Sens. Pete Domenici (R-NM), Mike Enzi (R-WY), and Ted Kennedy (D-MA) are leading an effort that will ultimately drive up the costs of health insurance and may even inflict harm on the very people they are trying to help.
The legislation, which has already passed out of one Senate committee, is known as the “Mental Health Parity Act.”
Although Domenici’s desire to help the mentally ill is noble, it has led him to support a proposal that inevitably, if inadvertently, will harm both them and the uninsured.
The bill, S. 558, would require health insurance policies that cover mental illness to provide it in the same way they provide benefits for other conditions. Thus, if the co-pay to see a family doctor is $20, then the co-pay to see a psychiatrist must also be $20.
In a real market, of course, the decision about how to cover mental health benefits is left to the insurer and the insured. A mandate to require that mental health coverage be given parity eliminates that freedom and consumer choice.
Mental health parity is one of the most costly benefit mandates. Using actuarial data, the Council for Affordable Health Insurance, an insurance industry group, estimates the rule can add between 5 and 10 percent to the cost of a health insurance policy.
Few of the likely consequences of a national government-imposed mental health parity mandate are good for employees.
Forcing insurance programs to cover mental health the same way they cover physical illnesses and conditions will increase the cost of health insurance. That means more businesses will increase their insurance premiums or drop their insurance altogether, resulting in an increase in the number of uninsured.
Another route businesses might pursue is simply dropping mental illness coverage from their insurance policies, meaning employees will have less access to mental health benefits.
The proposed law’s provisions suggest Domenici recognizes it will lead to higher costs. The bill tries to shield small businesses from rising health insurance costs by exempting any business with fewer than 50 employees. It also exempts any business whose health insurance costs rise more than 2 percent due to the mental health parity mandate.
Attempts to ask any of the three senators what they thought about the cost of the bill proved fruitless. All three Senate offices responded to our calls, made over a two-week period, by saying the staff members who could address our questions were out of the office.
Only four health insurance benefit mandates currently exist at the national level. However, benefit mandates are common among the states–most have dozens, mandating everything from hair prostheses to massage therapists.
New Mexico, for example, has 45 such mandates.
Health care mandates at the state level have become such a problem that one of the most promising–though so far unsuccessful–efforts to reform health care was led last year by then-House Speaker Dennis Hastert (R-IL) and Rep. John Shadegg (R-AZ). Their legislation would have changed national law to allow individuals to purchase insurance across state lines.
The law essentially would have forced insurance companies to compete nationally. That would have pressured states to tailor their health care regulations in order to compete against each other.
Aside from the inherent cost, what makes national mental health parity legislation so troubling is that it could start a trend that shifts mandates from the state to the national level, thus closing off a potential route to reform and future cost reductions.
Instead of raising costs by creating new mandates, Domenici, Enzi, Kennedy, et al. should be working to cut health care costs by allowing consumers to purchase health insurance–including mental health insurance–across state lines.
Paul Gessing ([email protected]) is president of the Rio Grande Foundation, a New Mexico-based nonpartisan, tax-exempt research and educational organization. David Hogberg ([email protected]) is an adjunct scholar with the Rio Grande Foundation.