Economic Bailout Bill Expands Mental Health Parity Laws

October 22, 2008

The Mental Health Parity and Addiction Equity Act of 2008 (the “Act”), enacted as part of the Emergency Economic Stabilization Act of 2008, made permanent the current mental health parity rules regarding annual and lifetime dollar limits effective January 1, 2009, and greatly expanded mental health parity, effective for the first plan year beginning on or after October 3, 2009. Accordingly, for plans with calendar year plan years, these new rules will become effective January 1, 2010. Collectively bargained plans have until the first plan year beginning after the later of (1) the date on which the last of the collective bargaining agreements terminates, or (2) January 1, 2009, to comply with the expanded requirements.

The parity provisions of the Act apply to both mental health and substance use disorder benefits. Furthermore, the Act expands the scope of parity required between such benefits and medical/surgical benefits. Specifically, the Act provides that a group health plan subject to the Act must ensure that:

  • Financial requirements (i.e., deductibles, copayments, coinsurance and out-of-pocket expenses) applicable to mental health or substance use disorder benefits are no more restrictive than those applicable to substantially all medical/surgical benefits covered by the plan;

  • Treatment limitations (i.e., limits on the frequency of treatment, number of visits, days of coverage) applicable to mental health or substance use disorder benefits are no more restrictive than those applicable to substantially all medical/surgical benefits covered by the plan; and

  • No separate cost sharing requirements or treatment limitations apply solely to mental health or substance use disorder benefits.

In addition, if plans subject to the Act provide out-of-network coverage for medical/surgical benefits, out-of-network coverage also must be provided for mental health and substance use disorder benefits. The Act does not require health plans to provide mental health or substance use benefits.

Small employers (generally, employers who, on a controlled group basis, employ fewer than 50 employees) are not subject to the Act. In addition, if the application of the Act causes an increase for the plan year involved in the actual total cost of coverage for medical/surgical benefits and mental health and substance use benefits that exceeds actual total plan costs by more than 2% for the first plan year (1% for each year thereafter), as certified by a qualified and licensed actuary, then the Act permits the plan sponsor to choose not to comply with these parity requirements for the following plan year. Eligibility for this exemption must be reevaluated by the plan sponsor each year.

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