Agreement is in Place on Mental Illness Insurance Parity
August 7, 2008
Separate mental health insurance parity bills have passed the Senate (on September 18, 2007) and the House (on March 5, 2008) by wide bipartisan margins. The bills (S 558 and HR 1424) were never far apart on substance, and in the end negotiations centered on narrow issues such as parity in out-of-network coverage and notice to plan enrollees in cases where a group health plan seeks a temporary exemption from the parity requirement.
The major provisions in the legislation were nearly identical in both bills and are preserved in the agreement:
- Equity for mental illness and substance abuse coverage with respect to numerical limits on inpatient and outpatient services – no more arbitrary limits on inpatient and outpatient coverage that do not also apply to medical-surgical coverage,
- Equity for mental illness and substance abuse coverage with respect to financial limitations – a ban on higher cost sharing, deductibles and out-of-pocket limits that do not also apply to medical-surgical coverage, and
- A parity standard in the federal ERISA law thereby covering the 82 million Americans in ERISA self-insured group health plans (with 50 employees or more) that are exempt from complying with the 42 state parity laws.
The agreement follows the Senate bill with respect to the definition of mental health and substance abuse benefits, deferring to group health plans to define mental health and substance abuse benefits. This excludes the "triggered" coverage mandate for the DSM in the House bill that would have preempted state mandates for covering serious mental illnesses. Likewise, the House-Senate agreement follows current law (known as HIPAA) with respect to federal preemption of state law. This means that "stronger" state laws on parity and mandated benefits will NOT be preempted and states will be able to enforce higher standards.
The remaining issue to be resolved is the budget "pay-fors" to offset the cost of the legislation. Budget rules in Congress require any increase in mandatory spending to be "offset" by a decrease of the same amount in some other category.
How is mental illness insurance parity an increase in federal spending?
The Congressional Budget Office (CBO) projects that enhanced coverage for mental illness and substance abuse treatment will result in insurance premiums increasing (on average) a miniscule 0.4%. This will in turn result in lost revenue to the Treasury as employer paid insurance premiums are not counted as taxable income. In addition, certain health care expenditures that are now excluded from coverage (e.g., because mental illness coverage is unfairly capped or limited) are now paid for with after tax dollars. With parity level coverage (and no arbitrary numerical limits on inpatient days or outpatient visits), many of these expenditures will no longer be counted as taxable income.
In addition, the bill would require private health plans that contract with Medicaid and SCHIP to meet a standard of parity, thereby increasing spending for these programs. The amount of the lost revenue and spending is relatively small in the scope of the overall federal budget -- $1.1 billion over 5 years and $3.2 billion over 10 years. Nonetheless, a corresponding "offset" in a separate mandatory program (e.g., Medicare or the tax code) must be found to make enactment of parity budget neutral. Time is of the essence as the window for final action on parity in 2008 narrows as the presidential campaign looms.
The sponsors of the parity bill – Senators Domenici, Kennedy and Enzi and Representatives Kennedy and Ramstad – are also working to find a legislative vehicle that will allow the parity bill to go to the President with assurances that it will be signed in to law. President Bush is on record in support of a federal parity bill and signed the Texas parity law back in 1997. Thus the issue is not a veto of parity legislation itself, but rather, whether and how to attach it to a separate "must pass" legislative vehicle that will be moving through Congress to the President in September.
Finally, it should be noted that two of the bill’s primary sponsors – Senator Domenici and Representative Ramstad – are retiring from Congress at the end of the year, making action in September extremely time sensitive.
For more information, please contact Andrew Sperling on the NAMI National Staff (email@example.com).