U.S. Department of Health and Human 

Substance Abuse and Mental Health

Services Administration

Center for Mental Health Services

Myles Maxfield

Lori Achman

Anna Cook

National Estimates of 

Mental Health

Insurance Benefits
J e ff rey A. Buck, Associate Director for Organization and Financing, CMHS, served as advisor.

Disclaimer

Material for this re p o rt was pre p a red by Mathematica Policy Research, Inc. for SAMHSA,

DHHS, under Contract Number 282-98-021, Task Order No. 21. The content of this

publication does not necessarily reflect the views, opinions, or policies of CMHS, SAMHSA, or

D H H S .

Public Domain Notice

All material appearing in this re p o rt is in the public domain and may be re p roduced or copied

without permission from SAMHSA or CMHS. Citation of the source is appreciated. However,

this publication may not be re p roduced or distributed for a fee without the specific, written

authorization of the Office of Communications, SAMHSA, DHHS.

Electronic Access and Copies of Publication

This publication can be accessed electronically through the following Internet World Wide We b

connection: www.samhsa.gov/. For additional free copies of this document, please call

S A M H S A’s National Mental Health Information Center at 1-800-789-2647 or 1-800-228-0427

( T T D ) .

Recommended Citation

Maxfield M, Achman L, Cook A. National Estimates of Mental Health Insurance Benefits.

DHHS Pub. No. (SMA) 04-3872. Rockville, MD: Center for Mental Health Services, Substance

Abuse and Mental Health Services Administration, 2004.

Originating Office

O ffice of the Associate Director for Organization and Financing, Center for Mental Health

S e rvices, Substance Abuse and Mental Health Services Administration, 5600 Fishers Lane, 15-

87, Rockville, MD 20857. 

DHHS Publication No. (SMA) 04-3872

Printed 2004

i i Special Report
Parity in Mental Health Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

I. I n t ro d u c t i o n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

A. Data and Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

II. Mental Health Insurance Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

A. Sources of Health and Mental Health Insurance . . . . . . . . . . . . . . . . . . . . .7

B. Covered Lives With Health Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 0

C. Mental Health Insurance Among Those With Health Insurance . . . . . . .1 7

D. Total Population With Mental Health Insurance . . . . . . . . . . . . . . . . . . .1 7

E. Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 1

III. G e n e rosity of Mental Health Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 3

A. Generosity of Mental Health Benefits, by Source of Coverage . . . . . . . . .2 3

B. Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 1

I V. Parity in Mental Health Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 3

A. Individuals With Parity in Mental Health Benefits in 1999 . . . . . . . . . . .3 3

B. State Mental Health Parity Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 7

C. Mental Health Parity Act of 1996 (MHPA ) . . . . . . . . . . . . . . . . . . . . . . .4 8

D. Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 0

V. S u m m a ry of Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 1

VI. R e f e re n c e s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 5

VII. Appendix A: Sources of Health and Mental Health Insurance . . . . . . . . . . .5 9

A. Employer- S p o n s o red Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 9

B. Medicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 0

National Estimates of Mental Health Insurance Benefits 
() 

J. Individually Purchased Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67

VIII. Appendix B: Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 9

A. Data Sourc e s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 9

B. Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 1

IX. Appendix C: Expert Advisory Panel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77

X. Appendix D: Mental Health Benefits in Non-Medicaid S-SCHIP Plans,

2 0 0 0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 9

i v Special Report
Benefits, 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 9

F i g u re IV.2. U.S. Population With Private, Employer- S p o n s o red Health

Insurance Covered by State Mental Health Parity Laws, 1999 . . . . . . . . . . .4 4

F i g u re IV.3. Individuals With Private, Employer- S p o n s o red Insurance Who

Would Have Been Subject to Full Financial Mental Health Parity Laws in

1999 if All States Had a Parity Law With a Small-Business Exclusion for

F i rms With 50 or Fewer Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 6

F i g u re IV.4. Percentage of U.S. Population Covered by State Full Financial 

Mental Health Parity Laws in 1999 if Each State Had a Parity Law Wi t h

No Small Employer Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 7

F i g u re IV.5. Private, Employer- S p o n s o red Health Insurance Market Subject to

Mental Health Parity Act of 1996, in 1999 . . . . . . . . . . . . . . . . . . . . . . . . . .4 9

F i g u re IV.6. U.S. Population Subject to the Mental Health Parity Act of 1996, 

1 9 9 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 0

F i g u re B.1. Maximum Number of Outpatient Visits Per Year for Firms With

Limits on Mental Health Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 5

F i g u re B.2. Maximum Number of Inpatient Days Per Year for Firms With

Limits on Mental Health Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 5

National Estimates of Mental Health Insurance Benefits 
Table II.4. Pro p o rtion of Population With Mental Health Insurance, by State, 

1999 (Perc e n t a g e s ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 0

Table III.1. Public Sources of Mental Health Insurance in 1999 . . . . . . . . . . . . .2 5

Table III.2. Generosity of Mental Health Benefits Among Individuals With

Private, Employer- S p o n s o red Insurance Provided by Firms With 10 or

M o re Employees, 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 7

Table III.3. Generosity of Mental Health Benefits Among Those With Health

Insurance, 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 8

Table IV.1. Full, Financial Parity in Mental Health Benefits Among Individuals

With Private, Employer- S p o n s o red Insurance Provided By Firms With 10 

or More Employees, 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 4

Table IV.2. Parity of Mental Health Coverage in Public Sources of Mental 

Health Insurance, 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 5

Table IV.3. Financial Parity in Mental Health Benefits Among Those With

Health Insurance, 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 8

Table IV.4. States With Full Mental Health Parity Laws for the Private Gro u p

Health Insurance Market, 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 1

Table IV.5. U.S. Population With Employer- S p o n s o red Health Insurance 

C o v e red by State Mental Health Parity Laws, 1999 . . . . . . . . . . . . . . . . . . .4 3

Table IV.6. State Parity Laws in the Individually Insured Market in 1999 . . . . .4 5

Table D.1. Mental Health Benefits in Non-Medicaid S-SCHIP Plans, 2000 . . . .8 0

v i Special Report


Mental health benefits are assessed in term s

of the types of services covered (inpatient

c a re, outpatient care, and pre s c r i p t i o n

d rugs), dollar limits (annual expenditure s

and lifetime expenditures), utilization limits

(number of days of inpatient care and number of outpatient visits), and cost sharing

(deductibles, co-insurance, and co-payments).

The benchmark level of generosity is defined

in this re p o rt in terms of the types of serv i c e s

c o v e red (inpatient and outpatient care and

p rescription drug coverage) and utilization

limits (20 inpatient days and 30 outpatient

visits). Full mental health parity is defined as

mental health benefits with the same covere d

s e rvices, dollar limits, utilization limits, and

cost sharing as the plan’s medical/surg i c a l

b e n e f i t s .

Mental Health Insurance Coverage

■ In 1999, more than thre e - q u a rters (76

p e rcent) of the U.S. population had mental health benefits as a component of their

health insurance. Approximately 18 percent of the population had no mental

health insurance benefits; the re m a i n i n g

six percent had unknown mental health

benefits. Of the 18 percent with no men

health benefits, the vast majority (84 pe

cent) had no health insurance whatsoev

while a small portion (16 percent) had

health insurance with no mental health

b e n e f i t s .

■ The pro p o rtion of the population with

mental health insurance benefits varied

moderately from state to state. The pro

p o rtion of individuals in 1999 with men

tal health insurance ranged from a high 

about 80 percent to a low of about 69

p e rc e n t .

Generosity of Coverage of Mental

Health Benefits

■ In 1999, approximately 59 percent of

individuals with private, employers p o n s o red health insurance through a fi

with 10 or more employees had mental

health benefits meeting the benchmark

level. The percentage of individuals wit

mental health benefits meeting the benc

mark increased with firm size. These

results are based on the assumption tha

health plans with parity in mental healt

benefits met or exceeded the benchmark

National Estimates of Mental Health Insurance Benefits 

benchmark level of generosity, the number of individuals with parity in

their mental health benefits, and the number of individuals potentially

subject to state and Federal mental health parity laws.
Parity in Mental Health Benefits

■ Among those with employer- s p o n s o re d

health insurance, individuals in smaller

f i rms were more likely to have parity in

mental health benefits than their larg e r- f i rm

c o u n t e r p a rts. Approximately 23 to 24 percent of individuals who had health insurance provided through firms with 10 to 499

employees had mental health benefits equal

to those of their medical benefits. In contrast, only 6 to 8 percent of individuals who

had health insurance provided thro u g h

f i rms with 500 or more employees had

mental health benefits at parity.

■ In 1999, 37 percent of individuals with

health insurance coverage had parity in

mental health benefits. The Medicaid program and private, employer- s p o n s o re d

insurance are the two largest sources of

health insurance coverage that provide mental health benefits at parity.

■ In 1999, 13 states mandated full mental

health parity in the private employers p o n s o red health insurance market, re q u i ring full equality of utilization and dollar

limits, as well as cost sharing. An estimated 9.8 million (8 percent) of the 124.6 million individuals who had health insurance

t h rough private employer- s p o n s o red plans

ed full financial mental health parity laws

without small business exclusions, only an

additional 19 percent would have been cove red, bringing the total covered by the law

to 55 percent of the private, employers p o n s o red insurance market. These individuals re p resent approximately 25 percent of

the total U.S. population.

■ In 1999, the Mental Health Parity Act of

1996 (MHPA) ensured parity in some

aspects of mental health benefits for

a p p roximately 42 percent of the U.S. population. Another 12 percent were exempt,

either due to the small employer exemption

(10 percent), or because the individual’s

plan did not cover mental health (2 percent). Enrollees in Federal programs not

c o v e red by the law accounted for another

24 percent of the total population.

Individuals with individually purc h a s e d

insurance, also not subject to the law’s provisions, made up another 4 percent of the

population. Data are insufficient to estimate whether individuals with health insurance from outside the household (2 percent) or non-working individuals with

e m p l o y e r- s p o n s o red health insurance were

subject to the law (1 percent). The re m a i ning individuals (15 percent) were unins u re d .

2 Special Report
Considerable attention has been paid to the

issue of parity as a way to improve mental

health insurance coverage, but relatively little

is known about the extent of current levels

of coverage and about generosity of benefits.

Even if current eff o rts to create parity mandates prove successful, little is known about

the potential impact of these mandates on

the number of people who would be aff e c ted. To broaden the current understanding of

these issues, the study documented in this

re p o rt addresses the following questions:

How many people in the United States

have mental health benefits as a part of their

health insurance?

How generous are the mental health be

fits for those who have them? What limits

a re placed on mental health benefits, and

how prevalent are those limits? How do th

limits vary by source of insurance? 

What pro p o rtion of the population falls

under the jurisdiction of Federal and state

parity laws?

Chapter II of this re p o rt presents estima

of the number of individuals covered by ea

s o u rce of mental health insurance coverag

Chapter III examines mental health benefi

g e n e rosity by re p o rting the number of ind

viduals with mental health benefits at a

benchmark standard; and Chapter IV pre -

sents the number of individuals subject to

National Estimates of Mental Health Insurance Benefits 

1 9 9 9). One major determinant of an individual’s access to mental health

care is whether he or she has health insurance that includes mental

health benefits. Research over the past decade (reviewed in Appendix A)

has found that although most individuals in the United States had health

insurance, and most with health insurance had mental health benefits,

most mental health benefits were substantially less generous than the

medical/surgical benefits provided by the same plans. Public concern

over unequal treatment led to passage of the Mental Health Parity Act

of 1996 (MHPA) (42 USC § 300gg–5), which required employers with

50 or more employees that were providing mental health benefits to

apply the same dollar limits to mental health benefits as they did to their

medical/surgical benefits. Although the MHPA technically “sunsetted”

in September 2001, subsequent laws have extended the original statute’s

provisions through the end of 2003.
guidance throughout this study. Appendix D

p resents the limits for mental health benefits

in the 33 separate State Children's Health

Insurance Programs (S-SCHIP). Detailed

state-by-state data tables on 1) health insurance by primary source and on 2) private

e m p l o y e r- s p o n s o red health insurance by firm

size and self-insured status are available fro m

the authors at Mathematica Policy Researc h ,

Inc., upon re q u e s t .

A . Data and Methods

The data sources for the analysis include the

M a rch 2000 Current Population Surv e y

(CPS), the 1999 Medical Expenditure

S u rvey—Insurance Component (MEPS-IC),

and the Mercer Worldwide National Surv e y

of Employer- S p o n s o red Health Plans. Each

s u rvey uses a nationally re p resentative pro b ability sample, with 1999 as the re f e rence period. The CPS is sponsored by the U.S. Bure a u

of the Census and contains data from a sample of approximately 47,000 households conc e rning their health insurance coverage. The

MEPS-IC is sponsored by the U.S.

D e p a rtment of Health and Human Serv i c e s

(DHHS) Agency for Healthcare Research and

Quality (AHRQ), and contains data from a

sample of approximately 20,000 public and

private employers concerning the health

insurance benefits they provide to their

employees. The National Survey of

E m p l o y e r- S p o n s o red Health Plans, sponsore d

database. The other two databases were used

to impute values not otherwise provided by

the CPS. Imputed information includes

g reater detail on firm size and the pro v i s i o n s

of the health plan than is available in the

C P S .

As in most studies, the results pre s e n t e d

a re based on several key assumptions. First,

in cases where persons re p o rted more than

one source of health insurance in the CPS,

individuals are categorized in one health

insurance group according to a hierarchy of

insurance sources (Appendix B provides a

m o re detailed discussion of the hierarc h y ) .

Second, because the CPS does not re c o rd

Medicaid and State Children's Health

Insurance Programs (SCHIP) enrollment sepa r a t e l y, enrollment in SCHIP was estimated

f rom administrative data, and Medicaid

e n rollment was estimated as the re s i d u a l .

Gaps in data were estimated by imputing the

following:

For 14 states in which the MEPS-IC

sample was not large enough to support

state-level estimates, we assumed the

p ro p o rtion of self-insured firms with

m o re than 50 employees was equal to

the national pro p o rt i o n .

For 11 states, the MEPS-IC sample did

not support reliable estimates of the

p e rcentage of firms with 10–49 employees. Thus, national estimates of the percentages were applied to these 11 states.

4 Special Report
National Estimates of Mental Health Insurance Benefits 

exempted from parity laws in these states

National Estimates of Mental Health Insurance Benefits 

A. Sources of Health and Mental

Health Insurance

The following is a brief description of the

major sources of mental health insurance in

the United States. These are listed in ord e r,

based on the number of individuals covere d

by each source. A more extensive discussion

of these insurance sources can be found in

Appendix A.

1. Employer-Sponsored Plans

Nearly half of the U.S. population is covere d

by employer- s p o n s o red health insurance. A

l a rge majority of employers provide mental

health insurance, but they impose more

restrictive limits on that coverage than on the

medical and surgical coverage they off e r.

Since the Mental Health Parity Act (MHPA )

of 1996 prohibited employers from imposing

d i ff e rent dollar limits on mental health coverage, employers increasingly have substituted utilization limits for dollar limits. In 1999,

80 percent of individuals with employers p o n s o red mental health insurance had inpatient day and/or outpatient visit limits on

their coverage (Sturm and Pacula, 2000). 

Rather than contracting with health ins

ers, many employers—particularly larg e

f i rms—have implemented self-funded plan

that pay physicians and hospitals dire c t l y.

The provisions of the Employee Retire m e n 

Income Security Act (ERISA) of 1974

exempt most self-funded plans from state

mandates that re q u i re parity in coverage f

mental health services and other health ca

In a 1997 survey of employer- s p o n s o re d

behavioral health benefits (Buck et al., 199

employers indicated that only about 15 pe

cent of their “most prevalent” plans (i.e.,

those with the largest enrollment) were sel

funded. The survey found that the larger t

number of employees, the greater the likel

hood that the firm had a self-funded plan.

2. Medicare

M e d i c a re is the largest publicly sponsore d

health insurance program in the United

States, covering an estimated 36.1 million

individuals in 1999. The majority of

insurance by primary source of coverage. Section C estimates the percentage of individuals with mental health insurance among those with

health insurance by source of coverage. Finally, Section D estimates the

proportion of the total U.S. population with mental health benefits and

includes state estimates of mental health coverage.
P a rt A provides hospital insurance; Part B

p rovides medical insurance that covers physician services and outpatient expenses.

Because of the limitations in Medicare's benefit package, 88 percent of Medicare beneficiaries in 1999 had some form of supplemental

insurance coverage (Laschober et al., 2002).

Major sources of this supplemental coverage

included: 

■ M e d i c a re+Choice (M+C).

M e d i c a re+Choice, Medicare ’s managed

c a re program, allows health plans to

o ffer supplemental benefits not covere d

in the traditional Medicare benefit

package. In 1999, approximately 16

p e rcent of Medicare beneficiaries were

e n rolled in Medicare+Choice (Health

C a re Financing Administration,

1999a); 84 percent of these

M e d i c a re+Choice enrollees had prescription drug coverage (Cassidy and

Gold, 2000). 

■ Medigap insurance. In 1999, 24 perc e n t

of Medicare beneficiaries had supplemental coverage under a Medigap plan

(Laschober et al., 2002). Tw o - t h i rds of

Medigap plans are standard policies

that cover the co-insurance for both

P a rt A and Part B, the Part A

deductible, and 365 additional hospital

days during a beneficiary's lifetime.

(These additional hospital days are for

beneficiaries in 1999 had supplemental

health insurance through a current or

f o rmer employer; 83 percent of these

beneficiaries had some drug coverage

(Laschober et al., 2002). 

■ Dual eligibility with Medicaid. Lowincome Medicare beneficiaries can

qualify for supplemental Medicare coverage through state Medicaid programs; in 1999, approximately 11 percent of Medicare beneficiaries had supplemental coverage from Medicaid. 

3. Medicaid

Medicaid is a means-tested entitlement program for low-income individuals, financed

jointly by the Federal government and the

states. Generally, each state sets its own eligibility re q u i rements beyond federally mandated minimum levels, based on a combination

of income, assets, and categorical aid status.

The most common categories of enrollees are

low-income children, pregnant women, the

e l d e r l y, the disabled, and parents meeting specific income thresholds. The Federal government mandates that all states must cover a

c o re benefit package that includes inpatient

and outpatient hospital services, as well as

early and periodic screening, diagnosis, and

t reatment (EPSDT) for children under age 21.

States also may choose to cover optional

s e rvices, such as prescription drugs and clinic

s e rvices. 

8 Special Report
SCHIP), by designing a separate child health

p rogram (S-SCHIP), or by combining the two

a p p roaches. 

M-SCHIP must provide the full Medicaid

benefit package that the individual state prov i d e s .

S-SCHIP must be comparable to one of the

following benchmark plans: the Federal

Employees Health Benefits standard option

plan; the specific state's employee health benefit plan; the health maintenance org a n i z ation (HMO) with the largest commerc i a l l y

e n rolled population in the individual state; or

another package approved by the Federal

g o v e rnment. 

5. Federal Employees Health Benefits

Program (FEHBP)

The Office of Personnel Management (OPM)

oversees the FEHBP, the health insurance

p rogram for employees of the Federal government. Beginning in 2001, the FEHBP

re q u i red full mental health parity for all

health plans participating in the pro g r a m .

Utilization limits and cost sharing for health

plan coverage of mental illness must be at

parity with limits and cost sharing for medical, surgical, and hospital serv i c e s .

6. TRICARE 

TRICARE is the health system operated by

the U.S. Department of Defense for activeduty members of the armed forces and their

National Estimates of Mental Health Insurance Benefits 

7. Veterans Affairs

The U.S. Department of Veterans Aff a i r s

( VA) provides care to eligible veterans, gen

ally at VA hospitals, as well as enro l l m e n t

and eligibility for care based on seven prio

g roups, in accordance with the veteran's

health status and financial circ u m s t a n c e s .

The VA provides unlimited inpatient and o

patient mental health services and pre s c r i p

tion drugs; cost sharing depends on an ind

v i d u a l ’s priority level.

8. Civilian Health and Medical Program of t

Department of Veterans Affairs (CHAMPVA

The Civilian Health and Medical Program 

the Department of Veterans Affairs (CHAM

P VA) is the federally administered, fee-fors e rvice health benefits program for depend

ents and survivors of veterans who have a

total, permanent disability, or who died fro 

a disability incurred or aggravated during

active-duty military service. Unlike those

receiving care through the VA, CHAMPVA

e n rollees may receive care through any

p ro v i d e r. 

9. Indian Health Service (IHS)

The Indian Health Service, part of the U.S

D e p a rtment of Health and Human Serv i c e 

(DHHS), provides health care to American

Indians and Alaska Natives who are memb
psychiatric services are provided under contract at local general, private psychiatric, and

state psychiatric hospitals; virtually no part i a l

hospitalization, transitional living, or child

residential services are off e red. 

10. Individually Purchased Insurance 

Individuals without access to health insurance in the group market may elect to purchase insurance in the individual market.

Such individuals include early re t i rees without re t i ree benefits, persons who are selfemployed, those whose employers do not

o ffer health insurance, and individuals who

have exhausted their continued group coverage allowable through the Consolidated

Omnibus Reconciliation Act (COBRA) of

1986. 

Unlike the group health insurance market,

most states allow companies selling individual health insurance policies to accept or

deny an applicant based on the individual's

health status, including their mental health.

Applicants often are re q u i red to provide a

medical history and may have to undergo a

medical examination (Gabel, 2002). Only 11

states re q u i re every insurer in the individual

market to accept all applicants, re g a rdless of

health status (U.S. General Accounting

O ffice, 2002, Febru a ry). 

health benefits is estimated. Finally, the figu res from the first and second steps are multiplied together to yield an estimate of the

number of individuals with mental health

insurance benefits.

Table II.1 presents the number and percentage of the U.S. population, by age gro u p ,

re p o rting health insurance by their primary

s o u rce of insurance in 1999. The figures are

taken primarily from the Current Population

S u rvey (CPS). However, the CPS combines

SCHIP with Medicaid. (Detailed state-bystate data tables on 1) health insurance by

p r i m a ry source and on 2) private employers p o n s o red health insurance by firm size and

s e l f - i n s u red status are available from the

authors at Mathematica Policy Researc h ,

Inc., upon request). The estimates of individuals covered by SCHIP programs were

derived from Centers for Medicare and

Medicaid Services administrative data

(Centers for Medicare and Medicaid Serv i c e s ,

2000b).

Slightly more than 15 percent, or 42 million individuals, had no health insurance coverage in 1999. By far, the most common

s o u rce of health insurance was private

e m p l o y e r- s p o n s o red insurance, covering more

than 45 percent of the U.S. population, or

125 million individuals. Medicare, the

1 0 Special Report
s o u rce of health insurance. 

The two Federal-state programs pro v i d i n g

health insurance to low-income families—

Medicaid and SCHIP—together covere d

m o re than 8 percent of the population, or 23

million individuals. Children constituted the

majority of individuals for whom Medicaid

was the primary source of health insurance.

State and local government employee health

plans covered nearly as many individuals as

Medicaid and SCHIP combined—22 million.

Less common sources of health insurance

i n c l u d e :

■ Insurance purchased by individuals, as

opposed to health insurance purc h a s e d

by a group of individuals, (e.g., an

e m p l o y e r- s p o n s o red gro u p )

National Estimates of Mental Health Insurance Benefits 

and a fee-for- s e rvice plan for depend

ents of veterans, labeled CHAMPVA

■ Health care provided by IHS, which

delivers health care through health

facilities located on or near Indian

re s e rvations to American Indians an

Alaska Natives who are members of

federally recognized tribes 

F i g u re II.1 presents the primary source 

health insurance coverage for individuals, 

age, in 1999. In these figures, the category

“other public” includes individuals enro l l e 

in the FEHBP, state/local government emp

ee plans, TRICARE, CHAMPVA, VA, and

IHS. The Medicaid group also includes

SCHIP enro l l e e s .
1 2 Special Report

Source: March 2000 Current Population Survey supplemented with administrative data on SCHIP enrollment in 1999 (Centers for Medicare and

Medicaid Services, 2000b).

Note: For individuals with more than one source of insurance, the primary source of coverage was determined by the study hierarchy. Estimates of

individuals in certain categories; e.g., VA, thus may be lower than administrative records for those sources would indicate.

aThe individual is covered under a health insurance policy whose policyholder does not reside in the household. For such individuals, the source of

insurance is not known.
National Estimates of Mental Health Insurance Benefits 

Source: 2000 Current Population Survey.

Note: “Other Public” includes Federal Employee Health Benefit Plan, state/local government employee plans, TRICARE, CHAMPVA, VA, and

IHS. “Medicaid” includes SCHIP enrollees.
1 4 Special Report

Source: 2000 Current Population Survey.

Note: “Other Public” includes Federal Employee Health Benefit Plan, state/local government employee plans, TRICARE, CHAMPVA, VA, and

IHS. “Medicaid” includes SCHIP enrollees.
National Estimates of Mental Health Insurance Benefits 

Source: 2000 Current Population Survey.

Note: “Other Public” includes Federal Employee Health Benefit Plan, state/local government employee plans, TRICARE, CHAMPVA, VA, and

IHS. “Medicaid” includes SCHIP enrollees.
1 6 Special Report

Source: 2000 Current Population Survey.

Note: “Other Public” includes Federal Employee Health Benefit Plan, state/local government employee plans, TRICARE, CHAMPVA, VA, and

IHS. “Medicaid” includes SCHIP enrollees.
National Estimates of Mental Health Insurance Benefits 

i n s u red for the costs of inpatient mental

health care.

Nearly all individuals with health insurance

had at least some coverage for both inpatient

and outpatient mental health care. The only

exception was that roughly one in 20 individuals covered by employer- s p o n s o re d plans did

not have mental health benefits of any kind.

M o re o v e r, roughly one in 10 individuals cove red by plans sponsored by small firm s

(fewer than 50 employees) had no mental

health benefits.

D. Total Population With Mental

Health Insurance

The number of individuals in the U.S. population with mental health insurance coverage

is estimated as the product of Table II.1 (the

p ro p o rtion of the population with health

insurance) and Table II.2 (the pro p o rtion of

those with health insurance and mental

health benefits). At least 90 percent of those

in the U.S. population who had health insurance had mental health benefits as a compo

p e rcent had mental health benefits, becaus

data were not available for individuals cov

e red under an individual policy, were nonworking but had employer- s p o n s o red insu

ance, or were covered from a source outsid

the household. The figures for inpatient m

tal health benefits and outpatient mental

health benefits are nearly identical.

The pro p o rtion of the population with

mental health coverage varied moderately

f rom state to state. In 1999, the pro p o rt i o 

of individuals with mental health insuranc

ranged from a high of 82.0 percent in

Minnesota, 82.9 percent in Massachusetts

and 81.9 percent in Hawaii to a low of 68

p e rcent in California, 68.7 percent in Te x a 

and 69.3 percent in Louisiana (Table II.4).

The primary reason for the state-to-state v

ation was the pro p o rtion of the population 

each state without health insurance. Rates 

uninsurance ranged from a low of 7.6 percent in Minnesota, 8.3 percent in Indiana,

and 8.6 percent in Missouri to a high of 2

p e rcent in Texas, 22.5 percent in Louisiana

and 21.0 percent in Arizona.
1 8 Special Report

Source: March 2000 Current Population Survey conducted by the Bureau of the Census; 2000 Insurance Component of the

Medical Expenditure Panel Survey (MEPS-IC) conducted by the Agency for Healthcare Research and Quality (AHRQ)

and the National Center for Health Statistics (NCHS).

NA = Not available.

a Primarily retired persons covered by insurance sponsored by a previous employer.
National Estimates of Mental Health Insurance Benefits 

State rates of uninsurance vary for a number

of reasons. First, smaller firms were less likely

to offer health benefits than larger firm s

(Kaiser Family Foundation and Health

R e s e a rch and Educational Trust, 2000) and

the pro p o rtion of individuals employed by

small firms varied from state to state. Second,

the pro p o rtion of individuals enrolled in public insurance programs, such as Medicaid and

S C H I P, varied by state due to diff e rences in

the income of the state population and state

eligibility levels. Finally, states with larg e

immigrant populations, such as Californ i a

and Texas, had higher rates of uninsurance

because of unique restrictions on immigrant

access to public health programs (Kaiser

Family Foundation, 2000).

The percentage of individuals who had

health insurance without mental health benefits varied over a much smaller range—fro m

a low of 1.0 percent in Massachusetts, 1.3

p e rcent in Florida and Hawaii, and 1.4 percent in Mississippi, to a high of 4.0 percent in

C a l i f o rnia, 2.9 percent in Minnesota, and 2.8

p e rcent in Colorado, Connecticut, and New

J e r s e y. Among the factors behind this variation were the pro p o rtion of the population

c o v e red by private employer- s p o n s o red insurance, the state rate of self-insurance, and the

rate of enrollment in Federal pro g r a m s .

Source: March 2000 Current Population Survey conducted by the Bureau of the Census; 2000 Insurance Component of the Medical Expenditure Panel

Survey (MEPS-IC) conducted by the Agency for Healthcare Research and Quality (AHRQ) and the National Center for Health Statistics (NCHS).

a This category represents individuals with individually purchased insurance policies, non-working individuals with employer-sponsored insurance, and

individuals with health insurance through a source outside the household. No consistent information is available about the prevalence of mental

health benefits in these policies.
2 0 Special Report
National Estimates of Mental Health Insurance Benefits 

E. Summary

A p p roximately 76 percent of the U.S. population had mental health benefits in 1999.

The lack of health insurance was the most

significant reason why an individual did not

have mental health benefits. Even at the state

level, diff e rences in the percentage of individuals with mental health coverage primarily

w e re driven by diff e rences in state rates of

health insurance coverage. Appro x i m a t e l y

nine out of 10 individuals with health insurance had mental health benefits as part of

their coverage. Nearly all public insurance

s o u rces and the overwhelming majority of

private, employer- s p o n s o red health insuran

plans covered mental health benefits.

H o w e v e r, little is known about mental hea

benefits among some subgroups of coverag

For instance, no information is available o

the prevalence of mental health benefits in

individual insurance plans or in health pla

for re t i re e s .

Source: March 2000 Current Population Survey conducted by the Bureau of the Census; 2000 Insurance Component of the

Medical Expenditure Panel Survey (MEPS-IC) conducted by the Agency for Healthcare Research and Quality (AHRQ)

and the National Center for Health Statistics (NCHS).

NA = The MEPS-IC sample was too small to prepare statistically reliable estimates for the state.

Note: Individuals residing in areas where the presence of mental health benefits is unknown are not presented in this table.

National Estimates of Mental Health Insurance Benefits 2 

The benchmark level of generosity for mental health insurance benefits is coverage of

30 inpatient days, 20 outpatient visits, and

p rescription drugs. This level was chosen to

re p resent the level of coverage typical of

many health plans and is not intended as a

m e a s u re of plan adequacy. 

Utilization limits for the benchmark were

selected based on three pieces of evidence.

The first was the advice of an expert advisory panel (the members of which are listed in

Appendix C) on the typical provisions of

e m p l o y e r- s p o n s o red mental health insurance

benefits in 1999. The second was the Merc e r

Worldwide Survey of Employer- S p o n s o re d

Health Insurance Plans, which indicated the

typical mental health insurance plan in 1999

c o v e red 30 inpatient days and 20 outpatient

visits (see Appendix B). A third indicator was

the Federal Employee Health Benefit Plan

(FEHBP) re q u i rement that all contracting

health plans cover a minimum 30 inpatient

mental health days and 20 outpatient mental

health visits in 1999. 

In addition to utilization limits, pre s c r i 

tion drug coverage was included in the

benchmark benefit package. Pre s c r i p t i o n

d rugs are now a primary form of tre a t m e n 

for many mental illnesses. In 1997, pre s c r 

tion drugs accounted for almost 13 perc e n 

of total mental health care spending (Mark

2000). Prescription drug coverage also is

c o n s i d e red “standard” in the employers p o n s o red health insurance market (Kaiser

Family Foundation, 2000). Cost sharing a

dollar limits were not included in the defin

tion of benefit generosity since these meas

u res vary considerably among health plans

A d d i t i o n a l l y, this definition of genero s i t y

only examines the availabilty of mental

health benefits, not the aff o rd a b i l t y.

A. Generosity of Mental Health

Benefits, by Source of Coverage

Although the most recent re s e a rch on the

g e n e rosity of mental health benefits has

focused on private, employer- s p o n s o re d

plans, this chapter provides a more compre

T

benchmark level of generosity, or that meet a common level

of mental health coverage. Wherever possible, generosity of mental

health benefits refers to one of the following: 1) benefits that meet or

exceed the benchmark level of coverage; 2) benefits that are less than the

benchmark; or 3) benefits that are not included in health insurance coverage.
2 4 Special Report

mental health care, and the generosity of their

coverage has significant implications for the

extent and breadth of mental health coverage

in the United States. 

1 . Private, Employer-Sponsored Insurance

In 1999, approximately 59 percent of individuals with private, employer- s p o n s o red health

insurance provided through a firm with 10 or

m o re employees had mental health coverage

that at least met the benchmark (see Ta b l e

III.2). The remaining individuals either had

mental health benefits that fell below the

benchmark (36 percent), or they had no mental health benefits at all (4 percent).

Estimates for the private, employers p o n s o red health insurance market were

derived from the Mercer Worldwide Surv e y

of Employer- S p o n s o red Health Plans. The

M e rcer survey provides no specific inform ation on benefit limits for medical/surg i c a l

s e rvices for those health plans indicating parity in mental health benefits. The survey did

not identify plans offering mental health benefits that were at parity but that did not meet

with employer- s p o n s o red health insurance in

a firm with 10–49 employees had mental

health benefits that met the benchmark, but

the number increased to 67 percent for individuals who had employer- s p o n s o red health

insurance in a firm with 500 or more

e m p l o y e e s .

2. Medicare

The traditional Medicare benefit package

does not meet the benchmark benefit since it

lacks prescription drug coverage, a major

component of today’s mental health care .

H o w e v e r, approximately 62 percent of

M e d i c a re beneficiaries in 1999 had some prescription drug coverage through supplemental

insurance, including a Medicare HMO,

Medicaid, or an employer- s p o n s o red re t i rement plan (Laschober et al., 2002).

T h e re f o re, Medicare beneficiaries with prescription drug coverage through supplemental

insurance were counted as having mental

health insurance that meets the benchmark

s t a n d a rd (see Table III.3).
National Estimates of Mental Health Insurance Benefits 
2 6 Special Report
National Estimates of Mental Health Insurance Benefits 

3. Medicaid

Under the Federal early and periodic scre e ning, diagnosis, and treatment (EPSDT)

re q u i rement, children enrolled in Medicaid

with an identified mental disorder are eligible

to receive an unlimited amount of medically

n e c e s s a ry mental health services, including

inpatient days, outpatient visits, and pre s c r i ption drugs. For this reason, all Medicaide n rolled children are categorized as re c e i v i n g

mental health benefits meeting the benchmark standards. However, state implementation of and adherence to EPSDT standard s

varies. A recent re p o rt issued by the U.S.

General Accounting Office (GAO) stated,

“The extent to which children in Medicaid

a c ross the country are receiving EPSDT services is not fully known, but the available e

dence indicates that many are not re c e i v i n g

these services” (U.S. General Accounting

O ffice, 2001). Absent quantitative evidenc

about the number of Medicaid-enrolled ch

d ren receiving EPSDT services, all childre n

a re counted as having access to such serv i c 

With re g a rd to adult beneficiaries, an

examination of state Medicaid plans re v e a 

six states in which the Medicaid benefit pa

age for adults between the ages of 22 and 

years does not appear to meet the benchm

of 30 inpatient mental health days, 20 out

tient mental health visits, and pre s c r i p t i o n

d rug coverage (Commerce Clearing House

see dates below).

Source: Mercer Worldwide Survey of Employer-Sponsored Health Plans combined with the March 2000 Current Population Survey,

conducted by the Bureau of the Census.

Note: The Mercer Worldwide survey does not include the smallest firms (nine or fewer employees); therefore, there is no information on the extent of their mental health coverage. Approximately 12.5 million individuals receive health insurance through

these very small firms.
2 8 Special Report

Source: Mathematica Policy Research, Inc. (MPR) calculations based on the Current Population Survey, the Medical Expenditure Panel SurveyInsurance Component (MEPS-IC), the Mercer Worldwide Survey of Employer-Sponsored Health Plans, and program information materials.

N/A: Not Available

a All states were considered to meet the benchmark except Alabama, Arkansas, Mississippi, Oklahoma, West Virginia, and Wyoming. Estimates of the

percentage of adult Medicaid recipients from these states were derived from CMS's Medicaid enrollment files for 1999.

b Enrollment information for M-SCHIP and S-SCHIP programs is from Centers for Medicare and Medicaid Services (2000b). Benefit information for 

S-SCHIP programs is from the National Conference of State Legislatures (2001) and does not include cost sharing (see Appendix D).
National Estimates of Mental Health Insurance Benefits 

pital days per year for physical and mental

health conditions. The state also limits outpatient visits to 12 per year for all physician

s e rvices. The state plan does not cover psychologist services for adults (April 6, 1999).

Mississippi limits total outpatient physician services to 12 per year. Psychiatric services by a physician are limited to 10 individual medical psychotherapy sessions and six

g roup medical psychotherapy sessions

(September 18, 2001).

With the exception of enrollees in

S o o n e r C a re Plus, a Medicaid managed care

p rogram in Oklahoma City, Oklahoma,

Medicaid enrollees are subject to an inpatient

hospital limit of 24 days per year total for

physical and mental conditions (April 16,

2 0 0 2 ) .

West Vi rginia limits inpatient care to 25

days per year for all conditions (December

31, 2001).

Wyoming has a limit of 12 visits per year

on all outpatient services for adults in its

Medicaid program (December 18, 2001).

The Institution for Mental Diseases (IMD)

exclusion prohibits states from re c e i v i n g

Federal reimbursement for Medicaid patients

aged 22 to 64 years in IMDs, although states

may add inpatient services in an IMD as an

optional service for the elderly population.

H o w e v e r, Medicaid programs generally provide inpatient psychiatric services to adult

e n rollees through general hospitals. 

For states that choose to implement an 

SCHIP program, benefits can be quite diff e 

ent from those available in the state Medic

p rogram. The Federal government re q u i re s

only that state S-SCHIP benefit packages b

comparable to one of the following benchmark plans: the FEHBP standard option

plan, the state’s employee health benefit pl

the health maintenance organization with 

l a rgest commercially enrolled population i

the state, or another package approved by

the Federal government. 

Specific to mental health benefits, the SSCHIP program must include coverage tha

at least 75 percent of the actuarial value o

selected plans (Center for Mental Health

S e rvices, 2000). Benefit limits are common

among the 33 states using the S-SCHIP

option (see Appendix D). Of the 33 states

with S-SCHIP programs, 10 have no limits

on mental health benefits (two additional

states have at least one S-SCHIP plan optio

with no limits on mental health benefits),

another 21 have benefit limits that meet or

exceed the benchmark, and two (Montana

and New Hampshire) have mental health

benefits below the benchmark. 

In 1999, approximately 5 percent of SSCHIP enrollees were in a plan with no lim

on mental health coverage and just fewer

than 95 percent were in a plan with limits

that nonetheless met the benchmark benef

Fewer than 1 percent of S-SCHIP enro l l e e s
3 0 Special Report

Figure III.1 Generosity of Mental Health Benefits in Total U.S. Population,

1999

Source: MPR calculations based on data from the CPS, the MEPS-IC, Mercer Worldwide Survey of Employer-Sponsored Health Plans, and public

program information materials.

have mental health benefits, compre h e n s i v einsurance policies (9.6 million).
National Estimates of Mental Health Insurance Benefits 3 

d rops to approximately 44 percent of the

e n t i re U.S. population (see Figure III.1).

A p p roximately 20 percent of the U.S. popu

p e rcent had health benefits, but with

unknown mental health benefits. The re m 

ing 15 percent were uninsure d .

National Estimates of Mental Health Insurance Benefits 3 

Following a discussion of the number of

individuals re p o rting parity in mental health

benefits in 1999, the focus turns to mental

health parity laws—one way in which both

Federal and state governments have acted to

e n s u re access to mental health benefits.

Estimates of the number of individuals in

1999 covered by state mental health parity

laws and the now sunsetted Federal Mental

Health Parity Act of 1996 (MHPA) are prov i d e d .

A. Individuals With Parity in Mental

Health Benefits in 1999

Most re s e a rch concerning parity in mental

health coverage has focused on the private,

e m p l o y e r- s p o n s o red market, excluding many

public programs. This section describes the

mental health benefits available from all

i n s u rers in relation to full financial parity. 

1. Private, Employer-Sponsored Health

Insurance

In 1999, approximately 14 percent of indi

viduals with private, employer- s p o n s o re d

health insurance provided through a firm

with 10 or more employees had full parity 

their mental health benefits (see Table IV. 1 

Parity in mental health benefits, as well as

g e n e rosity of mental health benefits, varies

by firm size. As firm size increases, genero 

ty of benefits increases, but the reverse is t

for mental health parity. As firm size incre 

es, firms are less likely to provide parity in

mental health benefits. 

A p p roximately 23 to 24 percent of indi

viduals who received health insurance

t h rough a firm of 10 to 499 employees ha

mental health benefits equal to those of th

medical benefits. In contrast, just 6 to 8 pe

cent of individuals with health insurance

t h rough a firm of 500 or more employees

had full mental health parity.

to dollar limits, utilization limits, and cost-sharing requirements, if mental health services are covered. It is possible that a benefit package can

meet the requirements of parity without meeting the benchmark benefit

package discussed earlier. For example, a health plan could have a 20-day

limit on inpatient hospital care for both medical and mental health stays,

qualifying the plan for parity coverage without meeting the benchmark.
3 4 Special Report

One possible explanation for the fact that

l a rger firms are less likely to provide parity in

mental health benefits has to do with

whether health plans are self-insured. Buck et

al. (1999) found that self-insured plans are

less likely to have mental health benefits on

par with medical/surgical benefits. Under the

Employment Retirement Income Security Act

of 1974 (ERISA), self-insured plans are not

subject to state mental health parity laws.

Since fewer small firms are self-insure d ,

smaller firms are more likely to be subject to

state parity laws. However, although more

small firms may offer parity in mental health

benefits, it should be noted that the perc e n tage of small firms that do not provide mental

health benefits at all is higher than that of

l a rge firm s .

2. Federal Public Programs

Coverage of mental health benefits in public

p rograms varies considerably. Although many

of the programs cover mental health benefits

at parity with medical/surgical benefits, some

i m p o rtant exceptions are noted. Table IV. 2

briefly describes the benefits in Federal and

state programs and whether the benefits

achieve parity.

M e d i c a re, which covered roughly 36 million individuals in 1999, does not offer parity

in mental health benefits. Although most outpatient services re q u i re 20 percent patient

cost sharing, mental health outpatient serv i ces have 50 percent cost sharing. Medicaid,

the Nation’s program for the poor and disabled, does offer parity in mental health benefits, despite the limitation that inpatient psychiatric care be provided in general hospitals.

H o w e v e r, states opting to offer S-SCHIP programs can, and often do, offer benefit packages that provide less mental health coverage

than is available under Medicaid. Ten of the

33 state S-SCHIP programs, which re p re s e n t

just 5 percent of S-SCHIP enrollees, pro v i d e

parity in mental health coverage. (Two additional states have one or more plan options

at parity. )

Source: Mercer Worldwide Survey of Employer-Sponsored Health Plans combined with March 2000 Current Population Survey, conducted by the

Bureau of the Census.
National Estimates of Mental Health Insurance Benefits 3 
3 6 Special Report

Source: Program information materials.

a Many states are not yet in full compliance with EPSDT requirements; however, all children are technically eligible for such

services.

b In 1999, only children were enrolled in SCHIP. Since that time, some states have allowed adults to enroll.

c In 2001, FEHBP mandated mental health parity for all participating health plans.
National Estimates of Mental Health Insurance Benefits 3 

Although it is estimated that 98 percent of

individuals with health insurance sponsore d

by state and local governments have mental

health benefits, comprehensive data on the

g e n e rosity of coverage in state and local

plans are not available. In 1999, two states,

N o rth Carolina and Texas, re q u i red full mental health parity for state employees. Since

1999, Indiana (2000) and South Caro l i n a

(2002) also have re q u i red full parity in their

state employee health plans.

No information on mental health benefits,

including whether mental conditions are cove red, is available for re t i red individuals with

insurance from their previous employer (3.7

million), individuals with insurance from a

s o u rce outside the household (4.6 million), or

those with individually purchased health

insurance policies (9.6 million).

4. Estimates of Number of Individuals With

Full Financial Parity in Mental Health Benefits

Nearly 38 percent of individuals with health

insurance had full financial parity in mental

health benefits in 1999 (see Table IV.3). The

private, employer- s p o n s o red health insurance

market and Medicaid were the two fore m o s t

i n s u rers offering parity in benefits. Another

38 percent of those with health insurance did

not have equal mental health and medical

benefits. Many of these individuals re c e i v e d

their insurance through public sourc e s ,

ing coverage of mental health services, was

unknown. Figure IV.1 provides a picture o

parity in mental health coverage among th

e n t i re U.S. population, including those wh

w e re uninsured. 

B. State Mental Health Parity Laws

A number of states have enacted laws that

re q u i re full mental health parity. All of the

state laws apply to the private, employers p o n s o red health insurance market; some

states also re q u i re parity in the individual

market. Parity laws vary significantly in

scope and application, but full parity re q u 

mental health benefits to be the same as m

ical and surgical benefits with respect to d

lar limits, utilization limits, and cost-sharin

re q u i rements, if covered. As of 2002, 24

states had enacted laws that meet the defin

tion of full mental health parity (National

C o n f e rence of State Legislatures, 2001;

National Alliance for the Mentally Ill, 200

1. Exemptions From State Parity Laws

A number of factors limit the number of

i n s u rers subject to state mental health parit

laws, in effect limiting the number of indiv

uals protected by these laws. Most state pa

laws focus on the private employer- s p o n s o r

insurance market, but even within this ma

ket, states are not able to re q u i re all insure 

to comply with parity laws.
3 8 Special Report

Source: MPR calculations based on the Current Population Survey, the Medical Expenditure Panel Survey-Insurance Component (MEPS-IC), the Mercer Worldwide

Survey of Employer-Sponsored Health Plans, and program information materials.

N/A: Not Available

a All states met the benchmark except Alabama, Arkansas, Mississippi, Oklahoma, West Virginia, and Wyoming. Estimates of the percentage of adult Medicaid recipients from these states were derived from CMS's Medicaid enrollment files for 1999.

b Enrollment information for M-SCHIP and S-SCHIP programs is from Centers for Medicare and Medicaid Services (2000b). Benefit information for S-SCHIP programs is

from the National Conference of State Legislatures (2001) and does not include cost sharing (see Appendix D).
National Estimates of Mental Health Insurance Benefits 3 

ERISA provides the biggest exemption of

health plans from state parity laws. ERISA

was enacted primarily to establish uniform

s t a n d a rds for private employee pension plans

so employers with operations in more than

one state would not be forced to comply separately with each state law (Butler, 2000). In

addition to employee pension plans, ERISA

also covers employee health plans. ERISA

p rohibits states from regulating self-insure d

e m p l o y e r- s p o n s o red health plans. A selfi n s u red health plan is one in which the

employer bears the insurance risk rather than

contracting it out to a third - p a rty insure r,

such as a Blue Cross organization or an

HMO. The employer can administer selfi n s u red plans directly or can contract out

administrative services—such as setting up 

p rovider network or conducting utilization

review—to a third - p a rty administrative ser

ices organization. As long as the employer

retains the insurance risk, the health plan i

c o n s i d e red a self-insured plan for the purp

es of ERISA. 

The ERISA preemption for self-insure d

e m p l o y e r- s p o n s o red health plans means th

health plans are subject only to Federal re g 

lation. Any state regulation, such as a state

parity law that goes further than the Ment

Health Parity Act (MHPA), does not apply 

Source: MPR calculations based on data from the Current Population Survey, the Medical Expenditure Panel Survey-Insurance Component (MEP

IC), the Mercer Worldwide Survey of Employer-Sponsored Health Plans, and program materials.
4 0 Special Report

authors at Mathematica Policy Research, Inc.

upon request. Since larger firms are in a better position to assume risk, it is not surprising that larger firms also are more likely to

s e l f - i n s u re than smaller ones. Only about 12

p e rcent of individuals with insurance thro u g h

a firm with fewer than 50 employees were in

a self-insured firm in 1999, compared with

nearly 50 percent for individuals insure d

t h rough a firm with 50 or more employees.

Some states either exempt small gro u p s

f rom compliance with parity statutes or

re q u i re only partial parity for these businesses. Nine states with mental health parity laws

in 2002 provided small-employer exemptions.

Most states use 50 employees as the bre a k

point for small employers, but Maine uses 20

employees, while Vi rginia and Hawaii use 25. 

Arkansas, Indiana, New Mexico, and

Oklahoma have built cost exemptions into

their statutes. Under these exemptions, if a

plan can prove that its costs increased more

than an established percentage after implementing the law, it may be exempted fro m

the law’s re q u i rements. 

2. Parity in 1999

In 1999, 13 states had mental health parity

laws that meet this study’s definition of full

with laws applying either to serious mental

illnesses only, or to all mental illnesses. State

laws that apply only to serious or biologically

based mental illness typically cover schizop h renia, schizoaffective disord e r, bipolar diso rd e r, major depressive disorders, obsessivecompulsive disord e r, and panic disorders. For

states with such laws, the applicable statutes

lay out the exact illnesses covered by the law,

usually those illnesses delineated above. State

parity laws that apply to the general category

of mental illnesses usually cover any illness

listed in the International Classification of

Diseases Manual 9 and/or the American

Psychiatric Association’s Diagnostic and

Statistical Manual of Mental Disorders IV).

(National Conference of State Legislature s ,

2001; the National Alliance for the Mentally

Ill, 2002).

In 1999, state mental health parity laws

c o v e red approximately 9.8 million individuals. The percentage of individuals in the private employer- s p o n s o red market subject to

state parity laws varied significantly fro m

state to state, ranging from 39 percent in

Arkansas to 67 percent in Ve rmont. The variation largely can be attributed to two factors:

variation in the pro p o rtion of firms that selfi n s u re, and the provision of a small-employer

e x e m p t i o n .
National Estimates of Mental Health Insurance Benefits 4 

Source: Information about state mental health parity laws comes from the National Conference of State Legislatures (2001) and the National Alliance f

Mentally Ill (2002). Information also was verified by looking up the pertinent state statutes. Estimates of the number of individuals covered by s

are MPR calculations based on CPS estimates of the number of individuals with employer-sponsored health insurance combined with MEPS-I

lations of the self-insured status of firms, by firm size.

a These states are among 14 states for which the MEPS-IC is unable to produce state-level estimates of the percentage of firms that were self-insured

rough estimate of the number of individuals covered under the state laws in these states, the national rates of self-insurance for firms with few

more than 50 employees can be applied to these states.

b Effective 1999, Connecticut expanded its law to cover all mental disorders. Similarly, Rhode Island expanded its law to cover all mental disorders, eff

2002.

c These states were among 11 without state-level estimates in the 1999 MEPS-IC. National estimates of the percentage of firms with 10 to 49 employee

to 99 employees were applied to these states.

d These data overestimate the number of individuals exempted through the state small-employer exemption. MEPS-IC does not allow for estimates of 

insured status for firms with fewer than 25 employees. For these states, a small-employer exemption for firms with 50 or fewer employees was

assumed.

e Maryland allows maximum co-insurance for outpatient mental health visits of 20 percent for visits one through five, 35 percent for visits six through 3

percent for visits 31 and over in a calendar year. Copayments cannot be higher than those for physical illnesses.

f MI: mental illnesses; SMI: serious mental illnesses or biologically based illnesses; ED: emotional disorders.
g reater percentage of individuals in Arkansas

than in Ve rmont. Furt h e rm o re, Arkansas has

a small-employer exemption for firms with

50 or fewer employees, thus exempting an

additional 18 percent of the state’s population with private employer- s p o n s o red insurance. Detailed state-by-state data tables on

private employer- s p o n s o red health insurance

by firm size and self-insured status are available from the authors at Mathematica Policy

R e s e a rch, Inc., upon re q u e s t .

In 1999, approximately 8 percent of individuals with private employer- s p o n s o re d

health insurance were enrolled in health plans

subject to state mental health parity laws (see

Table IV.5 and Figure IV.2). Approximately 6

p e rcent lived in a state with a mental health

parity law but participated in a plan exempt

f rom the law due to the firm ’s self-insure d

status or small size. The majority of individuals with private, employer- s p o n s o red insurance (83 percent) live in a state without a full

financial mental health parity law. Data are

i n s u fficient to estimate whether the re m a i n i n g

t h ree percent—non-working individuals with

e m p l o y e r- s p o n s o red insurance—were subject

to state parity laws.

Between 1999 and 2002, 11 states enacted

parity laws, bringing the total number of

states with parity laws to 24. Because 2002

data are not yet available, estimates of the

s o u rces of health insurance and the self-insurance status of firms in 2002 also are not

4 2 Special Report

s p o n s o red heath insurance) would have

become subject to mental health parity laws

since 1999, for a total of 28.5 million (22.9

p e rcent) in 2002. 

3. State Parity Laws in the Individual

Insurance Market

T h i rteen states re q u i re full parity in mental

health benefits in individually purc h a s e d

insurance plans (National Conference of

State Legislatures, 2001; National Alliance

for the Mentally Ill, 2002). The laws in

C a l i f o rnia, Delaware, Hawaii, Massachusetts,

Montana, New Jersey, and South Dakota

cover serious or biologically based mental illnesses. The laws in Connecticut, Indiana,

Maine, Maryland, Minnesota, Rhode Island,

and Ve rmont cover all mental illnesses (see

Table IV. 6 ) .

These state laws cover the individual market, but the degree of insurer compliance

with the parity re q u i rements is unclear. A

review of several individual policies for the

individual markets in those states re v e a l e d

that at least some of the policies off e red did

not appear to be in compliance with state

re q u i rements (ehealthinsurance.com, 2002).

H o w e v e r, the level of compliance varied by

state. For instance, all of the policies off e re d

in Connecticut appeared to be in compliance.
National Estimates of Mental Health Insurance Benefits 4 
4 4 Special Report

Source: CPS estimates of the number of individuals covered through employer-sponsored health insurance combined with MEPS-IC calculations

of the self-insured status of firms, by firm size. Information on state parity laws from the National Conference of State Legislatures (2001)

and the National Alliance for the Mentally Ill (2002).

Note: Unknown includes non-working individuals with private, employer-sponsored insurance. An unknown amount would be covered by state 

laws.
National Estimates of Mental Health Insurance Benefits 4 

4. Potential Effects of State Mental Health

Parity Laws

Even if all states had a full financial mental

health parity law in effect in 1999, with a

small employer exemption for firms with 50

or fewer employees, the laws ultimately

would have reached only 36 percent of individuals with private, employer- s p o n s o re d

health insurance (see Figure IV.3). Nineteen

p e rcent of individuals with this type of insurance coverage would have been exempt under

state small business exclusions. The ERISA

p reemption would have exempted another 

p e rcent of individuals with private, employ

s p o n s o red insurance; an additional 5 perc e 

would have been exempt because their

employer did not offer mental health bene

Data are insufficient to determine whether

the remaining 3 percent—non-working ind

viduals with employer- s p o n s o red insurance

would have been subject to state laws. 

If all states had implemented full, financ

mental health parity laws without small bu

ness exclusions, only an additional 19 perc 

would have been covered, bringing the tot

c o v e red by the law to 55 percent of individ

als with private, employer- s p o n s o red healt

i n s u r a n c e .

Source: National Conference of State Legislatures (2001) and National Alliance for the Mentally Ill (2002) charts on state

parity laws.

a From 1997 to 1998, Connecticut’s law covered serious mental illnesses. Effective 1999, the law was expanded to cover

all mental illnesses.

b From 1995 to 2001, Rhode Island’s law covered serious mental illnesses. Effective 2002, the law was expanded to cover

all mental illnesses.

c MI: mental illnesses; SMI: serious mental illnesses or biologically based illnesses; ED: emotional disorders.
4 6 Special Report

In addition to the ERISA preemption, state

parity laws also are limited in their re a c h

since they cannot affect Federal health insurance programs. Federal and state pro g r a m s

account for a large share of health insurance

coverage in the United States. Assuming all

states had a full financial mental health parity

law in 1999, with no small employer exemption, approximately 25 percent of the U.S.

population would be subject to those laws

( F i g u re IV.4). Approximately 17 percent of

individuals would have been exempt due to

the ERISA preemption. Two percent would

have been exempt because their private,

e m p l o y e r-based insurance does not cover

mental health benefits. Roughly 26 percent of

the U.S. population is in a Federal or state

p rogram such as Medicare, Medicaid, SCHIP,

Source: CPS estimates of the number of individuals covered through employer-sponsored health insurance combined with MEPS-IC 

calculations of the self-insured status of firms, by firm size. 

Note: Unknown includes non-working individuals with private, employer-sponsored insurance. An unknown amount would be covered by state

laws.
National Estimates of Mental Health Insurance Benefits 4 

H i s t o r i c a l l y, they have chosen not to do so. Itthe remaining 15 percent of the population

Source: CPS estimates of the number of individuals covered through employer-sponsored health insurance combined with MEPS-IC 

calculations of the self-insured status of firms, by firm size. 

Note: Unknown includes non-working individuals with private, employer-sponsored insurance. An unknown amount would be covered by stat

laws.

Figure IV.4. Percentage of U.S. Population Covered by State Full

Financial Mental Health Parity Laws in 1999 if Each State Had a Parity

Law With No Small Employer Exemption
4 8 Special Report

fewer employees) and businesses that could

demonstrate a 1 percent increase in costs.

Health plans that did not cover mental health

benefits were not re q u i red to begin covering

these benefits.

1. Coverage as a Proportion of Those With

Private, Employer-Sponsored Insurance

Of approximately 124.7 million individuals

in the private, employer- s p o n s o red insurance

market in 1999, 87.9 million (70 perc e n t )

had health insurance through firms with 50

or more employees that covered mental

health benefits, and there f o re were subject to

the MHPA (Figure IV.5). Approximately 26.9

million (22 percent) were in a health plan

exempt from the law’s provisions because of

the small business exclusion. Yet another 6.2

million (5 percent) individuals with private,

e m p l o y e r- s p o n s o red insurance were exempt

because their coverage did not include mental

health benefits at all. The final 3.7 million (3

p e rcent) were non-working with employerbased insurance—many of whom are pro b ably re t i rees not yet eligible for Medicare. It is

reasonable to assume that some portion of

these individuals receive their insurance

t h rough a firm of more than 50 employees,

and there f o re were subject to the MHPA, but

the CPS does not provide firm sizes for these

individuals. Thus, it is not possible to know

health insurance contains many more sourc e s

of coverage. This section estimates the percentage of the total U.S. population with

health insurance subject to the MHPA.

The 70 percent of individuals covered by

the MHPA in the private employer- s p o n s o re d

market in 1999 re p resents roughly 32 perc e n t

of the total U.S. population. Those with

health insurance through the FEHBP (2 percent) also were covered by the MHPA. State

and local government employee health plans

w e re allowed to opt out of the law, but only

a negligible number did so. Individuals in

state/local government health plans with

mental health benefits totaled 22.1 million (8

p e rcent). Added together, approximately 42

p e rcent of the U.S. population were subject

to the MHPA in 1999 (Figure II.6). Another

12 percent were exempt from the law based

on the small employer exemption (10 percent) or because the individual’s plan did not

cover mental health (2 percent). Enrollees in

Federal and Federal/state programs exempted

f rom the law, such as Medicare, Medicaid,

S C H I P, and TRICARE, accounted for another 24 percent of the U.S. population. 

Although some of these programs alre a d y

o ff e red full parity in mental health benefits,

some did not. Individuals with individually

p u rchased insurance, also not under the

scope of MHPA, accounted for 4 percent of

the U.S. population in 1999. It is unknown
National Estimates of Mental Health Insurance Benefits 4 

Source: 2000 Current Population Survey, MEPS-IC, and Mercer Worldwide Survey. “Unknown” includes individuals with insurance from a sourc

outside the household (2 percent) and non-working individuals with employer-sponsored insurance (1 percent).
5 0 Special Report

D. Summary

Nearly 38 percent of individuals with health

insurance had full financial parity in mental

health benefits in 1999. The private, employers p o n s o red health insurance market and

Medicaid were the two main insurers off e r i n g

parity in benefits. Additionally, in 1999, 13

states had full mental health parity laws.

H o w e v e r, because of the ERISA exclusion of

s e l f - i n s u red employers and small gro u p

exemptions, state laws often do not cover

l a rge numbers of those who have health

insurance through employer- s p o n s o red plans,

the main focus of such laws. In fact, just 8

p e rcent of those with health insurance from a

private, employer- s p o n s o red plan were subject to a parity law in 1999. State mental

health parity laws also generally do not cover

individuals with insurance from a source outside the private, employer- s p o n s o red market.

If each state had a mental health parity law

in 1999, with no small employer exemption,

a p p roximately 55 percent of the private,

e m p l o y e r- s p o n s o red market would have been

c o v e red—just 25 percent of the total U.S.

population. Federal parity laws have the

potential to cover more individuals. MPHA,

with its small business exemption for firm s

with 50 or fewer employees, provided part i a l

parity protection to approximately 42 percent of the U.S. population in 1999.

Source: 2000 Current Population Survey, MEPS-IC, and Mercer Worldwide Survey. “Unknown” includes individuals with insurance from a

source outside the household (2 percent) and non-working individuals with employer-sponsored insurance (1 percent).
National Estimates of Mental Health Insurance Benefits 5 

In 1999, 76 percent of the noninstitutionalized U.S. population had mental health

insurance benefits. The majority of those

who did not have these benefits did not have

health insurance at all. 

In 1999, approximately 52 percent of

individuals with health insurance had mental

health benefits that met a benchmark stand a rd of coverage of 30 inpatient days, 20

outpatient visits, and prescription drug coverage. When the uninsured are included in

the total, the percentage of individuals with

mental health insurance who met or exceeded the benchmark drops to approximately 44

p e rcent of the entire U.S. population.

A p p roximately 20 percent of the U.S.

population had mental health benefits lower

than the benchmark, and at least another 2

p e rcent had benefits that did not cover mental health services at all. Insufficient data

p revented estimates for an additional 19 percent of the population, either because the

individuals had mental health benefits of

unknown generosity (12 percent) or because

it could not be determined whether they had

mental health coverage or to what extent

they had any coverage (7 percent). The

remaining 15 percent of the population was

u n i n s u red in 1999.

Some individuals with mental health be

fits that fell short of the benchmark were

c o v e red by public insurance programs. Ev

though Medicare utilization limits exceede

the benchmark, the program lacked pre s c r 

tion drug coverage—a major component o

t o d a y ’s treatment for mental illness. Howe v e r, many individuals also had supplemen

M e d i c a re coverage to provide them with

some of this protection. Also, Medicaid be

efits for adults in six states did not meet th

benchmark level of genero s i t y. 

A p p roximately 14 percent of individual

with private, employer- s p o n s o red health

insurance through a firm with 10 or more

employees had mental health benefits at p

ty with their medical/surgical benefits. No

special restrictions were imposed on menta

health benefits, such as diff e rential dollar 

utilization limits, or cost-sharing re q u i rements. Across all health insurance sourc e s 

a p p roximately 38 percent of individuals w

mental health benefits had parity in that c

erage. Medicaid is a large provider of heal

insurance that includes mental health pari

in its benefit package. 

In 1999, approximately 8 percent of ind

viduals with employer- s p o n s o red health

insurance were subject to state statutes

Federal laws mandating mental health parity.
5 2 Special Report

additional 11 states enacting such laws

between 1999 and 2002.

If all 50 states and the District of

Columbia had a full mental health parity law

in 1999, with no small business exclusion, a

state law would have covered appro x i m a t e l y

55 percent of individuals with private,

e m p l o y e r- s p o n s o red health insurance.

A p p roximately 37 percent would have been

exempt under the Employment Retire m e n t

Income Security Act of 1974 (ERISA) preemption. Five percent would not have been

c o v e red because their insurance did not

include mental health benefits. Data are

i n s u fficient to estimate whether the re m a i n i n g

individuals with private, employer- s p o n s o re d

insurance (3 percent) would have been cove red. Individuals with private, employers p o n s o red insurance who would have been

mately 87.9 million individuals (70 perc e n t )

in the private, employer- s p o n s o red health

insurance market had health insurance

t h rough firms with 50 or more employees

that covered mental health benefits, and theref o re were subject to the MHPA. In addition to

those in the private, employer- s p o n s o re d m a rket, the MHPA also covered the Federal

Employees Health Benefit Program (FEHBP)

and nearly all state/local government health

plans. 

When individuals in these coverage sourc e s

a re included, the MHPA reached appro x imately 42 percent of the U.S. population in

1999. Even with its small business exclusion,

the Federal law reached nearly twice the

number of individuals who would have been

c o v e red had every state enacted a mental

health parity law without a small business

e x c l u s i o n .


National Estimates of Mental Health Insurance Benefits 5 

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5 8 Special Report

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A u t h o r.
National Estimates of Mental Health Insurance Benefits 5 

This appendix reviews the major sources of mental health insurance in the United States, as well as recent re s e a rch on each

s o u rce. The review begins with private, employer- s p o n s o re d

insurance and extends to public sources of mental health insurance.

Sources of insurance are presented in order of the number of covered

individuals.

Jensen et al. (1998) reviewed how ment

health benefits provided through employer

s p o n s o red health plans changed from 199

to 1995. They found that, although a larg 

number of employer health plans included

mental health benefits, the benefits becam

m o re restrictive over the study period. In

addition, plans increasingly imposed separ

limits for outpatient mental health visits a

inpatient days. Furt h e rm o re, in 1995, indi

viduals enrolled in health maintenance

o rganizations (HMOs) were more likely to

face stricter day or visit limits than those n

e n rolled in HMOs. For example, 88 perc e 

of the HMOs placed a limit on visits, but

only 36 percent of non-HMOs imposed su

a limit. Seventy-six percent of the study’s

non-HMOs imposed a dollar limit on outp

tient care, while 16 percent of the study’s

HMOs imposed such a limit. 

In another study, Buck and Umland

(1997) found that from 1989 to 1995,

A. Employer-Sponsored Plans

Nearly half the U.S. population is covered by

e m p l o y e r- s p o n s o red health insurance. The

General Accounting Office (GAO) (2000a)

found that a large majority of employers

p rovide mental health insurance, but they

impose more restrictive limits on that coverage than on the medical and surgical insurance they off e r. Since the Mental Health

Parity Act (MHPA) of 1996 pro h i b i t e d

employers from imposing diff e rent dollar

limits on mental health coverage than on

medical and surgical coverage, employers

i n c reasingly have substituted utilization limits for dollar limits. 

S t u rm and Pacula (2000) found that in

1999, 80 percent of individuals with mental

health insurance had inpatient day or outpatient visit limits. More than 50 percent of

such individuals were limited to 20 or fewer

outpatient visits; approximately 60 perc e n t

w e re limited to 30 or fewer inpatient days.
6 0 Special Report

tient benefit limit imposed by HMOs was 20

visits, which, as Buck and Umland note, is

the amount specified by the Health

Maintenance Organization Act of 1973 for

federally qualified HMOs. From 1986 to

1994, HMOs increasingly were likely to

re q u i re co-payments as opposed to coinsurance for mental health care, there b y

c o n t rolling costs.

Following implementation of the MHPA ,

the U.S. Government Accounting Off i c e

(2000a) found that employers were imposing

mental health service limits that were more

restrictive than limits for medical and surg i c a l

benefits. In a survey of employers subject to

the MHPA, GAO found that 87 percent of

respondents who complied with the MHPA’s

p rovisions still were subject to more stringent

limits on mental health coverage than on

medical and surgical benefits. Furt h e rm o re ,

a p p roximately two-thirds of employers who

changed their dollar limits to comply with

the law made their mental health benefits

m o re restrictive by lowering the number of

visits or days, or by raising co-insurance

rates. Most of these newly compliant employers covered fewer office visits for mental

health than they had in the past.

B. Medicare

Enacted in 1965, Medicare is the largest publicly sponsored health insurance program in

o t h e rwise eligible but have not contributed

for the full 40 quarters may buy into the program by paying additional pre m i u m s .

A p p roximately 13 percent of the Medicare

population is under age 65 and qualifies by

being either totally and permanently disabled

or diagnosed with end-stage renal disease

(ESRD). Approximately 10 percent of all

M e d i c a re beneficiaries—including 41 perc e n t

of Medicare beneficiaries under age 65—selfre p o rt a mental disorder (Sharma, 2001). 

M e d i c a re ’s benefit package is divided into

P a rts A and B. Part A provides hospital insurance; Part B provides coverage for physician

s e rvices and outpatient expenses. Stays in

psychiatric hospitals are subject to the same

cost-sharing stru c t u re applicable to stays in

general hospitals, including an $812 Part A

d e d u c t i b l e1 per benefit period.2 In addition to

the deductible, beneficiaries must pay $203

per day for days 61 through 90 of a hospital

stay and $406 for days 91 through 150.3

Beneficiaries must pay all costs for days spent

in the hospital beyond 150 per benefit peri1 In 1999, the Part A deductible was $768 per benefit

p e r i o d .

2 M e d i c a re defines a benefit period as a spell of illness that ends after a beneficiary does not re c e i v e

c a re in a hospital or skilled nursing facility for 60

d a y s .

3 In 1999, the co-payments for hospital stays were

$192 for days 61 through 90 and $384 for days 91

t h rough 150.
which includes both mental and physical

health care. For most physician services, the

b e n e f i c i a ryco-insurance is 20 perc e n t .

H o w e v e r, Medicare beneficiaries pay 50 percent for visits to psychologists and 20 perc e n t

for visits to psychiatrists and hospital outpatient clinics (Centers for Medicare and

Medicaid Services, 2001b; Hennessy, 2000).

No utilization limits are placed on the number of outpatient mental health visits for

M e d i c a re beneficiaries. Medicare does not

cover the cost of prescription drugs, which

have become increasingly important in the

t reatment of mental illness over the last

d e c a d e .

Due to limitations in Medicare ’s benefit

package, 88 percent of Medicare beneficiaries

in 1999 had some form of supplemental

insurance coverage (Laschober, 2002). Below

a re descriptions of the major sources of supplemental Medicare insurance.

National Estimates of Mental Health Insurance Benefits 6 

Cost sharing under Medicare HMOs ge

erally is less than traditional fee-for- s e rv i c e

M e d i c a re. Some plans, however, re c e n t l y

have instituted cost sharing for certain serv 

es, including inpatient mental health stays,

which can be higher than traditional

M e d i c a re (Achman and Gold, fort h c o m i n g 

This cost sharing is allowed because M+C

plans are re q u i red to have an actuarial val

only that is equal to or more than the enti

M e d i c a re benefit package and thus may go

below the value of individual benefits.

M e d i c a re+Choice plans are allowed to

o ffer supplemental benefits not covered in 

traditional Medicare benefit package. Thes

benefits are financed either through the sav

ings the plan can generate by providing tra

tional Medicare services or by charg i n g

e n rollees additional monthly premiums. In

1999, approximately 84 percent of

M e d i c a re+Choice enrollees had pre s c r i p t i o 

d rug coverage (Cassidy and Gold, 2000).

Twenty-two percent of enrollees with dru g

coverage had an unlimited prescription dru 

benefit; the remaining 78 percent had som

annual cap on benefits.6

4 The co-payment for the lifetime re s e rve days in

1999 was $384 per day.

5 The program has declined substantially since 1999

in terms of enrollment and the compre h e n s i v e n e s s

and aff o rdability of benefits; however, many M+C

e n rollees can still obtain mental health coverage

t h rough their HMO that is more aff o rdable and

c o m p rehensive than that in fee-for- s e rv i c e

M e d i c a re. In 2002, M+C enrollment is just over 5

million, or approximately 14 percent of the total

M e d i c a re population (Centers for Medicare and

Medicaid Services, 2002a).

6 Because of the tighter budgets of Medicare + C h o 

plans since 1999, only 71 percent of M+C enro 

have any prescription drug coverage in 2002

(Achman and Gold, 2002). Many plans that con

tinue to cover prescription drugs limit that cove

age by excluding brand-name drugs or imposing 

p a rticularly low annual dollar limit on brand-na

d rugs, sometimes under $500.
the remaining plans were purchased before

1990, with little currently known about the

specific benefits they cover. 

The standardized policies cover the coinsurance for both Part A and Part B, the

P a rt A deductible, and 365 additional hospital days during a beneficiary ’s lifetime. The

additional 365 days are for general hospitals

and do not extend the 190-day limit for inpatient care at psychiatric hospitals. 

T h ree Medigap plans (H, I, and J) cover

p rescription drugs, though their coverage is

relatively limited compared with most private

insurance plans.7 Only about 27 percent of

M e d i c a re beneficiaries with Medigap supplemental insurance had some drug coverage in

1999 (Laschober et al., 2002).

Medigap plans can provide financial protection for the elderly, but they are less likely

to help the disabled population under age 65,

for which a much higher incidence of mental

d i s o rders is re p o rted. For the most part ,

i n s u rers are not re q u i red to sell Medigap

6 2 Special Report

insurance through a current or form e r

employer (Laschober et al., 2002). Retire e

health insurance for the population over 65

years of age generally wraps around the

M e d i c a re benefit package, reducing individual out-of-pocket costs for co-insurance and

deductibles. A typical large employer’s re t i re e

health plan for Medicare eligibles includes a

$300 deductible, 80 percent employer coinsurance, and an out-of-pocket limit of

$1,750 (McArdle et al., 1999). 

No information currently exists on the

p rovisions in re t i ree health coverage specific

to mental health services. In 1999, appro x imately 83 percent of Medicare beneficiaries

with employer- s p o n s o red supplemental insurance had some drug coverage (Laschober et

al., 2002).

The share of all employers offering health

benefits to Medicare-eligible re t i rees has been

shrinking over the past decade and is expected to continue to decline in the near future

(Kaiser Family Foundation et al., 2002). In

addition, more employers are expected to

shift a greater share of costs onto re t i rees by

i n c reasing premium contributions and imposing greater cost-sharing re q u i rements (Kaiser

Family Foundation et al., 2002).

4. Dual Eligibility With Medicaid

Low-income Medicare beneficiaries can qualify for supplemental Medicare coverage

t h rough state Medicaid programs. In 1999,

7 Plans H and I have an annual deductible of $250

and cover 50 percent of drug costs up to $1,250

per year. Plan J also has an annual deductible of

$250 but pays 50 percent of drug costs up to

$3,000 per year (Health Care Financing

Administration, 2001b).

8 C a l i f o rnia, Connecticut, Kansas, Louisiana, Maine,

M a ryland, Massachusetts, Michigan, Minnesota,

Missouri, New Hampshire, New Jersey, New Yo r k ,

N o rth Carolina, Oklahoma, Oregon, Pennsylvania,

Texas, and Wisconsin (Health Care Financing

Administration, 2001b).
Quinn, 2001). In addition, those who meet

state Medicaid income and asset standard s

can qualify for full Medicaid benefits. In fact,

the vast majority of those who are dual eligibles in all states also qualify for full Medicaid

benefits in addition to their Medicare benefit

package (Ellwood and Quinn, 2001).

Additional benefits depend on the state,

but may include case management and adult

day care services, which can be valuable to

individuals with a mental disord e r. All state

Medicaid programs also cover outpatient prescription drugs. In 1999, 89 percent of dual

eligibles had prescription drug coverage.9

Medicaid pays the Medicare deductibles

and co-insurance for dually eligible individuals. However, only about a third of state

Medicaid programs cover the Medicare coinsurance re q u i rements in full (Ellwood and

Quinn, 2001). The remaining states use the

Medicaid rate schedule to determine the level

of payments for service providers, which can

be less than the Medicare amount. If pro -

viders are unwilling or unable to accept the

Medicaid payment rates, low re i m b u r s e m e n t s

for Medicaid enrollees could pose a potential

access barrier to individuals receiving serv i c e s .

National Estimates of Mental Health Insurance Benefits 6 

women, the elderly, disabled persons, and

p a rents meeting specific income thresholds

Since Medicaid focuses on enrolling ind

viduals in poverty or with disabilities, the

p rogram is particularly important for adul

with serious mental illnesses and childre n

with severe emotional disorders. Medicaid

accounts for nearly 20 percent of all spend

on mental health services in the United Sta

(Mark et al., 2000).

In June 1999, approximately 56 percent 

the national Medicaid population were

e n rolled in some managed care arr a n g e m e 

(Health Care Financing Administration,

1999b). Managed care arrangements range

f rom HMOs with prepaid capitated contra

to loosely stru c t u red networks of pro v i d e r 

that use gatekeeping to control utilization. 

states with Medicaid managed care, menta

health services can be carved out of the ma

aged care contract so that they remain in t

f e e - f o r- s e rvice setting; are included under t

managed care contract; or are provided un

a behavioral health managed care plan sep

rate from their physical health managed ca

plan.

Medicaid benefit packages cover a larg e

a rray of services. The Federal govern m e n t

mandates that all states must cover a core

benefit package, including inpatient and ou

patient hospital services, physician serv i c e s 

l a b o r a t o ry and x-ray services, nursing hom

and home health care services, and early a

9 The remaining individuals, pre s u m a b l y, do not

qualify for full Medicaid benefits.
ment that includes both physical and mental

health assessments (Centers for Medicare and

Medicaid Services, 2002b). Should a mental

or physical problem be identified, the state is

re q u i red to provide all medically necessary

c a re to “correct and ameliorate” that pro blem, “even if the service is not available

under the State’s Medicaid plan to the rest of

the Medicaid population” (Centers for

M e d i c a re and Medicaid Services, 2002b).

Even though this provision technically entitles Medicaid-enrolled children to all medically necessary care for a mental health condition, EPSDT re q u i rements are not well understood, and there is much variation in the level

of state adherence to such re q u i rements. For

this reason, the U.S. General Accounting

O ffice (2001) has re p o rted that many eligible

c h i l d ren are not receiving EPSDT serv i c e s .

Although Medicaid is supposed to pro v i d e

for all medically necessary mental health care

for children, care for adults can be more

restrictive. The most commonly noted re s t r i ction on adult mental health services under

Medicaid is the Federal Institution of Mental

Diseases (IMD) exclusion for adults 22 to 64

years of age. An IMD is defined by Federal

law as “a hospital, nursing facility, or other

institution of more than 16 beds that is primarily engaged in providing diagnosis, tre a tment, or care of persons with mental diseases, including medical attention, nursing

c a re, and related services” (Health Care

6 4 Special Report

hospitals with a psychiatric unit can, howeve r, be covered. States may elect to cover IMD

s e rvices for individuals aged 65 years and

older as an optional serv i c e .

Eight states—Arizona, Delaware ,

M a ryland, Massachusetts, Oregon, Rhode

Island, Tennessee, and Ve rm o n t — h a v e

received partial waivers from the Medicaid

IMD exclusion for persons 22 to 64 years of

age through 1115(b) Medicaid managed care

waivers (Kuo and Draper, 2002). Under the

waivers, the eight states can receive Federal

Medicaid money for 22- to 64-year- o l d

patients, although Federal re i m b u r s e m e n t

usually is limited to 30 days per episode and

60 days per year, and may be restricted to

c e rtain hospitals.1 0

D. State Children’s Health Insurance

Program (SCHIP)

In 1997, Congress enacted the State

C h i l d re n ’s Health Insurance Pro g r a m

(SCHIP) to expand health insurance coverage

for children. As originally conceived, SCHIP

p rovided states with Federal matching funds

to insure uninsured, low-income children not

eligible for Medicaid by expanding their

Medicaid program (called M-SCHIP), design1 0Rhode Island’s waiver has no limits on days and

applies only to one private psychiatric hospital.

M a ry l a n d ’s waiver applies only to private psychiatric hospitals. Ore g o n ’s waiver applies to

only one private facility (Kuo and Draper 2002).
States choosing to expand their Medicaid

p rograms to cover all or a portion of their

SCHIP populations through an M-SCHIP

p rogram must provide the full Medicaid benefit package (Center for Mental Health

S e rvices, 2000). For states that choose to

implement a separate child health pro g r a m

(S-SCHIP), their benefit package must be

comparable to one of four benchmark plans:

the Federal Employees Health Benefits

P rogram (FEHBP) standard option plan; the

s t a t e ’s employee health benefit plan; the

HMO with the largest commercially enro l l e d

population in the state; or another package

a p p roved by the Federal government. 

Specific to mental health benefits, the SSCHIP program must include coverage that is

at least 75 percent of the actuarial value of

those of the selected benchmark plan (Center

for Mental Health Services, 2000). Since

many private insurance plans include limits

on outpatient visits and/or inpatient days, the

benefit packages under S-SCHIP can be much

National Estimates of Mental Health Insurance Benefits 6 

FEHBP is the health insurance program 

employees of the Federal government. Befo

2001, health plans participating in FEHBP

w e re re q u i red to offer a minimum mental

health benefit of 50 percent of the cost of 

inpatient mental health days and 20 outpa

tient mental health visits (Office of Person

Management, 2001). In addition, per the

M H PA, health plans were not allowed to

impose separate annual or lifetime dollar l

its on mental health care .

Beginning in 2001, the FEHBP re q u i re d

full mental health parity for all part i c i p a t i n 

health plans. Under FEHBP’s current full p

ity re q u i rements, health plan coverage of

mental illness must have parity in utilizatio

limits and cost sharing as applicable to me

ical, surgical, and hospital providers. The

parity re q u i rements cover all mental illnes

listed in the Diagnostic and Statistical

Manual of Mental Disorders, Fourth Editi

(DSM-IV) (Office of Personnel Manageme

2000). 

The Office of Personnel Management, t

agency that oversees FEHBP, encourages

health plans to manage mental health care

utilization, including the use of managed

behavioral health care organizations. Othe

p e rmitted utilization management tools

include prior authorization, directing an

e n rollee to a specific pro v i d e r, and re q u i r i n 

that a treatment plan authorized by the

health plan be followed.

1 1Since 1999, enrollment in SCHIP has incre a s e d

significantly as states have expanded their programs and enhanced outreach eff o rts. In FY

2001, 4.6 million children were enrolled in

SCHIP nationwide at some point during the year

(Centers for Medicare and Medicaid Serv i c e s ,

2002c). In addition, some states received waivers

to begin enrolling parents in their S-SCHIP programs. In FY 2001, more than 236,000 adults

w e re enrolled in state SCHIP programs (Centers

for Medicare and Medicaid Services, 2002c).
CARE Prime), a pre f e rred provider org a n i z ation (PPO) option (TRICARE Extra), and a

f e e - f o r- s e rvice option (TRICARE Standard ,

f o rmerly CHAMPUS). 

The three programs differ by pro v i d e r

s t ru c t u re, but they all provide the same mental health benefits. Authorization is re q u i re d

for outpatient psychotherapy that involves

m o re than two sessions per week and/or eight

sessions per year. Inpatient hospitalization for

adults is covered for up to 30 days per year,

inpatient hospitalization for children is cove red for up to 45 days, and treatment in a

residential treatment facility is covered for up

to 150 days (TRICARE, 2000). With the

a p p roval of the TRICARE contractor, TRICARE enrollees can receive waivers for tre a tment that extends beyond these limits.

Depending on both the TRICARE enro l l e e ’s

eligibility status (e.g., whether an individual

is a military re t i ree or active-duty family

member) and the specific TRICARE plan

(TRICARE Prime, Extra, or Standard), cost

sharing for mental health services also can be

higher than for other health care core serv i c e s .

G. Veterans Affairs

The Department of Veterans Affairs (VA )

p rovides care to eligible veterans, generally at

VA hospitals. Enrollment and eligibility for

c a re are based on seven priority groups in

a c c o rdance with the veteran’s health status

and financial circumstances. Veterans with

6 6 Special Report

the VA is a product of an individual’s priority

level (Department of Veterans Affairs, 2002).

C a re related to a disability resulting fro m

m i l i t a ry service is available without charge to

all veterans. For care unrelated to a serv i c e -

connected disability, inpatient mental health

c a re involves the same cost-sharing re q u i rements as other inpatient hospital care .

Outpatient mental health visits are billed at

the specialty care rate for all medical specialties. Since the VA does not limit mental

health care separately from other health benefits and the cost-sharing re q u i rements are

the same, the VA meets the definition of mental health parity.

H. Civilian Health and Medical

Program of the Department of Veterans

Affairs (CHAMPVA)

The Civilian Health and Medical Program of

the Department of Veterans Affairs (CHAMP VA) is the federally administered health benefits program for dependents and survivors of

veterans who have a total and permanent disability or who died from a disability incurre d

or aggravated during active-duty military

s e rvice. CHAMPVA is a fee-for- s e rvice plan

with a deductible ($50 per person or $100

per family) and 25 percent co-insurance.

Unlike those receiving care through the VA ,

C H A M P VA enrollees may receive care fro m

any pro v i d e r. If an enrollee has other health

insurance, CHAMPVA acts as a second payor
be able to obtain a waiver of the day limits if

they meet certain conditions. Psychotherapy

during an inpatient hospital stay is limited to

five sessions per week. Under its outpatient

mental health benefit, prior authorization is

re q u i red for more than 23 psychotherapy sessions per fiscal year. Prior authorization also

is re q u i red from the CHAMPVA mental

health contractor for visits beyond these limits. CHAMPVA covers partial hospitalization

up to 60 days per fiscal year (Department of

Veterans Affairs, 2001b). 

I. Indian Health Service (IHS)

T h rough health facilities located on or near

Indian re s e rvations, the Indian Health Serv i c e

(IHS) provides health care to American

Indians and Alaska Natives who are members

of federally recognized tribes. American

Indians and Alaska Natives may receive services at IHS facilities if they live in geographic

a reas where facilities are located. All facilities

p rovide preventive and health pro m o t i o n

s e rvices; medical care and treatment serv i c e s

a re provided, as available, at IHS facilities or

on a contractual basis from the private sector

t h rough Contract Health Services (CHS). IHS

is considered a payor of last re s o rt. In other

w o rds, any care provided to IHS-eligible individuals who also are eligible for Medicare ,

Medicaid, or any other third - p a rty re i mbursement at an IHS facility must be re i mbursed first by the other payor.

National Estimates of Mental Health Insurance Benefits 6 

s e rvices are provided under contract at loc

general, private psychiatric, and state psyc

atric hospitals. 

J. Individually Purchased Insurance

Those without access to health insurance i

the group market may elect to purc h a s e

insurance in the individual market. A wide

variety of individuals, including early re t i re 

without re t i ree benefits, the self-employed,

those whose employers do not offer health

insurance, and those who have exhausted

their continued group coverage allowable

t h rough the Consolidated Omnibus Budge

Reconciliation Act (COBRA), hold individ

health insurance policies. Persons 60 to 64

years of age are nearly three times as likely 

be covered by individual health insurance 

those 20 to 29 years of age (U.S. Govern m 

Accounting Office, 1996).

In contrast to the group health insuranc

market, most states allow companies sellin

individual health insurance policies to acce

or deny an applicant based on the individu a l ’s health status, including his/her menta

health status. Applicants often are re q u i re

p rovide a medical history and may be

re q u i red to undergo a medical examination

(Gabel, 2002). Only 11 states re q u i re all

i n s u rers in the individual market to accept 

applicants re g a rdless of health status (U.S.

G o v e rnment Accounting Office, 2002).1 2
6 8 Special Report

policy likely will include higher pre m i u m s

and/or benefit restrictions beyond those

o ff e red in a standard individual policy. 

Although data limitations preclude this

re p o rt from including an estimate of the

extent or generosity of mental health benefits

in the individual market, Gabel et al. (2002)

restrictions and limitations are common.

Individuals obtaining mental health serv i c e s

under such plans generally face higher copayments and co-insurance (sometimes up to

50 percent) (Chollet and Kirk, 1998).

Separate annual and/or lifetime dollar limits

for mental health services below those of the

p l a n ’s overall limit also are common since the

M H PA never applied to individually purchased policies. Pollitz et al. (2001) found

that lifetime limits on mental health coverage

usually average $10,000, while overall plan

limits can range from $1 million to $6 million. In addition to, or in place of lifetime

caps on mental health benefits, individual

plans may impose annual limits; annual benefit limits of $3,500 or less are common

(Pollitz et al., 2001).

1 2Eight of the 11 states re q u i re all carriers to guarantee issue throughout the year (Idaho, Maine,

Massachusetts, New Hampshire, New Jersey, New

York, Ohio, and Ve rmont), while the other thre e

states impose the re q u i rement only on certain carr iers or during special open-enrollment periods

( M a ryland, Michigan, and West Vi rginia). Carr i e r s

in five additional states (Hawaii, North Caro l i n a ,

Pennsylvania, Rhode Island, and Vi rginia) and the

District of Columbia voluntarily guarantee access

to coverage re g a rdless of health status. As of July

2002, New Hampshire allows insurers to deny coverage based on health status (U.S. General

Accounting Office, 2002).
National Estimates of Mental Health Insurance Benefits 6 

Estimates of the pro p o rtion of those with

health insurance who have mental health

benefits are based on the 1999 Medical

E x p e n d i t u re Panel Surv e y - I n s u r a n c e

Component (MEPS-IC). Estimates of the gene rosity of benefits are based on the 1999

M e rcer Worldwide Survey of EmployerS p o n s o red Health Plans. Section A describes

each data source. Section B presents the

methods used to estimate the major results of

this re p o rt .

A. Data Sources

1. Current Population Survey

The CPS is a monthly survey conducted by

the Bureau of the Census, and is the off i c i a l

s o u rce of government statistics on unemployment and employment. Each month, demographic and employment data are obtained

f rom approximately 47,000 noninstitutionalized households selected to re p resent the U.S.

population. In March of each year, the CPS

collects additional data on work experience,

income, and employer- s p o n s o red benefits,

such as health insurance. The interv i e w e r

lists types of health insurance (employerbased, privately purchased, Medicare ,

Medicaid, military health care, or other), and

the respondent indicates whether he or she

was ever covered by that type of insurance 

the previous year (for example, 1999 for t

M a rch 2000 survey). The respondent also

lists the source of insurance coverage for

other individuals in the household.

Because of the CPS’s large sample size a

the focus on timeliness in releasing the dat

re s e a rchers who are examining curre n t

s o u rces of health insurance coverage for th

U.S. population frequently use the Marc h

CPS. The CPS variables used for this study

a re :

■ S o u rce of health insurance coverage

■ Demographic characteristics: age,

income level, ethnicity, location of re 

d e n c e

■ Characteristics of employer: size of

f i rm, type of industry, type of occup

tion (private sector, state, local, or

Federal govern m e n t )

2. Medical Expenditure Panel Survey—

Insurance Component (MEPS-IC)

The 1999 MEPS-IC was a survey of a pro b 

bility sample of slightly more than 20,000

U.S. employers. The Agency for Healthcar

R e s e a rch and Quality (AHRQ) and the

National Center for Health Statistics

(NCHS), both part of the U.S. Departmen

are derived from the March 2000 Current Population Survey (CPS).
7 0 Special Report

sample included Federal, state, and local gove rnments. Local government employers were

selected from the Census of Govern m e n t s .

The survey response rate was 66.1 perc e n t ,

and a total of 20,003 private employers fro m

the list sample completed the questionnaire in

1 9 9 6 .1 3 In that year, 2,224 state and local

g o v e rnment employers responded to the survey (84.6 percent response rate).1 4 Because of

the sample size limitation, statistically valid

data are available by state for only the 37

most populous states. MEPS-IC variables

used in this study are: 

■ Establishment size 

■ F i rm size

■ Whether the firm off e red health insura n c e

■ Whether the firm off e red coverage for

outpatient mental health serv i c e s

■ Whether the firm off e red coverage for

inpatient mental health serv i c e s

■ Whether the firm was self-insure d

■ Whether re t i rees were eligible to re c e i v e

hospital/physician coverage

3. Mercer Worldwide National Survey of

Employer-Sponsored Health Plans

The accounting and benefits consulting firm

M e rcer Worldwide conducts an annual survey of a nationally re p resentative sample of

private employers with 10 or more employees

who offer health insurance. In 1999, 2,737

employers responded to the surv e y, including

state and local governments. Private employers were selected into a probability sample

f rom the list of firm s1 5 with 10 or more

employees, which is maintained by Dun &

B r a d s t reet. The response rate was 52 percent. 

I n f o rmation was collected on the types of

health services covered, the generosity of benefits, and the cost of benefits by plan type—

health maintenance organization (HMO),

p re f e rred provider organization (PPO), and

f e e - f o r- s e rvice (FFS) plan. The variables used

in this study include:

■ Whether the plan covered inpatient and

outpatient mental health care 

■ Annual and lifetime limits on outpatient mental health visits

■ Annual and lifetime limits on inpatient

mental health days

■ Copayment, co-insurance, and

deductible for mental health care

■ Annual and lifetime dollar limits 

1 3AHRQ has not yet published the response rate of

the 1999 MEPS-IC surv e y.

1 4See Construction of Weights for the 1996 Medical

E x p e n d i t u re Panel Survey Insurance Component

List Sample, Methodology Report 8, U.S.

D e p a rtment of Health and Human Services, Agency

for Health Care Policy and Research, November

1 9 9 9 .

1 5The business unit listed is the one applying for a

loan or a line of credit. This unit may differ fro m

the entire corporation.
National Estimates of Mental Health Insurance Benefits 7 

period for each surv e y. The CPS contains

data from a sample of approximately 47,000

households on their health insurance coverage. The MEPS-IC contains data from a sample of approximately 20,000 public and private employers about the health insurance

benefits they provide to their employees. The

National Survey of Employer- S p o n s o re d

Health Plans is sponsored by Merc e r

Worldwide and contains data from a sample

of approximately 2,700 private employers

re g a rding the detailed provisions of their

health insurance plans.

The unit of analysis in this study is the

individual (the policyholder, as well as his or

her covered family members). Given that the

CPS is the only one of the three databases

used for this study that contains data on individuals, it served as the host database. The

other two databases were used to impute values to the CPS that are not provided by that

database. Imputed information includes

g reater detail on firm size and health plan

p rovisions than what is available in the CPS. 

Estimating the number of individuals who

have mental health insurance benefits is a

t h ree-step process. In the first step, the number of individuals covered by each source of

health (as opposed to mental health) insurance is estimated. In the second step, the prop o rtion of individuals with each type of

health insurance who are covered by mental

health insurance is estimated. In the third

well as what the source or sources of that

coverage were. Respondents were allowed 

list more than one category of coverage. F

example, an individual may have been une

ployed and covered by Medicaid during pa

of 1999 and then obtained employment th

p rovided employer- s p o n s o red health insur

ance for the remainder of the year. The sur

vey does not re c o rd the specific period in t

past year during which each source of insu

ance provided coverage.

An estimated 15 percent of individuals l

m o re than one source of health insurance.

The primary source of health insurance for

these individuals was assigned according to

the following hierarc h y :

1. Medicare—The Federal health plan p

marily serving individuals aged 65 ye

and older

2. Medicaid—The Federal-state health

plan for low-income individuals

3. Federal Employee Health Benefits Pla

(FEHBP)—The Federal health plan se

ing civilian Federal employees and th

d e p e n d e n t s

4. State employer- s p o n s o red insurance—

Health plans serving state employees

and their dependents

5. Private employer- s p o n s o red insuranc

Health plans sponsored by private

employers. These health plans do not

include any govern m e n t - s p o n s o re d

employee health plans
7 2 Special Report

g roup plan

9. Indian Health System—Health serv i c e s

p rovided to Native Americans on tribal

re s e rv a t i o n s

10. Uninsured—Individuals who have no

health insurance

For example, an individual re p o rting TRICARE, as well as private employer- s p o n s o re d

health insurance, would be assigned to private insurance because the latter is higher on

the list.

The 1999 CPS did not separate individuals

who were insured through the Medicaid program and SCHIP. Because the mental health

benefits available to individuals enrolled in a

separate SCHIP program (S-SCHIP) can be

d i ff e rent from those available in the Medicaid

p rogram, it is useful to separate the two

insurance sources. To do so, CMS administrative data on the number of individuals

e n rolled in state SCHIP programs (separated

by M-SCHIP and S-SCHIP programs) were

used. These numbers were then subtracted

f rom the CPS estimate of the number of child ren receiving Medicaid to create mutually

exclusive categories.1 6

2. Covered Lives With Mental Health Benefits

The next step is to estimate the percentage of

those who have health insurance (covere d

ber of covered lives was estimated by weighting each firm according to the number of

lives covered by the firm .

MEPS-IC data were used to estimate the

number of covered lives with inpatient mental health benefits in each cell of a two-byfive matrix, defined by whether the firm was

s e l f - i n s u red or purchased health insurance,

and according to five categories of firm size

(1–9, 10–49, 50–499, 500–999, and 1,000 or

m o re employees). MEPS-IC also was used to

estimate the number of covered lives in each

of these 10 cells. Table II.2 in Chapter II

re p o rts the ratio of covered lives with inpatient mental health insurance to total covere d

lives as the pro p o rtion with inpatient mental

health insurance. 

Using the CPS as the host database, figure s

f rom the MEPS-IC were adjusted for consistency with CPS estimates. Each cell in the

MEPS-IC matrix of covered lives with inpatient mental health insurance was multiplied

by a ratio adjustment factor. The numerator

of the factor was the CPS estimate of the

number of individuals with private employers p o n s o red health insurance, and the denominator was the MEPS-IC estimate of covere d

lives. The denominator is the analogous

MEPS-IC figure. The adjustment factor is

computed separately for each firm size categ o ry (1–9, 10–49, 50–499, 500–999, and

1,000 or more) since firm size is re c o rded in

both the CPS and MEPS-IC. Table II.2

1 6In 1999, only children were enrolled in SCHIP.

Since that time some states have begun enro l l i n g

a d u l t s .
National Estimates of Mental Health Insurance Benefits 7 

the number of individuals with health insurance (Section 1 above) by the pro p o rtion of

those with health insurance who have mental

health benefits (Section 2 above). State-level

i n f o rmation on the percentage of firms that

cover mental health benefits as part of their

benefit package is available for only 37 states

as a consequence of sample size restrictions in

the MEPS-IC. There f o re, state-level estimates

of mental health insurance (see Table II.4) are

p resented only for these 37 states.

4. Generosity of Mental Health Benefits

In this study, four basic levels of genero s i t y

w e re established: mental health benefits at

full parity (cost sharing, utilization limits,

and dollar limits are the same as medical/surgical benefits); mental health benefits that

meet the benchmark benefit of coverage (30

inpatient days, 20 outpatient visits, and prescription drug coverage); mental health benefits less than the benchmark; and health

insurance that does not include mental health

coverage. 

The benchmark mental health benefit was

established in consultation with an expert

a d v i s o ry panel to reflect current trends in the

e m p l o y e r- s p o n s o red health insurance market

and is not intended to stand as a measure of

a d e q u a c y. Data from the Mercer Wo r l d w i d e

S u rvey of Employer- S p o n s o red Health

Insurance Plans indicated that 30 inpatient

days and 20 outpatient visits was where the

d rugs are now considered a primary form 

t reatment for nearly all mental illnesses. In

1997, prescription drugs accounted for

almost 13 percent of total mental health

spending (Mark 2000). Prescription dru g

coverage also is considered “standard” in 

e m p l o y e r- s p o n s o red health insurance mark

(Kaiser Family Foundation et al., 2000). 

The 1999 Mercer Worldwide survey of

e m p l o y e r- s p o n s o red health plans was the

main source of information used to assess

both the generosity of mental health cover

o ff e red by employers and the limits placed 

that coverage. A total of 2,737 randomly

selected employers with at least 10 employ

responded to the survey in 1999 (the samp

was stratified across eight size categories).

T h rough the Substance Abuse and Men

Health Services Administration (SAMHSA

M e rcer Worldwide provided estimates of t

number of firms with mental health insura

coverage and no special utilization limits o

benefits for mental health services. Merc e r

also provided estimates of the pro p o rtion 

individuals whose mental health benefits

w e re at least as generous as the benchmark

level of mental health benefits. It was

assumed that all firms with no special limi

met the benchmark benefit.

We estimated the number of individuals

who had mental health benefits at least as

g e n e rous as the benchmark by multiplying

the pro p o rtions provided by Mercer by the
7 4 Special Report

vey does not sample entities employing fewer

than 10 people. There f o re, it was not possible to produce estimates for those with insurance provided through very small firms. 

5. Mental Health Parity

Data from the National Conference of State

L e g i s l a t u res (2001) and the National Alliance

for the Mentally Ill (2002) indicate that 24

states had full mental health parity laws, as

of 2002. Yet, state parity laws provide for a

number of exemptions. Under ERISA, states

may not regulate self-insured employee benefit plans; thus, individuals covered by such

plans are not subject to state parity laws. In

addition, some state laws include an exemption for small employers. 

To estimate the number of individuals who

had employer- s p o n s o red health insurance

subject to state mental health parity laws

re q u i red comparing estimates of the number

of individuals who had health insurance

t h rough employer- s p o n s o red self-insure d

plans with the number of individuals in plans

who purchased insurance. These estimates

w e re calculated from CPS and MEPS-IC data,

as described in Section 2 above. Detailed

state-by-state data tables on private employers p o n s o red health insurance by firm size and

Due to data limitations, the following

adjustments were made: 

■ The MEPS-IC sample supports reliable figu res for 37 states. Figures are not available

for 13 states (Alaska, Arkansas, Delaware ,

Idaho, Nevada, New Hampshire, New

Mexico, North Dakota, Rhode Island,

South Dakota, Utah, West Vi rginia, and

Wyoming) and the District of Columbia.

For these states, we applied the national

p e rcentages of self-insured firms for firm s

with fewer than 50 employees and firm s

with 50 or more employees.

■ Since the available data made it necessary

to define small firms as those having 50 or

fewer employees, the number of individuals covered by the parity laws in states

whose small-firm exemption uses a firm

size of fewer than 50 employees—Hawaii,

Maine, and Vi rginia—is undere s t i m a t e d .

Our estimates excluded all individuals in

e m p l o y e r- s p o n s o red plans that purc h a s e d

insurance in firms that had fewer than 50

employees. 

■ The MEPS-IC and CPS data re p re s e n t

1999. Our projections to 2002 are produced by applying 2002 state laws to population estimates for 1999.
National Estimates of Mental Health Insurance Benefits 7 

Figure B.2. Maximum Number of Inpatient Days Per Year for Firms With

Limits on Mental Health Coverage

National Estimates of Mental Health Insurance Benefits 7 

Paul Fronstin

Employee Benefit Research Institute

(EBRI)

Chris Koyanagi

Bazelon Center for Mental Health Law

Katharine R. Levit

Office of the Actuary, Centers for

Medicare and Medicaid Services

Tami Mark

MEDSTAT

Margo Rosenbach

Mathematica Policy Research, Inc.

Roland Sturm

RAND

Sam Zuvekas

Agency for Healthcare Research and

Quality

SAMHSA Participants

Jeff Buck

Judith Teich

National Estimates of Mental Health Insurance Benefits 7 

Plans, 2000
8 0 Special Report
National Estimates of Mental Health Insurance Benefits 

Source: National Conference of State Legislatures, "Mental Health Benefits in Non-Medicaid SCHIP Plans, September 30, 2000."

a Inpatient days may be converted to outpatient visits at 2:1 rate.

b Delaware's Department of Children, Youth and Their Families provides an additional 31 days per year combined inpatient and

outpatient of wraparound services once the SCHIP's managed care benefit package of 30 outpatient visits per year is

exhausted.

c Limited to care in general acute care hospitals. Services administered in an IMD are not covered.

d Montana places no limits on benefits for children with severe emotional disturbances.


DHHS Publication No. (SMA) 04-3872

Printed 2004