Mental Health Parity Act
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The Mental Health Parity Act (MHPA) is legislation signed into United States law on September 26, 1996 that requires that annual or lifetime dollar limits on mental health benefits be no lower than any such dollar limits for medical and surgical benefits offered by a group health plan or health insurance issuer offering coverage in connection with a group health plan. MHPA was largely superseded by the Paul Wellstone and Pete Domenici's Mental Health Parity and Addiction Equity Act (MHPAEA), which the 110th United States Congress passed as rider legislation on the Troubled Asset Relief Program (TARP), signed into law by President George W. Bush in October 2008. Prior to MHPA and similar legislation, insurers were not required to cover mental health care and as a result access to treatment was limited, underscoring the importance of the act.
The MHPA applies to group health plans for plan years beginning on or after January 1, 1998. The original sunset provision (providing that the parity requirements would not apply to benefits for services furnished on or after September 30, 2001) was extended six times. The current extension runs through December 31, 2007. Insurers promptly were able to "circumvent" the consumer protections arguably intended in the legislation by imposing maximum numbers of provider visits and/or caps on the number of days an insurer would cover for inpatient psychiatric hospitalizations. In essence, the law had little or no effect on mental health coverage by group insurance plans. The rider on TARP prohibits all group health plans that offer mental health coverage from imposing any greater limit on co-pays, co-insurance, numbers of visits, and/or number of days covered for hospital stays due to mental health conditions. The rider legislation was the culmination of a long campaign fought by Sen. Paul Wellstone (D-MN) and his successors to enact mental health parity at the federal level. The new law's requirements will be phased in over several years. Still unsure is whether non-"biologically-based" mental illnesses such as PTSD and eating disorders are mandated to be covered by the new law.
Generally the act requires parity of mental health benefits with medical and surgical benefits with respect to the application of aggregate lifetime and annual dollar limits under a group health plan
It provides that employers retain discretion regarding the extent and scope of mental health benefits offered to workers and their families, including cost sharing, limits on numbers of visits or days of coverage, and requirements relating to medical necessity.
The law also contains the following two exemptions.
The MHPA does not apply to any group health plan or coverage of any employer who employed an average of between 2 and 50 employees on business days during the preceding calendar year, and who employs at least two employees on the first day of the plan year
The MHPA does not apply to a group health plan or group health insurance coverage if the application of the parity provisions results in an increase in the cost under the plan or coverage of at least one percent
Issues with the MHPA
Immediately after MHPA was enacted, insurers and employers began finding ways to circumvent the legislation. Larger emphasis on cost sharing, primarily implemented through higher co-pays, deductibles, and out-of-pocket maximums, was one strategy used by insurers. In addition, limits and caps on the number of visits with a care provider or number of days in a hospital visit were imposed. MHPA also did not provide benefits for substance abuse and dependency issues. Lastly, MHPA contained a sunset provision that meant that the law would go out of effect after a certain date. The original sunset date was extended six times, through 2007.
Health Parity and Addiction Equity Act
The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act (MHPAEA) was enacted in October of 2008. The main purpose of MHPAEA was to fill the loopholes left by the MHPA. The act requires health insurers as well as group health plans to guarantee that financial requirements on benefits, including co-pays, deductibles, and out-of-pocket maximums, and limitations on treatment benefits such as caps on visits with a provider or days in a hospital visit, for mental health or substance use disorders are not more restrictive than the insurer’s requirements and restrictions for medical and surgical benefits. MHPAEA only applies to insurance plans for public and private sector employers with over 50 employees. Similar to MHPA, MHPAEA requires parity in terms of total annual dollar limits, as well as aggregate lifetime benefits. It is important to note however, that MHPAEA does not explicitly require that any insurance plan offer benefits for mental health and substance abuse disorders. Instead, it enacts parity rules for plans that choose to offer both medical and surgical benefits as well as mental health and substance abuse disorder benefits. This includes out-of-network benefits. If plans choose to offer both types of benefits, MHPAEA mandates that insurers define and make available specific criteria for medical necessity when it comes to mental health and substance abuse disorder benefits. In addition, MHPAEA also requires that insurers provide specific information and reasons in the event that reimbursement or payment for treatment is denied.
One main challenge to the implementation of MHPAEA is what is known as “carve-out” health benefits. This refers to mental health benefits that are purchased by employers separately from medical benefits. The “carve-out” vendor may be separate from any number of other venders providing medical benefits. The law would require the “carve-out” vendor to ensure parity with medical benefits provided by a separate vendor or vendors. In addition, the legislation itself did not create a mechanism to regularly monitor or evaluate the enforcement or implementation of the act.