Health Insurance and Mental Health Parity

For many years, health insurance covered medical illnesses, but provided little coverage for mental illnesses. In recent years, state and federal legislation has required that health insurance provide the same level of coverage for mental illness that it provides for medical illnesses, but complete mental health parity has not yet been achieved.

A review of mental health parity laws demonstrates that, while progress has been made, there are still gaps in health insurance coverage in many cases.

Existing Laws Covering Health Insurance And Mental Health Parity

The federal Mental Health Parity Act, which was signed into law in 1996 and renewed in 2002, provides for parity in the application of aggregate lifetime and annual dollar limits on mental health insurance benefits with dollar limits on medical and surgical benefits.

In addition, 34 states have mental health insurance parity laws that supplement the provisions of the federal law. State mental health insurance parity laws are needed, according to parity advocates, because federal law does not go far enough.

Gaps In Mental Health Parity Laws

In spite of the Mental Health Parity Act:

• Health insurance plans are not required to provide coverage for mental health.
• The Mental Health Parity Act does not apply to health insurance coverage of substance abuse or chemical dependency.
• Parents sometimes have to give up custody of children with mental illness so that they can receive full health insurance coverage for their children through Medicaid.
• Health insurance plans continue to set terms and conditions for the amount, duration and scope of mental health benefits, such as cost-sharing and limits on the number of visits or days of coverage.
• If the cost of complying with the Mental Health Parity Act increases a group health insurance plan's costs by 1 percent or more, the plan can claim an exemption from the requirements of the Mental Health Parity Act. Once a health insurance plan qualifies for the exemption, it never has to comply with the mental health parity requirements of the federal law.

Grassroots efforts are taking place in many states to strengthen mental health insurance parity laws. In New York, for example, efforts are being made to pass Timothy's Law, which would be among the strongest mental health insurance parity laws.

Timothy's Law and Mental Health Parity

Timothy's Law refers to legislation being considered in New York State that would provide mental health insurance parity beyond what is provided by the Federal Mental Health Parity Act.

Timothy's Law would require that health insurance carriers and HMOs provide coverage for mental health and substance abuse services that is on par with other health insurance coverage provided by the policy.

Currently, in spite of the federal law, private health insurance typically limits the amount of coverage provided for mental health and substance abuse treatment, or requires additional co-payments.

Supporters of Timothy's Law argue that:

• Lack of health insurance parity is discriminatory
• Lack of health insurance parity is dangerous
• Health insurance parity would help keep families together
• Health insurance parity is cost effective

About Timothy's Law

Timothy's Law is named for Timothy O'Clair, a 12-year-old who hanged himself after his family spent nearly five years seeking treatment for his emotional disorder.

His parents sought help for their son for six years, and believe he would be alive today if health insurance covered mental health and substance abuse the same way it covers medical illnesses.

The Cost of Timothy's Law

Supporters of Timothy's Law cite a 2002 report by PricewaterhouseCoopers showing that, based on a study of similar mental health insurance parity legislation in 34 other states, Timothy's Law would cost only $1.26 per insured person each month to implement.

They also argue, though, that Timothy's Law could save more than it costs.

Because of the way existing health insurance regulations are written, many parents, including the parents of Timothy O'Clair, give up custody of their children so they can qualify for full mental health coverage through Medicaid. Such coverage costs hundreds of thousands of dollars a year, because it includes not only health insurance, but the costs of housing, education and other living expenses. Supporters of Timothy's Law say it would cost less to keep children with their parents.

Supporters of Timothy's Law also argue that mental illness costs billions of dollars a year in lost productivity, and that treating it would help both those with mental illness and their families to be more productive. The Journal of the American Medical Association estimates that depression alone costs more than $44 billion in lost productivity.

Enactment of Timothy's Law, supporters say, would help remove the stigma associated with mental illness, and would better enable those with mental illness and their families to live full and productive lives.

Click here for a recent article on mental health parity.