Mental health coverage to see boost as long-sought parity law is enacted

The law does not apply to small employers or the individual insurance market. But it leaves stronger state parity laws intact.

By Doug Trapp — Posted Oct. 27, 2008

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The $700 billion economic recovery bill signed into law on Oct. 3 was designed to improve the nation's economic health. But a provision in the law also should serve to improve the mental health of many by requiring parity between mental health benefits and physical health benefits.

The mental health parity law, more than a decade in the making, "is one of the most dramatic improvements in the health care available for people who have mental illness and substance use problems in my lifetime," said Jeremy A. Lazarus, MD, 65, a psychiatrist and speaker of the AMA House of Delegates.

Coverage requirements go into effect in January 2010 for most plans. Doctors who have had difficulty referring patients to psychiatrists and other mental health professionals should find significantly fewer obstacles, Dr. Lazarus said.

Physicians sometimes struggle with current coverage limitations in the mental health portions of insurance plans, said Nada Stotland, MD, MPH, president of the American Psychiatric Assn. Many plans, for example, require more prior authorizations or higher patient cost-sharing for mental health benefits than they do for medical or surgical benefits.

The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 became law on the back of the economic recovery act. The law bans most group health plans that offer mental health and substance abuse benefits from restricting them -- through higher cost-sharing or treatment limits -- more than they do medical or surgical benefits. It also requires plans to cover any out-of-network mental health benefits if they cover out-of-network medical and surgical benefits.

The parity law is expected to apply to more than 113 million Americans' health coverage, including 82 million enrolled in self-funded group plans, which aren't regulated by state mental parity laws, according to the measure's authors. Nearly every state has at least a limited mental parity law.

The federal law exempts employers with 50 or fewer workers. It also exempts for one year any group plans that see a 2% increase in the cost of benefits during the first year the law takes effect or a 1% increase in any subsequent year. The law does not apply to the individual health insurance market.

Patient advocates have been trying to broaden mental health coverage since the Mental Health Parity Act of 1996 was enacted. That law prohibits insurers only from imposing stricter lifetime or annual caps on mental health benefits than they do for physical health benefits.

"This is a civil rights issue," said Sen. Edward Kennedy (D, Mass.). "With passage of this bill, fundamental justice arrives for millions of our fellow Americans who deal with mental illness."

Representatives of hospitals and health plans also praised the measure.

It "marks a turning point for mental health in this country," said Chip Kahn, the Federation of American Hospitals' president.

America's Health Insurance Plans hailed the law for allowing health plans to continue to manage benefits based on valid medical evidence. "Millions of Americans will now be assured greater access to mental and behavioral health coverage while continuing to benefit from the innovative programs health plans have developed to promote high-quality, evidence-based care," said Karen Ignagni, AHIP president and CEO.

A long-sought balance

The final version, breaking a more-than-decade-old stalemate, is a compromise between parity bills adopted in September 2007 by the Senate and in March 2008 by the House.

Sens. Mike Enzi (R, Wyo.), Pete Domenici (R, N.M.) and Kennedy took the lead on the Senate version. Reps. Patrick Kennedy (D, R.I.) and Jim Ramstad (R, Minn.) authored the House measure.

For the compromise version, the senators agreed to drop a provision to preempt all state parity laws, not just the weaker ones. The House members agreed to drop a requirement that plans with mental health benefits cover all conditions in the Diagnostic and Statistical Manual of Mental Disorders version four.

The AMA, as part of the Coalition for Fairness in Mental Illness Coverage, a group of mental health advocates, supported the passage of the final mental health parity bill.

Business leaders fought mental health parity in the late 1990s but changed their perspectives after embracing wellness and preventive health care, said Neil Trautwein, National Retail Federation vice president and employee benefits policy counsel. "We want to be able to identify and manage chronic conditions. We want to prevent them when we best can."

Trautwein chaired an ad-hoc coalition of business and insurance representatives that participated in the negotiations and helped shape the final compromise between the more sweeping House bill and the more limited Senate measure.

Dr. Lazarus is hopeful that the parity law's benefit mandate won't lead employers to drop mental health coverage. "There's adequate evidence that when people get appropriate mental health treatment they're actually more productive workers."

The Government Accountability Office will report to Congress by October 2011 on the parity law's impact on coverage, costs and care. By 2012, the Dept. of Labor will report to Congress on group health plans' compliance.

A shortage of mental health care professionals could continue to hamper access to care, said the APA's Dr. Stotland. Although the law should encourage people who need care to seek it in part by destigmatizing many of the treatments, patients may have trouble finding an available professional. Health plans' networks sometimes include psychiatrists who are retired or who can't see new patients for weeks, she said.

Workers at businesses with 50 or fewer employees won't be affected by the law and could continue to have inferior mental health and substance abuse coverage, Dr. Stotland said. "When people go to [interview for] a job, that's not something they're going to make a fuss about."

Dr. Lazarus and Trautwein said it's too soon to tell if another mental health parity expansion will be needed down the road.

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Principles of parity law

Employer-based group health plans that have more than 50 members and cover medical and surgical plus mental health or substance abuse must:

  • Set equal financial requirements for the benefits, such as deductibles, co-payments, coinsurance and out-of-pocket expenses.
  • Set equal treatment limitations, such as caps on frequency of care, number of visits and days of coverage.
  • Offer out-of-network coverage for mental health and substance abuse benefits if out-of-network coverage is offered for medical and surgical benefits.

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Years in the making

The Mental Health Parity Act of 1996 prohibited group plans from offering mental health and substance abuse coverage with more restrictive annual and lifetime limits than for medical and surgical coverage. Lawmakers tried for more than a decade to strengthen the law.

105th Congress (1997-98): Two mental health parity bills are introduced in the House, including one that would require plans offering mental health benefits to offer equivalent coverage for all conditions in the DSM-IV. No hearings are held, but lawmakers extend the 1996 parity law to all State Children's Health Insurance Program and Medicaid managed care plans.

106th Congress (1999-2000): Four mental health parity bills are introduced, but none receives a vote. President Clinton extends full mental health and substance abuse parity to federal employees' health plans.

107th Congress (2001-02): Sens. Mike Enzi (R, Wyo.) and Paul Wellstone (D, Minn.) introduce a bill that would provide full parity for all DSM-IV diagnoses, but the House rejects it. Instead, lawmakers extend the 1996 parity law through 2003. Wellstone dies in a plane crash in October 2002.

108th Congress (2003-04): Lawmakers extend the 1996 parity law through 2005 but hold no hearings on three new parity bills.

109th Congress (2005-06): Lawmakers extend the 1996 parity law through 2007. Reps. Patrick Kennedy (D, R.I.) and Jim Ramstad (R, Minn.) reintroduce a parity bill named after Wellstone that would provide full parity for all DSM-IV diagnoses, but no hearings are held.

110th Congress (2007-08): Kennedy and Ramstad reintroduce the Wellstone parity bill. Sens. Enzi, Edward Kennedy (D, Mass.) and Pete Domenici (R, N.M.) introduce a more limited parity bill based on negotiations with stakeholders. The House and Senate easily adopt their respective versions. Lawmakers include a compromise parity bill in an economic recovery act President Bush signs into law on Oct. 6.

Source: Congressional Research Service

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