WeVote
Log In

Bill

Bill

AB 877

Health care coverage: substance use disorder: residential facilities.

2025-2026 Regular Session

AB 877 requires regulators to inform CFOs of health plans that most SUD residential care is nonmedical, guiding correct billing; letters due 10/01/2026.

Re-referred to Com. on HEALTH.
#healthcarecoverage #residentialfacilities #substanceusedisorder
0
WeVote Research Nonpartisan
Bill Summary · AB 877

AB 877 — Summary (Dixon)

Health care coverage: substance use disorder: residential facilities

Purpose

AB 877 directs state regulators to send informational letters to chief financial officers of health plans, insurers, and Medi‑Cal managed care plans that cover substance use disorder (SUD) services in residential facilities. The letters are intended to clarify when SUD care provided in residential settings is nonmedical versus medical and to instruct payers on appropriate billing and claims handling.

Key provisions

  • Agencies required to send letters:
    • Department of Managed Health Care (Health & Safety Code section added as 1348.97)
    • Department of Insurance (Insurance Code section added as 10127.25)
    • Department of Health Care Services (Welfare & Institutions Code section added as 14124.17)
  • Recipients: one digital or hardcopy letter to each chief financial officer of a health care service plan, health insurer, or Medi‑Cal managed care plan that provides coverage (including out‑of‑network benefits) in California for SUD in residential facilities.
  • Required content of the letters:
    • A statement that SUD treatment in licensed/certified or unlicensed residential facilities is “almost exclusively nonmedical, with rare exceptions.”
    • Information about the requirements to bill nonmedical treatment accordingly.
    • A description of circumstances that permit medical treatment for SUD in such residential facilities.
  • Definition of “residential facility”: includes family homes, group care facilities, 24‑hour nonmedical care settings, Alcohol or Other Drug (AOD) programs certified or licensed under specified Health & Safety Code provisions, and recovery residences as defined in statute.
  • Consultation: the agencies must consult with the State Department of Social Services when drafting the letters; they may consult with one another.
  • Timeline and sunset:
    • Letters must be sent on or before October 1, 2026.
    • The statutory sections are temporary and automatically repeal on January 1, 2027.

Who is affected

  • Primary: chief financial officers and administrative decision‑makers at health care service plans, private health insurers, and Medi‑Cal managed care plans that cover SUD residential services.
  • Secondary: providers of residential SUD services (licensed/certified programs and recovery residences), billing/claims departments, and enrollees receiving residential SUD care.

Procedural status and fiscal notes

  • Introduced: February 19, 2025. Amended and re‑referred to the Assembly Health Committee (most recent action: April 22, 2025).
  • Digest indicates majority vote required, no appropriation, and referral to fiscal committee (fiscal committee: YES).

Potential impact

AB 877 is primarily an administrative/educational measure rather than a substantive change to coverage mandates. By clarifying that most residential SUD treatment is nonmedical and specifying billing expectations, the bill may influence payer claims processing, provider billing practices, and dispute resolution (e.g., denials or out‑of‑network payment determinations). Because the requirement is temporary and limited to sending informational letters, direct regulatory or reimbursement changes would depend on subsequent payer policy changes or enforcement actions.

Compiled from official sources — confirm details with the bill’s official record.

Sign in to ask a question.