Mental Health Parity Laws

Mental health parity laws are laws requiring that coverage for mental illnesses be on par with coverage for medical illnesses.

While mental health parity laws have been approved by Congress and by many states, existing laws do not provide universal mental health parity. A review of mental health parity laws demonstrates that, while progress has been made, there are still gaps in coverage in many cases.

Existing Mental Health Parity Laws

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 benefits with dollar limits on medical and surgical benefits.

In addition, 34 states have mental health parity laws that supplement the provisions of the federal law. State mental health 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 plans are not required to provide coverage for mental health.
• The Mental Health Parity Act does not apply to 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 coverage for their children through Medicaid.
• Health 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 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 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 parity laws. In New York, for example, efforts are being made to pass Timothy's Law, which would be among the strongest mental health 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 parity beyond what is provided by the Federal Mental Health Act.

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

Currently, in spite of the federal law, private 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 parity is discriminatory
• Lack of parity is dangerous
• Parity would help keep families together
• 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 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 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 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 also includes 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.