The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 requires that group health plans and group health insurers apply the same treatment and financial limits to mental health and substance use disorder benefits as they do to medical and surgical benefits. These FAQs are intended to provide an overview of the Mental Health Parity Act specifically as it applies to health insurance plans.

1. What is the basic structure of the new law?

The Mental Health Parity Act amends the existing federal mental health parity requirements found in the Employee Retirement Income Security Act (ERISA), Public Health Service Act (PHSA) and Internal Revenue Code (IRC).

2. What types of health coverage are subject to the Mental Health Parity Act?

The Act applies to ERISA group health plans and to health insurers that provide coverage to group health plans. Medicaid health plans and the State Children’s Health Insurance Program (SCHIP) are also subject to the Mental Health Parity Act. Within UniCare, this includes all of our group health plans (insured and self-funded; branded and unbranded; and National Accounts), FEP, State-Sponsored and Medicare Advantage (if offered through a large group ERISA health plan). Insurers that provide “excepted benefits” to group health plans (such as disability income insurance and long-term care and Medicare supplemental insurance coverage that is offered separately) are not subject to the new law.

3. Are all employers subject to the new law?

Only those employers with 51 or more employees are subject to this law. Employers with 50 or fewer employees, including companies in states that apply group insurance laws to “groups of one,” are exempted from the law.

4. Does the Mental Health Parity Act require plans to cover mental health or substance use disorder benefits?

No. The Mental Health Parity Act does not mandate coverage of mental health or substance use disorder benefits. Health insurance carriers may, however, be subject to state laws that mandate coverage for some or all of these benefits.

5. What takes priority, state or federal parity legislation?

Stronger state mental health parity laws are not preempted by the federal law. If, for example, a state law requires parity for all diagnoses listed in the Diagnostic and Statistical Manual of Mental Disorders (DSM), this state requirement remains in place, as do state laws that require parity for specific diagnoses (usually, a list of severe mental illnesses). In addition, the act does not override an obligation created in state law to either cover or offer mental health benefits. If a state parity law does not include substance use disorder, but a plan covers substance use disorder, the coverage must be at the federal parity level.

6. What diagnoses are included?

The act imposes no requirements as to what mental health and substance use disorder conditions must be covered and did not select the DSM as the source for included codes. (Subject to state mandates when applicable as noted above.)

7. How does the Mental Health Parity Act govern the provision of mental health or substance use disorder benefits?

Health insurance plans that provide coverage for mental health or substance use disorder benefits must do the following:

Annual and Lifetime Limits
In general, the existing parity requirements applicable to annual and lifetime financial and treatment limits were unchanged. As a result, if the health insurance plan includes an aggregate annual or lifetime financial or treatment limit on substantially all medical and surgical benefits, it must either:

• apply the same applicable limits to mental health and substance use disorder benefits or
• not include an aggregate annual or lifetime financial or treatment limit for mental health or
  substance use disorder benefits that is less than the limits applied to medical and surgical benefits

Financial Requirements
“Financial requirements” are defined in the Mental Health Parity Act as including deductibles, copayments, coinsurance and out-of-pocket expenses. The financial requirements applied to mental health or substance use disorder benefits must not be more restrictive than the predominant financial requirements applied to substantially all medical and surgical benefits. In addition, the health insurance plan may not apply a separate financial requirement to mental health or substance use disorder benefits that is not applicable to medical and surgical benefits.

Treatment Limitations
“Treatment limitations” are defined as including limits on the frequency of treatment, number of visits or days of coverage or other similar limits on the scope or duration of treatment. The treatment limitations applied to mental health or substance use disorder benefits must not be more restrictive than the predominant treatment limitations applied to substantially all medical and surgical benefits. In addition, the health insurance plan may not apply a separate treatment limit to mental health or substance use disorder benefits that is not applicable to medical and surgical benefits.

How does the new law affect out-of-network coverage?

Health insurance plans that cover mental health or substance use disorder benefits must provide out of- network coverage for such benefits if the plan provides out-of-network coverage for medical and surgical benefits. The parity requirements apply to the out-of-network coverage for medical and surgical benefits as well as mental health and substance use disorder benefits.

9. Can utilization reviews be applied?

Health insurance plans are not restricted from applying utilization review, medical necessity determinations or other tools to encourage appropriate and effective care. However, the act requires disclosure of the criteria for medical necessity determinations (and reasons for denials of coverage) regarding mental health or substance use disorder benefits to any current or potential participant, beneficiary or contracting provider upon request.

10. When do the provisions of the Mental Health Parity Act go into effect?

The requirements of the new law are effective for plan years beginning on or after one year from the date the legislation was signed into law (October 3, 2008). As a result, the provisions apply to new contracts and renewals on or after October 3, 2009.

• For groups with plan year benefits, the parity changes will take effect on the first renewal after
  10/3/2009. For groups with calendar year benefits, the parity benefits will take effect on a January 1, 2010 purchase or renewal.
• For collective bargaining agreement plans, the effective date is the later of January 1, 2010 or
  the date the collective bargaining agreement expires.

11. Are self-insured (ASO) groups included?

Yes. Self-insured groups (ASO), which are typically exempt from state regulations, are subject to the federal mental health parity legislation. These plans were previously subject to the 1996 federal parity law and are now included in this new legislation.

12. What are the cost implications of this act for an ASO group?

Actuarial analyses conducted both internally and externally estimate the cost impact for employers that currently comply with state parity mandates to be in the 0.2 – 2% range.The primary external source for this information is a Milliman Actuarial Study4, which projects cost increases of 0.1% to 0.6% depending on the level of management in place. The Congressional Budget Office has projected an average increase of 0.4% for plans. Please note that the figures in the Milliman study do reflect a scenario in which the copay for a Behavioral Health provider changes from $25 to $10.

The magnitude of the cost impact will depend on several factors, including the group’s current costsharing, whether or not out-of-network benefits are currently excluded, and whether or not out-patient behavioral health services are currently managed.