The Employee Retirement Income Security Act of 1974 ("ERISA") was amended by the Mental Health Parity Act of 1996 ("MHPA"). Effective January 1, 1998, MHPA prohibits group health plans from setting annual or lifetime limits on mental health benefits that are lower than similar limits set for medical or surgical benefits. Further, a health plan which imposes no annual or lifetime limits on medical and surgical benefits, may not impose such limits on mental health benefits. MHPA does not apply to substance abuse and chemical dependency nor does it require a health plan to provide mental health coverage. Health plans may continue to set the terms and conditions (e.g., require co-payments, deductibles, or provide a limited number of visits or days of coverage) for the amount, duration and scope of mental health benefits. Note that (a) small employers with 50 or fewer employees or (b) plans for which the mental health "parity" provision would result in increased plan costs of more than one percent are exempt from MHPA. Neither the Internal Revenue Service ("IRS") or the Department of Labor ("DOL") has determined whether (a) an employer can estimate the one percent prospectively or (b) parity must be met in 1998 with the employer demonstrating at the end of 1998, that parity increased plan costs more than one percent and then amending the Plan, effective the beginning of 1998.
The Newborns' and Mothers' Health Protection Act of 1996 ("Newborn Act") amended ERISA and is applicable for plan years beginning on or after January 1, 1998. The Newborn Act requires that group health plans allow new mothers and their newborns 48-hour hospital stays for vaginal births and 96-hour hospital stays for cesarian section births. Group health plans are prohibited from offering incentives to either patients or physicians to encourage shorter hospital stays.
The Taxpayer Relief Act of 1997 ("TRA '97") added the requirements of MHPA and the Newborn Act to the Internal Revenue Code of 1986, as amended (the "Code"). The effect of adding the requirements to the Code is that employers who violate the requirements of MHPA or the Newborn Act are subject to the same excise tax penalties that may be imposed for violations of Health Insurance Portability and Accountability Act of 1996 ("HIPAA"). (See our June Newsletter for a more complete discussion of HIPAA). The excise tax equals $100 per day with respect to each individual to whom the noncompliance relates. However, the excise tax is waived where (a) the violation is due to reasonable cause and is corrected within 30 days or (b) the employer exercising reasonable diligence would not have known of the existence of the violation.
We strongly urge each of you to review your health and welfare plans and summary plan descriptions to ensure compliance with MHPA and the Newborn Act, and where appropriate contact your outside providers such as HMOs and other insurers to coordinate compliance.