Section 1374.721.
Cal. Health and Safety Code - HSC § 1374.721.
in effect(a)
A health care service plan that provides hospital, medical, or surgical coverage shall base any medical necessity determination or the utilization review criteria that the plan, and any entity acting on the plan’s behalf, applies to determine the medical necessity of health care services and benefits for the diagnosis, prevention, and treatment of mental health and substance use disorders on current generally accepted standards of mental health and substance use disorder care.
(b)
In conducting utilization review of all covered health care services and benefits for the diagnosis, prevention, and treatment of mental health and substance use disorders in children, adolescents,
and adults, a health care service plan shall apply the criteria and guidelines set forth in the most recent versions of treatment criteria developed by the nonprofit professional association for the relevant clinical specialty.
(c)
In conducting utilization review involving level of care placement decisions or any other patient care decisions that are within the scope of the sources specified in subdivision (b), a health care service plan shall not apply different, additional, conflicting, or more restrictive utilization review criteria than the criteria and guidelines set forth in those sources. This subdivision does not prohibit a health care service plan from applying utilization review criteria to health care services and benefits for mental health and substance use disorders that meet either of the following criteria:
(1)
Are outside the scope of the criteria and guidelines set forth in the sources specified in subdivision (b), provided the utilization review criteria were developed in accordance with subdivision (a).
(2)
Relate to advancements in technology or types of care that are not covered in the most recent versions of the sources specified in subdivision (b), provided that the utilization review criteria were developed in accordance with subdivision (a).
(d)
If a health care service plan purchases or licenses utilization review criteria pursuant to paragraph (1) or (2) of subdivision (c), the plan shall verify and document before use that the criteria were developed in accordance with subdivision (a).
(e)
To ensure the proper use of the criteria described in subdivision (b), every health care service plan shall do all of the
following:
(1)
Sponsor a formal education program by nonprofit clinical specialty associations to educate the health care service plan’s staff, including any third parties contracted with the health care service plan to review claims, conduct utilization reviews, or make medical necessity determinations about the clinical review criteria.
(2)
Make the education program available to other stakeholders, including the health care service plan’s participating providers and covered lives. Participating providers shall not be required to participate in the education program.
(3)
Provide, at no cost, the clinical review criteria and any training material or resources to providers and health care service plan
enrollees.
(4)
Track, identify, and analyze how the clinical review criteria are used to certify care, deny care, and support the appeals process.
(5)
Conduct interrater reliability testing to ensure consistency in utilization review decisionmaking covering how medical necessity decisions are made. This assessment shall cover all aspects of utilization review as defined in paragraph (3) of subdivision (f).
(6)
Run interrater reliability reports about how the clinical guidelines are used in conjunction with the utilization management process and parity compliance activities.
(7)
Achieve interrater reliability pass rates of at least 90 percent and, if
this threshold is not met, immediately provide for the remediation of poor interrater reliability and interrater reliability testing for all new staff before they can conduct utilization review without supervision.
(f)
The following definitions apply for purposes of this section:
(1)
“Generally accepted standards of mental health and substance use disorder care” means standards of care and clinical practice that are generally recognized by health care providers practicing in relevant clinical specialties such as psychiatry, psychology, clinical sociology, addiction medicine and
counseling, and behavioral health treatment pursuant to Section 1374.73. Valid, evidence-based sources establishing generally accepted standards of mental health and substance use disorder care include peer-reviewed scientific studies and medical literature, clinical practice guidelines and recommendations of nonprofit health care provider professional associations, specialty societies and federal government agencies, and drug labeling approved by the United States Food and Drug Administration.
(2)
“Mental health and substance use disorders” has the same meaning as defined in paragraph (2) of subdivision (a) of Section 1374.72.
(3)
“Utilization review” means either of the following:
(A)
Prospectively,
retrospectively, or concurrently reviewing and approving, modifying, delaying, or denying, based in whole or in part on medical necessity, requests by health care providers, enrollees, or their authorized representatives for coverage of health care services prior to, retrospectively or concurrent with the provision of health care services to enrollees.
(B)
Evaluating the medical necessity, appropriateness, level of care, service intensity, efficacy, or efficiency of health care services, benefits, procedures, or settings, under any circumstances, to determine whether a health care service or benefit subject to a medical necessity coverage requirement in a health care service plan contract is covered as medically necessary for an enrollee.
(4)
“Utilization review criteria” means any
criteria, standards, protocols, or guidelines used by a health care service plan to conduct utilization review.
(g)
This section applies to all health care services and benefits for the diagnosis, prevention, and treatment of mental health and substance use disorders covered by a health care service plan contract, including prescription drugs.
(h)
This section applies to a health care service plan that conducts utilization review as defined in this section, and any entity or contracting provider that performs utilization review or utilization management functions on behalf of a health care service
plan.
(i)
The director may assess administrative penalties for violations of this section as provided for in Section 1368.04, in addition to any other remedies permitted by law.
(j)
A health care service plan shall not adopt, impose, or enforce
terms in its plan contracts or provider agreements, in writing or in operation, that undermine, alter, or conflict with the requirements of this section.
(k)
This section does not apply to contracts entered into pursuant to Chapter 7 (commencing with Section 14000) or Chapter 8 (commencing with Section 14200) of Part 3 of Division 9 of the Welfare and Institutions Code, between the State Department of Health Care Services and a health care service plan for enrolled Medi-Cal beneficiaries.
References
referencesCal. Welfare and Institutions Code - WIC § 14200.
referencesCal. Health and Safety Code - HSC § 1374.73.
referencesCal. Health and Safety Code - HSC § 1374.72.
referencesCal. Health and Safety Code - HSC § 1368.04.
referencesCal. Health and Safety Code - HSC § 14000.
Source: CA Legislative Counsel Bulk DataURL: https://downloads.leginfo.legislature.ca.gov/pubinfo_2025.zipFetched: 6/27/2026