When Congress passed the Emergency Economic Stabilization Act of 2008, commonly known as the Wall Street bailout package, it also made sure that health insurance providers offer equitable coverage to people with mental illnesses and substance abuse disorders.

The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act, part of the bailout legislation, requires health insurance providers to include mental health and substance abuse coverage on par with physical illness coverage in terms of the financial and treatment requirements.

"We are ushering in a new era of health care for those with mental illnesses. No longer will we allow mental health to be treated as a stepchild in the health care system. If you have insurance, then your mental health care must be equal to the benefits you get for any other disease," said Senator Pete Domenici (R-N.M.) on the day the bill was passed.

Employer preparations

The law takes effect for plan years beginning after Dec. 21, 2009, which means employers should start to examine and amend their plan designs and HR practices regarding mental health and substance abuse, says Frank McArdle, head of research practice at Hewitt Associates.

"The vast majority of employers are going to have to redesign their mental health benefits to comply with the new law. Most plans currently have limits on inpatient hospital days and outpatient visits for mental health conditions," McArdle says. Under the new law, such restrictions are prohibited.

He further explains that the new law allows states to enact supplemental laws and consumer remedies for coverage on mental health conditions and substance use disorders.

Yet additional state laws will only apply to fully insured plans.

The Employee Retirement Income Security Act continues to pre-empt such laws for self-insured plans, McArdle says.

Under the new law, the Departments of Health and Human Services, Labor, and Treasury are required to issue joint regulations within one year of enactment. Failure to issue the regulations after the one-year period does not delay the effective date of the new law.

"Now that we know what the law says, the plan sponsor community will need some guidance from federal regulators to figure out exactly what some terms mean within the scope of the new rules," says Kelly Traw, a principal at Mercer.

For example, under the equitable financial coverage rules, the law explains that "financial coverage for mental health and substance disorder benefits cannot be more restrictive than the predominant financial requirements applied for substantially all medical and surgical benefits under the plan."

Plans will need some help in figuring out what "more restrictive" means and what "substantially all medical and surgical benefits" should be considered when applying these rules, explains Traw.

Ramifications

Under the existing Act, parity is limited to dollar limits. Day or visit limits are allowed. "It will be interesting to see what [health plans] do a year from now when all benefits must be essentially the same," explains David Rubenzahl, president of The Maxon Company, which is a New York-based third-party administrator for employer-sponsored medical and retirement plans. "Some may decide to just not offer mental health and substance abuse benefits, which is allowed under the law, rather than incur the increased costs," he adds.

The Congressional Budget Office estimated that the new law would increase premium costs for employer-provided health plans by about 0.2%.

While the law provides employers with some flexibility in offering mental health coverage, some believe the statute represents a new government-sponsored benefit mandate.

"While striking the right balance, this legislation nonetheless remains a benefit mandate on large employers. At a time when large employers are working hard to maintain benefits, mandates have the potential over time to erode large employers' ability to provide coverage to their workers and dependents," says Helen Darling, president of the National Business Group of Health, a Washington, D.C.-based employer association. "Policymakers concluding that this legislation indicates an appetite for a 'one-size-fits-all' approach to health reform would be gravely mistaken. Our nation cannot mandate its way to meaningful and successful health care reform."

» Group health plans must provide out-of-network benefits for mental health and substance abuse disorders in a manner consistent with parity requirements if out-of-network benefits are provided for medical and surgical services.

» The terms "mental health conditions" and "substance use disorders" are to be defined by the group health plan, in accordance with any applicable federal and state laws.

» Employer health care plans must disclose to current and potential plan participants and providers the plan's criteria for determining medical necessity.

» A group health plan can obtain an exemption from the law's requirements if the plan can establish that applying the law will result in a cost increase of more than 2% in the first year and 1% in the case of each subsequent plan year.

Source: Hewitt Associates

» Nearly all covered workers (98%) have coverage for mental health benefits in 2008. However, limits on the number of visits for outpatient care and the number of days for inpatient care remain common features of all plan types.

» 18% of covered workers have coverage for an unlimited number of mental health outpatient visits. Sixty-two percent of covered workers are in plans that provide for 30 or fewer outpatient mental health visits in a year.

» 55% of covered workers in small firms (3-199 workers) have limits of 20 or fewer outpatient mental health visits per year compared to 24% of workers in large firms (200 or more workers). Twenty-two percent of covered workers have coverage for an unlimited number of mental health inpatient days.

» 62% of covered workers face an inpatient limit of 30 or fewer days. Thirty-three percent of covered workers in small firms (3-199 workers) have 20 or fewer covered days of inpatient mental health care covered by their plan, compared to 11% of covered workers in large firms (200 or more workers).

Source: Kaiser Family Foundation and Health Research & Educational Trust 2008 Employer Health Benefits Survey.

Exclusive Podcast

Listen in as Kelly Traw, a principal at Mercer, discusses how employers will have to redesign their health benefits to reflect the new Mental Health Parity and Addiction Equity Act. For more information, visit the corresponding article in Employee Benefit News, "Mental Health Parity and Addiction Equity Act signed into law."

The Mental Help Net Web site exists to promote mental health and wellness education and advocacy.

The National Institute of Mental Health is the world's largest scientific organization focusing on research to understanding the treatment, and prevention of mental disorders and the promotion of mental health.

For more information about Autism, we suggest this online article from The AIS Report on Blue Cross and Blue Shield Plans.