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Position Statement 15: Parity in Health Insurance
All people in America should have a right to health-care benefits, including needed behavioral health services. Mental Health America (MHA) calls on the federal and state governments to ensure, as a matter of law, that public and private health plans afford people access to needed behavioral health care and treatment on the same terms as surgical and other medical care. Such services should be subject to the same terms and conditions as care and treatment for any other condition, without regard to diagnosis, severity, or cause.
Mental health is essential to leading a healthy life and to the development and realization of every person’s full potential. Yet mental illnesses and substance-use disorders are leading causes of disability and premature mortality in the United States. As the President’s New Freedom Commission on Mental Health observed in its final report, mental disorders are “shockingly common.” Most people are affected in some way by mental illness, and almost half (47.4%) will be diagnosed with a mental health condition at some point in their lives.
With striking scientific advances over the last half century, behavioral health problems are now reliably diagnosed, and there is a range of treatments for virtually every disorder. Those treatments have efficacy rates comparable to or exceeding those for many medical and surgical conditions. Yet all too often people with diagnosable mental disorders do not seek treatment. “Concerns about the cost of care – concerns made worse by the disparity in insurance coverage for mental disorders in contrast to other illnesses – are among the foremost reasons why people do not seek needed mental health care,” the Surgeon General observed in his landmark 1999 report on mental health.
The longstanding practice of providing unequal coverage for behavioral health and other medical care not only limits access to needed care, but subjects many Americans to the risk of major financial losses from out-of-pocket costs. At the most profound level, these practices reinforce the poisonous stigma underlying disparate treatment of “others.” That disparate coverage of behavioral health should be routine, and that discrimination against people with or at risk of behavioral health disorders should be lawful, is not only morally offensive in itself, but fosters a climate that tolerates and even encourages other forms of discrimination and weakens the fabric of equal-opportunity laws.
No rational basis supports these discriminatory health-insurance practices, which have drawn criticism from voices ranging from former President George W. Bush to Fortune 500 chief executive officers. A landmark report by the National Business Group on Health recommended that employers equalize their medical and behavioral benefit structures given evidence that parity yields significant clinical benefit without increasing overall healthcare costs.
The Parity Act
Congress took the decisive step toward ending discriminatory insurance practices when it enacted the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA” or “Parity Act”), a federal law that generally prevents group health plans and health insurance issuers that provide mental health or substance use disorder benefits from imposing less favorable limitations on those benefits than on medical/surgical benefits.
The Parity Act originally applied to group health plans and group health insurance coverage and was amended by the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively referred to as the “Affordable Care Act”) to also apply to individual health insurance coverage, and the new health insurance policies issued through the insurance marketplaces and Medicaid expansion plans all require mental health and substance use benefits to be offered at parity with general health benefits. HHS has jurisdiction over public sector group health plans while the Departments of Labor and the Treasury have jurisdiction over private group health plans.
The Parity Act established the principle that there should be no disparity in health insurance between mental-health and general medical benefits. However, as the General Accounting Office (GAO) reported in reviewing the Parity Act’s implementation, the vast majority of employers it surveyed substituted new restrictions and limitations on mental health benefits, thereby evading the spirit of the law. As GAO documented, employers routinely limited mental health benefits more severely than medical and surgical coverage, most often by restricting the number of covered outpatient visits and hospital days, and by imposing far higher cost-sharing requirements.
State Parity Laws
Most states have adopted laws requiring parity between mental health and general health benefits in group health insurance. But those state laws vary widely in scope, and, under federal law, do not govern the health plans of the many employers who elect to self-insure. Facing opposition to parity proposals, state legislators have generally limited the scope of such measures and provided parity protection to only certain populations. Sound public policy aimed at achieving fairness is certainly not realized, however, when the law affords fair and equal treatment to some and not others. Mental Health America, therefore, does not support enactment of legislation that limits parity protection only to individuals who have specified diagnoses. However, state parity laws can be of enormous assistance in getting state insurance commissioners to take on parity as an issue, and all but five insurance commissioners are now enforcing the Parity Act.
Those opposing parity asserted that it would add to the cost of health care. But as the National Business Group on Health observed in its employer’s guide to behavioral health services, a number of parity studies have found that equalizing specialty behavioral health and general medical benefits either will not increase total healthcare expenses at all or will increase them by only a very modest amount of total healthcare premium. The real cost lies in not treating behavioral health disorders. As the National Business Group noted, the indirect costs associated with mental illness and substance-use disorders – excess turnover, lost productivity, absenteeism and disability – commonly meet or exceed the direct treatment costs, and have been estimated to be as high as $105 billion annually.
Against this background, the current debate concerns the regulations and litigation that will define the implementation and enforcement of parity, including changes to the mental health and substance use treatment landscape that may result from coverage at parity with medical/surgical benefits.
Interim Regulations and Litigation Issues
The interim regulations (IR) for the Parity Act were approved effective in July, 2010 and passed an initial court test. Despite the judge’s assurance of prompt action by the administration, the final rule (FR) was not released for more than 3 years, meaning that the first tests of the law's ability to ensure equal coverage for behavioral health and general health conditions relied upon the interim regulations. Generally, mental health advocacy organizations have been supportive of the interim regulations, but insurers have objected. These concerns continue to be voiced as objections to the FR.
In addition to the classification of the six benefits to which parity will be applied, the major issues with the interim and final regulations are non-quantitative treatment limitations (defined below) and the potential that parity may result in expansion of care in more restrictive settings. And coverage issues are being litigated that will spur further controversy.
- Six Classifications: The IR clarified that the parity requirements will be applied against “substantially all” medical/surgical benefits in six classification areas, which continue to be the core of parity regulation under the FR. Those six classifications are: inpatient/in-network, inpatient/out-of-network, outpatient/in-network, outpatient/out-of-network, emergency department, and prescription drugs. Plans offering mental health and substance use coverage must provide parity in all classification areas where medical/surgical benefits are offered.
- Quantitative v. Non-quantitative Treatment Limitations: The IR distinguished between quantitative and non-quantitative treatment limitations. Quantitative treatment limitations include frequency of treatment, number of visits, and days of coverage, and must be at parity with substantially all medical/surgical benefits. The Departments give separate guidance with examples of parity with medical/surgical benefits for non-quantitative treatment limitations like medical management and utilization management.
- The opposition (Chamber of Commerce) response is: “One of the most unexpected requirements of the [IR] is the requirement for parity for non-quantitative treatment limits. MHPAEA explicitly imposes parity requirements with respect to treatment limitations and financial requirements, as well as out-of-network coverage. The Act does not, however, expressly extend parity requirements to medical management techniques. In fact, the Act includes a rule of construction that states that nothing shall be construed as affecting the terms and conditions of the plan or coverage to the extent that the plan terms and conditions do not conflict with the Act's parity requirements. ERISA § 712(b). Since there is no explicit parity requirement for medical management in the Act, none should be implied in regulatory guidance by the Agencies.”
- Deductibles: Under the IR and the FR, mental health and substance use benefits and medical/surgical benefits have combined deductibles and combined financial restrictions and quantitative treatment limitations.
- Mental Health as a Non-specialty: Under the IR and the FR, mental health and substance use benefits are not a specialty, and are administered in parity with the medical/surgical non-specialty benefits offered by an insurance plan.
- Residential Care for Eating Disorders: Studies thus far support the affordability of parity, and business support was and is premised on them. But to the extent that parity drives residential rather than outpatient, community-based care, parity may have an unanticipated cost. The first court tests of parity laws have come in cases challenging denial of coverage for residential care, and the first major appellate case concerned eating disorders.
- California decision: That case, a Ninth Circuit Court of Appeals decision, Harlick v. Blue Shield of California, 686 F.3d 699 (9th Cir. 2012), required reimbursement for residential care for anorexia under California’s state parity statute, and inspired a new round of controversy about expansion of benefits. The court ruled that:
“Some medically necessary treatments for severe mental illness have no analog in treatments for physical illnesses. For example, it makes no sense in a case such as Harlick’s to pay for 100 days in a skilled nursing facility — which cannot effectively treat her anorexia nervosa — but not to pay for time in a residential treatment facility that specializes in treating eating disorders.”
Reporting on the decision, the New York Times concluded that:
The insurers consider residential treatments not only costly — sometimes reaching more than $1,000 a day — but unproven and more akin to education than to medicine. Even some doctors who treat eating disorders concede there are few studies proving that residential care is effective, although they believe it has value.
The Times continued:
Ira Burnim, legal director of the Bazelon Center for Mental Health Law, which litigates for better mental health treatments, said that while he was not familiar with eating disorders, “study after study” had shown that residential centers for other mental or emotional disorders were not as effective as treatment at home.
Dr Anne E. Becker, president of the Academy of Eating Disorders and director of the eating disorders program at Massachusetts General Hospital, said that despite a paucity of studies, “There’s no question that residential treatment is life-saving for some patients.”
Some insurers say that there is no treatment for physical illnesses that is equivalent to residential treatment for mental illnesses, and therefore residential treatment does not have to be paid for under parity laws.
Ms. Harlick’s lawyer, Lisa S. Kantor, argued that residential treatment centers were equivalent to skilled nursing facilities, which Blue Shield did cover.
- New York Settlement: Similarly, on July 9, 2014, New York Attorney General Schneiderman announced a settlement with EmblemHealth and its behavioral health subsidiary, Value Options, for failure to provide residential treatment for eating and substance use disorders. Community-based treatment of those conditions is favored as a matter of overall behavioral health policy. But it seems right that with a proper medical workup, residential care may be required for these conditions, and the medical necessity process should be the same as with skilled nursing care, at parity with general medical standards. Removing the requirement that members “fail” outpatient substance abuse treatment before receiving inpatient rehabilitation treatment, as provided by the Value Options settlement, thus seems appropriate.
This argument has just begun, and there are many more issues to come as the details of this important policy shift are worked through in individual cases. For example:
Rea et al. vs. Blue Shield Of California, 226 Cal App 4th 1209 (June 10, 2014) affirmed the Harlick result, mandating residential care for eating disorders despite a policy exclusion. The Court of Appeal held that the California Parity Act requires plans to provide coverage for all
medically necessary modalities of care for the mental conditions in the statute, although it stated that plans could apply "policy limits" to that coverage. The Supreme Court has not yet ruled on the Petition for Review, which is the last step in the appeal process.
MHA Comment Submitted: MHA's comments were submitted on April 29th, 2010, and are available at http://www.dol.gov/ebsa/pdf/1210-AB30-5102.pdf.
Final Rule Released
After considerable delays, the Departments of Treasury, Labor, and Health and Human Services released the final rule (FR) on November 8, 2013. The FR went into effect on July 1, 2014. All insurance plans administered after July 1, 2014 must comply with the FR, and since most plans are renewed at the beginning of each year, most plans will need to comply with the final rule when renewed on January 1, 2015. MHA applauds the final rule. Achieving parity between mental health and substance use treatment and general health care is a goal for which MHA and its affiliates have been advocating for several decades.
The FR clarified several issues that had not been resolved with the release of the IR, which are covered below. Additionally, MHA has a few concerns regarding implementation that do not appear to have been addressed sufficiently in the FR and may require litigation and/or further guidance.
- Scope of Service. The IR outlined six classifications of benefits (identified above) that are required to be covered in any plan offering mental health and substance use treatment. The FR clarified that enumeration of these six types of benefits does not exclude coverage of intermediate levels of care (i.e., intensive outpatient treatment, partial hospitalization, and residential treatment). The FR stated that the six classifications are broad categories, and within those categories, sub-categories and the intermediate services required to treat them must be covered in a comprehensive manner at parity with medical/surgical benefits. It is not sufficient for plans to offer one service in each of the six categories to be considered at parity. Examples given in the rule indicate that intermediate levels of care offered for medical/surgical treatment must have comparable coverage for mental health and substance use services.
- Non-Quantitative Treatment Limitations. The FR reiterates the important principle established by the IR that non-quantitative treatment limitations (NQTLs) that are more stringent for mental health and substance use than for medical/surgical benefits are in violation of the law. The FR also reaffirms the requirement that medical necessity criteria (i.e., "the processes, strategies, evidentiary standards and other factors used by the plan or issuer to determine whether and to what extent a benefit is subject to an NQTL") are subject to parity. The FR did clarify or alter several assertions made in the IR regarding NQTLs.
- The FR did away with the IR's exemption that plans could apply more stringent limits to mental health and substance use treatment if a "recognized clinically appropriate standard of care" justified the difference.
- The FR clarified that restricting geographic location, facility type, or provider specialty are limitations in scope of service and constitute an NQTL, subject to parity.
- The FR confirmed that provider reimbursement rates are NQTLs, subject to parity. Plans can take into account various factors - service type, geographic market, supply of providers, licensure, etc. - when determining reimbursement, but that the determining factors must be equivalent for medical/surgical and mental health and substance use services.
- Under the FR, multiple provider network tiers are permitted, but tiered networks may not impose greater restrictions for mental health and substance use than for medical/surgical treatment.
- Similarly, under the FR, multi-tiered prescription drug programs are allowable but must be equivalent for mental health and substance use medications and medical/surgical medications.
- MHA Concern: Medical Necessity Criteria. The Parity Act, the IR, and FR require plans to release medical necessity criteria for mental health and substance use treatment and mandate that if coverage of a service has been denied, the plan must release the reason for the denial. However, medical necessity criteria for medical/surgical benefits remain proprietary information. Thus, it is difficult to determine if medical necessity criteria are being applied more stringently for mental health or substance use treatment. The FR partially addresses this issue by requiring plans to provide documentation regarding processes, strategies, evidentiary standards, and any other factors used to determine medical necessity for both medical/surgical and mental health and substance use benefits. But MHA continues to be concerned about the ability of consumers to obtain the medical necessity criteria for both medical/surgical and mental health and substance use benefits to be able to understand their application and to determine if an NQTL was imposed more stringently for mental health and substance use than for comparable medical/surgical treatments. MHA National, MHA affiliates, and other stakeholders should watch this issue carefully, educate consumers and providers about their rights to disclosure of medical necessity criteria, and monitor and report plan practices.
- MHA Concern: Applicability to Medicaid. Neither the IR nor the FR apply to Medicaid Managed Care, the Children's Health Insurance Program (CHIP), or the Alternative Benefits Plans (ACA's Medicaid expansion), although MHPAEA applies to those insurance programs. A CMS State Health Official Letter issued in January 2013 provides guidance to these insurance programs regarding parity, and the FR states that further guidance will be issued. MHA will continue to monitor the release of guidance regarding Medicaid/CHIP plans and state Medicaid compliance with the January 2013 letter and the parts of the IR and FR that were specified as applying to those programs, including ensuring NQTLs are not more restrictive for mental health and substance use than medical/surgical treatments.
- MHA Concern: Expansion of Care in More Restrictive Settings. Advocates are concerned that the FR may result in expansion of care in more restrictive settings. Vigilance is required to assure availability of residential treatment when needed without losing the emphasis on community-based care that is basic to recovery. MHA will monitor implementation of the FR and the Affordable Care Act to advocate that the expansion of mental health and substance use coverage is used to promote access to innovative community supports and services, promising practices, and evidence-based practices that promote community inclusion and are delivered in the least restrictive settings. Litigation should be monitored as well and amicus participation should be considered to avoid the unintended consequence of expanding hospital, residential, and traditional in-office services at the expense of less well-documented, more recovery-oriented services in the community.
- For further analysis, MHA recommends the Parity Implementation Coalition summary of the FR: http://parityispersonal.org/sites/default/files/PIC%20summary%20final%20rule.pdf
Call to Action
- MHA continues to support the principles of the Parity Act and the implementation of the final rule. Although MHA is concerned about potential expansion of residential services using parity as a lever, and continues to support community-based care and cost containment, individual cases must be decided based on detailed individual findings of medical necessity and monitored by HHS to determine if a systemic problem needs to be addressed with further guidance or plan enforcement.
- MHA and its affiliates should also monitor the compliance of plans and educate consumers and providers with regard to scope of service, NQTLs, and medical necessity criteria to ensure proper implementation of the final rule.
- Since the final federal rules assign to states the initial/primary obligation to enforce the federal parity laws and because some states have stronger parity laws than the federal law, affiliates should focus their efforts on advocating that state insurance departments and other state actors vigorously enforce parity.
- There are many places where health plans list providers as being available who no longer accept new patients with their insurance, and there are often long delays in getting access to mental health care.
- Health plans also often limit the amount of residential treatment, intensive outpatient recovery-oriented programs and inpatient treatment to levels below what has been medically recommended and force consumers to pay for care first and then appeal to get recognition of the finding of medical necessity.
- To avoid this unfair pressure, states should be aggressive in imposing penalties. All states have general authority over new policy forms, and all but five are enforcing the Affordable Care Act and by extension, parity, in reviewing health insurance plans. State authority over complaints is more difficult to establish, absent a state statute establishing authority to enforce federal law. Market conduct examinations and unfair trade practice regulatory authority are the principle means being explored.
- Affiliates must be vigilant in their legislative efforts to ensure that their state insurance commissioner has the authority and resources to take strong action. Developing a consultative relationship with insurance regulators, MHA affiliates and other advocates can pursue legislation to provide additional enforcement tools when required.
- Federal enforcement is divided:
- HHS responsible for insurer compliance
- Public Health Service Act (PHSA) incorporates ACA market reforms; applying them to insurers
- PHSA gives states primary enforcement role with HHS as backup
- HHS can impose fines up to $100/day/affected individual
- DOL and Treasury primarily regulate employer compliance
- ERISA and Internal Revenue Code apply ACA market reforms to employer group health plans
- DOL can fine employer plans for certain violations –
- Employee right to sue employer plan - key ERISA enforcement mechanism
- Treasury can impose $100/day of noncompliance tax/affected individual
- MHA will continue to advocate for HHS to monitor and enforce the final rule when states are unable or unwilling to do so, and will advocate for the release of further guidance regarding Medicaid managed care, CHIP, and the Alternative Benefits Plans.
Final Rule Link: www.dol.gov/ebsa/pdf/mhpaeafinalrule.pdf
The Mental Health America Board of Directors approved this policy on September 13, 2014. It is reviewed as required by the Mental Health America Public Policy Committee.
Expiration: December 31, 2019
Achieving the Promise: Transforming Mental Health Care in America, New Freedom Commission on Mental Health (2003), at 1.
 Kessler, R. C., Angermeyer, M., Anthony, J. C., de Graaf, R., Demyttenaere, K., Gasquet, I., ... Üstün, T. B. (2007). Lifetime prevalence and age-of-onset distributions of mental disorders in the World Health Organization's World Mental Health Survey Initative. World Psychiatry, 6(3), 6168-6176.
 Mental Health: A Report of the Surgeon General (1999) at 23.
 Remarks by the President on Mental Health, April 29, 2002; Hackett, J.T., CEO of Ocean Energy Inc., testimony before the Subcommittee on Health of the Energy and Commerce Committee, House of Representatives, July 23, 2002.
 “An Employer’s Guide to Behavioral Health Services,” National Business Group on Health, 2005, at 68.
 “Mental Health Parity Act: Despite New Federal Standards, Mental Health Benefits Remain Limited,” United States General Accounting Office, May 2000, at 21.
 Id. at 13-14.
 The Employer Retirement Income Security Act of 1974 (ERISA) allows employers to offer uniform national health benefits by preempting states from regulating employer-sponsored benefit plans. Thus, while states can regulate health insurers, they are unable to regulate employee benefit plans established by employers.
 A law that requires health plans to provide parity only for those with a severe mental illness or those with a “biologically-based mental illness,” for example, implicitly conveys the message that it is acceptable to discriminate against those with other mental disorders, and suggests that such disorders do not merit the law’s protection. Such limited parity protection discourages early intervention and leaves children at particular risk, since the few illnesses covered under such laws seldom occur until late adolescence or early adulthood. Mental Health America does, nevertheless, recognize that enactment and implementation of such laws have enabled advocates in some states to build on an incremental gain and later win passage of comprehensive legislation.
 An Employer’s Guide to Behavioral Health Services,” National Business Group on Health, op. cit.
 The information on state enforcement is derived from comments supplied by Josh Goldberg of the National Association of Insurance Commissioners, based in Washington, D.C. The states currently identified by HHS as not “substantially enforcing” the ACA are TX, OK, MO, WY and GA. See presentation by Joel Ario, Manatt Health Solutions and Sally McCarty, Georgetown Health Policy Institute, “ Operationalizing Oversight of ACA Insurance Market Reforms,” (January 28, 2013) (available from MHA).