Analysis of the House and Senate Mental Illness Insurance Parity Bills
July 19, 2007
The House and Senate insurance parity bills (HR 1424 and S 558) have a number of elements in common. Both bills:
- Expand on the modest 1996 Mental Health Parity Act (which required parity only for annual and lifetime dollar limits) by adding equitable coverage requirements for mental illness treatment with respect to –
- Durational treatment limits – defined in both bills as arbitrary numerical limits on inpatient days and outpatient visits,
- Financial limitations – defined in both bills as cost sharing, co-payments, deductibles, out-of-pocket limits, etc.
- Apply parity standards to fully insured plans regulated by the states and ERISA self-insured plans that are exempt from state regulation
- Do not mandate coverage of mental illness, but, for plans that do provide coverage, require that coverage for mental illness be on the same terms and conditions as “substantially all” medical-surgical coverage
- Exempt small businesses (firms with 50 or fewer workers) and the individual health plan market from the parity requirements,
- Allow a temporary (1 year) exemption for health plans whose costs of initial compliance with parity exceed 2%
- Authorize health plans to engage in medical management of health benefits, including applying medical necessity criteria, as well as concurrent, retrospective and prospective utilization review (HR 1424 adds a requirement for disclosure of medical necessity criteria)
- Include both mental illness and substance abuse in the parity requirements, and
- Would NOT result in large increases in health insurance costs - the Congressional Budget Office (CBO) estimates that S 558 would increase premiums by an average of only 0.4% and HR 1424 would increase premiums by an average of only 0.6% (and by only 0.1% if benefits are aggressively managed).
These similarities create enormous potential for quickly reconciling the Senate and House bills to ensure prompt action by Congress in the fall. President Bush has signaled support for federal parity legislation, and signed the
Scope of mental health benefits – S 558 allows employers and health plans to define the scope of covered mental health benefits, consistent with applicable state laws that may require coverage of specific diagnoses. HR 1424 requires plans to cover the same mental health diagnoses and conditions covered by the Federal Employee Health Benefits Program (FEHBP). The FEHBP covers all conditions in the Diagnostic and Statistical Manual of Mental Disorders (DSM).
Out-of-network coverage –HR 1424 requires health plans to have both parity in out of network benefits and provision of an out of network benefit for mental health, if it exists for medical-surgical coverage. S 558 simply requires that cost sharing and treatment limits for mental illness in an out of network benefit (if it exists) be the same as that for medical-surgical coverage.
Preemption of Existing State Parity and Mandated Benefit Laws
Whether and how to preempt or preserve state parity laws is proving to be the most difficult issue to resolve between the House and Senate bills.
S 558 contains a special rule that limits preemption of state laws to three specific instances:
- Treatment limits and financial limitations –The standard in S 558 would displace all state laws with respect to limits on inpatient days, outpatient visits, as well as cost sharing, deductibles and out of pocket limits. For plans subject to S 558, states would be barred from imposing numerical or financial limits on the treatment of mental illness.
- Out of network coverage –The standard in S 558 for parity within an out-of-network mental health benefit would displace state law. However, state laws that require out-of-network coverage would remain in place.
- Cost increase exemption –The limited cost increase exemption in S 558 would displace state law.
In contrast, the state preemption rule in HR 1424 attempts to preserve the ability of states to impose their own parity standard if it is ABOVE the federal standard. Specifically, HR 1424 declares that states are free to enforce their own standards with respect to consumer protections, benefits, external review, remedies and rights, “except to the extent that such provision prevents application” of the parity and coverage standards in federal law. This clearly allows states to impose parity requirements above federal law. At the same time, it is not clear whether or not states would be able to enforce (or allow group health plans to impose) standards BELOW federal law. Thus, if a state parity law or mental illness benefit requirement were deemed to “prevent application” of anything in HR 1424, it would likely be subject to preemption.
One area that both the House and Senate bills are attempting to resolve is whether or not a new federal parity standard would displace state laws either mandating coverage of specific mental illnesses or conditions (e.g., severe mental illness or the broad set of conditions in the DSM). The sponsors of S 558 are currently working to include language to ensure that state mental illness benefit mandate laws (requirements that certain mental illnesses be covered or offered) are NOT preempted. HR 1424 contains language attempting to separate mental illness benefit mandate laws from parity and ensure that they are preserved and not preempted.
Preemption is a complex issue and is further complicated by the fact that the debate is based on speculation about how a state court might interpret a new federal standard to supersede (or not supersede) state law. Work continues in both the House and Senate—as well as with governors and other state officials—to resolve preemption issues so that federal parity legislation can pass Congress this year.
July 19. 2007