California SB 855: Mental Health Coverage and Medical Necessity

California’s SB 855 requires every state-regulated health plan and insurance policy to cover medically necessary treatment for all mental health and substance use disorders on the same terms it applies to any other medical condition. The law took effect January 1, 2021, and it rewrote California’s Mental Health Parity Act to close the loopholes insurers had used to limit behavioral health care. It defines what counts as medically necessary, dictates which clinical standards insurers must use, and bans plans from capping coverage at short-term or acute care.¹

What Your Plan Has to Cover

SB 855 covers any condition listed in the current edition of either the American Psychiatric Association’s Diagnostic and Statistical Manual of Mental Disorders (DSM) or the World Health Organization’s International Classification of Diseases (ICD).² It is not limited to a short list of named disorders. If the diagnosis is in either manual, your plan has to cover treatment for it, and when the manuals are updated, newly recognized conditions are automatically included.

Covered benefits run across the full continuum of care, not just office visits. The law requires:²

Basic outpatient services: psychotherapy, counseling, psychological testing, case management, and medication management.
Intermediate services: residential treatment, partial hospitalization, and intensive outpatient programs.
Prescription drugs, if your plan includes a drug benefit.
Behavioral health crisis services, including care delivered through California’s 988 system under the CDI’s 2025 final regulations.³

The parity principle underneath all of this: your plan cannot impose visit limits, higher copays, stricter preauthorization requirements, or narrower network access standards on these services than it imposes on comparable medical or surgical care.

How Medical Necessity Gets Decided

Before SB 855, insurers wrote their own internal rulebooks for what counted as medically necessary, and many of those rulebooks were more restrictive than the standards clinicians actually use. The federal Wit v. United Behavioral Health case found that one of the largest behavioral health administrators in the country had applied criteria that were “pervasively more restrictive than generally accepted standards of care.”⁴ SB 855 was California’s direct response.

Under the law, every medical necessity determination must be based on current generally accepted standards of care, meaning criteria developed by nonprofit professional associations rather than proprietary internal guidelines. For substance use disorders, that typically means the ASAM Criteria developed by the American Society of Addiction Medicine. For other mental health conditions, plans must use tools such as the Level of Care Utilization System (LOCUS), the Child and Adolescent Level of Care Utilization System (CALOCUS/CASII), or the Early Childhood Service Intensity Instrument (ECSII).⁵ If a plan wants to use criteria from an organization not listed in the regulations, it has to file notice with the DMHC and show those criteria match generally accepted standards.

The law also regulates who is doing the reviewing. Plans must sponsor formal education programs, run by the relevant nonprofit clinical associations, for every employee or contractor who reviews claims or makes medical necessity decisions. They must also conduct interrater reliability testing to check whether different reviewers reach the same decision on the same case, and they must pass that testing at a rate of at least 90 percent.⁶ For substance use disorder reviews, the CDI’s 2025 regulations require that an adverse determination be made by an actively practicing, board-certified addiction specialist physician.³

No More Short-Term Treatment Caps

One of the most consequential pieces of SB 855 is a flat prohibition on limiting mental health or substance use disorder coverage to short-term or acute treatment, and plans must say so explicitly in their Evidence of Coverage documents.⁷⁸

In practice, this stops a common pattern: insurers approving a brief course of treatment and then cutting off further care even when the treating clinician recommended continuing. Under SB 855, if the applicable nonprofit clinical criteria indicate a patient still meets the threshold for a given level of care, the plan has to keep authorizing it. The law also prevents a plan from retroactively rescinding a treatment authorization after a provider has already delivered services in good faith.²

Does SB 855 Apply to Your Coverage

SB 855 applies to all state-regulated health plans and insurance policies in California: individual-market coverage, and group plans from both small and large employers, as long as the plan is fully insured, meaning the insurer bears the financial risk.¹ The Department of Managed Health Care (DMHC) oversees health care service plans such as HMOs. The California Department of Insurance (CDI) oversees traditional insurance policies.³

The main gap is self-insured employer plans. Many large employers fund employee health benefits directly rather than buying a policy. Those arrangements are regulated under the federal Employee Retirement Income Security Act (ERISA), which preempts state insurance mandates, so SB 855 does not apply.⁹ If you get coverage through a self-insured employer, your parity protections come from the federal Mental Health Parity and Addiction Equity Act, enforced by the U.S. Department of Labor’s Employee Benefits Security Administration.

To find out which category you are in, check your plan documents or ask your employer’s benefits department whether the plan is fully insured or self-funded. That one answer decides which rules protect you and which agency handles your complaints.

If Your Claim Is Denied

If your plan denies, delays, or modifies a request for mental health or substance use treatment, you have a structured path to challenge it. The steps differ depending on which agency regulates your plan.

DMHC-Regulated Plans

Start by filing a grievance directly with your health plan. You have to participate in the plan’s grievance process for 30 days before escalating. The exception is an immediate, serious threat to your health, in which case you can contact the DMHC right away.¹⁰

If the plan does not resolve your grievance within 30 days, or you disagree with the outcome, file an Independent Medical Review (IMR) and complaint with the DMHC using a single form. An independent medical expert, not employed by your health plan, reviews the case. Standard IMRs are generally decided within 45 days from the date the case qualifies, and expedited reviews, used when there is severe pain or risk of serious harm, move faster.¹⁰ The IMR decision is final. Neither you nor the insurer can appeal it, and if the reviewer overturns the denial, the plan has to authorize the service.

CDI-Regulated Policies

For insurance policies overseen by the CDI, the process looks similar: internal appeal with the insurer first, then escalation to the CDI. You can reach the CDI’s consumer hotline at (800) 927-4357, or file a complaint online through the CDI website.³

How SB 855 Goes Beyond Federal Parity Law

The federal Mental Health Parity and Addiction Equity Act (MHPAEA) requires group health plans to treat mental health and substance use benefits no more restrictively than medical and surgical benefits.¹¹ SB 855 is stronger in three concrete ways. It defines medical necessity by reference to specific nonprofit clinical standards instead of leaving the definition to each insurer. It bans short-term treatment limits outright. And it mandates both utilization review training and interrater reliability testing, neither of which federal law requires.

Regulators have backed the law with real penalties. In one DMHC enforcement action, a major California health plan was fined $200 million after findings that included failure to use the nonprofit clinical criteria SB 855 requires. That signals California treats parity violations as substantive, not paperwork.

If your coverage is state-regulated, SB 855 gives you the right to medically necessary care across the full range of recognized conditions and levels of care, assessed against the same clinical standards your treating providers use. Knowing which agency oversees your plan, and keeping documentation from your clinicians about why the recommended treatment is medically necessary, puts you in the strongest position to use that right.

1
California Legislative Information. California Health and Safety Code 1374.72
2
California Legislative Information. California Insurance Code 10144.5
3
California Department of Insurance. Commissioner Lara Expands Mental Health Access With Final Landmark Rulemaking to Enforce California Mental Health Parity Act
4
Senate of California. SB 855 Fact Sheet – Mental Health as a Medical Necessity
5
Department of Managed Health Care. APL 24-007 – Implementation of Senate Bill 855 Regulation, Mental Health and Substance Use Disorder Coverage
6
Department of Managed Health Care. APL 21-002 – SB 855, MH/SUD Coverage
7
LegiScan. CA SB855 2019-2020 Regular Session Chaptered
8
Legal Information Institute. California Code of Regulations Title 28 Section 1300.74.72
9
U.S. Department of Labor. Self-Compliance Tool for the Mental Health Parity and Addiction Equity Act (MHPAEA)
10
Department of Managed Health Care. How to File a Complaint
11
Office of the Law Revision Counsel. 29 US Code 1185a – Parity in Mental Health and Substance Use Disorder Benefits