Tuesday, September 23, 2008

Legislative Bulletin: H.R. 6983, Paul Wellstone and Pete Domenici Mental Health and Addiction Equity Act

Order of Business:  The bill is scheduled to be considered on Tuesday, September 23, under a motion to suspend the rules and pass.

Summary:  H.R. 6983 would amend the Internal Revenue Code, the Public Health Service Act, and the Employee Retirement Income Security Act (ERISA) to require equity in the provision of mental health disorder benefits for group health insurance plans that offer both mental health benefits and medical and surgical benefits.  Previously, the Mental Health Parity Act—first enacted in 1996, and extended in subsequent legislation—required only that plans choosing to offer both mental health and medical and surgical benefits must have equal annual and lifetime limits on coverage for both types of treatments.  Specific details of the federal mandates in the bill include the following:

Treatment Limits and Beneficiary Financial Requirements:  The bill would require group health plans to offer a financial benefit structure for mental and substance abuse disorders that is no more restrictive than the predominant requirements applied to substantially all medical and surgical benefits.  The federal mandate would apply to overall coverage limits on treatment (e.g. number of days or visits) as well as deductibles, out-of-pocket limits, and similar beneficiary financial requirements.

Expansion of Definition:  The bill would expand the definition of “mental health benefits” subject to the federal mandate to include substance abuse and disorder treatments.

Medical Necessity:  The bill would permit plans to make coverage decisions for mental health and substance abuse disorders based on medical necessity criteria, but would require employers and insurers to disclose such criteria pursuant to regulations.

Out-of-Network Benefits:  The bill would mandate plans that offer out-of-network insurance coverage for medical and surgical benefits provide out-of-network coverage for mental health benefits in a manner consistent with the financial requirements listed above.

Increased Cost Exemption:  The bill would raise the level at which employers whose health insurance costs rise as a result of implementing mental health parity in benefits may claim an exemption from the federal mandate.  The bill would exempt employers whose costs due to mental health claims rise by more than 2% in the first year of implementation, and by more than 1% in subsequent years.  The more limited version of the Mental Health Parity Act first enacted in 1996 exempted employers whose claim costs rose 1%.  Employers with fewer than 50 workers would be exempt from federal mandates under the legislation, consistent with current law.

GAO Study:  The bill would require a study by the Government Accountability Office evaluating the law’s impact on the cost of health insurance coverage, access to mental health care, and related issues.

Worldwide Interest Allocation:  H.R. 6983 would delay by two years (from 2011 to 2013) the implementation of the worldwide allocation of interest, and reduces the first-year implementation of this rule.  In 2004, Congress gave taxpayers the option of using a liberalized rule for allocating interest expense between United States sources and foreign sources for the purposes of determining a taxpayer’s foreign tax credit limitation.  This is a multi-billion-dollar tax increase on Americans, taking particular aim at people who have financial dealings abroad.

Additional Background—Differences from Earlier Legislation:  On March 5, 2008, the House by a 268-148 vote passed mental health parity legislation in the form of H.R. 1424.  Subsequent negotiations with the Senate made modifications to the House-passed language that incorporated several key provisions in bipartisan Senate legislation (S. 558), and removed some provisions objectionable to conservatives.  Specifically, the compromise language in H.R. 6983:

  • Retains ERISA pre-emption for the large employers (those with more than 50 employees) subject to the law—states would not have the option of enacting more stringent and conflicting laws and regulations, as was proposed in H.R. 1424;
  • Remains silent on codifying classes of mental disorders—the compromise language removes provisions included in H.R. 1424 requiring group health plans to offer coverage for all disorders under the Diagnostic and Statistical Manual of Mental Disorders, including psycho-sexual disorders many conservatives find objectionable;
  • Does not mandate an out-of-network coverage benefit—plans must offer out-of-network coverage for mental disorders only to the extent they do so for medical and surgical benefits; and
  • Includes language stating that mental health parity provisions do not affect the “terms and conditions” of insurance contracts to the extent they do not conflict with the bill language—permitting employers and carriers to continue making medical necessity and related determinations—while requiring plans to make information on these medical management practices transparent.

While some conservatives may still have concerns with the mandates imposed by mental health parity legislation and the way in which these mandates would increase health insurance premiums, some segments of the business community have embraced the compromise as a reasonable attempt to achieve the goal of both bills without eroding ERISA pre-emption or imposing undue restrictions on benefit plan design.

Additional Background on Benefit Mandates:  Since the 1960s, state legislatures have considered—and adopted—legislation requiring health insurance products sold within the state to cover various products and services.  These benefit mandates are frequently adopted at the behest of disease groups advocating for coverage of particular treatments (e.g. mammograms) or physician groups concerned that patients have access to specialists’ services (e.g. optometrists).

A recent survey by the Council for Affordable Health Insurance found that as of 2007, states had enacted a total of 1,961 mandates for benefits and services—an increase of 60 (more than one per state) when compared to the 2006 total.[1]  The number of state mandates varies from a low of 15 in Idaho to a high of 64 in Minnesota.  However, because employer-sponsored health insurance is pre-empted from state-based laws and regulations under the Employee Retirement Income Security Act of 1974 (ERISA), benefit mandates do not apply to employers who self-fund their health insurance plans—one reason why H.R. 6983 seeks to impose those mandates on group plans (as well as state-regulated individual plans) on the federal level.

The cost and impact of benefit mandates on health insurance premiums have been the subject of several studies in recent years.  For instance, the Heritage Foundation prepared an analysis suggesting that each individual benefit mandate could raise the cost of health insurance premiums by $0.75 monthly.[2]  Although the cost of a single mandate appears small, the aggregate impact—particularly given the recent growth of benefit mandates nationwide—can be significant: For instance, Massachusetts’ 43 benefit mandates would raise the cost of health insurance by more than $30 monthly under the Heritage analysis.

Although well-intentioned, some conservatives may view the groups who advocate for benefit mandates as operating from fundamentally flawed logic: that individuals should go without health insurance entirely rather than purchase coverage lacking the “consumer protection” of dozens of mandates.  In addition, some conservatives note that the prospect of increasing the number of uninsured due to rising premium costs resulting from benefit mandates may precipitate a “crisis” surrounding the uninsured, increasing calls for a government-run health system.  In short, many conservatives may believe individuals should have the “consumer protection” to purchase the insurance plan they desire—rather than the “protection” from being a consumer by a government which seeks to define their options, and raise the cost of health insurance in the process.

Committee Action:  None; the bill was introduced on September 22, 2008.

Possible Conservative Concerns:  Several aspects of H.R. 6983 may raise concerns for conservatives, including, but not necessarily limited to, the following:

  • Process.  Multiple sources and press reports indicate that numerous stakeholders involved in negotiating the bipartisan Senate compromise have concerns with the House’s consideration of stand-alone mental health parity legislation—as opposed to its inclusion in the tax extenders package.  As recently as Monday, September 22, House Democrat leadership indicated they would not attempt to pass the mental health parity provisions separately; however, the majority later switched course.  Some conservatives may be concerned by reports indicating that this separate House vote is intended to provide “political cover” for Blue Dogs who may oppose the tax extenders bill (with mental health parity included) because it does not include enough tax increases to offset extensions of existing tax relief.
  • Tax Increase.  In order to pay for the nearly $4 billion cost of mental health parity, H.R. 6983 would delay by a further two years a provision allowing taxpayers flexibility in allocating worldwide interest for the purposes of determining a taxpayer’s foreign tax credit limitation.  Some conservatives may be concerned that this provision increases taxes on Americans in order to pay for H.R. 6983’s benefit mandates.
  • Increase Health Insurance Costs and Number of Uninsured.  As noted above, benefit mandates generally have the effect of increasing the cost of health insurance.  Moreover, some estimates suggest that every 1% increase in premium costs has a corresponding increase in the number of uninsured by approximately 200,000-300,000 individuals nationwide.[3]  Therefore, some conservatives may be concerned that H.R. 6983 will actually increase the number of uninsured Americans.
  • Private-Sector Mandates on Businesses; UMRA Violation.  As detailed above, the bill contains multiple new federal mandates on the private sector, affecting the design and structure of health insurance plans.  CBO has previously estimated that mental health parity would impose mandates on the private sector totaling $1.3 billion in 2008, rising to $3 billion in 2012, thus exceeding the annual threshold established in the Unfunded Mandates Reform Act or UMRA ($131 million in FY2007, adjusted annually for inflation).  These costs will ultimately be borne by employers offering health insurance and employees seeking to obtain coverage.

Administration Position:  Although the Statement of Administration Policy (SAP) was not available, the Administration has previously supported the goal of mental health parity—and previously opposed the worldwide interest allocation provision used to pay for H.R. 6983.

Cost to Taxpayers:  A Congressional Budget Office (CBO) score of H.R. 6983 was not available at press time.  However, CBO estimates of previously considered (H.R. 1424) mental health parity legislation noted that the bill would cost the federal government nearly $4 billion over ten years.  Direct federal outlays would increase by $820 million through increased Medicaid costs.  In addition, federal revenues would decline by more than $3.1 billion due to increases in the cost of health insurance, as employees with group coverage would exclude more of their income from payroll and income taxes.

The bill proposes to offset the costs outlined above by delaying by two years (from 2011 to 2013) the implementation of the worldwide allocation of interest, and reducing the first-year implementation of this rule. In 2004, Congress gave taxpayers, beginning in tax years after 2008, the option of using a liberalized rule for allocating interest expense between United States sources and foreign sources for the purposes of determining a taxpayer’s foreign tax credit limitation.

Does the Bill Expand the Size and Scope of the Federal Government?:  Yes, the bill would impose new federal mandates with respect to health insurance coverage requirements.

Does the Bill Contain Any New State-Government, Local-Government, or Private-Sector Mandates?:  Yes, the bill would impose significant new mandates on private insurance carriers (and large employers who self-insure their workers) with respect to the structure and design of their benefit packages.  CBO has previously estimated that the direct costs of the private-sector mandates would total $1.3 billion in 2008, rising to $3 billion in 2012, significantly in excess of the annual threshold ($131 million in 2007, adjusted for inflation) established by the Unfunded Mandates Reform Act (UMRA).

In addition, the bill would also impose an intergovernmental mandate as defined by UMRA by pre-empting some state laws in conflict with the bill, but CBO estimates that this mandate would impose no significant costs on state, local, or tribal governments.

However, costs to state, local, and tribal governments would increase under the bill, for two reasons.  First, a prior CBO cost estimate indicated that state spending for Medicaid would increase by $235 million between 2008-2012.  Second, while state, local, and tribal governments that self-insure their workers would be able to opt-out of H.R. 6983’s federal mandates, some governments that fully insure their workers (i.e. purchase coverage through an insurance carrier, as opposed to paying benefits directly) would see their costs rise under the legislation.  CBO has estimated that the bill would increase state, local, and tribal expenditures by $10 million in 2008, rising to $155 million by 2012.  However, because these increased costs result from mandate costs initially borne by the private sector and passed on to the governments while purchasing insurance, CBO did not consider them intergovernmental mandates as such.

Does the Bill Comply with House Rules Regarding Earmarks/Limited Tax Benefits/Limited Tariff Benefits?:  A Committee report citing compliance with clause 9 of rule XXI was unavailable.

Constitutional Authority:  A Committee report citing Constitutional authority was unavailable.


[1] Council for Affordable Health Insurance, “Health Insurance Mandates in the States 2008” and “Health Insurance Mandates in the States 2007,” available online at http://www.cahi.org/cahi_contents/resources/pdf/HealthInsuranceMandates2008.pdf and http://www.cahi.org/cahi_contents/resources/pdf/MandatesInTheStates2007.pdf, respectively (accessed July 19, 2008).

[2] Michael New, “The Effect of State Regulations on Health Insurance Premiums: A Revised Analysis,” (Washington, Heritage Center for Data Analysis Paper CDA06-04, July 25, 2006), available online at http://www.heritage.org/Research/HealthCare/upload/CDA_06-04.pdf (accessed July 19, 2008), p. 5.

[3] See, for instance, Todd Gilmer and Richard Kronick, “It’s the Premiums, Stupid: Projections of the Uninsured through 2013,” Health Affairs Web Exclusive April 5, 2008, available online at http://content.healthaffairs.org/cgi/content/full/hlthaff.w5.143/DC1 (accessed July 19, 2008), and Government Accountability Office, Impact of Premium Increases on Number of Covered Individuals is Uncertain (Washington, Report GAO/HEHS-98-203R, June 11, 1999), available online at http://archive.gao.gov/paprpdf2/160930.pdf (accessed July 19, 2008), pp. 3-4.