Issue Brief

September 2002

Parity in Mental Health Treatment: Should Congress Mandate it?

"Mental illness is the second leading cause of disability and premature death worldwide..." World Health Organization, 1990

Introduction

In the last several years there has been considerable debate on whether the federal government should require employers to provide the same insurance coverage for the treatment of mental illness that they provide for other health services—a concept called parity.

Senator Paul Wellstone of Minnesota and Senator Pete Domenici of Arizona have been the main advocates of this idea. They have introduced legislation to accomplish this purpose in the Senate and Congresswoman Marje Roukema and Congressman Patrick Kennedy have introduced a companion bill in the House.

At present there are 242 members of the House and 67 members of the Senate who have cosponsored these bills. President Bush has also indicated support for some type of parity legislation.

What does it all mean?

Background

Before going into the specifics of the policy debate on parity, it is useful to review some of the basics. In 1999 the Surgeon General of the United States issued the first report ever issued by that office on the topic of mental health and mental illness. The report concluded that, "Mental health is fundamental to health and human functioning. Yet much more is known about mental illness than about mental health."

About one in five—18.5%—American adults experience a mental disorder in any given year. While the range in behavior that is considered "normal" in children and adolescents is much wider, a similar portion of young people experience signs and symptoms of mental illness and 5 percent experience what professionals call "extreme functional impairment." Few families in the United States are untouched by mental illness.

Mental Illness

Mental illness refers collectively to all the diagnosable mental disorders. Mental disorders are defined as "... those health conditions that are characterized by alterations in thinking, mood, or behavior associated with distress and or impaired functioning." Typical examples of mental disorders are Alzheimer's disease which alters thinking, depression which alters mood, and attention-deficit/hyperactivity which alters behavior and/or thinking.

In the mid-1990's the World Health Organization—in collaboration with Harvard University and the World Bank—launched a major research effort to ascertain the "burden of disability" associated with a variety of diseases and health conditions around the world. One of its more interesting findings is that the "impact of mental illness on overall health and productivity in the United States and throughout the world is profoundly underrecognized."

"Today in established market economies such as the United States, mental illness is the second leading cause of disability and premature mortality," according to this study. They discovered that mental disorders account for more than 15% of the overall burden of disease from all causes. This is slightly more than the burden associated with all forms of cancer and second only to heart disease as a cause of disability and premature death. The surgeon general says, "...these data underscore the importance and urgency of treating and preventing mental disorders and of promoting mental health in our society."

The System

In the United States, the mental health service system is broad and complex. It comprises a variety of caregivers who work in both public and private facilities. There are four major components and sectors:

the specialty mental health sector,
the general medical/primary care sector,
the human services sector, and
the volunteer support network sector.

The review of research undertaken for the Surgeon General's report found that a range of treatments exists for most mental disorders, and the efficacy of these treatments is well documented.

Despite the ability of the health care system to diagnose and treat mental illnesses, nearly half of all Americans who have severe mental illness do not seek treatment. Two of the main reasons sited for this phenomenon are stigma and financing.

The main purpose of the legislation promoting insurance parity is to reduce the financial impediments to care.

Parity Proposals

History

Traditionally, private insurers were motivated to be more restrictive in covering mental illness than other health conditions by several concerns. They believed that these services would be extremely costly due to extended hospital stays and the cost of intensive psychotherapy. They also believed that mental health patients would have a greater propensity to use mental health services than other medical services.

Insurers dealt with these concerns in various ways. Some simply refused to cover treatment for mental illness. Others limited coverage to acute care or imposed other restrictions on mental health coverage.

The States

The states, as the traditional regulators of the insurance industry, have wrestled with the question of mental health parity for several years. There are now 34 states that have laws requiring some parity, with 23 requiring complete mental health parity. Among these states, 14 require mental illness parity for all state-regulated carriers, five require parity for mental illness and substance abuse, and four require mental illness parity for their state employee health benefit plans.

According to Lee Dixon of the National Conference of State Legislatures many states are expanding their definitions of mental illness or adding provisions for substance treatment. As of March 11, 2002, 88 bills related to coverage for the treatment of mental illness or substance abuse had been introduced in more than 28 states.

The Federal Employees Health Benefits Program (FEHBP)

The federal government has also wrestled with this problem in the health insurance program it provides for its own employees, the Federal Employees Health Benefits Program (FEHBP). The FEHBP, which was established in 1959, covers federal employees, federal retirees, and their dependents. Today the program provides comprehensive health insurance coverage for more than 8.5 million people.

Parity-level mental health benefits were initially introduced into the FEHBP in the 1970's and early 1980's. Naturally, employees with more severe mental illnesses gravitated to the plans that offered the best benefits and those plans experienced the deleterious effects of adverse selection. As could be expected they soon dropped their coverage.

This prompted the program administrators in the Office of Personnel Management (OPM) to reassess their coverage of mental health care. In the late 1980's they set a floor for benefits and informed health plans that they would not accept any reductions in their existing plans. They did, however, leave the details up to the individual plans.

In 1994, OPM set minimum mental health coverage requirements that all health plans needed to meet. These benefits were still significantly lower than comparable benefits for other medical care.

Since 1994, OPM has worked with health plans to improve mental health benefits in the program. In 1995 they abolished lifetime limits on mental health benefits. In later negotiations they were able to eliminate annual limits on benefits also. In 1999 all federal employee plans began providing the same coverage for office visits, diagnostic testing, and drug treatment for mental conditions as for other medical conditions.

In June of 1999, President Clinton instructed OPM to achieve complete benefit parity for mental health and substance abuse treatment in the program by contract year 2001. They met that deadline and today participants in the FEHBP can receive care for mental illness and substance abuse under the same coverage terms as other medical conditions. Deductibles, coinsurance, copayments, and day and visit limitations parallel those for other medical problems.

The first year of the program showed average premium increases of 1.64% for fee-for-service plans, 0.3% for HMOs, and an aggregate program increase of 1.3 %. The OPM is currently working with the Department of Health and Human Services on a three-year evaluation of the parity initiative. They are also reviewing the program with stakeholders and others to determine the impact of parity on a range of matters.

Congressional Actions and The Mental Health Parity Act of 1996

Congress has struggled with the issue of mental health parity since the 1970's, but in the last several years the issue has really taken hold. Since most large, self-insured companies are governed under the provisions of the Employment, Retirement, Income Security Act of 1974 (ERISA), state parity laws do not affect them. This has increased pressures at the federal level.

In 1992, Senators Domenici and Wellstone introduced their first parity bill. After four years of struggle and many compromises, Congress finally passed a bill, the Mental Health Parity Act of 1996. Senator Domenici refers to this law as "mental illness coverage lite".

The 1996 law was limited in scope but it was a first step. It focused on one aspect of the inequities of insurance coverage for mental health—catastrophic benefits. The law prohibited using lifetime and annual limits on coverage for mental illness that differ from limits on coverage for somatic illness. It was implemented in 1998 and is scheduled to expire at the end of this year, having been extended one year past its original expiration date of 2001.

Although the Mental Health Parity Act of 1996 was an important rhetorical victory for mental health advocates, it was limited in a number of ways. It did not apply to other forms of benefit limits such as length-of-stay limits, visit limits, copayments, or deductibles. It did not include substance abuse treatment and companies with fewer than 50 employees were not subject to its provisions. Companies who did not offer any mental health benefit were also exempt from its provisions. Further, companies who experienced an increase in premium costs greater than 1% were allowed to apply for an exemption from the provisions of the law.

In spite of all these limitations it was an important step forward for the advocates of mental health parity. Because it was federal law, it covered large ERISA employers who were not subject to state parity laws. It also moved mental health coverage into the forefront of public discussion on insurance concerns and provided the opportunity to obtain much better information on the cost of parity.

The Domenici-Wellstone Parity Bill

The most serious legislative vehicle on parity before Congress today is the Domenici-Wellstone bill—The Mental Health Equitable Treatment Act of 2001. The bill is quite straightforward. It simply requires that all employee group health plans and related insurers who provide both medical-surgical health and mental health benefits, not impose different treatment limitations or financial requirements for mental health care than they impose for basic medical-surgical care.

In the course of working on this legislation over the years, the authors have accepted several compromises including an exemption for small businesses with fewer than 50 employees. They also do not require parity of coverage for substance abuse treatment although many state parity bills include this coverage.

The proposal is cosponsored by a majority of members in both houses of Congress and has been endorsed by the President.

Arguments for the bill

Proponents of the legislation argue that it is long overdue. They make the following case:

Mental illness is prevalent. About one-fifth of the United States population is affected by mental disorders in any given year.

Mental illnesses are costly to the economy. The Surgeon General's 1999 Report found that more than $70 billion is lost every year in use of sick time and disability leave, higher use of non-psychiatric medical services, and lost productivity.

Scientific understanding of mental disorders has improved significantly and treatment works. Mental illness diagnosis and treatment are accelerating and disorders of the central nervous system are on the cutting edge of science for genetics, neurophysiology and other fields. Major advances in psycho- pharmacology are as significant as any work being done on cancer, heart disease, and many other medical conditions.

Arguments against the bill

Opponents of the bill argue that parity is inappropriate because mental illness differs from physical illness in two major ways. First, they note that diagnosis for mental illness is different from every other branch of medicine (i.e. there are no simple scientific tests such as blood tests or urinalysis). Second, many mentally ill patients get treated against their will.

They also make several arguments based on cost. They say:

Policy makers need to worry not only about the average cost increase which is estimated to be slightly less than 1% by CBO but also about the distribution of those costs. Opponents say these costs will not be spread evenly among employers and employees but rather will hit harder on some populations than others.

Congress should not enact a mandate that primarily helps people who already have generous coverage but hurts people who have less. They maintain that employers who offer the least generous mental health coverage today will experience the greatest cost increases in trying to get to parity and will most likely drop coverage altogether thereby hurting the most vulnerable.

Mandated broad mental health parity can have a serious affect on the long-term affordability of coverage. They argue that employers who have been able to provide good mental health coverage at a reasonable cost have been able to do so only because they were free to bargain toughly with health care providers and this type of mandate will reduce their bargaining power.

Conclusion

It is too soon to tell if the Domenici-Wellstone bill will move forward in the remainder of this legislation session, but it is not impossible. There is much that remains to be done before Congress adjourns for the year, but this is an area where they could move quickly if they choose to do so.

As experience with parity in the federal employees' health insurance system and the various states moves forward, valuable information is being developed on the cost and other impacts of insurance parity for the mentally ill. An editorial in the Washington Post recently argued for parity legislation citing two reasons. The first noted that experience in these programs show, " ...by managing care, insurers can move toward equal treatment without crippling cost increases." And their second argument was that fundamental fairness requires equal treatment. The Post noted that, "Many mental disorders can be clearly diagnosed and effectively treated; some can't. The same can be said of cancers."

Opponents of parity argue that it will prove too costly, introduce new unfairness into the system, and result in some serious unintended consequences. At the very least it is likely that Congress will extend the existing parity law beyond its expiration date this year and continue to study the effects of parity within the FEHBP system.

Sources

Congressional Budget Office Cost Estimate, S 543, the Mental Health Equitable Treatment Act of 2001, Congressional Budget Office, Washington, DC, August 22, 2001.

Bowman, Jennifer; De Sa, Jeanne; Hagen, Stuart; Memorandum Re: Estimate of S. 543, the Mental Health Equitable Treatment Act, Congressional Budget Office, Washington, DC, July 12, 2002.

Flynn, William E. III, Associate Director for Retirement and Insurance, Office of Personnel Management, Achieving Parity for Mental Health Services, Testimony before the Committee on Health, Education, Labor, and Pensions, United States Senate, Washington, DC, July 11, 2001.

Kennedy, Senator Edward M., Statement before the Committee on Health, Education, Labor, and Pensions, United States Senate, Washington, DC, July 11, 2001.

Domenici, Senator Pete V., Achieving Parity for Mental Health Treatment, Statement before the Committee on Health, Education, Labor, and Pensions, United States Senate, Washington, DC, July 11, 2001.

Wellstone, Senator Paul D., Statement before the Committee on Health, Education, Labor, and Pensions, United States Senate, Washington, DC, July 11, 2001.

Regier, Darrel A., MD, MPH; Executive Director, American Psychiatric Institute for Research and Education, On Parity in Mental Health Treatment, Testimony before the Committee on Health, Education, Labor, and Pensions, United States Senate, Washington, DC, July 11, 2001.

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Cohen, David and Hoeller, Keith; "Mental Health Insurance Parity is an Empty Notion," Los Angeles Times, Los Angeles, CA, July 8, 2002.

Cutler, Charles M., MD; Chief Medical Officer, American Association of Health Plans, Testimony before the Subcommittee on Health, Committee on Energy and Commerce, US House of Representatives, Washington, DC, July 23, 2002.

Dixon, Lee, Group Director for the Health Policy Tracking Service, National Conference of State Legislatures, Testimony before the Subcommittee on Employer-Employee Relations of the Committee on Education and the Workforce, US House of Representatives, Washington, DC, March 13, 2002.

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