INSURANCE ‑- MEDICAL AID ‑- MENTAL HEALTH TREATMENT ‑- GROUP DISABILITY INSURANCE COVERAGE FOR MENTAL HEALTH TREATMENT
The provisions of RCW 48.21.240, RCW 48.44.340 and RCW 48.46.290, requiring group disability insurers, health care service contractors, and health maintenance organizations, respectively, to offer supplemental coverage for mental health treatment by a physician, psychologist or community mental health agency unless waived by the contract holder, do allow those companies or organizations, acting in good faith in accordance with RCW 48.01.030, then to offer such coverage only by a physician or psychologist if the contract holder has first waived the mandated three‑part offering.
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May 9, 1985
Honorable Ray Moore
State Senator, 36th District
1722 Bigelow Avenue North
Seattle, Washington 98109
Cite as: AGO 1985 No. 8
By letter previously acknowledged you requested the opinion of this office upon the following question:
"Do RCW 48.21.240 and RCW 48.44.340, requiring group insurance and health care contracts to offer optional supplemental coverage for mental health treatment by a physician, psychologist or community mental health agency, unless waived by the contract holder, allow contracts to offer such coverage only by a physician or psychologist if the contract holder had waived the mandated offering?"
We answer your question in the affirmative for the reasons set forth in our analysis.
RCW 48.21.240 provides that:
[[Orig. Op. Page 2]]
"(1) Each group disability insurance contract which is issued, delivered, or renewed in this state on or after July 1, 1983, shall offer optional supplemental coverage for mental health treatment for the insured and the insured's covered dependents. Treatment shall be covered under the optional supplemental coverage if treatment is rendered by: (a) A physician licensed under chapter 18.71 or 18.57 RCW; (b) a psychologist licensed under chapter 18.83 RCW; or (c) a community mental health agency licensed by the department of social and health services pursuant to chapter 71.24 RCW. The treatment shall be covered at the usual and customary rates for such treatment. However, the treatment may be subject to contract provisions with respect to reasonable deductible amounts or copayments. In order to qualify for coverage under this section, a licensed community mental health agency shall have in effect a plan for quality assurance and per review, and the treatment shall be supervised by a physician licensed under chapter 18.71 or 18.57 RCW or by a psychologist licensed under chapter 18.83 RCW.
"(2) The group disability insurance contract may provide that the coverage for mental health treatment is waived for all covered members if the contract holder so states in advance in writing to the insurer."
RCW 48.21.240 was enacted as § 1 of chapter 35, Laws of 1983. Section 2 of that act, now codified as RCW 48.44.340, is identical in all respects except that it applies, instead, to health care service contractors under chapter 48.44 RCW. In addition by § 3 (now RCW 48.46.290), the same requirement was also imposed with respect to health maintenance organizations. Your question, then, actually relates to all three statutes. The problem which is common to all three and which gives rise to your question, however, can be seen from an examination of the provision quoted above.
It is clear from the language of subsection (1) that each group contract must offer coverage for all three sources of treatment, i.e., treatment rendered by a licensed physician, treatment rendered by a licensed psychologist, and treatment rendered by a qualified community mental health agency. It is likewise clear that this mandatory offering need not be accepted; as stated in subsection (2), it may be "waived."
What is less clear, however, is the answer to two related questions. First, may the waiver be made with respect to one or [[Orig. Op. Page 3]] two parts of the mandatory offering or, instead, may it be made only with respect to the entire offering? Must the waiver, in short, be on an "all or nothing" basis? And second, even if the waiver must on an "all or nothing" basis, are the parties still free (once the waiver has been made) to negotiate a contract which provides less than all three types of coverage?
In addressing these issues, we start with the fundamental proposition that a statute is to be interpreted in such a way as to ascertain and give effect to the intent and purpose of the legislation as expressed by the act as a whole, and that the language of the statute itself is the first place to look for that legislative intent and purpose. Condit v. Lewis Refrigeration Co., 101 Wn.2d 106, 110, 676 P.2d 466 (1984). With that principle in mind, we believe the answer to the first question is to be found in the language of subsection (2), supra, which states that the health care contract ". . . may provide that the coverage for mental health treatment is waived for all covered members . . ."
The scope of this provision is not as clear as might first appear. It certainly allows the person making the waiver (e.g., the employer) to say, in effect: "I don't want may mental health coverage at all." But does it also allow him to make the waiver with respect to only part of the offered coverage? Does it allow him to say, instead: "I don't want all three parts of the coverage but I do want this single part or these two parts"?
While the answer is not entirely clear we believe that the most natural reading of the phrase ". . . the coverage for mental health treatment . . ." encompasses all three parts as an entirety, and only that. That phrase, in other words, refers to the entire three‑part offering which must be made under subsection (1) and not to any of its individual parts, taken separately. And thus the waiver contemplated by subsection (2) must be made on an "all or nothing" basis. Conversely, if the legislature had intended to allow a partial waiver it could easily have so provided, by inserting the phrase "in whole or in part" after the word "waived" in subsection (2).
As noted above, however, a further question still remains. Once the waiver of all three parts of the mandatory offer is made are the parties then free to negotiate a contract which provides only one or two sources of mental health treatment?
In addressing this ultimate issue certain preliminary considerations should be mentioned. First, before the enactment of [[Orig. Op. Page 4]] the law in question the parties presumably were free to agree upon as broad or as narrow a coverage for mental health treatment as they might wish. And likewise, the insurer was also free to make an offer for such coverage as broad or as narrow as it might wish, and indeed to make no offer for such coverage at all.
The adoption of chapter 35, Laws of 1983, certainly changed the second proposition; the insurer must now offer the entire three‑part coverage. But did that law change the first proposition as well? In other words, do the resulting statutes now prohibit the parties (once the waiver is made under subsection (2)) from thereafter negotiating a contract for as broad or as narrow a coverage as they wish?
Clearly, the statutes do not explicitly impose any such prohibition. Subsection (1) of each provision expressly requires only the mandatory offering which the insurer must make; and subsection (2) expressly addresses only the waiver which the policy holder may make if he so wishes. Accordingly, if the statutes impose this prohibition they do so only by implication.
In order to determine whether the prohibition should be implied we must first identify exactly what it is that would be prohibited. And that may be characterized as the common-law right of the parties to enter into such contracts as they wish. We use the phrase "common law right" because the right is based, not upon any statute, but rather upon fundamental principles embodied in the judicially developed law of contracts.
This characterization is important, in our view, because of a rule of construction which is expressed as follows in McNeal v. Allen, 95 Wn.2d 265, 621 P.2d 1285 (1980):
". . .[T]he statute, being in derogation of the common law, must be strictly construed and no intent to change that law will be found, unless it appears with clarity. . . ." 95 Wn.2d at 269.
This is not to suggest, of course, that the legislation in question did not change the common law at all. Quite to the contrary, it obviously did. Before its enactment insurers were free to offer as narrow a type of mental health coverage as they wished, and indeed to offer no coverage at all. Now, however, they are no longer free to do either. But are the parties restricted even further in their ability to contract; i.e., are they precluded [[Orig. Op. Page 5]] from contracting at all, for any sort of mental health coverage, once the waiver has been made by the policyholder?
Relying upon the rule of construction stated in McNeal, supra, we believe that a more positive indication of legislative intent would have to be found before that question could be answered in the affirmative. Or, in other words, a prohibition against contracting for mental health coverage after the waiver is made should not be implied.1/
In thus concluding, we have considered the argument that the conclusion results in the legislature having done, at lease in part, a useless act. And, of course, a familiar rule of construction presumes that the legislature does not do such things. Accordingly, such an argument, if valid, would cast doubt on the correctness of our conclusion.
This argument would be based upon our previous indication that the waiver provided for in subsection (2) must be on an "all or [[Orig. Op. Page 6]] nothing" basis and that the policyholder, accordingly, cannot pick and choose (in making his waiver) between the three parts of the mandatory offer provided for in subsection (1). We have also just said, however, that the parties may, after the policyholder has made a complete waiver of any mental health coverage, negotiate a contract which provides for one or more parts of the originally offered coverage. Does this not result in the legislature having done a useless act in providing that the waiver must be on an "all or nothing" basis in the first place? Or, to state the argument another way, do not these two conclusions represent conflicting legislative policies?
Although the argument is not without merit, we do not believe it requires a change in either conclusion. Why? Because allowing the parties to negotiate after a complete waiver has been made does not produce the same situation, legally, as would a partial waiver. With a partial waiver, the insurer would be statutorily required to accept the policyholder's unilateral choice as to the extent of the partial coverage. But this is not so if the parties negotiate after a complete waiver. The mandatory three‑part offer has then been terminated, by reason of the waiver, and the insurer is free to offer as little or as much as he wishes. Thus, while negotiating a contract after a full waiver might produce the same result (i.e., the same coverage) as would exercise by the policyholder of just a partial waiver, it also might produce a different result depending upon what the insurer is willing to offer.
Finally, we have reviewed such legislative history as exists to see if it requires any different conclusions from those reached here. We believe that this legislative history shows that the legislators involved never actually focused upon the issues raised by your question.2/
As previously noted, the statutes we are here examining were enacted as § § 1, 2 and 3 of chapter 35, Laws of 1983, which in bill form was SSB 3645. Although the Senate Journal for the 1983 session has not yet been published in book form we have obtained a copy of the transcript regarding SSB 3645.
[[Orig. Op. Page 7]]
Two formal points of inquiry were raised concerning SSB 3645. Both were answered by Senator McManus. Senator McManus was both one of the original sponsors of the bill and chairman of the Senate Committee on Social and Health Services which favorably reported out SSB 3645. The points of inquiry were as follows:
"POINT OF INQUIRY
"Senator Sellar: 'Senator McManus, I understand that this bill deals with providing mental health care coverage for consideration. Does this bill specify any particular level of minimum benefits? Or would the usual process of negotiations between the employer and/or union be followed?'
"Senator McManus: Senator Sellar, no. This bill does not specify minimums. We are going to leave that to the insurance commissioner and the insurance commissioner will set the minimums‑-whatever the prevailing minimums are for this kind of coverage.'
". . .
"Senator Talmadge: 'Senator McManus, if the measure would require non-discrimination for reimbursement by those companies offering mental health insurance coverage at the present time, would that be the case, also, for those companies presently offering mental health coverage, as well as those companies offering mental health coverage in the future?'
"Senator McManus: 'Yes, it would, Senator.'
As this second inquiry shows, a major feature of the bill was a requirement of "non-discrimination for reimbursement by those companies offering mental health insurance coverage . . ." This inquiry does not tell us, however, whether the non-discrimination is to be incorporated only into theoffer of coverage by the insurer or whether it must also be incorporated into any contract for mental health coverage ultimately entered into. Thus, on that count we must conclude that the legislative history is inconclusive. We are left, therefore, with the above‑stated analysis of the law as enacted based upon which we answer your question in the affirmative; i.e., the subject statutes do allow [[Orig. Op. Page 8]] group disability insurers (RCW 48.21.240), health care service contractors (RCW 48.44.340) and health maintenance organizations (RCW 48.46.290) to offer supplemental coverage for mental health treatment only by a physician or psychologist‑-but not a licensed community mental health agency‑-if the contract holder has first waived the mandated three‑part offer.
To this we would add, however, a seemingly obvious qualification. Unquestionably, the statutes require insurers, health care service contractors, and health maintenance organizations to act in good faith.3/ For example, an insurer would not be permitted purposefully to make its offer of the mandated "three provider" mental health benefit unattractive by artificially inflating the premium to an unrealistic level‑-to thereby deter any policyholder or subscriber from accepting the coverage and then to replace the mandated offer with its real offer, e.g., one which excluded payment for services provided by community mental health agencies at a greatly reduced premium. We do not mean to say that there may not be differences in premiums between policies which cover the services of all three types of providers and those which do not. However, any company which uses different premiums for such varying policies should be able to justify them to the insurance commissioner. The original offer of the mandated coverage must be made in good faith with the spirit of the law, not as a hollow gesture meant only to satisfy the letter of the statute.
[[Orig. Op. Page 9]]
We trust that the foregoing will be of assistance to you.
Very truly yours,
KENNETH O. EIKENBERRY
TIMOTHY R. MALONE
Assistant Attorney General
*** FOOTNOTES ***
1/The rule of construction which we here rely upon is usually called the rule of strict construction of statutes in derogation of the common law. See Sutherland,Statutory Construction, § 61.01 (4th Ed., Vol. 3, p. 41). The rule, we would agree, must be applied with caution, for reasons which Sutherland states as follows:
"If the rule is viewed as a presumption against change of the common law, as some of the critics appear to regard it, then in most cases it contradicts legislative purpose. As previously explained, the 'common law' to which the rule refers is the system of legal arrangements in effect just prior to the moment in time when the statute goes into effect. In that sense, the object of every statute must be either (1) to remedy a defect existing in the common law or (2) to restate the common law for the purposes of achieving greater clarity and uniformity. Although the incidence of legislation having no other purpose than to codify preexisting law may not be insignificant, it seems clear that the purpose of an overwhelming majority of statutes is to make some change in the existing legal order. Generally the real question, therefore, is not whether but how much a statute changes the 'common law.'" § 61.04, p. 55. (Emphasis in original; footnotes omitted).
That, of course, is the real question here.
2/The original sponsors of SB 3645 included Senators McManus, Talmadge, Rinehart, Hemstad, Lee, Kiskaddon and Fleming, as well as yourself. Only very minor changes were made between the original bill and the substitute bill, and none of them are relevant to your question.
3/In addition to any general requirement that the spirit, as well as the letter, of the law be observed, the insurance code has a particular section imposing a duty of good faith upon all those engaging in the insurance business. RCW 48.01.030 provides as follows:
"The business of insurance is one affected by the public interest, requiring that all persons be actuated by good faith, abstain from deception, and practice honesty and equity in all insurance matters. Upon the insurer, the insured, and their representatives rests the duty of preserving inviolate the integrity of insurance."
Our Supreme Court has recognized that this section is not just "window dressing," but rather that it states a real duty imposed on those conducting the business of insurance. For example, see Salois v. Mutual of Omaha Insurance Co., 90 Wn.2d 355, 581 P.2d 1349 (1978).