Mental Health Parity Act
Despite New Federal Standards, Mental Health Benefits Remain Limited

Results in Brief

Most employers responding to our survey reported that they are complying with the federal mental health parity law, but because of its narrow scope and reductions in mental health benefits that the employers have made to offset the required enhancements, compliance may have little effect on employees access to mental health services. Eighty-six percent of the responding employers in the 26 states and the District of Columbia reported that as of December 1999 their plans were in compliance with the federal parity requirement that annual and lifetime dollar limits for mental health benefits be no more restrictive than those for all medical and surgical benefits. Our survey found that 14 percent of plans were noncomplianta noncompliance rate similar to Labors preliminary estimates based on investigations of employer-sponsored plans. In contrast, in 1996 before the parity law was enacted, only about 55 percent of responding employers reported offering parity in dollar limits. Many responding employers cited the federal Mental Health Parity Act as a significant or primary reason for changing the dollar limits in their health benefit plans.

Although most employers plans now have parity in dollar limits for mental health coverage, 87 percent of those that comply contain at least one other plan design feature that is more restrictive for mental health benefits than for medical and surgical benefits. For example, about 65 percent of plans restrict the number of covered outpatient office visits and hospital days for mental health treatment further than those for other health treatment. In addition, many employers may have adopted newly restrictive mental health benefit design features since 1996 specifically to offset the more generous dollar limits they adopted as a result of the federal law. About two-thirds of these newly compliant employers changed at least one other mental health benefit design feature to a more restrictive one compared with only about one-fourth of the employers that did not change their dollar limits.

While most employers have not examined changes in their plans claims costs, the federal parity law appears to have had a negligible effect on claims costs. Only about 3 percent of responding employers reported that compliance with the law increased their claims costs, and virtually no employers have dropped their mental health benefits or health coverage altogether since the law was enacted. In addition, published estimates of the cost of federal parity are typically less than 1 percent. More comprehensive parity laws as enacted by some states are generally estimated to have higher but modest cost increases of about 2 to 4 percent.

Federal agencies have made varying progress in performing their oversight roles under the parity law. Labor is in the process of expanding its oversight role to include not only the complaint-driven approach used in its oversight of private employer-sponsored health plans but also one that in the future may include randomly selected employer investigations to gauge overall compliance with parity and other federal standards. HCFA has not yet fully determined the nature and extent of its oversight responsibilities. Before it can exercise an oversight role, it must first identify states that are not enforcing the federal standards. HCFA initially identified seven states that appeared not to have a parity law. As of May 2000, HCFA reported that four of these states are enforcing the federal standards through conforming legislation or other means and that it is still working with the three other states to assist them in enacting similar protections. HCFA has determined that laws in 20 states appear to fully conform to the federal standards and is still evaluating whether laws in the remaining 24 states fully conform to the federal standards.

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