Organization & Financing
Consumer Questions and Answers on the Mental Health Parity Act
1. What is the Mental Health Parity Act (MHPA)?
MHPA was signed into law on September 26, 1996. The law provides that employer
group health plans and health insurance issuers, insurance companies and managed
care organizations offering mental health benefits will not be allowed to set annual
or lifetime dollar limits on mental health benefits that are lower than any such
dollar limits for medical and surgical benefits. A group health plan or policy that
does not impose an annual or lifetime dollar limit on medical and surgical benefits
may not impose such a limit on mental health benefits. MHPA protections do not
extend to benefits for substance abuse or chemical dependency. Also, MHPA does not
apply to any policies sold in the individual market.
MHPA provisions for group health plans are effective beginning on or after January 1,
1998. MHPA includes a sunset provision under which the requirements do not apply to
benefits for services furnished on or after September 30, 2001.
On December 22, 1997, the Departments of the Treasury, Labor, and Health and Human
Services published in the Federal Register an interim final regulation implementing
the provisions of MHPA.
2. What does parity mean?
Parity means equality. In the case of MHPA, it means equality in value with
regard to annual and lifetime dollar limits on benefits. Sometimes it requires
computation to compare values because plans have more than one dollar limit for
medical/surgical benefits.
3. What is a group health plan? What is a health insurance issuer?
A group health plan is an employee welfare benefit plan (as defined in section 3(1) of
the Employee Retirement Income Security Act (ERISA)) that provides medical care to
employees or their dependents. A health insurance issuer is an insurance company,
insurance service, or insurance organization that is licensed by the State to be in
the insurance business and is subject to State law for the regulation of insurance.
4. Does MHPA require all group health plans to provide mental health benefits?
No. Group health plans are not required to include mental health coverage in their
benefits packages. The requirements under MHPA apply only to group health plans
offering mental health benefits.
5. May group health plans impose other restrictions on mental health benefits and
still be in compliance with the MHPA?
Yes. The law does not affect the terms and conditions (such as cost sharing, limits
on numbers of visits or days of coverage, and requirements relating to medical
necessity) relating to the amount, duration, or scope of mental health benefits.
6. Do all group health plans offering mental health benefits have to meet the parity
requirements?
No. There are two exemptions from the parity requirements. The mental health parity
requirements do not apply to small employers who have between 2 and 50 employees or to
any group health plan whose costs increase one percent or more due to the application
of the parity requirements. (State laws vary regarding a health plan consisting of
one employee; some States may consider it to be a group health plan and others may
consider it to be in the individual health insurance market. In either case the
provisions of MHPA do not apply.)
7. How does a group health plan qualify for an exemption under the one percent cost
provision?
Generally, plans must implement parity for the first plan year beginning on or after
January 1, 1998, but may claim an exemption from parity if, based on at least six
months actual data, a plan has experienced a one percent or more cost increase
attributable to parity. (Six months of actual data includes all claims incurred
during the six months period and reported within eight months after implementation
of parity.) Increased costs do not include premium payments.
The exemption is not effective until 30 days after the plan notifies participants
and beneficiaries of the plan's decision to claim the one percent increased cost
exemption. Plans also must send a copy of the notice to the government.
A group health plan that is a church plan must furnish the notice to the Department
of the Treasury. A group health plan subject to Part 7 of Subtitle B of Title I of
ERISA must furnish the notice to the Department of Labor. A group health plan that
is a nonfederal governmental plan must furnish the notice to the Department of Health
and Human Services.
In addition, to claim the one percent increased cost exemption, a plan (or issuer)
must make available to participants and beneficiaries (or their representatives), on
request and at no charge, a summary of the information required to support the
exemption.
8. For how long is the exemption granted?
The group health plan exemption continues in effect (at the plan's discretion) until
September 30, 2001, even if the group health plan subsequently purchases a different
policy from the same or a different issuer and regardless of any other changes to the
plan's benefit structure.
9. What kind of costs can be used in making this one percent increased cost
determination?
The costs may include claims incurred during the six month period that would have
been denied under the terms of the plan absent the parity requirements, as well as
administrative expenses attributable to complying with these requirements.
10. If a group health plan claims an exemption, what ensures that the cost information
is accurate?
Because the exemption is based on actual claims data and administrative expenses,
the summary information plans are required to make available will be based on data
at hand and not based on projections of costs. Plan participants and beneficiaries
have a private right to seek civil action against the plan. Any evidence that the
cost information is not accurate may be referred to the Federal agency that has
jurisdiction.
11. Who enforces the law?
The provisions of MHPA are set forth in Chapter 100 of Subtitle K of the Internal
Revenue Code, (the Code), Part 7 of Subtitle B of Title I or ERISA, and Title XXVII
of the Public Health Service Act (PHS Act). The Secretaries of the Treasury, Labor,
and Health and Human Services share jurisdiction over the MHPA provisions. These
provisions are substantially similar, except as follows:
The MHPA provisions in the Code generally apply to all group health plans other than
governmental plans, but they do not apply to health insurance issuers. A taxpayer
that fails to comply with these provisions may be subject to an excise tax under
section 4980D of the Code.
The MHPA provisions in ERISA generally apply to all group health plans other than
governmental plans, church plans, and certain other plans. These provisions also
apply to health insurance issuers that offer health insurance coverage in connection
with such group health plans. Generally, the Secretary of Labor enforces the MHPA
provisions in ERISA, except that no enforcement action may be taken by the Secretary
against issuers. However, individuals may generally pursue actions against issuers
under ERISA and, in some circumstances, under State law.
The MHPA provisions in the PHS Act generally apply to health insurance issuers that
offer health insurance coverage in connection with group health plans and to certain
State and local governmental plans. States, in the first instance, enforce the PHS
Act with respect to issuers. Only if a State does not substantially enforce any
provisions that apply to issuers under its insurance laws will the Department of
Health Human Services enforce the provisions, through the imposition of civil money
penalties. Moreover, no enforcement action may be taken by the Secretary of Health
and Human Services against any group health plan except certain State and local
governmental plans.
12. How do I know if my group health plan complies with MHPA? If I believe that my group health plan is not in compliance, what should I do?
All group health plans are required to comply with MHPA unless they meet one of the
two exemptions in question #6 above. Plans claiming the one percent cost increase
exemption are required to notify participants and beneficiaries, as well as the
appropriate Federal agency. If you believe your plan is not in compliance with
these rules, you should notify either: the Department of the Treasury for church
plans, the Department of Labor for ERISA-covered group health plans, or the
Department of Health and Humans Services for nonfederal governmental plans.
For notices to the Department of the Treasury, notify: Office of the Assistant
Commissioner, Examination, Examination Programs CP, EX:E, 1111 Constitution Avenue,
NW., Washington, DC 20224; Attention: MHPA one-percent exemption.
For notices to the Department of Labor, notify: Public Documents Room, Pension and
Welfare Benefits Administration, U.S. Department of Labor, Room N-5638, 200
Constitution Avenue, NW., Washington, DC 20210; Attention: MHPA one-percent exemption
notice.
For notices to the Department of Health and Human Services, notify: Health Care
Financing Administration, CMSO/PEIS C4-25-02, 7500 Security Boulevard, Baltimore,
MD 21244-1850; Attention: Mental Health Parity.
13. Will the names of group health plans claiming the one percent exemption be published? Can the public obtain the supporting cost data of those plans that claim the
exemption?
Nonfederal governmental plans claiming the one percent exemption will be listed on
CMS's website. Group health plans must make available to participants and
beneficiaries (or their representatives), on request and at no charge, a summary of
the information required to support the exemption. An individual who is not a
participant or beneficiary and who presents a notice is considered to be a
representative.
14. What if a group health plan claiming the exemption fails to notify participants and
beneficiaries?
Such a group health plan would not be exempt from the requirements of MHPA.
15. In January 1998 my group health plan had different annual spending limits for mental health services. Does this mean that it is in violation of the MHPA, and if so,
who is responsible for enforcing the law?
The MHPA provisions are generally effective for group health plans for plan years
beginning on or after January 1, 1998. This means that group health plans must have
parity with respect to annual and lifetime dollar limits for mental health benefits
beginning that time. However, for requirements other than the one percent increased
cost exemption, there is a transition period during which no enforcement action can
be taken by any of the Secretaries against a group health plan (or issuer) that has
sought to comply in good faith with the requirements of the law before the earlier
of the first day of the first plan year beginning on or after April 1, 1998, or
January 1, 1999.
There is also a transition period for compliance with the parity requirements with
respect to the increased cost exemption. No enforcement action will be taken against
a group health plan (or issuer) that is subject to the MHPA requirements prior to
April 1, 1998, solely because the plan has claimed the increased cost exemption
based on assumptions inconsistent with the interim rules, provided that the plan is
amended to comply with the parity requirements no later than March 31, 1998, and the
plan complies with certain notice requirements.
16. My health plan raised its limits on mental health spending to comply with the MHPA,
but increased its copayments for outpatient visits at the same time. Isn't this
against the law?
No; as stated in the answer to question #5 above, plans may continue to set the
terms and conditions (such as cost sharing and limits on the number of visits or
days of coverage) relating to the amount, duration, or scope of mental health
benefits. This means the law does not prevent plans from increasing copayments or
limiting the number of visits.
17. If a State has its own parity law that is more liberal than MHPA (i.e., it requires
more favorable treatment of mental health benefits), which law takes precedence?
What effect do State mandated benefits laws have if they do not require parity but
do mandate mental health benefits?
A State law that requires more favorable treatment of mental health benefits under
health insurance coverage offered by issuers (generally, health insurance companies)
would not be preempted by the provisions of MHPA and the interim rules. Generally,
group health plans and issuers must comply with the Federal parity requirements, but
issuers are also subject to more liberal State law. The combined effect of Federal
and State rules will vary from State to State. You should contact your State
insurance commissioner's office for information about parity and State laws mandating
that mental health benefits be included in the plan.
18. How can I learn more about the MHPA?
To view the text of the MHPA, click here.
To view a full copy of the December 22, 1997 interim rule in the Federal Register,
click here.
You can also contact the the Centers for Medicare and Medicaid Services, CMSO/PEIS C4-25-02,
7500 Security Boulevard, Baltimore, MD 21244-1850; Attention: Mental Health Parity.
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