Original Notice.

Preproposal statement of inquiry was filed as WSR 98-01-117.

Title of Rule: Standards for coverage of chemical dependency.

Purpose: The rule was identified in the commissioner's regulatory improvement process as one that was out of date and should be reviewed and updated.

Other Identifying Information: Insurance Commissioner Matter No. R 97-8.

Statutory Authority for Adoption: RCW 48.02.060, 48.44.050, and 48.46.200.

Statute Being Implemented: RCW 48.21.180, 48.44.240, 48.46.350.

Summary: This rule making would update the chemical dependency rule.

Reasons Supporting Proposal: References in the existing rule are outdated, benefit minimums established in 1987 have become ceilings and are no longer adequate to pay for increasingly effective but expensive treatment.

Name of Agency Personnel Responsible for Drafting: Don Sloma, P.O. Box 40255, Olympia, WA, (360) 586-5597; Implementation and Enforcement: Bethany Weidner, P.O. Box 40255, Olympia, WA, (360) 664-8137.

Name of Proponent: Deborah Senn, Insurance Commissioner, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: The chemical dependency rule was among those rules identified in the commissioner's regulatory improvement process as a rule that needed to be updated. The original rule was adopted in 1987 and has never been amended. References to WAC and RCW sections are outdated. Benefit provisions are no longer adequate. Since 1987, the treatment of chemical dependency has become increasingly effective but has also become increasingly expensive due to medical inflation. Provisions that were intended as floors in 1987 become ceilings and are no longer adequate to provide effective, comprehensive treatment to policyholders. This rule making will update the regulatory scheme.

Proposal Changes the Following Existing Rules: WAC 284-53-005 is created.

Existing WAC 284-53-010 is amended under the proposal:

Proposed subsection (1) is new. It would require coverage of medically necessary detoxification as an emergency medical condition. In addition, it would require that payments for medically necessary detoxification services not be counted as part of the minimum benefits required under the rule.

Proposed subsection (2) deletes a considerable amount of existing text in old subsection (1).

Proposed subsection (4)(a) deletes some existing text (old subsection (3)). It raises the minimum benefit from $5,000 to $10,000. Subsection (4)(b) ties future adjustments to the change in the medical care component of the consumer price index in the Seattle standard metropolitan statistical area as complied by the Bureau of Labor. The lifetime limit on chemical dependency coverage is removed.

Proposed subsection (5) deletes some existing text. Subsection [(5)](d) excepts medically necessary detoxification from prenotification standards.

There are numerous other changes also, mainly changes in language and references to increase clarity and bring the rule up to date.

A small business economic impact statement has been prepared under chapter 19.85 RCW.

Later in 1987, the insurance commissioner adopted WAC 284-53-010 to effectuate the legislation passed earlier that year.

The 1987 rule adopted minimum benefits of $5,000 in any consecutive twenty-four month period and a lifetime maximum benefit of not less than $10,000. The rule has not been amended since 1987. The floors established in 1987 have become de facto ceilings. A random survey of health plans conducted by staff of the Office of the Insurance Commissioner indicated that no plan had standard benefits that exceeded the 1987 minimums.

In the past twelve years, treatment of chemical dependency has become increasingly effective but has also become increasingly expensive due to medical inflation. The cost of effective, comprehensive treatment can exceed the minimum benefit over twenty-four months and approach the "lifetime" benefit.

In 1998, the commissioner decided to review this subject. In response to consumer complaints and the concerns of addiction treatment specialists and providers, the commissioner established a work group to focus on the issue of chemical dependency.

The work group was composed of consumers, insurers, addiction treatment providers, and representatives of state agencies. The work group met four times over the course of several months. It reviewed the existing rule and discussed the current state of chemical dependency treatment. One resource that was utilized was the standards established by the American Society of Addiction Medicine (ASAM). These criteria were developed and refined over the course of several years and have been adopted as the standard of care by eighteen states and the Department of Defense. In addition, the ASAM standards are a condition for certification to offer chemical dependency treatment in Washington according to rules adopted by the Washington State Department of Social and Health Services.

The work group suggested necessary and desired amendments to the rule and alternatives. The recommendation of the work group was submitted to the commissioner for her consideration. The draft rule submitted by the work group was the basis for the proposed rule.

Is the rule required by federal law or federal regulation? This rule is not required by federal law or regulation.

What industry is affected by the proposed rule? The industry code that would be affected by the proposed rules includes hospital and medical service plans, industry code # 6324. In Washington, such plans are called health care service contractors (HCSCs) and health maintenance organizations (HMOs). It will also apply to group and blanket disability carriers, unless exempted by RCW 48.21.190, which fall under the classification of accident and health insurance companies, industry code # 6321.

List the specific parts of the proposed rule, based on the underlying statutory authority (RCW section), which may impose a cost to business: Many of the changes to the language are substantive. Many more changes update and clarify language as a part of the commissioner's on-going regulatory improvement program.

The following provisions may impose a cost to businesses:

Proposed WAC 284-53-005 adds a definition of "medically necessary" or "medical necessity" which was developed by the American Society of Addiction Medicine.

Proposed WAC 284-53-010(1) would require coverage of medically necessary detoxification as an emergency medical condition. In addition, it would require that payments for medically necessary detoxification services not be counted as part of the minimum benefits required under the rule.

Proposed WAC 284-53-010 (4)(a) raises the minimum benefit from $5,000 to $10,000. Subsection [(4)](b) ties future adjustments to the change in the medical care component of the consumer price index in the Seattle standard metropolitan statistical area as compiled by the Bureau of Labor.

The lifetime limit on chemical dependency coverage is removed.

Proposed WAC 284-53-010(5) excepts medically necessary detoxification from prenotification standards.

What will be the compliance costs for the industries affected? There will be initial costs associated with raising the minimum benefit standards from $5,000 to $10,000 and removing the lifetime cap. Additionally, the rule would extend coverage in some cases by including coverage of medically necessary detoxification.

However, it should be noted that the initial minimum standards were established in 1987. In the twelve years that have passed, medical inflation has risen well over 100%. The "lifetime" cap of 1987 of $10,000 does not have the same relative value in 1999 as the minimum standard of $5,000 did in 1987. The benefit has become almost illusory. Adjusting the minimum benefit to $10,000 is intended to restore the benefit that originally existed in rule.

Removal of the "lifetime" cap reflects the efficacy and importance of chemical dependency treatment. Addiction treatment has outcomes that are comparable in efficacy to the treatment of other chronic conditions. Compliance rates for patients are higher for chemical dependency patients than for patients with diabetes, hypertension, and asthma, amongst other conditions. Thus, treatment can be extremely effective and patients are generally more apt to stay with the treatment than many other chronic conditions.¹

While initial treatment costs may rise for carriers, they will enjoy considerable cost-offsetting. Carriers may spend/pay less money on health coverage overall by providing the necessary chemical dependency coverage. Studies show that a mere 5% to 10% of the medical costs of a chemically dependent person are related to addiction treatment.² While chemical dependency users and their families are among the highest users of medical care, the cost of chemical dependency treatment is comparatively very low. The families of a drug or alcoholic dependent person use two to three times more health care services than a family without a chemically dependent person.³ The children of alcoholics incur medical costs 32% greater that other children.⁴ The health costs drop dramatically after treatment. It is important not only medically to adequately treat the chemically dependent person, it is important in terms of medical costs as well. The drug abuse treatment outcome study by the Center for Substance Abuse Treatment indicates that patients who receive long-term residential treatment (over ninety days) are almost twice as likely to remain free of drug use.⁵

An Aetna study of federal employees showed that chemically dependent enrollees and their families incurred costs of $398 per month immediately prior to substance abuse treatment. It dropped to $252 per month for the year after treatment and fell further to $192 per month.⁶ A 1997 Washington state study found that the hospital costs of treated (defined as receiving at least thirty days of chemical dependency treatment) clients had an average of $4,500 less in Medicaid medical costs ($3,500 in inpatient expenses, $1,000 in outpatient expenses) than the average untreated client for the five-year follow-up period.⁷ Studies by the state of California show that the longer the duration of treatment, the greater the cost-savings. They reported a reduction in hospitalizations of roughly one third after treatment.⁸

A study by Kaiser Permanente noted that after off-setting the reductions in the patient's medical service costs, the overall cost of treatment was a mere $136 per year per patient.⁹ This decline in the patient's health costs off-sets the great bulk of the costs of treatment and does not factor in the decline in health care costs of the family of the chemically dependent person.

It should be noted that the current rules include coverage of a limited amount of the possible costs of treatment. If coverage is unavailable or inadequate, the condition may not be treated or may be treated unsuccessfully. Unsuccessful treatment due to inadequate coverage reaps none of the cost savings and will incur considerably greater costs than the additional coverage amounts.

The net result will be at least a considerable cost-offset. There may be a complete cost-offset when the reduction in health costs of the chemically dependent person's family is included. Possibly, there could even be a net gain in terms of health costs once all savings are calculated.

What percentage of the industries in the four-digit standard industrial classification will be affected by the rule? The proposed rule would affect 100% of the health carriers that offer health plans subject to regulation by the insurance commissioner. It would also affect 100% of the group disability carriers that are not exempted by RCW 48.21.160.

Will the rule impose a disproportionately higher economic burden on small businesses within the four-digit classification? No. The proposed rule will not impose a disproportionately higher economic burden on smaller carriers.

Can mitigation be used to reduce the economic impact of the rule on small businesses and still meet the stated objective of the statutes that are the basis of the proposed rule? Yes. The effective date of the rule will be delayed until January 1, 2000, and the rule will only apply to contracts issued or renewed after that date.

No other mitigation techniques were proposed that achieved the goals of this rule making.

The rule drafter will continue to work with all parties, including carriers of all sizes, throughout the rule making period. If mitigation techniques are proposed that do not undermine the goals of the rule, they will be considered.

What steps will the commissioner take to reduce the costs of the rule on small businesses? See above.

Which mitigation techniques have been considered and incorporated into the proposed rule? The effective date of the rule will be delayed until January 1, 2000, and the rule will only apply to contracts issued or renewed after that date.

Which mitigation techniques were considered for incorporation into the proposed rule but were rejected, and why? No other mitigation techniques were proposed that achieved the goals of this rule making. A suggestion was made to exempt group plans from the amended requirements of the rule. That suggestion was not incorporated at this time. The importance and the efficacy of chemical dependency treatment to enrollees is undercut by exempting groups. Currently, the minimum standards are rarely exceeded by groups despite the fact that they are inadequate. There is no reason to believe that groups would adjust their standards in the future.

The rule drafter will continue to work with all parties, including carriers of all sizes. If mitigation techniques are proposed that do not undermine the goals of the rule, they will be considered.

Briefly describe the reporting, recordkeeping, and other compliance requirements of the proposed rule. There are no new reporting or record-keeping requirements. Carriers would have to change new contracts or reissued contracts after the effective date of January 1, 2000.

List the kinds of professional services that a small business is likely to need in order to comply with the reporting, recordkeeping, and other compliance requirements of the proposed rule: There are no new reporting or record-keeping requirements in this rule. It is expected that no new professional services will be needed by smaller carriers.

Cost of Equipment: There is no anticipated additional cost of equipment.

Cost of Supplies: There is no anticipated additional cost of equipment.

Cost of Labor: There should be no more than minimal labor costs associate with reconciling new and reissued filings to the requirements of the rule.

Cost of Increased Administration: There will be some negligible costs in reading and comprehending the new requirements. There may be some minimal costs associated with calculating the minimum benefit by determining the changes in the medical care component of the consumer price index. The commissioner may be able to offer technical assistance to carriers in this regard.

Compare the cost of compliance for small business with the cost of compliance for the largest business in the same four-digit classification, using one or more of the following: The cost of compliance should be proportional for small businesses. There should be no significant proportional differences in costs of equipment, supplies, labor, or administration. The benefits are exactly the same for all plans and any additional compliance costs should be proportional to the size of the carrier. Larger carriers may face slightly higher per-employee costs due to the added complexity of monitoring more plans, more contracts, and more materials.

Have businesses that will be affected been asked what the economic impact will be? All parties were informed of the commissioner's intent to revisit this subject and to draft rules regarding provider contracting on December 18, 1997. The proposal was published in the Washington State Register and was posted on the insurance commissioner's website. Interested parties and carriers, including smaller carriers, were mailed the CR-101 on December 22, 1997. The CR-101 requested comments and gave agency contact numbers for parties interested in participating in the rule-making process.

A work group of interested parties was established. The group was open to all interested participants. Members included consumers, representatives of carriers, providers of chemical dependency services, and representatives from other state agencies.

How did the commissioner involve small business in the development of the proposed rule? See above.

How and when were affected small businesses advised of the proposed rule? The CR-101 was filed on December 18, 1997. The proposal was published in the Washington State Register and was posted on the insurance commissioner's website. Interested parties and carriers, including smaller carriers, were mailed the CR-101 on December 22, 1997. The CR-101 requested comments and gave agency contact numbers for parties interested in participating in the rule-making process.

1	O'Brien and McLellan, "Myths About the Treatment of Addiction," The Lancet, January 27, 1996, Vol. 347, pages 237-240.
2	Langenbucher, J.W., McCrady B.S., and Esterly, R. Socioeconomic Evaluations of Addictions Treatment: Prepared for the President’s Commission on Model State Drug Laws. Pisctaway, N.J. Rutgers University, 1993.
3	Langenbucher, J.W., McCrady B.S., and Esterly, R. Socioeconomic Evaluations of Addictions Treatment: Prepared for the President’s Commission on Model State Drug Laws. Pisctaway, N.J. Rutgers University, 1993.
4	Children of Alcoholics Foundation, Inc. Children of Alcoholics in the Medical System: Hidden Problems; Hidden Costs, 1990.
5	U.S. Dept. Of Health and Human Services, Substance Abuse and Mental Health Services, Center for Substance Abuse Treatment, A Guide to Substance Abuse Services for Primary Care Physicians, 1997, page 57.
6	National Institute on Alcohol Abuse and Alcoholism. Alcoholism treatment impact on total health care utilization and costs: Analysis of the federal employee health benefit program with Aetna Life Insurance Company. Rockville, MD. U.S. Dept. Of Health and Human Services, 1985.
7	Luchansky, B., Longhi D. Cost Savings in Medicaid Medical Expenses: An Outcome of Publicly Funded Chemical Dependency Treatment in Washington State. Washington State Department of Social and Health Services, 1997.
8	Gerstein DR, Johnson RA, Harwood, et al. Evaluating Recovery Services: The California Drug and Alcohol Treatment Assessment (CALDATA) Report, Department of Alcohol and Drug Programs, Sacramento, CA, 1994.
9	Moore, Charles, Costs and benefits of Chemical Dependency Treatment at Kaiser Permanente, Sacramento Chemical Dependency Recovery Program, 1997.

A copy of the statement may be obtained by writing to Kacy Brandeberry, P.O. Box 40255, Olympia, WA 98504-0255, phone (360) 66-3784 [664-3784], fax (360) 664-2782.

RCW 34.05.328 applies to this rule adoption. This is a significant legislative rule.

Hearing Location: 14th and Water, Cherberg Building, Senate Hearing Room 2, Olympia, Washington, on July 1, 1999, at 10:00 a.m.

Assistance for Persons with Disabilities: Contact Lorie Villaflores by June 30, 1999, TDD (360) 407-0409.

Submit Written Comments to: Kacy Brandeberry, P.O. Box 40255, Olympia, WA 98504-0255, Internet e-mail KacyB@oic.wa.gov, fax (360) 664-2782, by June 30, 1999.

Date of Intended Adoption: July 15, 1999.

May 19, 1999

Robert A. Harkins

Chief Deputy Commissioner

OTS-2898.2

NEW SECTION
WAC 284-53-005
Definitions.

(1) "Chronic illnesses" include, but are not limited to, heart disease, diabetes, chronic obstructive pulmonary disease, and chemical dependency.

(2) "Medically necessary" or "medical necessity," with respect to chemical dependency coverage, means indicated in the Patient Placement Criteria for the Treatment of Substance Abuse-Related Disorders II as published in 1996 by the American Society of Addiction Medicine.

(3) Other terms used in this chapter, but not specifically defined here, shall have the meanings given in WAC 284-43-130 or, if not defined there, in WAC 284-50-030.

[]

Contractual provisions in any policy issued or renewed on or after January 1, 2000, for chemical dependency required by RCW 48.21.180, 48.44.240, or 48.46.350 shall meet the following standards and administrative requirements.

(1) Medically necessary detoxification must be covered as an emergency medical condition according to RCW 48.43.093, and so long as a patient is not yet enrolled in other chemical dependency treatment, detoxification may not be included when calculating payments within the chemical dependency payment minimum required in this chapter.

(2) The coverage for chemical dependency shall provide payment ((toward)) for reasonable charges for any medically necessary treatment and supporting services provided to ((covered individuals)) an enrollee by an "approved treatment ((facility)) program" approved ((pursuant to)) under RCW 70.96A.020(((2) or 69.54.030, which may include medical evaluations, psychiatric evaluations, room and board (inpatient only), psychotherapy (individual and group), counseling (individual and group), behavior therapy, recreation therapy, family therapy (individual and group) for the patient and covered persons, prescription drugs prescribed by an approved treatment facility, and supplies prescribed by an approved treatment facility.  The coverage shall provide such payment whether the treatment or services are provided on an inpatient (resident) or an outpatient (nonresident) basis, except to the extent that inpatient or outpatient coverage is not provided to the individual insured for other common illnesses or disease.  Inpatient coverage shall include detoxification if detoxification is not specifically included in other contract coverage)) (3). In addition, medically necessary detoxification services may also be provided in hospitals licensed according to chapter 70.41 RCW.

(((2))) (3) Except to the extent prohibited by this ((section)) chapter, the chemical dependency coverage may be limited by provisions of the contract that are applicable to other benefits or services for other ((common)) chronic illnesses or disease generally including, but not limited to, provisions relating to ((deductibles, coinsurance and copayments)) enrollee point of service cost sharing.  However, coverage shall not be denied by reason of contract provisions which are not pertinent to the treatment of chemical dependency, such as provisions requiring a treatment ((facility)) program to have surgical facilities or approval by the joint commission on accreditation of hospitals, that there be a physician in attendance, or that the exact date of onset be known.

(((3))) (4)(a) The minimum benefits for chemical dependency treatment((,)) and supporting services ((and detoxification)) shall be ((an amount which is the lesser of five)) no less than ten thousand dollars, exclusive of ((deductibles, coinsurance and copayments,)) all enrollee point of service cost-sharing amounts in any consecutive twenty-four-month period ((or an amount equal to the benefit limit in the contract applicable to the individual insured which would normally be applied to treatment of any common major illness or disease other than chemical dependency.  The benefits may be limited to a lifetime maximum of not less than ten thousand dollars exclusive of deductibles, coinsurance and copayments, notwithstanding WAC 284-44-040(2).  For purposes of determining the limitations allowed by this subsection, with regard to all benefits except the lifetime maximum a carrier may take credit for any benefits paid by any carrier on behalf of a covered individual for chemical dependency treatment and supporting services received in an immediately preceding twenty-four-month period.  For purposes of determining the lifetime maximum allowed by this subsection, calculation must be made on either a per contract or per carrier basis except that when one group contract holder has utilized one or more carriers or plans then a carrier may take credit for amounts paid on behalf of a covered individual from January 1, 1987, onward under all past and current carriers and plans with respect to that group contract holder)).

(((4))) (b) The minimum benefit specified in this subsection must be adjusted by a carrier in any of its contracts for which a new or revised form is filed with the commissioner. The adjustment must correspond with the change in the medical care component of the consumer price index for all urban consumers for the Seattle Standard Metropolitan Statistical Area compiled by the Bureau of Labor statistics, United States Department of Labor. The base year for the computation shall be 1999.

(5) Contract provisions subject to this rule:

(a) Shall not impose waiting periods or preexisting condition limitations on chemical dependency coverage, except that a carrier may impose ((a waiting period or)) no longer than a three month preexisting condition limitation for chemical dependency treatment and supporting services to the extent that a ((waiting period or)) preexisting condition limitation is imposed for other ((common)) chronic illnesses ((or disease)).

(b) ((Shall not provide for the application of comparative statistical measures which are lacking in statistical reliability.  Because of the limited number of approved treatment facilities in this state and the diversity of methodologies and fee structures, a measure based on the application of usual, customary and reasonable charges for overall chemical dependency treatment and supporting services is not currently acceptable but comparison of costs for specific components of such treatment and supporting services may be acceptable.

(c))) Shall not deny reasonable benefits for actual treatment and services rendered solely because a course of treatment was interrupted or was not completed.

(((d))) (c) May limit coverage to specific facilities but only if the carrier provides ((one or more reasonably available and conveniently located)) or contracts for the provision of approved treatment ((facilities)) programs under RCW 70.96A.020(((2) or 69.54.030)) which alone or in combination offer both inpatient and outpatient care and which comply with network adequacy requirements established in WAC 284-43-200.  This right to limit coverage to specific facilities ((will)) permits a carrier to limit diagnosis and treatment to that rendered by itself or by a facility to which it makes referrals, but, in either case, only if the facility is or part of an approved treatment ((facility)) program under RCW 70.96A.020(((2) or 69.54.030)).

(((e))) (d) Except in the case of detoxification services, may require prenotification in all reasonable situations; may also require a second opinion if such second opinion is required under the contract generally for other ((common)) chronic illnesses ((and disease)).  Prenotification with respect to medically necessary detoxification ((in most cases would)) services is not ((be)) reasonable.

(((5))) (6) In situations where an ((insured)) enrollee is under court order to undergo a chemical dependency assessment or treatment, or in situations related to deferral of prosecution, deferral of sentencing or suspended sentencing, or in situations pertaining to motor vehicle driving rights and the Washington state department of licensing, the carrier may require the ((insured)) enrollee to furnish at the ((patient's)) enrollee's expense no less than ten and no more than thirty working days before treatment is to begin, an initial assessment of the need for chemical dependency treatment and a treatment plan, made by an individual of the ((patient's)) enrollee's choice who is a ((qualified alcoholism and/or drug treatment)) chemical dependency counselor as defined in chapter 440-22 WAC employed by an approved treatment ((facility)) program under RCW 70.96A.020(((2) or 69.54.030)) or licensed under chapter 18.57 or 18.71 RCW to enable the carrier to make its own evaluation of medical necessity prior to scheduled treatment. Nothing in this chapter may be construed to require a carrier to pay for court ordered chemical dependency treatment that is not medically necessary, nor may anything in this chapter be construed to relieve a carrier from its obligations to pay for court ordered chemical dependency treatment that is medically necessary.

(((6))) (7) Except as determined to be medically necessary or otherwise specifically provided in this ((section)) chapter, contractual provisions subject to this section and the administration of such provisions shall not use definitions, predetermination procedures or other prior approval requirements, or other provisions, requirements or procedures, which ((unreasonably)) restrict access to treatment, continuity of care or payment of claims.

[Statutory Authority: RCW 48.02.060, 48.44.050 and 48.46.200.  87-18-050 (Order R 87-10), § 284-53-010, filed 8/31/87, effective 1/1/88; 86-18-027 (Order R 86-2), § 284-53-010, filed 8/27/86, effective 1/1/87.]

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