Government Relations Update

February 20, 2007

Senate Brings Life to Mental Health and Substance Abuse Parity

Senate Developments

Senators Domenici, Kennedy and Enzi reached agreement on new mental health parity legislation, which they introduced this week and approved in the Senate HELP Committee on Feb. 14.  The revised bill is known as the, “Senator Paul Wellstone Mental Health Parity Act of 2007,” and it will close loopholes in existing federal law the,”Mental Health Parity Act of 1996”.  The new bill provides protection for some 113 million Americans in health care coverage sponsored by larger employers (over 50 employees, as in current federal law).

The bill provides parity for day and visit limits, copayments, deductibles and other ways in which health plans have discriminated against mental health and substance abuse treatment services.  The legislation will give full parity without limiting such benefits to a narrow list of diagnoses. The bill is modeled on parity provided to the 8.5 million persons in the Federal Employee Health Benefits Program, but it preserves state laws that require coverage of mental disorders, thus giving additional assurance to the many Americans who are currently protected by state laws that their needs will be met.  For most of the 25 million Americans covered by a state parity law, employers would not be able to drop diagnoses that are required in a state.  The language spells out a narrow preemption of state laws to preserve provisions that provide patient protections, including state social worker vendorship laws.  Significantly, the bill also requires parity for out-of-network services when a health plan offers those as well as in-network services.
 
The bill contains compromises by advocates designed to fend off provisions that could be much more onerous.  For example, there is a cost exemption in the bill for health plans that experience higher costs instituting parity.  However, all plans must provide parity for the first year, and those that can demonstrate with retrospective data over six months that their first year costs are over 2% are allowed to apply for an exemption for year #2.  In a real innovation in drafting parity bills, such a plan must come back and provide parity in year #3.  Given the state experience, proponents believe that if plans go ahead and implement parity, they’ll experience lower than expected costs.  For the bill as a whole, sponsors believe this is the best deal they could negotiate.  Proponents are optimistic that the Senate compromise has greatly improved the bill’s chance of congressional passage and with many in the business and insurance industry in support of the bill; the White House could be expected to sign the bill.

NASW Supports with Broad Coalition

This compromise legislation reflects more than a year of discussions among business, insurance, and mental health organizations. To date, NASW and over 100 other health, behavioral health, business, insurance and medical groups have supported the Senate bill. NASW and the other supporting organizations believe that gaining the support of the business community and insurance industry is key to breaking the political logjam that has derailed this bill for several years. NASW has formally supported the bill, but noted to the sponsors that it will support strengthening amendments during consideration of the bill. Among our key concerns is the inclusion of a federal vendorship law covering clinical social workers who do not now have such protection under state law.

Summary of the Senate Bill (S. 558)

Following is a summary of the Senate bill based on information provided by HELP Committee staff.

Requirements for Health Plans

• The bill does not mandate group health plans provide any mental health coverage. However, if a plan does offer mental health coverage, then:
  1. The plan or coverage must ensure that financial requirements applied to mental health and substance abuse benefits are no more restrictive than the financial requirements applied to substantially all medical and surgical benefits that the plan covers. Such financial requirements include deductibles, copayments, coinsurance, out-of-pocket expenses, and annual and lifetime limits. The plan may not establish separate cost sharing requirements that are only applicable to behavioral health benefits.
  2. The plan or coverage must also ensure that treatment limitations applied to such benefits are no more restrictive than the treatment limitations applied to substantially all medical and surgical benefits that the plan covers. Such treatment limitations include limits on the frequency of treatment, number of visits, days of coverage, or other similar limits on the scope and duration of treatment.  

Health Plan Discretion

• The bill would not prohibit group health plans from negotiating separate reimbursement or provider payment rates, or managing the provision of mental benefits in order to provide medically necessary treatments under the plan (as a means to contain costs and monitor and improve the quality of care). This statute would not prohibit group health plans from taking into consideration similar treatment settings or similar treatments when applying the provisions of this statute.
• The bill would not require group health plans to provide out-of-network coverage for mental health benefits, but if a group health plan does provide both medical and surgical benefits and mental health benefits (including substance abuse treatment), and provides such benefits on both an in- and out-of- network basis pursuant to the terms of the plan (or coverage), then the plan must ensure that the requirements of this section are applied to both in- and out-of-network services by comparing in-network medical and surgical benefits to in-network mental health benefits and out-of-network medical and surgical benefits to out-of-network mental health benefits.

Scope of Coverage Limits – Small Business and Individual Market

• The mental health parity requirements apply to all group health plans with 50 or more employees, including those that are state regulated and those self-funded and regulated under ERISA.
• It does not apply to employers with less than 50 employees who are exempt from the Act, nor does it affect the individual insurance market.

Cost Exemption

• Plans may elect to be exempt from the parity requirement if it is projected that the health plan will experience increased actual total costs of coverage under the plan that exceed 2% of the actual total plan costs during the first plan year or exceed 1% of the actual total plan costs each subsequent year.  The cost exemption would apply for the next plan year following determination that the cost threshold will be exceeded.

Definitions: Mental Health Includes Substance Abuse

• “Mental Health Benefits” are defined to mean benefits with respect to mental health services (including substance abuse treatment) as defined under the terms of the plan or coverage, and when applicable, as may be defined under State law to health insurance coverage offered in connection with a group health plan.

Effect on State Mental Health Parity Laws

• At the state level, mental health parity standards regarding financial requirements and treatment limitations would be preempted.  The bill would not preempt state laws mandating that mental health benefits be covered and preserves state social work vendorship regulations and any willing provider requirements.  States that elect to adopt the federal standards would not be subject to preemption.

Administration

• Oversight and administration would be conducted by the Department of Labor for self-funded ERISA plans and by the Department of Health and Human Services for insured plans. 

Effective Date

• The requirements of the bill will be effective in the first plan year that begins on or after January 1 of the first calendar year that begins more than 1 year after the date of the enactment of this Act.