When President Bush signed the financial services bailout bill on October 3, long-awaited mental health parity legislation became law. This legislation requires health care plans to provide the same coverage for mental health and substance abuse disorders at they do for other medical illnesses. For most calendar-year plans, the law will take effect on January 1, 2010.
Key provisions summary
Parity required – Expands the 1996 law on annual and lifetime limits to financial requirements (co-payments, deductibles, coinsurance, out-of-pocket expenses) and treatment limitations (frequency, number of visits, days of coverage) for mental health and substance abuse coverage.
Preemption – Maintains the Health Insurance Portability and Accountability Act (HIPAA) standard, thereby creating a federal floor for parity standards and allowing states to enact more extensive requirements for insured plans.
Out-of-network coverage – Requires that an employer offer out-of-network mental health and substance abuse coverage if the plan offers out-of-network medical coverage.
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Medical management – Protects plan medical management practices that are vital to assuring the cost and quality of services for covered benefits.
Potential Impact
Modest cost increase. Most group health plans do not currently meet these new requirements. While plan changes would be extensive, the cost impact for health insurance is expected to be modest. Last year, the Congressional Budget Office estimated that enactment of a similar bill would boost health insurance premiums by an average of about 0.2 percent a year.
Positive outcomes. Employers may experience several positive outcomes with improved coverage of mental health treatment. Ronald Kessler of Harvard Medical School along with other researchers have found that mental disorders can substantially limit an employee’s ability to work, thus increasing absenteeism and reducing workplace productivity.
Incentive for early treatment. Researchers frequently cite starting treatment early as an important way to control the severity of a mental health episode and keep the employee at work and fully productive.
Reduced treatment costs. Lower copayments have been seen as an effective way to get employees into treatment sooner. Mental health lobbying groups believe that mental health parity will provide this financial incentive.
To receive the greatest impact from the new mental health parity requirement, the challenge remains for employers to greatly destigmatize the treatment of mental health. Kessler estimated that almost 30 percent of the U.S. population experiences some diagnosable mental health or addictive disorder within a 12 month period, but fail to seek treatment or drop out because they want to solve the problem on their own.