Organization & Financing

SAMHSA Study Shows Impact of Mental Health Parity Act Largely Positive

The Substance Abuse and Mental Health Services Administration (SAMHSA) today reported substantial progress in closing the gap in group health benefits for physical illness and for mental disorders following enactment of the Mental Health Parity Act of 1996.

The Mental Health Parity Act went into effect in January 1998 and sought to establish the same benefits level for coverage of mental health and medical/surgical treatments and services. According to the report, Background Report: Effects of the Mental Health Parity Act of 1996, the majority of those employers who made changes to comply with the Act stated that it did not increase their costs or require major changes to other benefits provisions. In addition, about half of those employers affected were already in compliance prior to the law becoming effective in January 1998. The study also noted an unintended positive effect of improving benefits covering substance abuse.

"This report offers highly encouraging evidence that establishing parity between group health plan benefits for people with physical ailments and people with mental disorders is now widely accepted by this nation's employers," said SAMHSA Administrator Nelba Chavez, Ph.D. "Equally encouraging is the finding that, even before the Mental Health Parity Act had taken effect, many employers had already taken the initiative to provide mental health services benefits to their employees, including coverage of substance abuse treatment."

"The Mental Health Parity Act has helped create a more level playing field for recipients of group mental health benefits," said Bernard S. Arons, M.D., Director of SAMHSA's Center for Mental Health Services (CMHS). "This report clearly indicates that implementation of the Act is not placing an undue hardship on employers."

The new SAMHSA report is based on data from the Mercer/Foster Higgins "National Survey of Employer-Sponsored Health Plans," analyzed under a SAMHSA contract supported by CMHS and the Center for Substance Abuse Treatment (CSAT). This survey collects information on a wide range of issues concerning employer health plans, including costs, strategic planning, scope, and limitations of health coverage. In 1998, this survey included questions on employers' responses to the Mental Health Parity Act of 1996.

Under the Act, group health plans providing both medical/surgical and mental health benefits may not impose a lifetime or annual dollar limit on mental health benefits that is less than that applied to its medical/surgical benefits. The law expires on September 30, 2001.

Group health plans and health insurance coverage offered in connection with group health plans, are not required by the Act to provide mental health benefits. In addition, the Act does not affect other terms and conditions, including cost sharing and limits on visits or days relating to the amount, duration, or scope of mental health benefits. Provisions of the Act do not extend to benefits for substance abuse or chemical dependency. Employers with 50 or fewer employees are exempt from the Act. A plan may be exempted from the Act if, after one year of implementation, plan costs increase at least one percent.

The Mercer/Foster Higgins survey was mailed to a random sample of all employers, with 10 or more workers, who offer a health insurance benefits plan. Only employers for whom the parity law directly applies were included in the data analysis. For private firms in the survey, a random sample in eight size categories was drawn from the Dun & Bradstreet database. All state governments were included. A random sample of county and local governments was also included.

Major findings of the study include:

Nearly half of those employers subject to the Act were already in compliance before the January 1, 1998 effective date.
Slightly more than a quarter of the respondents retained separate mental health limits, but raised them, or included mental health expenses with other expenses in determining annual or lifetime dollar limits.
There had been concern in the mental health community that Mental Health Parity Act and similar parity mandates might result in employers dropping mental health coverage altogether, or increasing other limits in compensation. The report indicates, however, that only a small proportion of employers took such actions.
Among employers who made changes as a result of the Act, the large majority (86 percent) indicated that they made no compensatory changes to their benefits, primarily because expected cost increases were judged minimal or nonexistent.

CMHS and CSAT are components of the Substance Abuse and Mental Health Services Administration (SAMHSA). SAMHSA, a public health agency in the U.S. Department of Health and Human Services, is the federal government's lead agency for improving the quality and availability of substance abuse prevention, addiction treatment, and mental health services in the United States. This news release is available on SAMHSA's web page at http://www.samhsa.gov/

CMHS 03-99