Plans
Association for Behavioral Health and Wellness
Association of California Life & Health Insurance Companies
California Association of Health Plans
ARGUMENTS IN SUPPORT: Insurance Commissioner (IC) Ricardo Lara, a co-sponsor of this bill, writes that the 2024 Final Rules clarify how existing statutory parity obligations must be evaluated and enforced, including standards for demonstrating compliance both as written and in operation, and that these regulations did not create new parity requirements; rather, they provided needed clarity to support consistent enforcement of existing law. The IC indicates this bill codifies federal standards into California statue to ensure continuity and enforceability, regardless of future federal administrative or judicial actions. The California Academy of Child and Adolescent Psychology, California State Association of Psychiatrists, the Steinberg Institute, and the Kennedy Forum are also co-sponsors, and they write that this bill does not create new benefit mandates, expand coverage, or impose new obligations on state regulators, and that regulators are already enforcing parity consistent with these standards under existing authority. The cosponsors say this bill simply affirms and preserves those practices in state law. The California Academy of Family Physicians writes this bill helps remove barriers to treatment, allowing family physicians to deliver the care their patients need without unnecessary restrictions or delays. The California Alliance of Child and Family Services indicate many organizations struggle with mental health parity issues, including network adequacy and reimbursement practices, and they support legislation that ensures stability for mental health providers and continued access to mental health and substance use care. Sponsors and supporters indicate that California has long been a national leader in advancing mental health parity, calling SB 855 the most comprehensive and expansive parity law in the country, which has set the standard for ensuring mental health and substance use disorder care are treated on par with physician health care, and this bill continues that leadership
ARGUMENTS IN OPPOSITION: The Association for Behavioral Health and Wellness (ABHW) is concerned that this bill will create confusion and further complicate the legal patchwork of laws attempting to enforce parity by codifying requirements that are unsettled at the federal level and could be invalidated or modified. ABHW requests that this bill not advance until the federal parity landscape is settled and a clear, stable compliance framework is established. ABHW raises concerns that provisions in the 2024 Final Rules may not sufficiently account for clinically appropriate variation. ABHW also believes this bill would increase compliance obligations and expand reporting and enforcement exposure for regulated entities. The California Association of Health Plans (CAHP) and ACLHIC have significant concerns about moving forward with legislation while there is unresolved federal litigation, non-enforcement, and statutory interpretation disputes, indicating these concerns warrant extreme caution rather than codification. CAHP/ACLHIC argue that the 2024 Final Rules exceed statutory authority and introduce an outcomes-based compliance standard that does not meaningfully improve parity enforcement or patient access. CAHP/ACLHIC indicate updating comparative analyses to meet new standards that are highly resource-intensive and may not result in substantive changes but will significantly increase compliance burdens and legal risk.
ASSEMBLY FLOOR: 54-10, 4/27/26
AYES: Addis, Aguiar-Curry, Ahrens, Alvarez, Arambula, Ávila Farías, Bauer-Kahan, Bennett, Berman, Calderon, Caloza, Carrillo, Castillo, Connolly, Elhawary, Fong, Garcia, Gipson, Mark González, Haney, Harabedian, Hart, Irwin, Jackson, Kalra, Krell, Lee, Lowenthal, McKinnor, Muratsuchi, Nguyen, Ortega, Pacheco, Papan, Patel, Pellerin, Quirk-Silva, Ramos, Ransom, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Solache, Soria, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas
NOES: Davies, DeMaio, Dixon, Jeff Gonzalez, Hadwick, Hoover, Johnson, Lackey, Ta, Tangipa
NO VOTE RECORDED: Alanis, Bains, Boerner, Bonta, Bryan, Chen, Ellis, Flora, Gabriel, Gallagher, Macedo, Patterson, Petrie-Norris, Celeste Rodriguez, Sharp-Collins, Stefani
Prepared by: Teri Boughton / HEALTH / (916) 651-4111
8/17/26 10:47:35
**** END ****
SENATE COMMITTEE ON
Senator Sabrina Cervantes, Chair
2025 - 2026 Regular Session
AB 2011 (Hart) - Nonquantitative treatment limitations
Version: | Policy Vote: |
Urgency: | Mandate: |
Hearing Date: | Consultant: |
Bill Summary:
AB 2011 would impose requirements on health plans and insurers regarding nonquantitative treatment limitations (NQTLs) on mental health or substance use disorder benefits.
*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********
The following information is revised to reflect amendments
adopted by the committee on August 13, 2026
Fiscal Impact:
Unknown costs, likely minor, for the Department of Managed Health Care (DMHC) and the California Department of Insurance (CDI) for state administration.
Author Amendments:
Replace requirements on health plans and insurers with requirements based on federal rules, regulations, and guidance that existed on January 1, 2025.
-- END --
SENATE COMMITTEE ON
Senator Sabrina Cervantes, Chair
2025 - 2026 Regular Session
AB 2011 (Hart) - Nonquantitative treatment limitations
Version: | Policy Vote: |
Urgency: | Mandate: |
Hearing Date: | Consultant: |
Bill Summary:
AB 2011 would impose requirements on health plans and insurers regarding nonquantitative treatment limitations (NQTLs) on mental health or substance use disorder benefits.
Fiscal Impact:
- The Department of Managed Health Care (DMHC) estimates costs of approximately $18,454,000 in 2026-27, $46,668,000 in 2027-28, $67,835,000 in 2028-29, $70,952,000 in 2029-30, $72,166,000 in 2030-31, and $72,386,000 in 2031-32 and annually thereafter for state administration (Managed Care Fund).
- The California Department of Insurance (CDI) anticipates no fiscal impact.
Background:
The Federal Mental Health Parity and Addiction Equity Act (MHPAEA) requires commercial health plans and issuers that offer mental health and substance use disorder benefits to do so in a manner comparable to medical and surgical benefits. The MHPAEA prohibits health plans and issuers from imposing NQTLs (such as medical necessity and utilization management) on mental health and substance use disorder benefits that apply more restrictively than are applied to medical and surgical benefits. In order to assess compliance, the MHPAEA requires group health plans and issuers that provide both medical and surgical benefits, and mental health or substance use disorder benefits, to perform and document comparative analyses of the design and application of NQTLs that apply to mental health or substance use disorder benefits as compared to medical and surgical benefits. In 2024, the federal government issued “Final Rules” which included additional NQTL comparative analyses requirements related to implementation of the MHPAEA. In 2025, the ERISA Industry Committee (ERIC) filed a suit against the federal government challenging the 2024 Final Rules.
California law requires health plans and insurers to provide all covered mental health and substance use disorder benefits in compliance with MHPAEA and all rules, regulations and guidance issued. State law also requires every health plan and insurer 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.
Proposed Law:
Specific provisions of the bill would:
- Provide that NQTL includes, but is not limited to, all of the following:
- 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.
- Formulary design for prescription drugs.
- For health plans/insurers with multiple network tiers, including, for example, preferred providers and participating providers, network tier design.
- 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 contract/policy.
- Health plan/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.
- 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.
- Exclusions based on failure to complete a course of treatment.
- 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 contract/policy.
- Prohibit health plans and insurers from relying upon discriminatory factors or evidentiary standards to design an NQTL to be imposed on mental health or substance use disorder benefits, as specified.
- Require health plans and insurers to collect and evaluate relevant data 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/insurer’s evaluation, as specified.
- Require health plans and insurers that provide both medical/surgical benefits and mental health or substance use disorder benefits and that impose any NQTLs on mental health or substance use disorder benefits to perform and document comparative analyses of the design and application of each NQTL applicable to mental health or substance use disorder benefits, as specified.
- Require health plans and insurers to make the comparative analyses available, as specified.
- Provide that to the extent that a provision is determined to impose requirements that conflict with or materially differ from federal regulations, that provision must be reviewed by DMHC/CDI; and require DMHC/CDI to issue guidance to plans/insurers on compliance based on the conflict or material difference.
-- END --
SENATE COMMITTEE ON HEALTH
Senator Akilah Weber Pierson, Chair
BILL NO: AB 2011
AUTHOR: | Hart | ||
VERSION: | February 17, 2026 | ||
HEARING DATE: | June 10, 2026 | ||
CONSULTANT: | Teri Boughton | ||
SUBJECT: Nonquantitative treatment limitations
SUMMARY:
Codifies federal mental health and substance use disorder parity requirements regarding nonquantitative treatment limitations (NQTL) on mental health and substance use disorder benefits in comparison to medical and surgical benefits, including requirements to perform and document analyses comparing the design and application of each NQTL to assess impact on access and outcomes. Requires the comparative analyses to be provided to state regulators annually, and others upon request.
Existing federal law:
- Establishes the Mental Health Parity and Addiction Equity Act (MHPAEA), which requires commercial health plans and issuers that offer mental health and substance use disorder benefits to do so in a manner comparable to medical and surgical benefits. Prohibits commercial health plans and issuers that provide mental health or substance use disorder benefits from placing limits on those benefits that are less favorable than the limits placed on medical and surgical benefits. Requires health plans and issuers to ensure that financial requirements, such as copayments, coinsurance, and deductibles, and treatment limitations, such as the number and frequency of visits that are applied to mental health and substance use disorder benefits are not more restrictive than the predominant requirements applied to most of the medical and surgical benefits. Prohibits health plans and insurers from imposing NQTLs such as medical necessity and utilization management on mental health and substance use disorder benefits that apply more restrictively than are applied to medical and surgical benefits. [42 U.S.C. Sect 300gg-26]
- Establishes the Consolidated Appropriations Act of 2021 (CAA), which among other provisions, amends MHPAEA to require group health plans and issuers that provide both medical and surgical benefits, and mental health or substance use disorder benefits, to perform and document comparative analyses of the design and application of NQTLs that apply to mental health or substance use disorder benefits. Requires plans and issuers to make their analyses available to the Department of Treasury, Department of Labor, and the Department of Health and Human Services (HHS) [Departments] or applicable State authorities, upon request, effective February 10, 2021. Sets forth a process by which the Departments must evaluate the requested NQTL comparative analyses and enforce the comparative analyses requirements and requires the Departments to submit annually to Congress and make publicly available a report summarizing the comparative analyses requested for review by the Departments. [42 U.S.C. Sect 300gg-26 (a)(8)(A)-(C)]
Existing state law:
- Establishes the Department of Managed Health Care (DMHC) to regulate health plans under the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act) and the California Department of Insurance (CDI) to regulate health insurers under the Insurance Code. [HSC §1340, et seq. and INS §106, et seq.]
- Requires a health plan contract to provide all covered mental health and substance use disorder benefits in compliance with MHPAEA and all rules, regulations and guidance issued pursuant to MHPAEA. [HSC §1374.76 and INS §10144.4]
- Includes, in California’s essential health benefits (EHB) benchmark established pursuant to the federal Affordable Care Act, that MHPAEA applies to mental health and substance use disorder services under EHB, and any scope and duration limits imposed on benefits to be in compliance with MHPAEA, and all rules, regulations, and guidance issued pursuant to MHPAEA. [HSC §1367.005 and INS §10112.27]
- Requires every health plan contract and insurance policy 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. This is California’s mental health and substance use disorder parity requirement. [HSC §1374.72 and INS §10144.5]
- Requires health plans and insurers, if services are not available in network within geographic and timely access standards, to arrange coverage to ensure the delivery of medically necessary out-of-network services and any medically necessary follow-up services that, to the maximum extent possible, meet those geographically and timely access standards. Defines “arrange coverage to ensure the delivery of medically necessary out-of-network services” to include, but not be limited to, providing services to secure medically necessary out-of-network options that are available to the enrollee/insured within geographic and timely access standards. Requires the enrollee/insured to pay no more than the same cost-sharing that the enrollee would pay for the same covered services received from an in-network provider. [HSC §1374.72(d) and INS §10144.5(d)]
- Requires health plans and insurers that offer contracts and policies described above to base any medical necessity determination or utilization review criteria used to determine medical necessity on current generally accepted standards of mental health and substance use disorder care. [HSC §1374.721 and INS §10144.52]
This bill:
2013 Final Rules provisions codification
- Establishes definitions for “medical and surgical benefits,” “mental health benefits,” “substance use disorder benefits,” and “NQTL” consistent with a 2013 Final Rules related to MHPAEA. An NQTL includes prior authorization, formulary design, preferred providers, network tiers, and network participation standards.
2024 Final Rules provisions codification
- Adds to the definition of an NQTL: reimbursement credentialing, step therapy, and other exclusions and restrictions.
- Authorizes a health plan contract or health insurance policy to define the condition in accordance with applicable federal and state law, to the extent that generally recognized independent standards of current medical practice do not address whether a condition is a mental health condition.
- Prohibits a health plan or health insurer from relying upon discriminatory factors or evidentiary standards to design an NQTL to be imposed on mental health and substance use disorder benefits. Specifies that a factor or evidentiary standard is discriminatory if the information, evidence, sources, or standards for the factor or evidentiary standards are biased or not objective in a manner that discriminates against mental health or substance use disorder benefits as compared to medical and surgical benefits.
- Specifies that 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 and surgical benefits if, based on all of the relevant facts and circumstances, the information, evidence, sources, or standards systemically disfavor access or are specifically designed to disfavor access to mental health or substance use disorder benefits as compared to medical and surgical benefits. States that “relevant facts and circumstances” include, but are not limited to:
- Reliability of information, evidence, sources, standards and data;
- Independence of the information, evidence, sources, and standards relied upon;
- Analyses and methodologies employed to select the information and the consistency of application; and,
- Any known safeguards deployed to prevent reliance on skewed data or metrics.
- Specifies that evidence, sources, or standards are not considered biased or not objective if a plan or insurer has taken steps necessary to correct, cure, or supplement information. Includes requirements about considering historical plan data or other historical information.
- Requires health plans and insurers to collect and evaluate relevant data to ensure benefits in a classification, in operation, are no more restrictive than the predominate NQTL applied to substantially all medical and surgical benefits to assess the impact of the NQTL on relevant outcomes related to access to mental health and substance use disorder benefits and medical and surgical benefits and carefully consider the impact as part of the plan’s or insurer’s evaluation. Prohibits the plan or insurer from disregarding relevant outcomes data associated with material differences in access to these benefits. Permits DMHC and CDI to specify in guidance the type, form, and manner of collection and evaluation for the data required in this bill.
- Requires each comparative analysis to include the NQTL, including the specific terms of the plan contract or other relevant terms, the policies or guidelines, and the applicable sections of any other relevant documents, including provider contracts, that describe the NQTL.
- Requires, for all benefits to which the NQTL applies, a description of which benefits are included in each classification, every factor considered or relied upon, as well as the evidentiary standards considered or relied upon to design or apply each factor, the sources from which each evidentiary standard was defined, and a description of any steps the plan or insurer has taken to correct, cure, or supplement anything considered biased or not objective.
- Requires each comparative analysis to include a description of how each factor is used, and explanation of the evidentiary standards or other information sources, what the application of the factor depends upon, and specified explanations if more than one factor is identified. Requires each comparative analysis to evaluate the terms of the contract or policy as written, as specified, and to evaluate in operation, the processes, strategies, evidentiary standards and other factors, as specified. Requires the comparative analysis to address the findings and conclusions and any actions taken or intended to address any potential areas of concern or noncompliance.
- Requires a health plan or insurer to notify all enrollees or insureds within seven business days of final notice of determination if DMHC or CDI makes a final determination of noncompliance. Requires a copy of the notice to be provided to DMHC and CDI, any service provider involved in the claims process, and any fiduciary responsible for deciding benefit claims within the same time frame. Specifies information to be contained in the notice.
- Authorizes DMHC and CDI, when there is a final determination on noncompliance with the comparative analysis, or MHPAEA, with respect to the NQTL, in addition to existing penalties, to direct the plan or insurer not to impose the NQTL with respect to mental health and substance use disorder benefits in the relevant classification, unless and until the plan or insurer demonstrates compliance with the requirements of this bill or with federal law or takes appropriate action to remedy the violation.
CAA
- Requires a health plan or insurer to perform and document comparative analyses of the design and application of each NQTL and requires each comparative analysis to comply with this bill. Requires plans and insurers to also prepare and make available to DMHC or CDI, upon request, a written list of all NQTLs imposed under the plan contract or insurance policy.
- Requires a copy of the comparative analysis to be made available to any applicable state authority, or an enrollee, insured, or authorized representative no later than 30 days after receiving a request.
New State Requirement
- Requires the comparative analysis to be made available to DMHC and CDI on an annual basis beginning January 1, 2027.
FISCAL EFFECT:
According to the Assembly Appropriations Committee, CDI anticipates no costs. Costs of an unknown, but likely minor and absorbable, amount to DMHC.
PRIOR VOTES:
Assembly Floor: | 54 - 10 |
Assembly Appropriations Committee: | 10 - 4 |
Assembly Health Committee: | 13 - 2 |
COMMENTS:
- Author’s statement. According to the author, this bill addresses a serious risk patients face when seeking mental health or substance use disorder care. Access to care is at risk for millions of Californians because the Trump administration has recklessly decided to stop enforcing federal protections that require insurers provide equal access to mental health care as they do with traditional medical treatment. This bill will enshrine protections in state law, ensuring that state regulators can continue to enforce these parity requirements on insurers, regardless of the changes that occur at the federal level. At a time when our state is working to expand behavioral health, this bill ensures that the promise of equal access becomes a reality for Californians.
- CAA Final Rules. The 2024 Final Rules amended the 2013 Final Rules, and added additional NQTL comparative analyses requirements and emphasize that plans must not design or apply financial requirements and treatment limitations that impose greater burden on access that are more restrictive to mental health and substance use disorder benefits than are imposed on access to medical and surgical benefits in the same classification of benefits. The 2024 Final Rules add new definitions for evidentiary standards, factors, processes and strategies. The 2024 Final Rules require coverage to provide meaningful benefits for the condition or disorder in every classification in which meaningful medical and surgical benefits are provided. The 2024 Final Rules require six content elements for comparative analysis.
- 2024 Final Rules Process. Under the 2024 Final Rules, the process for reviews, requires after an initial request for comparative analysis, the plan or issuer must submit it to the relevant Secretary within 10 business days, if it is determined insufficient additional information will be requested which must be provided within 10 business days. If there is an initial determination of noncompliance, the plan or issuer has 45 calendar days to specify if it will take action to comply and provide additional comparative analysis. If the Secretary makes a final determination of noncompliance, the plan or issuer must notify all participants, and enrollees not later than seven business days after the determination. Plans and insurers must make a copy of the comparative analysis available when requested by any applicable state authority, a participant, beneficiary, or enrollee who has received an adverse benefit determination related to mental health and substance use disorder benefits, and participants and beneficiaries in ERISA plans at any time.
- 2024 Final Rules challenged. On January 17, 2025, an association of employers (ERISA Industry Committee [ERIC]) filed suit in the U.S. District Court for the District of Columbia challenging provisions of the 2024 Final Rules on multiple issues including vague and undefined terms, onerous and unclear requirements and that the rule is contrary to law. On May 15, 2025, the Departments issued a statement that the ERIC litigation be held in abeyance while the Departments reconsider the 2024 Final Rules, including whether to rescind or modify the regulation. The Departments will not enforce the 2024 Final Rules or pursue enforcement actions, based on failure to comply prior to a final decision in the litigation and 18 months after the litigation is resolved. This enforcement relief applies only with respect to those portions of the 2024 Final Rules that are new in relation to the 2013 Final Rules. The Departments indicate that MHPAEA’s statutory obligations, as amended by the CAA, continue to be in effect. HHS encourages states that are the primary enforcers of MHPAEA with respect to issuers to adopt a similar approach to enforcement. HHS will not consider a state to be failing to substantially enforce MHPAEA, as amended, because the state adopts such an approach.
- DMHC oversight. Following the release of the MHPAEA 2013 Final Rules, DMHC required commercial health plans they regulate to conform to the new requirements and conducted initial compliance reviews, which included a desk review and a focused survey to ensure the plans put MHPAEA compliant benefit designs into practice. The desk review included a review of the classification of benefits and compliance with both Quantitative Treatment Limits (QTLs) and NQTLs. As a result of the focused compliance review, many health plans were required to update their policies and procedures and/or revise cost-sharing for services and treatment. Enrollees were reimbursed a total of $517,375. Enforcement actions were also taken against plans found to be out of compliance. DMHC is also conducting focused behavioral health investigations of all full-service commercial health plans regulated by DMHC. Under the CAA, health plans that impose NQTLs on mental health and substance use disorder benefits, are required to perform and document comparative analyses of the design and application of the NQTLs, providing specified, detailed information to demonstrate compliance. The CAA requires that a health plan’s processes, strategies, evidentiary standards, or other factors used to apply the NQTLs to mental health and substance use disorder benefits in the classification, as written and in operation, are comparable to, and applied no more stringently than, the processes, strategies, evidentiary standards, or other factors used to apply the NQTLs to medical and surgical benefits in the classification. DMHC is conducting a compliance project to assess health plan compliance with the CAA.
- CDI oversight. CDI announced regulations approved on June 26, 2025, described as enforcing California’s Mental Health Parity Act following the passage of SB 855 (Wiener, Chapter 151, Statutes of 2020) and AB 988 (Bauer-Kahan, Chapter 747, Statues of 2022). In November of 2025, the Association of California Life and Health Insurance Companies (ACLHIC) filed a complaint in Superior Court against CDI and the Insurance Commissioner challenging portions of the regulations specific to the 2024 Final Rules, indicating that the 2024 Final Rules are unconstitutionally vague and impose new requirements beyond MHPAEA relating to meaningful benefits, access and comparative analyses (similar to the ERIC litigation), and are not being enforced federally. The ACLHIC complaint also challenges a requirement by CDI for prior review of QTLs and NQTLs related home health services, and requirements on how clinicians must apply statutory nonprofit criteria in a case of inadequate or conflicting information or difficulty in making a judgement.
- Related legislation. SB 1280 (Valladares) would have set an amount to be paid by health plans and insurers for out-of-network mental health and substance use disorder services at the greater of the average contracted rate or 125% of the amount Medicare reimburses on a fee-for-service basis for the same or similar services in the general geographic region in which the services were rendered. SB 1280 would have prohibited a noncontracting individual health professional from billing or collecting an amount from the enrollee or insured for services that are more than the in-network cost-sharing amount as determined by the plan or insurer. SB 1280 was not heard in the Senate Health Committee.
AB 2551 (Elhawary) requires health plans and health insurers to collect data and report on the number of enrollees and insureds seeking out-of-network behavioral health care. Expands existing licensing board reporting requirements to include whether a license and registrant contracts with a health plan or health insurer to provide services. AB 2551 is pending in the Senate Rules Committee.
AB 2511 (Ahrens) requires the Department of Industrial Relations, in consultation with DMHC, CDI, the Department of Health Care Access and Information, and the Office of Health Care Affordability, to conduct a comparable worth study to examine and compare compensation and reimbursement for behavioral health providers for similarly situated medical-surgical providers and submit it to the Legislature by January 1, 2028. AB 2511 was held in the Assembly Appropriations Committee.
- Prior legislation. SB 221 (Wiener, Chapter 724, Statutes of 2021) codifies existing timely access to care standards for health plans and health insurers, applies these requirements to Medi-Cal managed care plans, adds a standard for non-urgent follow-up appointments for nonphysician mental health care or substance use disorder providers that is within 10 business days of the prior appointment, and, prohibits contracting providers and employees from being disciplined for informing patients about timely access standards.
SB 855 (Weiner, Chapter 151, Statutes of 2020) expands California’s mental health parity law with broader requirements on health plans and disability insurers to cover medically necessary treatment of mental health and substance use disorders under the same terms and conditions applied to other medical conditions; establishes new requirements for medically necessary care determinations and utilization review; and bans discretionary clauses in health plan contracts.
SB 857 (Committee on Budget and Fiscal Review, Chapter 31, Statutes of 2014) requires health plans and insurers to provide all covered mental health and substance use disorder benefits in compliance with federal MHPAEA and all rules, regulations, and guidance issued under MHPAEA. SB 857 permits DMHC to issue guidance until the director adopts regulations and requires DMHC to consult with CDI.
AB 88 (Thomson, Chapter 534, Statutes of 1999) requires health plans and insurers to cover the diagnosis and medically necessary treatment of “severe mental illness” of a person of any age, and of “serious emotional disturbances” of a child; requires parity under the same terms and conditions applied to other medical conditions; and requires parity with respect to enrollee cost-sharing for covered benefits.
- Support. Insurance Commissioner (IC) Ricardo Lara, a co-sponsor of this bill, writes that the 2024 Final Rules clarify how existing statutory parity obligations must be evaluated and enforced, including standards for demonstrating compliance both as written and in operation, and that these regulations did not create new parity requirements; rather, they provided needed clarity to support consistent enforcement of existing law. The IC indicates this bill codifies federal standards into California statue to ensure continuity and enforceability, regardless of future federal administrative or judicial actions. The California Academy of Child and Adolescent Psychology, California State Association of Psychiatrists, the Steinberg Institute, and the Kennedy Forum are also co-sponsors, and they write that this bill does not create new benefit mandates, expand coverage, or impose new obligations on state regulators, and that regulators are already enforcing parity consistent with these standards under existing authority. The cosponsors say this bill simply affirms and preserves those practices in state law. The California Academy of Family Physicians writes this bill helps remove barriers to treatment, allowing family physicians to deliver the care their patients need without unnecessary restrictions or delays. The California Alliance of Child and Family Services indicate many organizations struggle with mental health parity issues, including network adequacy and reimbursement practices, and they support legislation that ensures stability for mental health providers and continued access to mental health and substance use care. Sponsors and supporters indicate that California has long been a national leader in advancing mental health parity, calling SB 855 the most comprehensive and expansive parity law in the country, which has set the standard for ensuring mental health and substance use disorder care are treated on par with physician health care, and this bill continues that leadership.
- Opposition. The Association for Behavioral Health and Wellness (ABHW) is concerned that this bill will create confusion and further complicate the legal patchwork of laws attempting to enforce parity by codifying requirements that are unsettled at the federal level and could be invalidated or modified. ABHW requests that this bill not advance until the federal parity landscape is settled and a clear, stable compliance framework is established. ABHW raises concerns that provisions in the 2024 Final Rules may not sufficiently account for clinically appropriate variation. ABHW also believes this bill would increase compliance obligations and expand reporting and enforcement exposure for regulated entities. The California Association of Health Plans (CAHP) and ACLHIC have significant concerns about moving forward with legislation while there is unresolved federal litigation, non-enforcement, and statutory interpretation disputes, indicating these concerns warrant extreme caution rather than codification. CAHP/ACLHIC argue that the 2024 Final Rules exceed statutory authority and introduce an outcomes-based compliance standard that does not meaningfully improve parity enforcement or patient access. CAHP/ACLHIC indicate updating comparative analyses to meet new standards that are highly resource-intensive and may not result in substantive changes but will significantly increase compliance burdens and legal risk.
- Policy comments.
- Existing law already requires health plans and insurers to comply with all MHPAEA rules, regulations and guidance.
- With the challenge to, and reconsideration of, the 2024 Final Rules it is likely that it will be rescinded or modified in which case the 2024 Final Rules may no longer be required as currently published. If the ERIC challenge and ACLHIC challenge are found to have merit, in that there are vague, unclear and unspecified terms and requirements, enactment of this bill may also be difficult for plans and insurers to implement without additional state guidance or regulations. At a minimum state regulations or guidance may be necessary.
- The requirement for annual reporting to state regulators contained in this bill is not in MHPAEA or its rules or regulations. The existing federal requirement is for plans to provide the comparative analysis upon request. Federal enforcement agencies have indicated in their annual reports to Congress that their review and enforcement is labor intensive.
- Amendments. The Committee may wish to amend this bill to address any potential conflicts.
SUPPORT AND OPPOSITION:
Support: California Academy of Child and Adolescent Psychiatry (co-sponsor)
California State Association of Psychiatrists (co-sponsor)
Insurance Commissioner Ricardo Lara / California Department of Insurance (co-sponsor)
Steinberg Institute (co-sponsor)
The Kennedy Forum (co-sponsor)
Board of Behavioral Sciences
California Academy of Family Physicians
California Alliance of Child and Family Services
California Association of Alcohol and Drug Program Executives, INC.
California Behavioral Health Association
California Chapter of the American College of Emergency Physicians
California Children's Hospital Association
California Chronic Care Coalition
California Coalition for Behavioral Health
California Consortium of Addiction Programs and Professionals
California Medical Association
California Psychological Association
Coalition for Developmental Approaches
County Behavioral Health Directors Association
Greenhouse Therapy Center
Health Access California
Inseparable
MCG Health
Mental Health America of California
National Alliance on Mental Illness
National Health Law Program
National Union of Healthcare Workers
Rural County Representatives of California
The California Association of Local Behavioral Health Boards and Commissions
Urban Counties of California
Oppose: America’s Health Insurance Plans
Association for Behavioral Health and Wellness
Association of California Life & Health Insurance Companies
California Association of Health Plans
-- END --
ASSEMBLY THIRD READING
ATR Bill Id:AB 2011
Author:(Hart)
As Introduced Ver:February 17, 2026
Majority vote
SUMMARY
Codifies federal Mental Health Parity and Addiction Equity Act (MHPAEA) regulations into state law.
Major Provisions
COMMENTS
Mental Health (MH) Parity. Federal MH Parity laws require if a health plan includes services for mental health and substance use disorders as part of their benefits that those services must be covered under the same terms and conditions as other medical services. The Affordable Care Act (ACA) also specifies coverage of the ten essential health benefits, including MH and substance use disorder (SUD) treatment services. The ACA went beyond existing federal law by mandating coverage instead of requiring parity only if coverage is provided.
SB 855 (Wiener), Chapter 151, Statutes of 2020, requires commercial health plans and insurers in California to provide full coverage for the treatment of all MH conditions and SUDs. SB 855 also establishes specific standards for what constitutes medically necessary treatment and criteria for the use of clinical guidelines. SB 855 applies to all state-regulated health plans and insurers that provide hospital, medical, or surgical coverage, and to any entity acting on the plan or insurer's behalf. A health plan cannot limit benefits or coverage for MH or SUD treatments or services when medically necessary.
2024 MHPAEA Regulations. In September 2024, the federal Departments of Labor, Health and Human Services, and Treasury released updated MHPAEA regulations to implement provisions of the Consolidated Appropriations Act of 2021 and update 2013 regulations that implemented the law. The final rule strengthens standards for demonstrating parity in coverage. It clarifies critical terminology, requires that non-quantitative treatment limits (NQTLs) be comparable in both design and application between MH/SUD and medical/surgical benefits, prohibits the use discriminatory factors or standards that systematically disadvantage MH/SUD care, and mandates a data-drive comparative analysis to monitor compliance. In 2025, the ERISA Industry Committee (ERIC) filed a complaint against the federal government seeking to invalidate the 2024 rules, the federal administration subsequently announced that it would not enforce key requirements.
In November 2025 the Association of California Life & Health Insurance Companies (ACLHIC) filed suit against the California Department of Insurance (CDI) and the Insurance Commissioner, seeking to invalidate state regulations that incorporate the 2024 rule. The legal complaint relies heavily on the federal non-enforcement announcement. However, states, as the primary enforcers of health insurance standards, are still able to enforce the 2024 federal rule and additional protections in their respective laws. According to the Commonwealth Fund, a few states have moved to adopt the 2024 federal MHPAEA rule into state law. Washington enacted legislation that requires insurers to comply with the federal rule as published in 2024. Colorado similarly leveraged the 2024 federal rule to add state protections through legislation. This bill similarly aims to codify the 2024 federal rule into California law to clarify its application and ensure it remains in place regardless of action at the federal level.
According to the Author
This bill addresses a serious risk patients face when seeking MH or SUD care. The author argues that access to care is at risk for millions of Californians because the Trump administration has recklessly decided to stop enforcing federal protections that require insurers provide equal access to MH care as they do with traditional medical treatment. The author continues that this bill will enshrine protections in state law, ensuring that state regulators can continue to enforce these parity requirements on insurers, regardless of the changes that occur at the federal level. The author concludes that at a time when our state is working to expand behavioral health, this bill ensures that the promise of equal access becomes a reality for Californians.
Arguments in Support
The Kennedy Forum, Steinberg Institute, California State Association of Psychiatrists, and California Academy of Child & Adolescent Psychiatry are co-sponsoring this bill. The sponsors state that in 2024, federal regulators issued final MHPAEA regulations that clarify how existing statutory parity obligations must be evaluated and enforced, including standards for demonstrating compliance both as written and in operation. The sponsors continue that these regulations did not create new parity requirements; rather, they provided needed clarity to support consistent enforcement of existing law. The sponsors argue that this bill codifies those federal standards into California statute to ensure continuity and enforceability, regardless of future federal administrative or judicial actions. The sponsors note that California has taken this approach before, including during the first Trump administration when the state codified key provisions of the ACA to protect Californians from federal rollbacks. The sponsors continue that this bill does not create new benefit mandates, expand coverage, or impose new obligations on state regulators. The sponsors state that regulators are already enforcing parity consistent with these standards under existing authority and this bill simply affirms and preserves those practices in state law. The sponsors conclude that this bill reaffirms California's commitment to strong, enforceable parity protections and preserving the progress achieved.
Arguments in Opposition
The California Association of Health Plans and ACLHIC are opposed to this bill, stating that they have significant concerns that codifying the existing federal rule, which is currently under review, rather than adhering to longstanding statutory framework, would introduce legal and operational uncertainty. The opposition argues that this bill does not merely preserve parity; it goes beyond the existing federal and state standards and creates a separate and much more onerous structure. The opposition continues that this bill closely mirrors the federal MHPAEA Final Rules issued in September 2024, which, in May 2025, the U.S. Department of Justice announced that it would not enforce while the Administration considers whether to modify or rescind. The opposition argues that by embedding these requirements into state law now, this bill risks locking California carriers into conflicting and potentially irreconcilable obligations without clear evidence of improved access or quality for patients. The opposition believes there are more targeted, effective approaches California can pursue to expand access to MH/SUD services, such as investments that directly increase the availability of care, such as improving access to high-quality, affordable, and evidence-based behavioral health services for children and adolescents.
FISCAL COMMENTS
According to the Assembly Appropriations Committee, the California Department of Insurance anticipates no costs. Costs of an unknown, but likely minor and absorbable, amount to the Department of Managed Health Care.
VOTES
ASM HEALTH: 13-2-1
YES: Bonta, Addis, Aguiar-Curry, Pacheco, Caloza, Carrillo, Mark González, Patel, Rogers, Sanchez, Schiavo, Sharp-Collins, Stefani
NO: Chen, Johnson
ABS, ABST OR NV: Patterson
ASM APPROPRIATIONS: 10-4-1
YES: Wicks, Arambula, Caloza, Fong, Mark González, Krell, Muratsuchi, Pacheco, Pellerin, Solache
NO: Hoover, Dixon, Ta, Tangipa
ABS, ABST OR NV: Calderon
UPDATED
VERSION: February 17, 2026
CONSULTANT: Riana King / HEALTH / (916) 319-2097 FN: 0002344
Date of Hearing: April 8, 2026
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Buffy Wicks, Chair
ABPCA Bill Id:AB 2011
Author:(Hart) – As Introduced Ver:February 17, 2026
Policy Committee: | Health | Vote: | 13 - 2 |
|
| ||
|
|
Urgency: No State Mandated Local Program: Yes Reimbursable: No
SUMMARY:
This bill generally codifies into state law the federal Mental Health Parity and Addiction Equity Act (MHPAEA) regulations.
MHPAEA generally provides that financial requirements (such as copays) and treatment limitations (such as visit limits) imposed on mental health (MH) and substance use disorder (SUD) benefits may not be more restrictive than the predominant financial requirements and treatment limitations that apply to substantially all medical/surgical benefits in a classification. MHPAEA also prohibits separate financial requirements and treatment limitations that apply only to MH/SUD benefits. MHPAEA also imposes several important disclosure requirements on group health plans and health insurers.
For a description of the specific provisions of this bill, please see the Assembly Health Committee analysis.
FISCAL EFFECT:
The California Department of Insurance (CDI) anticipates no costs.
Costs of an unknown, but likely minor and absorbable, amount to the Department of Managed Health Care.
COMMENTS:
- Purpose. This bill is sponsored by the California Academy of Child and Adolescent Psychiatry, California State Association of Psychiatrists, Steinberg Institute, The Kennedy Forum, and Insurance Commissioner Ricardo Lara / CDI. According to the author:
[This bill] addresses a serious risk patients face when seeking mental health or substance use disorder care. Access to care is at risk for millions of Californians because the Trump administration has…[stopped] enforcing federal protections that require insurers provide equal access to mental health care as they do with traditional medical treatment. This bill will enshrine protections in state law, ensuring that state regulators can continue to enforce these parity requirements on insurers, regardless of the changes that occur at the federal level.
- Background. 2024 MHPAEA Regulations. In September 2024, the federal Departments of Labor, Health and Human Services, and Treasury released finalized MHPAEA regulations to implement provisions of the Consolidated Appropriations Act of 2021 and update other regulations. The final rule strengthens standards for health plans and insurers demonstrating parity in coverage, clarifies critical terminology, requires that non-quantitative treatment limitations (NQTLs) be comparable in both design and application between MH/SUD and medical/surgical benefits, prohibits the use discriminatory factors or standards that systematically disadvantage MH/SUD care, and mandates a data-driven comparative analysis to monitor compliance.
In 2025, a trade group filed a complaint against the federal government seeking to invalidate the 2024 MHPAEA rules. The federal administration subsequently announced it would not enforce key requirements. CDI and DMHC continued to enforce the MHPAEA requirements.
In November 2025 the Association of California Life & Health Insurance Companies (ACLHIC) filed suit against CDI and the Insurance Commissioner, seeking to invalidate state regulations that incorporate the 2024 MHPAEA rules. - Opposition. The California Association of Health Plans (CAHP), ACLHIC, and Association for Behavioral Health and Wellness (ABHW) oppose this bill, stating codifying the existing federal rule, which is under review, rather than adhering to longstanding statutory framework, would introduce legal and operational uncertainty. Opponents argue this bill closely mirrors the federal MHPAEA Final Rules issued in September 2024, which, in May 2025, the U.S. Department of Justice announced it would not enforce while the Trump Administration considers whether to modify or rescind.
Analysis Prepared by: Allegra Kim / APPR. / (916) 319-2081
Date of Hearing: March 24, 2026
ASSEMBLY COMMITTEE ON HEALTH
Mia Bonta, Chair
ABPCA Bill Id:AB 2011
Author:(Hart) – As Introduced Ver:February 17, 2026
SUBJECT: Nonquantitative treatment limitations.
SUMMARY: Codifies federal Mental Health Parity and Addiction Equity Act (MHPAEA) regulations into state law. Specifically, this bill:
- Requires any condition or procedure defined by a health plan contract or health insurance policy as being or as not being a medical condition or surgical procedure to be defined consistently with generally recognized independent standards of current medical practice. Permits, 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 plan or insurer to define the condition or procedure in accordance with applicable federal and state law.
- Requires any condition defined by a health plan contract or health insurance policy as being or as not being a mental health (MH) condition to be defined consistently with generally recognized independent standards of current medical practice. Requires, to be consistent with generally recognized independent standards of current medical practice, the definition to include all conditions covered under the health plan contract or health insurance policy, except for substance use disorders (SUDs) 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).
- Permits, to the extent that generally recognized independent standards of current medical practice do not address whether a condition is a MH condition, a health plan or insurer to define the condition in accordance with applicable federal and state law.
- Requires any disorder defined by the health plan contract or health insurance policy as being or as not being a SUD to be defined consistently with generally recognized independent standards of current medical practice. Requires, to be consistent with generally recognized independent standards of current medical practice, the definition to include all covered disorders 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.
- Permits, to the extent that generally recognized independent standards of current medical practice do not address whether a disorder is a SUD, a health plan or insurer to define the disorder in accordance with applicable federal and state law.
- Establishes a nonquantitative treatment limitation (NQTL) to include, but not be limited to, all of the following:
- 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;
- Formulary design for prescription drugs;
- For plans or insurers with multiple network tiers, network tier design;
- 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;
- Plan or 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;
- 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;
- Exclusions based on failure to complete a course of treatment; and,
- 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.
- Prohibits, for purposes of determining comparability and stringency under this bill, a health plan or insurer from relying upon discriminatory factors or evidentiary standards to design an NQTL to be imposed on MH or SUD benefits. Requires a factor or evidentiary standard to be discriminatory if the information, evidence, sources, or standards are biased or not objective in a manner that discriminates against MH or SUD benefits as compared to medical/surgical benefits.
- Requires information, evidence, sources, or standards to be considered biased or not objective in a manner that discriminates against MH or SUD 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.
- Defines relevant facts and circumstances as, but not limited to, all of the following:
- The reliability of the source of the information, evidence, sources, or standards, including any underlying data;
- The independence of the information, evidence, sources, and standards relied upon;
- The analyses and methodologies employed to select the information and the consistency of their application; and,
- Any known safeguards deployed to prevent reliance on skewed data or metrics.
- Requires information, evidence, sources, or standards to not be considered biased or not objective if the health plan or 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.
- Requires historical plan data or other historical information from a time when the health plan or insurer was not subject to, or not in compliance with, the MHPAEA to be considered biased or not objective, as specified.
- Requires a health plan or health insurer to collect and evaluate relevant data in a manner reasonably designed to assess the impact of an NQTL on relevant outcomes related to access to MH and SUD benefits and medical/surgical benefits and carefully consider the impact as part of the plan’s evaluation.
- Prohibits a health plan or health insurer from disregarding relevant outcomes data that it knows, or reasonably should know, suggests that an NQTL is associated with material differences in access to MH or SUD benefits as compared to medical/surgical benefits. Permits the Department of Managed Health Care (DMHC) and California Department of Insurance (CDI) to specify the type, form, and manner of collection and evaluation for the data required under this bill.
- Requires a health plan or health insurer that provides both medical/surgical benefits and MH or SUD benefits and that imposes any NQTLs on MH or SUD benefits to perform and document comparative analyses of the design and application of each NQTL applicable to MH or SUD disorder benefits. Specifies what must be included in the comparative analysis.
- Requires the health plan or health insurer to make the comparative analysis available to DMHC and CDI on an annual basis commencing January 1, 2027. Requires the health plan or insurer to provide a copy of the comparative analysis when requested by any applicable state authority or an enrollee/insured or their authorized representative no later than 30 days after receiving a request. Prohibits a health plan or health insurer from withholding any information contained in the comparative analysis, including any information from or developed by third parties.
- Requires, if DMHC or CDI makes a final determination of noncompliance, the health plan or health insurer to notify all enrollees that the plan has been determined to not be in compliance with the requirements of parity or this bill with respect to the plan contract, as specified.
- Requires, if a health plan or health insurer receives a final determination from DMHC or CDI that the plan or insurer is not in compliance with the comparative analysis requirements or the requirements of the federal MHPAEA, the NQTL to be deemed a violation of parity. Permits, in addition to existing penalty authority, DMHC or CDI to direct the health plan or insurer not to impose the NQTL with respect to MH or SUD benefits in the relevant classification, unless and until the plan or insurer demonstrates compliance with the state or federal law or takes appropriate action to remedy the violation.
- Defines “medical/surgical benefits” as benefits with respect to items or services for medical conditions or surgical procedures, as defined under the terms of the health plan contract or health insurance policy and in accordance with applicable federal and state law, but does not include MH benefits or SUD benefits.
- Defines “MH benefits” as benefits with respect to items or services for MH conditions, as defined under the terms of the health plan contract or health insurance policy and in accordance with applicable federal and state law, but does not include medical/surgical benefits or SUD benefits.
- Defines “SUD benefits” as benefits with respect to items or services for SUD, as defined under the terms of the health plan contract or health insurance policy and in accordance with applicable federal and state law, but does not include medical/surgical benefits or mental health benefits.
EXISTING LAW:
- Establishes DMHC to regulate health plans under the Knox-Keene Health Care Service Plan Act of 1975 and CDI to regulate health insurers. [Health and Safety Code (HSC) § 1340, et seq., and Insurance Code (INS) § 106, et seq.]
- Establishes as California's Essential Health Benefits benchmark under the Patient Protection and Affordable Care Act (ACA), the Kaiser Small Group Health Maintenance Organization, existing California health insurance mandates, and the ten ACA mandated benefits. [HSC § 1367.005 and INS § 10112.27]
- Defines “basic health care services” as all of the following:
- Physician services, including consultation and referral;
- Hospital inpatient services and ambulatory care services;
- Diagnostic laboratory and therapeutic radiologic services;
- Home health services;
- Preventive health services;
- Emergency health care services, including ambulance and ambulance transport services and out-of-area coverage. Basic health care services includes ambulance and ambulance transport services provided through the 911 emergency response system; and,
- Hospice care, as specified. [HSC § 1345]
- Requires every disability insurance policy and health plan that provides hospital, medical, or surgical coverage to provide coverage for medically necessary treatment of MH and SUDs, under the same terms and conditions applied to other medical conditions, as specified. [HSC § 1374.72 and INS § 10144.5]
- Defines medically necessary treatment of MH or SUD including that the service or product is in accordance with generally accepted standards of mental health or substance use disorder care, clinically appropriate in terms of type, frequency, extent, site, and duration. [HSC § 1374.72 and INS § 10144.5]
- Requires a health plan or insurer that provides hospital, medical, or surgical coverage to base any medical necessity determination or the utilization review criteria on current generally accepted standards of MH and SUD care, as specified. Requires medical necessity determinations concerning service intensity, level of care placement, continued stay, and transfer or discharge of enrollees diagnosed with MH and SUDs to be conducted in accordance with the requirements in 7) below. [HSC § 1374.72 and INS § 10144.5]
- Requires a health plan or insurer that provides hospital, medical, or surgical coverage to base any medical necessity determination or the utilization review criteria that the plan, and any entity acting on the plan’s behalf, applies to determine the medical necessity of health care services and benefits for the diagnosis, prevention, and treatment of MH and SUDs on current generally accepted standards of MH and SUD care, as specified. Requires a health plan or insurer to apply the criteria and guidelines set forth in the most recent versions of treatment criteria developed by the nonprofit professional association for the relevant clinical specialty in conducting utilization review of all covered health care services and benefits for the diagnosis, prevention, and treatment of MH and SUDs in children, adolescents, and adults. [HSC § 1374.721 and INS § 10144.52]
- Requires the criteria or guidelines used by health plans and insurers, or any entities with which plans or insurers contract for utilization review or utilization management functions, to determine whether to authorize, modify, or deny health care services to:
- Be developed with involvement from actively practicing health care providers;
- Be consistent with sound clinical principles and processes;
- Be evaluated, and updated if necessary, at least annually;
- If used as the basis of a decision to modify, delay, or deny services in a specified case under review, be disclosed to the provider and the enrollee or insured in that specified case; and,
- Be available to the public upon request. [HSC § 1363.5 and INS § 10123.135]
- Requires every health plan to establish and maintain a grievance system approved by DMHC under which enrollees may submit grievances to the plan. Requires a plan’s response to also comply with federal requirements. Requires, in regulations, that a plan’s grievance system be established in writing and provide for procedures that will receive, review and resolve grievances within 30 calendar days of receipt by the plan, or any provider or entity with delegated authority to administer and resolve the plan’s grievance system. Defines grievance as a written or oral expression of dissatisfaction regarding the plan and/or provider. [HSC § 1368]
FISCAL EFFECT: Unknown. This bill has not been analyzed by a fiscal committee.
COMMENTS:
- PURPOSE OF THIS BILL. According to the author, this bill addresses a serious risk patients face when seeking MH or SUD care. The author argues that access to care is at risk for millions of Californians because the Trump administration has recklessly decided to stop enforcing federal protections that require insurers provide equal access to MH care as they do with traditional medical treatment. The author continues that this bill will enshrine protections in state law, ensuring that state regulators can continue to enforce these parity requirements on insurers, regardless of the changes that occur at the federal level. The author concludes that at a time when our state is working to expand behavioral health, this bill ensures that the promise of equal access becomes a reality for Californians.
- BACKGROUND.
- MH Parity. Federal MH Parity laws require if a health plan includes services for mental health and substance use disorders as part of their benefits that those services must be covered under the same terms and conditions as other medical services. The ACA also specifies coverage of the ten EHBs, including MH and SUD treatment services. The ACA went beyond existing federal law by mandating coverage instead of requiring parity only if coverage is provided.
SB 855 (Wiener), Chapter 151, Statutes of 2020, requires commercial health plans and insurers in California to provide full coverage for the treatment of all MH conditions and SUDs. SB 855 also establishes specific standards for what constitutes medically necessary treatment and criteria for the use of clinical guidelines. SB 855 applies to all state-regulated health plans and insurers that provide hospital, medical, or surgical coverage, and to any entity acting on the plan or insurer's behalf. A health plan cannot limit benefits or coverage for MH or SUD treatments or services when medically necessary.
- 2024 MHPAEA Regulations. In September 2024, the federal Departments of Labor, Health and Human Services, and Treasury released updated MHPAEA regulations to implement provisions of the Consolidated Appropriations Act of 2021 and update 2013 regulations that implemented the law. The final rule strengthens standards for demonstrating parity in coverage. It clarifies critical terminology, requires that NQTLs be comparable in both design and application between MH/SUD and medical/surgical benefits, prohibits the use discriminatory factors or standards that systematically disadvantage MH/SUD care, and mandates a data-drive comparative analysis to monitor compliance. In 2025, the ERISA Industry Committee (ERIC) filed a complaint against the federal government seeking to invalidate the 2024 rules, the federal administration subsequently announced that it would not enforce key requirements.
In November 2025 the Association of California Life & Health Insurance Companies (ACLHIC) filed suit against CDI and the Insurance Commissioner, seeking to invalidate state regulations that incorporate the 2024 rule. The legal complaint relies heavily on the federal nonenforcement announcement. However, states, as the primary enforcers of health insurance standards, are still able to enforce the 2024 federal rule and additional protections in their respective laws. According to the Commonwealth Fund, a few states have moved to adopt the 2024 federal MHPAEA rule into state law. Washington enacted legislation that requires insurers to comply with the federal rule as published in 2024. Colorado similarly leveraged the 2024 federal rule to add state protections through legislation. This bill similarly aims to codify the 2024 federal rule into California law to clarify its application and ensure it remains in place regardless of action at the federal level.
- SUPPORT. The Kennedy Forum, Steinberg Institute, California State Association of Psychiatrists, and California Academy of Child & Adolescent Psychiatry are cosponsoring this bill. The sponsors state that in 2024, federal regulators issued final MHPAEA regulations that clarify how existing statutory parity obligations must be evaluated and enforced, including standards for demonstrating compliance both as written and in operation. The sponsors continue that these regulations did not create new parity requirements; rather, they provided needed clarity to support consistent enforcement of existing law. The sponsors argue that this bill codifies those federal standards into California statute to ensure continuity and enforceability, regardless of future federal administrative or judicial actions. The sponsors note that California has taken this approach before, including during the first Trump administration when the state codified key provisions of the ACA to protect Californians from federal rollbacks. The sponsors continue that this bill does not create new benefit mandates, expand coverage, or impose new obligations on state regulators. The sponsors state that DMHC and CDI are already enforcing parity consistent with these standards under existing authority and this bill simply affirms and preserves those practices in state law. The sponsors conclude that this bill reaffirms California’s commitment to strong, enforceable parity protections and preserving the progress achieved.
- OPPOSITION. The California Association of Health Plans and ACLHIC are opposed to this bill, stating that they have significant concerns that codifying the existing federal rule, which is currently under review, rather than adhering to longstanding statutory framework, would introduce legal and operational uncertainty. The opposition argues that this bill does not merely preserve parity; it goes beyond the existing federal and state standards and creates a separate and much more onerous structure. The opposition continues that this bill closely mirrors the federal MHPAEA Final Rules issued in September 2024, which, in May 2025, the U.S. Department of Justice announced that it would not enforce while the Administration considers whether to modify or rescind. The opposition argues that by embedding these requirements into state law now, this bill risks locking California carriers into conflicting and potentially irreconcilable obligations without clear evidence of improved access or quality for patients. The opposition believes there are more targeted, effective approaches California can pursue to expand access to MH/SUD services, such as investments that directly increase the availability of care, such as improving access to high-quality, affordable, and evidence-based behavioral health services for children and adolescents.
- PREVIOUS LEGISLATION.
- SB 221 (Wiener), Chapter 724, Statutes of 2021, codifies existing timely access to care standards for health plans and insurers, applies these requirements to Medi-Cal Managed Care plans, and adds a standard for non-urgent follow-up appointments for nonphysician MH care or SUD providers that is within 10 business days of the prior appointment.
- SB 855 (Wiener) revises and recasts California’s MH Parity provisions, and requires a health plan contract or disability insurance policy issued, amended, or renewed on or after January 1, 2021, to provide coverage for medically necessary treatment of MH and SUD, as defined, under the same terms and conditions applied to other medical conditions and prohibits a health plan or disability insurer from limiting benefits or coverage for MH and SUD to short-term or acute treatment. Specifies that if services for the medically necessary treatment of a MH and SUD are not available in network within the geographic and timely access standards in existing law, the health plan or insurer is required to arrange coverage to ensure the delivery of medically necessary out of network services and any medically necessary follow up services, as specified.
REGISTERED SUPPORT / OPPOSITION:
Support
California Academy of Child and Adolescent Psychiatry (sponsor)
California State Association of Psychiatrists (sponsor)
Steinberg Institute (sponsor)
The Kennedy Forum (sponsor)
Insurance Commissioner Ricardo Lara / California Department of Insurance (sponsor)
California Alliance of Child and Family Services
California Association of Alcohol and Drug Program Executives, Inc.
California Behavioral Health Association
California Chronic Care Coalition
California Coalition for Behavioral Health
California Psychological Association
Coalition for Developmental Approaches
County Behavioral Health Directors Association
Greenhouse Therapy Center
Inseparable
MCG Health
Mental Health America of California
National Health Law Program
National Union of Healthcare Workers
The California Association of Local Behavioral Health Boards and Commissions
Opposition
Association of California Life & Health Insurance Companies
California Association of Health Plans
Analysis Prepared by: Riana King / HEALTH / (916) 319-2097
Discussed in Hearing
1MIN
Assembly Floor
2MIN
Senate Floor
17MIN
Senate Standing Committee on Health
1MIN
Assembly Floor
4MIN
Assembly Standing Committee on Appropriations
15MIN
Assembly Standing Committee on Health
Bill Author
