Health care: medically necessary treatment.

Plain English Breakdown

The official source material does not provide specific details on the penalties that may be assessed for violations of utilization review requirements.

Health Care: Medically Necessary Treatment

AB-980 requires health care service plans and insurance policies to cover medically necessary treatment of physical conditions under the same terms as other medical conditions, starting January 1, 2026.

What This Bill Does

• Requires health care service plans and insurance policies to provide coverage for medically necessary treatment of physical conditions from January 1, 2026.
• Allows out-of-network delivery of medically necessary services if they are not available within geographic and timely access standards.
• Sets clinical criteria and guidelines that must be used in reviewing requests for health care services based on medical necessity.
• Gives the Director of the Department of Managed Health Care or the Insurance Commissioner authority to assess penalties for violations related to utilization review.

Who It Names or Affects

• Health care service plans
• Insurance companies
• People with health insurance or health care service plans

Terms To Know

Utilization review

The process used by health care providers to approve, modify, delay, or deny requests for health care services based on medical necessity.

Medically necessary health care service

Legally prescribed medical care that is reasonable and meets the standard set by the medical community.

Limits and Unknowns

• It is unclear what specific penalties may be assessed for violations of utilization review requirements.
• The exact clinical criteria and guidelines to be used in reviewing requests are not detailed.

Official Summary Text

AB 980, as amended, Arambula.
Health
care service plan: managed care entity: duty of care.
care: medically necessary treatment.
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 provides for the regulation of health insurers by the Department of Insurance. Existing law requires a health care service plan contract or health insurance policy 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. Existing law generally authorizes a health care service plan or health insurer to use utilization review to approve, modify, delay, or deny requests for health care services based on medical necessity.
This bill would require a health care service plan contract or health insurance policy issued, amended, or renewed on or after January 1, 2026, to provide coverage for medically necessary treatment of physical conditions and diseases under the same terms and conditions applied to other medical conditions, as specified. The bill would require the delivery of medically necessary services out of network if those services are not available within geographic and timely access standards. The bill would require a plan or insurer to apply specified clinical criteria and guidelines in conducting utilization review of the covered health care services and benefits for physical conditions and diseases. The bill would authorize the Director of the Department of Managed Health Care or the Insurance Commissioner, as applicable, to assess administrative or civil penalties, as specified, for violation of the requirements relating to utilization review. Because a willful violation of
these requirements relative to health care service plans would be a crime, the bill would impose a state-mandated local program.
Under existing law, a health care service plan or managed care entity has a duty of ordinary care to arrange for the provision of medically necessary health care services to its subscribers or enrollees and is liable for all harm legally caused by its failure to exercise that ordinary care when the failure resulted in the denial, delay, or modification of the health care service recommended for, or furnished to, a subscriber or enrollee and the subscriber or enrollee suffers substantial harm, as defined.
This bill would define “medically necessary health care service” for purposes of the above-described provision to mean legally prescribed medical care that is reasonable and comports with the medical community standard.
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.

Current Bill Text

Download Bill PDF