Group health plans that currently offer some level of mental health or substance use coverage need to be aware of some significant federal law changes that will take effect in October 2009. These changes, made under the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Act of 2008, will require many group health plans to amend their plans to conform with this new federal mandate.
On October 3, 2008, President Bush signed into law the Emergency Economic Stabilization Act of 2008. Included in that economic package was the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Act of 2008. After years of contentious debate at both the federal and state levels, this new law provides a federal floor for mental health coverage for most group health plans. It should be noted that the new law does not mandate that a group health plan include mental health or substance use benefits; it does, however, require parity between mental health and substance use benefits and medical and surgical benefits when a plan includes such benefits.
This federal floor not only makes permanent the Mental Health Parity Act of 1997, but also significantly expands what was previously required under federal law. The most significant change for group health plans is the inclusion of “substance use disorder benefits” (which are commonly referred to today as substance abuse benefits) in the parity requirement. “Substance use disorder benefits” are defined as “benefits with respect to services for substance use disorders, as defined under the terms of the plan and in accordance with applicable Federal and State law.”
The new law also makes significant changes with respect to permissible member cost and treatment limitations and consequently, the new requirements will impact those group health plans that offer mental health or substance use disorder benefits where the member costs for those benefits are higher or the treatment limitations of those benefits are more restrictive than the member costs or treatment limitations applicable to all medical and surgical benefits under the plan.
Under the new law, group health plans that provide both medical and surgical benefits and mental health or substance use disorder benefits must ensure that: (1) any member financial obligations – such as deductibles, co-payments, coinsurance, and out-of-pocket expenses – applied to the mental health or substance use benefits are no greater than the member financial obligations applied to substantially all medical and surgical benefits covered by the plan, and (2) there are no separate cost sharing requirements that apply only to the mental health or substance use disorder benefits.
Group health plans must also ensure that: (1) the treatment limitations – such as frequency of treatment, number of visits or days of coverage – applied to the mental health or substance use benefits are no more restrictive than the treatment limitations applied to substantially all medical and surgical benefits that the plan covers, and (2) there are no separate treatment limitations that are applicable only to the mental health or substance use disorder benefits.
The new law also extends parity to the utilization of out-of-network providers. If a plan provides coverage for medical or surgical benefits provided by out-ofnetwork providers, that plan must also provide coverage for mental health or substance use disorder benefits provided by out-of-network providers.
Small Employer Exemption
The new parity provisions do not apply to small employers – i.e. employers with fewer than 50 employees.
Exemption Based on Increased Costs
The new law also provides an exemption for plans that experience a cost increase as a result of compliance of more than 2% in the first plan year of compliance or 1% in any subsequent year. If complying with the new law causes a group health plan’s actual total cost of coverage with respect to medical, surgical, mental health and substance abuse benefits combined to increase more than the applicable percentage, then the plan may elect to implement an exemption from compliance for the following plan year. In order to utilize the cost exemption, plans must comply with the Act’s requirements for at least six months and must have documented actuarial determinations of such cost increases, and provide certain notifications required by law. The exemption lasts for one year.
The new law, which applies to both self-insured and fully insured groups, takes effect for plan years starting after October 3, 2009. Plans covered under a collective bargaining agreement are subject to special effective date rules.
The law directs the secretaries of the U.S. Department of Labor, Health and Human Services and Treasury to promulgate regulations by October 3, 2009, which should provide further guidance.
Most group health plan currently offer some level of mental health and/or substance use coverage and impose some sort of member financial obligations and/ or treatment restrictions, and will be subject to the new law. If your plan imposes greater member financial obligations or treatment restrictions than permitted under the new federal parity law, your plan will need to be amended before the law’s effective date.