As the demand for behavioral health services continues to rise, federal and state lawmakers are introducing a growing number of bills aimed at regulating the industry.
Most recently, California Governor Gavin Newsom signed two new behavioral health-related bills into law while vetoing two others. The new laws restrict providers’ ability to offer housing and transportation services and prohibit paying for clients’ insurance coverage. Meanwhile, the vetoed bills sought to curb misleading advertising and introduce new licensing requirements for addiction recovery facilities.
While these changes are specific to California, industry stakeholders believe they could set a precedent for national behavioral health reform.
New Laws in California
Two key pieces of legislation, AB 919 and AB 290, have been signed into law.
AB 919: Regulating Housing and Transportation in Treatment Programs
AB 919 focuses on the housing and travel practices of labs and certified outpatient treatment programs. The law mandates that treatment facilities establish separate housing contracts with patients, ensuring that rent payments are the responsibility of the patient rather than being tied to health insurance. It also imposes limitations on transportation services that these facilities can provide.
The law is designed to protect patients from being left homeless after receiving treatment, an issue highlighted in the Orange County Register’s 2017 “Rehab Riviera” investigative series, which exposed exploitative practices in California’s addiction treatment industry.
“This law aims to prevent patients from being evicted from their housing and ending up on the streets following treatment,” said Polsinelli shareholder Rick Rifenbark during a recent webinar on behavioral health compliance.
AB 290: Addressing Insurance Payment Incentives
AB 290 was initially introduced to regulate dialysis providers but also has implications for behavioral health providers. The law seeks to eliminate the financial incentives tied to providers covering patients’ insurance premiums. Previously, some providers would pay insurance premiums for patients in exchange for significant reimbursements from insurers. The new law reduces reimbursement rates for these services to Medicare levels, limiting the financial incentives behind this practice.
While some argue this change may negatively impact providers with good intentions, Governor Newsom contends that patients should receive the same level of care, regardless of financial backing.
“Charities that purport to impartially provide patient assistance, and the providers that substantially fund these charities, should act in good faith and continue providing assistance to patients,” Newsom stated in his signing letter.
Vetoed Bills and Future Implications
Despite these new laws, two proposed bills—AB 920 and SB 589—were vetoed, though legal experts believe they could be reintroduced in revised forms.
AB 920: Licensing Requirements for Outpatient Centers
AB 920 aimed to require outpatient addiction treatment centers to obtain licenses from the California Department of Health Care Services. Governor Newsom vetoed the bill, citing the complexity of creating a new licensing framework. However, its author, Assemblywoman Cottie Petrie-Norris, has indicated that she and other proponents are working on drafting a more comprehensive version of the legislation.
SB 589: Regulating Misleading Advertising
SB 589 sought to prohibit false and misleading advertising by both licensed and unlicensed substance abuse treatment facilities and marketers. This bill was also inspired by the “Rehab Riviera” exposé, which revealed instances of deceptive marketing practices that misled families seeking treatment for their loved ones.
While Governor Newsom agreed that unethical marketing practices should be addressed, he vetoed the bill, arguing that enforcement would be difficult due to the lack of regulatory oversight over recovery residences and third-party marketers.
“The Department of Health Care Services has no jurisdiction or licensing oversight over recovery residences or third parties. As such, it cannot take enforcement against those entities for violations of advertisement requirements,” Newsom explained in his veto message.
Legal experts believe that a revised version of SB 589, potentially excluding sober living residences from its scope, could be reintroduced in the near future.
Broader Impact on the Behavioral Health Industry
California has a history of pioneering health care regulations that later influence nationwide policies. Many industry experts believe that these new behavioral health laws could be the first wave of broader reforms across the country.
“As suggested by the … new California laws, we’ll likely see additional regulation in this area at the state level,” said Rifenbark during Polsinelli’s legal update webinar.
As the behavioral health sector continues to evolve, providers should remain vigilant in tracking legislative changes that could impact their operations. By understanding and adapting to new regulations, they can position themselves to navigate an increasingly complex legal landscape while continuing to provide essential services to those in need.
