Mental Health Parity Act: Despite New Federal Standards, Mental Health
Benefits Remain Limited (Letter Report, 05/10/2000, GAO/HEHS-00-95).

Pursuant to a congressional request, GAO reviewed the implementation of
the Mental Health Parity Act of 1996, focusing on the: (1) extent to
which employers comply with the law and how they have revised their
health plans; (2) law's effect on claims costs; and (3) steps federal
agencies have taken to ensure compliance with the law.

GAO noted that: (1) 86 percent of the responding employers in the 26
states and the District of Columbia reported that as of December 1999
their plans were in compliance with the federal parity requirement that
annual and lifetime dollar limits for mental health benefits be no more
restrictive than those for all medical and surgical benefits; (2) GAO's
survey found that 14 percent of plans were noncompliant--a noncompliance
rate similar to Department of Labor's preliminary estimates based on
investigations of employer-sponsored plans; (3) although most employers'
plans now have parity in dollar limits for mental health coverage, 87
percent of those that comply contain at least one other plan design
feature that is more restrictive for mental health benefits than for
medical and surgical benefits; (4) in addition, many employers may have
adopted newly restrictive mental health benefit design features since
1996 specifically to offset the more generous dollar limits they adopted
as a result of the federal law; (5) about two-thirds of these newly
compliant employers changed at least one other mental health benefit
design feature to a more restrictive one compared with only about
one-fourth of the employers that did not change their dollar limits; (6)
only about 3 percent of responding employers reported that compliance
with the law increased their claims costs, and virtually no employers
have dropped their mental health benefits or health coverage altogether
since the law was enacted; (7) federal agencies have made varying
progress in performing their oversight roles under the parity law; (8)
Labor is in the process of expanding its oversight role to include not
only the complaint-driven approach used in its oversight of private
employer-sponsored health plans but also one that in the future may
include randomly selected employer investigations to gauge overall
compliance with parity and other federal standards; (9) the Health Care
Financing Administration (HCFA) reported that 4 out of 7 states
identified as not having a parity law are enforcing the federal
standards through conforming legislation or other means and that it is
still working with the three other states to assist them in enacting
similar protections; and (10) HCFA has determined that laws in 20 states
appear to fully conform to the federal standards and is still evaluating
whether laws in the remaining 24 states fully conform to the federal
standards.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-00-95
     TITLE:  Mental Health Parity Act: Despite New Federal Standards,
	     Mental Health Benefits Remain Limited
      DATE:  05/10/2000
   SUBJECT:  Health insurance
	     Federal/state relations
	     Health insurance cost control
	     Insurance regulation
	     Employee medical benefits
	     Administrative law
	     Mental health care services
	     Noncompliance
	     Claims processing costs

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GAO/HEHS-00-95

Appendix I: Survey Scope and Methods

24

Appendix II: Summary of Survey Responses

29

Appendix III: State Laws on Mental Illness and Substance Abuse Treatment

40

Appendix IV: Comments From the Health Care Financing
Administration

62

Appendix V: GAO Contact and Staff Acknowledgments

64

Table 1: State Laws Affecting Mental Health Benefits Compared
With the Federal Mental Health Parity Act of 1996 as of
March 2000 8

Table 2: Lifetime Dollar Limits for Noncompliant Employer Plans,
1999 12

Table 3: Compliant Employer Plans Reporting More Restrictive
Limits on Mental Health Benefits Than Medical and Surgical
Benefits, 1999 12

Table 4: Selected Design Features for a Typical Employer-Sponsored Group
Health Plan, 1999 13

Table 5: Employers' Plans That Have Further Restricted Mental
Health Benefits Since 1996 14

Table 6: Estimated Cost Increases for Full Parity in Mental Health
and Substance Abuse Benefits 17

Table 7: Selected Survey Sample and Response Data 26

Table 8: Mental Health Benefits Offered Now 29

Table 9: Mental Health Benefits Ever Offered Since December 1996 29

Table 10: Number of Lives Benefits Cover 30

Table 11: Plan Insurance 30

Table 12: Plan Type 30

Table 13: Administered by a Managed Behavioral Health Care
Company 31

Table 14: Financial Risk of Administering Organization 31

Table 15: Plan Design Features for Current Plan 32

Table 16: Current Plan in 1996 33

Table 17: Mental Health Benefits in Any Plan 33

Table 18: Plans Covering the Most Lives in December 1996 33

Table 19: Plan Design Features in December 1996 34

Table 20: Reasons for Benefit Changes After December 1996, Part 1 35

Table 21: Reasons for Benefit Changes After December 1996, Part 2 36

Table 22: Administered by a Managed Behavioral Health Care
Company in 1996 37

Table 23: Managed Care in Current Plan Compared With
December 1996 37

Table 24: Employees' Access to Benefits 37

Table 25: Employee Eligibility for Coverage 38

Table 26: Exemption Filed 38

Table 27: Reasons Exemption Not Filed 38

Table 28: Compliance and Claims Costs 39

Table 29: Claims Cost Increases 39

Table 30: State Laws Addressing Coverage of Mental Illness and
Substance Abuse as of March 1, 2000 41

APA American Psychiatric Association

CBO Congressional Budget Office

DSM Diagnostic and Statistical Manual of Mental Disorders

ERISA Employee Retirement Income Security Act of 1974

HCFA Health Care Financing Administration

HHS Department of Health and Human Services

HIPAA Health Insurance Portability and Accountability Act 1996

HMO health maintenance organization

ICD Internal Classification of Disease

NCSL National Conference of State Legislatures

POS point of service

PPO preferred provider organization

SAMSHA Substance Abuse and Mental Health Services Administration

Health, Education, and
Human Services Division

B-283034

May 10, 2000

The Honorable James M. Jeffords
Chairman, Committee on Health,
Education, Labor, and Pensions
United States Senate

Dear Mr. Chairman:

An estimated 40 million American adults suffer from some type of mental
illness each year, 5.5 million of them suffering from a severe mental
illness such as schizophrenia or major depression. Private health insurance
plans typically provide lower levels of coverage for the treatment of mental
illness than for the treatment of other illnesses. Consequently, treatment
for patients with severe mental illness, who often require repeat
hospitalizations, can exhaust their mental health coverage.

To help address the discrepancies in coverage between mental and other
illnesses, the Congress passed the Mental Health Parity Act of 1996. The law
imposed new federal standards on mental health coverage offered under most
employer-sponsored group health plans.1 Specifically, the law prohibits
employers from imposing annual or lifetime dollar limits on mental health
coverage that are more restrictive than those imposed on medical and
surgical coverage. Although the act has been in effect for just over 2
years, questions persist about the actual cost of complying with the law and
the benefits it provides to consumers. Therefore, in preparation for the
law's September 30, 2001, sunset and possible reauthorization, you asked us
to report on

ï¿½ the extent to which employers comply with the law and how they have
revised their health plans,

ï¿½ the law's effect on claims costs, and

ï¿½ the steps federal agencies have taken to ensure compliance with the law.

To determine employers' compliance and responses to the law, we conducted a
mail survey of 1,656 employers with more than 50 employees offering mental
health benefits. We obtained a response rate of 52 percent. Because our goal
was to measure the effect of federal--not state--parity requirements, we
surveyed employers in the 26 states and the District of Columbia that did
not have state laws that were more comprehensive than the federal Mental
Health Parity Act as of July 1999.2 The survey gathered information on how
employer-sponsored plans have changed since the Mental Health Parity Act was
enacted, what changes can be attributed to it, and the effect of the law on
claims costs. Because this survey was based on a random sample, stratified
by employer size, we weighted the results so they would be statistically
representative of all 103,000 employers with more than 50 employees offering
mental health benefits in these 26 states and the District of Columbia.
Unless otherwise indicated, the confidence intervals for our survey results
are not greater than plus or minus 5 percentage points and differences we
report are statistically significant. While large employers and those
located in the Northeast were somewhat less likely to respond to our survey
than other employers, we do not believe that this noticeably skews our
results because we did not identify significant differences in the extent to
which employers complied with the federal parity act by employer size or
location.3 Nonetheless, as with any survey based on a sample, appropriate
caution should be used in interpreting the results, given sampling and other
potential measurement errors. Appendix I provides more details about our
survey's scope and methodology, and appendix II provides summary data of the
survey responses.

To identify steps the federal agencies have taken to ensure compliance with
the Mental Health Parity Act, we interviewed officials from the Department
of Health and Human Services' (HHS) Health Care Financing Administration
(HCFA) and the Department of Labor's Pension and Welfare Benefits
Administration. To determine the extent to which states have passed
conforming laws and regulations, we requested the National Conference of
State Legislatures' (NCSL) Health Policy Tracking Service to develop a
summary of each applicable state law. We conducted our work between June
1999 and March 2000 in accordance with generally accepted government
auditing standards.

Most employers responding to our survey reported that they are complying
with the federal mental health parity law, but because of its narrow scope
and reductions in mental health benefits that the employers have made to
offset the required enhancements, compliance may have little effect on
employees' access to mental health services. Eighty-six percent of the
responding employers in the 26 states and the District of Columbia reported
that as of December 1999 their plans were in compliance with the federal
parity requirement that annual and lifetime dollar limits for mental health
benefits be no more restrictive than those for all medical and surgical
benefits. Our survey found that 14 percent of plans were noncompliant--a
noncompliance rate similar to Labor's preliminary estimates based on
investigations of employer-sponsored plans. In contrast, in 1996 before the
parity law was enacted, only about 55 percent of responding employers
reported offering parity in dollar limits. Many responding employers cited
the federal Mental Health Parity Act as a significant or primary reason for
changing the dollar limits in their health benefit plans.

Although most employers' plans now have parity in dollar limits for mental
health coverage, 87 percent of those that comply contain at least one other
plan design feature that is more restrictive for mental health benefits than
for medical and surgical benefits. For example, about 65 percent of plans
restrict the number of covered outpatient office visits and hospital days
for mental health treatment further than those for other health treatment.
In addition, many employers may have adopted newly restrictive mental health
benefit design features since 1996 specifically to offset the more generous
dollar limits they adopted as a result of the federal law. About two-thirds
of these newly compliant employers changed at least one other mental health
benefit design feature to a more restrictive one compared with only about
one-fourth of the employers that did not change their dollar limits.

While most employers have not examined changes in their plans' claims costs,
the federal parity law appears to have had a negligible effect on claims
costs. Only about 3 percent of responding employers reported that compliance
with the law increased their claims costs, and virtually no employers have
dropped their mental health benefits or health coverage altogether since the
law was enacted. In addition, published estimates of the cost of federal
parity are typically less than 1 percent. More comprehensive parity laws as
enacted by some states are generally estimated to have higher but modest
cost increases of about 2 to 4 percent.

Federal agencies have made varying progress in performing their oversight
roles under the parity law. Labor is in the process of expanding its
oversight role to include not only the complaint-driven approach used in its
oversight of private employer-sponsored health plans but also one that in
the future may include randomly selected employer investigations to gauge
overall compliance with parity and other federal standards. HCFA has not yet
fully determined the nature and extent of its oversight responsibilities.
Before it can exercise an oversight role, it must first identify states that
are not enforcing the federal standards. HCFA initially identified seven
states that appeared not to have a parity law. As of May 2000, HCFA reported
that four of these states are enforcing the federal standards through
conforming legislation or other means and that it is still working with the
three other states to assist them in enacting similar protections. HCFA has
determined that laws in 20 states appear to fully conform to the federal
standards and is still evaluating whether laws in the remaining 24 states
fully conform to the federal standards.

Private health insurance plans typically provide lower levels of coverage
for the treatment of mental illness than for the treatment of other
illnesses. Issuers of coverage--employers and health insurance
carriers--often limit mental health coverage through the use of plan design
features that can be more restrictive for mental health benefits than for
medical and surgical benefits.4 Commonly found are (1) lower annual or
lifetime dollar limits on what the plan will pay for mental health benefits,
(2) lower service limits for mental health benefits such as the number of
covered hospital days or outpatient office visits, and (3) higher
cost-sharing features for mental health benefits such as deductibles,
copayments, or coinsurance. In the absence of a requirement that benefits
for mental and other health coverage be equal, an employer plan might cover
unlimited hospital days and outpatient visits and impose a lifetime limit of
$1 million for medical and surgical coverage. For mental health services,
that same plan might cover only 30 hospital days and 20 outpatient visits
per year and impose a $50,000 lifetime limit.

Issuers provide more limited mental health coverage primarily because of
cost concerns. Limits on hospital days, outpatient office visits, and annual
or lifetime dollar amounts may reflect issuers' concern about the high costs
associated with long-term, intensive psychotherapy and extended hospital
stays. An issuer may also restrict mental health benefits to protect itself
from adverse selection. That is, a plan with relatively generous mental
health benefits is more likely to attract a disproportionate number of
individuals with a high demand for mental health care services, thus driving
up the claims and premium costs of the plan. In response to growing concern
about perceived inequities in health insurance coverage for mental health
treatment, the Congress passed the Mental Health Parity Act of 1996.5 The
act amended the Employee Retirement Income Security Act of 1974 (ERISA) and
the Public Health Service Act to require that annual and lifetime dollar
limits for mental health coverage be no more restrictive than for all
medical and surgical coverage.6 To achieve parity in dollar limits, a plan
may impose a dollar limit that does not distinguish between mental health
and all medical and surgical coverage, impose a dollar limit on mental
health benefits that is no lower than the limit on all medical and surgical
benefits, or eliminate dollar limits entirely.7 The law contains several
exemptions. It does not apply to

ï¿½ plans sponsored by an employer with 50 or fewer employees,

ï¿½ group plans that experience an increase in plan claims costs of at least 1
percent because of compliance, or

ï¿½ coverage sold in the individual (nongroup) market.

Furthermore, the law does not require any plan to offer mental health
coverage, does not cover substance abuse treatment, and does not prevent a
plan from imposing more restrictive service limits (hospital days or
outpatient visits) or cost-sharing provisions on mental health coverage than
on medical and surgical coverage. The law became effective for group health
plans for plan years beginning on or after January 1, 1998. Without
legislative action, the act will sunset on September 30, 2001.

During the past decade, most states also passed laws regulating mental
health benefits.8 As of March 2000, NCSL reported that laws in effect in 43
states and the District of Columbia addressed mental health coverage in
employer-sponsored group health plans.9 More than half, or 29, of the state
laws are more comprehensive than the federal parity law by requiring parity
not only in dollar limits but also in service limits or cost-sharing
provisions. Sixteen of these states require full parity. That is, they
mandate that mental health coverage be included in all group plans sold, and
they require parity in all respects, including dollar limits, service
limits, and cost sharing. Laws in six states essentially parallel the
federal law. Laws in eight states and the District of Columbia are more
limited and might not conform to the federal law, merely requiring, for
example, that plans containing mental health benefits include a nominal
amount of coverage (less than $1,000 annually) for inpatient or outpatient
mental health care. Seven states have no laws addressing mental health
benefits. (See table 1.)

Table 1: State Laws Affecting Mental Health Benefits Compared With the
Federal Mental Health Parity Act of 1996 as of March 2000

   Scope of state law                           State

 No law                   Alabama, Idaho, Iowa, Michigan, Oregon,a Utah,
                          Wyoming

 More limited than the    California,c District of Columbia, Illinois,
 federal lawb             Massachusetts, Mississippi, North Dakota, Ohio,
                          Washington, Wisconsin

 Meets federal lawd       Alaska, Arizona, Florida, New Mexico,e South
                          Carolina, West Virginia
                          Arkansas, Colorado, Connecticut, Delaware,
                          Georgia, Hawaii, Indiana, Kansas, Kentucky,
                          Louisiana, Maine, Maryland, Minnesota, Missouri,
 Exceeds federal lawf     Montana, Nebraska, Nevada, New Hampshire, New
                          Jersey, New York, North Carolina, Oklahoma,
                          Pennsylvania, Rhode Island, South Dakota,
                          Tennessee, Texas, Vermont, Virginia

Note: Our survey population included all 21 states and the District of
Columbia identified in the table as having no law, a law more limited than
the federal law, or a law that meets the federal law. We also surveyed
employers in 5 states identified in the table as exceeding the federal law.
We included Nevada and Tennessee because their more comprehensive laws
became effective after our sample was selected. We included Kansas and
Pennsylvania because, although they require that mental health benefits be
included in most coverage sold, they otherwise mirror the federal parity law
by requiring parity only in dollar limits. Finally, we included New York
because of unclear statutory language and HCFA's initial determination that
the state may not be enforcing the minimum federal standards.

aA law more limited than the federal law becomes effective July 2000.

bState law does not require parity in dollar limits but may mandate mental
health benefits, impose minimum service levels, or place limits on
cost-sharing features for mental health benefits.

cA law that exceeds the federal law becomes effective July 2000.

dState law requires parity in dollar limits but not in services or cost
sharing.

eA law that exceeds the federal law becomes effective October 2000.

fLaw requires parity in dollar limits and also imposes parity in services or
cost sharing or mandates that mental health benefits be included.

Source: GAO review of data compiled by NCSL.

Appendix III describes the laws in each state that affect the terms and
conditions of mental health and substance abuse benefits.

Enforcement authority for the Mental Health Parity Act is divided among
federal agencies and the states. Labor is responsible for ensuring that
private sector employer-sponsored group health plans comply with the law--an
extension of Labor's regulatory role under ERISA.10 In states that do not
adopt and enforce statutes or regulations that meet or exceed the federal
parity standards, HCFA is responsible for directly enforcing the federal
standards on carriers.11 The agency is authorized to impose a civil monetary
penalty on carriers of up to $100 per day per violation for each individual
affected by a carrier's failure to comply.12 In states that have standards
conforming to the federal parity law, state insurance regulators have
primary enforcement authority over insurance carriers.13

Mental Health Benefits

Most employers responding to our survey (86 percent) reported that they
comply with the federal parity standards, although the 14 percent that do
not comply represent 9,000 to 13,000 employers in the 26 states and District
of Columbia we surveyed. However, of the plans that do comply, 87 percent
contain one or more other design features such as office visit limits or
hospital day limits that restrict mental health benefits to a greater extent
than medical and surgical benefits. In addition, employers that newly
adopted the federal standards were much more likely than other employers to
also restrict mental health benefits by changing other plan features,
suggesting an attempt to mitigate the effect of the parity law. Finally,
other changes in the health care market besides parity laws also can affect
mental health benefit designs, such as the increasing use of managed care
techniques.

Employers report that they are largely complying with the federal mental
health parity law. That is, where employers' plans impose annual or lifetime
dollar limits, the limits are at least as generous for mental health
benefits as they are for all medical and surgical benefits. Eighty-six
percent of employer plans we surveyed reported compliance with the federal
parity requirement as of December 1999, representing about 68,000 to 74,000
employers in the 26 states and the District of Columbia we surveyed.14 In
contrast, 14 percent reported that they were noncompliant, representing
about 9,000 to 13,000 employers in the 26 states and the District of
Columbia.15 Both HCFA and Labor officials found the 14 percent noncompliance
rate comparable with their own assessments. For example, on the basis of a
preliminary review of its findings, Labor recently determined that 12
percent of about 200 employers it investigated were out of compliance with
federal parity standards. In contrast, in 1996 before the parity law was
enacted, only about 55 percent of employers had parity in the annual and
lifetime dollar limits for mental health and medical and surgical
benefits.16 When asked why employers changed their annual or lifetime dollar
limits, more than 75 percent (plus or minus 8.6 percent) of those responding
cited the federal Mental Health Parity Act as a significant or primary
reason for the change. Among the employer plans in our survey that were not
in compliance with the federal parity law, most had lifetime limits for
mental health coverage that did not exceed $100,000, as shown in table 2.

Table 2: Lifetime Dollar Limits for Noncompliant Employer Plans, 1999

 Lifetime dollar limit Percent of noncompliant plans
 $25,000 or less       37 (ï¿½ 9.8)
 $25,001 to $100,000   25(ï¿½ 8.7)
 More than $100,000    12 (ï¿½ 6.4)
 No limit              14 (ï¿½ 7.1)a

aThese plans met the federal requirement for parity in lifetime dollar
limits but were out of compliance because they had annual dollar limits for
mental health services that were more restrictive than those for medical and
surgical benefits.

Source: GAO survey of employers' mental health benefits.

Restrictive for Mental Health Benefits Than for Medical and Surgical
Benefits

Most employers' plans we surveyed contain other plan design features that
are more restrictive for mental health than for medical and surgical
benefits. Typically, these features include limits on the number of covered
hospital days and outpatient office visits as well as higher cost-sharing
features such as copayments and coinsurance. In December 1999, 87 percent of
compliant employer plans contained at least one design feature more
restrictive for mental health benefits.17 Most prevalent were restrictions
on the outpatient office visit and hospital day limits, as indicated in
table 3.

Table 3: Compliant Employer Plans Reporting More Restrictive Limits on
Mental Health Benefits Than Medical and Surgical Benefits, 1999

      Mental health plan design feature      Percent
 Lower outpatient office visit limits        66
 Lower hospital day limitsa                  65
 Higher outpatient office visit copaymentsa  27
 Higher outpatient office visit coinsurancea 25
 Higher cap on enrollee out-of-pocket costs  12
 Higher hospital stay coinsurance            10
 Higher hospital stay copaymentsa            5

aThe differences between compliant and noncompliant plans placing more
restrictive limits on mental health services for these plan design features
were not statistically significant.

Source: GAO survey of employers' mental health benefits.

In contrast, very few health plans we surveyed impose any limits on hospital
days or office visits for nonmental health conditions--about 10 and 8
percent, respectively. Table 4 illustrates the variation in selected design
features for the most popular health plan of employers we surveyed.

Table 4: Selected Design Features for a Typical Employer-Sponsored Group
Health Plan, 1999

 Design feature            Mental health            Medical and surgical

 Lifetime dollar limit     $1 million combined with $1 million combined
                           medical and surgical     with mental health
 Hospital day limit        30 days                  Unlimited
 Outpatient office visit
 limit                     20 days                  Unlimited
 Outpatient office visit
 coinsurancea              50%                      20%

aOutpatient office visit coinsurance includes the most frequent levels for
plans with coinsurance.

Source: Based on the mode of reported limits and coinsurance in GAO survey
of employers' mental health benefits.

Were More Likely to Add Other Restrictions

According to our survey, employers that newly adopted the federal parity
requirements were more likely than those that did not change dollar limits
after 1996 to further restrict access to mental health coverage by
tightening other design features. About 65 percent (plus or minus 8.2
percent) of employers that adopted annual or lifetime parity in dollar
limits after 1996 changed at least one other mental health design feature to
a more restrictive one. Most commonly changed were outpatient office visit
limits and hospital day limits, as shown in table 5. Only 26 percent (plus
or minus 5.2 percent) of employers that did not change dollar limits after
1996--that is, plans that were already in compliance or that remain out of
compliance--have changed at least one mental health design feature to become
more restrictive. This suggests that many employers have changed mental
health benefit design features in order to mitigate or offset the more
generous annual and lifetime dollar limits required by the Mental Health
Parity Act.

Table 5: Employers' Plans That Have Further Restricted Mental Health
Benefits Since 1996

 Benefit design feature change            Newly compliant Other employersa
 Fewer office visits covered              51% (ï¿½ 9.3)     11%
 Fewer hospital days covered              36 (ï¿½ 8.9)      11
 Increased outpatient office visit
 copaymentsb                              20 (ï¿½ 7.7)      13
 Increased outpatient office visit
 coinsurance                              11 (ï¿½ 5.8)      3
 Increased hospital stay coinsurance      7 (ï¿½ 4.6)       2
 Increased hospital stay copaymentsb      3 (ï¿½ 3.4)       7
 Increased cap on enrollee's
 out-of-pocket costs                      18 (ï¿½ 7.1)      7

aIncludes employers' plans that already had parity in 1996 and those that
did not have parity in 1996 and remained out of compliance in 1999.

bThe differences in the percentage of newly compliant and other employers
that increased hospital stay and office visit copayments after 1996 are not
statistically significant.

Source: GAO survey of employers' mental health benefits.

Our survey results show that 89 percent of employers' most popular health
plans contain managed care features. In addition, about 14 percent of the
survey respondents indicated that their employee health plans contained more
managed care features in 1999 than they did in 1996. Moreover, the mental
health benefits in many employers' health plans are administered by a
managed behavioral health organization that coordinates and manages the
mental health care. The Surgeon General estimates that almost 177 million
Americans with health insurance were enrolled in managed behavioral health
organizations in 1999.18 About 7 percent of employers responding to our
survey reported that their mental health benefits were separately
administered by a managed behavioral health care organization under a
carve-out arrangement in 1999. However, the extent to which mental health
benefits are carved out may be understated because employers may not have
been aware whether plans they purchase from a carrier carve out the mental
health benefits.

Some analysts and advocates for mentally ill persons suggest that managed
care can, under certain circumstances, diminish access to mental health
services. For example, the National Advisory Mental Health Council concluded
in its 1997 and 1998 reports to the Congress that parity alone does not
guarantee improved access to mental health care because of the counteracting
effect of managed care.19 Managed care techniques that can influence access
to care include primary care gatekeepers, capitation, financial incentives
to providers, the size and composition of provider networks, utilization
review, and case management services.

Conversely, other research suggests that managed care can have a more
positive effect on access to mental health services. According to a recent
study of eight large employers that insure more than 2.4 million Americans
through managed-care programs for mental health and substance abuse, the
employers in the study have eliminated most of the day and lifetime limits
and significantly decreased copayments. Employees' use of mental health and
substance abuse benefits has increased overall, with greater use of
outpatient and alternative treatment settings and a decrease in inpatient
care. Among factors that the study authors attributed to the success of
these programs were the availability of a full continuum of treatment
settings in the managed care networks and strong referral mechanisms to
connect employees to appropriate services.20

Which Appears to Be Negligible

While most of the employers we surveyed reported that they did not know
whether compliance with the law increased their plans' claims costs, early
concerns that the act's passage would increase claims costs by more than 1
percent appear to have been unfounded. Our findings corroborate past
studies' estimates that implementing federal parity would have a negligible
effect on employers' claims costs. Researchers anticipate higher yet modest
claims costs for employers in states that enact more comprehensive parity
laws.

Report Cost Increases

About 60 percent of the responding employers did not know whether compliance
with the Mental Health Parity Act increased their plans' claims costs, and
about 37 percent reported that compliance had not raised their claims costs.
Only about 3 percent of the respondents suggested that claims' costs
increased as a result of the act.21 However, as noted above, compliance with
the act was associated with increased restrictions for other plan features,
such as office visit or hospital day limits, which may have limited the
extent to which claims costs would increase. In addition, less than 1
percent of responding employers actually dropped coverage of mental health
benefits or their health benefits plans altogether after the law was
enacted, which may further illustrate the lack of employer concern about
increased costs.

Several studies aimed at estimating the costs of the federal parity law
concluded that requiring parity only in dollar limits would result in cost
increases of less than 1 percent. For example, the Congressional Budget
Office estimated that the Mental Health Parity Act would result in claims
costs increases of 0.16 percent, while Coopers and Lybrand predicted claims
cost increases of about 0.12 percent.22

Modest Cost Increases

Many states have enacted mental health laws that are more comprehensive than
the federal Mental Health Parity Act and thus are likely to have a greater
effect on claims costs than the federal law. Unlike the federal law, these
laws require parity not only in dollar limits but also in service limits,
cost-sharing provisions, or both. In addition, many state laws mandate the
inclusion of mental health benefits in fully insured group health plans and
cover substance abuse and chemical dependency. Public and private health
policy researchers have examined the estimated or actual costs resulting
from more comprehensive state parity laws. In addition to estimates of
increased claims costs in several states, several studies have examined the
potential premium cost increases associated with full parity nationally.
Most studies estimate the cost of full parity for individual states and on a
national basis to be between 2 and 4 percent, as summarized in table 6.

Table 6: Estimated Cost Increases for Full Parity in Mental Health and
Substance Abuse Benefits

                      Study                           Scope      Increasea
 Coopers and Lybrandb                             National       3.2%
 Milliman and Robertsonc                          National       3.9
 Congressional Budget Officed                     National       4.0
 Mathematica Policy Researche                     National       3.6
 Department of Banking, Insurance, Securities,
 and Health Care Administrationf                  Vermont        0-3
 North Carolina Psychological Associationg        North Carolina h
 Price Waterhouse Coopersi                        16 statesj     2.5-3.9

aThe national figures are estimates of premium increases. The figures for
the individual states represent an expected increase in claims costs. The
percentages are a composite of the estimated cost increases for
fee-for-service, preferred provider organization, point of service, and
health maintenance organization (HMO) plans. Typically, cost estimates
assume that HMO and other managed care plans have lower cost increases.

bCoopers and Lybrand, An Actuarial Analysis of the Domenici-Wellstone
Amendment to S. 1028 "Health Insurance Reform Act" to Provide Parity for
Mental Health Benefits Under Group and Individual Insurance Plans, for
American Psychological Association (n.p.: Apr. 1996).

cMilliman and Robertson, Premium Rate Estimates for a Mental Illness Parity
Provision to S. 1028, "The Health Insurance Reform Act of 1995" (n.p.: Apr.
1996).

dCongressional Budget Office, CBO's Estimates of the Impact on Employers of
the Mental Health Parity Amendment in H.R. 3103 (Washington, D.C.: May
1996).

eMathematica Policy Research, The Costs and Effects of Parity for Mental
Health and Substance Abuse Insurance Benefits, for the Substance Abuse and
Mental Health Services Administration (Washington, D.C.: Mar. 1998).

fDepartment of Banking, Insurance, Securities, and Health Care
Administration, Report of the Department of Banking, Insurance, Securities,
and Health Care Administration on Mental Health and Substance Abuse Parity
(Act 25) to the Vermont General Assembly (Washington, D.C.: Jan. 1999).

gNorth Carolina Psychological Association, North Carolina Comprehensive
Major Medical Plan for Teachers and State Employees: Data on the Mental
Health Benefit (Raleigh, N.C.: Apr. 1999).

hBetween 1992 and June 1998, mental health payments as a percentage of total
health payments for the N.C. Comprehensive Major Medical Plan for Teachers
and State Employees decreased from 6.4 to 3.1 percent, representing a
cumulative cost reduction of 52 percent. In this health plan, the mental
health benefits are managed by a managed behavioral health care
organization.

iPrice Waterhouse Coopers is the result of a merger between Price Waterhouse
and Coopers and Lybrand.

jPrice Waterhouse Coopers estimated the claims costs increases of parity for
mental health and substance abuse benefits in Arizona, California, Delaware,
Kentucky, Massachusetts, Michigan, Missouri, Nebraska, New Jersey, New
Mexico, Nevada, North Carolina, Ohio, Oregon, South Carolina, and Vermont.

Implementation of the Parity Law

Federal agencies have made varying progress in performing their oversight
roles under the act. Labor's role is expanding from a largely
complaint-driven approach to one that also uses investigations to more
systematically measure employers' compliance with the law. HCFA remains in
the early stages of identifying states that have not adopted conforming laws
or are not otherwise enforcing the federal standards. Once these states are
identified, HCFA must initiate a multistep process to establish itself as
the enforcement authority for insurance carriers found not to be enforcing
the federal parity standards in these states.

Labor has traditionally relied on a complaint-driven approach to identify
noncompliance with federal health plan standards. However, with the
enactment of several federal health insurance reforms since 1996, including
the Mental Health Parity Act, Labor's enforcement role has significantly
expanded.23 Accordingly, the agency has undertaken several initiatives to
improve and expand its oversight, customer service function, and consumer
and employer education efforts.24 On April 6, 2000, the agency published its
strategic enforcement plan to make public its goals and intended approach to
ensuring that employee benefit plans comply with federal standards,
including mental health parity.25

In particular, the agency has initiated a limited number of investigations
to more systematically determine health plan compliance. As of March 2000,
Labor officials said they had completed investigations of approximately 200
employers that varied by size and geography. In addition to reviewing their
compliance with other ERISA requirements, Labor had reviewed 215 of the
plans that were subject to the Mental Health Parity Act and found 26, or 12
percent, that were not in compliance, according to officials.26 These plans
typically retained annual or lifetime limits that were lower for mental
health coverage than for medical and surgical coverage or contained other
violations of the law. The agency plans to conduct approximately 1,000
investigations annually, according to agency officials. The agency is
considering developing a sampling model that it may use to help evaluate
compliance.

Enactment of the Mental Health Parity Act and other recent federal insurance
reforms has created a broad new regulatory role for HCFA. The agency must
enforce federal requirements on insurers in states where it determines that
a state has not enacted legislation that meets or exceeds the federal
standards or has otherwise failed to "substantially enforce" the federal
standards. Its activities in support of this new role have been evolving
since the enactment of the Health Insurance Portability and Accountability
Act of 1996 (HIPAA).27 On August 20, 1999, the agency issued enforcement
regulations that prescribe the process by which it assumes an enforcement
role in a particular state and describes regulatory responsibilities it may
perform.28

In mid-1999, the agency undertook an initial state-by-state analysis to
determine whether state laws conform to the federal standards--a precursor
to determining whether the agency may be required to play an enforcement
role in a particular state. Agency officials said that their preliminary
examination indicated that 7 states appeared not to have laws addressing the
federal parity standards, 24 states had laws about which the agency had
questions concerning their conformance to the federal standards, and 20
states appeared to have laws that fully conformed to federal parity
standards.

In December 1999, HCFA sent letters to the seven states without laws,
indicating that it had a reasonable question about whether the states'
standards substantially met the specified federal parity requirements. HCFA
officials said they would accept that states meet the federal standards if
alternatives such as regulations or advisory bulletins existed and had some
statutory basis. As of May 2000, HCFA officials said that four of these
states had enacted conforming laws or other directives or otherwise had
demonstrated that they enforce the federal parity requirements. In states
that do not meet these standards through other regulatory means, HCFA will
begin its formal determination process in which it can ultimately assume
direct enforcement responsibilities. As of April 2000, HCFA was still
evaluating the laws in the 24 states where it had questions concerning state
conformance.

The Mental Health Parity Act of 1996 sought to bring mental health benefits
closer to other health benefits. The act requires parity only in annual and
lifetime dollar limits and does not place restrictions on other plan
features such as hospital and office visit limits. Therefore, the changes
employers made to bring health plans into compliance with the act often
included further restrictions in these other plan features that may have
offset the parity achieved in dollar limits. Further, a significant minority
of plans--about 14 percent in the 26 states and the District of Columbia we
surveyed--continue to have lower mental health than medical and surgical
dollar limits in direct contradiction of the law. The net effect is that
consumers in states without more comprehensive laws have often seen only
minor changes in their health benefits, resulting in little or no increase
in their access to mental health services, and that the costs associated
with the federal law have been negligible for most health plans.

As the Congress considers proposals that would renew the Mental Health
Parity Act beyond 2001 or expand it to provide more complete parity between
mental health and other health benefits, the effects of the 1996 act along
with the experiences of the 29 states with more comprehensive parity laws
are instructive. These more comprehensive state laws, which require parity
not only in dollar limits but also in service limits, cost-sharing
requirements, or both may provide information about the potential costs of
extending parity--estimated to be about 2 to 4 percent. Further, the market
for mental health services has continued to evolve since 1996, with managed
care and carve-outs of mental health services increasingly applied.
Nonetheless, despite the federal and state parity laws and market changes,
many Americans are likely to remain in employer-sponsored health plans that
restrict benefits for mental illness more than for other types of illnesses.

HCFA and the Department of Labor commented on a draft of this report. Both
generally agreed with our findings and conclusions and provided technical
comments, which we have incorporated as appropriate. Appendix IV contains
the comment letter from HCFA.

As we agreed with your office, unless you publicly announce this report's
contents earlier, we plan no further distribution of it until 30 days after
its issue date. We will then send copies to the Honorable Donna E. Shalala,
Secretary of Health and Human Services; the Honorable Nancy-Ann Min DeParle,
Administrator of HCFA; the Honorable Alexis M. Herman, Secretary of Labor;
the Honorable Leslie B. Kramerich, Acting Assistant Secretary for the
Pension and Welfare Benefits Administration; and other interested
congressional committees and members and agency officials. We will also make
copies available to others on request.

Please call me at (202) 512-7114 if you have any questions. Other contacts
and major contributors are listed in appendix V.

Sincerely yours,

Kathryn G. Allen
Associate Director, Health Financing
and Public Health Issues

Survey Scope and Methods

To determine employers' compliance and responses to the Mental Health Parity
Act of 1996, we conducted a mail survey of employers in selected states
between November 1999 and February 2000. We sent the survey to a random
sample of employers, stratified by size, in the District of Columbia and 28
states initially identified as having mental health parity laws similar to
the federal law or that had no parity law of their own (and thus the federal
act was in effect). 29 The survey collected information about

1. the current most popular health plan that contains mental health
benefits;

2. the same plan in 1996, if available then, or the most popular health plan
containing mental health benefits offered in 1996 and how it compares with
the current plan; and

3. the cost of changes made to mental health benefits as a result of the
law.

To develop the questions we used in our survey, we reviewed the requirements
of the law as well as the existing research addressing the issue of mental
health parity. In addition, representatives from the Department of Health
and Human Services' (HHS) Substance Abuse and Mental Health Services
Administration (SAMHSA), the Washington Business Group on Health, and
Mercer/Foster Higgins reviewed a draft of the survey and provided us with
comments. We pretested the survey with five private employers of varying
sizes in California, Illinois, Michigan, and the District of Columbia.

We selected our sample to be representative of employers subject to the
law--private employers with more than 50 employees who offer medical
benefits, including mental health benefits, to their employees. We excluded
public employers (state and local governments) because their plans are
allowed to elect exemption from the federal mental health parity law.30 In
addition, because our goal was to measure the effect of federal rather than
state parity, we excluded states that had mental health parity laws that
exceeded the parity requirements of the federal law in order to avoid
confounding our results. On the basis of a preliminary review of state laws
that we requested from the National Conference of State Legislators (NCSL)
in July 1999, we initially identified 28 states and the District of Columbia
as eligible for inclusion in our survey.

Using our list of eligible states, Dun and Bradstreet identified all private
employers' headquarters offices with more than 50 employees in its database
of U.S. businesses.31 In addition, because certain aspects of health
benefits may vary depending on employer size and because more small
employers exist than larger ones, we divided the employers into three strata
by size before sampling in order to improve the precision of our estimates.
The three strata were

1. small employers, with 51 to 100 employees;

2. medium-sized employers, with 101 to 200 employees; and

3. large employers, with more than 200 employees.

The initial sample, drawn by Dun and Bradstreet, consisted of 2,500
employers in 28 states and the District of Columbia. Further review of state
laws revealed that Kentucky and Louisiana had mental health parity laws that
were more comprehensive than the federal law. Employers in these states were
removed from the sample (102 cases).

We received responses from 1,212 of the remaining 2,398 employers, and 102
were deemed undeliverable.32 We conducted three follow-up attempts to
increase the response rate--a second mailing of the survey to all
nonrespondents, a letter encouraging participation, and telephone calls to
about 63 percent of randomly selected nonresponding employers.

We adjusted the population and sample sizes for employers that we determined
were not subject to the federal law for the following reasons:

ï¿½ they did not offer a health plan or had health plans without mental health
benefits for their employees (279 cases) or

ï¿½ they reported having fewer than 50 employees (70 cases).

In adjusting both the population and sample sizes, we assumed that the
proportion of employers who were incorrectly identified as eligible for our
survey was the same for both responding and nonresponding employers and we
adjusted both the sample and population sizes accordingly. A total of 863
eligible responses were obtained out of an adjusted sample of 1,648
employers, for an overall response rate of 52 percent. See table 7 for
details of the population and sample sizes, number of responses received,
adjustments made, and response rates per strata.

Table 7: Selected Survey Sample and Response Data

  Size of   Initial   Initial    Total     Adjusted  Adjusted  Number of Adjusted
 business  population  sample  number of  population  sample   eligible  response
             size      size   responsesa     size     sizeb   responses   ratec
 Small    79,320      1,263   636         44,664     711      392        55%
 Medium   37,150      592     283         26,038     407      216        53
 Large    40,531      645     293         32,709     530      255        48
 Total    157,001     2,500   1,212       103,483    1,648    863        52%

aIncludes both ineligible and eligible responses.

bSample was adjusted based on proportion of ineligible responses.

c Response rate was based on eligible responses and adjusted sample size.

Because we used a sample to develop our estimates, our results contain
sampling error that occurs from not collecting data from all employers
subject to the federal law in the states we surveyed. Sampling error
indicates how closely we can reproduce from a sample the results that we
would expect to obtain if we were to survey all eligible employers.

The sampling errors for the point estimates used in this report are based on
the design of the survey and the response-adjusted sample weights. These
sampling errors were used to calculate 95 percent confidence intervals
around our estimates, which means that the chances are about 19 in 20 that
the actual percentage being estimated falls within the range defined by our
estimate, plus or minus the sampling error. Unless otherwise indicated in
the report, the sampling error for the survey results presented in this
report is no greater than 2.5, for a confidence interval of plus or minus 5
percentage points. Sampling errors were larger for some analyses of
subgroups, such as employers that were newly compliant with the federal law.
All differences we report are statistically significant unless we note
otherwise.33 Statistical significance means that the differences observed
between the subgroups are unlikely to be attributed to chance.

To identify potential biases in the responses we received that may occur
when certain employers respond and others do not, we compared key
characteristics--size of business, geographic region, and type of
industry--of employers that responded to the survey with those that did not.
We found that large employers were less likely to participate in the survey
than small and medium-sized firms. In addition, employers in the Northeast
were less likely to respond to the survey while those in the Midwest were
more likely to participate. Despite these differences, compliance with the
mental health parity law among responding employers did not vary
significantly by employer size, type of industry, or geographic region.
However, we were unable to determine whether the compliance of nonresponding
employers differed significantly from that of those participating in the
survey. Where differences exist, the estimates could incorrectly attribute
the characteristics of the responding employers to the nonresponding
employers. For example, if employers with noncompliant plans were less
likely to respond to the survey, our compliance estimate would underestimate
the portion of noncompliant employer plans.

We weighted the results so they would be statistically representative of
private employers with more than 50 employees who offer mental health
benefits in the District of Columbia and the 26 states. The results of our
survey cannot be generalized to employers with fewer than 50 employees,
government employers, or private employers in states other than those we
surveyed.

As with all surveys that rely on self-reported data, some degree of
measurement error--error that occurs when the responses received do not
accurately reflect reality--exists in the results. Measurement error may
have occurred in our survey if respondents either misunderstood a question
or used outdated information, such as old summaries of their health plan, to
answer a question. We contacted some employers by telephone to obtain,
clarify, or verify information related to certain problematic responses. To
ensure completeness and accuracy in the contractor keypunched data, we
independently verified 3 percent of the surveys, or 38, for keypunch
accuracy.

Finally, not every respondent answered every question. Relatively high item
nonresponse included questions pertaining to the health plan in place in
1996. To see how item nonresponse may affect two of our key results--parity
in annual and dollar limits for 1999 and 1996--we tested to see if there
were significant differences between employers for whom we could determine
the parity of their benefits and those for whom we could not. Employers were
compared on size, geographic region, and type of industry. Our ability to
determine parity in 1999 varied only by employer size, for which item
nonresponse meant that we could not determine compliance for 24 percent of
small employers. Our ability to determine parity in 1996 varied by both
employer size and geographic region. Item nonresponse for 1996 health plan
data meant that we could not determine parity for 58 percent of small
employers and 60 percent of respondents from the South.

Summary of Survey Responses

Following are the responses we received to our survey of employers' mental
health benefits. The sum of the combined responses may not equal 100 percent
because of rounding. In addition, because not every employer responded to
each question, we have provided the total number of responses for each
question. As with the survey, we divided the summary of responses into three
parts:

ï¿½ Information about the employer's current health plan that both covers the
largest number of lives and contains mental health benefits.

ï¿½ Information about the same plan in 1996 or the most popular health plan
containing mental health benefits offered in 1996 compared with the 1999
plan.

ï¿½ Information about the cost of changes made to mental health benefits as a
result of the Mental Health Parity Act.

Lives and Contains Mental Health Benefits

Table 8: Mental Health Benefits Offered Now

 Are mental health benefits included in any of the health plans offered
                        employees? (n = 1,097)
 Response                                           Percent
 Yes                                                79
 No                                                 15
 No health plan offered                             6

Table 9: Mental Health Benefits Ever Offered Since December 1996

 Have mental health benefits ever been included in any of the health plans
              offered employees since Dec. 1996? (n = 125)a
 Response                                            Percentb
 Yes                                                 4
 No                                                  61
 No health plan offered                              35

aQuestion applies only to employers indicating mental health benefits are
not included in any of their health plans.

bConfidence intervals ranged from ï¿½3.3 to ï¿½8.4 percent.

Table 10: Number of Lives Benefits Cover

   How many lives are covered by the plan that has the largest number of
 covered lives and contains mental health benefits? (Please include active
          and retired employees and their dependents.) (n = 745)
 Median                        122
 Range                         2-333,652

Table 11: Plan Insurance

 Is this health plan fully insured or self-insured? (n = 848)
 Response                                                     Percent
 Fully insured                                                64
 Self-insured or self-funded                                  32
 Don't know                                                   4

Table 12: Plan Type

 What type of plan is this health plan? (n = 837)
 Response                                         Percent
 Conventional indemnity                           8
 Preferred provider organization (PPO)            45
 Point-of-service (POS)                           12
 Health maintenance organization (HMO)            32
 Other                                            4

Table 13: Administered by a Managed Behavioral Health Care Company

 Does your organization contract with a managed behavioral health care
 company for separate administration of mental health benefits? (n = 846)
 Response                                  Percent
 Yes                                       7
 No                                        86
 Don't know                                6

Table 14: Financial Risk of Administering Organization

 What level of risk does the organization administering the mental health
                        benefits bear? (n = 59)a
                      Response                             Percentb
               Bears no financial risk                        41
 Bears some financial risk                            10
 Bears all financial risk                             10
 Don't know                                           38

aQuestion applies only to employers contracting with a managed behavioral
health care company for the administration of their mental health benefits.

bBecause only a subset of respondents answered this question, the confidence
intervals ranged from ï¿½7.4 to ï¿½12.5 percent.

Table 15: Plan Design Features for Current Plan

    What is the amount of the limit or cost-sharing feature that applies to the following plan
                                        design features?
                        Mental health benefita                  Medical surgical benefita
  Plan design             Percent   Median amount for               Percent   Median amount for
    feature     Number of   with    plans with limit      Number of   with    plans with limit
               responses                                 responses
                           limit  (25th-75th quartile)               limit  (25th-75th quartile)

 Annual dollar                    $6,300                                    $1,000,000
 limit         572        28%                            593        16%
                                  (1,500-1,000,000)                         (5,000-2,000,000)

 Lifetime                         $1,000,000                                $1,000,000
 dollar limit  658        54                             708        54
                                  (1,000,000-2,000,000)                     (1,000,000-2,000,000)
 Annual                           $1,000                                    $1,000
 out-of-pocket 660        62                             718        73
 maximum                          (750-1,500)                               (800-1,500)

 Annual                           $250                                      $250
 deductible    757        47                             771        51
                                  (200-300)                                 (200-300)
 Inpatient                        $100                                      $100
 hospital care 642        22                             671        24
 copayment                        (50-240)                                  (75-240)
 Inpatient                        20%                                       20%
 hospital care 720        51                             725        45
 coinsurance                      (10-20)                                   (10-20)
 Annual                           30 days                                   30 days
 inpatient     726        76                             679        10
 hospital days                    (30-30)                                   (30-70)
 Outpatient                       $15                                       $10
 office visit  710        70                             723        78
 copaymentb                       (10-20)                                   (10-15)
 Outpatient                       30%                                       20%
 office visit  707        49                             674        35
 coinsuranceb                     (20-50)                                   (10-20)
 Annual                           20 visits                                 20 visits
 outpatient    747        75                             683        8
 office visit                     (20-30)                                   (20-30)

aAll data reflect plan feature for in-network benefits, as applicable.
Estimates reflect plans that apply design features both to mental health and
medical surgical services combined and to those that apply a separate limit
or amount for mental health services and for medical surgical services.

bCopayment and coinsurance reflect amount for tenth visit.

Health Benefits Offered in 1996, Compared With the 1999 Plan

Table 16: Current Plan in 1996

   Were mental health benefits offered through your current health plan at
                    any time in December 1996? (n = 802)
                             Response                              Percent
 Yes                                                               62
 No, organization did not exist in December 1996                   5
 No, plan was not available or did not contain mental health
 benefits                                                          17
 Don't know                                                        17

Table 17: Mental Health Benefits in Any Plan

 Were mental health benefits offered through any of the plans that you
 offered in December 1996? (n = 268)a
 Response                             Percentb
 Yes                                  36
 No                                   11
 Don't know                           53

aQuestion applies only to employers whose current plan was not offered or
did not contain mental health benefits in 1996.

bConfidence intervals ranged from ï¿½3.8 to ï¿½6.0 percent.

Table 18: Plans Covering the Most Lives in December 1996

 Please identify the type of plan in place in December 1996 that covered
     the most lives and contained mental health benefits. (n = 94)a
                        Response                            Percentb
                 Conventional indemnity                        16
 Preferred provider organization (PPO)                    41
 Point-of-service (POS)                                   9
 Health maintenance organization (HMO)                    30
 Other                                                    4

aQuestion applies only to employers whose current plan was not offered or
did not contain mental health benefits in 1996.

bConfidence intervals ranged from ï¿½4.2 to ï¿½9.9 percent.

Table 19: Plan Design Features in December 1996

 For the health benefits plan that was available in December 1996, what was the amount of the
         limit or cost-sharing feature applied to the following plan design features?
                      Mental health benefita                 Medical surgical benefita

  Plan design             Percent Median amount for              Percent   Median amount for
    feature     Number of   with   plans with limit    Number of   with    plans with limit
               responses              (25th-75th      responses
                           limit                                  limit  (25th-75th quartile)
                                      quartile)

 Annual dollar                    $5,250                                 $1,000,000
 limits        379        51%b                        370        18%
                                  (1,500-15,000)                         (200,000-1,000,000)

 Lifetime                         $50,000                                $1,000,000
 dollar limits 413        66                          442        58
                                  (25,000-1,000,000)                     (1,000,000-2,000,000)
 Annual                           $1,000                                 $1,000
 out-of-pocket 391        59                          431        72
 maximum                          (700-1,500)                            (750-1,500)

 Annual                           $200                                   $200
 deductible    464        50                          471        55
                                  (100-250)                              (100-250)
 Inpatient                        $100                                   $100
 hospital care 398        19                          414        20
 copayment                        (50-250)                               (50-240)
 Inpatient                        20%                                    20%
 hospital care 448        52                          456        46
 coinsurance                      (10-20)                                (10-20)
 Annual                           30 days                                60 days
 inpatient     430        63                          429        8
 hospital days                    (30-30)                                (30-120)
 Outpatient                       $20                                    $10
 office visit  419        58                          433        67
 copaymentc                       (10-25)                                (10-15)
 Outpatient                       50%                                    20%
 office visit  456        55                          435        39
 coinsurancec                     (20-50)                                (10-20)
 Annual                           20 days                                20 days
 outpatient    442        60                          428        6
 office visit                     (20-30)                                (20-25)

aAll data reflect plan feature for in-network benefits, as applicable.
Estimates reflect plans that apply design features both to mental health and
medical surgical services combined and to those that apply a separate limit
or amount for mental health services and for medical surgical services.

bConfidence interval ï¿½5.0 percent.

cCopayment and coinsurance reflect amount for tenth visit.

Table 20: Reasons for Benefit Changes After December 1996, Part 1

 Where differences exist in the design features for mental health benefits
 in your current plan and those available in December 1996, please indicate
   which factors other than the Mental Health Parity Act influenced your
   decision to change these features. (Check all that apply.) (n = 652)
                            Response                              Percent
 No changes made                                                 36
 Employee needs or preferences                                   5
 Cost containment efforts                                        15
 Market trends in health plan benefits                           8
 Increased availability of managed health care services          5
 State statutes or regulations                                   9
 Don't know                                                      11
 Other                                                           10

Table 21: Reasons for Benefit Changes After December 1996, Part 2

  Where differences exist in the design features for mental health benefits
 in your current plan and those available in December 1996, please indicate
    whether changes were made primarily in response to the Mental Health
  Parity Act or primarily for the other reasons checked in the question in
                     table 20. (Check all that apply.)
                                                About as
                                                           Primarily
                                     Primarily   much in    or more
   Plan design   Number of     No   or more in  response      for     Don't
    feature      responses  change   response  to the act   reasons   know
                                    to the act   as for    other than
                                                  other
                                                reasons     the act
 Annual dollar
 limit           513        48%     25%        2%         9%          16%
 Lifetime dollar
 limit           517        51      22         1          10          16
 Annual
 out-of-pocket   501        61      7          2          14          16
 maximum
 Annual
 deductible      500        64      5          1          16          14
 Inpatient
 hospital care   502        67      4          1          14          14
 copayment
 Inpatient
 hospital care   500        64      6          2          14          15
 coinsurance
 Annual
 inpatient       506        57      14         2          12          15
 hospital days
 Outpatient
 office visit    501        61      6          1          18          14
 copayment
 Outpatient
 office visit    502        62      8          1          14          15
 coinsurance
 Annual
 outpatient      506        54      17         2          13          15
 office visit

Table 22: Administered by a Managed Behavioral Health Care Company in 1996

   Did your organization contract with a managed behavioral health care
 company for separate administration of mental health benefits in December
                             1996? (n = 577)
                 Response                             Percent
 Yes                                       5
 No                                        90
 Don't know                                5

Table 23: Managed Care in Current Plan Compared With December 1996

   Were more managed care features (such as case management, utilization
  review, precertification, provider networks, or individualized treatment
 plans) implemented in your current plan for mental health benefits than in
               the one available in December 1996? (n = 566)
 Response                                                       Percent
 Yes, implemented more managed care features                    14
 No, did not implement more managed care features               65
 Don't know                                                     22

Table 24: Employees' Access to Benefits

  In your view, have the changes made to your mental health benefits since
    December 1996 affected employees' access to mental health services?
                                 Greatly or       Neither      Greatly or
 Type of access     Number of     somewhat     increased nor    somewhat
                   responses
                                 increased      decreased      decreased
 Access to
 inpatient        501          13%            84%            2%
 services
 Access to
 outpatient       500          16             80             4
 services
 Access to
 preventive       496          13             86             1
 services
 Access to mental
 health services  501          17             81             3
 overall

Table 25: Employee Eligibility for Coverage

  In considering all of the health plans offered by your organization since
 December 1996, would you say that the proportion of your employees who are
  eligible to enroll in a health plan that contains mental health benefits
                                has changed?
                               Greatly or       Neither        Greatly or
                 Number of      somewhat     increased nor      somewhat
                responses
                               increased       decreased       decreased
 Employees
 eligible to   522           8%             91%             2%
 enroll

Mental Health Parity Act

Table 26: Exemption Filed

    A provision of the Mental Health Parity Act allows an exemption for
 employers who can demonstrate that compliance has resulted in an increase
  in total claims costs of 1 percent or more. Has your organization filed
      for an exemption from the Mental Health Parity Act? (n = 791)
                 Response                             Percent
 Yes                                       1
 No                                        78
 Don't know                                21

Table 27: Reasons Exemption Not Filed

 Below are reasons why an organization might not file for an exemption from
       the Mental Health Parity Act. Please indicate the reasons your
    organization did not apply for an exemption. (Check all that apply.)
                   Response                    Number of responses Percent
 No changes were necessary to comply with the
 act                                           620                 32%
 Not aware of exemption                        619                 28
 Claims costs did not increase at least 1
 percent                                       619                 15
 Changed benefit design to mitigate the cost
 of the act                                    619                 5
 Preferred to have employees benefit from the
 law                                           619                 9
 Did not examine changes in costs              619                 18
 Other                                         620                 5
 Don't know                                    620                 11

Table 28: Compliance and Claims Costs

 Has compliance with the act increased your health benefit plan's claims
 costs? (n=772)
 Response                                Percent
 Yes                                     3
 No                                      37
 Don't know                              60

Table 29: Claims Cost Increases

 By about what percentage did your total health benefit claims costs
          increase from complying with the act? (n = 33)a
                  Response                         Percent b
             Less than 1 percent                       19
 1 to 2 percent                              17
 3 to 5 percent                              22
 More than 5 percent                         15
 Don't know                                  27

a Question applies only to employers indicating that compliance with the act
increased their health benefit plan's claims costs.

b Because only a subset of respondents answered this question, the
confidence interval ranged from ï¿½12.1 to ï¿½15.1 percent.

State Laws on Mental Illness and Substance Abuse Treatment

NCSL's Health Policy Tracking Service tracks state laws regulating private
health insurance coverage. At our request, NCSL undertook a comprehensive
review of the state laws that affect mental illness and substance abuse
coverage and prepared a summary as of March 1, 2000. That summary is the
basis for table 30. Identified in the table are whether each state has an
applicable law, its effective date, the type of coverage (for example, group
or health maintenance organization (HMO) or individual market), the
illnesses whose treatments are covered (for example, mental illness or
substance abuse), and the scope of benefits. In addition, the "type of
benefit mandate" is specified, which describes the extent to which each law
requires that a benefit be covered. For example, a "mandated benefit" clause
within a law addressing the coverage of mental health benefits requires that
all coverage sold in the applicable market contain mental health benefits
that comply with the terms of the law. A "mandated offering" clause
generally requires that the terms of the law apply only if mental health
coverage is included in the health plan. Finally, with respect to the
requirements of the law as they pertain to the scope of benefits offered in
a health plan, the table indicates whether the law requires that certain
elements of coverage--inpatient benefits, outpatient benefits, cost-sharing,
or dollar limits--be provided on a par with benefits for medical and
surgical coverage or specifies that minimum levels of coverage must be
offered.

Table 30 shows that as of March 1, 2000, laws in effect in 43 states and the
District of Columbia addressed mental health coverage in employer-sponsored
group plans and, to a lesser extent, coverage sold in the individual market.
With regard to group plans, more than half, or 29, of the state laws are
more comprehensive than the federal law in that they require parity not only
in dollar limits but also in service limits or cost-sharing provisions. In
addition, many of these also mandate that mental health benefits be included
in all plans sold. Laws in 6 states essentially parallel the federal law.
Laws in 8 states and the District of Columbia are more limited and may not
conform to the federal law, while 7 states have no laws addressing mental
health benefits. Unlike the federal law, most states, or 41, and the
District of Columbia either explicitly include substance abuse within the
scope of their mental health benefit laws or have separate statutes
addressing substance abuse coverage. However, 13 of these state laws cover
only alcoholism.

State laws also define mental illness differently. For example, some state
laws define mental illness narrowly to include only specified mental
illnesses. Commonly specified are schizophrenia, schizoaffective disorder,
bipolar affective disorder, major depression, obsessive compulsion, and
panic disorder. Other state laws define mental illness more broadly,
generally including the conditions classified as mental illness by the
American Psychiatric Association's (APA) Diagnostic and Statistical Manual
of Mental Disorders (DSM). In addition, many state laws do not define mental
illness or do so in broad, nonspecific terms.

Table 30: State Laws Addressing Coverage of Mental Illness and Substance
Abuse as of March 1, 2000

                                                                    Scope of benefits
     Type of                      Type of
    insurance       lllness       benefit        Inpatient        Outpatient   Cost sharing:   Dollar limits:
    affected       covereda      mandateb    (hospitalization)    services     copayments and    annual and
                                                                                coinsurance      lifetimec
 Alabama
 1979
                                                                1 inpatient
                                                                day can be
 Group and HMO  Alcoholism     Mandated      30 days            converted to 3Not specified   Not specified
                               offering
                                                                outpatient
                                                                sessions
 Alaska
 1997d

 Group.                                                         May impose    May impose
 Exemption if                                May impose terms   terms and     terms and
 cost increase  Mental                       and conditions,    conditions,   conditions,
 of 1% or more  illness,       Mandated      including cost     including costincluding cost  Must be equal
 or small       excluding      offering      sharing and limits sharing and   sharing and     to other
 employer with  alcoholism and               on the number of   limits on the limits on the   illnesses
 50 or fewer    drug abuse                   visits or days     number of     number of
 employees                                   covered            visits or daysvisits or days
                                                                covered       covered
 1997
 Group. If 5                   Minimum
 employees or                  mandated                                                       At least $9,600
 fewer, exempt; Alcoholism and benefits or                                    Must be equal   every 2 years;
 if 20 or fewer,drug abuse     mandated      Not specified      Not specified to other        $19,200
 must offer                    offering for                                   illnesses       lifetime
 coverage                      small group
 Arizona
 1998

 Group.                                                         May impose    May impose
 Exemption if                                May impose terms   terms and     terms and
 cost increase  Mental                       and conditions,    conditions,   conditions,
 of 1% or more  illness,       Mandated      including cost     including costincluding cost  Must be equal
 or small       excluding      offering      sharing and limits sharing and   sharing and     to other
 employer with  alcoholism and               on the number of   limits on the limits on the   illnesses
 50 or fewer    drug abuse                   visits or days     number of     number of
 employees                                   covered            visits or daysvisits or days
                                                                covered       covered
 Arkansas
 1997
 Group.
 Exemption if
 cost increase  Mental illness
 of 1.5% or moreand            Mandated      Must be equal to   Must be equal Must be equal   Must be equal
 or small       developmental  benefits      other illnesses    to other      to other        to other
 employer with  disorderse                                      illnesses     illnesses       illnesses
 50 or fewer
 employees
 1987
                                                                Not less      Not less
                Alcoholism and               Not less favorable favorable     favorable       $6,000 every 2
 Group and HMO  drug           Mandated      generally than to  generally thangenerally than  years; $12,000
                dependency     offering      other illnesses    to other      to other        lifetime
                                                                illnesses     illnesses
 California
 1974
                Mental or
 Group          nervous        Mandated      Not specified      Not specified Not specified   Not specified
                disorders      offering
 July 2000
 Group,                                                         Must be equal Must be equal   Must be equal
 individual, andSevere mental  Mandated      Must be equal to   to other      to other        to other
 HMO            illnessf       benefits      other illnesses    illnesses     illnesses       illnesses
 1990

 Group          Alcoholism     Mandated      Not specified      Not specified Not specified   Not specified
                               offering
 Colorado
 1992
                                                                              Shall not
                                                                              exceed 50% of
                Mental                                          Covered under the payment;
                                                                major medical,
 Group          illness,       Mandated      45 days            not less than deductible      Not specified
                excluding      benefits                                       shall not
                autism                                          $1,000 per    differ from
                                                                year
                                                                              that for other
                                                                              illnesses
 1998
                Biologically                                    Must be equal Must be equal   Must be equal
 Group          based mental   Mandated      Must be equal to   to other      to other        to other
                illnessg       benefits      other illnesses    illnesses     illnesses       illnesses
 1994
                                                                              Shall not
                                                                              exceed 50% of
                                                                              the payment;
 Group          Alcoholism     Mandated      45 days            $500 annually deductible      Not specified
                               offering                                       shall not
                                                                              differ from
                                                                              that for other
                                                                              illnesses
 Connecticut
 Jan. 2000
                Mental or
                nervous
 Group and      conditions,    Mandated      Must be equal to   Must be equal Must be equal   Must be equal
 individual     including      benefits      other illnesses    to other      to other        to other
                alcoholism and                                  illnesses     illnesses       illnesses
                drug
                addictionh
 Delaware
 1997d

 Group.                                                         May impose    May impose
 Exemption if                                May impose terms   terms and     terms and
 cost increase  Mental                       and conditions,    conditions,   conditions,
 of 1% or more  illness,       Mandated      including cost     including costincluding cost  Must be equal
 or small       excluding      offering      sharing and limits sharing and   sharing and     to other
 employer with  alcoholism and               on the number of   limits on the limits on the   illnesses
 50 or fewer    drug abuse                   visits or days     number of     number of
 employees                                   covered            visits or daysvisits or days
                                                                covered       covered
 1999

 Group and      Serious mental Mandated      Must be equal to   Must be equal Must be equal   Must be equal
 individual     illnessi       benefits      other illnesses    to other      to other        to other
                                                                illnesses     illnesses       illnesses
 District of Columbia
 1997
                                                                75% for first                 Lifetime limit
                               Mandated                         40 visits and Deductibles,    of no less than
                                             45 days for mental               copayments, and
 Group,         Mental illness offering for  illness; 12 days   60% for visitslimits on total $80,000 or
 individual,    and alcohol    individual    of detoxification  exceeding 40  amounts payable one-third of
 HMO, and state and drug       plans;        and 28 days for    for mental    to an           the lifetime
 employee plans abusej         mandated      alcoholism and     illness; 30   individual in a maximum for
                               benefits for                     visits for                    other illness,
                               all others    drug abuse         alcoholism andcalendar year   whichever is
                                                                drug abuse    may be applied  greater
 Florida
 1992
                                                                              May be          May be
                Mental and                                                    different after different after
 Group and HMO  nervous        Mandated      30 days            $1,000 per    minimum         minimum
                disordersk     offering                         benefit year  benefits are    benefits are
                                                                              met             met
 1998d

 Group.                                                         May impose    May impose
 Exemption if                                May impose terms   terms and     terms and
 cost increase  Mental                       and conditions,    conditions,   conditions,
 of 1% or more  illness,       Mandated      including cost     including costincluding cost  Must be equal
 or small       excluding      offering      sharing and limits sharing and   sharing and     to other
 employer with  alcoholism and               on the number of   limits on the limits on the   illnesses
 50 or fewer    drug abuse                   visits or days     number of     number of
 employees                                   covered            visits or daysvisits or days
                                                                covered       covered
 1993

                                                                44 visit                      Annual limits
                                                                maximum, $35                  not specified;
 Group and HMO  Substance      Mandated      Not specified      maximum       Not specified   minimum
                abuse          offering                                                       lifetime
                                                                reimbursement
                                                                per visit                     benefit of
                                                                                              $2,000
 Georgia
 1998
                Mental
 Group and      disorders,     Mandated                                       Must be equal   Must be equal
 individual     including      offering      30 days            48 visits     to other        to other
                substance                                                     illnesses       illnesses
                abusee
 Hawaii
 1988
 Group,                                                                       Must be         Must be
 individual, andMental         Mandated      30 days            30 visits     comparable to   comparable to
 HMO            illnessl       benefits                                       other illnesses other illnesses
 1999
 Group and
 individual.
 Small-employer Serious mental Mandated      Must be equal to   Must be equal Must be equal   Must be equal
 exemption if 25illnessm       benefits      other illnesses    to other      to other        to other
 or fewer                                                       illnesses     illnesses       illnesses
 employees
 1988

 Group,         Alcohol and                  No less than two   No less than  Must be         Must be
 individual, anddrug           Mandated      treatment episodes two treatment comparable to   comparable to
 HMO            dependence     benefits      per lifetime       episodes per  other illnesses other illnesses
                                                                lifetime
 Idaho
 No law
 Illinois
 1991
                                                                                              Annual benefit
                Mental,                                                                       may be limited
                emotional, or                                                 Insured may be  to the lesser
 Group                         Mandated      Not specified      Not specified required to pay of $10,000 or
                nervous        offering                                       up to 50% of    25% of the
                disorders                                                     expenses        lifetime policy
                                                                                              limit
 1995

 Group          Alcoholism     Mandated      Not specifiedn     Not specified Not specified   Not specified
                               benefits
 Indiana
 1997d

 Group.                                                         May impose    May impose
 Exemption if                                May impose terms   terms and     terms and
 cost increase  Mental                       and conditions,    conditions,   conditions,
 of 1% or more  illness,       Mandated      including cost     including costincluding cost  Must be equal
 or small       excluding      offering      sharing and limits sharing and   sharing and     to other
 employer with  alcoholism and               on the number of   limits on the limits on the   illnesses
 50 or fewer    drug abuse                   visits or days     number of     number of
 employees                                   covered            visits or daysvisits or days
                                                                covered       covered
 Jan. 2000
                                                                              Must be equal   Must be equal
 Group,                                                                       to              to
 individual, and                                                Must be equal
 state                         Mandated      Must be equal to   to other      other illnesses other illnesses
 employees.                    offering;     other illnesses    illnesses for for             for
 Exemption if                  mandated      for plans that     plans that
 cost increase  Mental         benefits for  offer coverage;    offer         plans that      plans that
 of 4% or more  illnesso       state         mandated benefits  coverage;     offer           offer
 or small                      employee      for state employee mandated
 employer with                 plans         plans              benefits for  coverage;       coverage;
 50 or fewer                                                    state employeemandated        mandated
 employees                                                      plans         benefits for    benefits for
                                                                              state employee  state employee
                                                                              plans           plans
 Iowa
 No law
 Kansas
 1997d

 Group.                                                         May impose    May impose
 Exemption if                                May impose terms   terms and     terms and
 cost increase  Mental                       and conditions,    conditions,   conditions,
 of 1% or more  illness,       Mandated      including cost     including costincluding cost  Must be equal
 or small       excluding      offering      sharing and limits sharing and   sharing and     to other
 employer with  alcoholism and               on the number of   limits on the limits on the   illnesses
 50 or fewer    drug abuse                   visits or days     number of     number of
 employees                                   covered            visits or daysvisits or days
                                                                covered       covered
 1998
                                                                Not less than
                                                                100% of the
                                                                first $100,
 Group,         Mental                                          80% of the
 individual,    conditions,    Mandated                         next $100, and                Specified only
 HMO, and state alcoholism, or benefits      30 days            50% of the    Not specified   for outpatient
 employee plans drug abusep                                     next $1,640                   treatment
                                                                per year and
                                                                not less than
                                                                $7,500 per
                                                                lifetime
 Kentucky
 1986

                                             To the same extent To the same   To the same     To the same
 Group          Mental         Mandated      as coverage for    extent as     extent as       extent as
                illnessq       offering                         coverage for  coverage for    coverage for
                                             other illness
                                                                other illness other illness   other illness
 1980
                                             Emergency
                                                                10 visits
 Group          Alcoholism     Mandated      detoxification: 3  reimbursed at Not specified   Not specified
                               offering      days reimbursed at
                                             $40 per day        $10 per visit
 Louisiana
 1982
 Group,
 self-insured,                 Mandated      Must be equal to   Must be equal Must be equal   Must be equal
 and state      Mental illness offering      other illnesses    to other      to other        to other
 employee plans                                                 illnesses     illnesses       illnesses
 1997d

 Group.                                                         May impose    May impose
 Exemption if                                May impose terms   terms and     terms and
 cost increase  Mental                       and conditions,    conditions,   conditions,
 of 1% or more  illness,       Mandated      including cost     including costincluding cost  Must be equal
 or small       excluding      offering      sharing and limits sharing and   sharing and     to other
 employer with  alcoholism and               on the number of   limits on the limits on the   illnesses
 50 or fewer    drug abuse                   visits or days     number of     number of
 employees                                   covered            visits or daysvisits or days
                                                                covered       covered
 Jan. 2000
                                                                52 visits; 1
                                                                day of
 Group, HMO, and                                                inpatient     Must be equal   Must be equal
 state employee Serious mental Mandated      45 days            benefits can  to other        to other
 plans          illnessr       benefits                         be converted  illnesses       illnesses
                                                                to 4
                                                                outpatient
                                                                visits
 1982

 Group          Alcoholism and Mandated      Not specified      Not specified Not specified   Not specified
                drug abuse     offering
 Maine
 1996
 Group.
 Exemption if                                                   Must be equal Must be equal   Must be equal
 small employer Mental         Mandated      Must be equal to   to other      to other        to other
 with 20 or     illnesss       benefits      other illnesses    illnesses     illnesses       illnesses
 fewer employees
 1996
                                                                Must be equal Must be equal   Must be equal
 Individual     Mental         Mandated      Must be equal to   to other      to other        to other
                illnesss       offering      other illnesses
                                                                illnesses     illnesses       illnesses
 1984

 Group. Small                                                                 May place a     May place a
 employer       Alcoholism and                                                maximum limit   maximum limit
 exemption if 20drug           Mandated      Not specified      Not specified on benefits as  on benefits as
 or fewer       dependency     benefits                                       long as they    long as they
 employees                                                                    are consistent  are consistent
                                                                              with the law    with the law
 Maryland
 1994
                                                                Unlimited
                Mental                                          visits but
                illness,                                        subject to
                emotional                                       different
 Group and      disorder, drug Mandated      Must be equal to   copayments:   Must be equal   Must be equal
 individual     abuse          benefits      other illnesses    80% for visitsto other        to other
                disorder, or                                    1-5, 65% for  illnesses       illnesses
                alcohol abuse                                   visits 6-30,
                disorder                                        and 50% for 31
                                                                or more per
                                                                year
 Massachusetts
 1996
                                                                                              Lifetime
 Group,         Mental or                                                                     maximum must be
 individual, andnervous        Mandated      60 days in a       $500 per year Not specified   equal for
 HMO            conditionst    benefits      mental hospital                                  inpatient
                                                                                              treatment
 1991
 Group,
 individual, andAlcoholism     Mandated      30 days            $500 per year Not specified   Not specified
 HMO                           benefits
 Michigan
 1988
 Group for
 inpatient;                    Mandated
 group and                     offering of                      $1,500 per    Charges, terms, $1,500 per year
 individual for Substance      inpatient and To the extent      year for      and conditions  for outpatient
 other levels.  abuse          mandated      agreed upon        outpatient andshall not be    and
 Exemption for                 benefits for                     intermediate  less favorable  intermediate
 cost increase                 other levels                     treatment                     treatment
 of 3% or more
 Minnesota
 1995
                               Mandated
 Group,         Mental health  benefits for                     Must be equal Must be equal   Must be equal
 individual, andand chemical   HMOs;         Must be equal to   to other      to other        to other
 HMOs           dependency     otherwise,    other illnesses    illnesses     illnesses       illnesses
                               mandated
                               offering
 1986

                Alcoholism,                  At least 20% of    At least 130
 Group and      chemical       Mandated      the total days     hours of
 individual     dependency, or benefits      allowed but not    treatment per Not specified   Not specified
                drug addiction               less than 28 days  year
                                             per year
 Mississippi
 1994

 Group and                     Mandated      Services certified Services
 individual     Mental illness offering      as necessary       certified as  Not specified   Not specified
                                                                necessary
 1975
                                                                                              Annual limit of
                                                                                              $1,000 per
 Group          Alcoholism     Mandated      Not specified      Not specified Not specified   year; lifetime
                               benefits
                                                                                              limit not
                                                                                              specified
 Missouri
 1997
                                                                                              Must be equal
                                                                Must be equal                 for mental
                                                                              Must be equal   illness;
 Group,         Recognized                   90 days for mental for mental    for mental      chemical
 individual, andmental illness Mandated      illness, 6 days    illness; 26   illness and     dependency may
 HMO            and chemical   offering      for detoxification visits for    chemical        be limited to
                dependencyu                                     chemical
                                                                dependency    dependency      not less than
                                                                                              10 episodes of
                                                                                              treatment
 Jan. 2000
                                                                Equal for
                                                                                              A lifetime
                Mental                       Equal for mental   mental        Shall not be    limit equal to
 Group,         illness,                     illness; at least  illness; at   unreasonable in four times the
 individual, andincluding      Mandated      30 days for        least 20      relation to the annual limit
 HMO            alcohol and    offering      alcohol and drug   visits for    cost of         may be imposed
                drug abusev                  abuse if offered   alcohol and   services        for alcohol and
                                                                drug abuse if provided
                                                                offered                       drug abuse
 1995

                Alcoholism,    Mandated      30 days for
                               benefits for
 Group and      chemical       alcoholism;   alcoholism; 80% of 30 days for
 individual     dependency,    mandated      reasonable charges all levels of Not specified   Not specified
                and drug                     up to $2,000       care
                addiction      offering for  maximum
                               others
 Montana
 1997d

 Group.                                                         May impose    May impose
 Exemption if                                May impose terms   terms and     terms and
 cost increase  Mental                       and conditions,    conditions,   conditions,
 of 1% or more  illness,       Mandated      including cost     including costincluding cost  Must be equal
 or small       excluding      offering      sharing and limits sharing and   sharing and     to other
 employer with  alcoholism and               on the number of   limits on the limits on the   illnesses
 50 or fewer    drug abuse                   visits or days     number of     number of
 employees                                   covered            visits or daysvisits or days
                                                                covered       covered
 1997; exemptions expire Oct. 2001

 Group.                                                         No less than                  See specified
 Exemption if                                21 days with       $2,000 per    No less         maximums under
 cost increase  Mental                       $4,000 maximum     year for      favorable       inpatient and
 of 1% or more  illness,       Mandated      every 2 years;     mental illnessgenerally than  outpatient
 or small       alcoholism,    benefits      $8,000 lifetime    and $1,000 perfor other       benefits.
 employer       and drug                     maximum for        year for      illnesses up to Aggregate
 (number not    addiction                    alcohol and drug   alcohol and   maximums        limits may not
 specified)                                  addiction only     drug addiction                be imposed more
                                                                                              restrictively
 Jan. 2000

 Group and      Severe mental  Mandated      Must be equal to   Must be equal Must be equal   Must be equal
 individual     illnessw       benefits      other illnesses    to other      to other        to other
                                                                illnesses     illnesses       illnesses
 Nebraska
 Jan. 2000
 Group and HMO.
 Exemption if                                                   Must be equal May be          Must be equal
 small employer Serious mental Mandated      Must be equal to   to other      different from  to other
 with 15 or     illnessx       offering      other illnesses    illnesses     that for other  illnesses
 fewer employees                                                              illnesses
 1989

                                             30 days per year   60 visits     No less         No less
                                                                              favorable       favorable
 Group and HMO  Alcoholism     Mandated      with at least 2    during the    generally than  generally than
                               offering      treatment periods  lifetime of
                                             in a lifetime      the policy    for other       for other
                                                                              illness         illness
 Nevada
 1997d

 Group.                                                         May impose    May impose
 Exemption if                                May impose terms   terms and     terms and
 cost increase  Mental                       and conditions,    conditions,   conditions,
 of 1% or more  illness,       Mandated      including cost     including costincluding cost  Must be equal
 or small       excluding      offering      sharing and limits sharing and   sharing and     to other
 employer with  alcoholism and               on the number of   limits on the limits on the   illnesses
 50 or fewer    drug abuse                   visits or days     number of     number of
 employees                                   covered            visits or daysvisits or days
                                                                covered       covered
 Jan. 2000
 Group and
 individual.                                                                  Must not be
 Exemption if                                                                 more than 150%
 cost increase                                                                of              Must be equal
 of 2% or more  Severe mental  Mandated      40 days            40 visits     out-of-pocket   to other
 or small       illnessy       benefits                                       expenses        illnesses
 employer with                                                                required for
 25 or fewer                                                                  medical and
 employees                                                                    surgical
 1997
                                                                                              Must be paid in
                                                                                              same manner to
 Group,         Abuse of                     $9,000 inpatient                                 maximum
 individual, andalcohol or     Mandated      and $1,500 for     $2,500 per    Must be paid in benefit;
 HMO            drugs          benefits      detoxification per year          same manner     lifetime
                                             year
                                                                                              maximum not
                                                                                              specified
 New Hampshire
 1993
                                                                Ratio of                      Ratio of
                                             Ratio of benefits  benefits                      benefits
 Group,                                      substantially the  substantially                 substantially
 individual, and                             same as benefits   the same as                   the same as
 HMO. Different                              for other          benefits for  Ratio of        benefits for
 benefits for   Mental or                    illnesses under    other         benefits        other illnesses
 mental illness nervous        Mandated      nonmajor medical   illnesses     substantially   under nonmajor
 specified underconditions     benefits      plans and $3,000   under nonmajorthe same as     medical plans
 major medical                               per year and       medical plans benefits for    and $3,000 per
 and nonmajor                                $10,000 per        and not less  other illnesses year and
 medical plans                               lifetime under     than 15 hours                 $10,000 per
                                             major medical      per year under                lifetime under
                                             plans              major medical                 major medical
                                                                plans                         plans
 1995
                Biologically                                    Must be equal Must be equal   Must be equal
 Group and HMO  based mental   Mandated      Must be equal to   to other      to other        to other
                illnessz       benefits      other illnesses    illnesses     illnesses       illnesses
 New Jersey
 1999

 Group and      Biologically   Mandated      Must be equal to   Must be equal Must be equal   Must be equal
 individual     based mental   benefits      other illnesses    to other      to other        to other
                illnessaa                                       illnesses     illnesses       illnesses
 1985

                               Mandated                                       Benefits        Benefits
                                                                              provided to the provided to the
 Group and                     benefits for  Must be equal to   Must be equal same extent as  same extent as
 individual     Alcoholism     care          other illnesses    to other      benefits for    benefits for
                               prescribed by                    illnesses
                               a doctor                                       any other       any other
                                                                              sickness        sickness
 New Mexico
 1998d

 Group.                                                         May impose    May impose
 Exemption if                                May impose terms   terms and     terms and
 cost increase  Mental                       and conditions,    conditions,   conditions,
 of 1% or more  illness,       Mandated      including cost     including costincluding cost  Must be equal
 or small       excluding      offering      sharing and limits sharing and   sharing and     to other
 employer with  alcoholism and               on the number of   limits on the limits on the   illnesses
 50 or fewer    drug abuse                   visits or days     number of     number of
 employees                                   covered            visits or daysvisits or days
                                                                covered       covered
 Oct. 2000
 Group.
 Exemption if
 cost increase
 of 1.5% or more
 for small                                                      Must be equal Must be equal   Must be equal
 employer with  Mental health  Mandated      Must be equal to   to other      to other        to other
 49 or fewer    benefitsbb     benefits      other illnesses    illnesses     illnesses       illnesses
 employees or
 2.5% or more
 for larger
 employers
 1987
                                                                30 visits per
                                             30 days per year,  year, limited Consistent with Consistent with
 Group          Alcoholism     Mandated      limited to no less to no less    cost sharing    dollar limits
                               offering      than two episodes  than two      imposed on      imposed on
                                             per lifetime       episodes per  other benefits  other benefits
                                                                lifetime
 New York
 1998

                Mental,                                                       As deemed       As deemed
                nervous, or                  30 days mental     $700 mental   appropriate by  appropriate by
                emotional                    illness, 30 days   illness and 60the             the
 Group          disorders and  Mandated      alcoholism or      visits for    superintendent  superintendent
                alcoholism and offering      substance abuse,   alcoholism or and consistent  and consistent
                substance                    and 7 days         substance     with cost       with dollar
                abuse                        detoxification     abuse         sharing for     limits for
                                                                              other benefits  other benefits
 North Carolina
 1997

 State employee Mental illness Mandated      Must be equal to   Must be equal Must be equal   Must be equal
 plans          and chemical   benefits      other illnesses    to other      to other        to other
                dependencycc                                    illnesses     illnesses       illnesses
 1997d

 Group.                                                         May impose    May impose
 Exemption if                                May impose terms   terms and     terms and
 cost increase  Mental                       and conditions,    conditions,   conditions,
 of 1% or more  illness,       Mandated      including cost     including costincluding cost  Must be equal
 or small       excluding      offering      sharing and limits sharing and   sharing and     to other
 employer with  alcoholism and               on the number of   limits on the limits on the   illnesses
 50 or fewer    drug abuse                   visits or days     number of     number of
 employees                                   covered            visits or daysvisits or days
                                                                covered       covered
 1985

                                             $8,000 per year    $8,000 per    Same as for     $8,000 per year
 Group          Chemical       Mandated      and $16,000 per    year and      other illness   and $16,000 per
                dependencycc   offering                         $16,000 per
                                             lifetime                         generally       lifetime
                                                                lifetime
 North Dakota
 1995
                                                                              No deductible
                Mental                                          30 hours for  or copayment
                disorders,                   45 days for mental mental illnessfor first 5     Lifetime and
 Group and HMO  alcoholism,    Mandated      illness and 60     and 20 visits hours or        annual dollar
                and drug       benefits      days for substance for substance visits, not to  limits not
                addiction                    abuse              abuse         exceed 20% for  specified
                                                                              remaining hours
                                                                              or visits
 Ohio
 1987
                                                                At least $550
                Mental or      Mandated      At least $550 for  for mental    Benefits may be
 Group and      nervous        offering;     mental illness and illness and   subject to      Lifetime dollar
 self-insured   disorders and  mandated      $550 for           $550 for      reasonable      limits not
                alcoholism     benefits for  alcoholism per     alcoholism perdeductibles and specified
                               alcoholism    year                             coinsurance
                                                                year
 Oklahoma
 Jan. 2000
 Group.
 Exemption if
 cost increase
 of 2% or more  Severe mental  Mandated      Must be equal to   Must be equal Must be equal   Must be equal
 or small       illnessdd      benefits      other illnesses    to other      to other        to other
 employer with                                                  illnesses     illnesses       illnesses
 50 or fewer
 employees
 Oregon
 July 2000
                                                                                              Payments for
                                                                                              all treatment
                                                                $2,500 for                    for mental
                                                                both adults                   health and
                Mental or                    $5,000 for adults  and children                  substance abuse
                nervous                      and $7,500 for     per 24 months                 are $13,125 for
                conditions,                  children per 24    for mental    No greater than adults and
 Group and HMO  including      Mandated      months for mental  health; $1,875for the         $15,625 for
                alcoholism and benefits      health; $5,625 for for adults andtreatment of    children.
                chemical                     adults and $5,000  $2,500 for    other illnesses Payments for
                dependencyee                 for children for   children for                  substance abuse
                                             substance abuse                                  only are $8,125
                                                                substance
                                                                abuse                         for adults and
                                                                                              $13,125 for
                                                                                              children per 24
                                                                                              months
 1981
                                                                $4,500 in a   Coverage must
 Individual     Alcoholism     Mandated      $4,500 in a        24-month      be no less than Lifetime, not
                               offering      24-month period                                  specified
                                                                period        80% of total
 Pennsylvania
 1999
 Group and HMO.                                                 60 visits; 1
 Small- employer                                                day of        Must not        Must be equal
 exemption if 50Serious mental Mandated      30 days            inpatient can prohibit access to other
 or fewer       illnessi       benefits                         be converted  to care         illnesses
 employees                                                      to 2 visits
 Rhode Island
 1995
 Group,
 individual,    Serious mental Mandated      Must be equal to   Must be equal Must be equal   Must be equal
 HMO, and       illnessff      benefits      other illnesses    to other      to other        to other
 self-insured                                                   illnesses     illnesses       illnesses
 1995
                                                                30 hours for
                                                                each
 Group,                                      Three episodes of  individual
 individual,    Substance      Mandated      detoxification or  under
 HMO, and       dependency and benefits      21 days, whichever treatment and Not specified   Not specified
 self-insured   abusegg                      comes first, per   20 hours for
                                             year
                                                                family per
                                                                year
 South Carolina
 1994
                Psychiatric
                conditions,                                     $2,000 per                    $2,000 annual;
 Group          including      Mandated      $2,000 per year    year overall  May be          $10,000
                substance      offering      overall total      total         different       lifetime
                abusehh                                                                       maximum
 1997d

 Group.                                                         May impose    May impose
 Exemption if                                May impose terms   terms and     terms and
 cost increase  Mental                       and conditions,    conditions,   conditions,
 of 1% or more  illness,       Mandated      including cost     including costincluding cost  Must be equal
 or small       excluding      offering      sharing and limits sharing and   sharing and     to other
 employer with  alcoholism and               on the number of   limits on the limits on the   illnesses
 50 or fewer    drug abuse                   visits or days     number of     number of
 employees                                   covered            visits or daysvisits or days
                                                                covered       covered
 South Dakota
 1998
 Group,         Biologically                                    Must be equal Must be equal   Must be equal
 individual, andbased mental   Mandated      Must be equal to   to other      to other        to other
 HMO            illnessii      benefits      other illnesses    illnesses     illnesses       illnesses
 1979
                                                                              On the same     On the same
 Group,                                      30 days overall    30 days       basis as        basis as
 individual, andAlcoholism     Mandated      each 6 months; 90  overall each 6benefits        benefits
 HMO                           offering      days lifetime      months; 90    provided for    provided for
                                                                days lifetime
                                                                              other illnesses other illnesses
 Tennessee
 1997d

 Group.                                                         May impose    May impose
 Exemption if                                May impose terms   terms and     terms and
 cost increase  Mental                       and conditions,    conditions,   conditions,
 of 1% or more  illness,       Mandated      including cost     including costincluding cost  Must be equal
 or small       excluding      offering      sharing and limits sharing and   sharing and     to other
 employer with  alcoholism and               on the number of   limits on the limits on the   illnesses
 50 or fewer    drug abuse                   visits or days     number of     number of
 employees                                   covered            visits or daysvisits or days
                                                                covered       covered
 Jan. 2000
 Group.
 Exemption if
 cost increase
 of 1% or more  Mental or      Mandated                                       Must be equal   Must be equal
 or small       nervous        benefits      20 days            25 visits     to other        to other
 employer with  conditionsk                                                   illnesses       illnesses
 25 or fewer
 employees
 1982
                Alcohol and                                     Must be equal Must be equal   Must be equal
 Group and HMO  drug           Mandated      Must be equal to   to other      to other        to other
                dependency     offering      other illnesses    illnesses     illnesses       illnesses
 Texas
 1991

 State employee Biologically   Mandated      Must be equal to   Must be equal Must be equal   Must be equal
 plans only     based mental   benefits      other illnesses    to other      to other        to other
                illnessjj                                       illnesses     illnesses       illnesses
 1997
                               Mandated
 Group and HMO.                benefits with                    60 visits;
 Small-employer                a mandated                       medication    Must be equal   Must be equal
 exemption if 50Serious mental offering for  45 days            checks are notto other        to other
 or fewer       illnesskk      small groups                     counted towardillnesses       illnesses
 employees                     of 50 or                         the limit
                               fewer
 1981
                                                                Lifetime
                               Mandated      Lifetime maximum   maximum of
 Group, HMO, and               benefits with of three separate  three separate
 self-insured.                 a mandated    series of          series of     Must be         Must be
 Exemption for  Chemical       offering for  treatments,        treatments,   sufficient to   sufficient to
 self-insured   dependencyll   self-insured  including all      including all provide         provide
 plans of 250 or               plans of 250  levels of          levels of     appropriate     appropriate
 fewer members                 or fewer      medically          medically     care            care
                               members       necessary care in  necessary care
                                             each episode       in each
                                                                episode
 Utah
 1994
                Alcohol and
 Group          drug           Mandated      Not specified      Not specified Not specified   Not specified
                dependency     offering
 Vermont
 1998
                Mental health
                condition,
 Group and      including      Mandated      Must be equal to   Must be equal Must be equal   Must be equal
 individual     alcohol and    benefits      other illnesses    to other      to other        to other
                substance                                       illnesses     illnesses       illnesses
                abusemm
 Virginia
 Jan. 1, 2000, to July 1, 2004
 Group and      Biologically                                    Must be equal Must be equal   Must be equal
 individual.    based mental                 Must be equal to   to achieve theto achieve the  to achieve the
 Small-group    illness,       Mandated      achieve the same   same outcome  same outcome as same outcome as
 exemption if 25including drug benefits      outcome as         as treatment  treatment for   treatment for
 or fewer       and alcohol                  treatment for any  for any other any other       any other
 members        addictionnn                  other illness      illness       illness         illness
 Washington
 1987
                                                                              Reasonable
 Group and HMO  Mental health  Mandated      Not specified      Not specified deductible and  Not specified
                treatment      offering
                                                                              copayments
 1990

 Group and HMO  Chemical       Mandated      Not specified      Not specified Not specified   Not specified
                dependency     benefits
 West Virginia
 1997d
                                                                May impose    May impose
                                             May impose terms   terms and     terms and
 Group.         Mental                       and conditions,    conditions,   conditions,
 Exemption if   illness,       Mandated      including cost     including costincluding cost  Must be equal
 cost increase  excluding      offering      sharing and limits sharing and   sharing and     to other
 of 1% or more  alcoholism and               on the number of   limits on the limits on the   illnesses
                drug abuse                   visits or days     number of     number of
                                             covered            visits or daysvisits or days
                                                                covered       covered
 1998
                                                                50% of the
 Group and                                                      eligible                      Lifetime and
 individual.    Mental or                    45 days in a       expenses up to                aggregate
 Exemption for anervous        Mandated      mental hospital;   $500 per year;Not specified   limits must be
 cost increase  conditions     offering      must be equal in a must not                      equal to other
 of 1%                                       general hospital   exceed 50                     illnesses
                                                                visits in 12
                                                                months
 1998
                                                                                              Not less than
                                                                                              $750 per year
                                                                              Must be equal   and not less
                                                                              up to 30 days;  than an amount
 Group          Alcoholismoo   Mandated      30 days            Not specified cannot exceed   equal to the
                               offering
                                                                              50% for         lesser of
                                                                              outpatient      $10,000 or 25%
                                                                                              of the lifetime
                                                                                              policy limit
 Wisconsin
 1981

                                             The lesser of 30   $2,000 per
                Mental                       days or $7,000     year minus a
                                                                copayment of
 Group and HMO  disorders and  Mandated      minus a copayment  up to 10% for Copayment of up Lifetime limits
                alcohol and    benefits      of up to 10% for                 to 10%          not specified
                drug abuse                   group plans and    group plans
                                             $6,300 for HMOs    and $1,800 for
                                                                HMOs
 Wyoming
 No law

Note: Years below state names are years laws became effective, based on the
most recent major amendments to statutes.

aIllnesses that health plans subject to the law must cover. APA's DSM IV
defines 13 diagnoses that mental health providers and consumer organizations
commonly refer to as biologically based mental illnesses. Between 3 and 13
of these diagnoses are referred to in various state parity laws concerning
mental illness.

b Decribes the extent to which the law requires that a mental health benefit
be included. A mandated benefit clause requires that all coverage sold in
the applicable market contain the mental health benefits that complies with
the terms of the law. A mandated offering clause could require that (1)
mental health coverage, if offered, complies with the terms of the law or
(2) each issuer offer mental health coverage that meets the terms of the law
in at least one of its plans or as a separate rider. In either case, the
issuer may charge more for the plan with the mental health benefits or the
rider.

c Annual and lifetime dollar limits are the amounts of health coverage that
an insurer will cover per individual.

d Year the law was adopted.

e As defined in the Internal Classification of Disease (ICD) manual and DSM.

f In California, severe mental illness is defined as (1) schizophrenia, (2)
schizoaffective disorder, (3) bipolar disorder (manic-depressive illness),
(4) major depressive disorders, (5) panic disorder, (6) obsessive compulsive
disorder, (7) pervasive developmental disorder or autism, (8) anorexia
nervosa, and (9) bulimia nervosa.

g In Colorado, biologically based mental illness is defined as (1)
schizophrenia, (2) schizoaffective disorder, (3) bipolar affective disorder,
(4) major depressive disorder, (5) specific obsessive compulsive disorder,
and (6) panic disorder.

h In Connecticut, mental and nervous conditions are defined as mental
disorders, as defined in the most recent edition of DSM, and include
alcoholism and drug addiction as defined by DSM.

i Serious mental illness means any of the following: (1) schizophrenia, (2)
bipolar disorder, (3) obsessive compulsive disorder, (4) major depressive
disorder, (5) panic disorder, (6) anorexia nervosa, (7) bulimia nervosa, (8)
schizoaffective disorder, and (9) delusional disorder.

j In the District of Columbia, mental illness is defined as any psychiatric
disease identified in the most recent edition of ICD or DSM. Alcohol abuse
and drug abuse are defined as any pattern of the pathological use of alcohol
or a drug that causes impairment in social or occupational functioning or
that produces physiological dependency as evidenced by physical tolerance or
by physical symptoms when it is withdrawn.

k As defined by DSM.

l In Hawaii, mental illness is defined as a syndrome of clinically
significant psychological, biological, or behavioral abnormalities that
results in personal distress or suffering, impairment of capacity for
functioning, or both.

m In Hawaii, serious mental illness is defined as (1) schizophrenia, (2)
schizoaffective disorder, and (3) bipolar mood disorder, as defined in the
most recent edition of DSM, that is severe enough to result in substantial
interference with the activities of daily living.

n The Illinois statute reads: "no policy of group accident and health
insurance delivered in this state which provides inpatient hospital coverage
for sickness shall exclude from such coverage the treatment of alcoholism."
No further specifications are provided.

o Indiana defines "coverage for services for mental illness" to include
benefits with respect to mental health services as defined by the contract,
policy, or plan for health services. However, the term does not include
services for the treatment of substance abuse or chemical dependency.

p In Kansas, nervous and mental conditions are defined as disorders
specified in DSM IV but not conditions not attributable to a mental disorder
that are a focus of attention or treatment.

q In Kentucky, mental illness is defined as psychosis, neurosis, or any
emotional disorder.

r In Louisiana, severe mental illness includes (1) schizophrenia or
schizoaffective disorder, (2) bipolar disorder, (3) pervasive developmental
disorder or autism, (4) panic disorder, (5) obsessive compulsive disorder,
(6) major depressive disorder, (7) anorexia and bulimia, (8) Asperger's
disorder, (9) intermittent explosive disorder, (10) posttraumatic stress
disorder, (11) psychosis not otherwise specified when diagnosed in a child
younger than 17 years old, (12) Rett syndrome, and (13) Tourette syndrome.

s In Maine, mental illness is defined as (1) schizophrenia, (2) bipolar
disorder, (3) pervasive developmental disorder or autism, (4) paranoia, (5)
panic disorder, (6) obsessive compulsive disorder, and (7) major depressive
disorder.

t Massachusetts defines mental and nervous conditions as they are defined by
APA's standard nomenclature.

u In Missouri, recognized mental illness is defined as conditions classified
as "mental disorders" in DSM but does not include mental retardation.
Chemical dependency is defined as the psychological or physiological
dependence on and abuse of drugs, including alcohol, characterized by drug
tolerance or withdrawal and impairment of social or occupational role
functioning or both.

v In Missouri, mental illness is defined as the following disorders in ICD:
(1) schizophrenic disorders and paranoid states (295 and 297, except 297.3);
(2) major depression, bipolar disorder, and other affective psychoses (296);
(3) obsessive compulsive disorder, posttraumatic stress disorder, and other
major anxiety disorders (300.0, 300.21, 300.22, 300.23, 300.3, and 309.81);
(4) early childhood psychoses and other disorders first diagnosed in
childhood or adolescence (299.8, 312.8, 313.81, and 314); (5) alcohol and
drug abuse (291, 292, 303, 304, and 305, except 305.1); (6) anorexia
nervosa, bulimia, and other severe eating disorders (307.1, 307.51, 307.52,
and 307.53); and (7) senile organic psychotic conditions (290).

w In Montana, severe mental illness is defined as the following disorders as
defined by APA: (1) schizophrenia, (2) schizoaffective disorder, (3) bipolar
disorder, (4) major depression, (5) panic disorder, (6) obsessive compulsive
disorder, and (7) autism.

x In Nebraska, serious mental illness before January 1, 2002, is defined as
(1) schizophrenia, (2) schizoaffective disorder, (3) delusional disorder,
(4) bipolar affective disorder, (5) major depression, and (6) obsessive
compulsive disorder. Serious mental illness on and after January 1, 2002, is
defined as any mental health condition that current medical science affirms
is caused by a biological disorder of the brain and that substantially
limits the life activities of the person with the serious mental illness.
Serious mental illness includes but is not limited to (1) schizophrenia, (2)
schizoaffective disorder, (3) delusional disorder, (4) bipolar affective
disorder, (5) major depression, and (6) obsessive compulsive disorder.

y In Nevada, severe mental illness is defined as any of the following mental
illnesses that are biologically based and for which diagnostic criteria are
listed in DSM IV: (1) schizophrenia, (2) schizoaffective disorder, (3)
bipolar disorder, (4) major depressive disorders, (5) panic disorder, and
(6) obsessive compulsive disorder.

z In New Hampshire, biologically based mental illnesses are defined as (1)
schizophrenia, (2) schizoaffective disorder, (3) major depressive disorder,
(4) bipolar disorder, (5) paranoia and other psychotic disorders, (6)
obsessive compulsive disorder, (7) panic disorder, and (8) pervasive
developmental disorder or autism.

aa In New Jersey, biologically based mental illnesses are defined as mental
or nervous conditions that are caused by a biological disorder of the brain
and that result in a clinically significant or psychological syndrome or
pattern that substantially limits the functioning of a person with an
illness including, but not limited to, (1) schizophrenia, (2)
schizoaffective disorder, (3) major depression, (4) bipolar disorder, (5)
paranoia and other psychotic disorders, (6) obsessive compulsive disorder,
(7) panic disorder, and (8) autism.

bb In New Mexico, mental health benefits means the mental health benefits
described in the group health plan or group health insurance offered in
connection with the plan but does not include substance abuse benefits or
gambling addiction.

cc In North Carolina, mental illness is defined as (1) an illness that, when
applied to adults, so lessens their capacity to use self-control, judgment,
and discretion in the conduct of their affairs and social relationships as
to make it necessary or advisable for them to be under treatment, care,
supervision, guidance, or control and (2) a mental condition, other than
mental retardation alone, that, when applied to minors, so impairs their
capacity to exercise age-adequate self-control or judgment in conducting
their activities and social relationships that they are in need of
treatment. North Carolina defines chemical dependency as the pathological
use or abuse of alcohol or other drugs in a manner or to a degree that
impairs personal, social, or occupational functioning and that may, but need
not, include a pattern of tolerance and withdrawal.

dd In Oklahoma, severe mental illness is defined as (1) schizophrenia, (2)
bipolar disorder, (3) major depression, (4) panic disorder, (5) obsessive
compulsive disorder, and (6) schizoaffective disorder as defined in the most
current edition of DSM.

ee In Oregon, chemical dependency is defined as an addictive relationship
with any drug or alcohol that is either physical or psychological or both
and that interferes recurringly with an individual's physical,
psychological, or social adjustment to common problems. Chemical dependency
does not include addiction to or dependency on tobacco, tobacco products, or
foods. The Oregon law does not provide a specific definition for mental or
nervous conditions.

ff In Rhode Island, serious mental illness is defined as any mental disorder
that current medical science affirms is caused by a biological disorder of
the brain and that substantially limits the life activities of a person with
the illness. The term includes but is not limited to (1) schizophrenia, (2)
schizoaffective disorder, (3) delusional disorder, (4) bipolar affective
disorders, (5) major depression, and (6) obsessive compulsive disorder.

gg In Rhode Island, substance dependency and substance abuse are a pattern
of pathological use of alcohol or other psychoactive drugs characterized by
impairments in social or occupational functioning, debilitating physical
condition, inability to abstain from or reduce consumption of the substance,
or the need for daily use of the substance for adequate functioning.

hh In South Carolina, psychiatric conditions are defined as mental and
nervous conditions, drug and substance addiction or abuse, alcoholism, or
other conditions that the most current edition of DSM defines, describes, or
classifies as psychiatric disorders or conditions.

ii In South Dakota, biologically based mental illness is defined as (1)
schizophrenia and other psychotic disorders, (2) bipolar disorder, (3) major
depression, and (4) obsessive compulsive disorder.

jj In Texas, biologically based mental illness is defined as a serious
mental illness that current medical science affirms is caused by a
physiological disorder of the brain that substantially limits the life
activities of the person afflicted with the illness and includes (1)
schizophrenia, (2) paranoid and other psychotic disorders, (3) bipolar
disorders (manic-depressive disorders), (4) major depressive disorders, and
(5) schizoaffective disorders.

kk In Texas, serious mental illness is defined as the following psychiatric
illnesses as defined by DSM: (1) schizophrenia, (2) paranoid and other
psychotic disorders, (3) bipolar disorders (hypomanic, manic, depressive,
and mixed), (4) major depressive disorders (single episode or recurrent),
(5) schizoaffective disorders (bipolar or depressive), (6) pervasive
developmental disorders, (7) obsessive compulsive disorder, and (8)
depression in childhood and adolescence.

ll In Texas, chemical dependency is defined as the abuse of or psychological
or physical dependence on or addiction to alcohol or a controlled substance.

mm In Vermont, mental health condition is defined as any condition or
disorder involving mental illness or alcohol or substance abuse that falls
under any of the diagnostic categories listed in the mental disorders
section of ICD as periodically revised.

nn In Virginia, biologically based mental illness is defined as any mental
or nervous condition caused by a biological disorder of the brain that
results in a clinically significant syndrome that substantially limits a
person's functioning. The following diagnoses are specifically defined as
biologically based mental illness as they apply to adults and children: (1)
schizophrenia, (2) schizoaffective disorder, (3) bipolar disorder, (4) major
depressive disorder, (5) panic disorder, (6) obsessive compulsive disorder,
(7) attention deficit hyperactivity disorder, (8) autism, and (9) drug and
alcoholism addiction.

oo In West Virginia, alcoholism is defined as a chronic disorder or illness
in which the individual is unable, for psychological or physical reasons or
both, to refrain from the frequent consumption of alcohol in quantities
sufficient to produce intoxication and, ultimately, injury to health and
effective functioning.

Source: Tracy Delaney, Overview of State Laws Affecting Coverage of Mental
Illness and Substance Abuse Treatment (Washington, D.C.: NCSL, Health Policy
Tracking Service, Mar. 1, 2000).

Comments From the Health Care Financing Administration

GAO Contact and Staff Acknowledgments

John Dicken, (202) 512-7043

JoAnne Bailey, Randy DiRosa, Mary Freeman, and Betty Kirksey made key
contributions to this report.

In addition, Dae Park provided statistical support, Richard Lipinski and
Elsie Picyk provided programming assistance, Mary Reich provided legal
review, and Susan Anthony and Mark Vinkenes assisted in the design and
development of the questionnaire.

(101843)

Table 1: State Laws Affecting Mental Health Benefits Compared
With the Federal Mental Health Parity Act of 1996 as of
March 2000 8

Table 2: Lifetime Dollar Limits for Noncompliant Employer Plans,
1999 12

Table 3: Compliant Employer Plans Reporting More Restrictive
Limits on Mental Health Benefits Than Medical and Surgical
Benefits, 1999 12

Table 4: Selected Design Features for a Typical Employer-Sponsored Group
Health Plan, 1999 13

Table 5: Employers' Plans That Have Further Restricted Mental
Health Benefits Since 1996 14

Table 6: Estimated Cost Increases for Full Parity in Mental Health
and Substance Abuse Benefits 17

Table 7: Selected Survey Sample and Response Data 26

Table 8: Mental Health Benefits Offered Now 29

Table 9: Mental Health Benefits Ever Offered Since December 1996 29

Table 10: Number of Lives Benefits Cover 30

Table 11: Plan Insurance 30

Table 12: Plan Type 30

Table 13: Administered by a Managed Behavioral Health Care
Company 31

Table 14: Financial Risk of Administering Organization 31

Table 15: Plan Design Features for Current Plan 32

Table 16: Current Plan in 1996 33

Table 17: Mental Health Benefits in Any Plan 33

Table 18: Plans Covering the Most Lives in December 1996 33

Table 19: Plan Design Features in December 1996 34

Table 20: Reasons for Benefit Changes After December 1996, Part 1 35

Table 21: Reasons for Benefit Changes After December 1996, Part 2 36

Table 22: Administered by a Managed Behavioral Health Care
Company in 1996 37

Table 23: Managed Care in Current Plan Compared With
December 1996 37

Table 24: Employees' Access to Benefits 37

Table 25: Employee Eligibility for Coverage 38

Table 26: Exemption Filed 38

Table 27: Reasons Exemption Not Filed 38

Table 28: Compliance and Claims Costs 39

Table 29: Claims Cost Increases 39

Table 30: State Laws Addressing Coverage of Mental Illness and
Substance Abuse as of March 1, 2000 41
  

1. The Mental Health Parity Act also generally applies to certain state and
local government health plans, church plans, and certain other health plans,
although self-funded state and local government health plans may elect
exemption from the act.

2. These states were Alabama, Alaska, Arizona, California, Florida, Idaho,
Illinois, Iowa, Kansas, Massachusetts, Michigan, Mississippi, Nevada, New
Mexico, New York, North Dakota, Ohio, Oregon, Pennsylvania, South Carolina,
Tennessee, Utah, Washington, West Virginia, Wisconsin, and Wyoming.

3. The survey was stratified by employer size so that the results are
weighted to be representative of small, medium-sized, and large employers'
relative size in the population rather than their response rate. Further,
large employers were more likely than small or medium-sized employers to
provide complete responses, allowing us to determine whether they complied
with the law.

4. An employer may provide group coverage to its employees either by
purchasing a group policy from an insurance carrier (fully insured coverage)
or by funding its own health plan (self-funded coverage) and assuming the
financial risk.

5. P.L. 104-204, title VII, 110 Stat. 2847, 2944-50 (to be classified at 29
U.S.C. 1185a and 42 U.S.C. 300gg-5).

6. Provisions implementing the Mental Health Parity Act were later added to
the Internal Revenue Code of 1986 under the Taxpayer Relief Act of 1997.

7. The law also provides that in the case of a plan under which annual or
lifetime dollar limits differ for categories of medical and surgical
benefits, the plan may comply by calculating a weighted average annual or
lifetime dollar limit for mental health benefits based on a formula
specified by the secretary of Labor.

8. Tracy Delaney, Overview of State Laws Affecting Coverage of Mental
Illness and Substance Abuse Treatment (Washington, D.C.: NCSL , Health
Policy Tracking Service, Mar. 1, 2000).

9. A smaller number of state laws also apply to coverage sold in the
individual insurance market.

10. ERISA allows employers to offer uniform national health benefits by
preempting states from directly regulating employer-sponsored benefit plans.
As a result, states are unable to directly regulate self-funded plans but
can regulate health insurers. Under ERISA, Labor is responsible for ensuring
that employer-sponsored group health plans meet certain fiduciary,
reporting, disclosure, and appeal requirements related to the provision of
health benefits.

11. HCFA is also responsible for enforcing the parity standards on state and
local government health plans.

12. The Department of the Treasury also enforces the requirements for
generally all nongovernmental group health plans, including church plans, by
imposing an excise tax under the Internal Revenue Code as a penalty for
noncompliance.

13. This federal and state regulatory scheme applies to other federal health
insurance standards, including those established under the Health Insurance
Portability and Accountability Act of 1996, the Newborns' and Mothers'
Health Protection Act of 1996, and the Women's Health and Cancer Rights Act
of 1998. To facilitate coordination of their shared oversight
responsibilities, HHS, Labor, and the Department of the Treasury entered
into a memorandum of understanding effective April 21, 1999. See 64 Fed.
Reg. 70,164 (Dec. 15, 1999).

14. The compliance rate excludes employers that did not know their plan's
annual or lifetime dollar limits or did not respond to the question. We
could not determine compliance for 21 percent of employers in 1999 because
their responses did not provide complete information. We were less likely to
know the compliance for small employers than medium-sized and large
employers.

15. Our survey results did not find significant differences in the rate of
employer noncompliance based on characteristics such as employer size,
industry, or geographic region or whether the plan was fully insured or
self-funded.

16. Respondent uncertainty and item nonresponse prevented us from
determining parity for 51 percent of employers in 1996. We were less likely
to determine parity for both small employers and those in the South compared
with employers of other sizes and in other areas of the country.

17. As of December 1999, noncompliant plans did not differ significantly
from compliant plans, with about 93 percent (ï¿½ 5.5 percent) of noncompliant
plans also containing at least one such restriction.

18. HHS, Mental Health: A Report of the Surgeon General (Washington, D.C.:
Substance Abuse and Mental Health Services Administration, Center for Mental
Health Services, National Institutes of Health, National Institute of Mental
Health, 1999).

19. The National Advisory Mental Health Council is a congressional advisory
council made up of the National Institutes of Health and the National
Institute of Mental Health within HHS.

20. Kristen Reasoner Apgar, Report to the Office of Personnel Management:
Large Employer Experiences and Best Practices in Design, Administration, and
Evaluation of Mental Health and Substance Abuse Benefits--A Look at Parity
in Employer-Sponsored Health Benefit Programs (Washington, D.C.: Washington
Business Group on Health, Mar. 2000).

21. The act allows an exemption for group plans that experience an increase
in health benefit costs of 1 percent or more because of compliance with the
law's requirements. Federal agencies estimated that as many as 10 percent of
health plans affected by the law, or 30,000 health plans, could be eligible
for the exemption. However, as of March 2000, Labor officials reported that
only nine employers nationally had claimed an exemption.

22. Coopers and Lybrand, "An Actuarial Analysis of S. 2031, `The Mental
Health Parity Act of 1996,'" n.p., Sept. 1996.

23. The Health Insurance Portability and Accountability Act of 1996, the
Newborns' and Mothers' Health Protection Act of 1996, and the Women's Health
and Cancer Rights Act of 1998.

24. For additional information on Labor's initiatives, see Private Health
Insurance: Progress and Challenges in Implementing 1996 Federal Standards
(GAO/HEHS-99-100, May 12, 1999) and Health Insurance Standards: New Federal
Law Creates Challenges for Consumers, Insurers, Regulators (GAO/HEHS-98-67,
Feb. 25, 1998).

25. 65 Fed. Reg. 18,208 (Apr. 6, 2000).

26. The number of plans that Labor reviewed is larger than the number of
employers reviewed because the employers could offer more than one health
plan with mental health benefits.

27. For additional information on HCFA's activities, see Implementation of
HIPAA: Progress Slow in Enforcing Federal Standards in Nonconforming State
(GAO/HEHS-00-85, Mar. 31, 2000), (GAO/HEHS-99-100), (GAO/HEHS-98-67), and
Private Health Insurance: HCFA Cautious in Enforcing Federal HIPAA Standards
in States Lacking Conforming Laws (GAO/HEHS-98-217R, July 22, 1998).

28. 64 Fed. Reg. 45,786 (45 C.F.R. pt. 144, 146, 148, and 150).

29. Our survey results are based on responses from surveys sent to employers
in the District of Columbia and the following 26 states: Alabama, Alaska,
Arizona, California, Florida, Idaho, Illinois, Iowa, Kansas, Massachusetts,
Michigan, Mississippi, Nevada, New Mexico, New York, North Dakota, Ohio,
Oregon, Pennsylvania, South Carolina, Tennessee, Utah, Washington, West
Virginia, Wisconsin, and Wyoming. The initial sample also included Kentucky
and Louisiana, but these states were later removed from the sample after
further review of state laws.

30. As of April 2000, 530 self-insured state and local government plans had
filed for an exemption from the federal parity standards.

31. We included only single-site firms and the headquarters offices of
multisite businesses in the survey. We drew our population and sample from
Dun and Bradstreet's database of 11 million U.S. businesses, a source
commonly used for employer surveys.

32. About 126 employers provided summary plan descriptions that we
abstracted in order to complete the questionnaire, as applicable.

33. Statistical significance was measured at the 95 percent confidence level
(p< .05), which means that the probability of detecting a difference between
subgroups where none exists is no greater than 5 percent.
*** End of document. ***