Federal parity law is on verge of implementation

A new law requiring parity for mental health and addiction services takes effect on January 1, 2010

by Government Relations Staff

November 23, 2009 — The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act (the Wellstone-Domenici Parity Act) of 2008 takes effect on January 1, 2010. This article highlights a few key aspects of the law and is accompanied by a comprehensive question-and-answer guide (PDF, 118 KB).

The Wellstone-Domenici Parity Act requires equity in health insurance coverage for mental health/substance use benefits compared to medical/surgical benefits for group health plans with more than 50 employees. Historically, health plans have applied higher patient cost-sharing and more restrictive treatment limitations to mental health and substance use benefits compared to physical health benefits. The 2008 federal parity law ends this practice.

The parity law being implemented in January does not require a health plan to provide mental health and substance use benefits. But if the plan does provide such coverage, it must be at parity with physical health coverage. Given the nominal estimated impact of the parity law on health plan premiums (an average increase of approximately 0.4 percent, according to the Congressional Budget Office, or CBO), we do not expect employers to drop mental health benefits coverage in order to evade the new law.

Just as under the 1996 Mental Health Parity Act, the Wellstone-Domenici Parity Act allows a health plan to manage mental health and substance use benefits under the terms and conditions of the plan. Some health plans may react to the new parity requirement by making adjustments to their benefits management in order to meet the new coverage requirements.

Further, the new law provides for an exemption based on cost. After complying with the new law in 2010, if a group health plan has experienced an increase of 2 percent or more in actual total costs with respect to medical/surgical and mental health/substance use benefits, the plan can be exempted from the law if it so chooses. Based on their cost experience beginning in 2011, health plans can elect to seek an exemption if costs increase 1 percent or more. If a plan obtains an exemption, it would still provide mental health benefits — just not at parity with physical health benefits.

The exemption is limited. A health plan may exempt itself only for one year, and then must again comply with the parity requirement in the following year.

Given the limited duration of the exemption and that few plans are expected to meet the cost exemption threshold, it is unlikely that many plans will seek this exemption.

The question-and-answer guide provided in PDF format at the end of this article addresses many more aspects of the Wellstone-Domenici Parity Act. 

We will continue providing members with information and guidance as federal agencies publish regulations to implement the new law early in 2010.