Bazelon Center Mental Health Policy Reporter

Welcome to the Bazelon Center Mental Health Policy Reporter. Available exclusively online and to our email subscribers, the Reporter supplements the Bazelon Center's Action Alerts by providing a periodic bulletin on significant policy developments that affect people with mental illnesses.

Volume VII, No. 7, October 16, 2008

110th Congress Brings Victories for People with Mental Disabilities

In this issue

• Mental Health and Addiction Parity Signed by the President
• Criminal Justice Collaborations Improved
• Medicaid Services Restoration Act Introduced

Newsbytes

• Mental Health Services Funding Delayed
• Foster Care Adoption Incentives Enacted
• Americans with Disabilities Act Amended

Before recessing for the November elections, the 110th Congress claimed a major victory by passing long-awaited mental health parity legislation. This huge accomplishment represents notable progress in addressing the list of needed mental health care policy reforms. Lawmakers also voted to improve collaboration between state criminal justice and mental health systems and took steps to restore Medicaid’s vital rehabilitation and case management services.

With a new Congress and new Administration next year, advocates will continue their work to advance issues of importance to people with mental disabilities. These include protecting and improving Medicaid and SCHIP, modifying juvenile justice programs and the No Child Left Behind mandate to require positive behavioral support, and work on badly needed reform of the healthcare system.

Mental Health and Addiction Parity Enacted 

A sweeping law to mandate parity for mental health and substance abuse services in private health insurance has been enacted and will go into effect in January 2010.1  The law is estimated to help improve coverage for approximately 113 million Americans.  Today, many health plans fail to provide as much coverage for mental health or substance abuse services as they do for other health care.

The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, named for two Senators who advocated tirelessly against discriminatory mental health coverage, was included in the $700-billion financial bailout bill entitled the Emergency Economic Stabilization Act of 2008 (pages 310-244) and signed into law on October 3, 2008 (Public Law 110-343). This summary explains how this law will affect insurance coverage of mental health and substance abuse services, how the federal law relates to state parity laws and other important provisions.

Benefit Requirements

The new law requires large group health insurance plans2 that include coverage for mental health or substance use disorders to provide these benefits at parity with the plans’ medical/surgical benefits. Small groups and individual policies are not included.  For large plans, the financial requirements and treatment limitations (if any) must be the same for mental health/substance abuse as for medical/surgical care. The law prohibits inequitable coverage with respect to co-payments, coinsurance, deductibles, out-of-pocket expenses, number of covered visits and days of coverage, or other similar restrictions on the scope or length of treatment.

Specifically, group health plans covered by the law are prohibited from requiring more restrictive cost-sharing for mental health/substance use benefits than the predominant (or most common) financial requirement applied to medical/surgical benefits. The same rule holds true for any treatment limitations, such as the frequency of treatment, number of visits or days of coverage, or other similar restrictions on the scope or duration of treatment. A plan may not have any treatment limitations applicable to mental health or substance use disorder benefits that are not applicable to medical or surgical benefits. These requirements apply individually to a plan’s separate benefit packages.

If the plan provides out-of-network coverage for medical/surgical benefits, it must provide out-of-network coverage, at parity, for mental health/substance use disorder benefits.

This new law builds on the Mental Health Parity Act of 1996 (Public Law 104-204), which mandated parity for lifetime and annual dollar limits. In addition to the requirements in this law, the parity provisions of the 1996 Act will remain in effect. The sunset date in that law (extended several times) is eliminated, effective January 1, 2009.

Plans are given discretion to determine which mental health and substance disorders to cover and they retain the ability to make determinations about coverage based on medical necessity in a particular case. Medical-necessity criteria used by the plan for mental health/substance use disorder benefits must be shared with the beneficiary (current or potential) and contracting providers upon request. Additionally, the explanation for any payment denials for mental health/substance use services must also be available to the beneficiary upon request.

Exemptions

There are two principal exceptions to the parity requirements, one for small employers and one for cost increases. The small-employer exemption excludes from the parity requirements any plans of smaller employers (those with fewer than 50 employees). State parity laws, where relevant, would continue to apply to these employers’ plans.

This legislation is not expected to significantly increase the cost of health insurance coverage. The Congressional Budget Office estimated that it could raise health insurance premiums by 0.4% a year. However, the law includes a provision that allows plans to be exempt from its requirements if they experience a 2% or more increase in their total plan costs during the first plan year of implementation or 1% or more of total plan costs during subsequent plan years. This exemption is only for the following plan year and only lasts for that one year. In order to claim the exemption, the health plan must have complied with the parity requirements for the first six months of the plan year in question.

The cost exemption must be based on actual claims data from at least six months’ implementation of the parity provisions;  it cannot be an estimate of future costs. The cost increase must be documented in a written report by an actuary who is certified, licensed and a member in good standing of the American Academy of Actuaries. The report and all relevant documentation relied upon by the actuary must be maintained by the health plan or insurance issuer for at least six years.

For plans electing the cost exemption:

• Notification must be made to the appropriate Department (Labor or HHS) depending on the type of plan (Labor for self-funded, HHS for fully insured), the appropriate state agencies and beneficiaries.This notification will provide a description of covered lives in the plan and actual total costs of coverage for which the exemption is sought.
• The exemption applies for the following plan year and only for one year.
• Notification must be given to participants of a change in their benefits if a plan drops mental health and/or addiction coverage because they qualify for the cost exemption.
• The Departments of Labor and HHS (and the state) may audit a plan for compliance.

These notifications and reports to the federal agencies must remain confidential. However, an agency must make available, on request, an itemization of notifications (without identifying the plans) as well as a summary of the data included within the notifications. Such anonymous itemizations should not be made available more than once annually.

Jurisdiction and Enforcement

The law amends the Internal Revenue Code (IRC), the Employee Retirement Income Security Act of 1974 (ERISA) and Public Health Service Act (PHS) and therefore is subject to the jurisdiction of the Departments of Labor, Treasury and Health and Human Services. Thus,

• The Treasury Department can subject a health plan that fails to comply with these provisions to an excise tax, per the IRS Code.
• The Secretary of the Department of Labor has enforcement authority under ERISA (for self-insured or self-financed plans).
• For non-ERISA plans, consumers may pursue available enforcement mechanisms through any applicable state law.
• States have enforcement power with respect to health insurance issuers (i.e., non-ERISA plans). However, if a state does not substantially enforce any provisions that apply to issuers under its insurance laws, the Department of Health and Human Services (HHS) will enforce through the imposition of civil money penalties. The Secretary of HHS cannot enforce action against any group health plan, except for certain state and local governmental plans.

Status of State Parity Laws

State parity laws have limited reach because they cannot apply to ERISA plans. This new parity law does apply to ERISA plans and will not supersede3 state parity laws that provide stronger protections and rights for individuals with respect to their mental health or substance abuse coverage. This is accomplished by applying the preemption rule in the Health Insurance Portability and Accountability Act of 1996 (“HIPAA," Public Law 104-191).

The impact of the federal parity statute depends on an analysis of whether the particular provision of the State law is more or less stringent than the federal parity statute.4

This provision works, for example, like this:

• State laws that address mental health coverage in plans that are not affected by the federal law (that is, individual health insurance plans or plans of employers with fewer than 50 employees) will remain in force.
• State laws that mandate coverage for mental health services in health plans but require only a limited benefit will be overridden. Plans covered by that state law will have to provide mental health benefits (under the state law), and provide them at parity as defined in the federal law;
• State laws that mandate parity for certain specific mental health diagnoses will be overridden. Diagnoses covered under these state mandates will be those defined by the health plans, as under the federal law;
• State laws only requiring that if a plan includes mental health benefits it must include a specified minimum level of benefits will be overridden by the new federal law (within the constraints in the law, summarized here—such as size of employer, parity benefits only if the plan includes mental health coverage, etc.).

It will be important for consumers to contact their state insurance commissioner’s office for information on the specifics of their own state’s parity law. A chart of the state parity laws as of 2007 can be found at http://www.bazelon.org/issues/insurance

Relationship to SCHIP and Medicaid

The parity law applies to State Children's Health Insurance Program (SCHIP) plans and to Medicaid managed care plans, as required under the Balanced Budget Act of 1997 (Public Law 105-33). However, some SCHIP plans could still provide substantially less mental health coverage than medical/surgical. This will occur if a state chooses not to include mental health services in the SCHIP plan, as allowable under SCHIP law.

Effective Date and Regulations

Most plans will need to comply with the law beginning on or after January 1, 2010 (the effective date of the law is the beginning of the plan year one year after the date of enactment, October 3, 2008).

The Departments of Labor, Treasury and Health and Human Services will issue regulations implementing the law and must do so no later than one year after enactment, or by October 2009. The Secretaries of the three departments must ensure coordinated implementation and enforcement and avoid duplication of their rules through the execution or revision of an interagency memorandum.

Studies, Reports and Notices

The law requires the Government Accountability Office to conduct a study within three years of enactment that analyzes specific patterns, rates and trends in coverage and exclusion of mental health and substance use disorders by health insurance and health plans. The study should include specific coverage rates for specific mental health and substance use disorder diagnoses and the impact of covering or excluding them, as well as the effect of regulations on coverage and exclusion trends, and information about which diagnoses are most often covered and excluded. A second report must be submitted two years from the submission of the first.

By 2012 and every two years thereafter, the Secretary of Labor must submit a report to Congress regarding the compliance of ERISA group plans with the requirements of the law. The report should include results of audits or surveys on compliance of group health plans and an analysis of the reasons for failures in compliance.

In cooperation with the Secretaries of Health and Human Services and Treasury, the Secretary of Labor must publish and widely disseminate guidance and information about the requirements listed above to group health plans, participants, beneficiaries, applicable state and local regulatory bodies, as well as the National Association of Insurance Commissioners. These Department must also provide assistance to these recipients and include information in the materials regarding access to such assistance.

For many years, people needing mental health and substance abuse services have struggled because of the limited coverage for these services in their health plans. Studies of the impact of parity provisions in other situations show that consumers benefit considerably, particularly in the level of out-of-pocket costs they are expected to pay in order to receive needed treatment.

This new law is expected to make a substantial difference in the affordability of mental health and substance abuse services and is likely also to expand their availability. The many sponsors of the legislation--and the advocates who worked tirelessly for more than a dozen years to pass the bill--are to be congratulated.

Mental Health and Criminal Justice Collaboration Grants Improved

Congress renewed and improved the Department of Justice’s grant program that funds collaborations between mental health and criminal justice programs to help break the cycle of recidivism among offenders with mental illnesses. On September 29, it enacted the Mentally Ill Offender Treatment and Crime Reduction Reauthorization and Improvement Act (S. 2304).

The grant program is designed to help states and localities address the growing rate of incarceration of people with mental illnesses by providing the flexibility to develop collaborative mental health and criminal justice responses to offenders who have mental illnesses. (See the Bazelon Center’s overview of the original legislation.) Planning and implementation grants are awarded to create or expand programs that intervene at any point in the continuum of criminal justice contact (pre-booking, post-booking, mental health courts and other court-based approaches, re-entry and transitional programs). Such programs also include crisis-intervention teams and law-enforcement training.

The five-year grant (expires in 2014) is authorized for $50 million each year. Its expanded law-enforcement provisions allow for the development of specialized receiving centers to assess individuals in custody of law-enforcement staff for suicide risk and mental health and substance abuse treatment needs; improved technology, including computerized information systems to provide timely information that will improve the response by law enforcement and criminal justice system personnel to mentally ill offenders; and programs that offer campus security personnel training to identify and respond appropriately to incidents involving individuals with a mental illness.

The new law also authorizes a $2 million DOJ study and report on the prevalence of people with serious mental illnesses in the criminal justice system (probation, parole, jail and prison) and also those individuals receiving federal disability benefits. This report is to be completed within 3 years.

The original grant program, enacted in 2004, was set to expire next year. It was funded at $5 million in fiscal years 2006 and 2007 and $6.5 million in fy 2008. Congress passed a continuing resolution for fy 2009, which began October 1, to keep the government operating until March—allowing the next Congress and Administration to finalize funding. Accordingly, the program is operating under fy 2008 funding levels.

President Bush signed S. 2304 on October 14th.

Medicaid Services Restoration Act Introduced

Senator Debbie Stabenow (D-MI) introduced S. 3611, the Medicaid Services Restoration Act of 2008 on September 26. The legislation aims to improve the provision of Medicaid’s rehabilitation services and case management and targeted case management services.

The bill follows up on the welcomed moratorium enacted June 30 in the Iraq war supplemental appropriations bill (P.L. 110-252) (see the Bazelon Center’s July 7 Alert) that delays until April 1, 2009 implementation of harmful Medicaid rules issued by the Centers for Medicaid and Medicare Services (CMS). The Bazelon Center, in coalition with other national disability advocacy organizations, vigorously fought these rules and applauds Senator Stabenow’s leadership on introducing legislation to address them and improve these important Medicaid services.

The Medicaid Services Restoration Act would:

• Create a new service category to finance therapeutic foster care for children with serious mental and emotional disturbances. Therapeutic foster care is the least restrictive form of an out-of-home placement for children with serious mental disorders that would keep children in their home community. Trained surrogate parents provide a structured, therapeutic environment where children receive intensive individualized Medicaid psychiatric rehabilitation services and learn coping skills and how to manage the symptoms of their illness.
  
  
• Help individuals with disabilities attain and retain functional skills by authorizing “habilitation” services under the rehabilitation option.
  
  
• Allow states to use bundled rates to pay for services through the rehabilitation option instead of, as CMS insists, accounting and billing for services through 15-minute increments. Although not specifically described in the rehabilitation regulation, this denial of payment through daily rates, case rates and similar arrangements severely restricts providers’ ability to provide evidence-based practices like assertive community treatment and multi-systemic therapy. S. 3611 also permits efficient and reasonable payment methodologies under the case management and targeted case management option.
  
  
• Authorize Medicaid to pay for physical health care for children who are placed in a 24-hour psychiatric hospital or psychiatric residential treatment center that provides Medicaid psychiatric inpatient services for children under 21. This change addresses CMS’ claims that Medicaid law applies only to the provision of mental health services to children in these facilities in contradiction of Medicaid’s EPSDT requirement that a Medicaid-eligible child receive all medically necessary services under a State plan.
  
  
• Clarify the standard Medicaid rules on third-party liability for diagnostic, screening, preventive and rehabilitative services and also with case management and targeted case management.
  
  
• Codify the Olmstead case management standard included in sub-regulatory guidance that permits 180 days of intensive case management services for Medicaid beneficiaries with a disability who are transitioning from institutions to the community.
  
  
• Authorize states to assign case managers to individual Medicaid beneficiaries, including multiple case managers.

Upon introduction the legislation was referred to the Senate Finance Committee, where it will die upon adjournment of the 110th Congress. It will need to be re-introduced in the new Congress with hopes that the next Administration will rescind the regulations prior to the moratorium’s expiration. Then it can be a vehicle to seek remaining improvements to Medicaid.

Newsbytes

Mental Health Services Funding Delayed

Although fiscal year 2009 began on October 1, federal funding for most programs and agencies has been delayed. Unable to finalize most of the mandatory appropriations bills prior to recess and the beginning of the fiscal year, lawmakers enacted a year-end continuing resolution to keep the government operating until March 6, 2009. H.R. 2638, the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act (Public Law 110-329) was signed by the President on September 30 and will maintain most of the funding for federal programs and agencies at fiscal year 2008 levels. The next Congress and Administration is therefore left with the final funding decisions, including the programs and services administered by the Substance Abuse and Mental Health Services Administration.

Foster Care Adoption Incentives Enacted

On October 7, the President signed H.R. 6893, the Fostering Connections to Success and Increasing Adoptions Act of 2008. The legislation renews and expands the federal foster care adoption incentives program by making notable changes that value the contribution of blood relatives, such as grandparents, in caring for and raising children through guardianship and adoption. It does so by allowing relatives who adopt foster children to receive the same federal payments as non-relatives who adopt a foster care child to provide a permanent home. The law would also make children in foster care eligible to receive federal support services and benefits until age 21 and extends program benefits to American Indian tribes so they can use funds to administer foster care/adoption assistance programs. Please refer to the Child Welfare League of America at http://www.cwla.org/advocacy/adoptionhr6893summary.htm for a comprehensive summary of all the noteworthy changes included in HR 6893.

Americans with Disabilities Act Amended

On September 25, 2008, the President signed the ADA Amendments Act of 2008, expanding the definition of disability in the Americans with Disabilities Act and making it easier for people with disabilities to obtain protection against disability-based discrimination. The result of unusual cooperation between the disability and business communities, the amended law specifically overturns Supreme Court decisions that have caused many people with disabilities whom Congress intended the ADA to cover to lose important protection. It rescues people with psychiatric disabilities from the Catch 22 in which judicial rulings left them—that when medications reduce their symptoms, however temporarily, many no longer qualified for protection as ‘people with disabilities’ under the ADA. For more, see the Bazelon Center’s statement.

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1 The effective date for the parity law is the beginning of the plan year one year after the date of enactment (October 3, 2008) which for most plans will be on or after January 1, 2010.

2 With the exceptions described in this summary, the law applies to group health plans, including ERISA self-insured or self-funded plans, health-maintenance organizations, health insurance plans and some governmental plans. In this summary, the term "health plan" is used to connote all plans covered under the law.

3 Under the Supremacy Clause of the U.S. Constitution, federal law preempts State law when preemption is the clear and manifest purpose of Congress. In instances where the purpose of Congress is not clear, only the judicial branch of government can determine whether a federal law preempts a State law under the Supremacy Clause.

4 One might also argue that a state law could be subject to attack on non-severability grounds if a court finds that the parity law preempts such a substantial and integral portion of the state law as to render the entire state statute invalid. However, courts have routinely applied the section of HIPAA upon which the parity law preemption is based to preempt portions of state statutes without invalidating the entire state statute.

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