The California State Senate Budget and Fiscal Review Committee heard testimony on DMHC oversight of behavioral health coverage and enforcement of state parity and timely-access rules, with members pressing the regulator about high appeal reversal rates and ongoing network problems.

Chair Scott Wiener opened the hearing by saying the committee would examine “regulation of critical consumer protections in California's commercial health insurance market, and with enforcement by the Department of Managed Healthcare.”

Why it matters: Committee members and outside advocates told DMHC leadership the department’s enforcement must be stronger because many consumers never reach independent review, and when they do the denial is often overturned. Department witnesses described multi-year investigations and a high rate of reversals on independent medical reviews that the department said it is tracking and trying to address.

DMHC’s role and recent enforcement actions
Mary Watanabe, director of the Department of Managed Health Care, told the panel the agency licenses about 40 health plans that cover nearly 30 million Californians and that DMHC is funded by assessments on health plans rather than the general fund. She summarized the department’s tools for enforcing parity and timely access — routine triannual medical surveys, complaint-driven nonroutine surveys, focused behavioral-health investigations funded in the 2021 budget and a new regulation implementing SB 855 and SB 221.

Watanabe described a multistage enforcement response to systemic problems at Kaiser Permanente: "The Kaiser settlement agreement is a good example of the various components of our oversight work and how we monitor compliance," she said, noting DMHC opened nonroutine surveys and a targeted enforcement investigation and later reached a settlement that required corrective actions and reporting. She said DMHC will monitor compliance through quarterly meetings, posted corrective-action work plans and follow-up on-site reviews.

Senators pressed DMHC about penalty totals and timetables. Testimony about financial terms varied in the hearing record: DMHC cited an administrative penalty in public remarks and later described a package of penalties, community investments and withholds when answering questions. DMHC said it will post quarterly reports on progress and validate plan changes with on-site reviews.

Independent medical reviews, grievance process and data gaps
Dan Southern, DMHC chief deputy director, described the enrollee grievance process and the independent medical review (IMR) pathway. He gave the committee IMR figures for recent years: "In 2023, we resolved a total of 2,838 IMRs and 557 of those were related to behavioral services. For all IMRs, 72.7% resulted in overturn or reversing the plan's decision. And for the 557 behavioral health IMRs, 76.7 percent were overturned through that IMR process," he said. He also provided preliminary 2024 figures showing roughly 3,478 total IMRs with 483 behavioral IMRs and preliminary overturn rates near 70% overall and about 77% in behavioral health.

Committee members described those overturn rates as alarming and asked why so many denials are reversed. Watanabe and Southern said the state lacks comprehensive visibility into how many denials never reach IMR because the law generally requires enrollees to exhaust a plan’s internal grievance process before seeking department review, except in urgent cases. Watanabe said, "I share your concern when we see very high, reversal rates," and both witnesses told the committee a bill this year could give DMHC more data-collection authority.

Behavioral health investigations, network adequacy and Kaiser
Watanabe described the Behavioral Health Investigations (BHIs) funded in 2021 as separate from triannual surveys, focused specifically on behavioral health access and barriers. DMHC said it has completed two phases of BHIs, found multiple Knox-Keene violations and identified operational barriers; the third phase is expected this summer with investigations continuing through 2029.

On Kaiser specifically, DMHC described a nonroutine survey and an enforcement investigation prompted by consumer complaints, media reports and a strike by health system employees. The settlement requires Kaiser to submit corrective-action plans, meet quarterly with DMHC and accept monitoring that DMHC said will include file reviews and an on-site nonroutine follow-up survey. When pressed about the corrective-action work plan’s level of specificity, Watanabe said the settlement agreement, the plan and the quarterly reports together define the department’s oversight: "I think you need to kind of look at those three pieces," she told the committee.

Network adequacy questions also arose after Anthem Blue Cross left a contract with Scripps Health in San Diego. Senator leaders said DMHC reviews block transfer filings when a plan terminates a group contract and evaluates whether receiving providers have the capacity to take on transferred members, while noting DMHC cannot compel a plan to continue contracting with a specific provider.

Stakeholder testimony and workforce issues
Advocates and provider groups told the committee many people cannot navigate the grievance and IMR process, and that denial overturn rates likely represent a small visible fraction of inappropriate denials. Leandra Clark Harvey of the California Behavioral Health Association and John Drebinger of the Steinberg Institute urged DMHC to require more parity reporting, use federal parity templates for nonquantitative treatment limits (NQTLs) and impose clearer timelines and public reporting on corrective-action plans.

Health plan representatives and plan associations cited workforce shortages and difficulties contracting with behavioral health providers as a root cause of access problems. A plan representative told the committee that plans often encounter providers who will not sign full contracts or who seek one-off agreements, complicating network arrangements and continuity of care.

What the department wants from the Legislature
DMHC officials told the committee they are tracking overturn rates and grievance volumes and said more statutory authority to collect data would help them identify where denials occur and whether patterns require enforcement. Watanabe and Southern urged the Legislature to consider data-collection bills and sustained funding for enforcement staff; DMHC said it has sought additional resources in budget change proposals to support BHIs and follow-up enforcement.

Ongoing oversight
Senators emphasized the urgency of improving access to behavioral health services and expressed interest in legislation to give DMHC stronger data and enforcement tools. DMHC said it will continue monitoring Kaiser through the settlement’s reporting requirements, finish the behavioral health investigations, and seek to validate improvements with on-site reviews and complaint monitoring.

Ending note
Committee members and witnesses agreed that higher levels of public reporting, clearer corrective-action timelines and better data on denials and grievances would help clarify where patients are losing access and what legislative fixes are needed next.

Speakers quoted: Mary Watanabe, Dan Southern, Scott Wiener, and multiple senators and outside advocates from the hearing.