The Senate Mental Health Parity Bill Provides Complete Parity
Government Relations Office
What is the Mental Health Parity Act of 2007?
The Mental Health Parity Act of 2007 (S. 558) will completely end insurance discrimination against mental health and substance use disorder benefits coverage in all private employer health plans with more than 50 employees through a uniform and strong federal standard when it becomes law. S. 558 requires full parity between coverage for mental and physical health benefits for all financial and treatment requirements, including day and visit limits, coinsurance, co-payments, deductibles and out-of-pocket expenses. The bill adds to the parity protections of the Mental Health Parity Act of 1996, which already provides parity for lifetime and annual dollar limits.
S. 558 does not require a health plan to provide mental health benefits, but when a plan does, those benefits must be at full and complete parity with benefits for physical health. If a State parity law requires mental health coverage, this aspect of the State law remains in effect. In addition, State laws that require coverage for specific diagnoses or services remain in place. By adding to the protections provided by many State laws and by the fact that it is so comprehensive in scope, S. 558 will increase the level of mental health services provided by health plans in every State and provide parity coverage for those individuals who are not now protected by State law.
Introduced by Senators Pete Domenici (R-NM), Edward M. Kennedy (D-MA) and Michael B. Enzi (R-WY), the bill enjoys strong bipartisan support. The Senate Health, Education, Labor and Pensions Committee approved the bill on February 14th by a vote of 18-3, with all Democrats and most Republicans in support. 49 Senators, both Democrat and Republican, have cosponsored the legislation to date.
Who will the Mental Health Parity Act of 2007 protect?
The Senate bill requires parity in all private health plans, whether regulated by the State or by the federal government through the Employee Retirement Income Security Act (“ERISA”), as self-funded plans. Similar to current law, S. 558 will not apply to small employer plans with 50 or fewer employees or to the individual market. State parity laws will continue to protect people in these plans. When the Mental Health Parity Act becomes law, 113 million people across the country will have the right to non-discriminatory mental health coverage, including the 82 million individuals enrolled in ERISA plans who are not protected by State parity laws. (See the attached chart for a breakdown of individuals in ERISA self-funded plans and those in State-regulated plans.)
Will the Senate bill provide parity for all mental health diagnoses and does it completely cover substance use disorders?
Just like the Mental Health Parity Act of 1996, the Senate bill covers all mental diagnoses. S. 558 also goes beyond the federal 1996 parity law and some State parity laws by requiring parity for substance use disorders. There are no exclusions. Further, all mental health and substance use disorder services are covered, including psychotherapy and testing, and in all settings, including inpatient, outpatient, partial hospital, or residential treatment settings at parity with physical health services.
As in the current system, a health plan may deny coverage based on medical necessity or under the terms of its coverage contract with an employer just as under the 1996 federal parity law. It is important to note, however, that health plans have not dropped coverage of diagnoses or services as a result of enactment of the 1996 federal parity law or of enactment of the many State parity laws across the country. Rather, coverage is guaranteed at parity for the full range of mental and substance use diagnoses and services.
Does the Senate bill require parity for out-of-network services?
State parity laws that have been interpreted to require out-of-network mental health coverage when out-of-network physical health coverage is provided remain law and will continue to fully apply to State-regulated health plans. ERISA self-funded plans will be required to provide parity, if they provide any out-of-network mental health coverage.
Why is a federal law needed when most States have enacted parity laws?
State parity laws are vital to ensuring that mental health services are not discriminated against in the private health care market. Yet States are limited in their ability to protect all of their citizens and can provide parity for only 68 million of the people enrolled in insured health plans offered through their employers. 87 million people are covered by employer health plans that are exempt from State laws. These plans are regulated by a federal law, the Employee Retirement Income Security Act (“ERISA”). The only way to provide mental health parity for those enrolled in ERISA-regulated health plans, people who do not have parity protection now under State laws, is through a change in federal law. S. 558 will amend ERISA to provide parity coverage for all persons in these plans.
Many State parity laws themselves have limitations and not all State laws provide strong protections for all disorders. For example, many States provide parity only for a limited number of severe mental illnesses or exclude substance use disorders from protection. When made law, S. 558 will provide complete parity protection for all mental health and substance use disorders for all individuals in health plans with more than 50 employees.
Will the Senate bill preempt State parity laws?
S. 558 preserves State parity laws. When enacted S. 558 will replace only the financial and treatment limitation requirements in State parity laws—the parity standard itself. Since the federal law will provide complete parity for all diagnoses and aspects of coverage, the standard for all States is equaled or raised. S. 558 will also replace the cost exemption within these laws or impose a very limited cost exemption if one does not now exist. All other aspects of a State’s parity remain law, including:
The bill does not preempt or change a State parity law’s definition of diagnoses covered. So if a State law requires parity for all diagnoses as listed in the Diagnostic and Statistical Manual of Mental Disorders (“DSM”), this requirement remains in place and the federal parity law will require parity for all diagnoses. In a State requiring parity only for “severe mental illnesses” (“SMI”), the federal law will require parity for these disorders—and go farther to require parity for all diagnoses covered by a plan, whether SMI or otherwise.
If a State law provides parity and also mandates that mental health benefits be covered, this mandate in State law is preserved. Most State parity laws do this, and these provisions are preserved.
If a State parity law has other provisions in addition to parity requirements, such as a benefits requirement for certain services or diagnoses, the bill specifically preserves these additional State provisions. A provision in a parity bill that provides a 30 inpatient day/20 outpatient visit mandate is a typical example. The federal standard is intended to wrap around these provisions and provide greater protection by requiring nondiscriminatory coverage for mental health and substance use benefits.
State mental health parity laws will continue to apply to the health plans as they do today for plans of employers with 50 or fewer employees, and to the individual insurance market. The federal law will not apply to these plans, and it specifically preserves State laws which do.
Will the Senate bill preempt other State laws beyond parity laws?
The Senate bill does not preempt or change any other State law or any provision of any State law that protects or addresses mental health or substance use disorders in any way. Therefore:
Any State law that creates special rules pertaining to the coverage of mental health benefits is not preempted, including, among others, any willing provider or provider freedom of choice laws, required coverage laws for off-formulary antipsychotic drugs, and laws that require health plans to provide “report cards” describing delivery of mental health services.
· For example, a State law prohibits health plans from excluding from their provider networks any licensed mental health or substance use disorder provider located within the geographic coverage area, if the provider is willing to meet the plan’s participation requirements. This law is not preempted by S. 558.
· For example, a State law requires health plans that provide prescription drug coverage for antipsychotic medications whether the drug is in the plan’s formulary or not. S. 558 does not preempt this law.
Any State law, not specific to mental health, that regulates health insurance or the management of benefits is not preempted, including, among others, any law addressing utilization review or other benefits management techniques, network adequacy, complaint resolution, or prompt payment of claims.
· For example, a State law specifies how utilization review may be performed for health care coverage for both physical and mental health care services. The law details utilization review standards, notifications, appeals, expedited review, licensure of review organizations, and penalties for violations. This law will remain fully in effect when the federal parity bill is enacted.
Does S. 558 have a cost exemption? If so, is this a loophole for health plans to avoid the mental health parity law?
The Mental Health Parity Act does include a cost exemption, but it is not a loophole. This exemption allows a health plan to be exempted from the federal parity law if it can prove, as certified by a Member of the American Academy of Actuaries and based on experiential data, that parity is raising its total plan costs by more than 2% in the first year after enactment of the parity law and 1% thereafter. The exemption is only good for one year, and then a plan must again comply with the parity requirement.
Health plans are highly unlikely to apply for this exemption. The Congressional Budget Office (“CBO”) has determined that S. 558 will increase average total plan costs by only 0.4% (four-tenths of 1%). Considering the very low cost associated with providing parity, most plans will have difficulty showing that their plan costs have increased as a result of parity by more than 1% (2% in the first year after enactment). Since State-regulated health plans already must meet parity requirements in most States, their costs associated with the federal law will be even lower. Larger ERISA self-funded plans are even more likely to be able to absorb low the costs associated with parity. Thus there is little chance that plans will exceed the cost-exemption thresholds.
Considering that the exemption is good only for one year, health plans are highly unlikely to provide mental health parity coverage in one year and then take away from enrollees such coverage the next, yo-yoing in and out of the parity requirement from year to year. Such benefits vacillation would bewilder plan enrollees, and considering the low cost, the hassle of changing the mental health benefit alone probably outweighs the cost of simply providing parity coverage for enrollees.
How does the Senate mental health parity bill differ from the bill introduced in the House of Representatives?
The Senate and House mental health parity bills are very similar, but the House bill includes two primary provisions, which are highly controversial and unlikely to be passed into law. These provisions are: (1) a reference to the DSM, implying a federal coverage mandate, and (2) no recognition that federal law will set a uniform parity standard for treatment limitations and financial requirements across all plans through limited preemption of State parity laws.
Representatives Patrick Kennedy (D-RI) and Jim Ramstad (R-MN) have introduced H.R. 1424, the Paul Wellstone Mental Health and Addiction Equity Act of 2007. Like the Senate bill, H.R. 1424 enjoys strong bipartisan support in the House of Representatives.
In reality, the Senate and House bills are very similar.
· Both bills provide nearly the same parity requirements for financial requirements and treatment limitations.
· Both apply to all health plans in the health care system, except for small employer plans with 50 or fewer employees and individual plans.
· Neither bill mandates coverage of mental health and substance use benefits, which means that neither bill requires mental health or substance use disorder coverage, but when such coverage is provided, it must be at parity.
· Both bills recognize the use of benefits management, therefore health plans may continue to manage benefits as they do today under applicable State law.
· Both require out-of-network coverage. The Senate bill preserves State laws with these requirements and requires ERISA-regulated plans to provide parity for any out-of-network mental health services they provide. The House requires health plans to provide out-of-network mental health coverage, if the plan provides such coverage for physical benefits.
· Both bills include the same cost exemption.
Both bills require parity for all diagnoses under the terms and conditions of the plan. This is the standard under the 1996 parity law. The House bill also includes a reference to coverage for all diagnoses under the DSM, which has been interpreted by some to require a coverage mandate. As such, while well-intended, the provision is unlikely to be enacted into law.
Neither the House nor the Senate bill, in practical effect, preempts State laws. The Senate bill is straightforward and unambiguous, only replacing the financial and treatment requirements in State parity laws and improving the parity standard in many States. Both bills would add a cost exemption to State requirements. Neither bill is intended to have impact on State laws, other than parity laws.
The House bill specifies that State laws that provide “greater” consumer protections, benefits, methods of access to benefits or rights or remedies than the protections provided through its provisions are not preempted. This provision creates ambiguity in determining which State laws provide “greater” protections that would survive preemption under the bill. The Senate bill is more specific in preserving State laws than is the House bill.
ParityQ&A.pdf
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