Mental Health Parity and the Patient
Protection and Affordable Care Act of 2010
Amanda K. Sarata
Specialist in Health Policy
January 7, 2011
Congressional Research Service
7-5700
www.crs.gov
R41249
CRS Report for Congress
P
repared for Members and Committees of Congress
Mental Health Parity and the Patient Protection and Affordable Care Act of 2010
Summary
The Patient Protection and Affordable Care Act (PPACA, P.L. 111-148, as modified by P.L. 111-
152, the Health Care and Education Reconciliation Act of 2010) contains a number of provisions
that generally combine to extend the reach of existing federal mental health parity requirements.
Prior to 1996, health insurance coverage for mental illness had historically been less generous
than that for other physical illnesses. Mental health parity is a response to this disparity in
insurance coverage, and generally refers to the concept that health insurance coverage for mental
health services should be offered on par with covered medical and surgical benefits.
Prior to enactment of PPACA, two major mental health parity laws had been passed at the federal
level, and together created the federal mental health parity requirements. These two laws are the
Mental Health Parity Act of 1996 (MHPA, P.L. 104-204), which requires parity in annual and
aggregate lifetime limits, and the Paul Wellstone and Pete Domenici Mental Health Parity and
Addiction Equity Act of 2008 (MHPAEA, P.L. 110-343), which expands parity requirements to
treatment limitations, financial requirements (e.g., co-payments), and in- and out-of-network
covered benefits. Neither of these laws mandates the coverage of any specific mental health
condition; rather, where an insurer chooses to cover both mental health and medical and surgical
benefits, they are required to do so in compliance with these parity requirements.
PPACA contains a number of provisions which, when considered together, achieve two key goals
with respect to mental health parity: (1) they expand the reach of the applicability of the federal
mental health parity requirements; and (2) they create a mandated benefit for the coverage of
certain mental health and substance abuse disorder services (to be determined through
rulemaking) in a number of specific financing arrangements. PPACA expands the reach of federal
mental health parity requirements to three main types of health plans: qualified health plans as
established by PPACA; Medicaid non-managed care benchmark and benchmark-equivalent plans;
and plans offered through the individual market. PPACA did not alter the federal mental health
parity requirements with respect to CHIP plans, but the application of the requirements to CHIP
plans, as required in law prior to PPACA, is explained here in detail. This report also analyzes the
impact of PPACA on the existing small employer exemption under federal mental health parity
law.
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Mental Health Parity and the Patient Protection and Affordable Care Act of 2010
Contents
Background ................................................................................................................................ 1
Federal Mental Health Parity Law Prior to PPACA...................................................................... 2
The Mental Health Parity Act (MHPA) of 1996 ..................................................................... 3
The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity
Act of 2008 (MHPAEA)..................................................................................................... 3
Federal Mental Health Parity Law and PPACA............................................................................ 4
Coverage Mandate for Mental Health Services for Certain Plan Types................................... 5
Qualified Health Plans and Mental Health Parity................................................................... 6
Extension of Federal Mental Health Parity Requirements to Plans in the Individual
Market and the Small Employer Exemption ....................................................................... 7
Expansion of Federal Mental Health Parity Requirements to Certain Medicaid Plans
and the Medicaid Expansion Population ............................................................................. 8
CHIP, Federal Mental Health Parity Requirements, and PPACA ............................................ 9
Conclusion................................................................................................................................ 10
Tables
Table 1. Plans Impacted by PPACA Expansion of Federal Mental Health Parity
Requirements and Mandated Coverage of Mental Health Services............................................ 5
Table 2. Applicability of Federal Mental Health Parity Requirements to Medicaid
Coverage Arrangements ........................................................................................................... 9
Contacts
Author Contact Information ...................................................................................................... 11
Acknowledgments .................................................................................................................... 11
Congressional Research Service
Mental Health Parity and the Patient Protection and Affordable Care Act of 2010
he Patient Protection and Affordable Care Act (PPACA, P.L. 111-148, as modified by P.L.
111-152, the Health Care and Education Reconciliation Act of 2010) contains a number of
T provisions that generally combine to expand the reach of federal mental health parity
requirements as established by the Mental Health Parity Act of 1996 (MHPA) and the Mental
Health Parity and Addiction Equity Act of 2008 (MHPAEA).1 In addition, while PPACA does not
create an explicit federal-level mandated benefit for mental health and substance abuse disorder
services, it does create one for certain health plan types.
This report provides a brief background on mental health parity and the policy discussion around
parity in health insurance coverage; an overview of federal mental health parity law prior to the
enactment of PPACA; and an analysis of the impact of PPACA on federal mental health parity
law.
Background
Prior to 1996, health insurance coverage for mental illness had historically been less generous
than that for other physical illnesses. This has generally been reflected either by a complete lack
of coverage of a particular mental health condition or related services or by a differential
structuring of coverage terms for mental health benefits relative to benefits for medical and
surgical services. For example, prior to the enactment of the federal mental health parity laws,
health plans often chose to impose lower annual or lifetime dollar limits on mental health
coverage; to limit treatment of mental health illnesses by covering fewer hospital days and
outpatient office visits; and to increase cost sharing for mental health care services relative to
medical or surgical services. In addition, in- and out-of-network coverage has often been variable
between mental health and medical and surgical services.
Mental health parity is a response to this disparity in insurance coverage, and generally refers to
the concept that health insurance coverage for mental health services should be offered on par
with covered medical and surgical benefits. Policymakers have developed three general
approaches to achieving parity, based broadly on two dichotomous distinctions: namely, whether
the approach mandates coverage and whether the approach requires parity coverage.2 Specifically,
parity laws may require insurers to cover certain, or all, mental illnesses (mandated coverage);
laws also may or may not require parity coverage.
Policies including any type of coverage mandate for mental illnesses, and requiring parity
coverage, are defined as taking a full parity approach. Policies which include any type of
coverage mandate for mental illnesses, and which do not require parity coverage, are defined as
taking a minimum mandated benefit approach. Finally, policies which do not include coverage
mandates for mental illnesses, but which require parity coverage, are defined as taking a
mandated offering parity approach.
1 MHPA and MHPAEA together require parity coverage in the following four areas: financial requirements, treatment
limitations, in- and out-of-network benefits, and annual and lifetime aggregate limits. When this report uses the term
“federal mental health parity requirements,” it will be referring to parity in these four areas, as required by MHPA and
MHPAEA. PPACA did nothing to alter or modify the content of the federal mental health parity requirements
themselves.
2 Full parity (or parity) coverage may be defined as coverage requiring benefits for mental health illnesses that are on
par with those for physical illnesses in terms of three coverage provisions: treatment limitations (i.e., number of
covered visits); annual and lifetime dollar limits; and financial requirements (i.e., copayments, coinsurance).
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Federal mental health parity law prior to PPACA employed a mandated offering parity approach;
it did not mandate coverage of any specific mental health or substance abuse disorder service, but
it did require that where an insurer covered by the law chose to cover both mental health and
medical and surgical benefits, they had to do so in compliance with the federal mental health
parity requirements.
PPACA contains a number of provisions which, when considered together, achieve two key goals
with respect to mental health parity: (1) they expand the reach of the applicability of the federal
mental health parity requirements; and (2) they create a mandated benefit for the coverage of
certain mental health and substance abuse disorder services (to be determined through
rulemaking) in a number of specific financing arrangements. Importantly, PPACA does not
include an explicit or comprehensive coverage mandate for mental health services at the federal
level; it only contains separate provisions which, when considered together, mandate coverage of
mental health services for certain plans.3 In addition, PPACA does not modify the federal mental
health parity requirements themselves; rather it contains several provisions which expand the
applicability of said requirements to a number of specific financing arrangements.
Federal Mental Health Parity Law Prior to PPACA
Two major mental health parity laws passed at the federal level prior to enactment of PPACA, and
together establish the federal mental health parity requirements. These two laws are MHPA,
which requires parity in annual and
aggregate lifetime limits, and
Federal Mental Health Parity Requirements
MHPAEA, which expands the federal
Federal law requires certain insurers, when the insurer chooses
parity requirements to include parity in
to cover mental health and substance use disorder services, to
treatment limitations, financial
offer coverage of those services at parity with medical and
requirements, and in- and out-of-
surgical services, and specifically in the following four areas:
network covered benefits. Neither of
(1) Annual and Aggregate Lifetime Limits
these laws mandates the coverage of
(2) Treatment Limitations
any specific mental health condition;
(3) Financial Requirements
rather, where an insurer chooses to
cover both mental health and medical
(4) In- and Out-of-Network Covered Benefits
and surgical benefits, they are required
to do so in compliance with these parity requirements. Recent data indicate that approximately
one-third of employers with more than 50 employees have modified their benefits in response to
MHPAEA. Of this group, a small percentage has elected to drop coverage for mental health and
substance use disorder services in response to the requirements in MHPAEA, while the majority
has instead responded by eliminating limits on coverage or increasing utilization management of
benefits.4 PPACA requires coverage of (as of yet unspecified) mental health and substance use
disorder services by certain plans, including those plans to be offered through the Exchanges. It is
3 For this reason, existing federal mental health parity law may still be characterized as taking the mandated offering
parity approach.
4 “Employer Health Benefits 2010 Annual Survey.” The Kaiser Family Foundation and Health Research and
Educational Trust. Accessed on January 3, 2010 at http://ehbs.kff.org/pdf/2010/8085.pdf. Specifically, the survey found
that 31% of firms with more than 50 workers changed their benefits in response to the MHPAEA (those firms with 50
or fewer employees are exempt from the requirements of MHPAEA). Of this 31%, 5% dropped coverage for mental
health services; 66% eliminated limits on coverage; and 16% increased utilization management of benefits.
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unclear what impact these requirements will have on plans’ decisions to retain or drop coverage
of mental health and substance use disorder services once they go fully into effect in 2014.
The Mental Health Parity Act (MHPA) of 1996
MHPA (P.L. 104-204) was the first federal mental health parity law. MHPA employs a mandated
offering parity approach, with no coverage mandates, but requiring partial parity. It achieves this
by mandating that annual and aggregate lifetime dollar limits on coverage for mental health
services under group health plans and health insurance issuers offering group health coverage
offering mental health coverage be no less than those for medical and surgical services. MHPA,
as well as federal parity legislation introduced in later Congresses, amends the Employee
Retirement Income Security Act (ERISA), the Public Health Service Act (PHSA), and the
Internal Revenue Code (IRC) to apply the parity coverage requirements to all group health
coverage arrangements governed by these statutes.5 MHPA establishes a small employer
exemption, which was further amended by MHPAEA, exempting employers with between 2 and
50 employees from the federal mental health parity requirements. MHPA also contains a cost
exemption, also further amended by MHPAEA, allowing group health plans that experience a
cost increase of at least 1% as a result of complying with the act to be exempt from parity
requirements. Since its enactment, MHPA, which originally sunset in 2001, received annual
extensions through the end of 2008. The sunset provision in MHPA was repealed by MHPAEA.
The Paul Wellstone and Pete Domenici Mental Health Parity and
Addiction Equity Act of 2008 (MHPAEA)
MHPAEA (P.L. 110-343) expands the scope of mental health parity requirements at the federal
level, and includes substance use disorders within its scope. It expands on the MHPA requirement
of parity in aggregate lifetime and annual limits requiring, in addition, parity in treatment
limitations, financial requirements, and in- and out-of-network benefits.6 MHPAEA amends the
small employer exemption added by MHPA to include employers with only one employee
seeking group insurance in those states where small groups are permitted to include a single
individual and defining small employer per PHSA Sec. 2791(e)(4).7 MHPAEA also significantly
amends MHPA’s cost exemption to clarify its parameters. In addition, the federal mental health
parity requirements established by MHPA and MHPAEA do not apply to the individual market.
5 In general, while ERISA covers private-sector employee benefit plans, it does not cover governmental plans, church
plans, or insurance issuers providing group health coverage, and coverage in the individual market, including some
governmental plans. The IRC covers group health plans, including church plans, but does not cover health insurers. The
PHSA covers plans that are offered by state-licensed insurance carriers. The requirements of the PHSA may apply to
church plans if the plan provides coverage through a health insurer. For more information, please see CRS Report
R40635, Employment-Based Health Coverage and Health Reform: Selected Legal Considerations, by Jennifer Staman
and Edward C. Liu.
6 PHSA Sec. 2726 defines treatment limitation as “limits on the frequency of treatment, number of visits, days of
coverage, or other similar limits on the scope or duration of treatment.” Financial requirement is defined as including
deductibles, copayments, coinsurance, and out-of-pocket expenses, but excludes an annual limit and an aggregate
lifetime limit.
7 The term “small employer” is defined at PHSA Sec. 2791(e)(4), as amended by PPACA Sec. 1563, to mean, in
connection with a group health plan with respect to a calendar year and a plan year, an employer who employed an
average of at least 1 but not more than 100 employees on business days during the preceding calendar year and who
employs at least 1 employee on the first day of the plan year.
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Prior to the enactment of PPACA, all of the federal mental health parity requirements were
codified at PHSA Sec. 2705 (PPACA redesignates PHSA Sec. 2705 as PHSA Sec. 2726). Also
prior to PPACA, all Medicaid managed care plans and all CHIP plans that chose to cover mental
health services were required to comply with some or all of the federal mental health parity
requirements. Medicare, offered to beneficiaries through either traditional fee-for-service or
Medicare Advantage (managed care) plans, is not required to comply with the federal mental
health parity requirements to any extent.
Federal Mental Health Parity Law and PPACA
Generally, the effect of the mental health parity provisions in PPACA is to extend the applicability
of the federal mental health parity requirements, and to mandate coverage of certain (to be
specified) mental health services by specific plan types (see Table 1). In particular, several
questions are raised by the expansion of the applicability of the federal mental health parity
requirements.
Specifically, PPACA expands the reach of federal mental health parity law to three main types of
plans: qualified health plans (QHPs), as established by PPACA; Medicaid non-managed care
benchmark and benchmark-equivalent plans; and plans offered through the individual market.8
PPACA modifies existing parity law to require compliance with the federal mental health parity
requirements by plans offered through the individual market. It appears, however, that the small
employer exemption in federal parity law remains in effect, and in fact, that the definition of
small employer was expanded, per PPACA. Beginning in 2014, QHPs purchased through an
Exchange must cover mental health services (to be determined through rulemaking), and must
offer these services in compliance with the federal mental health parity requirements.9 The
interaction between this requirement, and the apparent continued existence of the small employer
exemption, raises considerations that may need to be reconciled through rulemaking. Medicaid
benchmark and benchmark-equivalent plans, that are not managed care plans and that offer
mental health services, must do so in compliance with the federal mental health parity
requirements for financial requirements and treatment limitations. PPACA did not alter the
applicability of parity requirements with respect to the Children’s Health Insurance Program
(CHIP), but the application of federal mental health parity requirements to CHIP plans, as
required in law prior to PPACA, is explained here in detail.
8 Although PPACA directly amends the PHSA, conforming amendments in the law extend the new provisions to plans
governed both by ERISA and by the IRC (PPACA Sec. 1563(e) and (f)).
9 PPACA will enable and support states’ creation by 2014 of “American Health Benefit Exchanges.” An exchange
cannot be an insurer, but will provide eligible individuals and small businesses with access to insurers’ plans in a
comparable way. The exchange will consist of a selection of private plans as well as “multi-state qualified health
plans,” administered by the Office of Personnel Management. Individuals will only be eligible to enroll in an exchange
plan if they are not enrolled in Medicare, Medicaid, or acceptable employer coverage as a full-time employee. Based on
income, certain individuals may qualify for a tax credit toward their premium costs and a subsidy for their costsharing;
the credits and subsidies will be available only through an exchange. States will have the flexibility to establish basic
health plans for low-income individuals not eligible for Medicaid. For more information, please see CRS Report
R40942, Private Health Insurance Provisions in the Patient Protection and Affordable Care Act (PPACA), by Hinda
Chaikind, Bernadette Fernandez, and Mark Newsom.
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In addition, PPACA mandates coverage of certain mental health services specifically for QHPs;
Medicaid benchmark and benchmark-equivalent plans; and new plans in the individual and small
group markets.
Table 1. Plans Impacted by PPACA Expansion of Federal Mental Health Parity
Requirements and Mandated Coverage of Mental Health Services
Expansion of Parity
Plan Type
Requirements
Coverage Mandate
Medicaid Non-Managed
Care Benchmark and
Benchmark Equivalent
PPACA Sec. 2001(c)
PPACA Sec. 2001(c)
Plans
Qualified Health Plans
PPACA Sec. 1311(j)
PPACA Sec. 1301(a)(1)(B)
Individual Plans
PPACA Sec. 1563(c)(4)
N/Aa
New Small Group and
PPACA Sec. 1201, adding
Individual Plans
N/Ab
New PHSA Sec. 2707(a)
Source: CRS analysis.
a. A coverage mandate applies to new plans offered through the individual market.
b. The federal mental health parity requirements are expanded by PPACA to apply to all plans offered through
the individual market.
Coverage Mandate for Mental Health Services for Certain
Plan Types
When considering coverage for mental health and substance abuse services, there are two main
issues that are generally considered: whether a mandate for coverage exists (or coverage is
voluntarily offered) and whether those services, if covered, are covered at parity with services for
medical or surgical services. Federal mental health parity law prior to PPACA, as mentioned
above, does not include any mandate for coverage, but does require that when such benefits are
offered, they be offered at full parity. PPACA, on the other hand, creates a coverage mandate for
mental health and substance abuse services broadly for QHPs.10 It also extends this coverage
mandate to Medicaid benchmark and benchmark-equivalent plans as well as to plans offered in
the small and individual group market (but not self-insured plans).11 It does this by defining
essential health benefits (EHB), which it then requires to be offered by various plan types.
Specifically, PPACA establishes and defines QHPs in Sec. 1301. QHPs are those plans that meet
specific statutorily defined requirements, and which are therefore allowed to be offered through
Exchanges (although they may also be offered outside of an Exchange). PPACA Sec.
1301(a)(1)(B) requires all QHPs to provide a specific set of defined benefits, the EHB. The EHB
are broadly defined by PPACA Sec. 1302(b), which outlines a series of 10 general categories of
10 The offering of qualified health plans is not limited to the Exchanges; such plans may also be offered outside of the
Exchanges.
11 PHSA Sec. 2707 requires all health insurance issuers that offer health insurance coverage in the individual or small
group market to ensure that such coverage includes the essential health benefits package.
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types of care, including “mental health and substance use disorder services, including behavioral
health treatment.”12 Therefore, mental health and substance abuse services are a category of
covered services within the EHB that are required to be offered by the QHPs; however, the scope
of covered services under this subsection must be defined through the rulemaking process. The
statute does not mandate coverage for any specific service or treatment; it instead requires
coverage to be provided for services within all 10 broad categories (i.e., ambulatory patient
services, emergency services, laboratory services, etc.). The statute requires the Secretary to
ensure that the scope of the essential health benefits package (EHBP) be equal to the scope of
benefits provided under a typical employer plan, and outlines a series of required elements for
consideration in determining the EHBP.
PPACA Sec. 2001(c) requires all Medicaid benchmark and benchmark-equivalent plans to offer at
least the EHB by January 1, 2014. In addition, new PHSA Sec. 2707(a), as added by PPACA,
requires new plans offered by a health insurance issuer through the individual and small group
markets to include coverage of the EHB (also by January 1, 2014).
While these provisions do not equate with a comprehensive federal-level mandate to cover mental
health services, they together have the effect of creating a federal-level requirement for coverage
of mental health benefits by a sizable portion of insurers.
Some states mandate coverage of certain mental health conditions through their parity laws.
Questions may be raised with respect to state mandated benefits, including those for mental
health conditions, and plans offered through Exchanges. PPACA Sec. 1311(d)(3), as amended by
PPACA Sec. 10104(e), authorizes a state to require that a QHP offered in that state cover certain
benefits that are in addition to the EHB as defined by PPACA Sec. 1302(b). However, if a state
makes such a requirement, the state is then required to assume the cost of those additional
benefits. The state may do so either by making payments directly to an individual enrolled in a
QHP, or directly to the QHP on behalf of an enrolled individual.
Qualified Health Plans and Mental Health Parity
Requiring QHPs to cover mental health and substance abuse services in some capacity is a
separate issue from that of requiring the provision of parity coverage.
To address this, PPACA Sec. 1311(j) requires federal mental health parity requirements to apply
to all QHPs in the same manner and to the same extent that such requirements apply to health
insurance issuers and group health plans. QHPs offered by the Exchanges will be provided
through both the small group and individual markets; large group plans may have less of an
incentive to participate (and will only be allowed to beginning in 2017), primarily because one of
the key advantages of participating in an Exchange is the risk pooling it will offer to enrollees in
small group plans and individual plans. The exemption of small employers from the federal
mental health parity requirements may impact some plans offered through the Exchange. A
discussion of the potential interaction between this PPACA Sec. 1311(j) and the small employer
exemption in federal mental health parity law (at PHSA Sec. 2726(c)) is discussed in more detail
below.
12 PPACA (P.L. 111-148), Sec.1302(b)(1)(E)).
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Extension of Federal Mental Health Parity Requirements to Plans
in the Individual Market and the Small Employer Exemption
Federal mental health parity law prior to PPACA contained a specific exemption for small
employers (those with between two and 50 employees). It also applied to group health plans, or
health insurance coverage offered in connection with such a plan, and not to health insurance
coverage in the individual market. The small employer exemption extends to those states where
the small employer definition includes self-employed individuals (“groups of one”).
PPACA Sec. 1563(c)(4) conforms PHSA Sec. 2726 to extend the federal mental health parity
requirements to the individual market.13 This section replaces existing references in PHSA Sec.
2726 to group health plans with the following language: “a health insurance issuer offering group
or individual health insurance coverage.” This effectively extends these requirements to plans in
the individual market.
However, it appears that the PPACA conforming amendment does not explicitly remove the small
employer exemption, found at PHSA Sec. 2726(c)(1). The language of this subsection, as
modified by the PPACA conforming amendment, now reads as follows (emphasis added by
CRS):
SMALL EMPLOYER EXEMPTION- This section shall not apply to any group health plan
(or a health insurance issuer offering group or individual health insurance coverage) for any
plan year of a small employer (as defined in section 2791(e)(4)),14 except that for purposes
of this paragraph such term shall include employers with 1 employee in the case of an
employer residing in a State that permits small groups to include a single individual.
Thus, based on this amended statutory language, it appears that the small employer exemption
under federal mental health parity law may remain in effect. In addition, the definition of “small
employer” at PHSA Sec. 2791(e)(4), as amended by PPACA Sec. 1563, is expanded to mean an
employer who employed an average of at least 1, but not more than 100, employees. The
definition of small employer prior to PPACA only included employers with an average of 2, but
not more than 50, employees. Therefore, it appears that the small employer exemption not only
remains in effect, but now will apply to a wider range of employers.15 Importantly, however, until
2016, the states have the option of using the definition of small employer that existed in law prior
to PPACA for plans offered through an Exchange.16
If this is the case, because the small employer exemption (and the amended definition of small
employer) includes self-employed individuals, questions may arise with respect to whether this
13 PPACA redesignates PHSA Sec. 2705 as PHSA Sec. 2726. These sections contain the federal mental health parity
requirements.
14 See note 9.
15 PHSA Sec. 2726(c)(1) may need to be modified to reflect the inclusion of groups of one in the amended definition of
small employer (at PHSA Sec. 2791).
16 Recent guidance published by the Department of Labor states that the small employer exemption remains in effect
post-PPACA. However, this guidance states that the modified definition of “small employer” per PPACA Sec. 1563
only applies to those plans governed by the PHSA (i.e., nonfederal governmental plans), while the original definition
(of 50 or fewer employees) applies to those plans governed by ERISA and the IRC. See “FAQs About Affordable Care
Act Implementation Part V and Mental Health Parity Implementation.” Accessed on January 3, 2010, at
http://www.dol.gov/ebsa/faqs/faq-aca5.html.
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language results in plans offered to individuals seeking coverage on the individual market having
to comply with the federal mental health parity requirements, in contrast with plans offered to
single individuals seeking group coverage in their capacity as an employer, which may not have
to comply with the federal parity requirements.
In addition, assuming the continued existence of the small employer exemption, one question that
arises is whether, in light of PPACA Sec. 1311(j), small employer QHPs (offered inside or outside
of an Exchange) might be exempt from the federal mental health parity requirements. As
discussed above, Sec. 1311(j) applies the requirements found in newly designated PHSA Sec.
2726 to “qualified health plans in the same manner and to the same extent as such section applies
to health insurance issuers and group health plans.” PPACA does not specify whether applying
the mental health parity provisions to QHPs “in the same manner and to the same extent” would
include application of the small employer exemption.
Implementing regulations may clarify how to reconcile PPACA Sec. 1311(j) and PHSA Sec.
2726(c)(1).
Expansion of Federal Mental Health Parity Requirements to
Certain Medicaid Plans and the Medicaid Expansion Population
Medicaid may be offered either in the form of traditional state plan benefits or by enrolling state-
specified groups in benchmark or benchmark-equivalent coverage.17 Either of these options may
be provided through managed care plans (“Medicaid managed care plans”).
Prior to PPACA, federal law required all Medicaid managed care plans providing both medical
and surgical benefits and mental health or substance use disorder benefits to comply with the
federal mental health parity requirements found in the PHSA.18 This requirement applies to any
managed care plan offered through either traditional Medicaid, as well as through the alternative
state options of Medicaid benchmark or benchmark-equivalent plans.
PPACA expands certain of the federal mental health parity requirements to Medicaid benchmark
and benchmark-equivalent plans, which are not Medicaid managed care plans, and which provide
both medical and surgical benefits as well as mental health or substance use disorder benefits.19
Importantly, it appears that PPACA Sec. 2001 only requires these Medicaid plans to comply with
the parity requirements specifically for treatment limitations and financial requirements.
Treatment limitations are defined in PHSA Sec. 2726 as “limits on the frequency of treatment,
number of visits, days of coverage, or other similar limits on the scope or duration of treatment.”
Financial requirements are defined in PHSA Sec. 2726 as “deductibles, copayments, coinsurance,
and out-of-pocket expenses, but excludes an aggregate lifetime limit and an annual limit.” Plans
that offer Early and Periodic Screening, Diagnostic, and Treatment Services (EPSDT), as defined
in Medicaid statute, are deemed to meet the parity requirement.20 This is in contrast with the
17 For more information on Medicaid benchmark and benchmark-equivalent plans and PPACA, please see CRS Report
R41210, Medicaid and the State Children’s Health Insurance Program (CHIP) Provisions in PPACA: Summary and
Timeline, coordinated by Julie Stone
18 SSA Sec. 1932(b)(8)
19 PPACA Sec. 2001(c)(3)
20 PPACA Sec. 2001 adds this language to existing SSA Sec. 1937 (Medicaid Statute), and it appears that it will need to
be conformed to reflect PPACA’s redesignation of PHSA Sec. 2705 to PHSA Sec. 2726.
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requirement placed on Medicaid managed care plans (described above), which does not deem
plans offering EPSDT services as being in compliance with parity requirements.
It therefore appears that Medicaid benchmark or benchmark-equivalent plans, that are not
Medicaid managed care plans, are not required to comply with the federal requirements for parity
in annual and lifetime limits and for in- and out-of-network covered benefits, per PPACA Sec.
2001(c). This is in contrast with Medicaid managed care plans, which are required to comply with
the totality of federal mental health parity requirements.
In addition, it is unclear whether the parity requirements in Sec. 2001(c) extend to plans that are
not managed care plans, but that are offered under traditional Medicaid as opposed to through the
benchmark or benchmark-equivalent option. It is also unclear what effect requiring any type of
Medicaid plan to adhere to federal mental health parity requirements, but then deeming those
plans which offer EPSDT services as meeting these requirements, which they are required by law
to do, will have on the actual terms of coverage for mental health and substance abuse services
for Medicaid enrollees.
PPACA Sec. 2001(a)(2)(A), in conjunction with PPACA Sec. 2001(c), has the effect of expanding
the requirement for compliance with certain of the federal mental health parity requirements to all
“newly eligible” Medicaid populations (up to or at 133% of federal poverty level), as added by
PPACA, who would be enrolled through benchmark or benchmark-equivalent non-managed care
plans.
Table 2. Applicability of Federal Mental Health Parity Requirements to Medicaid
Coverage Arrangements
Traditional Medicaid Coverage
Benchmark or Benchmark
Equivalent Medicaid Coverage
Fee-for-Service
Partial Compliance Required
No Compliance Required
(financial requirements and treatment
limitations)
Managed Care
Full Compliance Required
Full Compliance Required
Notes: CRS analysis.
CHIP, Federal Mental Health Parity Requirements, and PPACA
The CHIP statute contains two provisions, enacted prior to PPACA, extending and applying the
federal mental health parity requirements to CHIP plans. Although PPACA does not affect federal
mental health parity requirements as they apply to CHIP plans, it appears that these two existing
statutory provisions in SSA Title XXI may need to be conformed to reflect redesignations made
by PPACA.
The first relevant provision is found at SSA Sec. 2103(c)(6), stating that in cases where a State
child health plan provides both mental health or substance abuse disorder benefits and medical
and surgical benefits, the plan must comply with PHSA Sec. 2705 with respect to both financial
requirements and treatment limitations. This is the same language that was added by PPACA Sec.
2001 to extend federal mental health parity requirements to Medicaid non-managed care
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benchmark and benchmark-equivalent plans, and therefore has similar limitations (see analysis
above). As is the case with PPACA Sec. 2001 with respect to Medicaid non-managed care
benchmark and benchmark-equivalent plans, SSA Sec. 2103(c)(6)(B) deems CHIP plans that
offer EPSDT, as defined in Medicaid statute, as satisfying the parity requirement described in
SSA Sec. 2103(c)(6)(A).21 Since this provision appears to require adherence with only a subset of
the federal mental health parity requirements, it is unclear whether offering EPSDT services
would fulfill the subsequent requirement for compliance with the full set of parity requirements,
found at SSA Sec. 2103(f)(2) and described in more detail below.
In addition, SSA Sec. 2103(f)(2) requires all coverage offered under SSA Sec. 2103 to comply
with the requirements of subpart 2 of part A of Title XXVII of the PHSA (Sec. 2705 was
contained here, prior to the passage of PPACA). This has the effect of requiring CHIP plans to
comply with all, and not only with the financial requirements and treatment limitations as in SSA
Sec. 2103(c)(6), of the federal mental health parity requirements.22
Conclusion
In sum, the changes made by PPACA represent an expansion of the application of the federal
mental health parity requirements established by MHPA and MHPAEA. They extend these
requirements to plans in the individual market; to QHPs; and to additional Medicaid plan types
and to certain of the Medicaid expansion populations. In addition, provisions in PPACA act
together to create a mandate for coverage of certain mental health services (to be determined
through rulemaking) that applies to specific plan types. While this is not a comprehensive federal-
level coverage mandate, it represents a significant change from federal law prior to PPACA.
Changes made by PPACA to existing federal mental health parity law, while extending the
requirements to the individual market, appear to maintain the small employer exemption. Federal
mental health parity requirements are extended to all qualified health plans, as established by
PPACA; however, questions may be raised about how small employer plans in the Exchange may
be affected. In addition, it appears that certain of the federal mental health parity requirements are
extended to Medicaid non-managed care benchmark and benchmark-equivalent plans, but it
appears that certain are not. It is unclear whether federal mental health parity requirements extend
to non-managed care plans offered under traditional Medicaid. Finally, the CHIP statute contains
two separate parity related provisions, one which appears to have a more limited reach, and a
second which appears to apply the requirements in their entirety to CHIP plans.
21 It appears that this provision may need to be conformed with PPACA’s redesignation of PHSA Sec. 2726.
22 The fact that there are two provisions in this statute, both addressing the issue of requiring CHIP plans to comply
with the parity requirements, raises questions about which would be controlling. That statutory analysis is beyond the
scope of this report.
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Author Contact Information
Amanda K. Sarata
Specialist in Health Policy
asarata@crs.loc.gov, 7-7641
Acknowledgments
This report benefitted from the expertise of a number of CRS analysts. Jennifer Staman, Bernadette
Fernandez, Elicia J. Herz, Evelyne P. Baumrucker, and C. Stephen Redhead provided capable review of
and guidance throughout the development of this report.
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