From a historical perspective, employer health plans and private health insurers have provided more limited coverage for mental illnesses and substance abuse (if any) as compared to other medical conditions.
On Oct. 3, 2008, President Bush signed into law the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, as part of the Emergency Economic Stabilization Act of 2008.
Whether warranted or not, the unwillingness to cover mental health and substance abuse at the same coverage levels as other medical benefits reflects a concern on perceived higher costs, potential provider abuse and questions about the effectiveness of the treatment options.
Pulling it together
The Wellstone Act becomes effective the first day of the plan year beginning one year after the date of enactment (Oct. 3, 2008), which means Jan. 1, 2010 for calendar year plans. There is, however, a special rule that could extend this deadline for certain plans maintained pursuant to a collective bargaining agreement.
In addition, federal regulators from the Departments of Labor, Treasury and Health and Human Services recently issued a notice requesting public comments from health benefits stakeholders – especially sponsors of group health plans – on the rulemaking process for the Wellstone Act. The comments must be submitted on or before May 28, 2009.
Equitable coverage
Perhaps the most significant impact the Wellstone Act will have on employer-sponsored plans is the elimination of financial and treatment limitations for both mental health and substance abuse benefits.
This means that for most employer plans that provide mental health or substance abuse benefits, the same copays and cost-sharing percentages must be the same for mental health and substance abuse benefits as for other medical or surgical plan benefits.
Also, out-of-pocket expenses for mental health or substance abuse should apply toward the deductible like any other out of pocket cost. Finally, the law also bans treatment limitations as to the number of visits or number of days for inpatient or outpatient treatment that are more restrictive for treatment limitations for other medical benefits under the plan.
The intent of the Wellstone Act is to provide true parity between mental health/substance abuse benefits and other benefits for physical illnesses covered under the plan. The federal mandate does not require plans to cover mental health or substance abuse, nor does it require plans to cover one if they cover the other.
Extending benefits
The new law amends the Mental Health Parity Act of 1996 in the following ways:
• Substance abuse included: Extends the current parity law provisions related to annual and lifetime maximums to include substance abuse benefits, as well as extends all the other provisions of the Wellstone Act to substance abuse benefits along with mental health benefits.
• Financial requirements: Prohibits plans from imposing financial requirements to mental health or substance abuse benefits that are “more restrictive than the predominant” financial requirements applied to “substantially all medical and surgical benefits covered by the plan.” The term financial requirement “includes” deductibles, copays, coinsurance, and out-of-pocket expenses.
• Treatment limitations: Prohibits plans from imposing treatment limitations to mental health or substance abuse benefits that are more restrictive than the predominant financial requirements applied to substantially all medical and surgical benefits covered by the plan. Treatment limitations, as defined in the Act, include restrictions on the frequency of treatment, number of visits, days of coverage, or other “similar limits on the scope or duration of treatment.”
• Out-of-network coverage: Requires that plans providing out-of-network coverage for medical and surgical benefits also provide out-of-network options for mental health and substance abuse benefits covered under the plan.
• Availability of plan information: To the extent that the plan covers only those mental health or substance abuse services that are “medically necessary,” the criteria for medical necessity determinations must be made available by the plan administrator or the insurer “in accordance with regulations to any current or potential participant, beneficiary, or contracting provider upon request.” Presumably this means only those persons that are eligible or will soon be eligible for participation in the plan, but does not specifically require that this information be included in enrollment materials or summary plan documents.
Defining mental health and substance abuse
The Wellstone Act does not specifically define mental health benefits or substance abuse benefits, other than to state that the terms mean “benefits with respect to services for” mental health conditions or substance abuse disorders, as “defined under the terms of the plan and in accordance with applicable Federal and State law.”
The vagueness of these definitions has left many wondering whether self-insured plans (i.e., plans that generally are not subject to state mandates due to ERISA preemption) will be able to limit coverage for certain mental health and substance abuse disorders by restrictively defining these terms in the plan document.
For example, could autism be excluded from the definition of covered “mental health” under the plan? Can substance abuse benefits cover alcoholism, but not drug abuse? In some situations the Americans with Disabilities Act could prohibit such limitations.
Exemptions
The Act does not mandate that employer plans cover any mental health or substance abuse benefits at all. Accordingly, the law will not apply to plans that offer neither mental health nor substance abuse benefits.
There are two other ways a plan can be exempt from the Wellstone Act. First, certain small employers—generally those with 50 or fewer employees—are totally exempt from all compliance requirements. Second, employers who experience a cost increase may be eligible for a limited one-year exemption from compliance.
State laws
Employers with insured health plans may already be providing parity among mental health and other medical plan benefits. Through laws governing insurance and insurance carriers, nearly all states have enacted some type of legislation addressing mental health coverage.
Employers with self-insured medical plans, however, generally are not required to comply with state laws under the doctrine of ERISA preemption. Hence, self-insured medical plans have never been subjected to these state laws related to mental health coverage, which can vary from state to state. These self-insured plans, however, now will be required to comply with the Wellstone Act.
John Hickman can be reached at john.hickman@alston.com and Laurie Kirkwood can be reached at laurie.kirkwood@alston.com.
Mental Health Parity and Addiction Equity Act signed into law
