Employers subject to the Mental Health Parity Act of 1996 (Title VII of P.L. 104-204) will have to begin complying with the law on Jan. 1, 1998, before they may seek a qualified exemption, the Clinton Administration has decided.

The Mental Health Parity law requires group health plans of employers with more than 50 employees that provide mental health benefits to establish the same annual or lifetime dollar limits for mental health benefits as for physical health benefits (see 501.-27).  However, those plans may apply different deductibles, number of
treatments allowed, and per treatment payment limits for mental health and physical health benefits.

The law, which is effective Jan. 1, 1998, and sunsets Sept. 30, 2001, exempts any group health plan that experiences at least a 1% increase in costs as a result of compliance. In 1996, the Congressional Budget Office and other independent actuarial firms estimated the cost increases would be no more than 0.4%. And a
recently published study by the Rand Corporation and the University of California at Los Angeles concluded that parity will increase costs by approximately $1 per employee per year.

Business groups had wanted the exemption to be available based on estimates of anticipated cost increases, so that group health plans would not have to implement the parity requirements. The Clinton Administration was persuaded by arguments from mental health advocates and others to agree to the following requirements:

• Employers have until April 1, 1998, to comply with the new law
• Employers may begin to take the exemptions anytime after June 30, 1998, as long as they demonstrate with actual claims data that the parity requirements raised their health plan costs by at least 1%
• Employers taking exemptions only need to notify the appropriate government agency, and the employer's own workers, that they are doing so; employers do not need to obtain government approval for the exemption, but the government can investigate and challenge the exemption
• Employees may request and obtain a summary of the analysis justifying the exemption.

Mental health advocates also want disclosure of the names of companies seeking exemptions, but it is not clear if this provision also will be included in the regulations to be published before the end of this year.

"This is a tremendous victory, an important first step in getting equal treatment for mental illness," said Laurie Flynn, executive director of the National Alliance for the Mentally Ill. 

Three federal agencies issued interim rules on December 22, 1997 governing parity between medical/surgical benefits and mental health benefits in group health plans and health insurance coverage offered by issuers in connection with a group health plan.

The rules implement changes made to certain provisions of the Internal Revenue Code, ERISA and the Public Health Service Act enacted as part of the Mental Health Parity Act of 1996 (MHPA) and the Taxpayer Relief Act of 1997. The rules are being adopted on an interim basis "to ensure that sponsors and administrators of group health plans, participants and beneficiaries, States, and issuers of group health insurance coverage have timely guidance concerning compliance with the requirements of MHPA." They are effective January 1, 1998. (The requirements of MHPA and the interim rules apply to group health plans and health insurance issuers offering health insurance coverage in connection with a group health plan for plan years beginning on or after January 1, 1998.)