Mental Health Parity Myth?

Much has been written about the breakthrough that occurred when Congress passed the Mental Health Parity and Addiction Equity Act after more than a decade of trying by the Act’s proponents. It ended up being an add-on to the $700 billion bailout Congress recently approved, so though it was said to be significant, it was dwarfed by the bailout. The Act bcomes effective for most covered health plans on January 1, 2010.  But is it really a breakthrough?

As I’ve previously noted, employers and insurers have been free to discriminate between physical and mental health by setting higher co-payments and deductibles and stricter limits on treatment for mental illness and addiction. The new Act is said to change all that for employers having more than 50 employees. It requires that health plans cover, on the same basis as physical illnesses, mental illnesses like depression, autism, schizophrenia, eating disorders and alcohol and drug abuse, thus improving coverage for 113 million people, diminishing the stigma of mental illness, and acknowledging that mental illness represents diseases of the brain.

Yes, but.

The Act says that if–IF–a group health plan “provides both medical and surgical benefits and mental health or substance use disorder benefits,” then both the medical and surgical benefits and the mental  and addiction benefits must be on equal footing. It doesn’t require employers to include both in their plans. So, employers can have plans covering only physical illnesses. Employers who’ve previously covered both physical and mental (at a reduced level) can eliminate the mental, since it’s still feared that mental health parity will be cost prohibitive.

And speaking of cost, if the cost of a covered plan increases by two percent in the first year that the provisions of mental health parity are applied, the provisions won’t apply during the following year. In each subsequent year, if the plan cost increases by one percent, the mental health provisions won’t apply during the next year. 

What employers will do once the law becomes effective remains to be seen. There will surely be pressure from the proponents of the new Act to add coverage for mental illness or, at the very least, retain it. There will also be pressure to ignore the cost exception allowed by the Act. If our current economic tumult persists, pressure encouraging employers to voluntarily cover mental health will surely be ineffective. Even if the economy improves, such pressure may not work any better than it’s worked in the past. Time will tell. 

What’s important to realize in the meantime is that the Mental Health Parity and Addiction Equity Act doesn’t require covered employers to include coverage for mental illness and addiction. It doesn’t even require employers who’ve included it in the past to keep it. It says that if employers cover both physical and mental illness, both must be covered the same.  Even then, there’s the cost exception that could make the Act inapplicable. That’s a bit different from what’s being reported by the media.