There are two important federal laws that govern mental health benefits. The Mental Health Parity Act was passed in 1996 and the Mental Health Parity and Addiction Equity Act was passed in 2008. The Mental Health Parity and Addiction Equity Act largely superseded the Mental Health Party Act, but you will still hear the phrase “Mental Health Parity Act” (often because people refer to the collection of the two laws as Mental Health Parity).
Mental Health Parity Act (MHPA)
The Mental Health Parity Act was passed in 1996 and required that annual or lifetime dollar limits on mental health benefits be no lower than any such dollar limits for medical and surgical benefits offered by a group health plan or health insurance plan. Prior to the law’s passing, plans typically offered limited coverage for mental health issues. Importantly, the law allowed employers to retain discretion as to whether mental health benefits were offered under the policy at all.
The law did not apply to benefits for substance abuse or chemical dependency. The law contained three exemptions to the parity rules:
Policies that chose to not provide any mental health coverage
Employers who employed an average of between 2 and 50 employees on business days during the preceding calendar year
Employers that documented at least a 1% increase in premiums due to implementation of mental health parity requirements
Mental Health Parity and Addiction Equity Act (MHPAEA)
The Mental Health Parity and Addiction Equity Act was passed in 2008. The main purpose of the law was to close the loopholes left by the Mental Health Parity Act.
The law does not require plans to offer mental health benefits. Rather, the law requires that if health insurers and group health plans provide medical/surgical benefits and mental health benefits, the benefits provided must be functionally equivalent. Specifically, the financial requirements (deductibles and co-payments) and any treatment limitations that apply to mental health benefits must be no more restrictive than the predominant financial requirements or treatment limitations that apply to substantially all medical/surgical benefits. Likewise, if the plan includes substance use disorder benefits, the financial requirements and treatment limitations for substance use disorders must also be equivalent to coverage for other conditions.
Small employers are exempt from this law. This includes employers who employed an average of between 2 and 50 employees during the preceding calendar year.