Skip to main content SAMHSA News - SAMHSA's Award Winning Newsletter SAMHSA News - SAMHSA's Award Winning Newsletter
SAMHSA’s Award-Winning Newsletter
November/December 2008, Volume 16, Number 6 

Parity: What Does the New Law Mean?

You’re probably convinced that mental illness and substance abuse disorders are just as important as physical problems. Now Congress is, too.

On October 3, the President signed the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act as part of the Emergency Economic Stabilization Act of 2008.

Its enactment ends discrimination against consumers of mental health and substance abuse treatment services in insurance coverage and gives consumers improved access to the care they need.

“Countless advocates, consumers, people in recovery, family members, providers, professional associations, and insurance companies contributed to the enactment of this landmark legislation,” said Eric B. Broderick, D.D.S., M.P.H., SAMHSA’s Acting Administrator. “It was a long, hard-won journey.”

“Millions of Americans will now be assured greater access to mental and behavioral health coverage while continuing to benefit from the innovative programs health plans have developed to promote high-quality, evidence-based care.”

— Karen Ignani, President and Chief Executive Officer
America’s Health Insurance Plans

How It Works

“The Act requires that the financial and treatment limitations placed on mental health and substance abuse services in a health plan that covers such services cannot be any more restrictive than the financial and treatment limitations for medical and surgical benefits offered in the same plan,” said Joseph Faha, Director of Legislation for SAMHSA.

That means that annual and lifetime limits, copayments, coinsurance requirements, deductibles, and out-of-pocket expenses for mental health and substance abuse services may not be any more restrictive than those for medical and surgical services.

It also means that the limits on the frequency of treatment, number of visits, days of coverage, or similar limits on the scope and duration of treatment for mental health and substance abuse services cannot be any more restrictive than those for medical and surgical benefits.

The Act also stipulates that coverage for mental health and substance abuse services provided by out-of-network providers must be consistent with the coverage of out-of-network medical and surgical services.

“The Federal law, which goes into effect for most plans on January 1, 2010, is not a panacea, however,” Mr. Faha emphasized. “For example, the law does not require that a plan include mental health and substance abuse benefits.”

The law exempts employers with fewer than 50 employees from its requirements, although they may choose to implement them in their health plans.

The law also permits an exemption for businesses that can demonstrate through an actuarial assessment that implementing parity has increased costs by more than 2 percent in the first year or 1 percent in subsequent years. The exemption lasts for 1 year.

Still unclear is whether the law covers Medicaid managed care programs. It will be up to the Centers for Medicare & Medicaid Services (CMS) to make that determination. Also unknown is whether the law will apply to the State Children’s Health Insurance Program (SCHIP).

Many states already have their own parity laws. The new law does not preempt state laws that offer richer benefits than the Federal version. If a state law offers lesser benefits, however, the state must follow the Federal statute.

Expected Impact?

The law will improve coverage for an estimated 113 million Americans, according to Sarah A. Wattenberg, M.S.W., a senior public health analyst in SAMHSA’s Office of Policy, Planning, and Budget. Eighty-two million of these individuals are in employer-sponsored plans that aren’t subject to state regulation.

“One of the big advantages to consumers will be the removal of financially burdensome co-pays, which often deter people from entering treatment,” explained Rita Vandivort-Warren, M.S.W., a public health analyst in the Division of Services Improvement in SAMHSA’s Center for Substance Abuse Treatment. “In a recent study of employer substance abuse benefits done as part of SAMHSA’s spending estimates project, cost-sharing requirements remain higher for substance abuse treatment, with deductibles 46 percent higher than medical/surgical deductibles.”

“The passage of parity is historic. It is a major milestone on the long road to ensuring that mental illnesses and addictions are treated on par with other health conditions.”

— Linda Rosenberg, President and Chief Executive Officer,
National Council for Community Behavioral Healthcare

“A change in this one area alone will encourage more consumers to participate in treatment to achieve and maintain recovery,” said Ms. Wattenberg. Of course, plans can still use “utilization reviews” and other managed care techniques to limit access to benefits, she added.

The new law also requires plans to disclose the criteria they use to determine “medical necessity” to any current and potential participants, beneficiaries, and providers who request such information.

They also must disclose the reason behind any denial of a claim for mental health or substance abuse treatment.

If past experience holds true, the cost of implementing parity may be quite small.

Two studies conducted with SAMHSA support have been especially instructive, said Jeffrey A. Buck, Ph.D., Chief of the Survey, Analysis, and Financing Branch in the Division of State and Community Systems Development at SAMHSA’s Center for Mental Health Services (CMHS). (See “Recommended Reading on Parity.”)

“One common finding is that parity is pretty inexpensive,” said Dr. Buck. Although the research shows that parity seems to increase the number of people using services, he explained, the resulting cost increase for health plans was a fraction of 1 percent. “We would expect to see the same kind of effects as a result of the Federal law,” he said, noting that the Congressional Budget Office reached the same conclusion.

Insurance companies seem to accept the new law, said William J. Hudock, a special expert on financing policy in the Office of the Director at CMHS. While the insurance industry doesn’t necessarily appreciate having the Government mandate certain benefits, he said, “most of them acknowledge that providing parity is not a large-ticket item and is one that has probably been long overdue.”

“With approval of this bill, we will tear down the walls of stigma and discrimination and open the doors to the power and promise of treatment and recovery. It recognizes that mental health disorders are every bit as debilitating, and just as treatable, as cancer and diabetes.”

— David Shern, Ph.D.
President and Chief Executive Officer, Mental Health America

Next Steps

Passage of the law doesn’t mean the work is done.

“Our work is not over,” emphasized Dr. Broderick. “Now we need to move expeditiously forward in doing our part at SAMHSA to help achieve the goals of this new law.”

The next step is to interpret the law and develop regulations laying out how it will actually be put into action.

Over the coming year, the Departments of Labor, Health and Human Services (HHS), and the Treasury will craft those regulations and guidance.

Farther down the line, the 2008 law requires the U.S. Government Accountability Office (GAO) to assess the law’s impact and provide a report to Congress by 2012 and every 2 years after that.

The GAO study will analyze coverage rates, patterns, and trends; any exclusion of specific mental health or substance abuse diagnoses; and the law’s impact on coverage and costs.

But the law’s impact goes beyond the purely financial, emphasized Ms. Wattenberg.

“Congress has sent a message about mental health and addiction by moving them out from the shadows and into the realm of mainstream health care,” she said. “It’s a recognition that these are diseases that can be helped through treatment. That’s a big deal.”

  Women, Addiction, & Recovery  
image of women holding children

Conference Coverage & Related Stories

  Returning Veterans  
image of a woman in the military

Women in the Military: Overcoming Challenges

From mental health issues to sexual harassment—what’s being done to help.

image of a military person silhouetted in front of the American flag

Veterans & Major Depressive Episode: New Data

Last year, more than 300,000 veterans experienced MDEs.

  Suicide Prevention  
image of 5 cartoon-like characters

New Media Increase Options

Virtual suicide prevention efforts are helping.

image of a male on the telephone

Lifeline Answers One Millionth Call

Milestone for SAMHSA’s National Suicide Prevention Lifeline.

  Training Manuals  
TIP 45 image


This Treatment Improvement Protocol training manual offers basics on successful detox.

TIP 43 image

Medication-Assisted Treatment

This Treatment Improvement Protocol training manual discusses treatment for opioid addiction.

  Data on Youth  
image of a young man holding his neck

Inhalant Use & Depression

Some adolescents are three times as likely to start using inhalants—find out why.

Mental Health Settings: New Data

Do young people get mental health services at school more often than at specialty treatment centers?

image of a young man

Out-of-Home Treatment

Effective treatment options for young people.

  Also in This Issue  
logo for SAMHSA's Science and Service Awards

2008 Science & Service Award Winners

For best practices, 29 organizations honored.

Grant Updates

Awards announced.

Staff in the News logo

Advisory Councils

Five new members for SAMHSA’s Advisory Councils.

Treatment Line Gets National Attention

Oprah promotes SAMHSA’s substance abuse treatment line as a resource.

The Voice Awards logo

Voice Award Nominations

You have until March 2009 to cast your vote.

Primary Care Settings

Mental health may improve with treatment location.

Join the eNetwork Sign up for email alerts! New publications, eNetwork archives, Observances and Campaigns

SAMHSA’s eNetwork is your personal link to the latest news about our grants, publications, campaigns, programs, statistics, data reports, and more.

Join the eNetwork

Substance Abuse & Mental Health Services Administration – 1 Choke Cherry Road - Rockville, MD 20857
AdobeTM PDF and MS OfficeTM formatted files require software viewer programs to properly read them.
Click here to download these FREE programs now.