How Does Parity Law Affect Insurance Coverage for Treatment?

Posted in: Treatment

December 10, 2013

How Does Parity Law Affect Insurance Coverage for Treatment?

Mental health parity law ensures that insurance providers offer coverage for the treatment of mental health and substance use issues that is equal to the coverage they offer for treating other physical health conditions. This type of law emphasizes the importance of mental and behavioral health care by requiring specific types of insurance plans to provide equal coverage for mental health and substance abuse services.

Before and After the Mental Health Parity Act

Before 1996, health insurance companies were able to set their own arbitrary restrictions on how much mental health coverage an insured individual received. As a result, coverage for vital components of mental health care and addiction treatment, such as therapy sessions and hospital visits, was severely restricted. These restrictions kept many people from seeking professional help for their mental health or substance abuse issues, even if they were in desperate need of treatment.

In 1996, however, the United States government started reversing this trend by passing a law called the Mental Health Parity Act. This law prevented companies offering group health plans from discriminating against people who receive treatment for mental health issues. Specifically, it ensured that all health care provided under these group health plans, whether for physical or psychological conditions, received the same amount of insurance coverage.

In 2008, the US government expanded the scope of the Mental Health Parity Act to include addiction treatment and to require consistent equality beyond the total lifetime and annual payment limits. Called the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act, this law became effective on January 1, 2010. It ensured that all group health plans with more than 50 employees, federal insurance plans from the Federal Employees Health Benefit Program, the Children’s Health Insurance Program and Medicaid-managed care programs provided equal coverage for both physical and psychological treatment. This law excluded Medicare, traditional Medicaid, private insurance plans and group health plans with fewer than 50 employees. In states where parity law was lacking or completely absent, the federal law superseded the mandate of the state law.

Beginning in 2014, the Affordable Care Act (ACA) extended these protections even further. Building on the foundation set by previous parity laws, the ACA included mental health and addiction treatment as part of the law’s ten essential health benefits, all of which are covered equally with medical and surgical coverage. Unlike previous parity laws, the ACA also expanded the number of insurance plans that are required to offer parity, including all new small group and individual market plans. According to the Department of Health and Human Services, the implementation of the ACA resulted in the expansion of mental health and substance use parity protections to 62 million Americans.

How the Parity Laws Affected Insurance Coverage

As the American Psychological Association explains, under the Mental Health Parity and Addiction Equity Act, group health plans were required to offer equal mental and physical health treatment coverage for the following:

  • Out-of-pocket costs, such as co-pays and co-insurance
  • Restrictions on the number of services covered
  • Prior authorization
  • Limits of benefits
  • Out-of-network treatments and services
  • Specific criteria for determining medical necessity
Furthermore, group health plans could not require separate deductibles for mental health or substance abuse treatment and medical or surgical treatment. Instead, these deductibles were considered to share the same limit.

As SAMHSA explains, the Affordable Care Act expanded the Mental Health Parity and Addiction Equity Act even further in 2014. Specifically, all group plans with less than 50 employees, individual market plans that were created after March 23, 2010, and Medicaid Alternative Benefit Plans now also fall under the mandate of the parity law. Coverage meeting the federal parity law standard for mental health and substance use disorders must also be in every state’s Qualified Health Plans.

Over the past decade, each of these laws has gradually increased the insurance coverage and affordability of mental health and substance use treatment. Thankfully, these advancements have opened the door for many people to seek out and receive the mental health and addiction treatment they need. If you are struggling with a substance use disorder but have been too afraid to get professional help because of the cost, call our toll-free helpline today. Our admissions coordinators can answer your specific questions and even check your insurance benefits for free. We can help you see how parity law affects your insurance coverage and find a treatment and recovery plan that meets your needs.

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