Employers Begin Assessing Effect of New Mental Health, Maternity Stay Mandates

From the Employer's Health Benefits Bulletin, Thompson Publishing Group
Employers Begin Assessing Effect of New Mental Health, Maternity Stay Mandates

Summary: As members of Congress left Washington, D.C., Oct. 4, to begin campaigning for the November elections, employers began to consider the effect that two new health benefit "mandates" enacted into law will have on plan administration: mental health "parity" and minimum maternity stays.
(Oct. 25, 1996) Buoyed by the favorable image conveyed by the August enactment of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), Congress used the remaining weeks before its Oct. 4 adjournment to enact legislation that mandates mental health "parity" and minimum maternity stays. The provisions were added to an $84.7 billion appropriations bill to fund the federal offices of Veterans Affairs-Housing and Urban Development in fiscal 1997 (H.R. 3666), signed into law by President Clinton on Sept. 26. The law will become effective for plan years beginning on or after Jan. 1, 1998.
The mental health and maternity stay mandates represent an unwelcome intrusion of the federal government into medical decision-making, say employee advocacy groups.
Mark Ugoretz, president of the ERISA Industry Committee (ERIC), said the medical community, by lobbying for the law, has exposed itself to interference from "big brother."
"This sets an unfortunate precedent that could be harmful to consumers and employers," he said. "The government will define what constitutes an appropriate level of care rather than the physicians, and the practice of medicine will become subject to whoever is able to win in an intensive lobbying campaign."

Controversial Mental Health Mandate Modified
The Senate had unsuccessfully tried to include a mental health parity provision, sponsored by Sens. Pete Domenici, R-N.M., and Paul Wellstone, D-Minn., in the new HIPAA enacted in August. Under that provision, which was dropped from the final version of the legislation, health plans would have been required to provide the same level of benefits for mental illness as they provide for physical conditions.
On Sept. 5, Domenici sponsored a modified provision, entitled the "Mental Health Parity Act of 1996," as an amendment to the VA-HUD appropriations bill. Businesses with 50 employees or more that already offer mental health benefits will be subject to the act, which establishes the following rules.

Plans with annual and lifetime limits on medical benefits may not have lower limits on mental health benefits. A plan may achieve this one of two ways: set the same benefits level for both mental and health benefits; or bring the mental health benefits under the health benefits cap, as long as they cannot be distinguished in any way from the health benefits.

No limits can be placed on mental health benefits if there are none on medical benefits.

If a plan offers two or more mental benefit options, the maximum level of benefits apply to each option. For example, if the medical lifetime limit is $1 million and there are two mental health benefit options (Option A with a lifetime limit of $500,000 and Option B with a lifetime limit of $250,000) the maximum benefits levels for each option must be raised to $1 million.

Treatment for substance abuse and chemical dependency is excluded from the law.

Plan terms and conditions on the amount, duration or scope of mental health benefits are not affected. Therefore, plans still have the ability to include cost-sharing, limits on visits or days of coverage or medical necessity requirements.

Control group rules apply in determining employer size for the small-employer exemption.

Plans are exempt from the act if the rules result in at least a 1 percent increase in mental health benefit costs under the plan. The provisions take effect Jan. 1, 1998, and expire (or "sunset") Sept. 30, 2001.
Administrative Implications of Mental Health Parity Rule
Because of this new law, employers will have to amend plan documents and summary plan descriptions (SPDs), and send out disclosures on plan changes. In addition, wellness plans may be affected by these requirements.
Employers should determine how they wish to approach the new rules. For example, employers that wish to comply with the mandate should determine the kinds of limits they want to impose, or whether they should raise or lower their overall caps. On the other hand, employers that want to avoid the mandate should determine whether they want to retain mental health benefits, how they can take advantage of the 1-percent rule and if they can use alternative designs for mental health benefits.
"The increase in costs will force many employers to redesign their plans," Ugoretz said. "Some may have to drop mental health care and some may have to put it under increased managed care."
"Employers with limited budgets select the best mix of services," said Daniel Glucksman, spokesman for the National Employee Benefits Institute. "This system is essential, and when you get mandates, employers have to cut existing services to comply."

Maternity Stay Provision Added
Under the Newborns' and Mothers' Health Protection Act of 1996, plans that have maternity benefits would be required to provide a 48-hour hospital stay for new mothers who have vaginal births and a 96-hour (four day) stay for mothers who have cesarean sections. The act also establishes the following rules.

The mother and newborn may not be denied eligibility or continued eligibility to enroll or renew coverage under plan terms solely to avoid the maternity requirements.

Plans may not offer financial incentives to encourage mothers to accept shorter hospital stays.

Plans may not penalize or otherwise limit reimbursements to attending providers for complying with the maternity provisions.

Plans may not provide financial incentives to encourage attending providers to shorten hospital stays.

During the protected maternity period, plans may not restrict benefits in any way that would be less favorable than the coverage available prior to the hospital stay.
"This is the first specific benefit mandate at the federal level, and it sets a bad precedent," said Heidi Kendall, deputy director of health policy for the Association of Private Pension and Welfare Plans. "There is no evidence that 48 hours is a magic number...there are conditions that affect a baby that manifest themselves after 48 hours."
Kendall said that, although many OB-GYNs will feel less restrained by the new ruling because many women leave the hospital before 48 hours, other benefits will have to be cut.
"The most common reason for hospitalization is childbirth," she said. "That's a large base you're adding costs to."

Administrative Implications of Maternity Stay Rule
Sponsors of plans that provide maternity coverage have new responsibilities for benefits and employee communications. For plan sponsors that want to provide the coverage:

those with insured plans will need to compare federal and state requirements to determine which law prevails;

plan documents, particularly SPDs, will need to be reviewed to determine what changes, if any, are necessary; and

any changes will have to be disclosed.

Due to the delayed effective date, much of this can be accomplished during regular updating and disclosure upon the start of a plan year without significant additional work or cost. The key will be making sure the maternity benefits changes are noted. Also, plan sponsors may want to re-evaluate their deductibles, copays, etc.
It is not clear, but the statutory language suggests that states may impose other requirements if the minimum federal requirements are met. Therefore, multi-state insured plans could be subject to several different state maternity laws. About half of the states have such laws.
Plan sponsors will have to decide whether to adopt the strictest requirements for all plan participants, or adopt different benefit coverages to meet the respective state requirements. They may also need to evaluate whether they want to be insured or self-insured under the new statutory schemes.

Excerpted from the October 1996 supplement to the Employer's Health Benefits Bulletin, ©Thompson Publishing Group, 1996. All rights reserved.