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July 30, 2009 | Volume 3 | Number 7
July 30, 2009
By Ronald E. Bachman, FSA, MAAA and APA Practice Organization Staff
Click here to download this FAQ article and the accompanying employers guide as a PDF.
The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (Wellstone-Domenici Parity Act) is a federal law that requires private health insurance plans to provide equal coverage for mental and physical health. It was signed into law on October 3, 2008 by President Bush. The law is intended to improve access to appropriate treatment for people suffering from mental health disorders and extend equal coverage to all aspects of health insurance plans.
The law applies to organizations and companies with group health plans for more than 50 employees. It preserves existing state parity and consumer protection laws while extending protection of mental health services to those not protected by state laws.
Parity means equal coverage for mental health and substance use and physical health conditions covered under health plans. The Wellstone-Domenici Parity Act provides the following:
Equal benefits: Benefits coverage for mental health and substance use benefits must be at least equal to the coverage provided for physical health benefits.
Equal limits: Financial requirements and treatment limitations applied to mental health and substance use benefits may be no more restrictive than those applied to physical health benefits.
Equal cost-sharing: Patient cost-sharing (i.e., deductibles, copayments, maximum-out-of-pocket costs) may be no higher for mental health and substance use benefits than it is for physical health benefits.
Equity applied to all financial requirements, including:
a. lifetime and annual dollar limits;
b. deductibles, copayments, coinsurance;
c. out-of-pocket expenses; and
d. all treatment limitations, including frequency of treatment, number of visits, days of coverage and other similar limits.
The 2008 Wellstone-Domenici Parity Act amended and increased the parity requirements of the federal Mental Health Parity Act of 1996, which only required parity coverage for lifetime and annual dollar limits. The 2008 Wellstone-Domenici Parity Act requires that all financial requirements and treatment limitations applicable to mental health/substance abuse disorder benefits are no more restrictive than those requirements and limitations placed on physical benefits.
The Wellstone-Domenici Parity Act will apply to health plans beginning January 1, 2010. (The effective date is slightly different for labor union plans pursuant to collective bargaining agreements.) This will give health plans the time necessary to redesign their coverage to come into compliance with the new law. The current 1996 parity law will remain in effect through December 31, 2009.
The Wellstone-Domenici Parity Act applies to all group health plans with more than 50 employees, whether the plans are self-funded (regulated under ERISA) or fully-insured (regulated under state law) that provide mental health or substance abuse benefits. Those health plans with 50 or fewer employees that must meet state mental health parity requirements will continue to do so. The new law apply to the individual insurance market.
The Wellstone-Domenici Parity Act covers all diagnoses for mental disorders. It goes beyond the 1996 act and some state parity and mandated benefit laws by also requiring parity for substance use disorders. There are no explicit exclusions. In effect, whatever a plan covers must be covered at parity with physical health benefits. As in the current system, a health plan may deny coverage based on medical necessity or under the terms of its coverage contract with an employer.
Yes, employers are not prohibited from dropping coverage for a diagnosis. The Wellstone-Domenici Parity Act broadly defines mental health and substance use disorder benefits to mean benefits with respect to services for mental health conditions and substance use disorders, as defined under the terms of the plan and in accordance with applicable federal and state law.
Benefits management: A health plan may manage the benefits under the terms and conditions of the plan. Benefit management of mental health services that is more restrictive than benefit management of medical/surgical services could be a violation of the Wellstone-Domenici Parity Act.
Medical necessity: There is no language in the Wellstone-Domenici Parity Act defining medical necessity. Medical necessity standards for mental health services that are more restrictive than medical necessity standards for medical/surgical could be a violation of the Wellstone-Domenici Parity Act. The Wellstone-Domenici Parity Act requires a plan to make mental health/substance use disorder medical necessity criteria available to current or potential participants, beneficiaries or providers upon request. A plan must also make reasons for payment denials available to participants or beneficiaries on request or as otherwise required.
Yes. Under the new law, if a health plan provides both out-of-network physical and mental health/substance use disorder benefits, these services must be provided at parity. If a plan currently provides only out-of-network physical health benefits, this new law will require it to add out-of-network mental health and substance use disorder benefits, at parity.
A few health plans, typically referred to as “closed panel” or “staff model” HMOs, do not provide for any out-of-network coverage. Since these plans do not provide out-of-network physical health coverage, they are not required to provide out-of-network mental health and substance use coverage.
No. The new law does not address reimbursement rates. Reimbursement rates for services paid to network providers are negotiated between the providers and the health plan. However, an employer may be in violation of the Wellstone-Domenici Parity Act if covered mental health or substance use services are reimbursed at rates that limit provider participation or restrict access to care more than medical/surgical services.
The Congressional Budget Office (CBO) has determined that Wellstone-Domenici Parity Act will raise overall national health plan premiums by an average of about 0.4% (four-tenths of one percent), to be split between employers and their employees. Due to this very low cost, it is expected that health plans will continue to provide substantial mental health and substance use coverage. Of course, depending upon the current level of benefits provided before parity, the costs for a given employer’s plan may be higher or lower than the CBO average.
Yes. The Wellstone-Domenici Parity Act does not require health plans to provide mental health and substance use benefits, but if the plan does provide such coverage, it must be at parity with physical health coverage.
Elimination of these benefits would likely be very expensive to health plans. A Kaiser Family Foundation Annual Survey of Benefits showed that 97% of plans already provide mental health and substance use benefits. It is now well accepted that these benefits are an integral part of treating most health conditions. Effective treatment of illnesses like diabetes, asthma and congestive heart failure requires a full recognition and treatment of co-morbid mental health and substance use disorders.
State laws only apply to fully insured groups. They do not apply to self-insured ERISA groups. Forty-three states have enacted parity laws. While some of these laws provide for strong parity protections, many are not as comprehensive as the new federal law. For those states with strong existing parity laws, the Wellstone-Domenici Parity Act is protective of state law. Under HIPAA, only a state law that “prevents the application” of the federal law is preempted. This means that if a provision in a state parity law provides for less protection than the federal law, it is preempted. If the state law provides for more protection than the federal law, it is not preempted. In essence, if a group plan is fully insured under state law, the Wellstone-Domenici Parity Act is a “floor” from which states may provide for greater protection.
The Wellstone-Domenici Parity Act does not apply to Medicare patients. In July 2008, Congress provided for Medicare coinsurance parity for Medicare patients by 2014 when it enacted “phase-in parity” under the Medicare Improvements for Patients and Providers Act (MIPPA). The Wellstone-Domenici Parity Act, however, does apply to Medicaid managed care health plans.
For fully insured plans, states can pass parallel legislation to maintain enforcement responsibility with the Wellstone-Domenici Parity Act. If states fail to act, federal agencies will enforce the law. As with the 1996 mental health parity law, the U.S. Departments of Labor (for ERISA-regulated health plans), Health and Human Services (for all other health plans including self-insured plans) and Treasury (for tax penalties for noncompliance) will jointly enforce the law. Prior to the January 1, 2010 enforcement date, these departments will be creating regulations to enforce the law.
Click here to download this FAQ article and the accompanying employers guide as a PDF.
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