[Senate Report 110-53]
[From the U.S. Government Publishing Office]
Calendar No. 93
110th Congress Report
SENATE
1st Session 110-53
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MENTAL HEALTH PARITY ACT OF 2007
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April 11, 2007.--Ordered to be printed
_______
Mr. Kennedy, from the Committee on Health, Education, Labor, and
Pensions, submitted the following
R E P O R T
[To accompany S. 558]
The Committee on Health, Education, Labor, and Pensions, to
which was referred the bill (S. 558) to provide parity between
health insurance coverage of mental health benefits and
benefits for medical and surgical services, having considered
the same, reports favorably thereon with an amendment in the
nature of a substitute and recommends that the bill (as
amended) do pass.
CONTENTS
Page
I. Purpose and need for legislation.................................1
II. Summary of legislation...........................................2
III. History of legislation and votes in committee....................4
IV. Cost estimate....................................................4
V. Regulatory impact statement.....................................10
VI. Application of law to the legislative branch....................10
VII. Section-by-section analysis.....................................10
VIII.Changes in existing law.........................................13
I. Purpose and Need for Legislation
The purpose of S. 558 ``The Mental Health Parity Act of
2007'' is to expand the Mental Health Parity Act (MHPA) of 1996
by ensuring parity for mental health benefits that goes beyond
annual and lifetime limits. S. 558 does not mandate that group
health plans provide any mental health coverage, but if a plan
does offer mental health coverage, then S. 558 prohibits group
health plans (or health insurance coverage offered in
connection with a group health plan) from imposing financial
requirements (including deductibles, copayments, coinsurance,
out-of-pocket expenses, and annual and lifetime limits) or
treatment limitations (including limits on the frequency of
treatment, number of visits, days of coverage, or other similar
limits on the scope and duration of treatment) on mental health
benefits that are more restrictive than the financial
requirements or treatment limitations applied to medical and
surgical benefits. Thus, the group health plan or coverage must
ensure that the financial requirements or treatment limitations
applied to mental health benefits are no more restrictive than
the financial requirements applied to substantially all medical
and surgical benefits that the plan covers. It does not preempt
State mandate laws that require coverage of mental health
benefits.
Providing parity in mental health coverage is an urgent
matter because of the fact that mental disorders are a leading
cause of disability in the United States. Success rates for
treatment of mental disorders often equal or surpass those for
physical conditions. An estimated 26.2 percent of Americans
ages 18 and older--about one in four adults--suffer from a
diagnosable mental disorder in a given year, which equates to
57.7 million people in the United States. The Mental Health
Parity Act of 2007 would guarantee mental health parity to 87.4
million employees covered by self-insured plans and 31 million
employees covered by insured plans.
Parity in mental health benefits is necessary because of
the huge impact that mental illness and substance abuse has on
our society. Mental illness and substance abuse results in
significant lost productivity and absenteeism and accounts for
over 15 percent of the burden of disease in the United States.
Furthermore, it has been determined that mental illness and
substance abuse cause more days of work loss and work
impairment than many other chronic conditions such as diabetes,
asthma, and arthritis. The need for
S. 558 is further substantiated by the fact that approximately
217 million days of work are lost annually due to productivity
decline related to mental illness and substance abuse
disorders, which cost employers in the United States $17
billion each year. Investing in mental health parity is
beneficial for the Nation because the costs associated with
lost worker productivity and the costs of providing extra
physical health services outweigh the costs of implementing
parity for mental health treatment.
Additionally, it should be noted that a 2004 Department of
Health and Human Services actuarial study of the impact of
mental health and substance abuse parity on health plans under
the Federal Employee Health Benefit Program (FEHBP) shows that
utilization of services increased 15 percent from pre-parity
levels, and yet the cost increase associated with parity was
only 0.94 percent. S. 558 is, therefore, a fair solution to the
injustices that people with mental illness experience while
receiving treatment. It will save lives, increase the quality
of life for group health plan participants suffering from
mental illness, and save money.
II. Summary of Legislation
The Mental Health Parity Act of 2007 (S. 558) is a
comprehensive statute that incorporates several key provisions
relating to mental health parity protections for group health
plan participants that are consistent with the safe and sound
operation of group health plans. It also includes, for the
first time, a parity requirement for substance abuse.
S. 558 does not prohibit group health plans from
negotiating separate reimbursement or provider payment rates
and service delivery systems, or managing the provision of
mental benefits in order to provide medically necessary
treatments under the plan. S. 558 does, however, require that
if a group health plan provides both medical and surgical
benefits and mental health benefits (including substance abuse
treatment), and provides such benefits on both an in- and out-
of-network basis pursuant to the terms of the plan (or
coverage), then the plan must ensure that the requirements of
this section are applied to both in- and out-of-network
services by comparing in-network medical and surgical benefits
to in-network mental health benefits and out-of-network medical
and surgical benefits to out-of-network mental health benefits.
Individual plans and employers with 50 or fewer employees
are exempt from the law.
Additionally, group health plans that can demonstrate that
compliance with S. 558 increased their actual total costs of
coverage under the plan may elect to be exempt from parity
under this act for the following plan year if it is projected
that the health plan will experience increased actual total
costs of coverage under the plan that exceed 2 percent of the
actual total plan costs during the first plan year or exceed 1
percent of the actual total plan costs each subsequent year. It
should be noted that group health plans could not permanently
opt out of complying with the parity requirement and that the
exemption under this section only applies for one plan year. It
should also be noted that an employer may still elect to
continue to apply mental health parity even if it meets the
threshold for cost exemption.
``Mental Health Benefits,'' means benefits with respect to
mental health services (including substance abuse treatment) as
defined under the terms of the plan or coverage, and when
applicable, as may be defined under State law to health
insurance coverage offered in connection with a group health
plan. This definition comes from the 1996 definition of the
Mental Health Parity Act, with the exception of the portion
pertaining to substance abuse treatment.
The provisions of this legislation relating to a group
health plan or a health insurance issuer offering coverage in
connection with a group health plan shall supersede any
provision of State law that establishes, implements, or
continues in effect any standard or requirement which differs
from the specific standards or requirementscontained in
subsections (a), (b), (c), or (e) of Section 712A.
Enforcement of this act follows the enforcement structure
contained in the Mental Health Parity Act of 1996, which
requires the Department of Labor, Department of the Treasury,
and the Department of Health and Human Services to share
enforcement jurisdiction.
In addition, this act requires DOL and DHHS to each ensure
that random audits of health plans are conducted in order to
determine compliance with this act. This act also requires both
DOL and DHHS to designate an individual within each agency to
serve as the ombudsman whose primary duties are to serve as an
initial point of contact to permit individuals to obtain
information and provide assistance concerning their coverage of
mental health services under group health plans.
III. History of Legislation and Votes in Committee
Congress enacted the Mental Health Parity Act in 1996 in
response to the inequitable and unfair treatment afforded
people with mental illness in their health care coverage. The
original legislation established for the first time that group
health plans could not treat mental illnesses differently from
medical illnesses with regard to annual and lifetime limits on
coverage. However, it soon became apparent that while this
original legislation was a step in the right direction, the
legislation failed to adequately address the continued
inequities that persons with mental illness experience in their
health care coverage. The Mental Health Parity Act of 2007 aims
to address these inequities by prohibiting group health plans
from imposing financial requirements or treatment limitations
on the coverage of mental health conditions (including
substance abuse) that are more restrictive than financial
requirements and treatment limitations that are applied to
medical and surgical benefits.
Notwithstanding its limited provisions, the Mental Health
Parity Act of 1996 was a significant step forward in the advent
of State mental health policy. In 1991, Texas and North
Carolina became the first States to enact mental health parity
legislation. The laws required health insurers that covered
State government employees to provide equal coverage for mental
and physical conditions. Prior to the enactment of the Mental
Health Parity Act in 1996, five more States passed laws that
required State-regulated group health plans to provide parity
in mental health coverage. By 2001, 45 States had enacted some
parity law. Today, there are 49 States in total that have some
parity law.
A bipartisan bill, S. 558, was introduced on February 12,
2007 by Senator Domenici, Senator Kennedy, and Senator Enzi.
The bill was referred to the Committee on Health, Education,
Labor, and Pensions. S. 558 was brought up for markup at the
Health, Education, Labor, and Pensions Committee Executive
Session on February 14, 2007. At that time, Senator Harkin
offered an amendment by Senator Dodd, which included a
technical change to clarify provisions relating to the GAO
study. This amendment required GAO to examine and report on
``the impact on out-of-network coverage for mental health
benefits (including substance abuse treatment).'' The amendment
was adopted by unanimous consent and the bill was favorably
reported to the full Senate by a vote of 18-3.
IV. Cost Estimate
S. 558--Mental Health Parity Act of 2007
Summary: The Mental Health Parity Act of 2007 would
prohibit group health plans and group health insurance issuers
that provide both medical and surgical benefits and mental
health benefits from imposing treatment limitations or
financial requirements for coverage of mental health benefits
that are different from those used for medical and surgical
benefits.
The bill would affect both Federal revenues and direct
spending for Medicaid, beginning in 2009. The bill would result
in higher premiums for employer-sponsored health benefits.
Higher premiums, in turn, would result in more of an employee's
compensation being received in the form of nontaxable employer-
paid premiums, and less in the form of taxable wages. As a
result of this shift, Federal income and payroll tax revenues
would decline. The Congressional Budget Office (CBO) estimates
that the proposal would reduce Federal tax revenues by $1
billion over the 2009-2012 period and by $3 billion over the
2009-2017 period. Social Security payroll taxes, which are off-
budget, would account for about 35 percent of those totals.
The bill's requirements for issuers of group health
insurance would apply to managed care plans in the Medicaid
program. CBO estimates that enacting S. 558 would increase
Federal direct spending for Medicaid by $280 million over the
2009-2012 period and by $790 million over the 2009-2017 period.
In addition, assuming appropriation of the necessary amounts,
CBO estimates that implementing S. 558 would have discretionary
costs of $20 million in 2008, $143 million over the 2008-2012
period, and $322 million over the 2008-2017 period.
S. 558 would preempt State laws governing mental health
coverage that are different than those in this bill and that
apply to firms with 50 or more employees. That preemption would
be an intergovernmental mandate as defined in the Unfunded
Mandates Reform Act (UMRA). However, because the preemption
only would prohibit the application of State regulatory law,
CBO estimates that the costs of the mandate to State, local, or
tribal governments would not be significant and thus would not
exceed the threshold established by UMRA ($66 million in 2007,
adjusted annually for inflation).
As a result of this legislation, some State, local, and
tribal governments would pay higher health insurance premiums
for their employees. However, these costs would not result from
intergovernmental mandates, but would be costs passed on to
them by private insurers who would face a private-sector
mandate to comply with the requirements of the bill.
The bill would impose a private-sector mandate on group
health plans and group health insurance issuers by prohibiting
them from imposing treatment limitations or financial
requirements for mental health benefits that differ from those
placed on medical and surgical benefits. Under current law, the
Mental Health Parity Act of 1996 requires a more-limited form
of parity between mental health and medical and surgical
coverage.That mandate is set to expire at the end of 2007.
Thus, S. 558 would both extend and expand the existing mandate
requiring mental health parity. CBO estimates that the direct costs of
the private-sector mandate in the bill would total about $1.5 billion
in 2009, and would grow in later years. That amount would significantly
exceed the annual threshold established by UMRA ($131 million in 2007,
adjusted for inflation) in each of the years that the mandate would be
in effect.
Estimated cost to the Federal Government: The estimated
budgetary impact of S. 558 is shown in the following table.
ESTIMATED BUDGETARY EFFECTS OF S. 558
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By fiscal year, in millions of dollars--
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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2008-2012 2008-2017
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CHANGES IN REVENUES
Income and HI Payroll Taxes (on-budget)................. 0 -90 -160 -190 -210 -230 -250 -260 -280 -300 -650 -1,970
Social Security Payroll Taxes (off-budget).............. 0 -50 -90 -100 -110 -120 -130 -140 -150 -160 -350 -1,050
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Total Changes....................................... 0 -140 -250 -290 -320 -350 -380 -400 -430 -460 -1,000 -3,020
CHANGES IN DIRECT SPENDING
Medicaid:
Estimated Budget Authority.............................. 0 60 70 70 80 90 90 100 110 120 280 790
Estimated Outlays....................................... 0 60 70 70 80 90 90 100 110 120 280 790
CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Implementation costs for DHHS and DOL:
Estimated Authorization Level........................... 25 30 30 30 35 35 35 35 35 40 150 330
Estimated Outlays....................................... 20 29 30 30 34 35 35 35 35 39 143 322
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NOTE: DHHS = Department of Health and Human Services, DOL = Department of Labor, HI = Hospital Insurance (Part A of Medicare).
Basis of Estimate: This bill would prohibit group health
plans and group health insurance issuers who offer mental
health benefits (including benefits for substance abuse
treatment) from imposing treatment limitations or financial
requirements for those benefits that are different from those
used for medical and surgical benefits. For plans that offer
mental health benefits through a network of mental health
providers, the requirement for parity of benefits would be
established by comparing in-network medical and surgical
benefits with in-network mental health benefits, and comparing
out-of-network medical and surgical benefits with out-of-
network mental health benefits. The provision would apply to
benefits for any mental health condition that is covered under
the group health plan. The bill would not require plans to
offer mental health benefits, nor would it require that those
plans cover all types of mental health services or ailments if
the plan covered any mental health services or ailments. Laws
in some States, however, require that plans cover those
benefits, which would affect the potential impact of this bill
on health plan premiums.
Revenues: The provisions of the bill would apply to both
self-insured and fully insured group health plans. Small
employers (those employing between 2 and 50 employees in a
year) would be exempt from the bill's requirements, as would
individuals purchasing insurance in the individual market. The
bill also would exempt group health plans for whom the cost of
complying with the requirements would increase total plan costs
(for medical and surgical benefits and mental health benefits)
by more than 2 percent in the first plan year following
enactment, and 1 percent in subsequent plan years. In general,
S. 558 would preempt State laws regarding parity of mental
health benefits. The bill would not affect the application of
State law for firms with fewer than 50 employees. In addition,
because State parity laws and the proposed Federal law are very
similar, S. 558 would not have a significant impact on people
already affected by State parity laws.
CBO's estimate of the cost of this bill is based in part on
published results of a model developed by the Hay Group. That
model relies on data from several sources, including the claims
experience of private health insurers and the Medical
Expenditure Panel Survey. CBO adjusted those results to account
for the current and future use of managed care arrangements for
providing mental health benefits and the increased use of
prescription drugs that mental health parity would be likely to
induce. Also, CBO took account of the effects of existing State
and Federal rules that place requirements similar to those in
the bill on certain entities. (For example, the Office of
Personnel Management implemented mental health and substance
abuse parity in the Federal Employees Health Benefits Program
in January 2001.)
CBO estimates that S. 558, if enacted, would increase
premiums for group health insurance by an average of about 0.4
percent, before accounting for the responses of health plans,
employers, and workers to the higher premiums that would likely
be charged under the bill. Those responses would include
reductions in the number of employers offering insurance to
their employees and in the number of employees enrolling in
employer-sponsored insurance, changes in the types of health
plans that are offered (including eliminating coverage for
mental health benefits and/or substance benefits), and
reductions in the scope or generosity of health insurance
benefits, such as increased deductibles or higher copayments.
CBO expects that those behavioral responses would offset 60
percent of the potential impact of the bill on total health
plan costs.
The remaining 40 percent of the potential increase in
costs--less than 0.2 percent of group health insurance
premiums--would occur in the form of higher spending for health
insurance. Those costs would be passed through to workers,
reducing both their taxable compensation and other fringe
benefits. For employees of private firms, CBO assumes that all
of that increase would ultimately be passed through to workers.
State, local, and tribal governments are assumed to absorb 75
percent of the increase and to reduce their workers' taxable
income and other fringe benefits to offset the remaining one-
quarter of the increase. CBO estimates that the resulting
reduction in taxable income would grow from $2 billion in 2009
to $4.5 billion in 2017.
Those reductions in workers' taxable compensation would
lead to lower Federal tax revenues. CBO estimates that Federal
tax revenues would fall by $140 million in 2009 and by $3
billion over the 2009-2017 period if S. 558 were enacted.
Social Security payroll taxes, which are off-budget, would
account for about 35 percent of those totals.
Direct Spending: The bill's requirements for issuers of
group health insurance would apply to managed care plans in the
Medicaid program. CBO estimates that enacting S. 558 would
increase Medicaid payments to managed care plans by about 0.2
percent. That is less than the 0.4 percent increase in the
estimated increase in spending for employer-sponsored health
insurance because Medicaid programs offer broader coverage of
mental health benefits than the private sector. CBO estimates
that enacting S. 558 would increase Federal spending for
Medicaid by $280 million over the 2009-2012 period and $790
million over the 2009-2017 period.
Spending Subject to Appropriation: S. 558 would require the
Secretary of Labor and the Secretary of Health and Human
Services to each designate an individual to serve as ombudsman
to group health plans, and would require the departments to
conduct random audits of plans to ensure that they are in
compliance with the requirements of the bill. Based on the
costs of implementing the Health Insurance Portability and
Accountability Act of 1996, and assuming appropriation of the
necessary amounts, CBO estimates that implementing S. 558 would
increase spending by $20 million in 2008 and by $30 million to
$40 million annually in subsequent years.
Estimated Impact on State, Local, and Tribal Governments:
S. 558 would preempt State laws governing mental health
coverage that are different than those in this bill and that
apply to firms with 50 or more employees. The preemption would
be an intergovernmental mandate as defined in UMRA. However,
because the preemption would simply prohibit the application of
State regulatory law, CBO estimates that the mandate would
impose no significant costs on State, local, or tribal
governments.
An existing provision in the Public Health Service Act
(PHSA) would allow State, local, and tribal governments, as
employers that provide health benefits to their employees, to
opt out of the requirements of this bill. Consequently, the
bill's requirements for mental health parity would not be
intergovernmental mandates as defined in UMRA, and the bill
would affect the budgets of those governments only if they
choose to comply with the requirements on group health plans.
Roughly two-thirds of employees in State, local, and tribal
governments are enrolled in self-insured plans.
The remaining governmental employees are enrolled in fully
insured plans. Governments purchase health insurance for those
employees through private insurers and would face increased
premiums as a result of higher costs passed on to them by those
insurers. The increased costs, however, would not result from
intergovernmental mandates. Rather, they would be part of the
mandate costs initially borne by the private sector and then
passed on to the governments as purchasers of insurance. CBO
estimates that State, local, and tribal governments would face
additional costs of about $100 million in 2009, increasing to
about $155 million in 2012. This estimate reflects the
assumption that governments would shift roughly 25 percent of
the additional costs to their employees.
Because the bill's requirements would apply to managed care
plans in the Medicaid program, CBO estimates that State
spending for Medicaid also would increase by about $210 million
over the 2008-2012 period.
Estimated Impact on the Private Sector: The bill would
impose a private-sector mandate on group health plans and
issuers of group health insurance that provide medical and
surgical benefits as well as mental health benefits (including
benefits for substance abuse treatment). S. 558 would prohibit
those entities from imposing treatment limitations or financial
requirements for mental health benefits that differ from those
placed on medical and surgical benefits. The requirements would
not apply to coverage purchased by employer groups with fewer
than 50 employees. For plans that offer mental health benefits
through a network of mental health providers, the requirement
for parity of benefits would be established by comparing in-
network medical and surgical benefits with in-network mental
health benefits, and comparing out-of-network medical and
surgical benefits with out-of-network mental health benefits.
Under current law, the Mental Health Parity Act of 1996
prohibits group health plans and group health insurance issuers
from imposing annual and lifetime dollar limits on mental
health coverage that are more restrictive than limits imposed
on medical and surgical coverage. The current mandate is set to
expire at the end of calendar year 2007. Consequently, S. 558
would both extend and expand the current mandate requiring
mental health parity.
CBO's estimate of the direct costs of the mandate assumes
that affected entities would comply with S. 558 by further
increasing the generosity of their mental health benefits. Many
plans currently offer mental health benefits that are less
generous than their medical and surgical benefits. We estimate
that the direct costs of the additional services that would be
newly covered by insurance because of the mandate would equal
about 0.4 percent of employer-sponsored health insurance
premiums compared to having no mandate at all.
CBO estimates that the direct costs of the mandate in S.
558 would be $1.5 billion in 2009, rising to $3.4 billion in
2013. Those costs would exceed the threshold specified in UMRA
($131 million in 2007, adjusted annually for inflation) in each
year the mandate would be in effect.
Estimate Prepared By: Federal Costs: Jeanne De Sa and
Shinobu Suzuki. Impact on State, Local, and Tribal Governments:
Leo Lex. Impact on the Private Sector: Stuart Hagen.
Estimate Approved By: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.
V. Regulatory Impact Statement
The committee has determined that there will be minimal
increases in the regulatory burden imposed by this bill.
VI. Application of Law to Legislative Branch
The committee has determined that there is no legislative
impact.
VII. Section-by-Section Analysis
Section 1. Short title
Section 1 specifies the title of the legislation as the
``Mental Health Parity Act of 2007.''
Section 2. Mental health parity
Section 2 amends ERISA.
Section 712A. Mental health parity
This section stipulates that a group health plan (or health
insurance coverage offered in connection with such a plan) must
ensure that the financial requirements that are applied to
mental health benefits are no more restrictive than the
financial requirements applied to substantially all medical and
surgical benefits that the plan covers, including:
1. deductibles,
2. copayments,
3. coinsurance,
4. out-of-pocket expenses,
5. and annual and lifetime limits.
Group health plans are not permitted under this section to
establish separate cost sharing requirements that are only
directed at mental health benefits.
The group health plan (or health insurance coverage offered
in connection with such a plan) must also ensure that the
treatment limitations applied to mental health benefits are no
more restrictive than the treatment limitations applied to
substantially all medical and surgical benefits that the plan
covers, including:
1. limits on the frequency of treatment,
2. number of visits,
3. days of coverage,
4. or other similar limits on the scope or duration
of treatment.
This section does not prohibit health plans from:
1. negotiating separate reimbursement or provider
payment rates and service delivery systems for
different benefits or
2. managing the provision of mental benefits in order
to provide medically necessary treatments under the
plan (as a means to contain costs and monitor and
improve the quality of care) or
3. taking into consideration similar treatment
settings or similar treatments when applying the
provisions of this section.
This section requires that if a group health plan provides
both medical and surgical benefits and mental health benefits
(including substance abuse treatment), and provides such
benefits on both an in- and out-of-network basis pursuant to
the terms of the plan (or coverage), then the plan must ensure
that the requirements of this section are applied to both in-
and out-of-network services by comparing in-network medical and
surgical benefits to in-network mental health benefits and out-
of-network medical and surgical benefits to out-of-network
mental health benefits.
This section does not require that a group health plan (or
coverage) eliminate, reduce, or provide out-of-network
coverage.
This section does not apply to any group health plan for
any plan year of any small employer. Small employers are those
who employ 50 or less employees. Determination of employer size
for purposes of this act shall follow rules consistent with
those the rules under section 414 of the Internal Revenue Code
of 1986.
In order to determine whether an employer who did not exist
throughout the preceding calendar year is a small employer, for
the purpose of this section, it should be based on the average
number of employees that the employer is reasonably expected
will employ on business days in the current calendar year. It
should also be noted that any reference to an employer in this
section also includes a reference to any predecessor of the
current employer.
A group health plan may elect to be exempt from parity
under this act for the following plan year if it is projected
that the group health plan will experience increased actual
total costs of coverage with respect to medical and surgical
benefits and mental health benefits under the plan that exceed
2 percent of the actual total plan costs during the first plan
year or exceed 1 percent of the actual total plan costs each
subsequent year. It should be noted that the exemption under
this section only applies for one plan year and that an
employer may still elect to continue to apply mental health
parity even if it meets the threshold for cost exemption.
This section requires that a qualified actuary who is a
member in good standing in the American Academy of Actuaries
will determine the increases in costs under a plan. Such
determinations shall be certified by the actuary and be made
available to the general public.
This section stipulates that group health plans that desire
an exemption for meeting the threshold for cost exemption can
only do so after they have complied with this section for the
first 6 months of the plan year involved.
If the plan elects to modify its coverage of mental health
benefits, then it will be treated as a significant modification
in the terms of the plan and will have to give appropriate
notice to plan members when required.
This section should not be construed to require group
health plans to provide any mental health benefits.
This section defines ``Mental Health Benefits'' to mean
benefits with respect to mental health services (including
substance abuse treatment) as defined under the terms of the
group health plan or coverage.
Section 2705A. Mental health parity
The provisions of this section are identical to section
712A, but with the exception that Secretary under this section
refers to the Secretary of Health and Human Services because
this section pertains to the Public Health Service Act. Please
see section 712A above for the analysis.
This section defines ``Mental Health Benefits'' to mean
benefits with respect to mental health services (including
substance abuse treatment) as defined under the terms of the
group health plan or coverage, and, when applicable, as may be
defined under State law to health insurance coverage offered in
connection with a group health plan.
Section 3. Effective date
Section 3 stipulates that with respect to group health
plans or health insurance coverage offered in connection with
such plans--this law will take effect beginning in the first
plan year that begins on or after January 1 of the first
calendar year that begins more than 1 year after the date of
the enactment of this Act.
This section also states that the effective date noted
above does not apply to benefits for services that are
furnished after the effective date noted above.
Section 4. Special preemption rule
Section 4 amends Section 731 of the Employee Retirement
Income Security Act of 1974 to provide that the provisions of
this act relating to a group health plan or a health insurance
issuer offering coverage in connection with a group health plan
shall supersede any provision of State law that establishes,
implements, or continues in effect any standard or requirement
which differs from the specific standards or requirements
contained in subsections (a), (b), (c), or (e) of Section 712A.
Nothing in this section should be construed to preempt
State insurance laws relating to the individual insurance
market or to small employers.
With respect to a State, this law will be effective the
same date as it is effective with respect to group health
plans. [With respect to group health plans this law must take
effect beginning in the first plan year that begins on or after
January 1 of the first calendar year that begins more than 1
year after the date of the enactment of this act.]
Section 5. Federal administrative responsibilities
Section 5 requires both the Secretary of Labor and the
Secretary of Health and Human Services to designate a person
within their respective agencies to serve as the group health
plan ombudsman. The primary duties of the ombudsman is to serve
as an initial point of contact to permit individuals to obtain
information and provide assistance concerning their coverage of
mental health services under group health plans or under health
insurance coverage issued in connection with group health
plans.
This section requires that the Secretaries of Labor and
Health and Human Services each ensure that random audits of
group health plans and health insurance coverage offered in
connection with group health plans are conducted in order to
determine whether group health plans are in compliance with
this act.
This section requires the Comptroller General to conduct a
study and prepare and submit a report within 2 years of
enactment of this act to the appropriate committees of
Congress, which evaluates the effect that the implementation of
this Act has on:
1. The cost of health insurance coverage;
2. Access to health insurance coverage (including the
availability of in-network providers);
3. The quality of health care;
4. Impact on benefits and coverage for mental health
and substance abuse;
5. The impact of any additional costs or savings to
the plan;
6. The impact on out-of-network coverage for mental
health benefits (including substance abuse treatment);
7. The impact on State mental health benefit mandate
laws;
8. Other impact on the business community and the
Federal Government and,
9. Other issues as determined appropriate by the
Comptroller General.
Except as otherwise provided in this act, enforcement of
this act follows the enforcement structure contained in the
Mental Health Parity Act of 1996, which requires the Department
of Labor, Department of the Treasury, and the Department of
Health and Human Services to share enforcement jurisdiction.
This section also requires the Secretaries of Labor and
Health and Human Services to promulgate regulations within 1
year after the date that the act is enacted.
VIII. Changes in Existing Law
In compliance with rule XXVI paragraph 12 of the Standing
Rules of the Senate, the following provides a print of the
statute or the part or section thereof to be amended or
replaced (existing law proposed to be omitted is enclosed in
black brackets, new matter is printed in italic, existing law
in which no change is proposed is shown in roman):
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974
* * * * * * *
TITLE I--PROTECTION OF EMPLOYEE BENEFIT RIGHTS
Subtitle A--General Provisions
* * * * * * *
Part 7--Group Health Plan Requirements
Subpart A--Requirements Relating to Portability, Access, and
Renewability
* * * * * * *
Subpart B--Other Requirements
SEC. 711. [1185] STANDARDS RELATING TO BENEFITS FOR MOTHERS AND
NEWBORNS.
* * * * * * *
SEC. 712. [1185A] PARITY IN THE APPLICATION OF CERTAIN LIMITS TO MENTAL
HEALTH BENEFITS.
(a) In General.-- * * *
* * * * * * *
[(f) Sunset.--This section shall not apply to benefits for
services furnished after December 31, 2006.]
(f) Sunset.--This section shall not apply to benefits for
services furnished after the effective date described in
section 3(a) of the Mental Health Parity Act of 2007.
* * * * * * *
SEC. 712A. MENTAL HEALTH PARITY.
(a) In General.--In the case of a group health plan (or
health insurance coverage offered in connection with such a
plan) that provides both medical and surgical benefits and
mental health benefits, such plan or coverage shall ensure
that--
(1) the financial requirements applicable to such
mental health benefits are no more restrictive than the
financial requirements applied to substantially all
medical and surgical benefits covered by theplan (or
coverage), including deductibles, copayments, coinsurance, out-of-
pocket expenses, and annual and lifetime limits, except that the plan
(or coverage) may not establish separate cost sharing requirements that
are applicable only with respect to mental health benefits; and
(2) the treatment limitations applicable to such
mental health benefits are no more restrictive than the
treatment limitations applied to substantially all
medical and surgical benefits covered by the plan (or
coverage), including limits on the frequency of
treatment, number of visits, days of coverage, or other
similar limits on the scope or duration of treatment.
(b) Clarifications.--In the case of a group health plan (or
health insurance coverage offered in connection with such a
plan) that provides both medical and surgical benefits and
mental health benefits, such plan or coverage shall not be
prohibited from--
(1) negotiating separate reimbursement or provider
payment rates and service delivery systems for
different benefits consistent with subsection (a);
(2) managing the provision of mental health benefits
in order to provide medically necessary services for
covered benefits, including through the use of any
utilization review, authorization or management
practices, the application of medical necessity and
appropriateness criteria applicable to behavioral
health, and the contracting with and use of a network
of providers; or
(3) applying the provisions of this section in a
manner that takes into consideration similar treatment
settings or similar treatments.
(c) In- and Out-of-Network.--
(1) In general.--In the case of a group health plan
(or health insurance coverage offered in connection
with such a plan) that provides both medical and
surgical benefits and mental health benefits, and that
provides such benefits on both an in- and out-of-
network basis pursuant to the terms of the plan (or
coverage), such plan (or coverage) shall ensure that
the requirements of this section are applied to both
in- and out-of-network services by comparing in-network
medical and surgical benefits to in-network mental
health benefits and out-of-network medical and surgical
benefits to out-of-network mental health benefits.
(2) Clarification.--Nothing in paragraph (1) shall be
construed as requiring that a group health plan (or
coverage in connection with such a plan) eliminate,
reduce, or provide out-of-network coverage with respect
to such plan (or coverage).
(d) Small Employer Exemption.--
(1) In general.--This section shall not apply to any
group health plan (and group health insurance coverage
offered in connection with a group health plan) for any
plan year of any employer who employed an average of at
least 2 (or 1 in the case of an employer residing in a
State that permits small groups to include a single
individual) but not more than 50 employees on business
days during the preceding calendar year.
(2) Application of certain rules in determination of
employer size.--For purposes of this subsection:
(A) Application of aggregation rule for
employers.--Rules similar to the rules under
subsections (b), (c), (m), and (o) of section
414 of the Internal Revenue Code of 1986 shall
apply for purposes of treating persons as a
single employer.
(B) Employers not in existence in preceding
year.--In the case of an employer which was not
in existence throughout the preceding calendar
year, the determination of whether such
employer is a small employer shall be based on
the average number of employees that it is
reasonably expected such employer will employ
on business days in the current calendar year.
(C) Predecessors.--Any reference in this
paragraph to an employer shall include a
reference to any predecessor of such employer.
(e) Cost Exemption.--
(1) In general.--With respect to a group health plan
(or health insurance coverage offered in connections
with such a plan), if the application of this section
to such plan (or coverage) results in an increase for
the plan year involved of the actual total costs of
coverage with respect to medical and surgical benefits
and mental health benefits under the plan (as
determined and certified under paragraph (3)) by an
amount that exceeds the applicable percentage described
in paragraph (2) of the actual total plan costs, the
provisions of this section shall not apply to such plan
(or coverage) during the following plan year, and such
exemption shall apply to the plan (or coverage) for 1
plan year. An employer may elect to continue to apply
mental health parity pursuant to this section with
respect to the group health plan (or coverage) involved
regardless of any increase in total costs.
(2) Applicable percentage.--With respect to a plan
(or coverage), the applicable percentage described in
this paragraph shall be--
(A) 2 percent in the case of the first plan
year in which this section is applied; and
(B) 1 percent in the case of each subsequent
plan year.
(3) Determinations by actuaries.--Determinations as
to increases in actual costs under a plan (or coverage)
for purposes of this section shall be made by a
qualified actuary who is a member in good standing of
the American Academy of Actuaries. Such determinations
shall be certified by the actuary and be made available
to the general public.
(4) 6-month determinations.--If a group health plan
(or a health insurance issuer offering coverage in
connections with a group health plan) seeks an
exemption under this subsection, determinations under
paragraph (1) shall be made after such plan (or
coverage) has complied with this section for the first
6 months of the plan year involved.
(5) Notification.--An election to modify coverage of
mental health benefits as permitted under this
subsection shall be treated as a material modification
in the terms of the plan as described in section
102(a)(1) and shall be subject to the applicable notice
requirements under section 104(b)(1).
(f) Rule of Construction.--Nothing in this section shall be
construed to require a group health plan (or health insurance
coverage offered in connection with such a plan) to provide any
mental health benefits.
(g) Mental Health Benefits.--In this section, the term
``mental health benefits'' means benefits with respect to
mental health services (including substance abuse treatment) as
defined under the terms of the group health plan or coverage.
SEC. 731. [1191] PREEMPTION; STATE FLEXIBILITY; CONSTRUCTION.
(a) Continued Applicability of State Law With Respect to
Health Insurance Issuers.--
(1) In general.--* * *
* * * * * * *
(b) Special Rules in Case of Portability Requirements.--
(1) In general.--* * *
* * * * * * *
(c) Special Rule in Case of Mental Health Parity
Requirements.--
(1) In general.--Notwithstanding any provision of
section 514 to the contrary, the provisions of this
part relating to a group health plan or a health
insurance issuer offering coverage in connection with a
group health plan shall supercede any provision of
State law that establishes, implements, or continues in
effect any standard or requirement which differs from
the specific standards or requirements contained in
subsections (a), (b), (c), or (e) of section 712A.
(2) Clarifications.--Nothing in this subsection shall
be construed to preempt State insurance laws relating
to the individual insurance market or to small
employers (as such term is defined for purposes of
section 712A(d)).
[(c)](e) Rules of Construction.--* * *
[(d)](f) Definitions.--For purposes of this section--
(1) State law.--* * *
* * * * * * *
PUBLIC HEALTH SERVICE ACT
* * * * * * *
TITLE XXVII--REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE
Part A--Group Market Reforms
Subpart 1--Portability, Access, and Renewability Requirements
SEC. 2701 [300GG] INCREASED PORTABILITY THROUGH LIMITATION ON
PREEXISTING CONDITION EXCLUSIONS.
* * * * * * *
Subpart 2--Other Requirements
SEC. 2704. [300GG-4] STANDARDS RELATING TO BENEFITS FOR MOTHERS AND
NEWBORNS
* * * * * * *
SEC. 2705. [300GG-5] PARITY IN THE APPLICATION OF CERTAIN LIMITS TO
MENTAL HEALTH BENEFITS.
(a) In General.--* * *
* * * * * * *
[(f) Sunset.--This section shall not apply to benefits for
services furnished after December 31, 2007.]
(f) Sunset.--This section shall not apply to benefits for
services furnished after the effective date described in
section 3(a) of the Mental Health Parity Act of 2007.
* * * * * * *
SEC. 2705A. MENTAL HEALTH PARITY.
(a) In General.--In the case of a group health plan (or
health insurance coverage offered in connection with such a
plan) that provides both medical and surgical benefits and
mental health benefits, such plan or coverage shall ensure
that--
(1) the financial requirements applicable to such
mental health benefits are no more restrictive than the
financial requirements applied to substantially all
medical and surgical benefits covered by the plan (or
coverage), including deductibles, copayments,
coinsurance, out-of-pocket expenses, and annual and
lifetime limits, except that the plan (or coverage) may
not establish separate cost sharing requirements that
are applicable only with respect to mental health
benefits; and
(2) the treatment limitations applicable to such
mental health benefits are no more restrictive than the
treatment limitations applied to substantially all
medical and surgical benefits covered by the plan (or
coverage), including limits on the frequency of
treatment, number of visits, days of coverage, or other
similar limits on the scope or duration of treatment.
(b) Clarifications.--In the case of a group health plan (or
health insurance coverage offered in connection with such a
plan) that provides both medical and surgical benefits and
mental health benefits, such plan or coverage shall not be
prohibited from--
(1) negotiating separate reimbursement or provider
payment rates and service delivery systems for
different benefits consistent with subsection (a);
(2) managing the provision of mental health benefits
in order to provide medically necessary services for
covered benefits, including through the use of any
utilization review, authorization or management
practices, the application of medical necessity and
appropriateness criteria applicable to behavioral
health, and the contracting with and use of a network
of providers; or
(3) be prohibited from applying the provisions of
this section in a manner that takes into consideration
similar treatment settings or similar treatments.
(c) In- and Out-of-Network.--
(1) In general.--In the case of a group health plan
(or health insurance coverage offered in connection
with such a plan) that provides both medical and
surgical benefits and mental health benefits, and that
provides such benefits on both an in- and out-of-
network basis pursuant to the terms of the plan (or
coverage), such plan (or coverage) shall ensure that
the requirements of this section are applied to both
in- and out-of-network services by comparing in-network
medical and surgical benefits to in-network mental
health benefits and out-of-network medical and surgical
benefits to out-of-network mental health benefits.
(2) Clarification.--Nothing in paragraph (1) shall be
construed as requiring that a group health plan (or
coverage in connection with such a plan) eliminate,
reduce, or provide out-of-network coverage with respect
to such plan (or coverage).
(d) Small Employer Exemption.--
(1) In general.--This section shall not apply to any
group health plan (and group health insurance coverage
offered in connection with a group health plan) for any
plan year of any employer who employed an average of at
least 2 (or 1 in the case of an employer residing in a
State that permits small groups to include a single
individual) but not more than 50 employees on business
days during the preceding calendar year.
(2) Application of certain rules in determination of
employer size.--For purposes of this subsection:
(A) Application of aggregation rule for
employers.--Rules similar to the rules under
subsections (b), (c), (m), and (o) of section
414 of the Internal Revenue Code of 1986 shall
apply for purposes of treating persons as a
single employer.
(B) Employers not in existence in preceding
year.--In the case of an employer which was not
in existence throughout the preceding calendar
year, the determination ofwhether such employer
is a small employer shall be based on the average number of employees
that it is reasonably expected such employer will employ on business
days in the current calendar year.
(C) Predecessors.--Any reference in this paragraph to
an employer shall include a reference to any
predecessor of such employer.
(e) Cost Exemption.--
(1) In general.--With respect to a group health plan
(or health insurance coverage offered in connections
with such a plan), if the application of this section
to such plan (or coverage) results in an increase for
the plan year involved of the actual total costs of
coverage with respect to medical and surgical benefits
and mental health benefits under the plan (as
determined and certified under paragraph (3)) by an
amount that exceeds the applicable percentage described
in paragraph (2) of the actual total plan costs, the
provisions of this section shall not apply to such plan
(or coverage) during the following plan year, and such
exemption shall apply to the plan (or coverage) for 1
plan year. An employer may elect to continue to apply
mental health parity pursuant to this section with
respect to the group health plan (or coverage) involved
regardless of any increase in total costs.
(2) Applicable percentage.--With respect to a plan
(or coverage), the applicable percentage described in
this paragraph shall be--
(A) 2 percent in the case of the first plan
year in which this section is applied; and
(B) 1 percent in the case of each subsequent
plan year.
(3) Determinations by actuaries.--Determinations as
to increases in actual costs under a plan (or coverage)
for purposes of this section shall be made by a
qualified actuary who is a member in good standing of
the American Academy of Actuaries. Such determinations
shall be certified by the actuary and be made available
to the general public.
(4) 6-month determinations.--If a group health plan
(or a health insurance issuer offering coverage in
connections with a group health plan) seeks an
exemption under this subsection, determinations under
paragraph (1) shall be made after such plan (or
coverage) has complied with this section for the first
6 months of the plan year involved.
(5) Notification.--An election to modify coverage of
mental health benefits as permitted under this
subsection shall be treated as a material modification
in the terms of the plan as described in section
102(a)(1) and shall be subject to the applicable notice
requirements under section 104(b)(1).
(f) Rule of Construction.--Nothing in this section shall
be construed to require a group health plan (or health
insurance coverage offered in connection with such a plan) to
provide any mental health benefits.
(g) Mental Health Benefits.--In this section, the term
``mental health benefits'' means benefits with respect to
mental health services (including substance abuse treatment) as
defined under the terms of the group health plan or coverage,
and when applicable as may be defined under State law when
applicable to health insurance coverage offered in connection
with a group health plan.
* * * * * * *
SEC. 2723. [300GG-23] PREEMPTION; STATE FLEXIBILITY; CONSTRUCTION.
(a) Continued Applicability of State Law With Respect to
Health Insurance Issuers.--
(1) In general.--* * *
* * * * * * *
(b) Special Rules in Case of Portability Requirements.--
(1) In general.--* * *
* * * * * * *
(c) Special Rule in Case of Mental Health Parity
Requirements.--
(1) In general.--Notwithstanding any provision of
section 514 of the Employee Retirement Income Security
Act of 1974 to the contrary, the provisions of this
part relating to a group health plan or a health
insurance issuer offering coverage in connection with a
group health plan shall supercede any provisions of
State law that establishes, implements, or continues in
effect any standard or requirement which differs from
the specific standards or requirements contained in
subsections (a), (b), (c), or (e) of section 2705A.
(2) Clarifications.--Nothing in this subsection shall
be construed to preempt State insurance laws relating
to the individual insurance market or to small
employers (as such term is defined for purposes of
section 2705A(d)).
[(c)](e) Rules of Construction.--* * *
[(d)](f) Definitions.--For purposes of this section--
(1) State law.--* * *
* * * * * * *