69–006 

110TH CONGRESS REPT. 110–374 " ! HOUSE OF REPRESENTATIVES 1st Session Part 1 

PAUL WELLSTONE MENTAL HEALTH AND ADDICTION 

EQUITY ACT OF 2007 

OCTOBER 15, 2007.—Ordered to be printed 

Mr. GEORGE MILLER of California, from the Committee on 

Education and Labor, submitted the following 

R E P O R T 

together with 

MINORITY VIEWS 

[To accompany H.R. 1424] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Education and Labor, to whom was referred 

the bill (H.R. 1424) to amend section 712 of the Employee Retirement Income Security Act of 1974, section 2705 of the Public 

Health Service Act, and section 9812 of the Internal Revenue Code 

of 1986 to require equity in the provision of mental health and substance-related disorder benefits under group health plans, having 

considered the same, report favorably thereon with an amendment 

and recommend that the bill as amended do pass. 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

(a) SHORT TITLE.—This Act may be cited as the ‘‘Paul Wellstone Mental Health 

and Addiction Equity Act of 2007’’. 

(b) TABLE OF CONTENTS.—The table of contents of this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Amendments to the Employee Retirement Income Security Act of 1974. 

Sec. 3. Amendments to the Public Health Service Act relating to the group market. 

Sec. 5. Amendments to the Internal Revenue Code of 1986. 

Sec. 5. Government Accountability Office studies and reports. 

SEC. 2. AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974. 

(a) EXTENSION OF PARITY TO TREATMENT LIMITS AND BENEFICIARY FINANCIAL REQUIREMENTS.—Section 712 of the Employee Retirement Income Security Act of 1974 

(29 U.S.C. 1185a) is amended— 


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(1) in subsection (a), by adding at the end the following new paragraphs: 

‘‘(3) TREATMENT LIMITS.— ‘‘(A) NO TREATMENT LIMIT.—If the plan or coverage does not include a 

treatment limit (as defined in subparagraph (D)) on substantially all medical and surgical benefits in any category of items or services, the plan or 

coverage may not impose any treatment limit on mental health or substance-related disorder benefits that are classified in the same category of 

items or services. ‘‘(B) TREATMENT LIMIT.—If the plan or coverage includes a treatment 

limit on substantially all medical and surgical benefits in any category of 

items or services, the plan or coverage may not impose such a treatment 

limit on mental health or substance-related disorder benefits for items and 

services within such category that is more restrictive than the predominant 

treatment limit that is applicable to medical and surgical benefits for items 

and services within such category. ‘‘(C) CATEGORIES OF ITEMS AND SERVICES FOR APPLICATION OF TREATMENT

LIMITS AND BENEFICIARY FINANCIAL REQUIREMENTS.—For purposes of this 

paragraph and paragraph (4), there shall be the following five categories of 

items and services for benefits, whether medical and surgical benefits or 

mental health and substance-related disorder benefits, and all medical and 

surgical benefits and all mental health and substance related benefits shall 

be classified into one of the following categories: 

‘‘(i) INPATIENT, IN-NETWORK.—Items and services not described in 

clause (v) furnished on an inpatient basis and within a network of providers established or recognized under such plan or coverage. 

‘‘(ii) INPATIENT, OUT-OF-NETWORK.—Items and services not described 

in clause (v) furnished on an inpatient basis and outside any network 

of providers established or recognized under such plan or coverage. 

‘‘(iii) OUTPATIENT, IN-NETWORK.—Items and services not described in 

clause (v) furnished on an outpatient basis and within a network of 

providers established or recognized under such plan or coverage. 

‘‘(iv) OUTPATIENT, OUT-OF-NETWORK.—Items and services not described in clause (v) furnished on an outpatient basis and outside any 

network of providers established or recognized under such plan or coverage. 

‘‘(v) EMERGENCY CARE.—Items and services, whether furnished on an 

inpatient or outpatient basis or within or outside any network of providers, required for the treatment of an emergency medical condition 

(including an emergency condition relating to mental health and substance-related disorders). 

‘‘(D) TREATMENT LIMIT DEFINED.—For purposes of this paragraph, the 

term ‘treatment limit’ means, with respect to a plan or coverage, limitation 

on the frequency of treatment, number of visits or days of coverage, or other 

similar limit on the duration or scope of treatment under the plan or coverage. 

‘‘(E) PREDOMINANCE.—For purposes of this subsection, a treatment limit 

or financial requirement with respect to a category of items and services is 

considered to be predominant if it is the most common or frequent of such 

type of limit or requirement with respect to such category of items and 

services. 

‘‘(4) BENEFICIARY FINANCIAL REQUIREMENTS.—

‘‘(A) NO BENEFICIARY FINANCIAL REQUIREMENT.—If the plan or coverage 

does not include a beneficiary financial requirement (as defined in subparagraph (C)) on substantially all medical and surgical benefits within a category of items and services (specified under paragraph (3)(C)), the plan or 

coverage may not impose such a beneficiary financial requirement on mental health or substance-related disorder benefits for items and services 

within such category. 

‘‘(B) BENEFICIARY FINANCIAL REQUIREMENT.—

‘‘(i) TREATMENT OF DEDUCTIBLES, OUT-OF-POCKET LIMITS, AND SIMILAR

FINANCIAL REQUIREMENTS.—If the plan or coverage includes a deductible, a limitation on out-of-pocket expenses, or similar beneficiary financial requirement that does not apply separately to individual items and 

services on substantially all medical and surgical benefits within a category of items and services (as specified in paragraph (3)(C)), the plan 

or coverage shall apply such requirement (or, if there is more than one 

such requirement for such category of items and services, the predominant requirement for such category) both to medical and surgical benefits within such category and to mental health and substance-related 


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disorder benefits within such category and shall not distinguish in the 

application of such requirement between such medical and surgical 

benefits and such mental health and substance-related disorder benefits. ‘‘(ii) OTHER FINANCIAL REQUIREMENTS.—If the plan or coverage includes a beneficiary financial requirement not described in clause (i) on 

substantially all medical and surgical benefits within a category of 

items and services, the plan or coverage may not impose such financial 

requirement on mental health or substance-related disorder benefits for 

items and services within such category in a way that results in greater 

out-of-pocket expenses to the participant or beneficiary than the predominant beneficiary financial requirement applicable to medical and 

surgical benefits for items and services within such category. ‘‘(iii) CONSTRUCTION.—Nothing in this subparagraph shall be construed as prohibiting the plan or coverage from waiving the application 

of any deductible for mental health benefits or substance-related disorder benefits or both. ‘‘(C) BENEFICIARY FINANCIAL REQUIREMENT DEFINED.—For purposes of 

this paragraph, the term ‘beneficiary financial requirement’ includes, with 

respect to a plan or coverage, any deductible, coinsurance, co-payment, 

other cost sharing, and limitation on the total amount that may be paid by 

a participant or beneficiary with respect to benefits under the plan or coverage, but does not include the application of any aggregate lifetime limit 

or annual limit.’’; and 

(2) in subsection (b)—

(A) by striking ‘‘construed—’’ and all that follows through ‘‘(1) as requiring’’ and inserting ‘‘construed as requiring’’; 

(B) by striking ‘‘; or’’ and inserting a period; and 

(C) by striking paragraph (2). 

(b) EXPANSION TO SUBSTANCE-RELATED DISORDER BENEFITS AND REVISION OF

DEFINITION.—Such section is further amended—

(1) by striking ‘‘mental health benefits’’ and inserting ‘‘mental health or substance-related disorder benefits’’ each place it appears; and 

(2) in paragraph (4) of subsection (e)—

(A) by striking ‘‘MENTAL HEALTH BENEFITS’’ and inserting ‘‘MENTAL

HEALTH AND SUBSTANCE-RELATED DISORDER BENEFITS’’; 

(B) by striking ‘‘benefits with respect to mental health services’’ and inserting ‘‘benefits with respect to services for mental health conditions or 

substance-related disorders’’; and 

(C) by striking ‘‘, but does not include benefits with respect to treatment 

of substance abuse or chemical dependency’’. 

(c) AVAILABILITY OF PLAN INFORMATION ABOUT CRITERIA FOR MEDICAL NECESSITY.—Subsection (a) of such section, as amended by subsection (a)(1), is further 

amended by adding at the end the following new paragraph: 

‘‘(5) AVAILABILITY OF PLAN INFORMATION.—The criteria for medical necessity 

determinations made under the plan with respect to mental health and substance-related disorder benefits (or the health insurance coverage offered in connection with the plan with respect to such benefits) shall be made available in 

accordance with regulations by the plan administrator (or the health insurance 

issuer offering such coverage) to any current or potential participant, beneficiary, or contracting provider upon request. The reason for any denial under 

the plan (or coverage) of reimbursement or payment for services with respect 

to mental health and substance-related disorder benefits in the case of any participant or beneficiary shall, upon request, be made available in accordance with 

regulations by the plan administrator (or the health insurance issuer offering 

such coverage) to the participant or beneficiary.’’. 

(d) MINIMUM BENEFIT REQUIREMENTS.—Subsection (a) of such section is further 

amended by adding at the end the following new paragraph: 

‘‘(6) MINIMUM SCOPE OF COVERAGE AND EQUITY IN OUT-OF-NETWORK BENEFITS.—

‘‘(A) MINIMUM SCOPE OF MENTAL HEALTH AND SUBSTANCE-RELATED DISORDER BENEFITS.—In the case of a group health plan (or health insurance 

coverage offered in connection with such a plan) that provides any mental 

health or substance-related disorder benefits, the plan or coverage shall include benefits for any mental health condition and substance-related disorder for which benefits are provided under the benefit plan option offered 

under chapter 89 of title 5, United States Code, with the highest average 

enrollment as of the beginning of the most recent year beginning on or before the beginning of the plan year involved. 


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‘‘(B) EQUITY IN COVERAGE OF OUT-OF-NETWORK BENEFITS.— ‘‘(i) IN GENERAL.—In the case of a plan or coverage that provides both 

medical and surgical benefits and mental health or substance-related 

disorder benefits, if medical and surgical benefits are provided for substantially all items and services in a category specified in clause (ii) 

furnished outside any network of providers established or recognized 

under such plan or coverage, the mental health and substance-related 

disorder benefits shall also be provided for items and services in such 

category furnished outside any network of providers established or recognized under such plan or coverage in accordance with the requirements of this section. ‘‘(ii) CATEGORIES OF ITEMS AND SERVICES.—For purposes of clause (i), 

there shall be the following three categories of items and services for 

benefits, whether medical and surgical benefits or mental health and 

substance-related disorder benefits, and all medical and surgical benefits and all mental health and substance-related disorder benefits shall 

be classified into one of the following categories: ‘‘(I) EMERGENCY.—Items and services, whether furnished on an 

inpatient or outpatient basis, required for the treatment of an 

emergency medical condition (including an emergency condition relating to mental health or substance-related disorders). 

‘‘(II) INPATIENT.—Items and services not described in subclause 

(I) furnished on an inpatient basis. 

‘‘(III) OUTPATIENT.—Items and services not described in subclause (I) furnished on an outpatient basis.’’. 

(e) CONSTRUCTION.—Subsection (a) of such section is further amended by adding 

at the end the following new paragraph: 

‘‘(7) CONSTRUCTION.—Nothing in this section shall be construed to limit a 

group health plan (or health insurance offered in connection with such a plan) 

from managing the provision of medical, surgical, mental health or substancerelated disorder benefits through any of the following methods: 

‘‘(A) the application of utilization review; 

‘‘(B) the application of authorization or management practices; 

‘‘(C) the application of medical necessity and appropriateness criteria; or 

‘‘(D) other processes intended to ensure that beneficiaries receive appropriate care and medically necessary services for covered benefits; 

to the extent such methods are recognized both by industry and by providers 

and are not prohibited under applicable State laws.’’. 

(f) REVISION OF INCREASED COST EXEMPTION.—Paragraph (2) of subsection (c) of 

such section is amended to read as follows: 

‘‘(2) INCREASED COST EXEMPTION.—

‘‘(A) IN GENERAL.—With respect to a group health plan (or health insurance coverage offered in connection with such a plan), if the application of 

this section to such plan (or coverage) results in an increase for the plan 

year involved of the actual total costs of coverage with respect to medical 

and surgical benefits and mental health and substance-related disorder 

benefits under the plan (as determined and certified under subparagraph 

(C)) by an amount that exceeds the applicable percentage described in subparagraph (B) of the actual total plan costs, the provisions of this section 

shall not apply to such plan (or coverage) during the following plan year, 

and such exemption shall apply to the plan (or coverage) for 1 plan year. 

‘‘(B) APPLICABLE PERCENTAGE.—With respect to a plan (or coverage), the 

applicable percentage described in this paragraph shall be—

‘‘(i) 2 percent in the case of the first plan year which begins after the 

effective date of the amendments made by section 101 of the Paul 

Wellstone Mental Health and Addiction Equity Act of 2007; and 

‘‘(ii) 1 percent in the case of each subsequent plan year. 

‘‘(C) DETERMINATIONS BY ACTUARIES.—Determinations as to increases in 

actual costs under a plan (or coverage) for purposes of this subsection shall 

be made and certified by a qualified and licensed actuary who is a member 

in good standing of the American Academy of Actuaries. 

‘‘(D) 6-MONTH DETERMINATIONS.—If a group health plan (or a health insurance issuer offering coverage in connection with such a plan) seeks an 

exemption under this paragraph, determinations under subparagraph (A) 

shall be made after such plan (or coverage) has complied with this section 

for the first 6 months of the plan year involved. 

‘‘(E) NOTIFICATION.—An election to modify coverage of mental health and 

substance-related disorder benefits as permitted under this paragraph shall 

be treated as a material modification in the terms of the plan as described 


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in section 102(a) and notice of which shall be provided a reasonable period 

in advance of the change. 

‘‘(F) NOTIFICATION OF APPROPRIATE AGENCY.—

‘‘(i) IN GENERAL.—A group health plan that, based on upon a certification described under subparagraph (C), qualifies for an exemption 

under this paragraph, and elects to implement the exemption, shall notify the Department of Labor of such election. 

‘‘(ii) REQUIREMENT.—A notification under clause (i) shall include—

‘‘(I) a description of the number of covered lives under the plan 

(or coverage) involved at the time of the notification, and as applicable, at the time of any prior election of the cost-exemption under 

this paragraph by such plan (or coverage); 

‘‘(II) for both the plan year upon which a cost exemption is 

sought and the year prior, a description of the actual total costs of 

coverage with respect to medical and surgical benefits and mental 

health and substance-related disorder benefits under the plan; and 

‘‘(III) for both the plan year upon which a cost exemption is 

sought and the year prior, the actual total costs of coverage with 

respect to mental health and substance-related disorder benefits 

under the plan. 

‘‘(iii) CONFIDENTIALITY.—A notification under clause (i) shall be confidential. The Department of Labor shall make available, upon request 

to the appropriate committees of Congress and on not more than an annual basis, an anonymous itemization of such notifications, that includes—

‘‘(I) a breakdown of States by the size and any type of employers 

submitting such notification; and 

‘‘(II) a summary of the data received under clause (ii). 

‘‘(G) NO IMPACT ON APPLICATION OF STATE LAW.—The fact that a plan or 

coverage is exempt from the provisions of this section under subparagraph 

(A) shall not affect the application of State law to such plan or coverage.’’. 

(g) CHANGE IN EXCLUSION FOR SMALLEST EMPLOYERS.—Subsection (c)(1)(B) of 

such section is amended—

(1) by inserting ‘‘(or 1 in the case of an employer residing in a State that permits small groups to include a single individual)’’ after ‘‘at least 2’’ the first 

place it appears; and 

(2) by striking ‘‘and who employs at least 2 employees on the first day of the 

plan year’’. 

(h) ELIMINATION OF SUNSET PROVISION.—Such section is amended by striking subsection (f). 

(i) CLARIFICATION REGARDING PREEMPTION.—Such section is further amended by 

inserting after subsection (e) the following new subsection: 

‘‘(f) PREEMPTION, RELATION TO STATE LAWS.—

‘‘(1) IN GENERAL.—This part shall not be construed to supersede any provision 

of State law which establishes, implements, or continues in effect any consumer 

protections, benefits, methods of access to benefits, rights, external review programs, or remedies solely relating to health insurance issuers in connection 

with group health insurance coverage (including benefit mandates or regulation 

of group health plans of 50 or fewer employees) except to the extent that such 

provision prevents the application of a requirement of this part. 

‘‘(2) CONTINUED PREEMPTION WITH RESPECT TO GROUP HEALTH PLANS.—Nothing in this section shall be construed to affect or modify the provisions of section 

514 with respect to group health plans. 

‘‘(3) OTHER STATE LAWS.—Nothing in this section shall be construed to exempt 

or relieve any person from any laws of any State not solely related to health 

insurance issuers in connection with group health coverage insofar as they may 

now or hereafter relate to insurance, health plans, or health coverage.’ ’’. 

(j) CONFORMING AMENDMENTS TO HEADING.—

(1) IN GENERAL.—The heading of such section is amended to read as follows: 

‘‘SEC. 712. EQUITY IN MENTAL HEALTH AND SUBSTANCE-RELATED DISORDER BENEFITS.’’. 

(2) CLERICAL AMENDMENT.—The table of contents in section 1 of such Act is 

amended by striking the item relating to section 712 and inserting the following 

new item: 

‘‘Sec. 712. Equity in mental health and substance-related disorder benefits.’’. 

(k) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by this section shall apply with respect to plan years beginning on or after January 1, 2008. 


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(2) SPECIAL RULE FOR COLLECTIVE BARGAINING AGREEMENTS.—In the case of 

a group health plan maintained pursuant to one or more collective bargaining 

agreements between employee representatives and one or more employers ratified before the date of the enactment of this Act, the amendments made by this 

section shall not apply to plan years beginning before the later of—

(A) the date on which the last of the collective bargaining agreements relating to the plan terminates (determined without regard to any extension 

thereof agreed to after the date of the enactment of this Act), or 

(B) January 1, 2010. 

For purposes of subparagraph (A), any plan amendment made pursuant to a 

collective bargaining agreement relating to the plan which amends the plan 

solely to conform to any requirement imposed under an amendment under this 

section shall not be treated as a termination of such collective bargaining agreement. 

(l) DOL ANNUAL SAMPLE COMPLIANCE.—The Secretary of Labor shall annually 

sample and conduct random audits of group health plans (and health insurance coverage offered in connection with such plans) in order to determine their compliance 

with the amendments made by this Act and shall submit to the appropriate committees of Congress an annual report on such compliance with such amendments. 

(m) ASSISTANCE TO PARTICIPANTS AND BENEFICIARIES.—The Secretary of Labor 

shall provide assistance to participants and beneficiaries of group health plans with 

any questions or problems with compliance with the requirements of this Act. The 

Secretary shall notify participants and beneficiaries when they can obtain assistance 

from State consumer and insurance agencies and the Secretary shall coordinate 

with State agencies to ensure that participants and beneficiaries are protected and 

afforded the rights provided under this Act. 

SEC. 3. AMENDMENTS TO THE PUBLIC HEALTH SERVICE ACT RELATING TO THE GROUP MARKET. 

(a) EXTENSION OF PARITY TO TREATMENT LIMITS AND BENEFICIARY FINANCIAL REQUIREMENTS.—Section 2705 of the Public Health Service Act (42 U.S.C. 300gg–5) is 

amended—

(1) in subsection (a), by adding at the end the following new paragraphs: 

‘‘(3) TREATMENT LIMITS.—

‘‘(A) NO TREATMENT LIMIT.—If the plan or coverage does not include a 

treatment limit (as defined in subparagraph (D)) on substantially all medical and surgical benefits in any category of items or services (specified in 

subparagraph (C)), the plan or coverage may not impose any treatment 

limit on mental health and substance-related disorder benefits that are 

classified in the same category of items or services. 

‘‘(B) TREATMENT LIMIT.—If the plan or coverage includes a treatment 

limit on substantially all medical and surgical benefits in any category of 

items or services, the plan or coverage may not impose such a treatment 

limit on mental health and substance-related disorder benefits for items 

and services within such category that are more restrictive than the predominant treatment limit that is applicable to medical and surgical benefits 

for items and services within such category. 

‘‘(C) CATEGORIES OF ITEMS AND SERVICES FOR APPLICATION OF TREATMENT

LIMITS AND BENEFICIARY FINANCIAL REQUIREMENTS.—For purposes of this 

paragraph and paragraph (4), there shall be the following four categories 

of items and services for benefits, whether medical and surgical benefits or 

mental health and substance-related disorder benefits, and all medical and 

surgical benefits and all mental health and substance related benefits shall 

be classified into one of the following categories: 

‘‘(i) INPATIENT, IN-NETWORK.—Items and services furnished on an inpatient basis and within a network of providers established or recognized under such plan or coverage. 

‘‘(ii) INPATIENT, OUT-OF-NETWORK.—Items and services furnished on 

an inpatient basis and outside any network of providers established or 

recognized under such plan or coverage. 

‘‘(iii) OUTPATIENT, IN-NETWORK.—Items and services furnished on an 

outpatient basis and within a network of providers established or recognized under such plan or coverage. 

‘‘(iv) OUTPATIENT, OUT-OF-NETWORK.—Items and services furnished 

on an outpatient basis and outside any network of providers established or recognized under such plan or coverage. 

‘‘(D) TREATMENT LIMIT DEFINED.—For purposes of this paragraph, the 

term ‘treatment limit’ means, with respect to a plan or coverage, limitation 

on the frequency of treatment, number of visits or days of coverage, or other 


bajohnson on PROD1PC71 with REPORTS
7 

similar limit on the duration or scope of treatment under the plan or coverage. ‘‘(E) PREDOMINANCE.—For purposes of this subsection, a treatment limit 

or financial requirement with respect to a category of items and services is 

considered to be predominant if it is the most common or frequent of such 

type of limit or requirement with respect to such category of items and 

services. ‘‘(4) BENEFICIARY FINANCIAL REQUIREMENTS.— ‘‘(A) NO BENEFICIARY FINANCIAL REQUIREMENT.—If the plan or coverage 

does not include a beneficiary financial requirement (as defined in subparagraph (C)) on substantially all medical and surgical benefits within a category of items and services (specified in paragraph (3)(C)), the plan or coverage may not impose such a beneficiary financial requirement on mental 

health and substance-related disorder benefits for items and services within 

such category. ‘‘(B) BENEFICIARY FINANCIAL REQUIREMENT.— ‘‘(i) TREATMENT OF DEDUCTIBLES, OUT-OF-POCKET LIMITS, AND SIMILAR

FINANCIAL REQUIREMENTS.—If the plan or coverage includes a deductible, a limitation on out-of-pocket expenses, or similar beneficiary financial requirement that does not apply separately to individual items and 

services on substantially all medical and surgical benefits within a category of items and services, the plan or coverage shall apply such requirement (or, if there is more than one such requirement for such category of items and services, the predominant requirement for such category) both to medical and surgical benefits within such category and 

to mental health and substance-related disorder benefits within such 

category and shall not distinguish in the application of such requirement between such medical and surgical benefits and such mental 

health and substance-related disorder benefits. 

‘‘(ii) OTHER FINANCIAL REQUIREMENTS.—If the plan or coverage includes a beneficiary financial requirement not described in clause (i) on 

substantially all medical and surgical benefits within a category of 

items and services, the plan or coverage may not impose such financial 

requirement on mental health and substance-related disorder benefits 

for items and services within such category in a way that is more costly 

to the participant or beneficiary than the predominant beneficiary financial requirement applicable to medical and surgical benefits for 

items and services within such category. 

‘‘(C) BENEFICIARY FINANCIAL REQUIREMENT DEFINED.—For purposes of 

this paragraph, the term ‘beneficiary financial requirement’ includes, with 

respect to a plan or coverage, any deductible, coinsurance, co-payment, 

other cost sharing, and limitation on the total amount that may be paid by 

a participant or beneficiary with respect to benefits under the plan or coverage, but does not include the application of any aggregate lifetime limit 

or annual limit.’’; and 

(2) in subsection (b)—

(A) by striking ‘‘construed—’’ and all that follows through ‘‘(1) as requiring’’ and inserting ‘‘construed as requiring’’; 

(B) by striking ‘‘; or’’ and inserting a period; and 

(C) by striking paragraph (2). 

(b) EXPANSION TO SUBSTANCE-RELATED DISORDER BENEFITS AND REVISION OF

DEFINITION.—Such section is further amended—

(1) by striking ‘‘mental health benefits’’ and inserting ‘‘mental health and substance-related disorder benefits’’ each place it appears; and 

(2) in paragraph (4) of subsection (e)—

(A) by striking ‘‘MENTAL HEALTH BENEFITS’’ and inserting ‘‘MENTAL

HEALTH AND SUBSTANCE-RELATED DISORDER BENEFITS’’; 

(B) by striking ‘‘benefits with respect to mental health services’’ and inserting ‘‘benefits with respect to services for mental health conditions or 

substance-related disorders’’; and 

(C) by striking ‘‘, but does not include benefits with respect to treatment 

of substances abuse or chemical dependency’’. 

(c) AVAILABILITY OF PLAN INFORMATION ABOUT CRITERIA FOR MEDICAL NECESSITY.—Subsection (a) of such section, as amended by subsection (a)(1), is further 

amended by adding at the end the following new paragraph: 

‘‘(5) AVAILABILITY OF PLAN INFORMATION.—The criteria for medical necessity 

determinations made under the plan with respect to mental health and substance-related disorder benefits (or the health insurance coverage offered in connection with the plan with respect to such benefits) shall be made available by 


bajohnson on PROD1PC71 with REPORTS
8 

the plan administrator (or the health insurance issuer offering such coverage) 

to any current or potential participant, beneficiary, or contracting provider upon 

request. The reason for any denial under the plan (or coverage) of reimbursement or payment for services with respect to mental health and substance-related disorder benefits in the case of any participant or beneficiary shall, upon 

request, be made available by the plan administrator (or the health insurance 

issuer offering such coverage) to the participant or beneficiary.’’. (d) MINIMUM BENEFIT REQUIREMENTS.—Subsection (a) of such section is further 

amended by adding at the end the following new paragraph: ‘‘(6) MINIMUM SCOPE OF COVERAGE AND EQUITY IN OUT-OF-NETWORK BENE- FITS.—

‘‘(A) MINIMUM SCOPE OF MENTAL HEALTH AND SUBSTANCE-RELATED DIS- ORDER BENEFITS.—In the case of a group health plan (or health insurance 

coverage offered in connection with such a plan) that provides any mental 

health and substance-related disorder benefits, the plan or coverage shall 

include benefits for any mental health condition or substance-related disorder for which benefits are provided under the benefit plan option offered 

under chapter 89 of title 5, United States Code, with the highest average 

enrollment as of the beginning of the most recent year beginning on or before the beginning of the plan year involved. ‘‘(B) EQUITY IN COVERAGE OF OUT-OF-NETWORK BENEFITS.—

‘‘(i) IN GENERAL.—In the case of a plan or coverage that provides both 

medical and surgical benefits and mental health and substance-related 

disorder benefits, if medical and surgical benefits are provided for substantially all items and services in a category specified in clause (ii) 

furnished outside any network of providers established or recognized 

under such plan or coverage, the mental health and substance-related 

disorder benefits shall also be provided for items and services in such 

category furnished outside any network of providers established or recognized under such plan or coverage in accordance with the requirements of this section. 

‘‘(ii) CATEGORIES OF ITEMS AND SERVICES.—For purposes of clause (i), 

there shall be the following three categories of items and services for 

benefits, whether medical and surgical benefits or mental health and 

substance-related disorder benefits, and all medical and surgical benefits and all mental health and substance-related disorder benefits shall 

be classified into one of the following categories: 

‘‘(I) EMERGENCY.—Items and services, whether furnished on an 

inpatient or outpatient basis, required for the treatment of an 

emergency medical condition (including an emergency condition relating to mental health and substance-related disorders). 

‘‘(II) INPATIENT.—Items and services not described in subclause 

(I) furnished on an inpatient basis. 

‘‘(III) OUTPATIENT.—Items and services not described in subclause (I) furnished on an outpatient basis.’’. 

(e) REVISION OF INCREASED COST EXEMPTION.—Paragraph (2) of subsection (c) of 

such section is amended to read as follows: 

‘‘(2) INCREASED COST EXEMPTION.—

‘‘(A) IN GENERAL.—With respect to a group health plan (or health insurance coverage offered in connection with such a plan), if the application of 

this section to such plan (or coverage) results in an increase for the plan 

year involved of the actual total costs of coverage with respect to medical 

and surgical benefits and mental health and substance-related disorder 

benefits under the plan (as determined and certified under subparagraph 

(C)) by an amount that exceeds the applicable percentage described in subparagraph (B) of the actual total plan costs, the provisions of this section 

shall not apply to such plan (or coverage) during the following plan year, 

and such exemption shall apply to the plan (or coverage) for 1 plan year. 

‘‘(B) APPLICABLE PERCENTAGE.—With respect to a plan (or coverage), the 

applicable percentage described in this paragraph shall be—

‘‘(i) 2 percent in the case of the first plan year which begins after the 

date of the enactment of the Paul Wellstone Mental Health and Addiction Equity Act of 2007; and 

‘‘(ii) 1 percent in the case of each subsequent plan year. 

‘‘(C) DETERMINATIONS BY ACTUARIES.—Determinations as to increases in 

actual costs under a plan (or coverage) for purposes of this subsection shall 

be made by a qualified actuary who is a member in good standing of the 

American Academy of Actuaries. Such determinations shall be certified by 

the actuary and be made available to the general public. 


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‘‘(D) 6-MONTH DETERMINATIONS.—If a group health plan (or a health insurance issuer offering coverage in connection with such a plan) seeks an 

exemption under this paragraph, determinations under subparagraph (A) 

shall be made after such plan (or coverage) has complied with this section 

for the first 6 months of the plan year involved. ‘‘(E) NOTIFICATION.—A group health plan under this part shall comply 

with the notice requirement under section 712(c)(2)(E) of the Employee Retirement Income Security Act of 1974 with respect to the a modification of 

mental health and substance-related disorder benefits as permitted under 

this paragraph as if such section applied to such plan.’’. (f) CHANGE IN EXCLUSION FOR SMALLEST EMPLOYERS.—Subsection (c)(1)(B) of such 

section is amended— (1) by inserting ‘‘(or 1 in the case of an employer residing in a State that permits small groups to include a single individual)’’ after ‘‘at least 2’’ the first 

place it appears; and 

(2) by striking ‘‘and who employs at least 2 employees on the first day of the 

plan year’’. (g) ELIMINATION OF SUNSET PROVISION.—Such section is amended by striking out 

subsection (f). 

(h) CLARIFICATION REGARDING PREEMPTION.—Such section is further amended by 

inserting after subsection (e) the following new subsection: ‘‘(f) PREEMPTION, RELATION TO STATE LAWS.— ‘‘(1) IN GENERAL.—Nothing in this section shall be construed to preempt any 

State law that provides greater consumer protections, benefits, methods of access to benefits, rights or remedies that are greater than the protections, benefits, methods of access to benefits, rights or remedies provided under this section. ‘‘(2) CONSTRUCTION.—Nothing in this section shall be construed to affect or 

modify the provisions of section 2723 with respect to group health plans.’’. (i) CONFORMING AMENDMENT TO HEADING.—The heading of such section is 

amended to read as follows: 

‘‘SEC. 2705.’’. 

(j) EFFECTIVE DATE.—The amendments made by this section shall apply with respect to plan years beginning on or after January 1, 2008. 

SEC. 4. AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986. 

(a) EXTENSION OF PARITY TO TREATMENT LIMITS AND BENEFICIARY FINANCIAL RE- QUIREMENTS.—Section 9812 of the Internal Revenue Code of 1986 is amended— (1) in subsection (a), by adding at the end the following new paragraphs: 

‘‘(3) TREATMENT LIMITS.— ‘‘(A) NO TREATMENT LIMIT.—If the plan does not include a treatment limit 

(as defined in subparagraph (D)) on substantially all medical and surgical 

benefits in any category of items or services (specified in subparagraph (C)), 

the plan may not impose any treatment limit on mental health and substance-related disorder benefits that are classified in the same category of 

items or services. 

‘‘(B) TREATMENT LIMIT.—If the plan includes a treatment limit on substantially all medical and surgical benefits in any category of items or services, the plan may not impose such a treatment limit on mental health and 

substance-related disorder benefits for items and services within such category that are more restrictive than the predominant treatment limit that 

is applicable to medical and surgical benefits for items and services within 

such category. 

‘‘(C) CATEGORIES OF ITEMS AND SERVICES FOR APPLICATION OF TREATMENT

LIMITS AND BENEFICIARY FINANCIAL REQUIREMENTS.—For purposes of this 

paragraph and paragraph (4), there shall be the following four categories 

of items and services for benefits, whether medical and surgical benefits or 

mental health and substance-related disorder benefits, and all medical and 

surgical benefits and all mental health and substance related benefits shall 

be classified into one of the following categories: 

‘‘(i) INPATIENT, IN-NETWORK.—Items and services furnished on an inpatient basis and within a network of providers established or recognized under such plan or coverage. 

‘‘(ii) INPATIENT, OUT-OF-NETWORK.—Items and services furnished on 

an inpatient basis and outside any network of providers established or 

recognized under such plan or coverage. 

‘‘(iii) OUTPATIENT, IN-NETWORK.—Items and services furnished on an 

outpatient basis and within a network of providers established or recognized under such plan or coverage. 


bajohnson on PROD1PC71 with REPORTS
10 

‘‘(iv) OUTPATIENT, OUT-OF-NETWORK.—Items and services furnished 

on an outpatient basis and outside any network of providers established or recognized under such plan or coverage. 

‘‘(D) TREATMENT LIMIT DEFINED.—For purposes of this paragraph, the 

term ‘treatment limit’ means, with respect to a plan, limitation on the frequency of treatment, number of visits or days of coverage, or other similar 

limit on the duration or scope of treatment under the plan. 

‘‘(E) PREDOMINANCE.—For purposes of this subsection, a treatment limit 

or financial requirement with respect to a category of items and services is 

considered to be predominant if it is the most common or frequent of such 

type of limit or requirement with respect to such category of items and 

services. 

‘‘(4) BENEFICIARY FINANCIAL REQUIREMENTS.—

‘‘(A) NO BENEFICIARY FINANCIAL REQUIREMENT.—If the plan does not include a beneficiary financial requirement (as defined in subparagraph (C)) 

on substantially all medical and surgical benefits within a category of items 

and services (specified in paragraph (3)(C)), the plan may not impose such 

a beneficiary financial requirement on mental health and substance-related 

disorder benefits for items and services within such category. 

‘‘(B) BENEFICIARY FINANCIAL REQUIREMENT.—

‘‘(i) TREATMENT OF DEDUCTIBLES, OUT-OF-POCKET LIMITS, AND SIMILAR

FINANCIAL REQUIREMENTS.—If the plan or coverage includes a deductible, a limitation on out-of-pocket expenses, or similar beneficiary financial requirement that does not apply separately to individual items and 

services on substantially all medical and surgical benefits within a category of items and services, the plan or coverage shall apply such requirement (or, if there is more than one such requirement for such category of items and services, the predominant requirement for such category) both to medical and surgical benefits within such category and 

to mental health and substance-related disorder benefits within such 

category and shall not distinguish in the application of such requirement between such medical and surgical benefits and such mental 

health and substance-related disorder benefits. 

‘‘(ii) OTHER FINANCIAL REQUIREMENTS.—If the plan includes a beneficiary financial requirement not described in clause (i) on substantially 

all medical and surgical benefits within a category of items and services, the plan may not impose such financial requirement on mental 

health and substance-related disorder benefits for items and services 

within such category in a way that is more costly to the participant or 

beneficiary than the predominant beneficiary financial requirement applicable to medical and surgical benefits for items and services within 

such category. 

‘‘(C) BENEFICIARY FINANCIAL REQUIREMENT DEFINED.—For purposes of 

this paragraph, the term ‘beneficiary financial requirement’ includes, with 

respect to a plan, any deductible, coinsurance, co-payment, other cost sharing, and limitation on the total amount that may be paid by a participant 

or beneficiary with respect to benefits under the plan, but does not include 

the application of any aggregate lifetime limit or annual limit.’’; and 

(2) in subsection (b)—

(A) by striking ‘‘construed—’’ and all that follows through ‘‘(1) as requiring’’ and inserting ‘‘construed as requiring’’; 

(B) by striking ‘‘; or’’ and inserting a period; and 

(C) by striking paragraph (2). 

(b) EXPANSION TO SUBSTANCE-RELATED DISORDER BENEFITS AND REVISION OF

DEFINITION.—Such section is further amended—

(1) by striking ‘‘mental health benefits’’ and inserting ‘‘mental health and substance-related disorder benefits’’ each place it appears; and 

(2) in paragraph (4) of subsection (e)—

(A) by striking ‘‘MENTAL HEALTH BENEFITS’’ in the heading and inserting 

‘‘MENTAL HEALTH AND SUBSTANCE-RELATED DISORDER BENEFITS’’; 

(B) by striking ‘‘benefits with respect to mental health services’’ and inserting ‘‘benefits with respect to services for mental health conditions or 

substance-related disorders’’; and 

(C) by striking ‘‘, but does not include benefits with respect to treatment 

of substances abuse or chemical dependency’’. 

(c) AVAILABILITY OF PLAN INFORMATION ABOUT CRITERIA FOR MEDICAL NECESSITY.—Subsection (a) of such section, as amended by subsection (a)(1), is further 

amended by adding at the end the following new paragraph: 


bajohnson on PROD1PC71 with REPORTS
11 

‘‘(5) AVAILABILITY OF PLAN INFORMATION.—The criteria for medical necessity 

determinations made under the plan with respect to mental health and substance-related disorder benefits shall be made available by the plan administrator to any current or potential participant, beneficiary, or contracting provider upon request. The reason for any denial under the plan of reimbursement 

or payment for services with respect to mental health and substance-related disorder benefits in the case of any participant or beneficiary shall, upon request, 

be made available by the plan administrator to the participant or beneficiary.’’. 

(d) MINIMUM BENEFIT REQUIREMENTS.—Subsection (a) of such section is further 

amended by adding at the end the following new paragraph: 

‘‘(6) MINIMUM SCOPE OF COVERAGE AND EQUITY IN OUT-OF-NETWORK BENEFITS.—

‘‘(A) MINIMUM SCOPE OF MENTAL HEALTH AND SUBSTANCE-RELATED DISORDER BENEFITS.—In the case of a group health plan (or health insurance 

coverage offered in connection with such a plan) that provides any mental 

health and substance-related disorder benefits, the plan or coverage shall 

include benefits for any mental health condition or substance-related disorder for which benefits are provided under the benefit plan option offered 

under chapter 89 of title 5, United States Code, with the highest average 

enrollment as of the beginning of the most recent year beginning on or before the beginning of the plan year involved. 

‘‘(B) EQUITY IN COVERAGE OF OUT-OF-NETWORK BENEFITS.—

‘‘(i) IN GENERAL.—In the case of a plan that provides both medical 

and surgical benefits and mental health and substance-related disorder 

benefits, if medical and surgical benefits are provided for substantially 

all items and services in a category specified in clause (ii) furnished 

outside any network of providers established or recognized under such 

plan or coverage, the mental health and substance-related disorder 

benefits shall also be provided for items and services in such category 

furnished outside any network of providers established or recognized 

under such plan in accordance with the requirements of this section. 

‘‘(ii) CATEGORIES OF ITEMS AND SERVICES.—For purposes of clause (i), 

there shall be the following three categories of items and services for 

benefits, whether medical and surgical benefits or mental health and 

substance-related disorder benefits, and all medical and surgical benefits and all mental health and substance-related disorder benefits shall 

be classified into one of the following categories: 

‘‘(I) EMERGENCY.—Items and services, whether furnished on an 

inpatient or outpatient basis, required for the treatment of an 

emergency medical condition (including an emergency condition relating to mental health and substance-related disorders). 

‘‘(II) INPATIENT.—Items and services not described in subclause 

(I) furnished on an inpatient basis. 

‘‘(III) OUTPATIENT.—Items and services not described in subclause (I) furnished on an outpatient basis.’’. 

(e) REVISION OF INCREASED COST EXEMPTION.—Paragraph (2) of subsection (c) of 

such section is amended to read as follows: 

‘‘(2) INCREASED COST EXEMPTION.—

‘‘(A) IN GENERAL.—With respect to a group health plan, if the application 

of this section to such plan results in an increase for the plan year involved 

of the actual total costs of coverage with respect to medical and surgical 

benefits and mental health and substance-related disorder benefits under 

the plan (as determined and certified under subparagraph (C)) by an 

amount that exceeds the applicable percentage described in subparagraph 

(B) of the actual total plan costs, the provisions of this section shall not 

apply to such plan during the following plan year, and such exemption shall 

apply to the plan for 1 plan year. 

‘‘(B) APPLICABLE PERCENTAGE.—With respect to a plan, the applicable 

percentage described in this paragraph shall be—

‘‘(i) 2 percent in the case of the first plan year which begins after the 

date of the enactment of the Paul Wellstone Mental Health and Addiction Equity Act of 2007; and 

‘‘(ii) 1 percent in the case of each subsequent plan year. 

‘‘(C) DETERMINATIONS BY ACTUARIES.—Determinations as to increases in 

actual costs under a plan for purposes of this subsection shall be made by 

a qualified actuary who is a member in good standing of the American 

Academy of Actuaries. Such determinations shall be certified by the actuary 

and be made available to the general public. 


bajohnson on PROD1PC71 with REPORTS
12 

‘‘(D) 6-MONTH DETERMINATIONS.—If a group health plan seeks an exemption under this paragraph, determinations under subparagraph (A) shall be 

made after such plan has complied with this section for the first 6 months 

of the plan year involved.’’. 

(f) CHANGE IN EXCLUSION FOR SMALLEST EMPLOYERS.—Subsection (c)(1) of such 

section is amended to read as follows: 

‘‘(1) SMALL EMPLOYER EXEMPTION.—

‘‘(A) IN GENERAL.—This section shall not apply to any group health plan 

for any plan year of a small employer. 

‘‘(B) SMALL EMPLOYER.—For purposes of subparagraph (A), the term 

‘small employer’ means, with respect to a calendar year and a plan year, 

an employer who employed an average of at least 2 (or 1 in the case of an 

employer residing in a State that permits small groups to include a single 

individual) but not more than 50 employees on business days during the 

preceding calendar year. For purposes of the preceding sentence, all persons 

treated as a single employer under subsection (b), (c), (m), or (o) of section 

414 shall be treated as 1 employer and rules similar to rules of subparagraphs (B) and (C) of section 4980D(d)(2) shall apply.’’. 

(g) ELIMINATION OF SUNSET PROVISION.—Such section is amended by striking subsection (f). 

(h) CONFORMING AMENDMENTS TO HEADING.—

(1) IN GENERAL.—The heading of such section is amended to read as follows: 

‘‘SEC. 9812.’’. 

(2) CLERICAL AMENDMENT.—The table of sections for subchapter B of chapter 

100 of the Internal Revenue Code of 1986 is amended by striking the item relating to section 9812 and inserting the following new item: 

‘‘Sec. 9812. Equity in mental health and substance-related disorder benefits.’’. 

(i) EFFECTIVE DATE.—The amendments made by this section shall apply with respect to plan years beginning on or after January 1, 2008. 

SEC. 5. STUDIES AND REPORTS. 

(a) IMPLEMENTATION OF ACT.—

(1) GAO STUDY.—The Comptroller General of the United States shall conduct 

a study that evaluates the effect of the implementation of the amendments 

made by this Act on—

(A) the cost of health insurance coverage; 

(B) access to health insurance coverage (including the availability of innetwork providers); 

(C) the quality of health care; 

(D) Medicare, Medicaid, and State and local mental health and substance 

abuse treatment spending; 

(E) the number of individuals with private insurance who received publicly funded health care for mental health and substance-related disorders; 

(F) spending on public services, such as the criminal justice system, special education, and income assistance programs; 

(G) the use of medical management of mental health and substance-related disorder benefits and medical necessity determinations by group 

health plans (and health insurance issuers offering health insurance coverage in connection with such plans) and timely access by participants and 

beneficiaries to clinically-indicated care for mental health and substanceuse disorders; and 

(H) other matters as determined appropriate by the Comptroller General. 

(2) REPORT.—Not later than 2 years after the date of enactment of this Act, 

the Comptroller General shall prepare and submit to the appropriate committees of the Congress a report containing the results of the study conducted 

under paragraph (1). 

(b) GAO REPORT ON UNIFORM PATIENT PLACEMENT CRITERIA.—Not later than 18 

months after the date of the enactment of this Act, the Comptroller General shall 

submit to the appropriate committees of each House of the Congress a report on 

availability of uniform patient placement criteria for mental health and substancerelated disorders that could be used by group health plans and health insurance 

issuers to guide determinations of medical necessity and the extent to which health 

plans utilize such criteria. If such criteria do not exist, the report shall include recommendations on a process for developing such criteria. 

(c) DOL BIANNUAL REPORT ON OBSTACLES IN OBTAINING COVERAGE.—Every two 

years, the Secretary of Labor, in consultation with the Secretaries of Health and 

Human Services and the Treasury, shall submit to the appropriate committees of 


bajohnson on PROD1PC71 with REPORTS
13 

1P.L 104–204. 2The World Health Organization. The World Health Report 2004: Changing History; Annex 

Table 3: Burden of disease in Disability-Adjusted-Life-Years (DALY) by cause, sex, and mortality 

stratum in WHO regions, estimates for 2002. Geneva (2004). 3S. Rept. 102–397 at 96. 

each House of the Congress a report on obstacles that individuals face in obtaining 

mental health and substance-related disorder care under their health plans. 

I. PURPOSE

Millions of Americans suffer from mental illness however obstacles within our health care system prevent many from getting the 

care they desperately need. The Paul Wellstone Mental Health and 

Addiction Equity Act (H.R. 1424) will expand the Mental Health 

Parity Act of 1996 1 to ensure that mental illnesses are covered 

under similar terms as physical illnesses for the millions of Americans who currently receive health care through their employers. 

Mental disorders are the leading cause of disability in the U.S. 

for individuals ages 15–44. 2 However, private health insurers and 

employers generally provide less coverage for mental illnesses than 

for other medical and surgical benefits through the use of plan design features. H.R. 1424 seeks to increase access to mental health 

treatment by prohibiting group health plans (or health insurance 

coverage offered in connection with a group health plan) from imposing financial requirements (including deductibles, co payments, 

coinsurance, out-of-pocket expenses, and annual lifetime limits) or 

treatment limitations (including limitations on the number of visits, days of coverage, frequency of treatment, or other similar limits 

on the scope and duration of treatment) on mental health benefits 

that are more restrictive than those restrictions applied to medical 

and surgical benefits. 

II. COMMITTEE ACTION INCLUDING LEGISLATIVE HISTORY AND

VOTES IN COMMITTEE

102ND CONGRESS (1991–1992)

On May 12, 1992 during the 102nd Congress Senators Pete 

Domenici and John Danforth first introduced mental health parity 

legislation, Equitable Health Care for Severe Mental Illnesses Act 

of 1992, S. 2696. The legislation garnered 24 bipartisan co-sponsors 

and was referred to the Committee on Labor and Human Resources. S. 2696 prohibited discrimination in the healthcare system 

based on an individual’s severe mental illness, and stated health 

care coverage. No action was taken on S. 2696. 

The Senate Appropriations Committee included language in its 

Committee report 3 to accompany the FY1993 Labor-HHS appropriations bill that requested the National Advisory Mental Health 

Council prepare a report on the cost of mental health parity. 

103RD CONGRESS (1993–1994)

Congress considered mental health parity during the debate on 

the Clinton Administration’s health care reform proposal in the 

103rd Congress. The Health Security Act (introduced as H.R. 3600 

and S. 1757 respectively) included limited coverage of mental illness as part of its initial benefit package, however both bills provided for a phase-in of full parity by January 1, 2001. The Health 


bajohnson on PROD1PC71 with REPORTS
14 

4 H.R. 3600 was referred to the: House Ways and Means Committee, Subcommittee on Select 

Revenue Measures, Subcommittee on Health, Subcommittee on Social Security; Armed Services 

Committee, Subcommittee on Military Forces and Personnel; Education and Labor Committee, 

Subcommittee on Labor Standards, Occupational Health and Safety, Subcommittee on Postsecondary Education and Training, Subcommittee on Elementary, Secondary, and Vocational Education, Subcommittee on Labor-Management Relations, Subcommittee on Human Resources, 

Subcommittee on Select Education and Civil Rights; Government Operations Committee, Subcommittee on Information, Justice, Transportation, and Agriculture, Subcommittee on Legislation and National Security, Subcommittee on Human Resources and Intergovernmental Relations; Energy and Commerce Committee, Subcommittee on Health and Environment, Subcommittee on Commerce, Consumer Protection, and Competitiveness; Natural Resources Committee, Subcommittee on Native American Affairs; Judiciary Committee, Subcommittee on Economic and Commercial Law; Post Office and Civil Service Committee; Rules Committee; Veterans’ Affairs Committee, Subcommittee on Hospitals and Health Care. 5On April 26, 1994, the Senate Finance Committee held a hearing on S. 1757. 

6P.L. 104–191. 7 By voice vote, the Senate approved a second degree amendment offered by Senator Gramm 

which exempted health plans from the MHPA parity requirement if the cost of compliance exceeded the original cost of coverage by 1 percent. 8P.L 104–204. See also, Ramya Sundararaman, ‘‘The Mental Health Parity Act: A Legislative 

History,’’ CRS Report for Congress, May 18, 2007 at 5. 

Security Act was deliberated in the House 4 and Senate 5 Committees of jurisdiction however no further action was taken on either 

bill. 

104TH CONGRESS (1995–1996)

On January 31, 1995 Senators Domenici and Wellstone re-introduced the Equitable Health Care for Severe Mental Illnesses Act, 

S. 298 which sought to provide full mental health parity. The legislation had 7 co-sponsors and was similar to language approved by 

the Senate on April 18, 1996 as an amendment to S. 1028, the 

Health Insurance Reform Act. This amendment was later dropped 

in conference. A partial parity amendment offered by Senators 

Domenici and Wellstone was also rejected by the conferees as part 

of the Health Insurance Portability and Accountability Act 

(HIPAA). 6

On August 2, 1996, Senators Pete Domenici and Paul Wellstone 

introduced S. 2031, the Mental Health Parity Act (MHPA). The bill 

had 16 bipartisan co-sponsors and was referred to the Committee 

on Labor and Human Resources. MHPA required parity for annual 

and lifetime dollar amounts; included an exemption for employers 

with 25 or fewer employees; and applied the parity provisions only 

to those group health plans that provided mental health coverage. 

Representative Marge Roukema introduced the House version of 

the Mental Health Parity Act of 1996, H.R. 4058 on September 11, 

1996. The MHPA garnered 22 bipartisan co-sponsors and was referred to the Committee on Commerce, Subcommittee on Health 

and Environment; the Committee on Economic and Educational 

Opportunities, Subcommittee on Employer-Employee Relations; 

and the Committee on Government Reform and Oversight, Subcommittee on Civil Service. 

MHPA was offered as an amendment to the FY 1997 VA-HUD 

appropriations bill, H.R. 3666. On September 5, 1996, the Senate 

approved the Domenici-Wellstone amendment, as amended 7 by an 

82–15 vote. On September 11, 1996, the House voted 392–17 to 

adopt a motion to instruct conferees on H.R. 3666 and among other 

things, to agree to the Senate mental health parity provisions. The 

Domenici-Wellstone amendment was agreed to in conference and 

MHPA became Title VII of the FY1997 VA-HUD appropriations 

bill, which was signed into law on September 26, 1996. 8


bajohnson on PROD1PC71 with REPORTS
15 

9P.L. 105–34, Section 1531(a)(4), codified at 26 U.S.C. 9812. 

105TH CONGRESS (1997–1998)

During Congress’ debate on the Balanced Budget Act of 1997 

during the 105th Congress, Senators Domenici and Wellstone successfully attached an amendment to the State Children’s Health 

Insurance Plan (SCHIP) which required plans offering mental 

health benefits to provide full-parity coverage. Although the language was later deleted in conference, the conferees did accept language that required all SCHIP plans and Medicaid managed care 

plans to meet the requirements of the MHPA. The MHPA provisions were also added to the Internal Revenue Code (IRC) through 

the Taxpayer Relief Act of 1997. 9

On March 26, 1998, Representative Marge Roukema introduced 

the Mental Health and Substance Abuse Parity Amendments of 

1998, H.R. 3568. The bill had 26 Democratic and Republican cosponsors and was referred to the: Commerce Committee, Subcommittee on Health and the Environment; Education and the 

Workforce Committee, Subcommittee on Employer-Employee Relations; Ways and Means Committee, Subcommittee on Health. No 

further action was taken on H.R. 3568. 

106TH CONGRESS (1999–2000)

On April 14, 1999, the Mental Health Equitable Treatment Act, 

S. 796 was introduced by Senators Pete Domenici and Paul 

Wellstone. S. 796 had 28 Democratic and Republican co-sponsors 

and was referred to the Committee on Health, Education, Labor, 

and Pensions. 

On May 18, 2000, the Senate HELP committee held a hearing 

entitled Examining Mental Health Parity Issues, including S. 796, 

To Provide for Full Parity with Respect to Health Insurance Coverage for Certain Severe Biologically-based Mental Illnesses and to 

Prohibit Limits on the Number of Mental Illness-Related Hospital 

Days and Outpatient Visits that are Covered for All Mental Illnesses. The hearing consisted of three panels. The witnesses for the 

first panel included: Senator Pete V. Domenici and Senator Paul D. 

Wellstone. The second panel included: Kathryn G. Allen, Associate 

Director of Health Financing and Public Health Issues of the U.S. 

General Accounting Office and Dr. Steven E. Hyman, Director of 

the National Institute of Mental Health of the National Institute 

of Health. The third panel witnesses included: Ken Libertoff, Director of the Vermont Association for Mental Health; Dr. Kenneth 

Duckworth, Deputy Commissioner of the Massachusetts Department of Mental Health; Tara Wooldridge, Manager of the Employee 

Assistance Program of Delta Airlines; and Dean Rosen, senior Vice 

President of Policy and General Counsel of the Health Insurance 

Association of America. 

Representative Marge Roukema re-introduced the Mental Health 

and Substance Abuse Parity Amendments of 1999, H.R. 1515 on 

April 21, 1999. The bill which had 114 Democratic and Republican 

co-sponsors was referred to the: Commerce Committee, Subcommittee on Health and the Environment; Education and the 

Workforce Committee, Subcommittee on Employer-Employee RelaVerDate Aug 31 2005 07:14 Oct 17, 2007 Jkt 069006 PO 00000 Frm 00015 Fmt 6659 Sfmt 6602 E:\HR\OC\HR374P1.XXX HR374P1

bajohnson on PROD1PC71 with REPORTS
16 

tions; Ways and Means Committee, Subcommittee on Health. No 

further action was taken on H.R. 1515. 

107TH CONGRESS (2001–2002)

On March 15, 2001, the Mental Health Equitable Treatment Act 

of 2001 was introduced by Senators Pete Domenici and Paul 

Wellstone. The bill garnered 66 Democratic and Republican cosponsors and was referred to the HELP Committee. 

Senate consideration of mental health parity legislation 

On July 11, 2001 the Senate HELP Committee held a hearing 

entitled Achieving Parity for Mental Health Treatment. The witnesses included: Senator Paul Wellstone; Senator Pete Domenici; 

Edward Flynn, Associate Director for Retirement and Insurance of 

the Office of Personnel Management; Lisa Cohen; Dr. Henry Harbin, Chairman of the Board and Chief Executive Officer of Magellan Health Services; and Dr. Darrel A. Regier, Executive Director 

of the American Psychiatric Institute for Research and Education. 

On August 1, 2001, the Committee unanimously approved a substitute version of S. 543. On October 30, 2001, Senators Domenici 

and Wellstone offered S. 543, as reported, as an Senate Amendment 2020 to FY 2002 Labor-HHS appropriations bill, H.R. 3061, 

which the Senate approved by voice vote. The House version of 

H.R. 3061 did not include any parity language and on December 

18, 2001, the House conferees rejected Representative Kennedy’s 

motion to accept the Domenici-Wellstone mental health parity 

amendment. The conference did approve Representative Duke 

Cunningham’s motion to include language in the bill reauthorizing 

the MHPA through December 31, 2002. 

Consideration of mental health parity legislation in the House of 

Representatives 

On January 3, 2002, Representative Marge Roukema re-introduced the Mental Health and Substance Abuse Parity Amendments, H.R. 162. The bill was cosponsored by 202 Democratic and 

Republican members. H.R. 162 was referred to the Energy and 

Commerce Committee, Subcommittee on Health; the Education and 

the Workforce Committee, Subcommittee on Employer-Employee 

Relations; and the Ways and Means Committee, Subcommittee on 

Health. 

Committee consideration of mental health parity 

On March 13, 2002 the Subcommittee on Employer-Employee Relations of the Committee on Education and the Workforce held a 

hearing entitled, Assessing Mental Health Parity: Implications for 

Patients and Employers. The witnesses before this hearing included: Representative Marge Roukema; Representative Patrick 

Kennedy; Representative Lynn Rivers; Kay Nystul, Behavioral 

Health Nurse and Case Management Coordinator of Wausau Benefits; Lee Dixon, Group Director of Health Policy Tracking Service 

of the National Conference of State Legislatures; Dr. Henry Harbin, Chairman of the Board of Magellan Health Services Inc.; and 

Jane Greenman, Vice President of Human Resources and Communications and Deputy General Counsel of Honeywell International. 


bajohnson on PROD1PC71 with REPORTS
17 

10Section 610 of the Job Creation and Worker Assistance Act of 2002 (H.R. 3090, P.L. 107– 147) amended MHPA provisions in the IRC, and the Mental Health Parity Reauthorization Act 

of 2002 (H.R. 5716, P.L. 107–313) reauthorized the MHPA provisions in ERISA and the PHSA. 

H.R. 5716 was introduced by Representative John Boehner on November 13, 2002 and approved 

without objection by the House on November 15, 2002. On the same day, the Senate received 

and passed the bill by unanimous consent. 

On July 23, 2002, the Subcommittee on Health of the Committee 

on Energy and Commerce held a hearing entitled Insurance Coverage of Mental Health Benefits. The witnesses were Charles M. 

Cutler, Chief Medical Officer of the American Association of Health 

Plans; James T. Hackett, Chairman, President, and Chief Executive Officer of Ocean Energy Inc.; Kay Nystul, Psychiatric Registered Nurse and Certified Case Manager of Wausau Benefits Inc.; 

Darrel A. Regier, Director of the Office of Research or the American Psychiatric Association; and Neil E. Trautwein, Director of 

Employment Policy of the National Association of Manufacturers. 

Despite holding hearings, no further action was taken on the 

mental health parity legislation introduced in the House of Representatives. However, in two separate legislative actions, Congress 

reauthorized MHPA through December 31, 2003. 10

108TH CONGRESS (2003–2004)

On January 7, 2003 Senator Thomas Daschle introduced the 

Health Care Coverage Expansion and Quality Improvement Act of 

2003, S. 10. S. 10 required health plans treat mental illness in a 

nondiscriminatory and equitable manner by covering essential 

mental health treatment. The bill had 22 co-sponsors and was referred to the Senate Finance Committee. No further action was 

taken on the bill. 

On February 27, 2003, Representatives Patrick Kennedy and Jim 

Ramstad introduced the Senator Paul Wellstone Mental Health 

and Equitable Treatment Act of 2003, H.R. 953. The bill garnered 

248 bipartisan co-sponsors and was referred to the Energy and 

Commerce Committee, Subcommittee on Health; the Education and 

the Workforce Committee, Subcommittee on Employer-Employee 

Relations. There was no further consideration of the bill in the 

house. 

Also on February 27, 2003, Senators Pete Domenici and Edward 

Kennedy introduced the Senate version of the Senator Paul 

Wellstone Mental Health Equitable Treatment Act of 2003, S. 486. 

The Act had 69 bipartisan co-sponsors and was referred to the 

Committee on Health, Education, Labor, and Pensions. No further 

action was taken on this legislation. 

On November 4, 2003 the Senate HELP Committee, Subcommittee on Substance Abuse and Mental Health held a hearing 

on ‘‘Recommendations to Improve Mental Health Care in America: 

Report from the President’s new Freedom Commission on Mental 

Health.’’ The witnesses included: Stephen W. Mayberg, Commissioner of The President’s New Freedom Commission on Mental 

Health; Charles G. Curie, Administrator of the Substance Abuse 

and Mental Services Administration on behalf of the Campaign for 

Mental Health Reform; Dr. Paul S. Appelbaum, Professor of Psychiatry at the University of Massachusetts Medical School; Michael M. 

Faenza, President and Chief Executive Officer, national Mental 

Health Association on behalf of the Campaign for Mental Health 


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11P.L. 109–151. In the first session of the 109th Congress, the Employee Retirement Preservation Act, H.R. 4579 (P.L. 109–151), extended the provisions requiring mental health parity in 

ERISA, the PHS Act, and the IRC through 2006. H.R. 4579 passed the House by voice vote on 

December 17, 2005, and passed the Senate by unanimous consent on December 22, 2005. In the 

second session, Section 115 of the Tax Relief and Health Care Act of 2006, H.R. 6111 (P.L. 109–

432) extended MHPA provisions in all three statutes through 2007. 

Reform; Carlos Brandenberg, Administrator of Nevada Division of 

Mental Health and Developmental Services; and Ann Buchanan. 

On November 17, 2003, Senator Judd Gregg introduced the Mental Health Parity Reauthorization Act of 2003, S. 1875, with Senator Edward Kennedy. However, on November 21, 2003, a new 

version of the Mental Health Parity Reauthorization Act of 2003, 

S. 1929, was introduced by Senators Gregg and Kennedy. S. 1929 

was approved in the Senate by unanimous consent on the same 

day. On December 8, 2003 it was passed by the House by unanimous consent and became Public Law 108–197 on December 19, 

2003. 

109TH CONGRESS (2005–2006)

On March 17, 2005, Representatives Patrick Kennedy and Jim 

Ramstad reintroduced the Paul Wellstone Mental Health Equitable 

Treatment Act, H.R. 1402. The bill had 231 co-sponsors and was 

referred to the Committee on Education and the Workforce, Subcommittee on Employer-Employee Relations; and the Committee on 

Energy and Commerce, Subcommittee on Health. On September 

28, 2006, Representative Patrick Kennedy filed a discharge petition 

to request the bill be released from Committee and brought to the 

floor for consideration. The discharge petition gathered only 175 of 

the 218 member signature needed for discharge and subsequently 

failed. 

No further action was taken in either the House of Representatives or the Senate however Congress extended MHPA through the 

end of 2007. 11

110TH CONGRESS (2007)

The Mental Health Parity Act of 2007, S. 558 was first introduced by Senators Pete V. Domenici and Edward Kennedy on February 12, 2007 with 53 bipartisan co-sponsors. It was referred to 

the Senate HELP Committee and subsequently to the Subcommittee on Health. 

In the House of Representatives, the Paul Wellstone Mental 

Health and Addiction Equity Act of 2007 was first introduced by 

Representatives Patrick Kennedy and Jim Ramstad as H.R. 1367 

on March 7, 2007 with 255 co-sponsors. Two days later, on March 

9, 2007 a modified version of the bill was introduced and has garnered 268 Democratic and Republican co-sponsors. H.R. 1424 was 

referred to the Committee on Energy and Commerce, Subcommittee on Health; the Committee on Education and Labor, Subcommittee on Health, Employment, Labor, and Pensions; and the 

Committee on Ways and Means, Subcommittee on Health. 

Senate action on mental health parity legislation 

On February 14, 2007, the HELP Committee held an executive 

session to markup S. 558. During the markup Senator Harkin offered an amendment by Senator Dodd, which included a technical 


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change to clarify provisions relating to a GAO study. This amendment required GAO to examine and report on the impact of outof-network coverage for mental health benefits. The amendment 

was adopted by unanimous consent and the bill was favorably reported to the full Senate by a vote of 18–3. On March 27, 2007, the 

Committee met again and reported an amended version of S. 558 

with an amendment in the nature of a substitute offered by Chairman Kennedy. 

Hearings on mental health parity in the House of Representatives 

Ways and Means Committee, Health Subcommittee 

On March 27, 2007, the Subcommittee on Health of the Ways 

and Means Committee held a three panel hearing entitled Mental 

Health and Substance Abuse Parity. Witnesses testifying on panel 

one included: Representatives Patrick Kennedy, and Jim Ramstad; 

Witnesses on panel two included: David L. Shern, Ph.D., President 

and CEO, Mental Health America, Kathryne L. Westin, M.A., L.P., 

Eating Disorders Coalition for Research, Policy and Action, and Michael Quirk, Ph.D., Director, Behavioral Health Service, Group 

Health Cooperative. Panel three included: Eric Goplerud, Ph.D., Director, Ensuring Solutions to Alcohol Problems, George Washington 

University; Ronald W. Manderscheid, Ph.D., Director of Mental 

Health and Substance Use Programs Constella Group LLC; and 

Henry T. Harbin, M.D. 

Energy and Commerce Committee, Subcommittee on Health 

On June 15, 2007, the Subcommittee on Health of the Committee 

on Energy and Commerce held a hearing entitled H.R. 1424, the 

Paul Wellstone Mental Health and Addiction Equity Act of 2007. 

The witnesses included: Representative Patrick Kennedy; Representative Jim Ramstad; James Purcell, President and Chief Executive Officer of Blue Cross & Blue Shield of Rhode Island; Marley 

Prunty-Lara; Howard Goldman, Professor of Psychiatry of the University of Maryland; Edwina Rogers, Vice President of Health Policy for the ERISA Industry Committee; and James Klein, President 

of the American Benefits Council. 

Education and Labor Committee, HELP Subcommittee 

On July 10, 2007, the Subcommittee on Health, Employment, 

Labor, and Pensions of the Committee on Education and Labor 

held a two-panel hearing entitled the Paul Wellstone Mental 

Health and Addiction Equity Act of 2007 (H.R. 1424). The first 

panel included: Representative Patrick Kennedy and Representative Jim Ramstad. The second panel included: Rosalynn Carter, 

former First Lady and chairwoman of the Carter Center’s Mental 

Health Task Force; David Wellstone, son of the late Senator Paul 

Wellstone and co-founder of Wellstone Action; Sean Dilweg, Insurance Commissioner for the State of Wisconsin; Amy Smith, Vice 

President of Mental Health Association of Colorado; Steve Melek, 

actuary for Milliman Inc.; Neil Trautwein, Employee Benefits Policy Counsel for the National Retail Federation; and Jon Breyfogle, 

executive principal for the Groom Law Group. 


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Education and Labor Committee full committee mark-up of the 

Paul Wellstone Mental Health and Addiction Equity Act of 

2007 

On July 18, 2007, the Committee on Education and Labor met 

to markup H.R. 1424, the Paul Wellstone Mental Health and Addiction Equity Act of 2007. The Committee adopted by voice vote 

an amendment in the nature of a substitute offered by Chairman 

Miller and reported the bill favorably as amended by a vote of 33– 9 to the House of Representatives. 

The Miller amendment incorporates the provisions of H.R. 1424 

with the following modifications: • Adds emergency care to the list of categories of items and services that are subject to the treatment limit parity requirements 

(other categories are inpatient in-network, inpatient out-of-network, outpatient in-network, and outpatient out-of-network). • Makes clear that the requirement that group health plans 

make available to patients and providers their criteria for medical 

necessity determinations and reasons for any denial under the plan 

be provided in accordance with Department of Labor regulations. • Adds a provision that group health plans may utilize industry 

and provider recognized benefit management practices for medical, 

surgical, mental health and substance related disorder benefits. • Conforms preemption of state laws to existing HIPAA standards with specific protection of state laws relating to health insurance issuers including state laws providing for external review, requiring minimum benefits, covering employers with fewer than 50 

employees, or solely related to health insurance issuers. • Makes clear that collectively bargained plans become subject to 

the Act upon the expiration of an existing collective bargaining 

agreement. • Requires the Department of Labor to annually sample and conduct random audits of group health plans to ensure compliance 

with the Act. • Requires the Department of Labor to assist individuals with 

any questions or problems under the Act and to coordinate with 

state consumer protection agencies. 

The Kline amendment in the nature of a substitute was defeated 

by a vote of 16–27. The amendment incorporated an amended 

version of S. 558, the Senate Mental Health Parity Act of 2007. 

The Kline amendment differed from H.R. 1424 in at least two 

key areas. First, the Kline amendment would expressly permit 

every employer or health insurance issuer to establish its own definition of ‘‘mental health benefits.’’ In contrast, H.R. 1424 seeks to 

provide private sector employees the same mental health coverage 

provided to federal employees by requiring group health plans to 

utilize the definition of mental health benefits under by the federal 

employee health plan with the largest average enrollment of federal employees. 

The Committee supported the need for a federal standard for covered mental health benefits because of the long history of employer 

and insurer denial of coverage for mental health illnesses. As described elsewhere in this report, employers and insurers, historically and currently, have not provided comparable coverage of mental illnesses as they have of physical illnesses. For example, employers and insurers generally do not list covered and non-covered 


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physical illnesses, whereas such delineation of mental illnesses is 

commonplace. 

The Kline Substitute would have permitted employers to create 

millions of definitions of mental health benefits undermining the 

need for uniformity that employers claim to seek. Employers would 

be free to eviscerate the intent of the Act simply by defining mental 

health benefits to exclude benefits the employer or insurer does not 

want to cover. This would allow insurance companies and group 

health plans to codify discrimination by diagnosis allowing plans to 

use arbitrary, non-scientific criteria in determining what mental illnesses and addiction disorders to cover. 

The minority may argue that creation of a federal definition of 

mental health benefits exceeds ‘‘technical parity’’ since federal law 

does not define medical or surgical benefits. But, there is no data 

or allegations that employers or insurers narrowly define medical 

benefits, whereas there is ample data that employers and insurers 

have used narrow mental health definitions to evade coverage. 

Without a definition of covered mental health benefits, mental 

health parity legislation would continue to include loopholes that 

make parity an illusory promise. 

The minority also expresses concern that defining mental health 

benefits would create a ‘‘new mandate’’ and could increase employer costs and reduce employer health benefit coverage. Again, 

the minority is ignoring the history and evidence on this matter. 

Both federal and state law traditionally and repeatedly set minimum standards for the provision of health care benefits when public policy concerns have warranted such. Experience has demonstrated that such minimum standards do not lead to reduced 

coverage or increased costs. Specifically with respect to mental 

health parity legislation, neither the federal employee, state nor 

private sector experience bears out the minority’s fears. As noted 

below, the Congressional Budget Office (CBO), U.S. Government 

Accountability Office (GAO), and numerous other actuarial analyses have documented that expanded mental health coverage does 

not significantly increase costs or reduce coverage. 

Second, the Kline Substitute differed from H.R. 1424 in its preemption of state health care laws. The Majority and minority face 

fundamental differences on the issue of preemption. Historically, 

states have had the primary responsibility for protecting the public 

health of their citizens. States have regulated the provision of insurance, including health insurance, for hundreds of years. In fact, 

even into current times, the insurance community has preferred 

state regulation over federal regulation of insurance practices. 

Congress’ active involvement with national health care primarily 

began with the enactment of Medicare and Medicaid in 1965 and 

Congress has struggled with the need for additional national reforms ever since. Since 1996, a key principle for Congress has been 

to incrementally reform private health coverage by establishing a 

federal floor of protections for workers and their families. Through 

a federal standard that is a floor, not a ceiling, Congress has recognized that state policymakers may determine that to protect patients in state-regulated plans, a stronger set of standards are necessary than those provided in federal law. In fact, many states now 

require insurance companies to cover mental health services. This 


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12P.L. 93–406. 

bill recognizes and encourages states to enact stronger consumer 

protections. 

In addition to benefit requirements, many states have set standards to improve the quality of coverage to ensure that health insurance actually works for people who need it, while establishing rules 

to combat abusive practices by some in the health insurance industry. States have used a myriad of strategies to accomplish that, including patient protections and standards for medical management. 

Nothing in this bill is intended to in any way to affect those (or 

future) state efforts. 

Understandably, large employers who operate in multiple states 

prefer a single unified system—with one set of rules with which 

they must comply and treat their employees. But, large employers 

who once accepted the need for some federal minimum health care 

standards, now generally want only minimal rules at both the federal and state level. The employer community has used the Employee Retirement Income Security Act (ERISA) 12 ERISA as a 

shield against both federal and state health care protections. Only 

the most sophisticated legal and health care experts know that 

ERISA contains few health care standards. ERISA is primarily a 

pension law that establishes detailed standards for information, 

coverage, and funding of pension promises. While ERISA applies to 

all employer provided employee benefits, it does not generally contain minimum health care standards. Enacted in 1974, Congress 

expected that it would shortly adopt comprehensive federal standards. Congress has attempted to enact national health care standards on several occasions, but without success. 

As a result, the United States has not created a national system 

for providing health care to all citizens. Rather, it has a patchwork 

of federal and state and local laws providing a wide variety of 

health care requirements and protections for employers, insurers, 

and citizens. The large employers argue that only the federal government should set standards and preferably minimal ones. Congress’ choice is either to adopt comprehensive federal standards, 

free the states to enact comprehensive state standards or to continue dual federal and state regulation. 

Further complicating the issue is the illogical treatment of ‘‘insured’’ versus ‘‘self-insured’’ plans. Under current judicial interpretation of ERISA, if an employer establishes a health plan and the 

employer is the insurer of the plan, then the states are generally 

preempted from regulating the health plan. However, if the employer contracts with a state licensed insurance company or other 

state sanctioned health care entity, then the state may directly regulate the behavior of the insurer or other entity, and indirectly affect the actions of the health plan. Despite the illogic of this regulatory scheme, in the absence of broader Congressional direction on 

comprehensive health care reform, H.R. 1424 continues this existing system of split federal versus state oversight of health plans 

and benefits. 

However, solely with respect to mental health parity laws, H.R. 

1424 seeks to provide some improvement in the longstanding morass created by ERISA’s preemption of state laws. Thousands of 

court cases and dozens of law review articles have argued over the 


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13The Patient’s Bill of Rights Act of 2005, H.R. 2259 was introduced in the House on May 

11, 2005 by Representative John Dingell. Senator Edward Kennedy introduced the Senate 

version of the bill, S. 1012 on May 12, 2005. 14P.L. 104–191. 15See, Mila Koffman, Letter to Speaker Nancy Pelosi ( June 15, 2007). Mila Koffman is a nationally recognized expert on insurance regulation, unauthorized insurance and ERISA. She previously served as a federal regulator at the U.S. Department of Labor and as a special assistant 

to the Senior Health Care Advisor to President Bill Clinton. 16 Id. 

correct intent and interpretation of ERISA preemption of state 

laws. On the whole, ERISA preemption has served to take away 

legal protections for workers and consumers. Although Congress’ original intent had been strong federal standards over state standards, judicial interpretation of ERISA has created weak federal 

standards and minimal state protection. Congress’ long debate over 

what was known as the Patient’s Bill of Rights13 amply documented how ERISA preemption has harmed consumers and undermined long term health care reform efforts. 

H.R. 1424 rejects the continuation of this unfair preemption 

scheme. The bill adopts the model created by the Health Insurance 

Portability and Accountability Act of 1996.14 The bill generally 

would not preempt state laws that do not ‘‘prevent the application’’ of federal mental health parity standards. The bill also specifically 

enumerates types of laws that Congress does not intend to preempt. Those laws include state laws establishing, implementing or 

continuing consumer protections, benefits, methods of access to 

benefits, rights, external review programs, or remedies solely relating to health insurance issuers. The bill also specifically does not 

intend to preempt state laws containing benefit mandates, regulation of small employer group health plans or state laws solely related to health insurance issuers. Further, this bill would not relieve a company—licensed or registered under state law to perform 

utilization review—from its licensing or other applicable standards 

and obligations under state law. Unlike ERISA, HIPAA’s preemption provisions have not been subject to excessive litigation and 

have provided certainty to consumers, employers and states. 

Both the House and Senate passed versions of the Genetic Information Nondiscrimination Act, H.R. 493 used the HIPAA model to 

coordinate between federal and state regulatory policies. 

In contrast, the Kline Substitute provides exceptions to its general preemption that are ambiguous and likely would invite innumerable ERISA litigation challenges.15 The first exception seeks to 

clarify that portions of state law not preempted will continue to 

apply and that individual and small group coverage standards are 

not preempted. Yet, the language in Kline Substitute does not 

clearly ensure protection of existing individual and small group insurance market state laws. If the Kline Substitute were to become 

law, then states with one mental health coverage standard that applies to policies sold in the large group, small group and individual 

health insurance markets most likely can expect preemption challenges to their individual and small group mental health laws.16

In addition, the Kline Substitute would not preempt state coverage laws for ‘‘specific items, benefits, or services.’’ These terms 

are not defined and thus the ambiguity of this language makes it 

unclear as to what type of state law would qualify as requiring 

‘‘specific items, benefits, or services.’’ Furthermore, it is unclear as 

to whether a qualified law coupled with ‘‘parity requirements’’ (e.g. 


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17 Id. 18 Id. 19 42 U.S.C. § 6A. 20Summary of H.R. 1424, available at: http://www.thomas.gov/cgi-bin/bdquery/ 

z?d110:h.r.01424. 

requiring alcohol abuse treatment) would be eligible under this exception. Again, clarification would have to be determined through 

litigation.17

An example of how the Senate proposal would create ambiguity 

can be demonstrated by California’s mental health parity law. California has a standard mental health parity law which applies generally to health insurance coverage. Since California does not apply 

a specific law to the individual and small group markets, there is 

no guarantee that courts will uphold the law under an ERISA preemption challenge. In addition, Connecticut’s mental health coverage law has elements of ‘‘parity’’ and therefore may have to be 

litigated to determine which, if any, requirements would survive 

preemption.18

In addition to preempting stronger state parity laws and allowing insurance companies and group health plans to discriminate 

against an array of mental and substance abuse illnesses, the Kline 

Substitute does not provide any legal remedies for patients. Many 

Members of the Committee have long supported meaningful remedies for violations of the law and H.R. 1424 seeks to make clear 

that Congress never intended to preempt state insurance laws that 

provide legal protections to individuals covered by state regulated 

insurance products. 

III. SUMMARY OF THE BILL

The Paul Wellstone Mental Health and Addiction Equity Act, 

H.R. 1424 amends the ERISA and the Public Health Service Act 

(PHSA) 19 to prohibit employer group health plans offering mental 

health benefits from imposing mental health treatment limitations 

or financial requirements at a less comparable rate to the requirements and limitations they impose on medical or surgical benefits. 

The bill does not mandate group health plans to provide any mental health coverage; however, if the group health plan does offer 

mental health coverage then there must be equity between mental 

health coverage and all comparable medical and surgical benefits 

that the plan covers. H.R. 1424 makes clear that equity in financial 

requirements, treatment limitations, and out of network coverage 

is essential to a strong federal mental health parity law. Furthermore, the plan must cover the same range of mental illnesses and 

addiction disorders covered by the Federal Employee Health Plan 

that most federal employees and Members of Congress use.20 As of 

July 18, 2007, H.R. 1424 had 268 co-sponsors, 230 Democrats and 

38 Republicans. 

IV. STATEMENT AND COMMITTEE VIEWS

The Committee on Education and Labor of the 110th Congress 

is committed to improving access to health care, including treatment for mental health and substance disorders. The Paul 

Wellstone Mental Health and Addiction Equity Act addresses the 

inequities that those with mental illness experience in their health 

care coverage. The bill would prohibit group health plans from imVerDate Aug 31 2005 07:14 Oct 17, 2007 Jkt 069006 PO 00000 Frm 00024 Fmt 6659 Sfmt 6602 E:\HR\OC\HR374P1.XXX HR374P1

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21The Paul Wellstone Mental Health and Addiction Equity Act of 2007 (H.R. 1424), hearing 

before the Subcommittee on Health, Employment, Labor, & Pensions, 110th Cong., 1st Sess. 

(2007) (written testimony of Rosalyn Carter) [hereinafter Carter Testimony]. 22The Government Accounting Office (GAO). ‘‘Mental Health Parity Act: Despite New Federal 

Standards, Mental Health Benefits Remain Limited,’’ (May 2000) at 7. 23 Colleen Barry et al., ‘‘Design of Mental Health Benefits: Still Unequal After All These 

Years,’’ Health Affairs, September/October 2003. 24 National Mental Health Association, ‘‘Mental Illness in the Family,’’ 2005. 25 National Institutes of Mental Health, ‘‘The Numbers Count: Mental Disorders in America,’’ 2006. 26Mental Health and Substance Abuse Parity, hearing before the House Committee on Ways 

and Means, Subcommittee on Health, 110th Cong., 1st Sess. (2007) at 1 (written testimony of 

David L. Shern) [hereinafter Shern Testimony]. 27 U.S. Dep’t of Health & Human Svrs., Mental Health: A Report of the Surgeon General 46, 

179 (1999) hereinafter SGRMH]. 28 Id. 

posing financial requirements or treatment limitations on the coverage of mental health conditions and substance abuse that are 

more limited than those available for medical and surgical benefits. 

The Act is a cost-effective way of promoting increased access to 

mental health care. 

To echo the words of former First Lady Rosalyn Carter, who testified before the Education and Labor Committee’s Health, Employment, Labor, Pensions (HELP) Subcommittee: 

it is unconscionable in our country and morally unacceptable to treat 20 percent of our population (1 in every 

5 people in our country will experience a mental illness 

this year) as though they were not worthy of care . . . 

[t]hen we pay the price for this folly in homelessness, lives 

lost, families torn apart, loss of productivity.21

Mental Illness: An Overview 

An estimated 40 million American adults suffer from some type 

of mental illness each year, while 5.5 million or 6 percent suffer 

from a severe mental illness such as schizophrenia or major depression.22 Approximately 1 in 17 Americans suffer from a serious mental illness; about 12 million children suffer from mental disorders 

such as autism, depression and hyperactivity; 23 and every year, 

about 54 million Americans suffer from clearly diagnosable mental 

or substance abuse disorders.24 Overall, approximately 26.2 percent 

of Americans are afflicted with mental illness or substance abuse 

disorders; 25 while 14.8 million Americans suffer from depression; 

and 2.4 million suffer from schizophrenic disorders. 

Mental health is essential to leading a healthy life and to the development and realization of a person’s full potential.26 For those 

who suffer from mental illness, ‘‘mental disorders are treatable 

. . . there is generally not just one but a range of treatments of 

proven efficacy.’’ 27 Despite proven treatments, due to the social 

stigma and lack of understanding about the disease, mental illness 

often goes untreated. As a result, mental illness and substanceabuse disorders are leading causes of disability and premature 

mortality.28 As scientific knowledge about mental health has grown 

and analyses have proven a nominal economic impact on the consumer, the employer, and the insurance company with respect to 

mental health, coverage for mental illness continues to expand. 

Nevertheless, stigma still remains; the result is that many people 

in need of mental services are prevented from receiving proper 

care. 


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29 Id. 30Patrick Kennedy. ‘‘Policy Essay: Why We Must End Insurance Discrimination Against Mental Health Care.’’ Harvard Journal on Legislation Vol. 44, No. 2. (Summer 2004) available at: 

http://www.law.harvard.edu/students/orgs/jol/vol41l2/kennedy.php. The French philosopher 

Rene Descartes’ theory of dualism—the separation of mind and body—is seen as the non-scientific basis as to why people continue to believe having a mental illness is a personal failing, 

rather than a treatable disease. Descartes believed that while physicians had the ability to treat 

physical ailments, the mind, which implicated the spirit, could only be ‘‘treated’’ through religion. 31 Id. 32 Id. 33 Id. 34 Id. 35 Id. 36 Id. 37 Id. 38 Carter Testimony at 2. 39Shern Testimony at 2. 

The term mental illness refers collectively to all diagnosable 

mental disorders. Mental disorders are health conditions that are 

characterized by alterations in thinking, mood, or behavior associated with distress and/or impaired functioning.29

Social stigma about mental illness dates as far back as the 17th 

Century.30 The stigmatization of mental illness is manifested by 

bias, distrust, stereotyping, fear, embarrassment, anger, and/or 

avoidance. It is this stigma that leads people to avoid living, socializing or working with, renting to, or employing people with mental 

disorders. Stigma also reduces an individual’s access to resources 

and opportunities such as jobs and housing as well as leading to 

low self-esteem, isolation, and hopelessness.31

The public attitude toward mental illness has been surveyed nationally since the 1950s.32 In the 1950s, many people displayed an 

unscientific understanding of mental illness and had difficulty distinguishing mental illness from ordinary unhappiness. It was this 

misunderstanding of mental illness, along with the fear of unpredictable and violent behavior that perpetuated the social stigma behind it.33

Although Americans had achieved a better scientific understanding of mental illness by 1996, social stigma had not diffused. 

As the public’s acceptance of classifying anxiety and depression as 

mental disorders has grown so has their perception that mental illness frequently incorporates violent behavior.34 In 1996, 31 percent 

of the people surveyed mentioned violence in their descriptions of 

mental illness, in comparison with 13 percent in the 1950s.35

In the late 1990s, people with diagnosable mental disorders did 

not seek treatment due to the social stigma surrounding mental illness.36 Furthermore, the public was reluctant to pay for less severe 

mental health conditions due in large part to stigma but also due 

to their realization that higher taxes and premiums would be necessary to offset these costs.37 As former First Lady Carter testified, 

‘‘if insurance covered mental illnesses, it would be right to have 

them. This may be why the stigma has remained so pervasive. Because these illnesses are treated differently from other health conditions.’’ 38

Mental health coverage today 

Health insurance plans have long imposed barriers that limit access to needed behavioral health care with far-reaching and often 

tragic results.39 No comparable barriers limit access to needed care 


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40 Id. 41 National Institutes of Mental Health, supra note 25. 42 Id. 43 Henry J. Kaiser Family Foundation and Health Research and Educational Trust (KFF/ 

HRET) national employer survey (2002). 44 H.R. 1424, The Paul Wellstone Mental Health and Addiction Equity Act, hearing before the 

House Committee on Energy and Commerce, Subcommittee on Health, 110th Cong., 1st Sess., 

June 2007 (written testimony of Marley Prunty-Lara) [hereinafter Prunty-Lara Testimony]. 45 Id. at 1–2. 46The Paul Wellstone Mental Health and Addiction Equity Act of 2007 (H.R. 1424), hearing 

before the Subcommittee on Health, Employment, Labor, & Pensions, 110th Cong., 1st Sess. 

(2007) at 5 (written testimony of David Wellstone) [hereinafter Wellstone Testimony]. 47General Accounting Office, supra note 22 at 3. 

for any other illness. The discriminatory practices that have continued over forty years after the adoption of the first modern civil 

rights’ laws attest to the deep-rootedness of stigma surrounding behavioral disorders.40

In 2004, more than 23 million people aged 12 or older required 

treatment for alcohol or illicit drug use but only 2.3 million received it.41 For the 21.1 million who did not obtain treatment, cost 

and insurance barriers were cited as the primary obstacle.42 In 

2002, the Kaiser Family Foundation/Health Research and Educational Trust conducted an employer survey which found that 

while 98 percent of workers with employer-sponsored health insurance had coverage for mental health care, 74 percent of those covered workers were subject to an annual outpatient visit limit, and 

64 percent were subject to an annual inpatient days limits.43

In her testimony before the House Energy and Commerce Committee hearing, Marley Prunty-Lara testified about her struggle 

with bipolar disorder and the difficulty she experienced when trying to get treatment. Prunty-Lara told of how she experienced firsthand the ‘‘harrowing, sinister, suicidal depression no one talks 

about.’’ 44 However, as a 15-year-old with bipolar disorder, her 

mother struggled to find her treatment. Her state of South Dakota 

had limited mental health resources and the waiting list was four 

to five months to simply get an initial appointment. Prunty-Lara 

had to go 350 miles away to finally get treatment, however her 

treatment facility was not covered by her mother’s insurance. Consequently, her parents were forced to take out a second mortgage 

on their home to pay for the life-saving treatment.45

Evidence demonstrates without adequate treatment, mental illnesses can continue or worsen in severity. Each year, 30,000 Americans take their lives, hundreds of thousands attempt to do so, and 

in ninety percent of these situations, the cause is untreated mental 

illness.46

The first federal mental health parity law 

Congress took a first step toward ending discriminatory insurance practices with the enactment of the Mental Health Parity Act 

of 1996. As the first mental health parity law, MHPA sought to address the discrepancies in coverage between mental and other illnesses. The new law required employer-sponsored group health 

plans to abide by a set of new federal standards on mental health 

coverage. Specifically, the law prohibits employers from imposing 

annual or lifetime dollar limits on mental health coverage that are 

more restrictive than those imposed on medical and surgical coverage.47


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48The Paul Wellstone Mental Health and Addiction Equity Act of 2007 (H.R. 1424), hearing 

before the Subcommittee on Health, Employment, Labor, & Pensions, 110th Cong., 1st Sess. 

(2007) at 1 (written testimony of John Breyfogyle) [hereinafter Breyfogyle Testimony]. 49Shern Testimony at 2. 50General Accounting Office, supra note 22 at 21. 51 Id. 52 Id. at 13–14. 53Kennedy, supra note 30. 54Dr. Robin Hertz. ‘‘The Impact of Mental Disorders on Work.’’ Pfizer Pharmaceutical Group. 

(June 2002) available at http://www.pfizer.com/pfizer/download/health/ 

pubsllfactsllworkimpact.pdf. 

Through its adoption, significant progress has been made in the 

way of providing mental health coverage to those Americans suffering from a mental illness. During his testimony before the Education and Labor HELP Subcommittee on July 10, 2007, John 

Breyfogyle, testifying on behalf of the American Benefits Council, 

acknowledged that ‘‘better medical evidence on behavioral health 

conditions has become available and better treatment options have 

advanced during this period.’’ 48

While the 1996 Act represented an important milestone, it has 

not produced fundamental changes.49 People with or at risk of behavioral-health disorders continue to face arbitrary discrimination 

in insurance plans. When reviewing the implementation of MHPA, 

GAO reported that the vast majority of issuers and group health 

plans it surveyed complied with the law, but substituted new restrictions and limitations on mental health benefits, thereby evading the letter of the law.50 While the MHPA moved most employer 

plans toward parity in dollar limits for mental health coverage, the 

GAO reported that 87 percent of complying employers contained at 

least one other plan design feature that was more restrictive for 

mental health benefits than for medical and surgical benefits. Furthermore, one-fourth of employers did not comply, leaving their dollar limits unchanged.51

Loopholes in MHPA have created a system where employers routinely limit mental health benefits more severely than medical and 

surgical coverage, most often by restricting the number of covered 

outpatient visits and hospital days and by imposing far higher cost 

sharing requirements.52 These loopholes allow employers and insurance companies to deny mental health coverage to individuals 

and families most in need of it.53 Consequently, individuals and 

families with adequate health care coverage will continue to watch 

their premiums increase as the uninsured and those with limited 

coverage continue to go to the emergency room to treat an illness 

that could have been cured at a far less cost if treated earlier in 

a doctor’s office. 

The Need to expand access to mental health care 

Parity in mental health is needed because of the enormous impact that mental illness and substance abuse has on our society. 

Mental illness and substance abuse result in substantial lost productivity and absenteeism. It has been determined that mental illness and substance abuse cause more days of work loss and work 

impairment than many other chronic conditions such as diabetes, 

arthritis, and asthma. Approximately 217 million days of work are 

lost annually due to productivity decline related to mental illness 

and substance abuse disorders, costing employers approximately 

$17 billion each year.54


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55The Paul Wellstone Mental Health and Addiction Equity Act, hearing before the Subcommittee on Health, Employment, Labor, & Pensions, 110th Cong., 1st Sess. (2007) (written 

testimony of Rep. Patrick Kennedy) [hereinafter Kennedy Testimony]. 56Kennedy, supra note 30 at 367. 57 Id. 58SGRMH at 5–6. 59See, e.g., Nat’l Inst. of Mental Health, Schizophrenia Research 2 (May 2000) (noting that 

NIMH investigators have ‘‘recently discovered specific, subtle abnormalities in the structure and 

function of the brains of patients with schizophrenia’’); Nat’l Inst. of Mental Health, Bipolar Disorder Research 4 (Apr. 2000), (concluding that ‘‘[o]ne of the most consistent findings to date has 

been the appearance of specific abnormalities, or lesions, in the white matter of the brain in 

patients with bipolar disorder’’); Nat’l Institute of Mental Health, Anxiety Disorder Research 3 

(August 1999) (finding that animal research suggests ‘‘different anxiety disorders may be associated with activation in different parts of the amygdala [a structure in the brain]’’). 60See GAO Report, supra note 22, at 12 (finding that more than a quarter of private health 

plans require greater cost-sharing for mental health care than physical health care); See also, 

Colleen L. Barry et al., Design of Mental Health Benefits: Still Unequal After All These Years, 

Health Affairs, Sept.–Oct. 2003, at 127, 129 (finding that 22% of private health plans have 

greater cost-sharing for mental health care). 

According to Congressman Patrick Kennedy, who testified at the 

HELP Subcommittee hearing on the ‘‘Paul Wellstone Mental 

Health and Addiction Equity Act’’ on July 10, 2007, it is estimated 

that: 

untreated mental health and addiction cost employers 

and society hundreds of billions of dollars in lost productivity. The World Health Organization has found that 

these diseases are far and away the most disabling diseases, accounting for more than a fifth of all lost days of 

productive life. Depressed workers miss 5.6 hours per 

week of productivity due to absenteeism and presenteeism, 

compared to 1.5 hours for non-depressed workers. Alcoholrelated illness and premature death cost over $129.5 billion in lost productivity per year.55

Many U.S. business leaders fully understand the high returns 

wielded when investing in full mental health benefits for their employees. For example, James Hackett, the CEO of Ocean Energy, 

said that the increase in annual health costs to offer full parity between mental and physical health benefits is ‘‘more than offset by 

avoided costs of lost employee productivity.’’ 56

Gaps in coverage due to insurance discrimination 

While considerable scientific evidence supports the claim that a 

separation between the mind and body does not exist, stigma and 

insurance discrimination continue to stand in the way for many 

Americans seeking access to adequate mental health coverage.57

Despite the fact that former Surgeon General David Satcher wrote 

in his report on mental health in 1999 that the distinction between 

mind and body is arbitrary and not supported by science 58 and the 

National Institute of Mental Health continues to provide scientific 

evidence of the physiology of mental illness,59 our country’s insurance policies continue to perpetuate the stigma and discrimination 

surrounding mental illness.60

Employers and insurance companies routinely discriminate 

against mental health coverage when it comes to reimbursing individuals for their mental benefits. Insurers routinely increase patients’ costs for mental health treatment by limiting inpatient days, 

capping outpatient visits, and requiring higher co-payments than 

for physical illnesses. It is estimated that over 90 percent of workers with employer-sponsored health insurance are enrolled in plans 


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61 Colleen Barry et al., ‘‘Design of Mental Health Benefits: Still Unequal After All These 

Years,’’ Health Affairs, September/October 2003. 62 Id. 63Wellstone Testimony. 64Sundararaman, supra note 8. 65The National Conference of State Legislatures, ‘‘State Laws Mandating or Regulating Mental Health Benefits,’’ available at: http://www.ncsl.org/programs.health.mentalben.htm. 66Sundararaman, supra note 8 at 7. 67The National Conference of State Legislatures, ‘‘State Laws Mandating or Regulating Mental Health Benefits,’’ available at: http://www.ncsl.org/programs.health.mentalben.htm. 68Sundararaman, supra note 8 at 15. 

that impose higher costs in at least one of these ways. Furthermore, 48 percent are enrolled in plans that impose all three limitations.61

In 2000, GAO found that issuers and group health plans provide 

more limited mental health coverage primarily because of cost concerns. Limits on hospital days, outpatient office visits, and annual 

or lifetime dollar amounts may reflect an issuer’s concern about the 

high costs associated with long-term, intensive psychotherapy and 

extended hospital stays. Issuers may also restrict mental health 

benefits to protect themselves from perceived fears of adverse selection based on the argument that a plan with generous mental 

health benefits is more likely to attract a disproportionate number 

of individuals with a high demand for mental health services, and 

thus may drive up claims and premium costs of the plan.62

In his testimony before the Education and Labor HELP Subcommittee David Wellstone stated that in a ‘‘recent study of employer provided benefits . . . . the cost-sharing for addiction benefits 

was 46% higher for addiction benefits than for medical or surgical 

benefits and there were no out of pocket spending caps for addiction spending in 44% of the plans studied.’’ 63

Gaps in coverage due to the limited reach of state laws 

The inequities in mental health coverage were first addressed by 

the states in the 1970s. In 1991, Texas and North Carolina were 

the first states to enact mental health parity legislation.64 Today, 

46 states have some type of mental health law but they vary considerably and can be divided into three categories: (1) mental 

health ‘‘full parity’’ or ‘‘equal coverage’’ laws; (2) minimum mandated mental health benefit laws; and (3) mandated mental health 

‘‘offering laws.’’ 65

Full mental health parity laws prohibit insurers or group health 

plans from discriminating between coverage offered for mental illness, serious mental illness, substance abuse, and other physical 

disorders or diseases, and requires them to offer the same level of 

benefits across the board. ‘‘Full parity’’ means that an individual 

receives the same health care coverage for physical illnesses and 

mental health coverage, including treatment limitations and financial requirements. 

Today, 28 states have laws that mandate full-parity mental 

health coverage.66 Although mental health parity laws have increased coverage, they also have important limitations. Besides the 

fact that they do not apply to self-insured group health plans due 

to interpretations of ERISA’s preemption clause,67 these state fullparity laws seldom provide catastrophic coverage against the financial risk of severe mental illness.68


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69The DSM–IV is a categorization of psychiatric diagnoses for all mental health disorders for 

both children and adults. The manual also lists known causes of these disorders, statistics in 

terms of gender, age at onset, and prognosis, as well as some research concerning the optimal 

treatment approaches. Mental health professionals use the DSM-IV when working with patients 

in order to better understand their illness and potential treatment and to help 3rd party payers 

(e.g., insurance providers) understand the needs of the patient. The book is typically considered 

the ‘bible’’ for any professional who makes psychiatric diagnoses in the United States and many 

other countries. See also: http://allpsych.com/disorders/dsm.html. 70Sundararaman, supra note 8 at 7. 71The National Conference of State Legislatures, ‘‘State Laws Mandating or Regulating Mental Health Benefits,’’ available at: http://www.ncsl.org/programs.health.mentalben.htm. 72Sundararaman, supra note 8 at 26. 

In addition, state laws mandating full-parity differ in the types 

of mental illnesses and health plans they cover. In twelve of the 

states offering full-parity, the laws only apply to the treatment of 

all the conditions listed in the DSM–IV,69 while the other state 

full-parity laws restrict coverage to specified ‘‘serious’’ or ‘‘biological 

based’’ mental illness. In fifteen of the states that offer full parity, 

the laws apply to both insured group and individual health plans, 

compared to nine states where the laws only apply to insured 

group health plans. 

Six states have enacted minimum mandated benefit laws. These 

laws require ‘‘some’’ level of coverage be provided for mental illness, serious mental illness, substance abuse or a combination 

thereof. This is not considered full parity because these laws allow 

discrepancies in the level of benefits provided between mental illnesses and physical illnesses. These discrepancies can be in the 

form of different visit limits, co-payments, deductibles and annual 

lifetime limits.70

Fourteen states have enacted mandated offering laws. Mandated 

offering laws differ from the full-parity and minimum mandated 

benefit laws because they do not require that benefits be provided 

at all. Rather, they require that: (1) an option of coverage for mental illness, serious mental illness, substance abuse or a combination, be provided to the insured (this option can be accepted or rejected by the health service plan); and (2) if benefits are offered 

they must be equal.71

States with full-parity laws include Arkansas, California, Colorado, Connecticut, Delaware, Hawaii, Idaho, Illinois, Iowa, Maine, 

Massachusetts, Minnesota, Montana, New Hampshire, New Jersey, 

New York, North Carolina, Ohio, Oklahoma, Rhode Island, South 

Carolina, South Dakota, Vermont, Virginia, Washington, and West 

Virginia. States with minimum mandated benefits include Alaska, 

Maryland, Michigan, Nevada, North Dakota, Oregon, Pennsylvania, Tennessee, and Texas. States providing mandated offering 

law include Alabama, Arizona, District of Columbia, Florida, Georgia, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Missouri, 

Nebraska, New Mexico, Utah and Wisconsin.72

Mental health parity is cost-effective 

Fair and equitable mental health treatment can be offered as 

part of a health benefit package without escalating costs. However, 

opponents of mental health parity often cite cost and an increased 

burden on employers as the reason to reject mental health parity. 

But as Representative Jim Ramstad noted in his testimony before 

the Education and Labor Committee, HELP Subcommittee, ‘‘expanding access to treatment is not only the right thing to do; it’s 

also cost-effective . . . for the price of a cheap cup of coffee per 


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73The Paul Wellstone Mental Health and Addiction Equity Act of 2007 (H.R. 1424), hearing 

before the Subcommittee on Health, Employment, Labor, & Pensions, 110th Cong., 1st Sess. 

(2007) at 5 (written testimony of Rep. Jim Ramstad) [hereinafter Ramstad Testimony]. 74 H.R. 1424, the Paul Wellstone Mental Health and Addiction Equity Act, hearing before the 

Energy and Commerce Committee, Subcommittee on Health, 110th Cong., 1st Sess. (2007) (written testimony of James E. Purcell) [hereinafter Purcell Testimony]. 75 Id. at 4. 76Stephen Melek, Bruce Pyenson, and Kathryn Fitch, An Actuarial Analysis of the Impact of 

H.R. 1424, ‘‘The Paul Wellstone Mental Health and Addiction Equity Act of 2007,’’ (July 2007). 

See also, The Paul Wellstone Mental Health and Addiction Equity Act of 2007 (H.R. 1424), hearing before the Subcommittee on Health, Employment, Labor, & Pensions, 110th Cong., 1st Sess. 

(2007) at 5 (written testimony of Stephen Melek) [hereinafter Melek Testimony]. 77 Id. at 3. 78 Id. 79 Id. at 4. 

month, sixteen million people in health plans could receive treatment for their mental illness or chemical addiction.73

In his testimony before the Energy and Commerce Committee, 

Subcommittee on Health, James Purcell, President and CEO of 

Blue Cross & Blue Shield of Rhode Island (‘‘BCBSRI’’) testified 

about BCBSRI’s efforts to integrate behavioral and physical health, 

as it is the future and so fundamental to complete care.74 Purcell 

testified that not only is this the right thing to do, it is cost effective. The impact on claims costs of limiting annual coverage to fifteen visits rather than 30 visits would be approximately 0.3 percent of total claims.’’ 75

Numerous studies support the conclusion that while mental 

health parity imposes a nominal increase in costs to employers, it 

greatly benefits society as a whole. Stephen Melek, Bruce Pyenson, 

and Kathryn Fitch at Milliman Consultants and Actuaries issued 

a report on July 5, 2007 entitled, An Actuarial Analysis of the Impact of H.R. 1424. The study analyzed the estimated cost of implementing H.R. 1424.76 By evaluating the approximate cost of implementing mental health parity in comparison to the cost of implementation if the organization implements utilization management 

(UM), where all benefit plans would choose to further tighten their 

degree of behavioral healthcare management. 

The Milliman study projected that the cost increase for health insurance premiums would rise by between less than 0.1 percent and 

0.6 percent, or between $0.03 and $2.40 per member per month. 

Employer contributions for health costs would rise by between less 

than 0.1 percent and 0.2 percent.77 Utilization of facility-based behavioral healthcare services would increase by 9.7 percent, while 

professional services would increase by 30.0 percent without UM.78

However, with UM, it projects a 21.3 percent decrease in use of facility-based services (the majority from mental health services) and 

a 3.1 percent increase for professional services. Member out-ofpocket costs for behavioral health services would decrease by 18 

percent or about $0.20 per member per month without UM, reflecting balance between an increase in total out-of-pocket costs from 

higher service use by members under the higher parity benefit limits and a decrease in out-of-pocket costs per unit due to lower parity cost-sharing. For every 100,000 fully insured lives, member outof-pocket costs are estimated to drop by $240,000 annually. Finally, 

the study estimates that administrative costs account for about 15 

percent of the total increase, or $0.36 or less per member per 

month.79


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80 H.R. 1424, the Paul Wellstone Mental Health and Addiction Equity Act, hearing before the 

House Committee on Energy and Commerce, Subcommittee on Health, 110th Cong., 1st Sess., 

June 2007 (written testimony of Dr. Howard Goldman) [hereinafter Goldman Testimony]. 81 Id. 82Government Accountability Office, supra note 22 at 6. 83 CBO anticipates that approximately 60 percent of the .4 percent cost increase will be offset 

by employers changing the scope of benefits offered as a result of S. 558. The remaining 40 percent of the cost increase is expected to be covered by employees. 

Howard Goldman testified before the Energy and Commerce 

Committee 80 about his work, including that contained within the 

‘‘Surgeon General’s Report on Mental Health,’’ including his analysis of the cost of implementing the parity policy in the Federal 

Health Employee Benefit (FEHB) program. His research concluded 

that the policy was implemented smoothly and that plans did not 

drop out of the FEHB program. As a result, he further found that 

there was a significant decline in out-of-pocket spending in the 

FEHB plans compared to the non-parity plans. Goldman testified 

that this indicates parity coverage resulted in improved insurance 

protection against financial risks—the principal objective of health 

insurance. This savings to FEHB plan members was not associated 

with significant increases in use and spending attributable to parity. In fact, for the most part, increases in use and total spending 

in the FEHB plans were no greater than use and total spending 

increases in the comparison plans. This was true for adults, as well 

as for children and adolescents. The study concluded that parity of 

coverage of mental health and substance abuse services, when coupled with management of care, is feasible and can accomplish its 

objectives of greater fairness and improved insurance protection 

without adverse consequences for health care costs.81

In the 2000 GAO report on mental health parity, GAO found that 

the federal parity law appears to have had a negligible effect on 

claims costs. Only about 3 percent of responding employers reported that compliance with the law increased their claim costs, 

and virtually no employers had dropped their mental health benefits or health coverage altogether since the law was enacted.82 In 

addition, the CBO scored the Senate parity bill, S. 558 and concluded that there will be a nominal increase, approximately .4 percent,83 in cost to a group health plan over the next ten years. 

V. SECTION-BY-SECTION ANALYSIS

Title of the bill 

Section 1. Provides that the short title of H.R. 1424 is the ‘‘Paul 

Wellstone Mental Health and Addiction Equity Act of 2007.’’

Amendments to the Employee Retirement Income Security Act of 

1974 

Section 2(a): Amends Employee Retirement Income Security Act 

of 1974 (ERISA) to require group health plans offering mental 

health and substance abuse coverage to apply the same treatment 

limitations to mental health and substance benefits as they do for 

medical and surgical benefits. 

Section 2(a)(1) ‘‘(3)(C)’’: Categorizes the following items and services subject to mental health and substance-related treatment limit 

parity requirements (1) Inpatient, in-network; (2) inpatient, out-ofnetwork; (3) outpatient, in-network; (4) outpatient, out-of-network. 


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Section 2(a)(1) ‘‘(3)(C)(v)’’: Adds emergency care to the list of categories of items and services that are subject to the mental health 

and substance-related treatment limit parity requirements. 

Section 2(a)(1) ‘‘(3)(D)’’: Defines ‘‘treatment limit’’ under a health 

plan as limitation on the number of visits or days of coverage, or 

other similar limit on the duration or scope of treatment. 

Section 2(a)(1) ‘‘(4)(A)’’: Requires group health plan offering mental health benefits to apply the same financial limitations to mental health benefits as they do to medical and surgical benefits. This 

includes limits on deductibles, co-payments, coinsurance, out-ofpocket expenses, and annual and lifetime limits. Plans are prohibited from establishing cost-sharing requirements that are specific 

to mental health benefits. 

Section 2(a)(1) ‘‘(4)(B)’’: Requires group health plan offering substance-related benefits, to apply the same financial limitations to 

mental health benefits as they do to medical and surgical benefits. 

This includes limits on deductibles, co-payments, coinsurance, outof-pocket expenses, and annual and lifetime limits. Plans are prohibited from establishing cost-sharing requirements that are specific to mental health benefits. 

Section 2(a)(1) ‘‘(4)(B)(iii)’’: Clarifies that nothing in this section 

prohibits a group health plan for waiving any deductible for mental 

health benefits and/or substance-related disorder benefits. 

Section 2(b): Changes the term ‘‘mental health benefits’’ to ‘‘mental health or substance abuse-related disorder benefits.’’ Section 2(c): Makes available to a plan administrator the criteria 

for what is considered a medically necessary treatment for a mental illness or substance abuse disorder. 

Section 2(d): Provides a minimum mental health and substancerelated benefits package. If a group health plan offers mental 

health or substance-related benefits then it must cover the same 

range of mental illnesses and addiction disorders covered by the 

Federal Employee Health Benefit (FEHBP) plans with the highest 

average enrollment as of the beginning of the most recent year beginning on or before the beginning of the plan year involved. 

Section 2(d) ‘‘(6)’’: With respect to out-of-network coverage, requires group health plans offering mental health and substance-related benefits, to apply the same coverage they offer for medical 

and surgical services to mental health and substance-related benefits 

Section 2(e): Makes clear that group health plans may utilize 

benefit management practices for medical, surgical, mental health 

and substance related disorder benefits to the extent that these 

methods are recognized both by the industry and by providers and 

are not prohibited under applicable State laws. 

Section 2(f): Provides an exemption to group health plans whose 

costs exceed 2% in the first plan year after initiation or 1% in each 

subsequent year. 

Section 2(g): Provides an exemption for small employers with 50 

or fewer employees, as well as employers who experience an increase in claim costs of at least 2% in the first plan year and 1% 

in subsequent years. 

Section 2(i): Clarifies that nothing in this section preempts any 

State law that provides consumer protections, benefits, methods of 

access to benefits, rights, external review programs, or remedies 


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solely related to health insurance issuers except to the extent that 

such provision prevents the application of a requirement of this 

part. 

Section 2(j): Conforms section 712 heading. 

Section 2(k)(1): Makes the effective date of this section on or 

after January 1, 2008. 

Section 2(k)(2): Makes clear that collectively bargained plans become subject to the act upon the expiration of the collective bargaining agreement or by January 1, 2010. 

2(l): Requires the Department of Labor to annually sample and 

conduct random audits of group health plans to ensure compliance 

with the Act. 

Section 3 amendments to the Public Health Service Act 

Section 3(a)(1): Amends the Public Health Service Act to require 

group health plans offering mental health and substance abuse 

benefits to apply the same treatment limitations on mental health 

and substance abuse benefits as they do for medical and surgical 

benefits. 

Section 3(a)(1) ‘‘(3)(C)’’: Categorizes the following items and services subject to mental health and substance-related treatment limit 

parity requirements (1) Inpatient, in-network; (2) inpatient, out-ofnetwork; (3) outpatient, in-network; (4) outpatient, out of network. 

Section 3(a)(1) ‘‘(3)(D)’’: Defines ‘‘treatment limit’’ under a health 

plan as limitation on the number of visits or days of coverage, or 

other similar limit on the duration or scope of treatment. 

Section 3(a)(1) ‘‘(4)(A)’’: Requires group health plan offering mental health to apply the same financial limitations to mental health 

benefits as they do to medical and surgical benefits. This includes 

limits on deductibles, co-payments, coinsurance, out-of-pocket expenses, and annual and lifetime limits. Plans are prohibited from 

establishing cost-sharing requirements that are specific to mental 

health benefits. 

Section 3(a)(1) ‘‘(4)(B)’’: Requires group health plan offering substance-related coverage, to apply the same financial limitations to 

substance abuse benefits as they do to medical and surgical benefits. This includes limits on deductibles, co-payments, coinsurance, 

out-of-pocket expenses, and annual and lifetime limits. Plans are 

prohibited from establishing cost-sharing requirements that are 

specific to mental health benefits. 

Section 3(b): Changes the term ‘‘mental health benefits’’ to ‘‘mental health or substance abuse related disorder benefits.’’

Section 3(c): Makes available to a plan administrator the criteria 

for what is considered a medically necessary treatment for a mental illness or substance abuse disorder. 

Section 3(d): Provides a minimum mental health and substancerelated benefits package. If a group health plan offers mental 

health or substance-related benefits, then it must cover the same 

range of mental illnesses and addiction disorders covered by the 

Federal Employee Health Benefit (FEHBP) plans. 

Section 3(d) ‘‘(6)(B)’’: With respect to out-of-network coverage, requires group health plans offering mental health and substance-related benefits, to apply the same coverage they offer for medical 

and surgical services to mental health and substance-related benefits. 


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Section 3(e): Provides an exemption for employers who experience an increase in claim costs of at least 2% in the first plan year 

and 1% in subsequent years. 

Section 3(f): Provides an exemption for small employers with 50 

or fewer employees. 

Section 3(h): Clarifies that nothing in this section preempts any 

State law that provides greater consumer protections, benefits, 

methods of access to benefits, or rights or remedies. 

Section 3(i): Conforms section 712 heading. 

Section 3(j): Makes the effective date of this section on or after 

January 1, 2008. 

Section 4 amendments to the Internal Revenue Code of 1986 

Section 4(a): Amends the Internal Revenue Code to require group 

health plans offering mental health and substance abuse benefits 

to apply the same treatment limitations on mental health and substance abuse benefits as they do for medical and surgical benefits. 

Section 4(a)(1) ‘‘(3)(C)’’: Categorizes the following items and services subject to mental health and substance-related treatment limit 

parity requirements (1) Inpatient, in-network; (2) inpatient, out-ofnetwork; (3) outpatient, in-network; (4) outpatient, out of network. 

Section 4(a)(1) ‘‘(3)(D)’’: Defines ‘‘treatment limit’’ under a health 

plan as limitation on the number of visits or days of coverage, or 

other similar limit on the duration or scope of treatment. 

Section 4(a)(1) ‘‘(4)(A)’’: Requires group health plan offering mental health to apply the same financial limitations to mental health 

benefits as they do to medical and surgical benefits. This includes 

limits on deductibles, co-payments, coinsurance, out-of-pocket expenses, and annual and lifetime limits. Plans are prohibited from 

establishing cost-sharing requirements that are specific to mental 

health benefits. 

Section 4(a)(1) ‘‘(4)(B)’’: Requires group health plan offering substance-related coverage, to apply the same financial limitations to 

substance abuse benefits as they do to medical and surgical benefits. This includes limits on deductibles, co-payments, coinsurance, 

out-of-pocket expenses, and annual and lifetime limits. Plans are 

prohibited from establishing cost-sharing requirements that are 

specific to mental health benefits. 

Section 4(b): Expands coverage of substance-related disorder benefits under the Internal Revenue Code. 

Section 4(c): Makes available to a plan administrator the criteria 

for what is considered a medically necessary treatment for a mental illness or substance abuse disorder. 

Section 4(d) ‘‘(6)(A)’’: Provides a minimum mental health and 

substance-related benefits package. If a group health plan offers 

mental health or substance-related benefits, then it must cover the 

same range of mental illnesses and addiction disorders covered by 

the Federal Employee Health Benefit (FEHBP) plans. 

Section 4(d) ‘‘(6)(B)’’: Requires group health plans offering mental 

health and substance-related benefits, to apply the same out-of-network coverage they offer for medical and surgical services to mental health and substance-related benefits. 


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Section 4(e): Provides an exemption to employers who experience 

an increase in claim costs of at least 2% in the first plan year and 

1% in subsequent years. 

Section 4(f): Provides an exemption for small employers with 50 

or fewer employees. 

Section 4(h): Conforms section 712 heading. 

Section 4(i): Makes the effective date of this section on or after 

January 1, 2008. 

Section 5 Government Accountability Office studies and reports 

Section 5(a): Requires the Comptroller General of the United 

States to conduct a study that evaluates implementation of the 

Paul Wellstone Mental Health and Addiction Equity Act. The study 

will analyze: (1) access to health insurance coverage; (2) the quality 

of such coverage, Medicare, Medicaid, and State and local mental 

health and substance abuse treatment spending; (3) the number of 

individuals with private insurance receiving publicly funded 

healthcare for mental health and substance-related disorders; (4) 

spending on public services such as the criminal justice system, 

special education, and income assistance programs; (5) the use of 

medical management of mental health and substance-related disorder benefits and medical necessity determinations by group 

health plans; (6) and any other matters the Comptroller General 

thinks appropriate. The report must be submitted to Congress two 

years after the enactment of H.R. 1424. 

VI. EXPLANATION OF AMENDMENTS

The Amendment in the Nature of a Substitute is explained in the 

body of this report. Representative Kline introduced an amendment 

which would have substituted the Mental Health Parity Act (S. 

558) for the Paul Wellstone Mental Health and Addiction Equity 

Act (H.R. 1424). The amendment was defeated 16–27. 

VII. APPLICATION OF LAW TO THE LEGISLATIVE BRANCH

Section 102(b)(3) of Public Law 104–1, the Congressional Accountability Act, requires a description of the application of this bill 

to the legislative branch. The Committee has determined that there 

is no legislative impact, since the Federal Employee Health Benefits (FEHB) program already provides parity for mental health care 

coverage pursuant to administrative rule making. 

VIII. REGULATORY IMPACT STATEMENT

The Committee has determined that H.R. 1424 will have minimal impact on the regulatory burden. 

IX. UNFUNDED MANDATE STATEMENT

Section 423 of the Congressional Budget and Impoundment Control Act (as amended by Section 101(a)(2) of the Unfunded Mandates Reform Act, P.L. 104–4) requires a statement of whether the 

provisions of the reported bill include unfunded mandates. This 

issue is addressed in the CBO cost estimate letter. 


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X. EARMARK STATEMENT

H.R. 1424 does not contain any congressional earmarks, limited 

tax benefits, or limited tariff benefits as defined in clause 9(d), 9(e) 

or 9(f) of rule XXI. 

XI. ROLL CALL


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Insert offset folio 41 here HR374P1.001 


bajohnson on PROD1PC71 with REPORTS
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Insert offset folio 42 here HR374P1.002 


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XII. STATEMENT OF OVERSIGHT FINDINGS AND RECOMMENDATIONS

OF THE COMMITTEE

In compliance with clause 3(c)(1) of rule XIII and clause 2(b)(1) 

of rule X of the Rules of the House of Representatives, the Committee’s oversight findings and recommendations are reflected in the 

body of this report. 

XIII. NEW BUDGET AUTHORITY AND CBO COST ESTIMATE

With respect to the requirements of clause 3(c)(2) of rule XIII of 

the House of Representatives and section 308(a) of the Congressional Budget Act of 1974 and with respect to requirements of 

clause 3(c)(3) of rule XIII of the House of Representatives and section 402 of the Congressional Budget Act of 1974, the Committee 

has received the following estimate for H.R. 1424 from the Director 

of the Congressional Budget Office: 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, September 7, 2007. 

Hon. GEORGE MILLER, 

Chairman, Committee on Education and Labor, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 1424, the Paul Wellstone 

Mental Health and Addiction Equity Act of 2007. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Shinobu Suzuki. 

Sincerely, 

PETER R. ORSZAG, 

Director. 

Enclosure. 

H.R. 1424—Paul Wellstone Mental Health and Addiction Equity 

Act of 2007 

Summary: H.R. 1424 would prohibit group health plans and 

group health insurance issuers that provide both medical and surgical benefits and mental health benefits from imposing treatment 

limitations or financial requirements for coverage of mental health 

benefits (including benefits for substance abuse treatment) that are 

different from those used for medical and surgical benefits. 

Enacting the bill would affect both federal revenues and direct 

spending for Medicaid, beginning in 2008. The bill would result in 

higher premiums for employer-sponsored health benefits. Higher 

premiums, in turn, would result in more of an employee’s compensation being received in the form of nontaxable employer-paid 

premiums, and less in the form of taxable wages. As a result of this 

shift, federal income and payroll tax revenues would decline. The 

Congressional Budget Office estimates that the proposal would reduce federal tax revenues by $1.1 billion over the 2008–2012 period 

and by $3.1 billion over the 2008–2017 period. Social Security payroll taxes, which are off-budget, would account for about 35 percent 

of those totals. 

The bill’s requirements for issuers of group health insurance 

would apply to managed care plans in the Medicaid program. CBO 


bajohnson on PROD1PC71 with REPORTS
42 

estimates that enacting H.R. 1424 would increase federal direct 

spending for Medicaid by $310 million over the 2008–2012 period and by $820 million over the 2008–2017 period. In addition, assuming appropriation of the necessary amounts, CBO estimates that 

implementing H.R. 1424 would have discretionary costs of $20 million in 2008, $143 million over the 2008–2012 period, and $322 million over the 2008–2017 period. 

CBO has reviewed the non-tax provisions of the bill (sections 2, 

3, and 5) and has determined that sections 2 and 3 contain intergovernmental mandates as defined in the Unfunded Mandates Reform Act (UMRA). The bill would preempt state laws governing 

mental health coverage that conflict with those in this bill. However, because the preemption only would prohibit the application of 

state regulatory law, CBO estimates that the costs of the mandate 

to state, local, or tribal governments would not exceed the threshold established by UMRA ($66 million in 2007, adjusted annually 

for inflation). 

As a result of this legislation, some state, local, and tribal governments would pay higher health insurance premiums for their 

employees. However, these costs would not result from intergovernmental mandates, but would be costs passed on to them by private 

insurers who would face a private-sector mandate to comply with 

the requirements of the bill. 

The bill would impose a private-sector mandate on group health 

plans and group health insurance issuers by prohibiting them from 

imposing treatment limitations or financial requirements for mental health benefits that differ from those placed on medical and 

surgical benefits. Under current law, the Mental Health Parity Act 

of 1996 requires a more-limited form of parity between mental 

health and medical and surgical coverage. That mandate is set to 

expire at the end of 2007. Thus, H.R. 1424 would both extend and 

expand the existing mandate requiring mental health parity. CBO 

estimates that the direct costs of the private-sector mandate in the 

bill would total about $1.3 billion in 2008, and would grow in later 

years. That amount would significantly exceed the annual threshold established by UMRA ($131 million in 2007, adjusted for inflation) in each of the years that the mandate would be in effect. 

Estimated cost to the Federal Government: The estimated budgetary impact of H.R. 1424 is shown in the following table. The costs 

of this legislation fall within budget function 550 (health). 


bajohnson on PROD1PC71 with REPORTS
43 

ESTIMATED BUDGETARY EFFECTS OF H.R. 1424 

By fiscal year, in millions of dollars— 

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2008– 2012 2008– 2017 

CHANGES IN REVENUES 

Income and HI Payroll Taxes (on-budget) ............................................................................ ¥20 ¥120 ¥170 ¥190 ¥210 ¥230 ¥250 ¥260 ¥280 ¥300 ¥710 ¥2,030 

Social Security Payroll Taxes (off-budget) ........................................................................... ¥10 ¥70 ¥100 ¥100 ¥110 ¥120 ¥130 ¥140 ¥150 ¥160 ¥390 ¥1,090 

Total Changes .............................................................................................................. ¥30 ¥190 ¥270 ¥290 ¥320 ¥350 ¥380 ¥400 ¥430 ¥460 ¥1,100 ¥3,120 

CHANGES IN DIRECT SPENDING 

Medicaid: 

Estimated Budget Authority ........................................................................................ 30 60 70 70 80 90 90 100 110 120 310 820 Estimated Outlays ....................................................................................................... 30 60 70 70 80 90 90 100 110 120 310 820 

CHANGES IN SPENDING SUBJECT TO APPROPRIATION 

Implementation costs for DOL: 

Estimated Authorization Level ..................................................................................... 25 30 30 30 35 35 35 35 35 40 150 330 Estimated Outlays ....................................................................................................... 20 29 30 30 34 35 35 35 35 39 143 322 

Note: HI=Hospital Insurance (Part A of Medicare); DOL=Department of Labor. 


bajohnson on PROD1PC71 with REPORTS
44 

Basis of estimate: H.R. 1424 would prohibit group health plans 

and group health insurance issuers who offer mental health benefits (including benefits for substance abuse treatment) from imposing treatment limitations or financial requirements for those benefits that are different from those used for medical and surgical benefits. For plans that offer mental health benefits through a network 

of mental health providers, the requirement for parity of benefits 

would be established by comparing in-network medical and surgical 

benefits with in-network mental health benefits, and comparing 

out-of-network medical and surgical benefits with out-of-network 

mental health benefits. The provision would apply to benefits for 

any mental health condition that is covered under the group health 

plan. 

The bill would not require plans to offer mental health benefits. 

It would, however, require that the mental health benefits of plans 

that choose to offer such benefits be at least as generous as the 

Federal Employees Health Benefits Plan (FEHBP) with the highest 

average enrollment as of the beginning of the most recent plan 

year involved. Existing laws in some states, however, require that 

plans cover all types of mental health services or ailments, which 

would reduce the potential impact of this bill on health plan premiums. 

Revenues 

The provisions of the bill would apply to both self-insured and 

fully insured group health plans. Small employers (those employing 

fewer than 50 employees in a year) would be exempt from the bill’s 

requirements, as would individuals purchasing insurance in the individual market. The bill also would exempt group health plans for 

whom the cost of complying with the requirements would increase 

total plan costs (for medical and surgical benefits and mental 

health benefits) by more than 2 percent in the first plan year following enactment, and 1 percent in subsequent plan years. In general, H.R. 1424 would not preempt state laws regarding parity of 

mental health benefits except to the extent that state laws prohibit 

the application of a requirement of the bill. 

CBO’s estimate of the cost of this bill is based in part on published results of a model developed by the Hay Group. That model 

relies on data from several sources, including the claims experience 

of private health insurers and the Medical Expenditure Panel Survey. CBO adjusted those results to account for the current and future use of managed care arrangements for providing mental 

health benefits and the increased use of prescription drugs that 

mental health parity would be likely to induce. Also, CBO took account of the effects of existing state and federal rules that place requirements similar to those in the bill on certain entities. (For example, the Office of Personnel Management implemented mental 

health and substance abuse parity in the FEHBP in January 2001.) 

CBO estimates that H.R. 1424, if enacted, would increase premiums for group health insurance by an average of about 0.4 percent, before accounting for the responses of health plans, employers, and workers to the higher premiums that would likely be 

charged under the bill. Those responses would include reductions 

in the number of employers offering insurance to their employees 

and in the number of employees enrolling in employer-sponsored 


bajohnson on PROD1PC71 with REPORTS
45 

insurance, changes in the types of health plans that are offered (including eliminating coverage for mental health benefits and/or substance benefits), and reductions in the scope or generosity of health 

insurance benefits, such as increased deductibles or higher copayments. CBO expects that those behavioral responses would offset 

60 percent of the potential impact of the bill on total health plan 

costs. 

The remaining 40 percent of the potential increase in costs—less 

than 0.2 percent of group health insurance premiums—would occur 

in the form of higher spending for health insurance. Those costs 

would be passed through to workers, reducing both their taxable 

compensation and other fringe benefits. For employees of private 

firms, CBO assumes that all of that increase would ultimately be 

passed through to workers. State, local, and tribal governments are 

assumed to absorb 75 percent of the increase and to reduce their 

workers’ taxable income and other fringe benefits to offset the remaining one-quarter of the increase. CBO estimates that the resulting reduction in taxable income would grow from $400 million 

in 2008 to $4.5 billion in 2017. 

Those reductions in workers’ taxable compensation would lead to 

lower federal tax revenues. CBO estimates that federal tax revenues would fall by $30 million in 2008 and by $3.1 billion over the 

2008–2017 period if H.R. 1424 were enacted. Social Security payroll taxes, which are off-budget, would account for about 35 percent 

of those totals. 

Direct spending 

The bill’s requirements for issuers of group health insurance 

would apply to managed care plans in the Medicaid program. CBO 

estimates that enacting H.R. 1424 would increase Medicaid payments to managed care plans by about 0.2 percent. That is less 

than the 0.4 percent increase in the estimated increase in spending 

for employer-sponsored health insurance because Medicaid programs offer broader coverage of mental health benefits than the 

private sector. CHO estimates that enacting H.R. 1424 would increase federal spending for Medicaid by $310 million over the 

2008–2012 period and $820 million over the 2008–2017 period. 

Spending subject to appropriation 

H.R. 1424 would require the Secretary of Labor to provide assistance to participants and beneficiaries of group health plans and 

conduct random audits of plans to ensure that they are in compliance with the requirements of the bill. The bill also would require 

the Secretary to submit a biennial report on obstacles that individuals face in obtaining care for mental health and substance related 

disorders. Based on the costs of implementing the Health Insurance Portability and Accountability Act of 1996, and assuming appropriation of the necessary amounts, CBO estimates that implementing H.R. 1424 would incur discretionary costs of $20 million 

in 2008 and $30 million to $40 million annually in subsequent 

years. 

Estimated impact on state, local, and tribal governments: H.R. 

1424 would preempt state laws governing mental health coverage 

that conflict with those in this bill. That preemption would be an 

intergovernmental mandate as defined in UMRA. However, beVerDate Aug 31 2005 07:14 Oct 17, 2007 Jkt 069006 PO 00000 Frm 00045 Fmt 6659 Sfmt 6602 E:\HR\OC\HR374P1.XXX HR374P1

bajohnson on PROD1PC71 with REPORTS
46 

cause the preemption would simply prohibit the application of state 

regulatory laws that conflict with the new federal standards, CBO 

estimates that the mandate would impose no significant costs on 

state, local, or tribal governments. 

An existing provision in the Public Health Service Act (PHSA) 

would allow state, local, and tribal governments, as employers that 

provide health benefits to their employees, to opt out of the requirements of this bill. Consequently, the bill’s requirements for 

mental health parity would not be intergovernmental mandates as 

defined in UMRA, and the bill would affect the budgets of those 

governments only if they choose to comply with the requirements 

on group health plans. Roughly two-thirds of employees in state, 

local, and tribal governments are enrolled in self-insured plans. 

The remaining governmental employees are enrolled in fully insured plans. Governments purchase health insurance for those employees through private insurers and would face increased premiums as a result of higher costs passed on to them by those insurers. The increased costs, however, would not result from intergovernmental mandates. Rather, they would be part of the mandate 

costs initially borne by the private sector and then passed on to the 

governments as purchasers of insurance. CBO estimates that state, 

local, and tribal governments would face additional costs of about 

$10 million in 2008, increasing to about $155 million in 2012. This 

estimate reflects the assumption that governments would shift 

roughly 25 percent of the additional costs to their employees. 

Because the bill’s requirements would apply to managed care 

plans in the Medicaid program, CBO estimates that state spending 

for Medicaid also would increase by about $235 million over the 

2008–2012 period. 

Estimated impact on the private sector: The bill would impose a 

private-sector mandate on group health plans and issuers of group 

health insurance that provide medical and surgical benefits as well 

as mental health benefits (including benefits for substance abuse 

treatment). H.R. 1424 would prohibit those entities from imposing 

treatment limitations or financial requirements for mental health 

benefits that differ from those placed on medical and surgical benefits. The requirements would not apply to coverage purchased by 

employer groups with fewer than 50 employees. For plans that 

offer mental health benefits through a network of mental health 

providers, the requirement for parity of benefits would be established by comparing in-network medical and surgical benefits with 

in-network mental health benefits, and comparing out-of-network 

medical and surgical benefits with out-of-network mental health 

benefits. 

Under current law, the Mental Health Parity Act of 1996 prohibits group health plans and group health insurance issuers from 

imposing annual and lifetime dollar limits on mental health coverage that are more restrictive than limits imposed on medical and 

surgical coverage. The current mandate is set to expire at the end 

of calendar year 2007. Consequently, H.R. 1424 would both extend 

and expand the current mandate requiring mental health parity. 

CBO’s estimate of the direct costs of the mandate assumes that 

affected entities would comply with H.R. 1424 by further increasing 

the generosity of their mental health benefits, Many plans currently offer mental health benefits that are less generous than 


bajohnson on PROD1PC71 with REPORTS
47 

their medical and surgical benefits. We estimate that the direct 

costs of the additional services that would be newly covered by insurance because of the mandate would equal about 0.4 percent of 

employer-sponsored health insurance premiums compared to having no mandate at all. 

CBO estimates that the direct costs of the mandate in H.R. 1424 

would be $1.3 billion in 2008, rising to $3.0 billion in 2012. Those 

costs would exceed the threshold specified in UMRA ($131 million 

in 2007, adjusted annually for inflation) in each year the mandate 

would be in effect, 

Previous CBO estimate: On March 20, 2007, CBO transmitted a 

cost estimate for S. 558, the Mental Health Parity Act of 2007, as 

ordered reported by the Senate Committee on Health, Education, 

Labor, and Pensions on February 14, 2007. H.R. 1424 differs from 

S. 558 in several ways: (1) it would require mental health benefits 

of plans that choose to offer such benefits be at least as generous 

as FEHBP with the highest average enrollment as of the beginning 

of the most recent plan year involved; (2) it would exempt group 

health plans with collective bargaining agreements from the requirements of the bill until the later of the expiration of such 

agreements or January 1, 2010; (3) it would make conforming 

modifications to the Internal Revenue Code (IRC); and (4) the provisions of H.R. 1424 would apply to group health plans beginning 

January 1, 2008, while S. 558 specified that the policy would be effective more than one year after the date of the enactment, affecting plans beginning on or after January 1, 2009. 

CBO estimates the minimum benefit requirement and exception 

for the collective bargaining agreements would have no significant 

budgetary effect, while the difference in the effective dates would 

affect our estimate in 2008 and 2009. CBO and the Joint Committee on Taxation estimate that conforming modifications to the 

IRC would result in a negligible excise tax revenue collected from 

employers who fail to comply with the requirements of the bill. 

Estimate prepared by: Federal Costs: Jeanne De Sa and Shinobu 

Suzuki; Impact on State, Local, and Tribal Governments: Lisa Ramirez-Branum; Impact on the Private Sector: Stuart Hagen. 

Estimate approved by: Peter H. Fontaine, Assistant Director for 

Budget Analysis. 

XIV. STATEMENT OF GENERAL PERFORMANCE GOALS AND

OBJECTIVES

In accordance with clause 3(c) of House rule XIII, the goal of 

H.R. 1424 is to increase access to mental health treatment and to 

prevent health insurance providers and employers from discriminating against individuals on the basis of mental illness. 

XV. CONSTITUTIONAL AUTHORITY STATEMENT

Under clause 3(d)(1) of rule XIII of the Rules of the House of 

Representatives, the Committee must include a statement citing 

the specific powers granted to Congress in the Constitution to 

enact the law proposed by H.R. 1424. The amendments made by 

this bill increase access to mental health treatment by prohibiting 

group health plans (or health insurance coverage offered in connection with a group health plan) from imposing financial requireVerDate Aug 31 2005 07:14 Oct 17, 2007 Jkt 069006 PO 00000 Frm 00047 Fmt 6659 Sfmt 6602 E:\HR\OC\HR374P1.XXX HR374P1

bajohnson on PROD1PC71 with REPORTS
48 

ments (including deductibles, co-payments, coinsurance, out-ofpocket expenses, and annual lifetime limits) or treatment limitations (including limitations on the number of visits, days of coverage, frequency of treatment, or other similar limits on the scope 

and duration of treatment) on mental health benefits that are more 

restrictive than those restrictions applied to medical and surgical 

benefits. The Committee believes these amendments are within 

Congress’ authority under Article I, Section 8, Clauses 1 and 3 of 

the Constitution. 

XVI. COMMITTEE ESTIMATE

Clause 3(d)(2) of rule XIII of the Rules of the House of Representatives requires an estimate and a comparison of the costs 

that would be incurred in carrying out H.R. 1424. However, clause 

3(d)(3)(B) of that rule provides that this requirement does not 

apply when the Committee has included in its report a timely submitted cost estimate of the bill prepared by the Director of the Congressional Budget Office under section 402 of the Congressional 

Budget Act. 

XVII. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

existing law in which no change is proposed is shown in roman): 

EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 

1974 

* * * * * * * 

SHORT TITLE AND TABLE OF CONTENTS

SECTION 1. This Act may be cited as the ‘‘Employee Retirement 

Income Security Act of 1974’’. 

TABLE OF CONTENTS 

Sec. 1. Short title and table of contents. 

* * * * * * * 

PART 7—GROUP HEALTH PLAN REQUIREMENTS

SUBPART A—REQUIREMENTS RELATING TO PORTABILITY, ACCESS, AND RENEWABILITY

Sec. 701. Increased portability through limitation on 

* * * * * * * 

SUBPART B—OTHER REQUIREMENTS

Sec. 711. Standards relating to benefits for mothers and newborns. 

øSec. 712. Parity in the application of certain limits to mental health benefits.¿ 

Sec. 712. Equity in mental health and substance-related disorder benefits. 

* * * * * * * 

PART 7—GROUP HEALTH PLAN REQUIREMENTS

* * * * * * * 


bajohnson on PROD1PC71 with REPORTS
49 

SUBPART B—OTHER REQUIREMENTS

* * * * * * * 

øSEC. 712. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO 

MENTAL HEALTH BENEFITS.¿ 

SEC. 712. EQUITY IN MENTAL HEALTH AND SUBSTANCE-RELATED DISORDER BENEFITS. 

(a) IN GENERAL.— (1) AGGREGATE LIFETIME LIMITS.—In the case of a group 

health plan (or health insurance coverage offered in connection 

with such a plan) that provides both medical and surgical benefits and ømental health benefits¿ mental health or substancerelated disorder benefits— (A) NO LIFETIME LIMIT.—If the plan or coverage does not 

include an aggregate lifetime limit on substantially all 

medical and surgical benefits, the plan or coverage may 

not impose any aggregate lifetime limit on ømental health 

benefits¿ mental health or substance-related disorder benefits. 

(B) LIFETIME LIMIT.—If the plan or coverage includes an 

aggregate lifetime limit on substantially all medical and 

surgical benefits (in this paragraph referred to as the ‘‘applicable lifetime limit’’), the plan or coverage shall either—

(i) apply the applicable lifetime limit both to the 

medical and surgical benefits to which it otherwise 

would apply and to ømental health benefits¿ mental 

health or substance-related disorder benefits and not 

distinguish in the application of such limit between 

such medical and surgical benefits and ømental health 

benefits¿ mental health or substance-related disorder 

benefits; or 

(ii) not include any aggregate lifetime limit on 

ømental health benefits¿ mental health or substancerelated disorder benefits that is less than the applicable lifetime limit. 

(C) RULE IN CASE OF DIFFERENT LIMITS.—In the case of 

a plan or coverage that is not described in subparagraph 

(A) or (B) and that includes no or different aggregate lifetime limits on different categories of medical and surgical 

benefits, the Secretary shall establish rules under which 

subparagraph (B) is applied to such plan or coverage with 

respect to ømental health benefits¿ mental health or substance-related disorder benefits by substituting for the applicable lifetime limit an average aggregate lifetime limit 

that is computed taking into account the weighted average 

of the aggregate lifetime limits applicable to such categories. 

(2) ANNUAL LIMITS.—In the case of a group health plan (or 

health insurance coverage offered in connection with such a 

plan) that provides both medical and surgical benefits and 

ømental health benefits¿ mental health or substance-related 

disorder benefits—

(A) NO ANNUAL LIMIT.—If the plan or coverage does not 

include an annual limit on substantially all medical and 

surgical benefits, the plan or coverage may not impose any 


bajohnson on PROD1PC71 with REPORTS
50 

annual limit on ømental health benefits¿ mental health or 

substance-related disorder benefits. 

(B) ANNUAL LIMIT.—If the plan or coverage includes an 

annual limit on substantially all medical and surgical benefits (in this paragraph referred to as the ‘‘applicable annual limit’’), the plan or coverage shall either—

(i) apply the applicable annual limit both to medical 

and surgical benefits to which it otherwise would 

apply and to ømental health benefits¿ mental health 

or substance-related disorder benefits and not distinguish in the application of such limit between such 

medical and surgical benefits and ømental health benefits¿ mental health or substance-related disorder benefits; or 

(ii) not include any annual limit on ømental health 

benefits¿ mental health or substance-related disorder 

benefits that is less than the applicable annual limit. 

(C) RULE IN CASE OF DIFFERENT LIMITS.—In the case of 

a plan or coverage that is not described in subparagraph 

(A) or (B) and that includes no or different annual limits 

on different categories of medical and surgical benefits, the 

Secretary shall establish rules under which subparagraph 

(B) is applied to such plan or coverage with respect to 

ømental health benefits¿ mental health or substance-related disorder benefits by substituting for the applicable 

annual limit an average annual limit that is computed 

taking into account the weighted average of the annual 

limits applicable to such categories. 

(3) TREATMENT LIMITS.—

(A) NO TREATMENT LIMIT.—If the plan or coverage does 

not include a treatment limit (as defined in subparagraph 

(D)) on substantially all medical and surgical benefits in 

any category of items or services, the plan or coverage may 

not impose any treatment limit on mental health or substance-related disorder benefits that are classified in the 

same category of items or services. 

(B) TREATMENT LIMIT.—If the plan or coverage includes 

a treatment limit on substantially all medical and surgical 

benefits in any category of items or services, the plan or 

coverage may not impose such a treatment limit on mental 

health or substance-related disorder benefits for items and 

services within such category that is more restrictive than 

the predominant treatment limit that is applicable to medical and surgical benefits for items and services within 

such category. 

(C) CATEGORIES OF ITEMS AND SERVICES FOR APPLICATION OF TREATMENT LIMITS AND BENEFICIARY FINANCIAL

REQUIREMENTS.—For purposes of this paragraph and paragraph (4), there shall be the following five categories of 

items and services for benefits, whether medical and surgical benefits or mental health and substance-related disorder benefits, and all medical and surgical benefits and 

all mental health and substance related benefits shall be 

classified into one of the following categories: 


bajohnson on PROD1PC71 with REPORTS
51 

(i) INPATIENT, IN-NETWORK.—Items and services not 

described in clause (v) furnished on an inpatient basis 

and within a network of providers established or recognized under such plan or coverage. 

(ii) INPATIENT, OUT-OF-NETWORK.—Items and services not described in clause (v) furnished on an inpatient basis and outside any network of providers established or recognized under such plan or coverage. 

(iii) OUTPATIENT, IN-NETWORK.—Items and services 

not described in clause (v) furnished on an outpatient 

basis and within a network of providers established or 

recognized under such plan or coverage. 

(iv) OUTPATIENT, OUT-OF-NETWORK.—Items and services not described in clause (v) furnished on an outpatient basis and outside any network of providers established or recognized under such plan or coverage. 

(v) EMERGENCY CARE.—Items and services, whether 

furnished on an inpatient or outpatient basis or within 

or outside any network of providers, required for the 

treatment of an emergency medical condition (including an emergency condition relating to mental health 

and substance-related disorders). 

(D) TREATMENT LIMIT DEFINED.—For purposes of this 

paragraph, the term ‘‘treatment limit’’ means, with respect 

to a plan or coverage, limitation on the frequency of treatment, number of visits or days of coverage, or other similar 

limit on the duration or scope of treatment under the plan 

or coverage. 

(E) PREDOMINANCE.—For purposes of this subsection, a 

treatment limit or financial requirement with respect to a 

category of items and services is considered to be predominant if it is the most common or frequent of such type of 

limit or requirement with respect to such category of items 

and services. 

(4) BENEFICIARY FINANCIAL REQUIREMENTS.— (A) NO BENEFICIARY FINANCIAL REQUIREMENT.—If the 

plan or coverage does not include a beneficiary financial requirement (as defined in subparagraph (C)) on substantially all medical and surgical benefits within a category of 

items and services (specified under paragraph (3)(C)), the 

plan or coverage may not impose such a beneficiary financial requirement on mental health or substance-related disorder benefits for items and services within such category. 

(B) BENEFICIARY FINANCIAL REQUIREMENT.—

(i) TREATMENT OF DEDUCTIBLES, OUT-OF-POCKET LIMITS, AND SIMILAR FINANCIAL REQUIREMENTS.—If the 

plan or coverage includes a deductible, a limitation on 

out-of-pocket expenses, or similar beneficiary financial 

requirement that does not apply separately to individual items and services on substantially all medical 

and surgical benefits within a category of items and 

services (as specified in paragraph (3)(C)), the plan or 

coverage shall apply such requirement (or, if there is 

more than one such requirement for such category of 

items and services, the predominant requirement for 


bajohnson on PROD1PC71 with REPORTS
52 

such category) both to medical and surgical benefits 

within such category and to mental health and substance-related disorder benefits within such category 

and shall not distinguish in the application of such requirement between such medical and surgical benefits 

and such mental health and substance-related disorder 

benefits. 

(ii) OTHER FINANCIAL REQUIREMENTS.—If the plan or 

coverage includes a beneficiary financial requirement 

not described in clause (i) on substantially all medical 

and surgical benefits within a category of items and 

services, the plan or coverage may not impose such financial requirement on mental health or substance-related disorder benefits for items and services within 

such category in a way that results in greater out-ofpocket expenses to the participant or beneficiary than 

the predominant beneficiary financial requirement applicable to medical and surgical benefits for items and 

services within such category. 

(iii) CONSTRUCTION.—Nothing in this subparagraph 

shall be construed as prohibiting the plan or coverage 

from waiving the application of any deductible for 

mental health benefits or substance-related disorder 

benefits or both. 

(C) BENEFICIARY FINANCIAL REQUIREMENT DEFINED.—For 

purposes of this paragraph, the term ‘‘beneficiary financial 

requirement’’ includes, with respect to a plan or coverage, 

any deductible, coinsurance, co-payment, other cost sharing, and limitation on the total amount that may be paid 

by a participant or beneficiary with respect to benefits 

under the plan or coverage, but does not include the application of any aggregate lifetime limit or annual limit. 

(5) AVAILABILITY OF PLAN INFORMATION.—The criteria for 

medical necessity determinations made under the plan with respect to mental health and substance-related disorder benefits 

(or the health insurance coverage offered in connection with the 

plan with respect to such benefits) shall be made available in 

accordance with regulations by the plan administrator (or the 

health insurance issuer offering such coverage) to any current 

or potential participant, beneficiary, or contracting provider 

upon request. The reason for any denial under the plan (or coverage) of reimbursement or payment for services with respect to 

mental health and substance-related disorder benefits in the 

case of any participant or beneficiary shall, upon request, be 

made available in accordance with regulations by the plan administrator (or the health insurance issuer offering such coverage) to the participant or beneficiary. 

(6) MINIMUM SCOPE OF COVERAGE AND EQUITY IN OUT-OFNETWORK BENEFITS.— (A) MINIMUM SCOPE OF MENTAL HEALTH AND SUBSTANCE- RELATED DISORDER BENEFITS.—In the case of a group 

health plan (or health insurance coverage offered in connection with such a plan) that provides any mental health or 

substance-related disorder benefits, the plan or coverage 

shall include benefits for any mental health condition and 


bajohnson on PROD1PC71 with REPORTS
53 

substance-related disorder for which benefits are provided 

under the benefit plan option offered under chapter 89 of 

title 5, United States Code, with the highest average enrollment as of the beginning of the most recent year beginning 

on or before the beginning of the plan year involved. 

(B) EQUITY IN COVERAGE OF OUT-OF-NETWORK BENEFITS.—

(i) IN GENERAL.—In the case of a plan or coverage 

that provides both medical and surgical benefits and 

mental health or substance-related disorder benefits, if 

medical and surgical benefits are provided for substantially all items and services in a category specified in 

clause (ii) furnished outside any network of providers 

established or recognized under such plan or coverage, 

the mental health and substance-related disorder benefits shall also be provided for items and services in 

such category furnished outside any network of providers established or recognized under such plan or 

coverage in accordance with the requirements of this 

section. 

(ii) CATEGORIES OF ITEMS AND SERVICES.—For purposes of clause (i), there shall be the following three 

categories of items and services for benefits, whether 

medical and surgical benefits or mental health and 

substance-related disorder benefits, and all medical 

and surgical benefits and all mental health and substance-related disorder benefits shall be classified into 

one of the following categories: 

(I) EMERGENCY.—Items and services, whether 

furnished on an inpatient or outpatient basis, required for the treatment of an emergency medical 

condition (including an emergency condition relating to mental health or substance-related disorders). 

(II) INPATIENT.—Items and services not described in subclause (I) furnished on an inpatient 

basis. 

(III) OUTPATIENT.—Items and services not described in subclause (I) furnished on an outpatient 

basis. 

(7) CONSTRUCTION.—Nothing in this section shall be construed to limit a group health plan (or health insurance offered 

in connection with such a plan) from managing the provision 

of medical, surgical, mental health or substance-related disorder benefits through any of the following methods: 

(A) the application of utilization review; 

(B) the application of authorization or management practices; 

(C) the application of medical necessity and appropriateness criteria; or 

(D) other processes intended to ensure that beneficiaries 

receive appropriate care and medically necessary services 

for covered benefits; 


bajohnson on PROD1PC71 with REPORTS
54 

to the extent such methods are recognized both by industry and 

by providers and are not prohibited under applicable State 

laws. 

(b) CONSTRUCTION.—Nothing in this section shall be 

øconstrued— ø(1) as requiring¿ construed as requiring a group health plan 

(or health insurance coverage offered in connection with such 

a plan) to provide any ømental health benefits; or¿ mental 

health or substance-related disorder benefits. 

ø(2) in the case of a group health plan (or health insurance 

coverage offered in connection with such a plan) that provides 

mental health benefits, as affecting the terms and conditions 

(including cost sharing, limits on numbers of visits or days of 

coverage, and requirements relating to medical necessity) relating to the amount, duration, or scope of mental health benefits under the plan or coverage, except as specifically provided 

in subsection (a) (in regard to parity in the imposition of aggregate lifetime limits and annual limits for mental health benefits).¿ 

(c) EXEMPTIONS.— (1) SMALL EMPLOYER EXEMPTION.— (A) * * * 

(B) SMALL EMPLOYER.—For purposes of subparagraph 

(A), the term ‘‘small employer’’ means, in connection with 

a group health plan with respect to a calendar year and 

a plan year, an employer who employed an average of at 

least 2 (or 1 in the case of an employer residing in a State 

that permits small groups to include a single individual) 

but not more than 50 employees on business days during 

the preceding calendar year øand who employs at least 2 

employees on the first day of the plan year¿. 

* * * * * * * 

ø(2) INCREASED COST EXEMPTION.—This section shall not 

apply with respect to a group health plan (or health insurance 

coverage offered in connection with a group health plan) if the 

application of this section to such plan (or to such coverage) results in an increase in the cost under the plan (or for such coverage) of at least 1 percent.¿ 

(2) INCREASED COST EXEMPTION.— (A) IN GENERAL.—With respect to a group health plan (or 

health insurance coverage offered in connection with such 

a plan), if the application of this section to such plan (or 

coverage) results in an increase for the plan year involved 

of the actual total costs of coverage with respect to medical 

and surgical benefits and mental health and substance-related disorder benefits under the plan (as determined and 

certified under subparagraph (C)) by an amount that exceeds the applicable percentage described in subparagraph 

(B) of the actual total plan costs, the provisions of this section shall not apply to such plan (or coverage) during the 

following plan year, and such exemption shall apply to the 

plan (or coverage) for 1 plan year. 

(B) APPLICABLE PERCENTAGE.—With respect to a plan (or 

coverage), the applicable percentage described in this paragraph shall be—


bajohnson on PROD1PC71 with REPORTS
55 

(i) 2 percent in the case of the first plan year which 

begins after the effective date of the amendments made 

by section 101 of the Paul Wellstone Mental Health 

and Addiction Equity Act of 2007; and 

(ii) 1 percent in the case of each subsequent plan 

year. 

(C) DETERMINATIONS BY ACTUARIES.—Determinations as 

to increases in actual costs under a plan (or coverage) for 

purposes of this subsection shall be made and certified by 

a qualified and licensed actuary who is a member in good 

standing of the American Academy of Actuaries. 

(D) 6-MONTH DETERMINATIONS.—If a group health plan 

(or a health insurance issuer offering coverage in connection with such a plan) seeks an exemption under this paragraph, determinations under subparagraph (A) shall be 

made after such plan (or coverage) has complied with this 

section for the first 6 months of the plan year involved. 

(E) NOTIFICATION.—An election to modify coverage of 

mental health and substance-related disorder benefits as 

permitted under this paragraph shall be treated as a material modification in the terms of the plan as described in 

section 102(a) and notice of which shall be provided a reasonable period in advance of the change. 

(F) NOTIFICATION OF APPROPRIATE AGENCY.— (i) IN GENERAL.—A group health plan that, based on 

upon a certification described under subparagraph (C), 

qualifies for an exemption under this paragraph, and 

elects to implement the exemption, shall notify the Department of Labor of such election. 

(ii) REQUIREMENT.—A notification under clause (i) 

shall include—

(I) a description of the number of covered lives 

under the plan (or coverage) involved at the time 

of the notification, and as applicable, at the time 

of any prior election of the cost-exemption under 

this paragraph by such plan (or coverage); 

(II) for both the plan year upon which a cost exemption is sought and the year prior, a description 

of the actual total costs of coverage with respect to 

medical and surgical benefits and mental health 

and substance-related disorder benefits under the 

plan; and 

(III) for both the plan year upon which a cost exemption is sought and the year prior, the actual 

total costs of coverage with respect to mental 

health and substance-related disorder benefits 

under the plan. 

(iii) CONFIDENTIALITY.—A notification under clause 

(i) shall be confidential. The Department of Labor shall 

make available, upon request to the appropriate committees of Congress and on not more than an annual 

basis, an anonymous itemization of such notifications, 

that includes—

(I) a breakdown of States by the size and any 

type of employers submitting such notification; and 


bajohnson on PROD1PC71 with REPORTS
56 

(II) a summary of the data received under clause 

(ii). 

(G) NO IMPACT ON APPLICATION OF STATE LAW.—The fact 

that a plan or coverage is exempt from the provisions of 

this section under subparagraph (A) shall not affect the application of State law to such plan or coverage. 

* * * * * * * 

(e) DEFINITIONS.—For purposes of this section—

(1) * * * 

* * * * * * * 

(3) MEDICAL OR SURGICAL BENEFITS.—The term ‘‘medical or 

surgical benefits’’ means benefits with respect to 

medical or surgical services, as defined under the terms of the 

plan or coverage (as the case may be), but does not include 

ømental health benefits¿ mental health or substance-related 

disorder benefits. 

(4) øMENTAL HEALTH BENEFITS¿ MENTAL HEALTH AND SUBSTANCE-RELATED DISORDER BENEFITS.—The term ‘‘ømental 

health benefits¿ mental health or substance-related disorder 

benefits’’ means øbenefits with respect to mental health services¿ benefits with respect to services for mental health conditions or substance-related disorders, as defined under the terms 

of the plan or coverage (as the case may be)ø, but does not include benefits with respect to treatment of substance abuse or 

chemical dependency¿. 

ø(f) SUNSET.—This section shall not apply to benefits for services 

furnished after December 31, 2007.¿ 

(f) PREEMPTION, RELATION TO STATE LAWS.—

(1) IN GENERAL.—This part shall not be construed to supersede any provision of State law which establishes, implements, 

or continues in effect any consumer protections, benefits, methods of access to benefits, rights, external review programs, or 

remedies solely relating to health insurance issuers in connection with group health insurance coverage (including benefit 

mandates or regulation of group health plans of 50 or fewer employees) except to the extent that such provision prevents the application of a requirement of this part. 

(2) CONTINUED PREEMPTION WITH RESPECT TO GROUP HEALTH

PLANS.—Nothing in this section shall be construed to affect or 

modify the provisions of section 514 with respect to group 

health plans. 

(3) OTHER STATE LAWS.—Nothing in this section shall be construed to exempt or relieve any person from any laws of any 

State not solely related to health insurance issuers in connection with group health coverage insofar as they may now or 

hereafter relate to insurance, health plans, or health coverage. 

* * * * * * * 


bajohnson on PROD1PC71 with REPORTS
57 

SECTION 2705 OF THE PUBLIC HEALTH SERVICE ACT 

øSEC. 2705. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO MENTAL HEALTH BENEFITS.¿ 

SEC. 2705. 

(a) IN GENERAL.—

(1) AGGREGATE LIFETIME LIMITS.—In the case of a group 

health plan (or health insurance coverage offered in connection 

with such a plan) that provides both medical and surgical benefits and ømental health benefits¿ mental health and substance-related disorder benefits—

(A) NO LIFETIME LIMIT.—If the plan or coverage does not 

include an aggregate lifetime limit on substantially all 

medical and surgical benefits, the plan or coverage may 

not impose any aggregate lifetime limit on ømental health 

benefits¿ mental health and substance-related disorder 

benefits. 

(B) LIFETIME LIMIT.—If the plan or coverage includes an 

aggregate lifetime limit on substantially all medical and 

surgical benefits (in this paragraph referred to as the ‘‘applicable lifetime limit’’), the plan or coverage shall either—

(i) apply the applicable lifetime limit both to the 

medical and surgical benefits to which it otherwise 

would apply and to ømental health benefits¿ mental 

health and substance-related disorder benefits and not 

distinguish in the application of such limit between 

such medical and surgical benefits and ømental health 

benefits¿ mental health and substance-related disorder 

benefits; or 

(ii) not include any aggregate lifetime limit on 

ømental health benefits¿ mental health and substancerelated disorder benefits that is less than the applicable lifetime limit. 

(C) RULE IN CASE OF DIFFERENT LIMITS.—In the case of 

a plan or coverage that is not described in subparagraph 

(A) or (B) and that includes no or different aggregate lifetime limits on different categories of medical and surgical 

benefits, the Secretary shall establish rules under which 

subparagraph (B) is applied to such plan or coverage with 

respect to ømental health benefits¿ mental health and substance-related disorder benefits by substituting for the applicable lifetime limit an average aggregate lifetime 

limit that is computed taking into account the weighted 

average of the aggregate lifetime limits applicable to such 

categories. 

(2) ANNUAL LIMITS.—In the case of a group health plan (or 

health insurance coverage offered in connection with such a 

plan) that provides both medical and surgical benefits and 

ømental health benefits¿ mental health and substance-related 

disorder benefits—

(A) NO ANNUAL LIMIT.—If the plan or coverage does not 

include an annual limit on substantially all medical and 

surgical benefits, the plan or coverage may not impose any 

annual limit on ømental health benefits¿ mental health 

and substance-related disorder benefits. 


bajohnson on PROD1PC71 with REPORTS
58 

(B) ANNUAL LIMIT.—If the plan or coverage includes an 

annual limit on substantially all medical and surgical benefits (in this paragraph referred to as the ‘‘applicable annual limit’’), the plan or coverage shall either— (i) apply the applicable annual limit both to medical 

and surgical benefits to which it otherwise would 

apply and to ømental health benefits¿ mental health 

and substance-related disorder benefits and not distinguish in the application of such limit between such 

medical and surgical benefits and ømental health benefits¿ mental health and substance-related disorder 

benefits; or 

(ii) not include any annual limit on ømental health 

benefits¿ mental health and substance-related disorder 

benefits that is less than the applicable annual limit. 

(C) RULE IN CASE OF DIFFERENT LIMITS.—In the case of 

a plan or coverage that is not described in subparagraph 

(A) or (B) and that includes no or different annual limits 

on different categories of medical and surgical benefits, the 

Secretary shall establish rules under which subparagraph 

(B) is applied to such plan or coverage with respect to 

ømental health benefits¿ mental health and substance-related disorder benefits by substituting for the applicable 

annual limit an average annual limit that is computed 

taking into account the weighted average of the annual 

limits applicable to such categories. 

(3) TREATMENT LIMITS.— (A) NO TREATMENT LIMIT.—If the plan or coverage does 

not include a treatment limit (as defined in subparagraph 

(D)) on substantially all medical and surgical benefits in 

any category of items or services (specified in subparagraph 

(C)), the plan or coverage may not impose any treatment 

limit on mental health and substance-related disorder benefits that are classified in the same category of items or 

services. 

(B) TREATMENT LIMIT.—If the plan or coverage includes 

a treatment limit on substantially all medical and surgical 

benefits in any category of items or services, the plan or 

coverage may not impose such a treatment limit on mental 

health and substance-related disorder benefits for items 

and services within such category that are more restrictive 

than the predominant treatment limit that is applicable to 

medical and surgical benefits for items and services within 

such category. 

(C) CATEGORIES OF ITEMS AND SERVICES FOR APPLICATION OF TREATMENT LIMITS AND BENEFICIARY FINANCIAL

REQUIREMENTS.—For purposes of this paragraph and paragraph (4), there shall be the following four categories of 

items and services for benefits, whether medical and surgical benefits or mental health and substance-related disorder benefits, and all medical and surgical benefits and 

all mental health and substance related benefits shall be 

classified into one of the following categories: 

(i) INPATIENT, IN-NETWORK.—Items and services furnished on an inpatient basis and within a network of 


bajohnson on PROD1PC71 with REPORTS
59 

providers established or recognized under such plan or 

coverage. 

(ii) INPATIENT, OUT-OF-NETWORK.—Items and services furnished on an inpatient basis and outside any 

network of providers established or recognized under 

such plan or coverage. 

(iii) OUTPATIENT, IN-NETWORK.—Items and services 

furnished on an outpatient basis and within a network 

of providers established or recognized under such plan 

or coverage. 

(iv) OUTPATIENT, OUT-OF-NETWORK.—Items and services furnished on an outpatient basis and outside any 

network of providers established or recognized under 

such plan or coverage. 

(D) TREATMENT LIMIT DEFINED.—For purposes of this 

paragraph, the term ‘‘treatment limit’’ means, with respect 

to a plan or coverage, limitation on the frequency of treatment, number of visits or days of coverage, or other similar 

limit on the duration or scope of treatment under the plan 

or coverage. 

(E) PREDOMINANCE.—For purposes of this subsection, a 

treatment limit or financial requirement with respect to a 

category of items and services is considered to be predominant if it is the most common or frequent of such type of 

limit or requirement with respect to such category of items 

and services. 

(4) BENEFICIARY FINANCIAL REQUIREMENTS.— (A) NO BENEFICIARY FINANCIAL REQUIREMENT.—If the 

plan or coverage does not include a beneficiary financial requirement (as defined in subparagraph (C)) on substantially all medical and surgical benefits within a category of 

items and services (specified in paragraph (3)(C)), the plan 

or coverage may not impose such a beneficiary financial requirement on mental health and substance-related disorder 

benefits for items and services within such category. 

(B) BENEFICIARY FINANCIAL REQUIREMENT.— (i) TREATMENT OF DEDUCTIBLES, OUT-OF-POCKET LIM- ITS, AND SIMILAR FINANCIAL REQUIREMENTS.—If the 

plan or coverage includes a deductible, a limitation on 

out-of-pocket expenses, or similar beneficiary financial 

requirement that does not apply separately to individual items and services on substantially all medical 

and surgical benefits within a category of items and 

services, the plan or coverage shall apply such requirement (or, if there is more than one such requirement 

for such category of items and services, the predominant requirement for such category) both to medical 

and surgical benefits within such category and to mental health and substance-related disorder benefits within such category and shall not distinguish in the application of such requirement between such medical and 

surgical benefits and such mental health and substance-related disorder benefits. 

(ii) OTHER FINANCIAL REQUIREMENTS.—If the plan or 

coverage includes a beneficiary financial requirement 


bajohnson on PROD1PC71 with REPORTS
60 

not described in clause (i) on substantially all medical 

and surgical benefits within a category of items and 

services, the plan or coverage may not impose such financial requirement on mental health and substancerelated disorder benefits for items and services within 

such category in a way that is more costly to the participant or beneficiary than the predominant beneficiary 

financial requirement applicable to medical and surgical benefits for items and services within such category. 

(C) BENEFICIARY FINANCIAL REQUIREMENT DEFINED.—For 

purposes of this paragraph, the term ‘‘beneficiary financial 

requirement’’ includes, with respect to a plan or coverage, 

any deductible, coinsurance, co-payment, other cost sharing, and limitation on the total amount that may be paid 

by a participant or beneficiary with respect to benefits 

under the plan or coverage, but does not include the application of any aggregate lifetime limit or annual limit. 

(5) AVAILABILITY OF PLAN INFORMATION.—The criteria for 

medical necessity determinations made under the plan with respect to mental health and substance-related disorder benefits 

(or the health insurance coverage offered in connection with the 

plan with respect to such benefits) shall be made available by 

the plan administrator (or the health insurance issuer offering 

such coverage) to any current or potential participant, beneficiary, or contracting provider upon request. The reason for 

any denial under the plan (or coverage) of reimbursement or 

payment for services with respect to mental health and substance-related disorder benefits in the case of any participant or 

beneficiary shall, upon request, be made available by the plan 

administrator (or the health insurance issuer offering such coverage) to the participant or beneficiary. 

(6) MINIMUM SCOPE OF COVERAGE AND EQUITY IN OUT-OF- NETWORK BENEFITS.—

(A) MINIMUM SCOPE OF MENTAL HEALTH AND SUBSTANCE- RELATED DISORDER BENEFITS.—In the case of a group 

health plan (or health insurance coverage offered in connection with such a plan) that provides any mental health and 

substance-related disorder benefits, the plan or coverage 

shall include benefits for any mental health condition or 

substance-related disorder for which benefits are provided 

under the benefit plan option offered under chapter 89 of 

title 5, United States Code, with the highest average enrollment as of the beginning of the most recent year beginning 

on or before the beginning of the plan year involved. 

(B) EQUITY IN COVERAGE OF OUT-OF-NETWORK BENEFITS.—

(i) IN GENERAL.—In the case of a plan or coverage 

that provides both medical and surgical benefits and 

mental health and substance-related disorder benefits, 

if medical and surgical benefits are provided for substantially all items and services in a category specified 

in clause (ii) furnished outside any network of providers established or recognized under such plan or 

coverage, the mental health and substance-related disVerDate Aug 31 2005 07:14 Oct 17, 2007 Jkt 069006 PO 00000 Frm 00060 Fmt 6659 Sfmt 6603 E:\HR\OC\HR374P1.XXX HR374P1

bajohnson on PROD1PC71 with REPORTS
61 

order benefits shall also be provided for items and 

services in such category furnished outside any network 

of providers established or recognized under such plan 

or coverage in accordance with the requirements of this 

section. 

(ii) CATEGORIES OF ITEMS AND SERVICES.—For purposes of clause (i), there shall be the following three 

categories of items and services for benefits, whether 

medical and surgical benefits or mental health and 

substance-related disorder benefits, and all medical 

and surgical benefits and all mental health and substance-related disorder benefits shall be classified into 

one of the following categories: 

(I) EMERGENCY.—Items and services, whether 

furnished on an inpatient or outpatient basis, required for the treatment of an emergency medical 

condition (including an emergency condition relating to mental health and substance-related disorders). 

(II) INPATIENT.—Items and services not described in subclause (I) furnished on an inpatient 

basis. 

(III) OUTPATIENT.—Items and services not described in subclause (I) furnished on an outpatient 

basis. 

(b) CONSTRUCTION.—Nothing in this section shall be 

øconstrued— ø(1) as requiring¿ construed as requiring a group health plan 

(or health insurance coverage offered in connection with such 

a plan) to provide any ømental health benefits; or¿ mental 

health and substance-related disorder benefits. 

ø(2) in the case of a group health plan (or health insurance 

coverage offered in connection with such a plan) that provides 

mental health benefits, as affecting the terms and conditions 

(including cost sharing, limits on numbers of visits or days of 

coverage, and requirements relating to medical necessity) relating to the amount, duration, or scope of mental health benefits under the plan or coverage, except as specifically provided 

in subsection (a) (in regard to parity in the imposition of aggregate lifetime limits and annual limits for mental health benefits).¿ 

(c) EXEMPTIONS.—

(1) SMALL EMPLOYER EXEMPTION.—This section shall not 

apply to any group health plan (and group health insurance 

coverage offered in connection with a group health plan) for 

any plan year of a small employer. 

ø(2) INCREASED COST EXEMPTION.—This section shall not 

apply with respect to a group health plan (or health insurance 

coverage offered in connection with a group health plan) if the 

application of this section to such plan (or to such coverage) results in an increase in the cost under the plan (or for such coverage) of at least 1 percent.¿ 

(2) INCREASED COST EXEMPTION.—

(A) IN GENERAL.—With respect to a group health plan (or 

health insurance coverage offered in connection with such 


bajohnson on PROD1PC71 with REPORTS
62 

a plan), if the application of this section to such plan (or 

coverage) results in an increase for the plan year involved 

of the actual total costs of coverage with respect to medical 

and surgical benefits and mental health and substance-related disorder benefits under the plan (as determined and 

certified under subparagraph (C)) by an amount that exceeds the applicable percentage described in subparagraph 

(B) of the actual total plan costs, the provisions of this section shall not apply to such plan (or coverage) during the 

following plan year, and such exemption shall apply to the 

plan (or coverage) for 1 plan year. 

(B) APPLICABLE PERCENTAGE.—With respect to a plan (or 

coverage), the applicable percentage described in this paragraph shall be— (i) 2 percent in the case of the first plan year which 

begins after the date of the enactment of the Paul 

Wellstone Mental Health and Addiction Equity Act of 

2007; and 

(ii) 1 percent in the case of each subsequent plan 

year. 

(C) DETERMINATIONS BY ACTUARIES.—Determinations as 

to increases in actual costs under a plan (or coverage) for 

purposes of this subsection shall be made by a qualified actuary who is a member in good standing of the American 

Academy of Actuaries. Such determinations shall be certified by the actuary and be made available to the general 

public. 

(D) 6-MONTH DETERMINATIONS.—If a group health plan 

(or a health insurance issuer offering coverage in connection with such a plan) seeks an exemption under this paragraph, determinations under subparagraph (A) shall be 

made after such plan (or coverage) has complied with this 

section for the first 6 months of the plan year involved. 

(E) NOTIFICATION.—A group health plan under this part 

shall comply with the notice requirement under section 

712(c)(2)(E) of the Employee Retirement Income Security 

Act of 1974 with respect to the a modification of mental 

health and substance-related disorder benefits as permitted 

under this paragraph as if such section applied to such 

plan. 

* * * * * * * 

(e) DEFINITIONS.—For purposes of this section—

(1) * * * 

* * * * * * * 

(3) MEDICAL OR SURGICAL BENEFITS.—The term ‘‘medical or 

surgical benefits’’ means benefits with respect to 

medical or surgical services, as defined under the terms of the 

plan or coverage (as the case may be), but does not include 

ømental health benefits¿ mental health and substance-related 

disorder benefits. 

(4) øMENTAL HEALTH BENEFITS¿ MENTAL HEALTH AND SUBSTANCE-RELATED DISORDER BENEFITS.—The term ‘‘ømental 

health benefits¿ mental health and substance-related disorder 

benefits’’ means øbenefits with respect to mental health servVerDate Aug 31 2005 07:14 Oct 17, 2007 Jkt 069006 PO 00000 Frm 00062 Fmt 6659 Sfmt 6601 E:\HR\OC\HR374P1.XXX HR374P1

bajohnson on PROD1PC71 with REPORTS
63 

ices¿ benefits with respect to services for mental health conditions or substance-related disorders, as defined under the terms 

of the plan or coverage (as the case may be), but does not include benefits with respect to treatment of substance abuse or 

chemical dependency. 

ø(f) SUNSET.—This section shall not apply to benefits for services 

furnished after December 31, 2007.¿ 

(f) PREEMPTION, RELATION TO STATE LAWS.— (1) IN GENERAL.—Nothing in this section shall be construed 

to preempt any State law that provides greater consumer protections, benefits, methods of access to benefits, rights or remedies 

that are greater than the protections, benefits, methods of access 

to benefits, rights or remedies provided under this section. 

(2) CONSTRUCTION.—Nothing in this section shall be construed to affect or modify the provisions of section 2723 with respect to group health plans. 

INTERNAL REVENUE CODE OF 1986 

* * * * * * * 

Subtitle K—Group Health Plan 

Requirements 

* * * * * * * 

CHAPTER 100—GROUP HEALTH PLAN 

REQUIREMENTS 

* * * * * * * 

Subchapter B—Other Requirements 

* * * * * * * 

øSec. 9812. Parity in the application of certain limits to mental health benefits.¿ 

Sec. 9812. Equity in mental health and substance-related disorder benefits. 

* * * * * * * 

øSEC. 9812. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO MENTAL HEALTH BENEFITS.¿ 

SEC. 9812. EQUITY IN MENTAL HEALTH AND SUBSTANCE-RELATED DISORDER BENEFITS. 

(a) IN GENERAL.—

(1) AGGREGATE LIFETIME LIMITS.—In the case of a group 

health plan that provides both medical and surgical benefits 

and ømental health benefits¿ mental health and substance-related disorder benefits—

(A) NO LIFETIME LIMIT.—If the plan does not include an 

aggregate lifetime limit on substantially all medical and 

surgical benefits, the plan may not impose any aggregate 

lifetime limit on ømental health benefits¿ mental health 

and substance-related disorder benefits. (B) LIFETIME LIMIT.—If the plan includes an aggregate 

lifetime limit on substantially all medical and surgical 


bajohnson on PROD1PC71 with REPORTS
64 

benefits (in this paragraph referred to as the ‘‘applicable 

lifetime limit’’), the plan shall either— (i) apply the applicable lifetime limit both to the 

medical and surgical benefits to which it otherwise 

would apply and to ømental health benefits¿ mental 

health and substance-related disorder benefits and not 

distinguish in the application of such limit between 

such medical and surgical benefits and ømental health 

benefits¿ mental health and substance-related disorder 

benefits; or 

(ii) not include any aggregate lifetime limit on 

ømental health benefits¿ mental health and substancerelated disorder benefits that is less than the applicable lifetime limit. 

(C) RULE IN CASE OF DIFFERENT LIMITS.—In the case of 

a plan that is not described in subparagraph (A) or (B) and 

that includes no or different aggregate lifetime limits on 

different categories of medical and surgical benefits, the 

Secretary shall establish rules under which subparagraph 

(B) is applied to such plan with respect to ømental health 

benefits¿ mental health and substance-related disorder 

benefits by substituting for the applicable lifetime limit an 

average aggregate lifetime limit that is computed taking 

into account the weighted average of the aggregate lifetime 

limits applicable to such categories. 

(2) ANNUAL LIMITS.—In the case of a group health plan that 

provides both medical and surgical benefits and ømental 

health benefits¿ mental health and substance-related disorder 

benefits—

(A) NO ANNUAL LIMIT.—If the plan does not include an 

annual limit on substantially all medical and surgical benefits, the plan may not impose any annual limit on ømental health benefits¿ mental health and substance-related 

disorder benefits. (B) ANNUAL LIMIT.—If the plan includes an annual limit 

on substantially all medical and surgical benefits (in this 

paragraph referred to as the ‘‘applicable annual limit’’), the 

plan shall either— (i) apply the applicable annual limit both to medical 

and surgical benefits to which it otherwise would 

apply and to ømental health benefits¿ mental health 

and substance-related disorder benefits and not distinguish in the application of such limit between such 

medical and surgical benefits and ømental health benefits¿ mental health and substance-related disorder 

benefits; or 

(ii) not include any annual limit on ømental health 

benefits¿ mental health and substance-related disorder 

benefits that is less than the applicable annual limit. 

(C) RULE IN CASE OF DIFFERENT LIMITS.—In the case of 

a plan that is not described in subparagraph (A) or (B) and 

that includes no or different annual limits on different categories of medical and surgical benefits, the Secretary 

shall establish rules under which subparagraph (B) is applied to such plan with respect to ømental health benefits¿ 


bajohnson on PROD1PC71 with REPORTS
65 

mental health and substance-related disorder benefits by 

substituting for the applicable annual limit an average annual limit that is computed taking into account the 

weighted average of the annual limits applicable to such 

categories. 

(3) TREATMENT LIMITS.— (A) NO TREATMENT LIMIT.—If the plan does not include 

a treatment limit (as defined in subparagraph (D)) on substantially all medical and surgical benefits in any category 

of items or services (specified in subparagraph (C)), the 

plan may not impose any treatment limit on mental health 

and substance-related disorder benefits that are classified 

in the same category of items or services. 

(B) TREATMENT LIMIT.—If the plan includes a treatment 

limit on substantially all medical and surgical benefits in 

any category of items or services, the plan may not impose 

such a treatment limit on mental health and substance-related disorder benefits for items and services within such 

category that are more restrictive than the predominant 

treatment limit that is applicable to medical and surgical 

benefits for items and services within such category. 

(C) CATEGORIES OF ITEMS AND SERVICES FOR APPLICA- TION OF TREATMENT LIMITS AND BENEFICIARY FINANCIAL

REQUIREMENTS.—For purposes of this paragraph and paragraph (4), there shall be the following four categories of 

items and services for benefits, whether medical and surgical benefits or mental health and substance-related disorder benefits, and all medical and surgical benefits and 

all mental health and substance related benefits shall be 

classified into one of the following categories: 

(i) INPATIENT, IN-NETWORK.—Items and services furnished on an inpatient basis and within a network of 

providers established or recognized under such plan or 

coverage. 

(ii) INPATIENT, OUT-OF-NETWORK.—Items and services furnished on an inpatient basis and outside any 

network of providers established or recognized under 

such plan or coverage. 

(iii) OUTPATIENT, IN-NETWORK.—Items and services 

furnished on an outpatient basis and within a network 

of providers established or recognized under such plan 

or coverage. 

(iv) OUTPATIENT, OUT-OF-NETWORK.—Items and services furnished on an outpatient basis and outside any 

network of providers established or recognized under 

such plan or coverage. 

(D) TREATMENT LIMIT DEFINED.—For purposes of this 

paragraph, the term ‘‘treatment limit’’ means, with respect 

to a plan, limitation on the frequency of treatment, number 

of visits or days of coverage, or other similar limit on the 

duration or scope of treatment under the plan. 

(E) PREDOMINANCE.—For purposes of this subsection, a 

treatment limit or financial requirement with respect to a 

category of items and services is considered to be predominant if it is the most common or frequent of such type of 


bajohnson on PROD1PC71 with REPORTS
66 

limit or requirement with respect to such category of items 

and services. 

(4) BENEFICIARY FINANCIAL REQUIREMENTS.— (A) NO BENEFICIARY FINANCIAL REQUIREMENT.—If the 

plan does not include a beneficiary financial requirement 

(as defined in subparagraph (C)) on substantially all medical and surgical benefits within a category of items and 

services (specified in paragraph (3)(C)), the plan may not 

impose such a beneficiary financial requirement on mental 

health and substance-related disorder benefits for items 

and services within such category. 

(B) BENEFICIARY FINANCIAL REQUIREMENT.—

(i) TREATMENT OF DEDUCTIBLES, OUT-OF-POCKET LIMITS, AND SIMILAR FINANCIAL REQUIREMENTS.—If the 

plan or coverage includes a deductible, a limitation on 

out-of-pocket expenses, or similar beneficiary financial 

requirement that does not apply separately to individual items and services on substantially all medical 

and surgical benefits within a category of items and 

services, the plan or coverage shall apply such requirement (or, if there is more than one such requirement 

for such category of items and services, the predominant requirement for such category) both to medical 

and surgical benefits within such category and to mental health and substance-related disorder benefits within such category and shall not distinguish in the application of such requirement between such medical and 

surgical benefits and such mental health and substance-related disorder benefits. 

(ii) OTHER FINANCIAL REQUIREMENTS.—If the plan 

includes a beneficiary financial requirement not described in clause (i) on substantially all medical and 

surgical benefits within a category of items and services, the plan may not impose such financial requirement on mental health and substance-related disorder 

benefits for items and services within such category in 

a way that is more costly to the participant or beneficiary than the predominant beneficiary financial requirement applicable to medical and surgical benefits 

for items and services within such category. 

(C) BENEFICIARY FINANCIAL REQUIREMENT DEFINED.—For 

purposes of this paragraph, the term ‘‘beneficiary financial 

requirement’’ includes, with respect to a plan, any deductible, coinsurance, co-payment, other cost sharing, and limitation on the total amount that may be paid by a participant or beneficiary with respect to benefits under the plan, 

but does not include the application of any aggregate lifetime limit or annual limit. 

(5) AVAILABILITY OF PLAN INFORMATION.—The criteria for 

medical necessity determinations made under the plan with respect to mental health and substance-related disorder benefits 

shall be made available by the plan administrator to any current or potential participant, beneficiary, or contracting provider upon request. The reason for any denial under the plan 

of reimbursement or payment for services with respect to mental 


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67 

health and substance-related disorder benefits in the case of 

any participant or beneficiary shall, upon request, be made 

available by the plan administrator to the participant or beneficiary. 

(6) MINIMUM SCOPE OF COVERAGE AND EQUITY IN OUT-OFNETWORK BENEFITS.—

(A) MINIMUM SCOPE OF MENTAL HEALTH AND SUBSTANCERELATED DISORDER BENEFITS.—In the case of a group 

health plan (or health insurance coverage offered in connection with such a plan) that provides any mental health and 

substance-related disorder benefits, the plan or coverage 

shall include benefits for any mental health condition or 

substance-related disorder for which benefits are provided 

under the benefit plan option offered under chapter 89 of 

title 5, United States Code, with the highest average enrollment as of the beginning of the most recent year beginning 

on or before the beginning of the plan year involved. 

(B) EQUITY IN COVERAGE OF OUT-OF-NETWORK BENEFITS.—

(i) IN GENERAL.—In the case of a plan that provides 

both medical and surgical benefits and mental health 

and substance-related disorder benefits, if medical and 

surgical benefits are provided for substantially all 

items and services in a category specified in clause (ii) 

furnished outside any network of providers established 

or recognized under such plan or coverage, the mental 

health and substance-related disorder benefits shall 

also be provided for items and services in such category 

furnished outside any network of providers established 

or recognized under such plan in accordance with the 

requirements of this section. 

(ii) CATEGORIES OF ITEMS AND SERVICES.—For purposes of clause (i), there shall be the following three 

categories of items and services for benefits, whether 

medical and surgical benefits or mental health and 

substance-related disorder benefits, and all medical 

and surgical benefits and all mental health and substance-related disorder benefits shall be classified into 

one of the following categories: 

(I) EMERGENCY.—Items and services, whether 

furnished on an inpatient or outpatient basis, required for the treatment of an emergency medical 

condition (including an emergency condition relating to mental health and substance-related disorders). 

(II) INPATIENT.—Items and services not described in subclause (I) furnished on an inpatient 

basis. 

(III) OUTPATIENT.—Items and services not described in subclause (I) furnished on an outpatient 

basis. 

(b) CONSTRUCTION.—Nothing in this section shall be øconstrued—


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68 

ø(1) as requiring¿ construed as requiring a group health plan 

to provide any ømental health benefits; or¿ mental health and 

substance-related disorder benefits. 

ø(2) in the case of a group health plan that provides mental 

health benefits, as affecting the terms and conditions (including cost sharing, limits on numbers of visits or days of coverage, and requirements relating to medical necessity) relating 

to the amount, duration, or scope of mental health benefits 

under the plan, except as specifically provided in subsection (a) 

(in regard to parity in the imposition of aggregate lifetime limits and annual limits for mental health benefits).¿ 

(c) EXEMPTIONS.—

ø(1) SMALL EMPLOYER EXEMPTION.—This section shall not 

apply to any group health plan for any plan year of a small 

employer (as defined in section 4980D(d)(2)). 

ø(2) INCREASED COST EXEMPTION.—This section shall not 

apply with respect to a group health plan if the application of 

this section to such plan results in an increase in the cost 

under the plan of at least 1 percent.¿ 

(1) SMALL EMPLOYER EXEMPTION.—

(A) IN GENERAL.—This section shall not apply to any 

group health plan for any plan year of a small employer. 

(B) SMALL EMPLOYER.—For purposes of subparagraph 

(A), the term ‘‘small employer’’ means, with respect to a calendar year and a plan year, an employer who employed an 

average of at least 2 (or 1 in the case of an employer residing in a State that permits small groups to include a single 

individual) but not more than 50 employees on business 

days during the preceding calendar year. For purposes of 

the preceding sentence, all persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 

shall be treated as 1 employer and rules similar to rules of 

subparagraphs (B) and (C) of section 4980D(d)(2) shall 

apply. 

(2) INCREASED COST EXEMPTION.— (A) IN GENERAL.—With respect to a group health plan, if 

the application of this section to such plan results in an increase for the plan year involved of the actual total costs of 

coverage with respect to medical and surgical benefits and 

mental health and substance-related disorder benefits 

under the plan (as determined and certified under subparagraph (C)) by an amount that exceeds the applicable percentage described in subparagraph (B) of the actual total 

plan costs, the provisions of this section shall not apply to 

such plan during the following plan year, and such exemption shall apply to the plan for 1 plan year. 

(B) APPLICABLE PERCENTAGE.—With respect to a plan, 

the applicable percentage described in this paragraph shall 

be— (i) 2 percent in the case of the first plan year which 

begins after the date of the enactment of the Paul 

Wellstone Mental Health and Addiction Equity Act of 

2007; and 

(ii) 1 percent in the case of each subsequent plan 

year. 


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69 

(C) DETERMINATIONS BY ACTUARIES.—Determinations as 

to increases in actual costs under a plan for purposes of 

this subsection shall be made by a qualified actuary who 

is a member in good standing of the American Academy of 

Actuaries. Such determinations shall be certified by the actuary and be made available to the general public. 

(D) 6-MONTH DETERMINATIONS.—If a group health plan 

seeks an exemption under this paragraph, determinations 

under subparagraph (A) shall be made after such plan has 

complied with this section for the first 6 months of the plan 

year involved. 

* * * * * * * 

(e) DEFINITIONS.—For purposes of this section: 

(1) * * * 

* * * * * * * 

(3) MEDICAL OR SURGICAL BENEFITS.—The term ‘‘medical or 

surgical benefits’’ means benefits with respect to medical or 

surgical services, as defined under the terms of the plan, but 

does not include ømental health benefits¿ mental health and 

substance-related disorder benefits. 

(4) øMENTAL HEALTH BENEFITS¿ MENTAL HEALTH AND SUBSTANCE-RELATED DISORDER BENEFITS.—The term ‘‘ømental 

health benefits¿ mental health and substance-related disorder 

benefits’’ means øbenefits with respect to mental health services¿ benefits with respect to services for mental health conditions or substance-related disorders, as defined under the terms 

of the plan, but does not include benefits with respect to treatment of substance abuse or chemical dependency. 

ø(f) APPLICATION OF SECTION.—THIS SECTION SHALL NOT APPLY

TO BENEFITS FOR SERVICES FURNISHED—

ø(1) on or after September 30, 2001, and before January 10, 

2002, 

ø(2) on or after January 1, 2004, and before the date of the 

enactment of the Working Families Tax Relief Act of 2004, and 

ø(3) after December 31, 2007.¿ 

* * * * * * * 

XIII. COMMITTEE CORRESPONDENCE

None. 


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(70) 

MINORITY VIEWS

INTRODUCTION

The goal of providing parity between mental health benefits and 

other medical benefits provided under employer-sponsored health 

coverage is something that all Members of the Committee and, we 

believe, most Members of Congress, would endorse. In the 110th 

Congress, competing legislative proposals in the House and Senate 

offer substantially different approaches in addressing this issue. It 

is our belief that the proposal advancing in the Senate is a far superior one to that of the House. Accordingly, we set forth these 

views to express our concerns with the House bill, and urge that 

as the legislative process moves forward, the House brings its efforts in line with that of the other body. 

As a principal committee of jurisdiction, the Committee on Education and Labor has long been involved in the mental health parity debate. Full mental health parity bills have been introduced in 

prior Congresses but have not been enacted into law, largely because of the serious concerns associated with these proposals and 

the opposition to imposition of additional federal coverage mandates on employers, who continue to struggle to provide affordable, 

high-quality coverage to their employees. In the 110th Congress, 

mental health parity legislation is moving closer toward passage. 

The current parity bills, H.R. 1424 in the House and S. 558 in 

the Senate, represent two significantly different approaches to the 

issue of achieving mental health parity in employer-sponsored coverage. H.R. 1424, as reported by the Committee, more closely reflects prior failed efforts—it involved virtually no input from those 

parties responsible for complying with the mandates (employers, 

insurers, e.g.), and is, not surprisingly, strongly opposed by those 

parties. In stark contrast, the Senate bill, S. 558, reflects a carefully negotiated consensus of all major stakeholders on all sides of 

the mental health parity debate. 

Members on both sides of the aisle can in good conscience and 

good faith disagree on the merits of both pending bills. However, 

there can be little legitimate debate that the Senate bill, offered as 

the Republican Substitute at full Committee markup on July 18, 

2007 by Representative John Kline, is the only proposal that 

achieves exactly what all parties purportedly intend: full parity between mental health and other medical benefits. H.R. 1424, in contrast, grants preferential treatment for mental health benefits and 

as such, constitutes bad policy. Accordingly, and for the reasons set 

forth below, we oppose its passage. 

FEDERAL LAW ON THE PROVISION OF MENTAL HEALTH BENEFITS

The provision of health benefits by employers to their employees 

is generally governed by the Employee Retirement Income Security 


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1On the state level, all states except Wyoming have passed mental health parity laws which 

require state law-governed health plans to provide varying degrees of mental health coverage, 

subject these plans to certain financial limits, or otherwise mandate mental health benefits. Employers with fully-insured and self-insured plans that are regulated under ERISA (and thus the 

MHPA) are not bound by these state laws, and therefore not subject to these state mandates. 

Thus, actions taken by the Committee to amend ERISA will, of necessity, have far-reaching consequences. 2The Diagnostic and Statistical Manual of Mental Disorders is produced by the American Psychiatric Association and is a comprehensive system of diagnosis for psychiatric conditions. The 

fourth (IV) edition was published in 1995, and is the most current edition. 3 In general, the term ‘‘medical management’’ is used to describe practices designed to ensure 

appropriate diagnosis and treatment of medical conditions, and to improve efficiency and quality 

in the delivery of medical services. Such practices include utilization review, case management, 

disease management, and quality management. 

Act (‘‘ERISA’’). In 1996, Congress enacted the Mental Health Parity 

Act (‘‘MHPA’’), which amended ERISA and established new federal 

standards for mental health coverage offered by group health 

plans.1 The MHPA added section 712 of ERISA to create certain requirements for mental health coverage, if this coverage was offered 

by a health plan. Under the MHPA, health plans are not required 

to offer mental health benefits. However, plans that do choose to 

provide mental health benefits are prohibited from imposing lower 

annual and lifetime dollar limits on these benefits than the limits 

placed on medical and surgical benefits. Under current law, the 

MHPA’s parity requirements do not apply to substance abuse or 

chemical dependency treatment. 

The MHPA’s standards apply only to private-sector, employersponsored group health plans, including both fully-insured and selfinsured plans, but not to the individual (non-group) health insurance market. Employers retain discretion regarding the extent and 

scope of mental health benefits offered to workers and their families, including cost sharing and requirements relating to medical 

necessity. Also, certain plans may be exempt from the MHPA. For 

instance, a small employer exception provides that plans covering 

employers with 50 or fewer employees are exempt from compliance. 

In addition, the MHPA permits employers to ‘‘opt-out’’ of the 

MHPA’s requirements if they experience an increase in claims costs 

of at least one percent as a result of compliance. The provisions of 

the MHPA were originally set to expire in 2001, but have been routinely reauthorized on an annual basis, with the current authorization expiring on December 31, 2007. 

EXECUTIVE ACTION ON MENTAL HEALTH PARITY

In 1999, President Clinton issued an executive order that implemented full parity for both mental health and substance abuse benefits in health plans offered under the Federal Employees Health 

Benefits Program (FEHBP) beginning in 2001. These benefits cover 

all medically necessary treatments for all categories of mental illnesses listed in the Diagnostic and Statistical Manual of Mental 

Disorders (DSM–IV).2 Under the FEHBP, mental health parity is 

required only for services provided on an in-network basis (i.e., 

through a specific group of providers contracted by a managed 

health care organization and/or an insurance carrier to provide 

services to participants in that particular plan). Further, the 

FEHBP plans engage in medical management practices to ensure 

appropriate diagnosis and treatment of mental health conditions.3


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72 

4Members of the Fairness Coalition include the following health care provider and mental 

health advocacy groups: the American Hospital Association, the American Medical Association, 

the American Psychiatric Association, the American Psychological Association, the Association 

for Behavioral Health and Wellness, the Federation of American Hospitals, Mental Health 

America, National Alliance on Mental Illness, and the National Association of Psychiatric 

Health Systems. 5See, Congressional Budget Office, Cost Estimate, S. 558 Mental Health Parity Act of 2007, 

dated March 20, 2007. 

The Office of Personnel Management estimated that implementation of the order resulted in an average premium increase of 1.64 

percent for fee-for-service plans and 0.3 percent for HMOs. 

While endorsing in principle the concept of mental health parity, 

the current Administration has not yet endorsed any particular 

bill, including H.R. 1424 or S. 558. 

FEDERAL LEGISLATIVE ACTIVITY

Senate legislation 

In the 110th Congress, the Mental Health Parity Act of 2007, S. 

558, was introduced by Senators Pete Domenici (R–NM), Ted Kennedy (D–MA), and Mike Enzi (R–WY) on February 12, 2007. The 

Senate Health, Education, Labor, and Pensions (‘‘HELP’’) Committee approved the measure, as amended, on February 14, 2007. 

The Senate bill was the product of negotiations between patient advocates, behavioral health providers, insurers, and business groups 

(collectively, the ‘‘Fairness Coalition’’). 4

S. 558 generally requires health insurance plans that offer mental health coverage to provide that coverage on par with financial 

and treatment coverage offered for other physical illnesses, The 

Senate bill would not mandate that plans provide specific mental 

health benefits; however, fully insured plans, which remain subject 

to state insurance laws, would still be required to comply with 

state-specific benefit requirements. S. 558 also would specifically 

ensure that medical management of mental health benefits and negotiation of separate reimbursement or provider payment rates is 

not prohibited, meaning that employers and health plans could 

maintain flexibility in forming behavioral health care provider networks. Finally, the Senate bill, as introduced, would preempt state 

parity laws that could impact fully-insured plans governed by 

ERISA, but would largely leave benefit mandates intact. 

The Congressional Budget Office (‘‘CBO’’) scored S. 558 and concluded that it would result in a 0.4 percent increase in employersponsored premiums. This was estimated to amount to $1.5 billion 

in 2009 and $3.4 billion in 2013. Also, for the five-year period 

2008–2012, CBO estimated a $1 billion decrease in direct revenues 

(resulting from increased premium deductions), $280 million in increased direct spending (Medicaid managed care), and $150 million 

in increased appropriations.5

Additional discussions and negotiations involving S. 558 have 

continued subsequent to the HELP Committee’s markup, and have 

resulted in slight revisions to S. 558 as reported out of committee 

in the form of a proposed ‘‘manager’s amendment’’ for Senate Floor 

consideration. However, this has not changed the support of the 

Fairness Coalition for that bill. In fact, the parties that negotiated 

the manager’s amendment sent the following letter to Senators 

Kennedy, Enzi, and Domenici: 


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Insert graphic folio 79 HR374P1.003 


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All but two of the provider and advocacy groups of the Fairness 

Coalition involved in the negotiation of the Senate manager’s 

amendment—Mental Health America and the American Medical 

Association—signed the June 14 letter above; however, those two 

groups have not withdrawn their support for the Senate manager’s 

amendment. 

House Legislation 

On March 7, 2007, Representatives Patrick Kennedy (D–RI) and 

Jim Ramstad (R–MN) introduced H.R. 1424, the Paul Wellstone 

Mental Health and Addiction Equity Act of 2007. This bill amends 

ERISA, the Public Health Service Act, and the Internal Revenue 

Code, and was referred to the Committees on Education and Labor, 

Energy and Commerce, and Ways and Means, As a matter of policy, the bill raises a number of substantive concerns. 

As introduced, H.R.. 1424 purports to achieve mental health parity by prohibiting treatment limits or the imposition of financial requirements on mental health and substance-related disorder benefits within group health plans if those requirements and limitations 

are not similarly imposed on medical and surgical benefits under 

such plans. The bill would impose a further, broad mandate by requiring that where a plan covers any behavioral health disorder, it 

must cover all currently recognized conditions listed in the DSM– IV. This mandate would include requiring coverage for certain disorders, such as ‘‘caffeine intoxication’’ and ‘‘circadian rhythm sleep 

disorder (jet lag).’’ H.R. 1424 eliminates a plan’s flexibility to determine covered benefits. Under the bill, plans would not be specifically permitted to engage in medical management practices and negotiate separate reimbursement or provider payment rates. H.R. 

1424 would mandate out-of-network coverage for mental health 

and substance-related disorders, if such coverage is provided for 

emergency, inpatient or outpatient services. 

Finally, and perhaps most importantly, on the issue of ERISA 

preemption, H.R. 1424 would give states the authority to enact 

greater consumer protections, benefits, methods of access to benefits, rights or remedies than those contained in the federal bill. The 

bill, if enacted, would establish a benefit ‘‘floor’’ while permitting 

states to impose broader mental health coverage mandates, creating inconsistent and confusing regulatory schemes. At the same 

time, this provision allows state enforcement and remedy schemes 

to be established which would apply to certain fully-insured plans, 

only for mental health benefits but not other medical benefits. Such 

plans have operated under the exclusive jurisdiction and remedies 

set forth under ERISA, which has existed and has been interpreted 

by the courts for over three decades. 

CBO has not scored H.R. 1424. However, considering the CBO 

score for S. 558 and the broader employer mandate set forth in 

H.R. 1424, it is likely that H.R. 1424’s costs would meet or exceed 

those of the Senate bill. 

Legislative hearing on H.R. 1424 

On July 10, 2007, the Committee on Education and Labor Subcommittee on Health, Education, Labor, and Pensions held a legislative hearing on H.R. 1424. At that hearing, Representatives KenVerDate Aug 31 2005 07:14 Oct 17, 2007 Jkt 069006 PO 00000 Frm 00074 Fmt 6604 Sfmt 6602 E:\HR\OC\HR374P1.XXX HR374P1

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6Testimony of E. Neil Trautwein, testifying on behalf of the National Retail Federation, Committee on Education and Labor, Subcommittee on Health, Education, Labor, and Pensions Hearing, ‘‘The Paul Wellstone Mental Health and Addiction Equity Act of 2007 (H.R. 1424),’’ (July 

10, 2007) at 3–4 (emphasis added). 

nedy and Ramstad testified, as did Former First Lady Rosalyn 

Carter, mental health advocates, an economic analyst, and the 

Commissioner of Insurance for the State of Wisconsin. Additional 

witnesses included Jon Breyfogle, an attorney that represented the 

American Benefits Council, and E. Neil Trautwein, who represented the National Retail Federation (‘‘NRF’’). The hearing focused on the specific provisions of the House bill, but also featured 

robust discussion of the Senate proposal. 

Mr. Trautwein testified as to why the NRF opposes H.R. 1424, 

but also as to the reasons why that group supports the proposed 

manager’s amendment to S. 558. In his testimony, Mr. Trautwein 

raised a number of concerns regarding the provisions of H.R. 1424, 

including its broad coverage mandate, ERISA preemption and the 

role of the states, inadequate medical management protections, and 

the mandate to provide out-of-network coverage. Importantly, he 

outlined the collaborative Senate process that resulted in a balanced parity bill. In his own words: 

The mental health parity debate has been both long and 

fierce. have been an advocate in this debate for a number 

of years, both before and after the 1996 law addressing 

parity in annual and lifetime limits. We all have contributed heated rhetoric to this debate. Unfortunately, it has 

really obscured our shared objective of helping individuals 

get the coverage and care they needed. 

It is this last point that has encouraged a running dialogue between the advocates and Senate sponsors. I have 

been privileged to have participated over a number of years 

as a principal representative of the employer community in 

intense discussions and negotiations with both the Senate 

sponsors as well as advocates for the mental health and addiction communities. I would like to give special thanks to 

Senators Ted Kennedy (D–MA), Michael Enzi (R–WY) and 

Pete Domenici (R–NM) for their longstanding advocacy on 

this legislation as well as for their willing ear and fair and 

responsive negotiations through the years. 

The Senate compromise that I have highlighted throughout this testimony is the product of those negotiations. It 

has also created a broad coalition among erstwhile opponents—surely somewhat of a distinction. 

NRF is joined in this coalition not only by traditional allies like the American Benefits Council, Aetna, the U.S. 

Chamber of Commerce and the National Association of 

Manufacturers (among others) but also by the National Alliance on Mental Illness, the American Psychiatric and the 

American Psychological Associations and the American 

Hospital Association and the Federation of American Hospitals (among others). I have attached a copy of our joint 

letter at the conclusion of my testimony. I respectfully ask 

that it be made part of the hearing record.6


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7Testimony of Jon W. Breyfogle, Esq., testifying on behalf of the American Benefits Council, 

Committee on Education and Labor, Subcommittee on Health, Education, Labor, and Pensions 

Hearing, ‘‘The Paul Wellstone Mental Health and Addiction Equity Act of 2007 (H.R. 1424),’’ (July 10, 2007) at 7 (emphasis added). 

Mr. Breyfogle, an employment benefits practitioner with decades 

of experience, explained to the Subcommittee the reasons underlying support for the Senate bill, and specific concerns with the 

House bill. In particular, Mr. Breyfogle expressed concerns with 

H.R. 1424’s ERISA preemption provisions. As Mr. Breyfogle testified: 

We have significant concerns with the provisions in the 

House parity bill which would authorize States to provide 

‘‘greater consumer protections, benefits, methods of access 

to benefits, rights or remedies’’ than the provisions set out 

in the legislation. Clearly, this language gives States the 

ability to develop parity laws, at least for fully insured 

health plans, that are more extensive than the federal 

standards provided in the House bill. We prefer the approach adopted in the Senate bill, which would establish 

uniform federal parity rules applicable to treatment limitations and financial requirements for both self-insured and 

insured plans while preserving the traditional authority of 

States to require fully insured plans to provide mental 

health coverage. 

The more troubling aspect of this provision in the House 

bill is that it opens the door for greater State law remedies 

for disputes involving mental health benefits for participants in insured plans. The Supreme Court has issued numerous rulings making clear that ERISA’s enforcement 

scheme is exclusive for both fully insured and self-insured 

plans and completely preempts alternative State remedial 

schemes. It makes no sense whatsoever to allow access to 

State law remedies for one category of benefits—i.e., participants in fully insured plans for disputes over mental 

health benefits. To the extent the House bill is interpreted 

to revise remedies for all types of benefit disputes, H.R. 

1424 is certainly not the vehicle to do so. The debate over 

ERISA’s remedies has occurred over many years, generally 

in the context of the Patients’ Bill of Rights. Such a fundamental issue as ERISA’s remedial scheme should not be an 

adjunct to a bill whose purpose is to address mental health 

parity. 

The uniformity that ERISA establishes for employersponsored coverage, including its enforcement and remedies 

scheme, is sound public policy and is something employers 

consider crucial to their voluntary decision to offer health 

coverage to their employees. If Congress believes that 

changes are needed in this area, such changes should be 

debated on their own merits rather than included as one of 

many provisions of a mental health parity bill.7

Although testimony was received from other witnesses at the 

hearing in favor of mental health parity legislation, the main 

points raised by Mr. Trautwein and Mr. Breyfogle regarding the 


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77 

differences and impacts of the House and Senate bills remained 

largely unrebutted, or at best were the subject of legitimate disagreement among experts. Accordingly, credible testimony at the 

July 10, 2007 hearing established that H.R. 1424 did not accomplish mental health parity in a balanced and thoughtful manner, 

and that significant concerns remained regarding the imposition of 

mandated benefits. Notwithstanding (or possibly because of) these 

legitimate concerns, on July 12 the Democrat majority scheduled a 

full committee markup of H.R. 1424 for July 18, 2007. The Majority 

provided the final draft of the Chairman’s Amendment to H.R. 

1424 approximately twelve hours before the full committee markup. 

Full Committee markup 

On Wednesday, July 18, 2007, eight days after the Subcommittee 

hearing, the full Committee on Education and Labor met to consider and mark up H.R. 1424. An Amendment in the Nature of a 

Substitute to H.R. 1424 was offered by Chairman Miller (the ‘‘Miller Amendment’’) and was adopted without objection. A Substitute 

Amendment to the Miller Amendment was offered by Representative Kline which was rejected on a rollcall vote of 16 to 25. The 

Committee favorably reported H.R. 1424, as amended by the Miller 

Amendment, on a rollcall vote of 33 to 9. 

Amendment in the Nature of a Substitute to H.R. 1424, offered by Mr. George Miller of California 

At the full Committee markup, Chairman Miller offered an 

Amendment in the Nature of a Substitute to H.R. 1424 (‘‘the Miller 

Amendment’’). The Miller Amendment set forth minor revisions 

primarily to Section 2 of H.R. 1424. The late evening of July 17 

was the first time that Minority Members and staff were afforded 

the opportunity to review legislative text purporting to address concerns associated with H.R. 1424. 

Among its provisions, the Miller Amendment adds ‘‘emergency 

care’’ to the categories of items and services for application of treatment limits and beneficiary financial requirements. In an apparent 

attempt to address testimony received at the July 10 Subcommittee 

hearing, the Miller Amendment includes a new provision regarding 

medical management which provides that nothing in the bill shall 

limit a group health plan from managing, using certain methods, 

the provision of medical, surgical, mental health or substance-related disorder benefits, to the extent the methods are recognized 

and not prohibited under state laws. The Amendment makes modest revisions to the notice requirements under the cost exemption 

section. 

The Miller Amendment appears to seek to clarify the bill’s preemption section relating to state laws, ostensibly to address concerns raised regarding the impact of H.R. 1424’s broad provision 

permitting state laws to supersede the federal ERISA law. Specifically, section 2(i) of the Miller Amendment provides that the bill 

shall not be construed to supersede ‘‘any provision of State law 

which establishes, implements, or continues in effect any consumer 

protections, benefits, methods of access to benefits, rights, external 

review programs, or remedies solely relating to health insurance 


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issuers in connection with group health insurance coverage (including benefit mandates or regulation of group health plans of 50 or 

fewer employees) except to the extent that such provision prevents 

the application of a requirement of this part.’’ It is further stated 

that nothing in the section would affect or modify the provision of 

ERISA Section 514 with respect to group health plans. 

The Miller Amendment adds a special rule for collective bargaining agreements that would generally preclude application of 

the bill’s requirements until after expiration of the agreement or 

January 1, 2010, whichever is later. It adds a requirement on the 

Department of Labor to randomly sample group health plan compliance with the parity bill’s requirements, and to provide ‘‘assistance’’ to participants and beneficiaries who have any questions or 

problems with compliance with the bill’s requirements. Finally, in 

a revision to section 5 of H.R. 1424, the Miller Amendment directs 

the Department of Labor, rather than the Comptroller General, to 

prepare biannual reports to Congress on access to coverage. 

The Miller Amendment attempts to address some of the significant concerns raised with H.R. 1424. Despite good intent, however, 

the original bill remains largely unchanged, and the Miller Amendment does not provide sufficient clarity necessary to resolve some 

of the most troubling substantive concerns with the House legislation. 

Kline Substitute Amendment 

As discussed above, over the last two years significant progress 

on the issue of mental health parity has been made through the 

efforts of a bipartisan group of Senators (Kennedy, Enzi, and 

Domenici, among others) and a diverse and representative group of 

mental health advocates, health care providers, business groups 

and insurers. The unprecedented agreement reached among this bipartisan group is reflected in S. 558, with subsequent minor 

changes contained in the proposed manager’s amendment to that 

bill. 

In order to support the good policy and balanced compromise between all parties interested in achieving true mental health parity, 

which is and should be the goal of any legislation, Mr. Kline offered 

a substitute amendment at the full committee markup of H.R. 1424 

(the ‘‘Kline Substitute’’). The Kline Substitute embodies the proposed manager’s amendment to S. 558. 

The Kline Substitute addresses many of the concerns raised by 

the House bill. The Kline Substitute does not mandate that health 

plans cover specific mental health benefits, makes clear that medical management of mental health benefits and core payment and 

contracting issues necessary for success are not prohibited, and 

does not mandate costly out-of-network coverage. Further, the 

Kline Substitute ensures that ERISA preemption requirements are 

maintained and strengthened, in order to assure a uniform federal 

rule for the comprehensive and strong parity benefits provided by 

the bill. As such, it provides broad new parity requirements to participants in insured plans in approximately eight states that currently have no parity requirement and expands upon the parity requirements applicable to insured plans in approximately seventeen 

other states. It does this while ensuring that states can continue 


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their tradition role of regulating benefits provided under insurance 

policies in all other respects. 

It is important to note that, regardless of whether they support 

or oppose H.R. 1424, all of the parties involved in the Senate negotiations strongly support enactment of the manager’s amendment 

of S. 558 into law this year. 

The Kline Substitute was rejected on a rollcall vote of 16 to 25, 

with every Democrat present voting against it. The Democrats’ rejection of a broad-based and well-balanced substitute, which is publicly supported by mainstream mental health advocates and providers, threatens to undo the careful balance struck among all parties interested in this issue, and will make passage of meaningful 

mental health parity legislation this year exceedingly difficult. 

REPUBLICAN VIEWS

Committee Republicans are united in their desire to achieve parity between mental health and other medical benefits. However, 

the significant differences in current legislative efforts, as discussed herein, may only serve to frustrate this goal. 

Notwithstanding the rhetoric from supporters of H.R. 1424 and 

the Miller Amendment (hereafter collectively, unless specified otherwise, ‘‘H.R. 1424’’) which purports to characterize that legislation 

as providing ‘‘parity,’’ H.R. 1424 does nothing of the sort. In fact, 

largely because of the defined benefit and preemption provisions, 

H.R. 1424 would create a situation in which employer-sponsored 

plans would likely have to provide significantly greater mental and 

behavioral health benefits as compared to other medical benefits. 

This, for example, raises a question of fundamental fairness, left 

unanswered by the Majority: Why should those who potentially suffer from mental and behavioral illnesses be entitled to greater employer-sponsored benefits than an individual suffering from another 

medical condition, such as cancer? 

As set forth below, H.R. 1424’s flaws are numerous. As such, it 

should be rejected by the House. 

H.R. 1424 imposes a benefit mandate that defines covered illnesses 

too broadly 

Under H.R. 1424, every mental illness identified by the mental 

health profession through the DSM–IV would be required to be covered by health plans. Even the vast majority of states currently do 

not mandate this type of coverage. Further, H.R. 1424 applies no 

similar requirement on any other category of medical benefits covered by a plan (hospital services, physician services, drug benefits, 

or any other category of benefits), many of which involve serious 

medical conditions. At the same time, an employer is obligated to 

provide coverage for disorders such as ‘‘caffeine intoxication’’ and 

‘‘jet lag,’’ which raises serious questions about the validity of the 

conditions to be covered by this bill. The Majority apparently believes that ‘‘caffeine intoxication’’ and ‘‘jet lag’’ are the types of disorders that are worthy of a federal coverage mandate on employersponsored plans. 

Beyond the questionable nature of some of the ‘‘disorders’’ that 

would be required to be covered, H.R. 1424 does not create parity 

between medical/surgical and mental health conditions which must 


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be covered by a plan. Rather, at bottom, it is a preferential benefit 

mandate in favor of mental health conditions, which would override 

many existing state mandates for insurance plans that require coverage of a specific list of behavioral health and substance abuse 

conditions. 

The Majority may argue that beneficiaries in private, employersponsored plans should be entitled coverage for the same illnesses 

covered by the FEHBP. However, this argument is misleading. 

Simply because the federal government, through an executive order 

issued by then-President Clinton, chose to provide such coverage 

does not mean all employer-sponsored plans should be mandated 

by the federal government to do the same. Employers, like the federal government, are in the best position to assess the needs of 

their covered populations, and should be permitted to exercise their 

discretion to voluntarily assume which illnesses they choose to 

cover. It was for that reason that the Kline Substitute preserved 

the ability of group plans to use their discretion in determining 

covered benefits, and preserved the ability of states to mandate 

benefits only in certain circumstances. 

H.R. 1424 significantly weakens ERISA preemption 

Under the House bill as introduced, states would be authorized 

to enact ‘‘greater consumer protections, benefits, methods of access 

to benefits, rights or remedies’’ than the provisions set out in the 

legislation. This would give states the ability to develop parity 

laws, at least for fully insured health plans, that are more extensive than the federal standards provided in the House bill. A further concern is that virtually limitless state law remedies could be 

available to participants in insured plans for disputes involving 

mental health benefits. 

The Miller Amendment appears to attempt to correct these flaws 

by inserting new language relating to ERISA preemption, and its 

relation to state laws. The Majority may attempt to argue that this 

new language is consistent with provisions of the Health Insurance 

Portability and Accountability Act that have been in effect for 

many years. However, a close reading of the language reveals the 

potential for a substantial weakening of ERISA preemption. For example, the new language fails to clarify Congressional intent with 

sufficient specificity, as set forth in the Kline Substitute, that if 

any provision of a state law is preempted, any remaining provision 

of such law shall remain in effect and not be preempted. In addition, the claim by the Majority that the new language provides no 

new litigation rights for participants is questionable at best, if not 

simply incorrect. The new language specifically provides that any 

provision of state law that establishes, implements or continues 

‘‘any consumer protections, benefits, methods of access to benefits, 

rights, external review programs, or remedies’’ is not superseded. 

Although the new language limits the provision to group health insurance, and ostensibly continues ERISA preemption with respect 

to group health plans, this point will undoubtedly be the subject of 

litigation, and raises the substantial possibility of a significant erosion of ERISA preemption developed by court precedent over more 

than 30 years, Accordingly, the Miller Amendment creates the poVerDate Aug 31 2005 07:14 Oct 17, 2007 Jkt 069006 PO 00000 Frm 00080 Fmt 6604 Sfmt 6602 E:\HR\OC\HR374P1.XXX HR374P1

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8We note that there has been significant debate regarding the impact of S. 558 on ERISA 

preemption. See, Mila Kofman, Letter to Speaker Nancy Pelosi (June 15, 2007) and Sara Rosenbaum, JD, Letter to Senators Pete Domenici, Edward Kennedy and Michael Enzi (June 27, 

2007). Negotiations over this particular provision continue, and will hopefully be resolved to the 

satisfaction of all stakeholders. 

tential for confusing and conflicting state laws, and makes employer-sponsored plans subject to increased costs. 

If the Majority is truly interested in preserving ERISA preemption and not creating more expansive rights and remedies only for 

mental health benefits, as they stated at the full Committee markup, they simply would have sought to adopt the preemption language of the Kline Substitute, which is acceptable to interested 

stakeholders on both sides of this debate.8 The failure to do so suggests that the Majority is more interested in expanding rights and 

remedies and fueling litigation for a specific and narrow class of 

benefits. 

H.R. 1424 does not adequately address medical management of 

claims 

Apparently in response to testimony received from Republican 

witnesses at the Subcommittee hearing, H.R. 1424 as reported contains specific language which appears to attempt to authorize the 

use of medical management practices for mental health benefits. 

However, it still omits a key component that helps improve the effectiveness of medical management practices, which is contained in 

the Kline Substitute. 

Specifically, H.R. 1424 does not make clear that under its provisions group health plans are not prohibited from negotiating separate reimbursement or provider payment rates and service delivery 

systems for different benefits. This provision, combined with the 

specific authorization of medical management practices, would 

serve to provide group health plans with the tools necessary to appropriately manage and deliver mental and behavioral health care 

benefits. Further, given that such contracting practices are in use 

in the FEHBP, the Majority’s failure to include this specific authorization is inexplicable. As such, H.R. 1424 fails to protect the core 

payment and contracting practices that are essential to successful 

medical management programs that control cost and quality of benefits, and is therefore deficient. 

H.R. 1424 mandates out-of-network coverage 

H.R. 1424 mandates out-of-network coverage if a plan provides 

coverage for substantially all medical and surgical services in either emergency, inpatient or outpatient services. This is not ‘‘parity,’’ since it limits the ability of employer-sponsored plans to design benefit programs. Also, it exceeds the FEHBP requirement to 

provide parity only for in-network services. Although the Majority 

references the FEHBP program as the standard by which private 

plans should operate, they selectively exclude those portions of the 

FEHBP program which do not further the Majority’s goals. This 

provision should be rejected. 


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Employer mandates will increase costs and decrease coverage 

There is no debate over whether H.R. 1424 will increase the costs 

of employer-sponsored group health plan premiums. It will, and 

testimony from the Majority’s own witnesses confirm this fact. The 

only question involves how much will premium costs increase as a 

result of this mandate. At the Subcommittee hearing, the Majority 

cited testimony from an allegedly independent analysis of H.R. 

1424 that found a premium cost increase of approximately 0.6 percent for ‘‘typical’’ plans, and 0.1 percent if medical management 

practices are adopted. However, this analysis was not prepared by 

CBO, and can by no means be considered ‘‘independent’’ in that it 

was prepared by a paid actuarial consultant for several behavioral 

health organizations interested in passage of H.R. 1424. Also, the 

Miller Amendment fails to fully authorize medical management 

practices. Further, even under this analysis many group health 

plans, especially smaller plans, may experience cost increases significantly above the increase for a ‘‘typical’’ plan. 

Although there can be legitimate debate over the extent of cost 

increases, there should be no debate that imposing mandates increases costs and likely decreases the affordability and quality of 

coverage provided. Although when viewed in isolation, coverage 

mandates may appear to be more economically feasible and desirable, we remain concerned that the Majority will continue to consider the future imposition of additional coverage mandates. The 

cumulative costs associated with these mandates will have a detrimental impact on the quality and affordability of health care benefits. This appears to be contrary to the shared goal of all Members 

to expand access to affordable, high quality coverage. 

CONCLUSION

As we noted at the outset, the goal of providing parity between 

mental health benefits and other medical benefits provided under 

employer-sponsored health coverage is something that all Members 

of the Committee, and many in Congress, would likely endorse. 

There have been significant advances in diagnosis and treatment 

of mental and behavioral health disorders, and Committee Republicans generally believe that mental health benefits should be provided on the same terms as medical and surgical benefits. We recognize the two current legislative proposals, H.R. 1424 and S. 558, 

offer substantially different approaches toward achieving parity. 

However, only one bill, S. 558, before this Committee as the 

Kline Substitute at markup, achieves true parity and represents 

the product of two years of negotiation and agreement among a diverse group of interested stakeholder in this debate. The authors 

of H.R. 1424 did not involve all interested stakeholders, and the 

legislation appears to place mental health benefits in a more favored posture than all other medical benefits. Further, although attempts were made at full Committee markup to improve the bill, 

despite these efforts, it remains fundamentally flawed. If passed by 

the House, H.R. 1424, which differs substantially with legislation 

that could pass the Senate, will only serve to complicate enactment 

of mental health parity legislation this year. 


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For all of the reasons stated above, we oppose the passage of 

H.R. 1424. 

HOWARD P. ‘‘BUCK’’ MCKEON. 

THOMAS E. PETRI. 

PETER HOEKSTRA. 

MARK E. SOUDER. 

JUDY BIGGERT. 

JOHN KLINE. 

LUIS G. FORTUN ̃ O. 

CHARLES W. BOUSTANY, Jr. 

DAVID DAVIS. 

TIMOTHY WALBERG. 

Æ 


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