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AMERICAN
PSYCHOLOGICAL
ASSOCIATION
PRACTICE ORGANIZATION
The Senate Mental Health Parity Bill Provides Complete Parity
What is the Mental Health Parity Act of 2007?
The Mental Health Parity Act of 2007 (S. 558) will completely end insurance discrimination
against mental health and substance use disorder benefits coverage in all private employer health
plans with more than 50 employees through a uniform and strong federal standard when it
becomes law. S. 558 requires full parity between coverage for mental and physical health
benefits for all financial and treatment requirements, including day and visit limits, coinsurance,
co-payments, deductibles and out-of-pocket expenses. The bill adds to the parity protections of
the Mental Health Parity Act of 1996, which already provides parity for lifetime and annual
dollar limits.
S. 558 does not require a health plan to provide mental health benefits, but when a plan does ,
those benefits must be at full and complete parity with benefits for physical health. If a State
parity law requires mental health coverage, this aspect of the State law remains in effect. In
addition, State laws that require coverage for specific diagnoses or services remain in place. fu
adding to the protections provided by many State laws and by the fact that it is so comprehensive
in scope, S. 558 will increase the level of mental health services provided by health plans in
every State and provide parity coverage for those individuals who are not now protected by State
law.
Introduced by Senators Pete Domenici (R-NM), Edward M. Kennedy (D-MA) and Michael B.
Enzi (R-WY) , the bill enjoys strong bipartisan support. The Senate Health , Education, Labor
and Pensions Committee approved the bill on February 14th by a vote of 18-3, with all
Democrats and most Republicans in support. 49 Senators, both Democrat and Republican, have
cosponsored the legislation to date.
Who will the Mental Health Parity Act of 2007 protect?
The Senate bill requires parity in all private health plans, whether regulated by the State or by the
federal government through the Employee Retirement Income Security Act ("ERISA"), as self­
funded plans. Similar to current law, S. 558 will not apply to small employer plans with 50 or
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An affiliate of the American Psychological Association
fewer employees or to the individual market. State parity laws will continue to protect people in
these plans. When the Mental Health Parity Act becomes law, 113 million people across the
country will have the right to non-discriminatory mental health coverage, including the 82
million individuals enrolled in ERISA plans who are not protected by State parity laws . (See the
attached chart for a breakdown of individuals in ERISA self-funded plans and those in State­
regulated plans .)
Will the Senate bill provide parity for all mental health diagnoses and does it completely
cover substance use disorders?
Just like the Mental Health Parity Act of 1996, the Senate bill covers all mental diagnoses. S.
558 also goes beyond the federal 1996 parity law and some State parity laws by requiring parity
for substance use disorders. There are no exclusions. Further, all mental health and substance
use disorder services are covered, including psychotherapy and testing, and in all settings,
including inpatient, outpatient, partial hospital, or residential treatment settings at parity with
physical health services.
As in the current system, a health plan may deny coverage based on medical necessity or under
the terms of its coverage contract with an employer just as under the 1996 federal parity law. It
is important to note, however, that health plans have not dropped coverage of diagnoses or
services as a result of enactment of the 1996 federal parity law or of enactment of the many State
parity laws across the country. Rather, coverage is guaranteed at parity for the full range of
mental and substance use diagnoses and services.
Does the Senate bill require parity for out-of-network services?
State parity laws that have been interpreted to require out-of-network mental health coverage
when out-of-network physical health coverage is provided remain law and will continue to fully
apply to State-regulated health plans. ERISA self-funded plans will be required to provide
parity, if they provide any out-of-network mental health coverage.
Why is a federal law needed when most States have enacted parity laws?
State parity laws are vital to ensuring that mental health services are not discriminated against in
the private health care market. Yet States are limited in their ability to protect all of their citizens
and can provide parity for only 68 million of the people enrolled in insured health plans offered
through their employers. 87 million people are covered by employer health plans that are
exempt from State laws. These plans are regulated by a federal law, the Employee Retirement
Income Security Act ("ERISA"). The only way to provide mental health parity for those
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enrolled in ERISA-regulated health plans, people who do not have parity protection now under
State laws, is through a change in federal law. S. 558 will amend ERISA to provide parity
coverage for all persons in these plans .
Many State parity laws themselves have limitations and not all State laws provide strong
protections for all disorders. For example, many States provide parity only for a limited number
of severe mental illnesses or exclude substance use disorders from protection. When made law,
S. 558 will provide complete parity protection for all mental health and substance use disorders
for all individuals in health plans with more than 50 employees.
Will the Senate bill preempt State parity laws?
S. 558 preserves State parity laws. When enacted S. 558 will replace only the financial and
treatment limitation requirements in State parity laws-the parity standard itself. Since the
federal law will provide complete parity for all diagnoses and aspects of coverage, the standard
for all States is equaled or raised . S. 558 will also replace the cost exemption within these laws
or impose a ver y limited cost exemption if one does not now exist. All other aspects of a State's
parity remain law, including:
The bill does not preempt or change a State parity law's definition of diagnoses covered . So if a
State law requires parity for all diagnoses as listed in the Diagnostic and Statistical Manual of
Mental Disorders ("DSM") , this requirement remains in place and the federal parity law will
require parity for all diagnoses . In a State requiring parity only for "severe mental illnesses"
("SMI"), the federal law will require parity for these disorders-and go farther to require parity
for all diagno ses covered by a plan , whether SMI or otherwise.
If a State law provides parity and also mandates that mental health benefits be covered, this
mandate in State law is preserved. Most State parity laws do this, and these provisions are
preserved.
If a State parity law has other provisions in addition to parity requirements, such as a benefits
requirement for certain services or diagnoses, the bill specifically preserves these additional State
pro visions. A provision in a parity bill that provides a 30 inpatient day/20 outpatient visit
mandate is a typical example. The federal standard is intended to wrap around these provisions
and provide greater protection by requiring nondiscriminatory coverage for mental health and
substance use benefits.
State mental health parity laws will continue to apply to the health plans as they do today for
plans of employers with 50 or fewer employees, and to the individual insurance market. The
federal law will not apply to these plans, and it specifically preserves State laws which do.
Will the Senate bill preempt other State laws beyond parity laws?
The Senate bill does not preempt or change any other State law or any provision of any State law
that protects or addresses mental health or substance use disorders in any way. Therefore:
Any State law that creates special rules pertaining to the coverage of mental health benefits is not
preempted, including, among others, any willing provider or provider freedom of choice laws,
required coverage laws for off-formulary antipsychotic drugs, and laws that require health plans
to provide "report cards" describing delivery of mental health services.
• For example, a State law prohibits health plans from excluding from their provider networks
any licensed mental health or substance use disorder provider located within the geographic
coverage area, if the provider is willing to meet the plan's participation requirements. This
law is not preempted by S. 558.
• For example, a State law requires health plans that provide prescription drug coverage for
antipsychotic medications whether the drug is in the plan's formulary or not. S. 558 does not
preempt this law.
Any State law, not specific to mental health, that regulates health insurance or the management
of benefits is not preempted, including, among others, any law addressing utilization review or
other benefits management techniques, network adequacy, complaint resolution, or prompt
payment of claims.
• For example, a State law specifies how utilization review may be performed for health care
coverage for both physical and mental health care services. The law details utilization review
standards, notifications, appeals, expedited review, licensure of review organizations, and
penalties for violations. This law will remain fully in effect when the federal parity bill is
enacted.
Does S. 558 have a cost exemption? If so, is this a loophole for health plans to avoid the
mental health parity law?
The Mental Health Parity Act does include a cost exemption, but it is not a loophole. This
exemption allows a health plan to be exempted from the federal parity law if it can prove, as
certified by a Member of the American Academy of Actuaries and based on experiential data,
that parity is raising its total plan costs by more than 2% in the first year after enactment of the
parity law and 1% thereafter. The exemption is only good for one year, and then a plan must
again comply with the parity reguirement.
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Health plan s are highly unlikely to apply for this exemption. The Congressional Budget Office
("CBO") has determined that S. 558 will increase average total plan costs by only 0.4% (four­
tenths of 1%). Considering the very low cost associated with providing parity, most plans will
have difficulty showing that their plan costs have increased as a result of parity by more than 1%
(2% in the first year after enactment). Since State-regulated health plans alre ady must meet
parity requirements in most States, their costs associated with the federal law will be even lower.
Larger ERISA self-funded plans are even more likely to be able to absorb low the costs
associated with parity. Thus there is little chance that plans will exceed the cost-exemption
thresholds.
Considering that the exemption is good only for one year, health plans are highly unlikely to
provide mental health parity coverage in one year and then take away from enrollees such
coverage the next , yo-yoing in and out of the parity requirement from year to year. Such benefits
vacillation would bewilder plan enrollees, and considering the low cost , the hassle of changing
the mental health benefit alone probably outweighs the cost of simply providing parit y coverage
for enrollees.
How does the Senate mental health parity bill differ from the bill introduced in the House
of Representatives?
The Senate and House mental health parity bills are very similar, but the House bill includes two
primary provisions, which are highly controversial and unlikely to be passed into law. These
provisions are : (1) a reference to the DSM , implying a federal coverage mandate, and (2) no
recognition that federal law will set a uniform parity standard for treatment limitations and
financial requirements across all plans through limited preemption of State parity laws.
Representatives Patrick Kennedy (D-RI) and Jim Ramstad (R-MN) have introduced H.R. 1424,
the Paul Wellstone Mental Health and Addiction Equity Act of 2007. Like the Senate bill, H.R.
1424 enjoys strong bipartisan support in the House of Representatives.
In reality, the Senate and House bills are very similar.
• Both bill s provide nearly the same parity requirements for financial requirements and
treatment limitations.
• Both apply to all health plans in the health care system, except for small employer plans with
50 or fewer employees and individual plans .
• Neither bill mandates coverage of mental health and substance use benefits, which means that
neither bill requires mental health or substance use disorder coverage, but when such
coverage is provided, it must be at parity.
• Both bills recognize the use of benefits management, therefore health plans may continue to
manage benefits as they do today under applicable State law.
5
• Both require out-of-network coverage. The Senate bill preserves State laws with these
requirements and requires ERISA-regulated plans to provide parity for any out-of-network
mental health services they provide. The House requires health plans to provide out-of­
network mental health coverage, if the plan provides such coverage for physical benefits.
• Both bills include the same cost exemption.
Both bills require parity for all diagnoses under the terms and conditions of the plan. This is the
standard under the 1996 parity law. The House bill also includes a reference to coverage for all
diagnoses under the DSM , which has been interpreted by some to require a coverage mandate.
As such , while well-intended, the provision is unlikely to be enacted into law.
Neither the House nor the Senate bill, in practical effect, preempts State laws. The Senate bill is
straightforward and unambiguous, only replacing the financial and treatment requirements in
State parity laws and improving the parity standard in many States. Both bills would add a cost
exemption to State requirements. Neither bill is intended to have impact on State laws, other
than parity laws.
The House bill specifies that State laws that provide "greater" consumer protections, benefits,
methods of access to benefits or rights or remedies than the protections provided through its
provisions are not preempted. This provision creates ambiguity in determining which State laws
provide "greater" protections that would survive preemption under the bill. The Senate bill is
more specific in preserving State laws than is the House bill.
Government Relations Office .
June 2007
6
Fulltime Employees' Coverage of
Self-Insured Members by State
Split above and below 50 Employees
Fulltime Employees' Coverage of
Insured Mem bers by State
Split above and below 50 Employees
>=50 Ees
A ll
>=25 Ees
<50 Ees
Insured
Insur ed
Insu red
Insured
Lives By
Lives By
Lives By
Lives By
Sl ale
State
Slale
Slal e
# Members # Members # Members # Members
Total US
New England
Connecticut
Ma ine
Massachusetts
New Hamps h ire
Rhode Island
Vermont
Mid-Atlantic
New Jersey
New York
Pa
East - North - Central
Illinois
Indiana
Michigan
Ohio
Wiscons in
West - North· Central
Iowa
Kansas
Minnesota
Missouri
Nebraska
North Dakota
South Dakota
South Atlantic
Delaware
DC
Florida
Ga
Maryland
NC
SC
Virginia
West Virg inia
East - South· Central
Alabama
Kentucky
Mississippi
Tennessee
West - South· Central
Arkansas
Louisiana
Oklahoma
Texas
Mountain
Arizona
Colorado
Idaho
Montana
Nevada
New Mex ico
Utah
Wyom ing
Pac if ic
Alaska
Californ ia
Hawaii
Oregon
Washington
Based Upon 2003 MEPS
40077
98 1
56 7
328
333
>=25 Ees
Sel f-Insured
Lives By
Slal e
# Members
<50 Ees
Self-Insur ed
Lives By
Sla le
# Members
>=50 Ees
Self-Insured
Lives By
Sla le
# Members
83386
5131
82205
8733 6
All
Sel f-Insu red
Lives By
Slale
# Members
3692 4
31419
6834 3
554
229
82 1
220
163
102
350
77
1259
125
186
55
904
306
2081
345
349
158
46
23
156
56
25
23
1168
334
1519
360
189
157
121 3
357
1675
417
214
181
1193
2278
1487
1156
3121
2185
235 0
5399
3672
313
440
154
2294
4177
2790
26 08
4617
2945
1548
758
1255
1220
843
1596
262
1074
1296
446
3145
1021
2329
25 15
1289
201
85
143
286
111
4250
2274
3223
3632
1791
4451
2360
3366
3918
1902
352
375
740
782
312
106
129
236
251
585
428
96
33
55
58 7
626
1326
1210
407
139
184
58
46
91
113
25
11
8
1014
801
1733
1947
564
168
203
1072
847
1823
2060
589
179
211
135
131
2410
961
708
1138
497
1062
21 9
73
162
1480
879
540
383
167
760
113
208
294
3890
1840
1248
1522
664
1822
332
13
23
114
31
139
163
45
67
29
340
326
5745
2823
1570
3041
1291
1677
446
354
349
5859
2854
1709
3204
1336
1744
475
530
479
318
692
333
318
155
423
862
797
47 3
1115
78
57
15
50
1148
1039
764
2067
1226
1096
779
2117
289
617
480
2559
212
313
274
1450
501
93 1
754
4009
28
138
43
310
730
990
901
69 11
758
1128
944
722 1
610
580
199
152
234
223
282
83
497
533
56
40
273
165
218
1
1107
1113
25 5
192
508
388
499
84
76
103
25
27
62
52
46
22
149 1
1354
357
165
802
313
559
136
1567
1457
382
192
864
365
605
158
86
4202
144
606
871
55
5031
312
520
597
141
9233
456
1127
1468
28
7 13
36
41
100
124
8483
124
808
1277
152
9 196
160
850
1377
1691
2077
816
129