3

HEALTH

MENTAL HEALTH – HEALTH INSURANCE – IMPACT ON

MARYLAND LAW OF THE PAUL WELLSTONE AND PETER

DOMENICI MENTAL HEALTH PARITY AND ADDICTION

EQUITY ACT OF 2008 (“PARITY ACT”)

February 23, 2009

The Honorable Thomas M. Middleton, Chairman

Senate Finance Committee

The Honorable Peter A. Hammen, Chairman

House Health and Government Operations Committee

Congress recently enacted the Paul Wellstone and Pete

Domenici Mental Health Parity and Addiction Equity Act of 2008

(the “2008 Parity Act”), which builds upon the provisions of an

earlier federal law known as the Mental Health Parity Act of 1996

(the “1996 Parity Act”). Together, those laws (collectively, the

“federal Parity Acts”) establish various requirements for certain

health plans that offer mental health benefits and substance abuse

benefits. Maryland statutes governing health insurance and health

maintenance organizations (“HMOs”) mandate certain mental health

benefits, but are not identical to the federal Parity Acts and include

certain limitations. 

You have asked for our opinion concerning the relation of

federal law, as amended by the 2008 Parity Act, to Maryland law,

and specifically how each health insurance market in the State is

affected by the recent federal legislation. In particular, you ask

about the impact of the 2008 Parity Act on Annotated Code of

Maryland, Insurance Article (“IN”), §15-802, which, among other

things, contains specific cost-sharing requirements for outpatient

treatment and specifies a maximum copayment for methadone

treatment. You also ask about the impact of the federal law on IN

§15-840, which mandates coverage of medically necessary

residential crisis services.

For the reasons set forth in this opinion, the 2008 Parity Act

affects various segments of the health insurance market as follows:
4 [94 Op. Att’y

1. The 2008 Parity Act does not affect Maryland law as it

applies to individual non-group policies or small group policies

(defined as those covering at least two but not more than 50

employees). The mandates and specific limitations outlined in State

law continue to apply. Small employers that self-insure are not

subject to State law mandate.

2. The 2008 Parity Act applies to large group health

insurance policies and to self-insured large group plans provided

through employers.

3. Large group policies (defined as a health insurance

policies covering more than 50 employees) are regulated by a

combination of State and federal law concerning mental health and

substance abuse benefits. Mandates in Maryland law remain

effective. Pursuant to the federal law, these benefits must be offered

with financial limitations, cost sharing requirements, and treatment

limitations that are no more restrictive than the requirements and

limitations that apply to the “predominant” medical and surgical

benefits in the policy. Maryland law is preempted by the 2008 Parity

Act to the extent that Maryland provisions would allow mental

health and substance abuse benefits to be delivered with more

restrictive coverage rates and other treatment limitations. If the

policy offers an out-of-network benefit for medical and surgical

services, then the policy must also offer an out-of-network benefit

for mental health and substance abuse services. 

4. Self-insured health plans of private employers are

generally not governed by State law due to preemption of State laws

that relate to employee benefit plans by the Employee Retirement

Income Security Act (“ERISA”). Accordingly, these plans are

governed by federal law. For employers offering large group plans,

the Parity Acts, not State law, govern mental health and substance

abuse benefits. While these large group plans are not required to

offer mental health and substance abuse benefits, if a plan does

contain such benefits, the financial limitations, cost sharing

requirements and treatment limitations may not be more restrictive

than the predominant limitations on the medical and surgical benefits

in the plan. And, if the plan offers an out-of-network benefit for

medical and surgical services, then the plan must also offer an outof-network benefit for mental health and substance abuse services.

5. Employers that are eligible to self-insure under federal

law, but instead choose to purchase a state-regulated insurance

policy from a carrier, must provide mental health and substance
Gen. 3] 5

abuse services pursuant to Maryland law. For employers purchasing

a small group policy, the benefits outlined in Maryland law by the

Maryland Health Care Commission will apply. In the large group

market, the federal law will preempt some portions of Maryland law,

ensuring that these benefits are offered with financial limitations,

cost sharing requirements and treatment limitations that are no more

restrictive than the predominant limitations on the medical and

surgical benefits in the policy. If the policy offers an out-of-network

benefit for medical and surgical services, then the policy must also

offer an out-of-network benefit for mental health and substance

abuse services. 

With respect to your questions about the impact of the 2008

Parity Act on specific sections of Maryland law, we conclude that

some provisions of IN §15-802 and Health-General Article (“HG”)

§19-703.1 – in particular, cost sharing requirements for outpatient

coverage, minimum day limits for partial hospitalization, and

maximum copayments for methadone maintenance treatment – are

preempted with respect to large group policies to the extent that

those provisions would render coverage more restrictive than

coverage for physical illnesses. Section 15-840 of the Insurance

Article (coverage for medically necessary residential crisis services),

however, is not preempted. In addition, IN §15-824 (coverage for

maintenance drugs), and IN §15-831 (coverage of prescription

drugs) are not preempted.

Finally, you asked whether “corrective” State legislation is

necessary in light of the 2008 Parity Act. To the extent that the

federal law preempts State law, it does so by virtue of the Supremacy

Clause in Article VI of the United States Constitution and there is no

legal requirement to amend State law to recognize that preemption.

I

The Federal Parity Acts

A. 1996 Parity Act 

More than a decade ago, Congress enacted the initial federal

mental health parity law, the Mental Health Parity Act of 1996.

Pub.L. 104-204, Title VII, 110 Stat. 2944 (1996). By means of

virtually identical new sections added to both ERISA and the Public

Health Service Act (“PHSA”), the 1996 Parity Act established

certain requirements for mental health benefits offered in large
6 [94 Op. Att’y

 ERISA §712, 29 U.S.C. §1185a; PHSA, §2705, 42 U.S.C. §300gg-5. 1

The following year, as part of the Taxpayer Relief Act of 1997, a new

provision was added to the Internal Revenue Code to establish a tax

penalty for group plans that failed to comply with the provisions of the

1996 Parity Act. See Pub. L. 105-34, §1531, 111 Stat. 788, 1080-83

(1997), codified at 26 U.S.C. §9812.

 Pub. L. 104-191, 110 Stat. 1936 (1996). HIPAA was intended to 2

serve several purposes – protecting health care coverage for workers and

their families during a change or loss of employment, setting national

standards for electronic health care transactions, and mandating certain

provisions for the security and privacy of health information. See 88

Opinions of the Attorney General 205, 206-7 (2003); see also website of

Centers for Medicare and Medicaid Services, <http://www.cms.hhs.gov

/EducationMaterials/>; http://www.cms.hhs.gov/HIPAAGenInfo/.

 The origin and application of this preemption standard are somewhat 3

convoluted. In 1996, as part of HIPAA, Congress added identical

preemption provisions to Title XXVII of the Public Health Service Act

and Title VII of ERISA when it enacted certain provisions in each of those

statutes limiting exclusions for pre-existing conditions and mandating

certain coverage of mothers and newborns. Pub. L. 104-191, §§101(a),

102(a) (1996). See Medill, HIPAA and its Related Legislation: A New

Role for ERISA in the Regulation of Private Health Care Plans?, 65 Tenn.

L. Rev. 485, 502-3 (1998). Concurrently, the provisions of the 1996

Parity Act were included in the same titles of ERISA and the Public

Health Service Act and, accordingly, had the same preemptive effect on

state laws. Pub. L. 104-204, Title VII, 110 Stat. 2944 (1996). 

 In referencing specific provisions of the two federal Parity Acts, this

4

opinion will cite the provisions as they appear in ERISA. As explained in

note 1 above, parallel provisions appear in the PHSA, 42 U.S.C. §300gg5, and the Internal Revenue Code, 26 U.S.C. §9812.

group health plans provided through employers. In conjunction 1

with the Health Insurance Portability and Accountability Act

(“HIPAA”), passed the same year, the provisions of the 1996 Parity 2

Act preempted state laws “to the extent that [a] standard or

requirement [of state law] prevents the application of a requirement

of [the 1996 Parity Act].”3

The 1996 Parity Act did not require large group plans to offer

mental health benefits. 29 U.S.C. §1185a(b)(1). However, those 4

plans that chose to offer mental health benefits were prohibited from

setting annual or lifetime dollar limits on mental health benefits that
Gen. 3] 7

 The 2008 Parity Act amends the provisions of ERISA and the PHSA

5

that were enacted by the 1996 Parity Act – i.e., ERISA, §712, 29 U.S.C.

§1185a, and PHSA, §2705, 42 U.S.C. §300gg-5. In addition, it amends

the section of the Internal Revenue Code that was added in 1997 to

enforce compliance with the mental health benefits parity provisions – 26

U.S.C. §9812. 

The changes made by the 2008 Parity Act apply to plan years

beginning on or after October 3, 2009. See Pub. L. 110-343, §512(e).

Before that date, the Secretaries of Labor, Health and Human Services,

and the Treasury are to issue regulations to carry out the new provisions.

Id., §512(d). Special rules apply in connection with plans governed by

collective bargaining agreements. Id.

were lower than any such dollar limits for medical and surgical

benefits. 29 U.S.C. §1185a(a)(1)-(2). In particular, plans could

impose aggregate annual and lifetime limits subject to the following

restrictions: (1) if the plan did not impose limits on medical and

surgical benefits, no such limits could be imposed on any mental

health benefits; and, (2) if a plan did impose limits on medical and

surgical benefits, the plan had to impose either the same limits on

mental health benefits or could not impose a limit on mental health

benefits that was less than the limit on medical and surgical benefits.

Id.

Large group plans could, however, impose other conditions

such as cost sharing, limits on the number of visits or days of

coverage, and duration and scope of mental health benefits. 29

U.S.C. §1185a(b)(2) (as enacted in 1996). The 1996 Parity Act did

not apply to a group health plan of a “small employer” – defined

generally as an employer with at least two, but no more than 50,

employees. 29 U.S.C. §1185a(c)(1). Nor did it apply if its

application to a plan would result in an increase of 1% or more in the

cost for such coverage. 29 U.S.C. §1185a(c)(2).

B. 2008 Parity Act

The 2008 Parity Act was recently enacted as part of federal

omnibus legislation. Pub. L. 110-343, 122 Stat. 3765, 3881 (2008).

The 2008 Parity Act builds upon the earlier federal parity law, but 5

alters the nature of the mental health benefits large group plans must

provide. Like the earlier law, the 2008 Parity Act does not mandate
8 [94 Op. Att’y

 While the Parity Acts do not mandate that large group plans offer 6

mental health services, carriers may be required to provide such services

as part of their large group policies under the laws of a particular state.

See Part II.A of this opinion below concerning such requirements under

Maryland law.

 In referring to the 2008 Parity Act, this opinion uses the phrase 7

“mental health benefits” to encompass both mental health benefits and

“substance use disorder benefits.” 

that large group plans offer mental health benefits. If, however, a 6

plan chooses to offer its members mental health benefits in addition

to medical and surgical benefits, the 2008 Parity Act specifies the

manner in which those benefits must be covered. In addition, the

2008 Parity Act extends the parity provisions to “substance use

disorder benefits.” 

Definition of Benefits Covered by the Parity Acts

The 2008 Parity Act defines mental health benefits and

substance use disorder benefits to mean, respectively, benefits with

respect to services for mental health conditions and benefits with

respect to services for substance use disorders, as defined under the

terms of the plan and in accordance with Federal and State law.

Thus, the phrase “substance use disorder benefits” presumably

denotes the same types of benefits as the phrase “substance abuse

benefits” in State law.7

Prohibition against Special Cost-Sharing or Treatment

Limitations

In a new provision, the 2008 Parity Act restricts elements of a

health plan that would impose separate cost-sharing and treatment

limitations for mental health benefits. 29 U.S.C. §1185a(a)(3). In

particular, “financial requirements” applicable to mental health

benefits may not be more restrictive than the “predominant”

financial requirements applied to substantially all of the medical and

surgical benefits covered by the plan. 29 U.S.C. §1185a(a)(3)(A)(i).

“Financial requirements” are defined to include deductibles,

copayments, coinsurance, and out-of-pocket expenses. 29 U.S.C0.
Gen. 3] 9

 Aggregate lifetime limits and annual limits are excluded from the 8

definition of “financial requirements”; requirements in the 1996 Parity Act

concerning those limits remain in the law. See 29 U.S.C. §1185a(a)(1)-

(2).

§1185a(a)(3)(B)(i). A financial requirement is considered 8

“predominant” if it is the most common or frequent of such type of

limit or requirement in the plan. 29 U.S.C. §1185a(a)(3)(B)(ii).

Similarly, a plan cannot impose separate “treatment

limitations” that are applicable only to mental health benefits. 29

U.S.C. §1185a(a)(3)(A)(ii). A “treatment limitation” is defined as

any limit “on the frequency of treatment, number of visits, days of

coverage, or other similar limits on the scope or duration of

treatment.” 29 U.S.C. §1185a(a)(3)(B)(iii). In addition, treatment

limitations for mental health benefits may not be more restrictive

than the predominant treatment limitations applied to substantially

all of the medical and surgical benefits covered by a plan. 29 U.S.C.

§1185a(a)(3)(A)(ii).

Benefits with Respect to Out-of-Network Providers

Under another new provision, a plan that provides coverage for

medical or surgical benefits provided by out-of-network providers

must also provide coverage for mental health benefits provided by

out-of-network providers. 29 U.S.C. §1185a(a)(5).

Summary of Parity Provisions

Thus, while the federal Parity Acts do not require the inclusion

of mental health benefits, if a plan chooses to provide such benefits,

they must be delivered to those covered by the plan in a manner that

is no more restrictive than the delivery of substantially all of the

medical and surgical benefits provided by the plan. This includes

parity in deductibles, copayments, coinsurance, out-of-pocket

expenses, treatment limitations and out-of-network coverage. 

Disclosure of Information

The 2008 Parity Act requires a plan to disclose the criteria it

uses to make medical necessity determinations with respect to

mental health benefits. 29 U.S.C. §1185a(a)(4). In addition, a plan

must make available the reason for any denial of such benefits. Id.
10 [94 Op. Att’y

 A 2% increase in actual total costs of coverage with respect to 9

medical and surgical benefits and mental health and substance use

disorder benefits triggers the exemption in a plan’s first year under the

2008 ParityAct; a 1% increase triggersthe exemption in subsequent years.

29 U.S.C. §1185a(c)(2). The determination of the increase of total costs

must be made by an actuary, and this determination cannot be made until

a plan has provided mental health benefits for at least six months. Id. A

plan that invokes this exemption must notify the federal government,

appropriate state agencies, and the beneficiaries of the plan. 29 U.S.C.

§1185a(c)(2)(E). The plan’s compliance with the exemption provision is

subject to audit by federal and state agencies. 29 U.S.C. §1185a(c)(2)(F).

These disclosures are to be made in accordance with regulations to

be issued under the Act.

Modified Cost Exemption

The 2008 Parity Act also modified the cost exemption

contained in the prior law. 29 U.S.C. §1185a(c)(2). If the

application of the federal Parity Acts would result in specified

percentage increases in plan costs, a plan that offers mental health

benefits may claim an exemption from the provisions of the federal

Parity Acts for the following year. Id. The cost exemption is not 9

mandatory; a plan may elect to continue to comply with the Parity

Act regardless of the amount of increase in total costs.

Preemption of State Law

The 2008 Parity Act did not make any changes to the HIPAA

preemption provision that is applicable to the 1996 Parity Act. Thus,

only a State law that “prevents the application of a requirement” of

the federal parity laws is preempted. State laws that do not “prevent

the application” of federal law to insurance plans continue in effect.

A provision added by the 2008 Parity Act requires the Secretary of

Labor to provide guidance concerning, among other things, the

operation of the new law and its impact on State law. 29 U.S.C.

§1185a(g).

We next examine current Maryland law concerning mandated

mental health benefits and the impact of the federal preemption

provision in light of the requirements added by the 2008 Parity Act.
Gen. 3] 11

 Preemption under this provision of ERISA is, of course, distinct from 10

the HIPAA preemption provision under which the Parity Acts preempt

some state laws. See Part I.A of this opinion.

 Pursuant to federal law, employers engaged in commerce or in any 11

industry or activity affecting commerce, or an employee organization or

organizations representing employees engaged in commerce or in any

industry or activity affecting commerce, or both are eligible to self-insure.

29 U.S.C. §1003(a).

 Governmental and certain church-related plans are generally exempt 12

from ERISA. When fully insured, such plans are subject to State

insurance law mandates. However, even governmental plans that are selffunded and exempt from ERISA and State insurance regulations will still

be affected by the federal Parity Acts. See Part II.C of this opinion and

note 18 below.

II

Relation of the Parity Acts to Maryland Law

A. Application of State Law to Health Insurance Policies and

Self-Insured Plans

Maryland law regulates health insurance policies issued by

insurance carriers in the individual, small group, and large group

markets. In ERISA, Congress preempted state laws “insofar as they

may now or hereafter relate to any employee benefit plan ....”

ERISA, §514(a), 29 U.S.C. §1144(a). Thus, as a result of ERISA 10

preemption, federal law and not State law, governs a health plan of

an employer that is eligible to self-insure and does so. 11 12

Eligibility to self-insure is not a requirement to do so, and an

employer may instead choose to provide health benefits by

purchasing a health insurance product. State law regarding

insurance is not preempted by ERISA. See Kentucky Ass’n of Health

pPlans, Inc. v. Miller, 538 U.S. 329 (2003); Metropolitan Life Ins.

Co. v. Massachusetts, 471 U.S. 724 (1985). If an employer

purchases a health insurance product from an insurance company,

the benefits provided by that insurance product are regulated by

Maryland law. 
12 [94 Op. Att’y

 With respect to small group employers that choose to purchase an 13

insurance product, State law mandates specific benefits. Those benefits,

called the Comprehensive Standard Health Benefit Plan, are set forth in

regulations adopted by the Maryland Health Care Commission. See IN

§15-1207; HG §19-108. See also COMAR 31.11.06.

B. Mandated Mental Health Benefits under Maryland Law

Two parallel Maryland statutes applicable to health insurance

policies contain parity provisions related to mental health and

substance use disorder benefits, the latter category generally

described in State law as treatment for drug and alcohol abuse. One

statute sets forth requirements for large group and individual health

insurance policies. See IN §15-802. The other applies identical

standards to HMOs. See HG §19-703.1.

Unlike the federal Parity Acts, Maryland law mandates that

health insurance policies contain specific benefits for mental health

services. The Maryland statutes start from the premise that a 13

policy unlawfully discriminates against individuals “with a mental

illness, emotional disorder, or drug abuse disorder, or alcohol abuse

disorder by failing to provide benefits for the diagnosis and

treatment of these illnesses under the same terms and conditions that

apply under the policy or contract for the diagnosis and treatment of

physical illnesses.” IN §15-802(c); see also HG §19-703.1(b)(1)

(similar language with respect to HMOs). The statutes then define

a set of practices that do not constitute such discrimination, thus

limiting the breadth of the mandate. 

In particular, the statutes provide that a policy does not

discriminate if it provides at least the following benefits:

inpatient benefits – under the policy, the total

number of days for which benefits are provided and the

terms and conditions of benefits are at least equal to

those provided for physical illnesses. 
Gen. 3] 13

 The statutes define “partial hospitalization” as “the provision of 14

medically directed intensive or intermediate short-term treatment” for a

period of more than four, but less than 24, hours per day. IN §15-

802(a)(5); HG §19-703.1(a)(5).

 Office visits to a physician for medication management are not 15

counted against the number of visits required to be covered. IN §15-

802(f)(1); HG §19-703.1(e).

 Also, copayments for mental health or substance abuse benefits are 16

to be actuarially equivalent to coinsurance requirements under the statute

or, if there is no coinsurance requirement, no greater than copayments for

treatment for a physical illness. See IN §15-802(e)(4); HG §19-

703.1(c)(6). 

partial hospitalization benefits – the policy covers 14

at least 60 days under the same terms and conditions that

apply to benefits for physical illnesses. 

outpatient coverage – the policy provides benefits

for covered expenses, after the applicable deductible, at

a rate at least equal to 80% for the first five visits per

calendar year or 12-month period; 65% for the sixth

through 30 visits; and 50% for any subsequent visits. th 15

IN §15-802(d); HG §19-703.1(b)(2). The mandate applies only to

expenses for conditions that are treatable and for treatments that are

medically necessary. IN §15-802(e)(1); HG §19-703.1(c)(1). The

mental health and substance abuse benefits are to be provided as one

set of benefits under the same terms and conditions as benefits for

physical illnesses and may be provided through a managed care

system. IN §15-802(e)(2); HG §19-703.1(c)(2)-(4).

The Maryland statutes also generally require parity in costsharing requirements. In particular, a policy may not have separate

lifetime maximums, deductibles, coinsurance amounts, or out-ofpocket limits for benefits related to mental health and substance

abuse treatment benefits, compared to the limits for benefits related

to physical illnesses. IN §15-802(e)(3); HG §19-703.1(c)(5). 16

However, there is an exception to this rule for the coinsurance

requirements established for outpatient treatment related to mental

health or substance abuse benefits. See IN §15-802(d)(3); HG §19-

703.1(b)(2)(iii). There is also a specific limitation in the statute on

copayments for methadone maintenance treatment – they may not be
14 [94 Op. Att’y

 The law does not apply to residents of nursing homes, and the law

17

does not apply to the first prescription or change in a prescription for a

maintenance drug. The drug must be prescribed by an authorized

prescriber. IN §15-824(c) and (d)(2).

more than 50% of the daily cost. IN §15-802(e)(4)(ii); HG §19-

703.1(c)(6)(ii). 

Several provisions in the Insurance Article mandate particular

types of coverage for health insurance policies and HMO contracts

that are issued or delivered in the State. In particular, benefits must

be provided for medically necessary residential crisis services. IN

§15-840(c). Such services are defined as mental health and support

services provided in a community-based residential setting to an

individual with a mental illness in an effort to prevent or shorten a

psychiatric inpatient admission. IN §15-840(a). 

Benefits must also be provided to allow an insured or enrollee

to receive up to a 90-day supply of maintenance drugs in a single

dispensing. IN §15-824(d)(1). Similarly, policies subject to 17

Maryland law must establish and implement a procedure by which

a member may receive a prescription drug that is not on the

prescription drug formulary. Coverage for non-formulary drugs is

required when, in the judgment of an authorized prescriber, there is

no equivalent drug available on the formulary or the equivalent drug

has been ineffective or produced an adverse condition or harm to the

member. IN §15-831(c) and (d). 

C. Preemptive Effect of Federal Parity Acts

As noted above, the Parity Acts apply only to large group plans

and policies offered through employers.

Individual Market

The individual market is not affected by the federal Parity

Acts; thus, current Maryland law outlining the required mental

health and substance abuse benefits in the individual market, along

with any allowable limitations in this coverage, continues to apply

to individual policies without change. 
Gen. 3] 15

As noted above, some large group plans, such as the self-funded 18

plans in the State Employee and Retiree Health and Welfare Benefits

Program, are not subject to State insurance law orto ERISA. These plans,

however, are subject to the Public Health Service Act. Governmental

large group plans must comply with the provisions of the PHSA, including

the provisions found in the federal Parity Acts, unless the plan makes an

election to be excluded. See 42 U.S.C. §300gg-21(b)(2).

Small Group Market

Maryland law generally defines a small group employer as one

that employs at least two but not more than 50 employees. IN §15-

1203(b). Because the federal Parity Acts do not apply to “small

employers” (defined in similar terms to Maryland law), see 29

U.S.C. §1185a(c)(1), they do not affect the small group market. The

mandates of Maryland law, as well as its limitations, continue to

apply to employers who purchase small group policies.

Large Group Market 

The federal Parity Acts do, however, apply to the large group

market – i.e., plans with more than 50 employees – regardless of

whether the plan is a large group insurance policy regulated by State

law or a self-insured plan. However, Maryland’s mandate that a 18

large group policy provide mental health and substance abuse

benefits does not “prevent the application of” the federal Parity Acts;

therefore, the mandate itself is not preempted and remains in effect.

(As noted above, the mandates do not apply to self-insured plans as

a result of a separate federal preemption provision under ERISA).

To the extent that Maryland law allows certain practices that provide

a reduced level of benefits for mental health and substance abuse

benefits compared to medical and surgical benefits, those provisions

prevent the application of the Parity Act as to large group policies

and are preempted.

What portions of Maryland law are preempted by the Parity

Acts? Maryland law allows carriers to place limitations on mental

health benefits that may not be placed on benefits for physical illness

in several areas. For example, carriers are not required to cover

more than 60 days of partial hospitalization for mental illness under

the same conditions for which they cover partial hospitalization for

physical illness. See IN §15-802(d)(2); HG §19-703.1(b)(2)(ii).

Maryland law does not consider it discriminatory for carriers to

reimburse covered expenses for outpatient coverage of mental illness
16 [94 Op. Att’y

 If the Parity Acts do not apply as a result of the cost exemption, see 19

Part I.B. & footnote 9 above, then the State mandates presumably remain

applicable with respect to large group health insurance policies.

at gradually decreasing levels. For example, a carrier may pay 80%

of covered expenses for the first five outpatient visits in a calendar

year, then pay only 65% of the covered expenses for the sixth

through the thirtieth visit. IN §15-802(d)(3)(i) and (ii) and HG §19-

703.1(b)(2)(iii). Carriers may also charge a copayment for

methadone maintenance treatment that is up to fifty percent (50%)

of the daily cost of the treatment. IN §15-802(e)(4)(ii); HG §19-

703.1(c)(6)(ii). 

Unless the types of financial and treatment limitations in a

policy allowed by Maryland law for mental health and substance

abuse benefits are no more restrictive than the “predominant”

financial and treatment limitations applied to all medical and

surgical benefits by a carrier, these limitations on mental health

benefits allowed by Maryland law “prevent the application” of the

Parity Acts as to large group policies and are preempted.19

Some of Maryland’s mandated benefits that relate to mental

health and substance abuse benefits do not prevent the application

of the Parity Act; therefore, these provisions are not preempted. For

example, as noted above, IN §15-840 mandates coverage for

medically necessary residential crisis services. In mandating this

coverage, the statute does not specify any allowable financial

requirements, cost sharing requirements or treatment limitations that

differ from those for medical and surgical benefits. As such, the

Maryland law does not prevent the application of the Parity Acts,

and the mandate to provide residential crisis services remains intact.

It is important to note, however, that to the extent that a health

insurance carrier’s large group policy is currently imposing financial

limitations, cost sharing requirements, or treatment limitations when

providing residential crisis services, the carrier is no longer able to

impose such limitations or requirements in a large group policy

under the Parity Act.

Similarly, Maryland law outlines specific requirements

regarding coverage of maintenance medications and prescription

medications in large group policies that contain prescription drug

benefits. See IN §§15-824, 15-831. While these sections do not

mention mental health and substance abuse benefits specifically, to

the extent that treatment for either of these conditions involves
Gen. 3] 17

medications, these provisions apply to mental health and substance

abuse treatment. Neither of these sections sets forth any specific

allowable limitations on coverage of medications as that coverage

relates to mental health or substance abuse treatment. Thus,

application of these sections does not prevent the application of the

Parity Act and Maryland law is not preempted. However, as with

the mandate for residential crisis services, if a large group policy

contains financial limitations, cost sharing requirements or treatment

limitations with regard to prescription medications for mental health

or substance abuse treatment that are not being imposed with regard

to medical or surgical coverage, such limitations will be prohibited

by the 2008 Parity Act. 

Finally, Maryland law does not allow separate lifetime

maximums for physical illness and illnesses related to mental health

or substance abuse. See IN §15-802(e)(3)(i) and HG §19-

703.1(c)(5)(i). These laws do not prevent the application of the

Parity Act; therefore, these provisions are not preempted. 

III

Conclusion

In summary, any State law that applies to large group policies

and that “prevents the application” of the federal Parity Acts is

preempted by federal law. The resulting impact of preemption by

the federal Parity Acts is as follows:

• Individual policies and policies not provided though an

employer are not affected by the Parity Acts. Any State

mandates and limitations that apply remain in effect.

• Self-insured plans of private employers are not subject to

Maryland law due to federal preemption under ERISA

and are governed solely by federal law. Small group

plans are specifically exempted from the Parity Acts;

thus, the Parity Acts do not apply to employers that

choose to self-insure a small group plan. If an employer

is eligible to self-insure, but elects to purchase a small

group health insurance product, the mandates and specific

limitations outlined in State law apply. 
18 [94 Op. Att’y

• The Parity Acts apply to self-insured large group plans;

however, the mandates in Maryland law do not apply to

such plans. Employers that choose to self-insure and

offer a large group plan do not have to offer mental

health and substance abuse benefits; however, if a plan

does contain such benefits, the financial limitations, cost

sharing requirements and treatment limitations may not

be more restrictive than the predominant limitations on

the medical and surgical benefits in the plan. And, if the

plan offers an out-of-network benefit for medical and

surgical services, then the plan must also offer an out-ofnetwork benefit for mental health and substance abuse

services.

• Large group health insurance policies are governed by a

combination of State and federal law. Mandates in

Maryland law concerning mental health and substance

abuse benefits remain applicable to those policies, but

any provisions in State law that allow financial, cost

sharing and treatment limitations more restrictive than

those for medical and surgical benefits are preempted by

the 2008 Parity Act. Thus, provisions in Maryland law

allowing these benefits to be delivered with cost sharing

requirements for outpatient coverage, minimum day

limits for partial hospitalization, and maximum

copayments for methadone maintenance treatment are

preempted to the extent that they are more restrictive than

the equivalent requirements with respect to physical

illnesses. If the policy offers an out-of-network benefit

for medical and surgical services, the policy must also

offer an out-of-network benefit for mental health and

substance abuse services. 

• If an employer is eligible to self-insure, but elects to

purchase a large group insurance product, State mandates

apply unless preempted by the federal Parity Acts as

outlined above.

• Provisions in Maryland law mandating coverage for

medically necessary residential crisis services, and setting

specific requirements related to the coverage of

maintenance drugs and prescription drugs are not

preempted by the Parity Acts. However, if carriers are

placing any limitations in their large group health

insurance policies regarding these services, such
Gen. 3] 19

limitations will no longer be allowed unless they are also

the predominant limitations in the policy for medical and

surgical benefits.

Finally, you also asked whether “corrective” State legislation

is necessary in light of the 2008 Parity Act. To the extent that the

federal law preempts State law, it does so by virtue of the Supremacy

Clause in Article VI of the United States Constitution and there is no

legal requirement to amend State law to recognize that preemption.

If the General Assembly wishesto amend Maryland law to recognize

the areas of federal preemption, we would be happy to assist in that

effort. In drafting amendments to Maryland statutes for that

purpose, it would be appropriate to take into account the guidance

that the Secretary of Labor is to provide states pursuant to the 2008

Parity Act. 

Douglas F. Gansler

Attorney General

Ellen L. Kuhn

Assistant Attorney General

Robert N. McDonald

 Opinions and Advice