Guest Article

(From the February 19, 2007 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

Health Issues on Congressional Agenda -- Committees Act on Genetic Nondiscrimination and Mental Health Parity Bills; Chairman Baucus Outlines Plans for Comprehensive Changes

Congressional health committees in both the Senate and the House of Representatives have begun work at a brisk pace. Chairs of both Senate committees with jurisdiction on health issues have weighed in on their health care priorities for the 110th Congress, as expected. And legislation is moving forward.

Genetic Information Nondiscrimination Bills Reported in House & Senate

Already the health committees in both the House (H.R. 493) and the Senate (S. 358) have reported bills on genetic information nondiscrimination. These bills would bar genetic discrimination in employment and would prohibit employers from using individuals' genetic information when making hiring, firing, job placement or promotion decisions. The bills would also make it illegal for group health plans and health insurers to deny coverage to healthy individuals or charge them higher premiums based solely on a genetic predisposition to a specific disease. President Bush has voiced his support for measures to prevent genetic discrimination. However, both bills must be enacted by their respective full bodies and then any differences between the two bills must be reconciled.

Mental Health Parity -- HELP Committee Acts Quickly

Chairman Ted Kennedy (D-MA) and the Ranking Minority Member, Mike Enzi (R-WY) were joined by Senator Pete Domenici (R-NM), a long time advocate of mental health benefits in designing and introducing a bill to both expand coverage of mental health benefits and make the law enacting those benefits permanent. That bill, the Mental Health Parity Act of 2007 (S. 588), passed the committee on February 14 by a vote of 18-3.

While federal law has never mandated mental health benefit coverage, since 1996 the Mental Health Parity Act (MHPA) has required some form of parity for employer-provided mental health benefits, if such benefits are offered by ERISA covered health plans. But these MHPA laws have always had an expiration date. And each time the expiration date grew near, Congress extended the MHPA -- but only after creating considerable uncertainty for employers, plan participants and mental health providers. The principles of this 110th Congress's S. 588 have been under negotiation for more than a year among members of Congress, mental health, insurance and business organizations to craft compromise legislation. Among the sticking points has always been the definition of mental illness, which would in fact determine the scope of the benefit required.

S. 588 would establish permanent requirements for the parity of mental health benefits, although the bill does not mandate group plans to provide any mental health coverage. Rather, like previous versions of mental health parity acts, the bill requires health insurance plans that offer mental health coverage to provide that coverage on par with the financial and treatment coverage offered for physical illnesses provided under the plan. The Committee described the provisions of the bill as summarized below.

Summary of Senate HELP Committee's Mental Health Parity Act of 2007

Under the bill "Mental Health Benefits" are defined to mean benefits with respect to mental health services (including substance abuse treatment) as defined under the terms of the plan or coverage, and when applicable, as may be defined under State law to health insurance coverage offered in connection with a group health plan. The following paragraphs are a based on the HELP Committee's summary of the MHPA bill and on questions and answers provided by the Committee.

Mental Health Plan Requirements

For those plans offering mental health coverage, the plan or coverage must ensure that the financial requirements applied to mental health benefits are no more restrictive than the financial requirements applied to substantially all medical and surgical benefits that the plan covers. Such financial requirements include deductibles, co-payments, coinsurance, out-of-pocket expenses, and annual and lifetime limits. The plan may not establish separate cost sharing requirements that are only applicable to mental health benefits.

The plan or coverage must also ensure that the treatment limitations applied to such benefits are no more restrictive than the treatment limitations applied to substantially all medical and surgical benefits that the plan covers. Such treatment limitations include limits on the frequency of treatment, number of visits, days of coverage, or other similar limits on the scope and duration of treatment.

What the Bill Would NOT Prevent

The bill would not prohibit group health plans from negotiating separate reimbursement or provider payment rates, or managing the provision of mental benefits in order to provide medically necessary treatments under the plan (as a means to contain costs and monitor and improve the quality of care). This statute would not prohibit group health plans from taking into consideration similar treatment settings or similar treatments when applying the provisions of this statute.

The bill would not require group health plans to provide out-of-network coverage for mental health benefits, but if a group health plan does provide both medical and surgical benefits and mental health benefits (including substance abuse treatment), and provides such benefits on both an in- and out-of- network basis pursuant to the terms of the plan (or coverage), then the plan must ensure that the requirements of this section are applied to both in- and out-of-network services by comparing in-network medical and surgical benefits to in-network mental health benefits and out-of-network medical and surgical benefits to out-of-network mental health benefits.

Scope of Coverage -- Small Business and Individual Market Exemption

The mental health parity requirements would apply to group health plans with 50 or more employees. It would not apply to employers with less than 50 employees who are exempt from this Act, nor would it affect the individual insurance market.

Cost Exemption

Plans may elect to be exempt from the parity requirement if the health plan's are projected to experience increased actual total costs of coverage under the plan that exceed two percent of the actual total plan costs during the first plan year or exceed one percent of the actual total plan costs each subsequent year. The cost exemption would apply for the next plan year following determination that the cost threshold will be exceeded.

Effect on State Mental Health Parity Laws

At the State level, mental health parity standards regarding financial requirements and treatment limitations would be preempted. The bill would not preempt state laws mandating that mental health benefits be covered. States that elect (through statute or regulation) to adopt the federal standards would not be subject to preemption.

Administration

The U.S. Department of Labor would conduct oversight and administration of the MHPA for self funded ERISA plans; the Department of Health and Human Services would have this responsibility for insured plans.

Effective Date

The requirements of the bill would be effective in the first plan year that begins on or after January 1 of the first calendar year that begins more than one year after the date of the enactment of the MHPA.

Mental Health Parity Act of 2007 -- Q & A

The follow questions and answers were provided by the HELP Committee.

Q: Who does the bill affect?

A: Anyone who has group health insurance through their employer, if their employer has more than 50 employees. That's roughly 113 million Americans.

Q: What does the bill do?

A: This bill requires insurance companies and employers offering mental health coverage to provide parity between mental health and physical health coverage, meaning that they must treat the two benefits similarly to each other. They can't establish different financial requirements for mental health, such as deductibles, co-pays, annual and lifetime limits, etc. Plans can also not create different treatment limitations such as day and visit limits for mental health, meaning that the treatment they cover for mental health should be on par with what you would receive for physical health care.

Q: Does it mandate or require a plan to offer mental health coverage?

A: No. It simply requires a plan that offers mental health coverage to treat that coverage in a similar way to its physical health coverage.

Q: Will it take away my state mandated mental health coverage?

A: No. State laws requiring plans to provide mental health coverage will remain in effect. The primary difference is that these plans will now have to treat your mental health coverage the same as physical health coverage under the federal parity guidelines that address financial requirements such as co-pays, and treatment limitations such as day and visit limits.

Q: What happens if my state's laws outline specific mental health treatment limitations?

A: This bill would not affect the state's basic mandate of mental health coverage, but it would take the place of any specific day or visit limits that your state might currently mandate.

Q: Are small businesses required to comply with the parity rule?

A: No, businesses of 50 or fewer employees do not have to offer plans with parity under this bill, but they'll still be required to follow state regulations that apply to them.

Q: Will the parity requirement result in a cost to employers?

A: Past Congressional Budget Office scoring of mental health parity has shown a less than one percent increase in cost to employers.

Q: Can companies and insurance providers opt out of providing parity?

A: Yes, but only if they can show that their actual costs for providing parity increased their overall cost by two percent over the course of the first year parity is in effect, or one percent for subsequent years. If so, they may choose to opt out for one year, but must comply with the parity requirements the next year.

Q: What happens if my insurance doesn't comply?

A: If your plan does not offer the parity required by law, the first recourse is through your state's Department of Insurance or other agency handling insurance matters in the state. If the state fails to enforce the law, you can appeal to the U.S. Department of Health and Human Services, which can charge the health insurance issuer a civil monetary penalty fee of up to $100 per day per violation for each individual affected. The U.S. Department of the Treasury is also authorized to penalize employers with an excise tax of up to $100 per day per violation for each individual affected. The U.S. Department of Labor can also enforce compliance in group health plans. Finally, if none of the above appeals have resolved your dispute, you can also bring a claim against the plan issuer through the federal courts to get them to do what was required under law.

Q: Will the states all enforce parity in the same way?

A: Yes. Each state is required to enact the federal parity standard, or change their state law to mirror the federal standard. This ensures uniformity in how the states enforce the parity requirements.

Q: Will my out of network mental health coverage be protected by parity?

A: Yes, the bill requires that plans which offer out of network mental health coverage provide parity for that coverage, so that out of network mental health coverage is treated the same as out of network physical health coverage. However, the bill does not require that a plan offer out of network mental health coverage, even if the plan does offer out of network coverage for physical health.

Q: Is substance abuse treatment included in the bill?

A: Yes, plans that cover substance abuse will be required to provide parity, but the bill does not mandate that plans offer any substance abuse coverage.

Q: Does it affect my coverage under Medicare or Medicaid?

A: Yes and no. Medicare is not affected. Medicaid managed care, SCHIP, and some state and local health plans are affected.

Q: Will the group health plan issuer be required to notify me of any changes to my mental health coverage?

A: Yes, the bill requires that plans notify enrollees of any changes in their mental health coverage.

Q: When does the federal parity requirement go into effect?

A: The parity requirement will take effect on the first plan year of your coverage that begins at least one calendar year after the President signs the bill into law.

HELP Committee's National Mental Health Fact Sheet

The Committee also released the following data on mental health in the U.S.

An estimated 26.2 % of Americans ages 18 and older -- about one in four adults -- suffer from a diagnosable mental disorder in a given year. When applied to the 2004 U.S. Census residential population estimate for ages 18 and older, this figure translates to 57.7 million people.

Finance Committee Chair Baucus Outlines Views for Health Care Changes

In a speech to the National Health Policy Conference this week, Senator Max Baucus (D-MT), the new Chairman of the Senate Finance Committee, outlined his view of needed health care changes that his Committee would undertake. He opened his remarks, saying, "The season for a real debate on health care reform is coming. And it is long overdue. My job as Chairman of the Finance Committee is to prepare Congress for this season of reform."

In his view, while the U.S. has many of the world's best doctors and hospitals, the U.S. medical system is still out of reach for 47 million Americans. According to Chairman Baucus, "...too many people across the country tell me that they have difficulty getting or paying for health care." Business leaders believe "health-care costs are impeding their ability to compete." About one quarter of American health-care dollars -- about $400 billion -- is spent on non-medical costs, most of which is paperwork.

Chairman Baucus listed five areas of reform that he plans to address: universal coverage, creating and supporting purchasing pools to share the burden of coverage, controlling costs, prevention, and shared responsibility. In discussing these areas for reform he stressed the following points.

The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations. If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact: Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Taina Edlund 202.879.4956, Laura Edwards 202.879.4981, Mike Haberman 202.879.4963, Stephen LaGarde 202.879-5608, Erinn Madden 202.572.7677, Bart Massey 202.220.2104, Laura Morrison 202.879-5653, Martha Priddy Patterson 202.879.5634, Tom Pevarnik 202.879.5314, Tom Veal 312.946.2595, Deborah Walker 202.879.4955. Copyright 2007, Deloitte.