{"id":32003,"date":"2008-03-26T16:35:41","date_gmt":"2008-03-26T21:35:41","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/uncategorized\/mental-health-parity.html"},"modified":"2008-03-26T16:35:41","modified_gmt":"2008-03-26T21:35:41","slug":"mental-health-parity","status":"publish","type":"corporate","link":"https:\/\/corporate.findlaw.com\/corporate-governance\/mental-health-parity.html","title":{"rendered":"Mental Health Parity"},"content":{"rendered":"
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STATUS<\/font><\/p>

On December 22, 1997, the Departments of the Treasury, Labor, and Health and Human Services published in the Federal Register an interim final regulation implementing the provisions of the Mental Health Parity Act of 1996 (MHPA). The provisions of the law and regulation are effective for group health plans for plan years beginning on or after January 1, 1998. There are no special effective date provisions for collectively bargained plans. Comments on the interim final regulations will be accepted through March 23, 1998.<\/font><\/p>

BRIEF SUMMARY<\/font><\/p>

MHPA provides that a group health plan or insurance offered in connection with a plan, providing both medical\/surgical benefits and mental health benefits, may not impose an aggregate lifetime dollar limit or annual dollar limit on mental health benefits that is less than such a limit on medical\/surgical benefits.<\/font><\/p>

Group health plans and health insurance are not required by MHPA to provide mental health benefits. In addition, the law does not affect the terms and conditions (including cost sharing, limits on numbers of visits or days of coverage, and requirements relating to medical necessity) relating to the amount, duration, or scope of mental health benefits.<\/font><\/p>

The MHPA provides two exemptions from the parity requirements. The first exemption is for small employers (defined as an employer with at least 2 but not more than 50 employees). The second exemption is for group health plans if the application of these provisions results in an increase in the cost under the plan or coverage of at least 1 percent. The regulation requires all plans to implement parity for at least six months. For most plans this will be the first six months of the first plan year beginning on or after January 1, 1998. However, a plan may claim an exemption from parity if, based on at least six months actual data with parity in place, a plan has experienced a one percent or more cost increase attributable to the application of the parity provisions. (Six months of actual data includes all claims incurred during the six months period and reported within eight months after implementation of parity.) Increased costs do not include premium payments. The exemption is not effective until 30 days after the plan notifies participants and beneficiaries of the plan's decision to claim the one percent increased cost exemption. Plans also must send a copy of the notice to the government.<\/font><\/p>

MHPA provisions are effective for plan years beginning on or after January 1, 1998. MHPA includes a sunset provision under which the MHPA requirements do not apply to benefits for services furnished on or after September 30, 2001.<\/font><\/p>

DETAILED SUMMARY OF THE LAW<\/font><\/p>

The Mental Health Parity Act of 1996 (MHPA) amended the Public Health Service Act (PHSA) and the Employee Retirement Income Security Act of 1974 (ERISA) to provide for parity in the application of dollar limits on certain mental health benefits when limits are placed on medical and surgical benefits. Substantially similar provisions implementing MHPA were later added to the Internal Revenue Code of 1986 (Code) under the Taxpayer Relief Act of 1997. Health coverage is regulated, in part, by the Federal government, under ERISA and the PHS Act, and other Federal provisions including the Code, and, in part, by the States.<\/font><\/p>

MHPA provides that a group health plan, or health insurance coverage offered in connection with a group health plan, providing both medical and surgical benefits and mental health benefits may not impose an aggregate lifetime dollar limit or annual dollar limit on mental health benefits if it does not also impose such a limit on substantially all of the medical and surgical benefits.<\/font><\/p>

If the plan does impose an aggregate lifetime dollar limit or annual dollar limit on substantially all medical and surgical benefits, the plan cannot impose a limit on mental health benefits that is less than that applied to the medical and surgical benefits.<\/font><\/p>

If a group health plan offers two or more benefit package options under the plan, the requirements of the MHPA apply separately to each option.<\/font><\/p>

The MHPA makes clear that the requirements of the law apply to group health plans and health insurance issuers offering coverage under such plans regardless of whether the mental health benefits are separately administered under the plan.<\/font><\/p><\/div>

There are many ways under the law that plans and issuers are permitted to use to control plan costs.<\/font><\/p>

Group health plans and health insurance coverage offered in connection with group health plans are not required by MHPA to provide mental health benefits.<\/font><\/p>

In addition, the law does not affect the terms and conditions (including cost sharing, limits on numbers of visits or days of coverage, and requirements relating to medical necessity) relating to the amount, duration, or scope of mental health benefits under a plan or coverage except as specifically provided in regard to parity of aggregate lifetime limits and annual limits.<\/font><\/p>

MHPA protections do not extend to benefits for substance abuse or chemical dependency.<\/font><\/p><\/div>

The MHPA also provides two exemptions from these requirements.<\/font><\/p>

The first exemption is for small employers (defined as an employer with at least 2 but not more than 50 employees).<\/font><\/p>

The second exemption is for group health plans if the application of these provisions results in an increase in the cost under the plan or coverage of at least 1 percent. The statute is very brief and general, and does not prescribe what costs must be considered, or how the exemption is to be administered.<\/font><\/p><\/div>

MHPA provisions for group health plans are effective beginning on or after January 1, 1998. MHPA includes a sunset provision under which the MHPA requirements do not apply to benefits for services furnished on or after September 30, 2001.<\/font><\/p>

PROVISIONS OF THE REGULATIONS<\/font><\/p>

Weighted Average<\/u><\/font><\/p>

If a plan has no or different aggregate lifetime limits or annual limits on different categories of medical and surgical benefits, the interim rule establishes rules to calculate an average aggregate lifetime limit or annual limit for mental health benefits that is computed taking into account the weighted average of such limits applicable to the different categories.<\/font><\/p>

Definition of "Substantially All"<\/u><\/font><\/p>

The law provides that a plan or coverage that includes an annual dollar limit on substantially all medical and surgical benefits must either apply the annual dollar limit both to the medical and surgical benefits and to the mental health benefits and not distinguish in the application of the limit between these benefits; or not include any annual limit on mental health benefits that is less than the applicable annual limit on medical and surgical benefits.<\/font><\/p>

The regulation interprets "substantially all medical and surgical benefits" as at least two-thirds of the dollar amount of all plan payments for medical and surgical benefits covered under the plan.s benefit package. A plan or coverage that includes either no annual dollar limits or different annual dollar limits on different categories of medical and surgical benefits must comply by substituting, for the aggregate lifetime or annual limits, an average limit that is computed by taking into account the weighted average of the aggregate lifetime or annual limit, as appropriate, that is applicable to the categories of benefits. An unlimited benefit is valued as a reasonable estimate of the upper limit on the dollar amount a plan may incur with respect to that benefit.<\/font><\/p>

Increased Cost Exemption<\/u><\/font><\/p>

The interim rule also describes the exemption from MHPA.s requirements if the application of MHPA results in an increase in the cost under the plan or coverage of at least one percent.<\/font><\/p>

Generally, plans must implement parity for the first plan year beginning on or after January 1, 1998, but may claim an exemption from parity if, based on at least six months actual data, a plan has experienced a one percent or more cost increase.<\/font><\/p>

A plan that complied with parity after the date of enactment of the law, but before the date that the plan becomes subject to the requirements of the interim rule, may use data from that period to show a cost increase justifying an exemption.<\/font><\/p>

Increased costs do not include premium payments.<\/font><\/p>

The exemption is not effective until 30 days after the plan notifies participants and beneficiaries of the plan's decision to claim the one percent increased cost exemption. Plans also must send a copy of the notice to the government. (See copy below.)<\/font><\/p>

To claim the one percent increased cost exemption:<\/font><\/p>