HEALTH

Mental Health Parity Rules for Health Insurance

Mental health issues are problems with the mind or emotions. They can be treated with counseling, medications, and other therapies. This is a detailed beginner’s guide.

Mental health parity refers to rules preventing health insurance plans from having more restrictive requirements for mental health benefits than medical and surgical benefits.

This article will discuss how mental health parity rules have evolved over the years to make mental health care and substance abuse treatment more accessible. But there are still gaps in coverage.

History of Mental Health Parity

The first mental health parity rules took effect in 1998 under the Mental Health Parity Act (MHPA). This law, signed by President Bill Clinton in 1996, prohibited large-group (employer-sponsored) health plans from having lower dollar caps (the maximum they would pay) for mental health benefits than medical or surgical benefits.

But the MHPA did not require mental health care coverage, so that group health plans could skip that benefit altogether.

Group plans offering mental health benefits could get around the MHPA by imposing limits on how many mental health visits they would cover or how many days a member could have coverage for inpatient mental health care. (This was allowed under the MHPA because visit/day limits differ from dollar limits on benefits.)

Mental Health Parity and Addiction Equity Act of 2008

It was clear that additional legislation was necessary. That came with the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA).

This legislation was initially introduced as a standalone bill.1 It was ultimately included as a rider on the Troubled Asset Relief Program legislation, signed into law by President George W. Bush in 2008.

The MHPAEA still did not require group health plans to provide mental health benefits and did not apply to individual/family (self-purchased) health insurance. But for, group health plans did build upon the original Mental Health Parity Act in several ways.

Under the MHPAEA, mental health parity rules were expanded to include coverage for the treatment of substance use disorders. And the overall parity rules were expanded to include cost-sharing and treatment limits, as opposed to just an overall dollar cap on benefits.

Once the MHPAEA took effect, group health plans couldn’t impose higher deductibles, co-pays, or coinsurance for mental health or substance use treatment than they imposed for medical/surgical benefits.

A deductible is how much you have to pay for a service before your health plan starts to cover your expenses. A co-pay is a set amount you pay for a service. Coinsurance is a percentage of the cost you must pay for a service while the insurance covers the rest.

The plans cannot impose separate cost-sharing that only applies to mental health and substance use treatment—for example, a project cannot have a separate deductible for mental health benefits. Plans also can’t impose more restrictive limits on the number of visits or days of coverage that could be provided for mental health or substance use treatment (treatment limits).

The MHPAEA further ensures that if a group health plan includes coverage for out-of-network care (assuming it does include coverage for mental health and substance use treatment), it has to include out-of-network coverage for mental health and substance use treatment.

Out-of-network care means using a provider with no contract with your health insurer to provide services at their negotiated rates.

As of 2016, MHPAEA rules also apply to Medicaid-managed care and Children’s Health Insurance Program (CHIP) plans.

Although the MHPAEA helped improve access to mental health and substance use coverage, there were some significant gaps. For example, the legislation did not apply to small groups or individual/family plans that people purchased independently.

And if a large-group plan experienced an increase in costs due to compliance with the mental health parity rules, the project could seek an exemption from compliance for the following year.

It’s important to understand that while the MHPAEA did impose significant new parity rules, it still did not require any health plans to provide coverage for mental health or substance use treatment.

Mental Health Parity and the Affordable Care Act

Under the MHPA and MHPAEA, group health insurance plans were not required to cover mental health care, and mental health parity rules did not apply to small-group or individual/family plans.

But the Affordable Care Act (ACA) significantly improved access to mental health and substance use care. It was signed into law in 2010 by President Barack Obama, and its major provisions went into effect in 2014.

The ACA extended the MHPAEA’s parity rules to the individual/family market as of 2014. That means self-purchased plans can’t impose stricter rules, including coverage limits and prior authorization requirements (which allow the insurance company to approve treatment before you get it), for mental health/substance use coverage than they do for medical/surgical benefits. They also can’t impose higher cost-sharing for those services.

Under the ACA, all individual/family and small-group health plans with effective dates of 2014 or later must cover ten essential health benefits.

Mental health/substance use care is one of the essential health benefits. It has to be covered by new individual and small-group plans nationwide, regardless of whether they’re sold in the health insurance exchange or outside the business.

Public health insurance exchanges are used to compare and buy individual and family health insurance plans that comply with the ACA.

Each state sets guidelines for what has to be covered under each essential health benefit category. So specific benefit rules do vary from one state to another.

But there are no longer any individual/family plans that do not cover mental health care or substance use care unless they’re grandfathered (in effect before 2010) or grandmother (in effect between 2010 and 2014).

Before the ACA, more than one-third of people with individual/family health plans had no coverage for substance use treatment, and nearly one in five had no mental health benefits.6 Even among programs that included a range of mental health and substance use care, there were no parity requirements or minimum coverage levels before the ACA.

The essential health benefit rules also extend to the small-group health insurance market. In most states, “small group” means businesses with up to 50 employees, although there are a few states where the small-group market includes companies with up to 100 employees.

When small businesses purchase health coverage for their employees, it must include coverage for the essential health benefits, including mental health/substance use care.

Ongoing Gaps in Mental Health Coverage

The MHPA, MHPAEA, and ACA have substantially improved access to mental health coverage. But there are still people who struggle to access mental health and substance use treatment, even on plans that are regulated under mental health parity laws.

Large-group and self-insured health plans are not required to cover the ACA’s essential health benefits. Therefore, while these plans have to follow parity rules if they offer mental health/substance abuse benefits, they are not required to offer them at all.

Most large-group and self-insured plans tend to be robust and offer coverage for the essential health benefits. However, an employer’s health plans are an important part of recruiting and retaining employees, and large businesses often compete with one another in offering high-quality health benefits.

But no federal rules require those plans to include mental health or substance use benefits. However, states can require large-group plans to have mental health/substance use care coverage, but only if the project is fully insured.

With fully-insured plans, the employer purchases the plan through a commercial insurance company that handles the risk, while with self-insured plans, the employer runs the health plan and assumes financial risk.

Most huge employers opt to self-fund (pay employee health claims from their funds rather than buy employee insurance), and self-funded plans are regulated under ERISA (federal law) rather than state laws.

Large groups that self-fund can also opt out of MHPAEA altogether. Again, most self-funded large group health plans tend to be robust, but some are not, particularly in industries with high turnover and low wages.

Mental health parity rules also do not apply to coverage such as:

  • Short-term health insurance: Plans that are not ACA-compliant but can be purchased as temporary coverage
  • Fixed indemnity coverage: Plans that pay a set amount of money based on the medical service given, regardless of the cost of the care.
  • Healthcare sharing ministry plans: Programs where people with a common faith pay monthly to cover the members’ health care costs.


These plans are not regulated by the ACA or the mental health parity rules, meaning they have no specific coverage or parity requirements.

There are also access issues, even on health plans that do cover mental health and substance use treatment. For example, mental health professionals are more likely than other specialties not to accept health insurance. And provider networks—the number of doctors and medical facilities available under the plan—tend to be smaller for mental health care than other types of medical care.

Summary

For more than a quarter of a century, various mental health parity rules have applied to at least some health plans in the United States. And over time, these provisions have increasingly targeted some of the worst gaps in coverage that previously prevented people from obtaining mental health and substance use treatment.

The Mental Health Parity Act took effect in the late 1990s but didn’t make a substantial difference in the health benefits that most people had. The Mental Health Parity and Addiction Equity Act of 2008 imposed stricter rules and expanded mental health coverage to include substance use treatment—but there was still no requirement that mental health care is covered on health plans.

The Affordable Care Act further strengthened the rules as of 2014, requiring coverage for mental health/substance use treatment on all new individual and small group plans, with parity rules in place.

Still, millions of Americans don’t have access to affordable mental health or substance use treatment. Some are uninsured, and others have coverage under health plans that don’t cover mental health care or don’t adequately comply with mental health parity rules.

A Word From Verywell

If you have health coverage in the United States, you likely have mental health and substance use treatment coverage. And although coverage specifics vary significantly from one plan to another, various rules have been put in place over the last couple of decades to ensure that mental health benefits are covered the same as medical/surgical benefits.

If you feel your plan isn’t following mental health parity rules, you can contact your state’s insurance department. If your goal is regulated under state law, the staff may be able to assist you.

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