Mental Health Parity Bill Clears Committee

April 1, 2007

Senate committee passage of a landmark bill (S. 558) expanding mental health coverage requirements for employers may have hit its first roadblock.

Senate committee passage of a landmark bill (S. 558) expanding mental health coverage requirements for employers may have hit its first roadblock. Sen Christopher Dodd (D, Conn) wants the Senate to vote on an amendment that would allow states to override some requirements in the Mental Health Parity Act of 2007. The bill, which passed the Senate Committee on Health, Education, Labor, & Pensions on February 14 by a vote of 18-3, preempts state laws.

Psychiatrists, the National Alliance on Mental Illness, the National Association of Psychiatric Health Systems, and other advocacy groups have been trying for a decade to expand the mental health mandates included in a 1996 law. That law requires companies with more than 50 employees to offer the same annual and lifetime dollar limits for mental health expenses as they do for other medical expenses. The Mental Health Parity Act of 2007 would expand that parity dictate by applying it to deductibles, copayments, out-of-pocket expenses, coinsurance, covered hospital days, and covered outpatient visits. As with the 1996 law, companies with fewer than 50 employees would be exempt, and the mandate would not require companies that do not provide mental health coverage to do so.

Senators Edward Kennedy (D, Mass) and Pete V. Domenici (R, NM) had introduced this bill in 2004, but that version included requirements that were considered objectionable by many business groups. In 2004, the US Chamber of Commerce, American Benefits Council, National Restaurant Association, National Federation of Independent Business, National Association of Manufacturers, National Retail Federation and other politically powerful groups, citing a report by the Congressional Budget Office, argued that that version of mental health parity would raise health costs by $23 billion over 5 years, making it 11 times more costly than simply extending the Mental Health Parity Act of 1996.

Over the past few years, Kennedy and Domenici have met with those business groups, associations representing the insurance industry, and mental health advocacy groups in an effort to forge an agreement on compromise legislation. The outcome of that effort was S. 558, which omitted a number of provisions from the 2004 bill. The new Kennedy-Domenici bill also contains a preemption of state laws on mental health parity.

However, the bill is silent on a key issue: which psychiatric conditions a company must cover if it offers mental health care. Tom Leibfried, deputy director, congressional affairs for the American Psychiatric Association, said the bill leaves it to the states to define what is protected in terms of covered diagnoses. States that cover all of DSM-IV diagnoses would be allowed to do that. States that allow a less complete range would be allowed to do that.

Dodd has not said publicly exactly what his amendment would do, except for some general comments about a more limited preemption provision. One lobbyist for a mental health group, who did not want to be quoted, could not explain where Dodd was headed. But Dodd has apparently agreed to only offer an amendment that has gotten prior approval from the business and mental health groups that agreed to S. 558. It is possible that the Connecticut Democrat may want to be more exact with language relating to covered illnesses, especially for states that specify expansive coverage. His press office did not return a call asking for clarification.

One Senate staffer, who asked for anonymity, suggested that perhaps Connecticut has a state law that is considered stronger than the Mental Health Parity Act of 2007, and Dodd wants to protect that state law. The source gave 2 other possible reasons. First, Dodd may be hoping that by offering this amendment, he will win the thanks of patient groups who would then be favorable toward his campaign for the Democratic nomination for the presidency in 2008. Second, Dodd has a friendly but competitive relationship with Sen Edward Kennedy (D, Mass), one of two sponsors of S. 558. Dodd may be jockeying with Kennedy to be recognized as the "darling of the health care set," this Senate staffer theorized.

The Dodd amendment, if it passed, would result in business groups reversing their support for the parity bill, which passed the Senate committee with their blessing. James A. Klein, president of the American Benefits Council, said, "We urge that the legislation not be amended during further consideration by the Senate or in the House. For parity legislation to succeed in Congress or in the marketplace, it must not weaken or remove any of the key employer and health plan protection provisions."

Besides the state preemption, S. 558 has a provision that allows companies with more than 50 employees to avoid complying with the law if the parity requirement causes an increase in health plan costs that exceeds 2% of the total plan costs during the first plan year or 1% of the actual total plan costs each subsequent year. The cost exemption would apply for the next plan year following determination that the cost threshold will be exceeded.

However, even if the Dodd amendment is defeated on the Senate floor-Senate leaders want the vote to take place this spring or early summer at the latest-the bill may run into a second set of difficulties in the House, where a similar bill is being sponsored by Representatives Patrick Kennedy (D, RI) and Jim Ramstad (R, Minn). Although that bill had not been introduced as of late February, House staffers involved in its drafting said the bill would be more far-reaching than the Senate bill.

The House bill is in its second draft. Sources that have reviewed it say it includes some of the features of the Senate bill, such as the "opt out" provisions for businesses if their costs exceed certain thresholds. However, it also includes some provisions not in the Senate bill-for example, one that would require companies to cover all mental health conditions listed in DSM-IV.