Rea v. Blue Shield California

• Decision Date: 09 July 2014
• Docket Number: B244314
• Citation: 172 Cal.Rptr.3d 823,226 Cal.App.4th 1209
• Court: California Court of Appeals Court of Appeals
• Parties: Marissa REA et al., Plaintiffs and Appellants, v. BLUE SHIELD OF CALIFORNIA, Defendant and Respondent.

226 Cal.App.4th 1209

172 Cal.Rptr.3d 823

Marissa REA et al., Plaintiffs and Appellants,

v.BLUE SHIELD OF CALIFORNIA, Defendant and Respondent.

B244314

Court of Appeal, Second District, Division 1, California.

Filed June 10, 2014

As Modified on Denial of Rehearing July 9, 2014

See 2 Witkin, Summary of Cal. Law (10th ed. 2005) Insurance, § 126.

APPEAL from a judgment of the Superior Court of Los Angeles County, Anthony J. Mohr, Judge. Reversed. (Los Angeles County Super. Ct. No. BC468900)

Kantor & Kantor, Lisa S. Kantor, J. David Oswalt and Elizabeth K. Green, Northridge, for Plaintiffs and Appellants.

Law Offices of Daniel H. Willick and Daniel H. Willick, Los Angeles, for Honorable Helen MacLeod Thomson and California Psychiatric Association as Amici Curiae on behalf of Plaintiffs and Appellants.

Disability Rights California, Melinda Bird, Los Angeles, Connie Huang Chu; Western Center on Law and Poverty, Richard A. Rothschild, Los Angeles, and Mona Tawatao, Pacoima, for Mental Health America of California, Mental Health Advocacy Services, Inc., Alliance of California Autism Organizations, Autism Deserves Equal Coverage, Disability Rights Education and Defense Fund, Inc., Disability Rights Legal Center and National Health Law Programs as Amici Curiae on behalf of Plaintiffs and Appellants.

California Department of Insurance, Adam M. Cole, San Francisco, and Teresa R. Campbell for California Insurance Commissioner Dave Jones as Amicus Curiae for Plaintiffs and Appellants.

Law Offices of Russell G. Petti and Russell G. Petti for International Association of Eating Disorders Professionals, Eating Disorder Coalition, Binge Eating Disorder Association and Residential Eating Disorder Coalition as Amici Curiae for Plaintiffs and Appellants.

Manatt, Phelps & Phillips, Gregory N. Pimstone, Adam Pines and Joanna S. McCallum, Los Angeles, for Defendant and Respondent.

Crowell & Moring, William A. Helvestine, San Francisco, and David D. Johnson, Santa Ana, for California Association of Health Plans as Amicus Curiae on behalf of Defendant and Respondent.

JOHNSON, J.

In 1999, the Legislature enacted the California Mental Health Parity Act (Health & Saf.Code, § 1374.72) ¹ (Parity Act) to address the imbalance between medical coverage for physical illnesses and mental illnesses. The Parity Act mandated that every health care service plan contract “provide coverage for the diagnosis and medically necessary treatment of severe mental illnesses ... under the same terms and conditions applied to other medical conditions.” ( § 1374.72, subd. (a).) At issue in this appeal is whether the Parity Act requires coverage for residential treatment for the eating disorders anorexia nervosa and bulimia nervosa even where the health plan does not provide coverage. In Harlick v. Blue Shield of California (9th Cir.2012) 686 F.3d 699 ( Harlick ), the Ninth Circuit found that the Parity Act, which requires coverage for all “medically necessary treatment” for “several mental illnesses” mandated the coverage of residential care treatment for such eating disorders. The trial court here disagreed, holding that the statutory language of the Parity Act and the statutory scheme of the Knox–Keene Health Care Service Plan Act of 1975 (§§ 1340–1399) (Knox–Keene Act) (of which the Parity Act is a part), as well as the Parity Act's legislative history, did not support coverage for a treatment not specifically enumerated in the Parity Act.

Plaintiffs Marissa Rea and Kelly Melachouris, who suffer from eating disorders and are covered by defendant Blue Shield of California's health plans, principally argue on appeal that the Parity Act's “medically necessary treatment” language must be read broadly to include residential treatment for the mental illnesses anorexia nervosa and bulimia because there is no treatment analog in the realm of treatments for physical illnesses, and thus the trial court's limited reading of the statute failed to take into account the Legislature's goal of achieving parity. Blue Shield counters that nothing in the statutory language evinces a legislative intent to cover all treatments for mental illness simply because they are medically necessary; rather, reference must be made to the Knox–Keene Act of which the Parity Act is a part and which defines required coverage for physical illnesses to consist of “basic health services.”

We conclude that the Legislature in crafting the Parity Act, which uses broad statutory language to mandate the provision of medically necessary services for mental health conditions, recognized that most mental health conditions have a physical basis, and also recognized the fundamental difference between the most effective treatments of mental and physical conditions. As a result the Legislature chose to delimit the scope of the Parity Act's reach with the concept of “medically necessary” rather than relying on the Knox–Keene Act's limiting principle of “basic health services.” We reverse the judgment of the trial court.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

A. Legal Framework

1. Knox–Keene Act and the Parity Act

In 1975, the Legislature enacted the Knox–Keene Act, which provides the legal framework for the regulation of California's individual and group health care plans, including health maintenance organizations (HMO) and other similarly structured managed care organizations (MCO). While HMO's and MCO's are regulated by the Department of Managed Health Care (DMHC), traditional health insurance companies are regulated by the Department of Insurance. The express purpose of the Knox–Keene Act is “to promote the delivery of health and medical care” for persons enrolled in health care service plans. (§ 1342.) The Knox–Keene Act provides that DMHC “has charge of the execution of the laws of this state relating to health care service plans and the health care service plan business including, but not limited to, those laws directing the department to ensure that health care service plans provide enrollees with access to quality health care services and protect and promote the interests of enrollees.” (§ 1341, subd. (a).) Under the Knox–Keene Act, plans must provide their subscribers with “basic health care services,” which are defined to include physician services, hospital inpatient services, diagnostic laboratory services, home health services, and preventive health services. (§ 1345, subd. (b).) DMHC's director is authorized to define the scope of required basic health care services. (§ 1367, subd. (i).)

In 1999, in enacting the Parity Act, the California Legislature specifically found that mental illnesses can be reliably diagnosed and treated, and that the treatment of mental illness was cost effective. Further, most private health insurance policies “provide coverage for mental illness at levels far below coverage for other physical illnesses.” (Assem. Bill No. 88 (1999–2000 Reg. Sess.) ch. 534, § 1.) Such coverage limitations resulted in inadequate treatment of mental illnesses, “relapse and untold suffering,” as well as increases in homelessness, crime, and resultant demands on the state budget. ( Ibid.)

The three main subdivisions of the Parity Act and its implementing regulation are the heart of the present debate over the scope of coverage for residential care to treat eating disorders. The Parity Act provides that, beginning in July 2000, every health plan providing hospital, medical or surgical coverage must also “provide coverage for the diagnosis and medically necessary treatment of severe mental illnesses of a person of any age” as specified in the statute. (§ 1374.72, subd. (a), italics added (hereafter subdivision (a)).) The statute specifically itemizes the “ ‘severe mental illnesses' ” which must be covered, including “[a]norexia nervosa” and “[b]ulimia.” (§ 1374.72, subd. (d)(7), (8).)

The Parity Act does not specifically define the term “medically necessary treatment,” although it does state that “[t]hese benefits include” outpatient services, inpatient hospital services, partial hospital services, and prescription drugs (if the plan otherwise covers prescription drugs.) (§ 1374.72, subd. (b) (hereafter subdivision (b).)) ² The Parity Act also provides “[t]he terms and conditions applied to the benefits required by this section, that shall be applied equally to all benefits under the plan contract, shall include, but not be limited to, the following: [¶] (1) [m]aximum lifetime benefits[;] [¶] (2) [c]opayments[; and] [¶] (3) [i]ndividual and family deductibles.” ( § 1374.72, subd. (c) (hereafter subdivision (c).))

The Parity Act's implementing regulation states, “(a) The mental health services required for the diagnosis, and treatment of conditions set forth in [ ] section 1374.72 shall include, when medically necessary, all health care services required under the Act including, but not limited to, basic health care services within the meaning of Health and Safety Code sections 1345(b) and 1367(i), and section 1300.67 of Title 28.” (Cal.Code Regs., tit. 28, § 1300.74.72, subd. (a) (implementing regulation).) ³

2. Harlick v. Blue Shield

On June 4, 2012, in Harlick,supra, 686 F.3d 699, the Ninth Circuit interpreted these provisions and addressed the issue of whether residential treatment for anorexia nervosa was covered under Blue Shield's insurance plan, and if not, whether the Parity Act nonetheless required coverage.⁴ Blue Shield's plan covered inpatient services, limited outpatient services, office visits, psychological testing, and counseling sessions for the treatment of mental illnesses. Although the Harlickcourt held the terms of Blue Shield's plan did not cover residential treatment for anorexia nervosa, the court found that the Parity Act mandated such a level of care. ( Id. at pp. 710, 721.)

Harlick,supra, 686 F.3d 699 reasoned that section 1374.72 defined anorexia nervosa as a “serious mental illness” that was subject to the Parity Act and therefore subdivision (a)...