Mental Health Parity and Addiction Equity Act of 2008

Mental Health Parity and Addiction Equity Act of 2008

In 1996, the Mental Health Parity Act (MHPA) was passed by the US Congress. The law imposed restrictions on insurance companies that offered group health insurance policies. Under the MHPA, a group health plan was barred from imposing annual or lifetime limits on mental health benefits (if offered) that were less favorable than those annual or lifetime limits on medical or surgical benefits. The MHPA only applied to mental health benefits, not to benefits related to substance use disorders, including drug addiction and alcoholism.

In 2008, the MHPA was expanded by the Mental Health Parity and Addiction Equity Act (MHPAEA). Under this new Act, the original protections imposed by the MHPA were preserved, and new ones were added. For instance, the new Act requires parity with regard to both mental health and substance use including annual dollar limits, lifetime dollar limits, financial requirements and treatment limitations. As with the MHPA, the MHPAEA does not require a group policy to offer mental health or substance use benefits. Instead, the Act only requires benefits equivalent to medical and surgical benefits if mental health or substance use coverage is offered.

The MHPAEA applies to large group (50+ workers) self-funded plans and large group fully insured group health plans. Medicaid managed care plans are also subject to the MHPAEA. However, the Act does not protect insureds under individual plans or small group plans, unless state law requires it.

Major changes made by the MHPAEA include requiring group health plans to treat benefits, deductibles, co-payments and treatment limits (number of visits or days of coverage) equally whether the insured is using medical, surgical, mental health, or substance use coverage. In addition, the insurance companies cannot require insureds to maintain separate cost sharing or treatment accounting based on the type of benefits being used; all cumulative financial requirements must integrate both traditional medical-surgical treatment and mental health or substance use treatment. If the group plan provides for out-of-network medical surgical benefits, it must also provide for out-of-network mental health and substance use benefits. Further, the standards used by the insurance company for making medical necessity determinations and denials must be disclosed, as well as the reason for the denial.

MHPAEA Exception for some Large Groups

While, on its face, the MHPAEA seems to go a long way in equalizing treatment for those suffering with mental health issues or substance abuse disorders, a major exception exists for large group policies that may make the law largely ineffective. Large group health plan sponsors that meet the Cost Exemption exception and demonstrate that compliance with the MHPAEA increases claims by at least two percent in the first year, or one percent in subsequent years, can request to be exempt from the provisions of the MHPAEA. Further, state or local government self-funded employers may also be able to opt-out of the MHPAEA protections.

Although the MHPAEA was passed in 2008, regulations implementing the law did not go into effect until April 5, 2010 and will only effect plan years beginning on or after July 1, 2010. Under the regulations, the parity requirements must be applied separately to all six potential benefit classifications. If medical-surgical benefits are offered in one of the classifications, any benefits offered for mental health or substance use must be identical. The classifications include benefits for in-patient in-network, out-patient in-network, in-patient out-of-network, out-patient out-of-network, emergency and prescription drugs.

The protections for mental health, drug addiction and alcoholism provided by the Mental Health Parity and Addiction Equity Act of 2008 can be bolstered by state law. Almost every state has its own mental health parity law, but the protections afforded by them vary widely.

State mental health parity laws fall into roughly three categories. The first type of protection, equal coverage, prohibits insurers from discriminating between coverage offered for mental illness, serious mental illness, substance abuse and other physical disorders or diseases. Insurers must provide the same level of benefits, no matter what the issue. The parity requirements apply to visit limits, deductibles, co-payments, annual limits and lifetime limits. Some states, such as Arkansas, provide broad coverage for all mental illnesses. Other states may limit coverage to a specific list of biological-based mental illness. States in this category also differ with regard to whether substance use is protected, in addition to other forms of mental illness.

The second type of state protection, minimum mandated benefit, requires insurers to offer some level of coverage for mental illness, serious mental illness, substance abuse or a combination of the three. These are not considered full parity laws as they allow differences in the level of benefits offered between mental and physical illness. However, some do require co-payments and deductibles for mental health to be equal to that of physical illness.

The final type of state parity laws, mental health mandated offering, doesn’t require mental health or substance use benefits to be offered at all. However, some states require an optional coverage to be offered, usually at a higher premium or require equal treatment if benefits are offered (like the MHPAEA).

Michelle’s Law

Another law restricting the unfair or unscrupulous practices of insurance companies, Michelle’s Law, was signed by President Bush in October 2008. Michelle’s Law, named for Michelle Morse of Manchester New Hampshire, ensures that seriously ill college students who take medically necessary leaves of absence do not lose health insurance coverage by doing so. Under traditional law, some individuals who are insured solely as a result of their student status, either via their parents’ policy or school health insurance, would lose coverage if their enrollment dropped below a certain level. For seriously ill students, this forced them to chose between taking time off to recover, and thus losing insurance coverage, and staying in school against medical advice.

Michelle Morse was a student at Plymouth State University when she was diagnosed with colon cancer. Michelle’s doctor recommended that she take a leave of absence from her studies so that she could devote her full attention to beating her cancer. However, Morse knew that her insurance coverage would lapse if she failed to maintain her course load. In the end, Morse opted to stay in school in order to keep her health insurance. She died shortly thereafter.

Michelle’s Law amends ERISA, the Public Health Service Act and the IRS code to require a group health plan to continue coverage of a depend child who is on a medically necessary leave of absence from a postsecondary educational institution until either one year has elapsed or the date on which the coverage would normally terminate, whichever is earlier. In order to invoke the protections of Michelle’s Law, the health insurance plan must receive written certification by a treating doctor that the serious illness or injury requires a leave of absence.

Related Article: Alcoholism and Drug Addiction Can Lead to Loss of Health Insurance

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