Mental Health Parity Bill Becomes $700 Billion Economic Stabilization Act

Published December 1, 2008

A relatively unheralded part of the $700 billion Troubled Asset Relief Program passed by Congress in October is a provision for “mental health parity,” which requires businesses with more than 50 employees that offer mental health insurance to workers to cover mental health at the same level as physical health. President George W. Bush signed the bill on October 3.

The mental health parity bill, HR 1424, was originally named the “Paul Wellstone Mental Health and Addiction Equity Act,” after the late Sen. Paul Wellstone (D-MN), who fought for mental health parity during his legislative career.

That legislation, which was passed by the House of Representatives in March, does not require employers to offer mental health coverage but requires parity if that coverage is offered.

Vehicle for Bailout

The Senate made HR 1424 the vehicle for the larger bailout package to avoid running afoul of the Constitutional requirement that all financial legislation originate in the House, and to provide an incentive for House Democrats who originally voted against the bailout legislation to change their opinions.

The Mental Health and Addiction Equity Act was extremely popular among House members, particularly Democrats. It garnered 274 cosponsors and 221 Democrat votes in its favor this past spring.

The legislation, which will take effect on January 1, 2010, requires the U.S. Department of Labor to submit biannual reports to Congress on group health plan compliance.

Big Downside Identified

Andrew Sperling, director of legislative advocacy for the National Alliance on Mental Illness, called the parity legislation “the culmination of a 15-year effort” in a press release.

Other experts say the new parity law will have a big downside.

“The Mental Health Parity Act will unnecessarily drive up the cost of health insurance,” said Paul Gessing, president of the Rio Grande Foundation. “More expensive health insurance means more businesses will increase their insurance premiums or drop their insurance altogether, resulting in an increase in the number of uninsured.”

“Further,” Gessing added, “businesses might simply drop mental illness coverage from their insurance policies, meaning employees will have less access to mental health benefits—all because the federal government thought they could use more regulation to ‘fix’ something that isn’t broken.”

Businesses Will Get Blame

Greg Scandlen, director of Consumers for Health Care Choices at The Heartland Institute, agrees.

“Congress has discovered what state legislators have known for decades,” Scandlen said. “Legislators constantly want to be seen ‘doing something’ about society’s problems, and there is an easy way for them to feel like they are ‘doing something’ without spending any taxpayer money—just pass a mandate on employers. Easy as pie.

“Of course, the downside is that the cost of coverage is already driving companies out of business—or, at the very least, out of providing health insurance for their employees,” Scandlen added. “But the legislators never get blamed for that. Insurance companies, employers, and consumers get the blame, as unjust as that may be.”

Jeff Emanuel ([email protected]) is research fellow for health care policy at The Heartland Institute and managing editor of Health Care News.