Federal Mental Health Parity Law in Effect in January

As reported in our July/August edition (“Widened State Mental Health Benefits”, MGH Community News), a Massachusetts mental health parity law went into effect on July 1, 2009 that added autism, eating disorders, substance abuse problems, and post-traumatic-stress disorders to the list of “medically-based” diagnoses for which health insurers cannot impose across-the-board treatment limits (i.e., standard limits on the number of visits per year or days in the hospital). We also reported at the time that roughly half of Massachusetts companies are exempt from state insurance laws (generally because they are “self-insured”), and are governed by federal regulations that call for less-generous mental health services. The Paul Wellstone-Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (federal law) that goes into effect in January 2010 will help.

The Wellstone/Domenici Act will end inequity in insurance benefits between mental health/substance abuse disorders and medical/surgical benefits for group health plans with more than 50 employees. All of the financial requirements and treatment limitations applied to mental health and substance abuse may be no more restrictive than for physical health benefits.

Unfortunately, though it is set to begin January 1, final regulations have not been released and are not expected before late January, so some details are still murky.

What does the new federal parity act do?

Under this new law a group health plan of 50 or more employees that provides both physical and mental health/substance use benefits must ensure that all financial requirements and treatment limitations applicable to mental health/substance use disorder benefits are no more restrictive than those requirements and limitations placed on physical benefits. This means that equity in coverage will apply to all financial requirements, including lifetime and annual dollar limits, deductibles, copayments, coinsurance, and out-of-pocket expenses, and to all treatment limitations, including frequency of treatment, number of visits, days of coverage and other similar limits. Historically health plans have applied higher patient cost-sharing and more restrictive treatment limitations to mental health and substance use benefits than for physical benefits. This new law ends this practice.

How is this new law different from the 1996 federal parity law?

The Wellstone-Domenici Parity Act amended and substantially increased the mental health benefits protection afforded under the federal Mental Health Parity Act of 1996, which only required parity coverage for lifetime and annual dollar limits and did not apply to benefits for substance use disorders.

Which health plans will have to comply with the new parity law?

The Wellstone-Domenici Parity Act applies to all group health plans with 50 or more employees, whether they are self-funded (regulated under ERISA) or fully-insured (regulated under state law), that provide mental health or substance use benefits. About 97 percent of these plans provide some mental health or substance use benefits now. Small employers of 50 or fewer employees are exempt from the requirements of the Act. State parity laws will continue to apply to small employers, as well as to individual plans.

The new law does not apply to Medicare patients. This past July, however, Congress provided for Medicare coinsurance parity for Medicare patients when it enacted the Medicare Improvements for Patients and Providers Act (MIPPA). Currently, Medicare beneficiaries are responsible for paying 50 percent of the approved amount for outpatient mental health services, but only 20 percent for other services. Under MIPPA, mental health services will enjoy the same 80-20 percent split in coinsurance by 2014. This phase-in to coinsurance parity for outpatient mental health services begins in January 2010, when beneficiaries will pay 45 percent coinsurance; the figure drops to 40 percent in 2012, 35 percent in 2013 and 20 percent in 2014.

The Wellstone-Domenici Parity Act, however, does apply to Medicaid managed care health plans (but not Medicaid Fee for Service plans).

Under what circumstances can an insurer deny coverage?

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 Act. It is important to note, however, that health plans have not dropped coverage of diagnoses or services as a result of the 1996 Act or of enactment of the many state parity laws across the country.

Though employers are not prohibited from dropping coverage for a diagnosis, experience suggests that this will not happen. Most plans in the market today provide for comprehensive coverage. Such coverage will continue under this new law, and Congress will be closely watching the impact of the new law on coverage of diagnoses. The new parity act requires the U.S. General Accountability Office (GAO) to conduct a study that analyzes the specific rates, patterns and trends in coverage, any exclusion of specific mental health and substance use diagnoses by health plans, and the impact of this Act on such coverage and costs. GAO will provide a report to Congress within three years (and an additional report after five years) on the results of these studies.

Does this new parity law have any impact on benefits management and medical necessity criteria?

Just as under the 1996 Mental Health Parity Act, under the Wellstone-Domenici Parity Act, a health plan may manage the benefits under the terms and conditions of the plan. The new law goes beyond the 1996 law by requiring a plan to make mental health/substance use disorder medical necessity criteria available to current or potential participants, beneficiaries or providers upon request. A plan must also make reasons for payment denials available to participants or beneficiaries on request or as otherwise required.

Does the Wellstone-Domenici Parity Act apply to the out-of-network (OON) services?

Yes. Under the new law, if a health plan provides both Out-of-Network physical and mental/substance use disorder benefits, these services must be provided at parity. If a plan currently provides only OON physical benefits, this new law will require it to add OON mental health/substance use disorder benefits, at parity. A few health plans, typically referred to as “closed panel or staff model” HMOs, do not provide for any OON coverage. Since these plans do not provide OON physical coverage, they are not required to provide OON mental health/substance use coverage.

Can plans get an exemption from these requirements?

If a group health plan (or coverage) experiences an increase in actual total costs with respect to medical/surgical and mental health/substance use benefits of 1% (2% in the first plan year that this Act is applicable), the plan can be exempted from the law. Any exemption will only last for one year; health plans getting an exemption must come back into compliance with the federal parity law the following year.

However, an employer may elect to continue parity coverage regardless of this cost increase.

A plan must notify, in a timely manner, its participants and beneficiaries when it elects an exemption.

Are state laws preserved?

Yes, the federal law specifically allows states to continue to enforce any parity requirement deemed stronger than federal law.

Is confidentiality retained for medical records?

Yes, the same confidentiality that covers medical treatment is extended to mental disorders. Insurers can only require consent to disclose to the same extent that they require disclosure of information on other medical conditions.

When will this law go into effect?

The Act will apply to plans beginning in the first plan coverage year that is one year after the date of enactment. For most plans, this will mean the effective date begins on January 1, 2010. Plans maintained under collective bargaining agreements ratified before the enactment date are not subject to the Act until they terminate (i.e., the next contract cycle).

What will this mean in practice?

This remains to be seen when the regulations are released and insurers implement the law.

The American Psychiatric Association (APA) in public comment on the new law noted that based on their members’ experience, they have concerns that some insurers may utilize overly aggressive management techniques in response to the statute.

Partners Government Relations’ early analysis seems to indicate that in general Massachusetts is ahead of the curve and most plans will not require major retooling. However, some consumers may benefit and see lower co-pays and more generous benefits. It is thought that very few plans will drop mental health coverage all together especially here in Massachusetts where most plans are required to offer it.

Stay tuned…

For more information

Federal Law:

http://www.namimass.org/policy/NAMI%20Mass%20Fed.parity.Q&A..doc

State Law:

http://www.namimass.org/policy/state%20mental%20health%20parity%20fact%20sheet.doc

-From: “ The Wellstone-Domenici Mental Health Parity Act of 2008 Questions and Answers for Psychologists”, American Psychological Association, APA Practice Organization, Government Relations Office, October 2008, http://www.apapractice.org/apo/in_the_news/parity_law_q_a.html# retrieved 1/1/709; “The Federal Mental Health Parity Law of 2008”,National Alliance of the Mentally Ill, Massachusetts, http://www.namimass.org/policy/NAMI%20Mass%20Fed.parity.Q&A..doc, retrieved 11/1/609; APA public comment in response to Request for Information Regarding the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 http://www.psych.org/MainMenu/AdvocacyGovernmentRelations/GovernmentRelations/Final-Parity-Comments-5-28-09.aspx , retrieved 11/16/09. Special thanks also to Kim Simonian, MPH, Associate Director, Patient Access, Partners Health Care Community Benefit Programs and Aimee K. Golbitz, Partners Health Care Government Relations, for background and context for this article.

11/09