Electronic Summer 2024 | Issue 59

State Legislative Update

By: Mark Peysakhovich, IPS Legislative Consultant

Illinois General Assembly Moves to Protect Mental Health Patients from Insurance Company Abuses

For many years, prior authorization requirements and step therapy/fail first policies have been abused by insurance companies to pad their profits. This year, state officials moved to protect patients from some of these unfair and unhealthy practices.

First, with support from Governor JB Pritzker, both houses of the Illinois General Assembly passed House Bill 5395 (The Healthcare Protection Act), which now awaits the Governor’s signature. Although nothing in Springfield can be taken for granted, since the Governor advocated for the policies included in this bill, he is likely to sign it. Once enacted, the following provisions will kick in at the beginning of 2026.

The law will end prior authorization requirements for admission for inpatient mental health treatment at participating hospitals. For the first 72 hours, coverage will not be subject to concurrent review, but insurers must be made aware of the admission and the early treatment plan within the first 48 hours. While retrospective review of treatments will still be allowed, patients themselves will be protected from retrospective billing. If coverage is denied retroactively, patients cannot be billed for the treatment they got up to the date of the denial, except for relevant deductibles, copayments and/or coinsurance. 

The legislation will also prohibit step therapy requirements in most cases, unless drug substitution reviews are otherwise legally applicable. Unfortunately, this provision does not apply to Medicaid managed care plans for drugs not listed on the newest Preferred Drug List.

Importantly, HB 5395 defines the term “step therapy” as a utilization review or formulary requirement that specifies, as a condition of coverage under a health care plan, the order in which certain health care services must be used to treat or manage an enrollee's health condition. Step therapy does not include utilization review based on generally accepted standards of care; the removal of a drug from a formulary or changing the drug’s preferred or cost sharing tier to higher cost sharing; a requirement to obtain prior authorization for the requested treatment; or utilization controls or a preferred drug list required under the Public Aid Code.

Another notable bill that recently passed the Illinois General Assembly, Senate Bill 3268 (the Medicaid Omnibus Package), also fixes some insurance problems. It increases the Medicaid psychiatry reimbursement rate to $264.42 per hour. Assuming the bill gets signed into law by Gov. Pritzker, the rate increase is effective January 1, 2025.

Most importantly, SB 3268 improves access to psychotropic medications for Medicaid recipients by limiting the ability of Medicaid to require prior authorization for the use of psychotropic medications to treat serious mental illnesses in adults. Specifically, prior authorization cannot be used when the patient has changed providers, including a change from inpatient to outpatient provider and the patient is stable on a drug that was previously prescribed; when the patient has changed insurance coverage and is stable on a drug that has been previously prescribed and received prior authorization; or, when the patient has previously been prescribed and obtained prior authorization for the drug and the prescription modifies the dosage or frequency or both as part of the same treatment.

IPS actively supported these policies, and we are grateful to see these important steps in the ongoing efforts to shore up our ailing health care system. We commend the patients, providers and advocates whose hard work in Springfield makes these victories possible.