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Mental Health Parity Act of 1996 (MHPA)

This topic provides information about the Mental Health Parity Act of 1996 (MHPA), one of the amendments to the Health Insurance Portability and Accountability Act of 1996 (HIPAA).

You can read this topic sequentially, or click one of the links below to jump to a specific section:

·               Summary

·               Questions and Answers

·               Interim Rules

·               Statutory Text and Transition Notices

Summary

Overview

The Mental Health Parity Act of 1996 (MHPA) is a federal law that may prevent your group health plan from placing annual or lifetime dollar limits on mental health benefits that are lower - less favorable - than annual or lifetime dollar limits for medical and surgical benefits offered under the plan. For example, if your health plan has a $1 million lifetime limit on medical and surgical benefits, it cannot put a $100,000 lifetime limit on mental health benefits. The term "mental health benefits" means benefits for mental health services defined by the health plan or coverage.

Although the law requires "parity," or equivalence, with regard to dollar limits, MHPA does NOT require group health plans and their health insurance issuers to include mental health coverage in their benefits package. The law's requirements apply only to group health plans and their health insurance issuers that include mental health benefits in their benefits packages.

If your group health plan has separate dollar limits for mental health benefits, the dollar amounts that your plan has for treatment of substance abuse or chemical dependency are NOT counted when adding up the limits for mental health benefits and medical and surgical benefits to determine if there is parity.

Coverage under MHPA

MHPA applies to most group health plans with more than 50 workers. MHPA does NOT apply to group health plans sponsored by employers with fewer than 51 workers. MHPA also does NOT apply to health insurance coverage in the individual market. But you should check to see if your State law requires mental health parity in other cases.

An Example of a Coverage Provision that Violates MHPA Protection:

Your plan has a limit of 60 visits per year for mental health benefits, along with a fixed dollar limit of $50 per visit - a total annual dollar limit of $3,000. It places no similar limits on medical and surgical benefits. MHPA does NOT allow this inequality to exist for group health plans covered by the law.

Restrictions Allowed under MHPA

Group health plans may impose some restrictions on mental health benefits and still comply with the law. MHPA does NOT prohibit group health plans from:

·               Increasing copayments or limiting the number of visits for mental health benefits;

·               Imposing limits on the number of covered visits, even if the plan does not impose similar visit limits for medical and surgical benefits; and

·               Having a different cost-sharing arrangement, such as higher coinsurance payments, for mental health benefits as compared to medical and surgical benefits.

Answers to Commonly Asked Questions

Consumer Specific Questions About the Mental Health Parity Act

1) My plan has a limit of 30 visits per year on mental health benefits and pays 80 percent of the provider's usual, customary, and reasonable (UCR) charges. There is no similar visit limit on medical and surgical benefits. Is this a violation of MHPA?

No. A visit limit coupled with UCR charges is not the equivalent of an annual or lifetime dollar limit. As a result, it is NOT a violation of the MHPA requirements. Payments made by the plan on the basis of UCR charges will vary from one case to the next.

2) I am in a network plan that has an annual limit for mental health benefits received out-of-network. There are no limits for out-of-network medical and surgical benefits. Does MHPA allow this?

Yes. As long as there is parity between medical and surgical benefits and mental health benefits received in the network, then out-of-network limits do not violate MHPA

3) If a State has a law that provides stronger protections for mental health benefits than MHPA does, which law applies?

Group health plans generally are not subject to State insurance laws. State insurance laws, however, do apply to health insurance issuers, and health insurance issuers must comply with State insurance laws that provide additional consumer protections. If a group health plan provides health coverage to employees and their family members by purchasing insurance for them, health insurance issuers may be required to comply with State insurance laws that provide stronger protections than MHPA.

Employer Specific Questions about the Mental Health Parity Act

1) Is there a separate effective date for collectively bargained plans?

No. MHPA is effective for plan years beginning on or after January 1, 1998, regardless of when the plan is collectively bargained.

2) If a State has its own parity law that is more liberal than MHPA (i.e., 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 must comply with the Federal parity requirements, but issuers are subject to 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.

3) 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. Also, parity does not apply to any policies sold in the individual market.

4) 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.

5) 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.

6) 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. 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.

7) 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 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.

8) What kind of costs can be used in making this one percent increased cost determination?

The costs may include claims incurred during the six months 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.

9) 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.

10) 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 below.

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.

11) Must self-funded nonfederal governmental plans comply with MHPA?

Self-funded nonfederal governmental plans may choose to be exempted from the parity provisions if the election complies with the requirements of the Federal regulations at 45 CFR 146.180.

12) 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. 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.

13) Do all group health insurance policies have to include parity?

No, but a health insurance issuer can only sell a non-parity policy to a plan that is exempt from the parity provisions of the law. Also, MHPA does not apply to any policies sold in the individual market.

Interim Rules

Interim rules implementing the MHPA were published on December 22, 1997. The rules clarify that a plan or insurer applies annual or lifetime dollar limits on "substantially all" medical/surgical benefits if such limits apply to at least two-thirds of all such benefits. The rules specify how a plan or insurer must calculate whether the portion of medical/surgical benefits subject to a limit represents one-third or two-thirds of all medical/surgical benefits. The results of this calculation will determine how a plan or insurer that offers medical/surgical and mental health benefits must apply any annual or lifetime dollar limits.

A plan or insurer offering separate benefit packages must apply these rules separately to each package. These rules apply regardless of whether mental health benefits are administered separately under the plan.

These rules explain how an insurer or plan is to calculate whether the requirements of the MHPA increase costs by at least one percent, which would qualify a plan/insurer for an exemption. The rules also explain how a plan or insurer must notify participants and beneficiaries of the one percent cost exemption. A plan meeting the exemption requirements may change insurers without having to again meet the exemption requirements.

The rules generally apply to plan years beginning on or after January 1, 1998, although there are certain limits on the government's ability to take enforcement actions against health plans with respect to MHPA.

Statutory Text and Transition Notices

The Mental Health Parity Act is a Federal law, the text of which can be found at the MHPA Statutory Text link below.

The Mental Health Parity Act permits plans to opt out of its requirements if to comply would increase the plan's costs by at least one percent. The MHPA's rules state that no enforcement action will be taken against a group health plan based on a violation that occurs before April 1, 1998, solely because the plan claimed the increased cost exemption based on assumptions that were inconsistent with the opt-out rules published in the December 22, 1997, rules. However, for a plan to gain such protections, it must have adopted a plan amendment meeting certain requirements by March 31, 1998, and have notified the appropriate Federal agency by March 31, 1998. Nonfederal governmental plans were directed to notify the Department of Health and Human Services. A list of such plans that had notified HHS of their decision to use the transition period can be found at the Transitional Notices from Nonfederal Plans link below.

See Also:

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) - Overview

Source

Information in this topic was drawn from pages of the Centers for Medicare & Medicaid Services' Health Insurance Portability and Accountability Act of 1996 (HIPAA) website at:
http://www.cms.hhs.gov/HealthInsReformforConsume/04_TheMentalHealthParityAct.asp

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