Organization & Financing

Effects of the Mental Health Parity Act of 1996

This report provides information on the effects of the federal Mental Health Parity Act of 1996 (MHPA), which became effective on January 1, 1998. Under the Act, group health plans providing both medical/surgical benefits and mental health benefits may not impose a lifetime or annual dollar limit on mental health benefits that is less than that applied to its medical/surgical benefits. MHPA includes a sunset provision which becomes effective on September 30, 2001.

Group health plans, and health insurance coverage offered in connection with group health plans, are not required by MHPA to provide mental health benefits. In addition, the law does not affect other terms and conditions (e.g., cost sharing and limits on visits or days) relating to the amount, duration, or scope of mental health benefits. Finally, MHPA protections do not extend to benefits for substance abuse or chemical dependency.

Employers with 50 or fewer employees are exempt from the Act. Also, a plan may be exempted from the Act if implementation results in an increase in plan costs of at least 1 percent.

Method
Data are from the Mercer/Foster Higgins National Survey of Employer-Sponsored Health Plans, and were analyzed under a contract supported by the Offices of Managed Care in CMHS and CSAT, SAMHSA. The Mercer/Foster Higgins survey collects information on a wide range of health care issues concerning employer health plans, including costs, strategic planning, and scope and limitations of health coverage. In 1998, this survey was administered from July through September, and included questions on employers' responses to MHPA.

The survey instrument was mailed to a stratified random sample of all U.S. employers including state and local governments who sponsor insurance with ten or more employees and who sponsor insurance. For private firms in the survey, a random sample was drawn from the Dun and Bradstreet database, stratified in eight size categories. All state governments were included; a random sample of county and local governments was drawn from the Census of Governments.

The 1998 database included 3725 respondents, representing a 55 percent response rate. Each respondent was requested to be the person "who knows the most about the health care benefits program." For the analysis of questions related to MHPA, respondents not subject to the Act (e.g., those with no MH coverage or with fewer than 50 employees) were eliminated. This left a total of 1946 respondents. Responses from these were weighted to reflect the actual national distribution of employers by firm size.

Results
Many employers have benefit plans that do not have annual or lifetime limits for MH benefits, or took early actions to comply with MHPA. Table 1 shows that nearly half of those subject to the Act were in compliance prior to its effective date. Slightly more than a quarter either retained separate MH limits, but raised them, or included MH expenses with others in determining annual or lifetime dollar limits. About a fifth of respondents indicated that they had not yet taken action in response to the Act. This response was more common among employers with fewer than 500 employees. Larger employers were more likely to include MH expenses in determining overall limits or to take other actions in responding to MHPA.

Most employer-sponsored health plans treat mental health and substance abuse services similarly. However, MHPA only required plans to equalize spending limits for mental health services. The survey therefore asked employers that had taken some action to comply with MHPA whether they also took the same action for their substance abuse benefits. More than two-thirds (68 percent) said that they did. This response was more common among smaller employers.

Finally, there has been concern that MHPA and similar parity mandates may result in employers dropping MH coverage altogether, or increasing other limits in compensation. Table 2 provides information on such actions, for employers that made MHPA-related changes to their benefit. Of these, the large majority (86 percent) indicated that they made no compensatory changes to their benefit, usually because expected cost increases were judged to be minimal or nonexistent. The remainder did make some type of compensatory changes in benefits or administration, most commonly by increasing limits on inpatient days and/or outpatient visits. These types of actions were more common among larger employers.

Summary
These results indicate that the effects of MHPA have been largely positive. Only about half of the health plans subject to the Act had to make changes in their MH benefits. Of these, the large majority did not judge that the mandate required compensating changes in other benefit provisions. Further, MHPA had an unintended beneficial effect of also improving coverage for substance abuse benefits in many plans. Nevertheless, some employers did make changes that would tend to nullify any beneficial effects of the legislation, and a very small number actually dropped MH coverage.

For further information, contact:
Jeffrey A. Buck, Ph.D.
Director, Office of Managed Care
Center for Mental Health Services, SAMHSA
(301)443-0588

Table 1
Responses (in percent) to the Mental Health Parity Act,
by Size of Employer

Response	Number of Employees
Response	Under 500	More than 500	Total
In compliance before 1998	47%	40%	46%
Dropped mental health coverage	1	1	1
Retained separate mental health limits, but raised to equal medical/surgical	11	14	11
Mental health costs are now included with medical/surgical in determining limits	16	23	17
Other	5	16	6
No action taken yet	22	6	21

Unweighted N = 1946
Note: Percentages do not add to 100 due to rounding.
Source: 1998 Mercer/Foster Higgins National Survey of Employer-sponsored Health Plans

Table 2
Compensatory Changes Made to Plans,
by Size of Employer

Changes	Number of Employees
Changes	Under 500	More than 500	Total
No changes made, no increased costs expected	74%	43%	68%
No changes made, possible increased costs affordable	4	7	5
No changes made, not enough information yet	12	15	13
Day/visit limits were implemented or changed	10	34	14
Employee cost-sharing was increased	1	2	1
Changes were made in administration or utilization management	1	2	1
Other changes were made	1	3	1

Unweighted N = 882
Note: More than one response could be chosen, therefore, percentages do not add to 100.
Source: 1998 Mercer/Foster Higgins National Survey of Employer-sponsored Health Plans