110TH CONGRESS

1ST SESSION S. 558

AN ACT

To provide parity between health insurance coverage of mental health benefits and benefits for medical and surgical

services.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Mental Health Parity

5 Act of 2007’’.
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1 SEC. 2. MENTAL HEALTH PARITY.

2 (a) AMENDMENTS OF ERISA.—Subpart B of part 7

3 of title I of the Employee Retirement Income Security Act

4 of 1974 is amended by inserting after section 712 (29

5 U.S.C. 1185a) the following:

6 ‘‘SEC. 712A. MENTAL HEALTH PARITY.

7 ‘‘(a) IN GENERAL.—In the case of a group health

8 plan (or health insurance coverage offered in connection

9 with such a plan) that provides both medical and surgical

10 benefits and mental health benefits, such plan or coverage

11 shall ensure that—

12 ‘‘(1) the financial requirements applicable to

13 such mental health benefits are no more restrictive

14 than the financial requirements applied to substan15 tially all medical and surgical benefits covered by the

16 plan (or coverage), including deductibles, copay17 ments, coinsurance, out-of-pocket expenses, and an18 nual and lifetime limits, except that the plan (or cov19 erage) may not establish separate cost sharing re20 quirements that are applicable only with respect to

21 mental health benefits; and

22 ‘‘(2) the treatment limitations applicable to

23 such mental health benefits are no more restrictive

24 than the treatment limitations applied to substan25 tially all medical and surgical benefits covered by the

26 plan (or coverage), including limits on the frequency
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1 of treatment, number of visits, days of coverage, or

2 other similar limits on the scope or duration of

3 treatment.

4 ‘‘(b) CLARIFICATIONS.—In the case of a group health

5 plan (or health insurance coverage offered in connection

6 with such a plan) that provides both medical and surgical

7 benefits and mental health benefits, and complies with the

8 requirements of subsection (a), such plan or coverage shall

9 not be prohibited from—

10 ‘‘(1) negotiating separate reimbursement or

11 provider payment rates and service delivery systems

12 for different benefits consistent with subsection (a);

13 ‘‘(2) managing the provision of mental health

14 benefits in order to provide medically necessary serv15 ices for covered benefits, including through the use

16 of any utilization review, authorization or manage17 ment practices, the application of medical necessity

18 and appropriateness criteria applicable to behavioral

19 health, and the contracting with and use of a net20 work of providers; and

21 ‘‘(3) applying the provisions of this section in a

22 manner that takes into consideration similar treat23 ment settings or similar treatments.

24 ‘‘(c) IN- AND OUT-OF-NETWORK.—In the case of a

25 group health plan (or health insurance coverage offered
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1 in connection with such a plan) that provides both medical

2 and surgical benefits and mental health benefits, and that

3 provides such benefits on both an in- and out-of-network

4 basis pursuant to the terms of the plan (or coverage), such

5 plan (or coverage) shall ensure that the requirements of

6 this section are applied to both in- and out-of-network

7 services by comparing in-network medical and surgical

8 benefits to in-network mental health benefits and out-of9 network medical and surgical benefits to out-of-network

10 mental health benefits.

11 ‘‘(d) SMALL EMPLOYER EXEMPTION.—

12 ‘‘(1) IN GENERAL.—Except as provided in para13 graph (2), this section shall not apply to any group

14 health plan (or group health insurance coverage of15 fered in connection with a group health plan) for

16 any plan year of any employer who employed an av17 erage of at least 2 (or 1 in the case of an employer

18 residing in a State that permits small groups to in19 clude a single individual) but not more than 50 em20 ployees on business days during the preceding cal21 endar year.

22 ‘‘(2) NO PREEMPTION OF CERTAIN STATE

23 LAWS.—Nothing in paragraph (1) shall be construed

24 to preempt any State insurance law relating to em25 ployers in the State who employed an average of at
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1 least 2 (or 1 in the case of an employer residing in

2 a State that permits small groups to include a single

3 individual) but not more than 50 employees on busi4 ness days during the preceding calendar year.

5 ‘‘(3) APPLICATION OF CERTAIN RULES IN DE6 TERMINATION OF EMPLOYER SIZE.—For purposes of

7 this subsection:

8 ‘‘(A) APPLICATION OF AGGREGATION RULE

9 FOR EMPLOYERS.—Rules similar to the rules

10 under subsections (b), (c), (m), and (o) of sec11 tion 414 of the Internal Revenue Code of 1986

12 shall apply for purposes of treating persons as

13 a single employer.

14 ‘‘(B) EMPLOYERS NOT IN EXISTENCE IN

15 PRECEDING YEAR.—In the case of an employer

16 which was not in existence throughout the pre17 ceding calendar year, the determination of

18 whether such employer is a small employer shall

19 be based on the average number of employees

20 that it is reasonably expected such employer

21 will employ on business days in the current cal22 endar year.

23 ‘‘(C) PREDECESSORS.—Any reference in

24 this paragraph to an employer shall include a

25 reference to any predecessor of such employer.
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1 ‘‘(e) COST EXEMPTION.—

2 ‘‘(1) IN GENERAL.—With respect to a group

3 health plan (or health insurance coverage offered in

4 connections with such a plan), if the application of

5 this section to such plan (or coverage) results in an

6 increase for the plan year involved of the actual total

7 costs of coverage with respect to medical and sur8 gical benefits and mental health benefits under the

9 plan (as determined and certified under paragraph

10 (3)) by an amount that exceeds the applicable per11 centage described in paragraph (2) of the actual

12 total plan costs, the provisions of this section shall

13 not apply to such plan (or coverage) during the fol14 lowing plan year, and such exemption shall apply to

15 the plan (or coverage) for 1 plan year. An employer

16 may elect to continue to apply mental health parity

17 pursuant to this section with respect to the group

18 health plan (or coverage) involved regardless of any

19 increase in total costs.

20 ‘‘(2) APPLICABLE PERCENTAGE.—With respect

21 to a plan (or coverage), the applicable percentage de22 scribed in this paragraph shall be—

23 ‘‘(A) 2 percent in the case of the first plan

24 year in which this section is applied; and
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1 ‘‘(B) 1 percent in the case of each subse2 quent plan year.

3 ‘‘(3) DETERMINATIONS BY ACTUARIES.—Deter4 minations as to increases in actual costs under a

5 plan (or coverage) for purposes of this section shall

6 be made and certified by a qualified and licensed ac7 tuary who is a member in good standing of the

8 American Academy of Actuaries. All such determina9 tions shall be in a written report prepared by the ac10 tuary. The report, and all underlying documentation

11 relied upon by the actuary, shall be maintained by

12 the group health plan or health insurance issuer for

13 a period of 6 years following the notification made

14 under paragraph (6).

15 ‘‘(4) 6-MONTH DETERMINATIONS.—If a group

16 health plan (or a health insurance issuer offering

17 coverage in connection with a group health plan)

18 seeks an exemption under this subsection, deter19 minations under paragraph (1) shall be made after

20 such plan (or coverage) has complied with this sec21 tion for the first 6 months of the plan year involved.

22 ‘‘(5) NOTIFICATION.—An election to modify

23 coverage of mental health benefits as permitted

24 under this subsection shall be treated as a material

25 modification in the terms of the plan as described in
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1 section 102(a) and shall be subject to the applicable

2 notice requirements under section 104(b)(1).

3 ‘‘(6) NOTIFICATION TO APPROPRIATE AGEN4 CY.—

5 ‘‘(A) IN GENERAL.—A group health plan

6 (or a health insurance issuer offering coverage

7 in connection with a group health plan) that,

8 based upon a certification described under para9 graph (3), qualifies for an exemption under this

10 subsection, and elects to implement the exemp11 tion, shall notify the Department of Labor or

12 the Department of Health and Human Services,

13 as appropriate, of such election.

14 ‘‘(B) REQUIREMENT.—A notification

15 under subparagraph (A) shall include—

16 ‘‘(i) a description of the number of

17 covered lives under the plan (or coverage)

18 involved at the time of the notification, and

19 as applicable, at the time of any prior elec20 tion of the cost-exemption under this sub21 section by such plan (or coverage);

22 ‘‘(ii) for both the plan year upon

23 which a cost exemption is sought and the

24 year prior, a description of the actual total

25 costs of coverage with respect to medical
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1 and surgical benefits and mental health

2 benefits under the plan; and

3 ‘‘(iii) for both the plan year upon

4 which a cost exemption is sought and the

5 year prior, the actual total costs of cov6 erage with respect to mental health bene7 fits under the plan.

8 ‘‘(C) CONFIDENTIALITY.—A notification

9 under subparagraph (A) shall be confidential.

10 The Department of Labor and the Department

11 of Health and Human Services shall make

12 available, upon request and on not more than

13 an annual basis, an anonymous itemization of

14 such notifications, that includes—

15 ‘‘(i) a breakdown of States by the size

16 and type of employers submitting such no17 tification; and

18 ‘‘(ii) a summary of the data received

19 under subparagraph (B).

20 ‘‘(7) AUDITS BY APPROPRIATE AGENCIES.—To

21 determine compliance with this subsection, the De22 partment of Labor and the Department of Health

23 and Human Services, as appropriate, may audit the

24 books and records of a group health plan or health

25 insurance issuer relating to an exemption, including
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1 any actuarial reports prepared pursuant to para2 graph (3), during the 6 year period following the no3 tification of such exemption under paragraph (6). A

4 State agency receiving a notification under para5 graph (6) may also conduct such an audit with re6 spect to an exemption covered by such notification.

7 ‘‘(f) MENTAL HEALTH BENEFITS.—In this section,

8 the term ‘mental health benefits’ means benefits with re9 spect to mental health services (including substance use

10 disorder treatment) as defined under the terms of the

11 group health plan or coverage, and when applicable as may

12 be defined under State law when applicable to health in13 surance coverage offered in connection with a group health

14 plan.’’.

15 (b) PUBLIC HEALTH SERVICE ACT.—Subpart 2 of

16 part A of title XXVII of the Public Health Service Act

17 is amended by inserting after section 2705 (42 U.S.C.

18 300gg–5) the following:

19 ‘‘SEC. 2705A. MENTAL HEALTH PARITY.

20 ‘‘(a) IN GENERAL.—In the case of a group health

21 plan (or health insurance coverage offered in connection

22 with such a plan) that provides both medical and surgical

23 benefits and mental health benefits, such plan or coverage

24 shall ensure that—
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1 ‘‘(1) the financial requirements applicable to

2 such mental health benefits are no more restrictive

3 than the financial requirements applied to substan4 tially all medical and surgical benefits covered by the

5 plan (or coverage), including deductibles, copay6 ments, coinsurance, out-of-pocket expenses, and an7 nual and lifetime limits, except that the plan (or cov8 erage) may not establish separate cost sharing re9 quirements that are applicable only with respect to

10 mental health benefits; and

11 ‘‘(2) the treatment limitations applicable to

12 such mental health benefits are no more restrictive

13 than the treatment limitations applied to substan14 tially all medical and surgical benefits covered by the

15 plan (or coverage), including limits on the frequency

16 of treatment, number of visits, days of coverage, or

17 other similar limits on the scope or duration of

18 treatment.

19 ‘‘(b) CLARIFICATIONS.—In the case of a group health

20 plan (or health insurance coverage offered in connection

21 with such a plan) that provides both medical and surgical

22 benefits and mental health benefits, and complies with the

23 requirements of subsection (a), such plan or coverage shall

24 not be prohibited from—
 †

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1 ‘‘(1) negotiating separate reimbursement or

2 provider payment rates and service delivery systems

3 for different benefits consistent with subsection (a);

4 ‘‘(2) managing the provision of mental health

5 benefits in order to provide medically necessary serv6 ices for covered benefits, including through the use

7 of any utilization review, authorization or manage8 ment practices, the application of medical necessity

9 and appropriateness criteria applicable to behavioral

10 health, and the contracting with and use of a net11 work of providers; and

12 ‘‘(3) applying the provisions of this section in a

13 manner that takes into consideration similar treat14 ment settings or similar treatments.

15 ‘‘(c) IN- AND OUT-OF-NETWORK.—In the case of a

16 group health plan (or health insurance coverage offered

17 in connection with such a plan) that provides both medical

18 and surgical benefits and mental health benefits, and that

19 provides such benefits on both an in- and out-of-network

20 basis pursuant to the terms of the plan (or coverage), such

21 plan (or coverage) shall ensure that the requirements of

22 this section are applied to both in- and out-of-network

23 services by comparing in-network medical and surgical

24 benefits to in-network mental health benefits and out-of-
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1 network medical and surgical benefits to out-of-network

2 mental health benefits.

3 ‘‘(d) SMALL EMPLOYER EXEMPTION.—

4 ‘‘(1) IN GENERAL.—Except as provided in para5 graph (2), this section shall not apply to any group

6 health plan (or group health insurance coverage of7 fered in connection with a group health plan) for

8 any plan year of any employer who employed an av9 erage of at least 2 (or 1 in the case of an employer

10 residing in a State that permits small groups to in11 clude a single individual) but not more than 50 em12 ployees on business days during the preceding cal13 endar year.

14 ‘‘(2) NO PREEMPTION OF CERTAIN STATE

15 LAWS.—Nothing in paragraph (1) shall be construed

16 to preempt any State insurance law relating to em17 ployers in the State who employed an average of at

18 least 2 (or 1 in the case of an employer residing in

19 a State that permits small groups to include a single

20 individual) but not more than 50 employees on busi21 ness days during the preceding calendar year.

22 ‘‘(3) APPLICATION OF CERTAIN RULES IN DE23 TERMINATION OF EMPLOYER SIZE.—For purposes of

24 this subsection:
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1 ‘‘(A) APPLICATION OF AGGREGATION RULE

2 FOR EMPLOYERS.—Rules similar to the rules

3 under subsections (b), (c), (m), and (o) of sec4 tion 414 of the Internal Revenue Code of 1986

5 shall apply for purposes of treating persons as

6 a single employer.

7 ‘‘(B) EMPLOYERS NOT IN EXISTENCE IN

8 PRECEDING YEAR.—In the case of an employer

9 which was not in existence throughout the pre10 ceding calendar year, the determination of

11 whether such employer is a small employer shall

12 be based on the average number of employees

13 that it is reasonably expected such employer

14 will employ on business days in the current cal15 endar year.

16 ‘‘(C) PREDECESSORS.—Any reference in

17 this paragraph to an employer shall include a

18 reference to any predecessor of such employer.

19 ‘‘(e) COST EXEMPTION.—

20 ‘‘(1) IN GENERAL.—With respect to a group

21 health plan (or health insurance coverage offered in

22 connection with such a plan), if the application of

23 this section to such plan (or coverage) results in an

24 increase for the plan year involved of the actual total

25 costs of coverage with respect to medical and sur-
 †

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1 gical benefits and mental health benefits under the

2 plan (as determined and certified under paragraph

3 (3)) by an amount that exceeds the applicable per4 centage described in paragraph (2) of the actual

5 total plan costs, the provisions of this section shall

6 not apply to such plan (or coverage) during the fol7 lowing plan year, and such exemption shall apply to

8 the plan (or coverage) for 1 plan year. An employer

9 may elect to continue to apply mental health parity

10 pursuant to this section with respect to the group

11 health plan (or coverage) involved regardless of any

12 increase in total costs.

13 ‘‘(2) APPLICABLE PERCENTAGE.—With respect

14 to a plan (or coverage), the applicable percentage de15 scribed in this paragraph shall be—

16 ‘‘(A) 2 percent in the case of the first plan

17 year in which this section is applied; and

18 ‘‘(B) 1 percent in the case of each subse19 quent plan year.

20 ‘‘(3) DETERMINATIONS BY ACTUARIES.—Deter21 minations as to increases in actual costs under a

22 plan (or coverage) for purposes of this section shall

23 be made and certified by a qualified and licensed ac24 tuary who is a member in good standing of the

25 American Academy of Actuaries. All such determina-
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1 tions shall be in a written report prepared by the ac2 tuary. The report, and all underlying documentation

3 relied upon by the actuary, shall be maintained by

4 the group health plan or health insurance issuer for

5 a period of 6 years following the notification made

6 under paragraph (6).

7 ‘‘(4) 6-MONTH DETERMINATIONS.—If a group

8 health plan (or a health insurance issuer offering

9 coverage in connection with a group health plan)

10 seeks an exemption under this subsection, deter11 minations under paragraph (1) shall be made after

12 such plan (or coverage) has complied with this sec13 tion for the first 6 months of the plan year involved.

14 ‘‘(5) NOTIFICATION.—An election to modify

15 coverage of mental health benefits as permitted

16 under this subsection shall be treated as a material

17 modification in the terms of the plan as described in

18 section 102(a) of the Employee Retirement Income

19 Security Act of 1974 and shall be subject to the ap20 plicable notice requirements under section 104(b)(1)

21 of such Act.

22 ‘‘(6) NOTIFICATION TO APPROPRIATE AGEN23 CY.—

24 ‘‘(A) IN GENERAL.—A group health plan

25 (or a health insurance issuer offering coverage
 †

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1 in connection with a group health plan) that,

2 based upon a certification described under para3 graph (3), qualifies for an exemption under this

4 subsection, and elects to implement the exemp5 tion, shall notify the Department of Labor or

6 the Department of Health and Human Services,

7 as appropriate, of such election. A health insur8 ance issuer providing health insurance coverage

9 in connection with a group health plan shall

10 provide a copy of such notice to the State insur11 ance department or other State agency respon12 sible for regulating the terms of such coverage.

13 ‘‘(B) REQUIREMENT.—A notification

14 under subparagraph (A) shall include—

15 ‘‘(i) a description of the number of

16 covered lives under the plan (or coverage)

17 involved at the time of the notification, and

18 as applicable, at the time of any prior elec19 tion of the cost-exemption under this sub20 section by such plan (or coverage);

21 ‘‘(ii) for both the plan year upon

22 which a cost exemption is sought and the

23 year prior, a description of the actual total

24 costs of coverage with respect to medical
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1 and surgical benefits and mental health

2 benefits under the plan; and

3 ‘‘(iii) for both the plan year upon

4 which a cost exemption is sought and the

5 year prior, the actual total costs of cov6 erage with respect to mental health bene7 fits under the plan.

8 ‘‘(C) CONFIDENTIALITY.—A notification

9 under subparagraph (A) shall be confidential.

10 The Department of Labor and the Department

11 of Health and Human Services shall make

12 available, upon request and on not more than

13 an annual basis, an anonymous itemization of

14 such notifications, that includes—

15 ‘‘(i) a breakdown of States by the size

16 and type of employers submitting such no17 tification; and

18 ‘‘(ii) a summary of the data received

19 under subparagraph (B).

20 ‘‘(7) AUDITS BY APPROPRIATE AGENCIES.—To

21 determine compliance with this subsection, the De22 partment of Labor and the Department of Health

23 and Human Services, as appropriate, may audit the

24 books and records of a group health plan or health

25 insurance issuer relating to an exemption, including
 †

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1 any actuarial reports prepared pursuant to para2 graph (3), during the 6 year period following the no3 tification of such exemption under paragraph (6). A

4 State agency receiving a notification under para5 graph (6) may also conduct such an audit with re6 spect to an exemption covered by such notification.

7 ‘‘(f) MENTAL HEALTH BENEFITS.—In this section,

8 the term ‘mental health benefits’ means benefits with re9 spect to mental health services (including substance use

10 disorder treatment) as defined under the terms of the

11 group health plan or coverage, and when applicable as may

12 be defined under State law when applicable to health in13 surance coverage offered in connection with a group health

14 plan.’’.

15 SEC. 3. EFFECTIVE DATE.

16 (a) IN GENERAL.—The provisions of this Act shall

17 apply to group health plans (or health insurance coverage

18 offered in connection with such plans) beginning in the

19 first plan year that begins on or after January 1 of the

20 first calendar year that begins more than 1 year after the

21 date of the enactment of this Act.

22 (b) TERMINATION OF CERTAIN PROVISIONS.—

23 (1) ERISA.—Section 712 of the Employee Re24 tirement Income Security Act of 1974 (29 U.S.C.
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1 1185a) is amended by striking subsection (f) and in2 serting the following:

3 ‘‘(f) SUNSET.—This section shall not apply to bene4 fits for services furnished after the effective date described

5 in section 3(a) of the Mental Health Parity Act of 2007.’’.

6 (2) PHSA.—Section 2705 of the Public Health

7 Service Act (42 U.S.C. 300gg–5) is amended by

8 striking subsection (f) and inserting the following:

9 ‘‘(f) SUNSET.—This section shall not apply to bene10 fits for services furnished after the effective date described

11 in section 3(a) of the Mental Health Parity Act of 2007.’’.

12 SEC. 4. FEDERAL ADMINISTRATIVE RESPONSIBILITIES.

13 (a) GROUP HEALTH PLAN OMBUDSMAN.—

14 (1) DEPARTMENT OF LABOR.—The Secretary

15 of Labor shall designate an individual within the De16 partment of Labor to serve as the group health plan

17 ombudsman for the Department. Such ombudsman

18 shall serve as an initial point of contact to permit

19 individuals to obtain information and provide assist20 ance concerning coverage of mental health services

21 under group health plans in accordance with this

22 Act.

23 (2) DEPARTMENT OF HEALTH AND HUMAN

24 SERVICES.—The Secretary of Health and Human

25 Services shall designate an individual within the De-
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1 partment of Health and Human Services to serve as

2 the group health plan ombudsman for the Depart3 ment. Such ombudsman shall serve as an initial

4 point of contact to permit individuals to obtain in5 formation and provide assistance concerning cov6 erage of mental health services under health insur7 ance coverage issued in connection with group health

8 plans in accordance with this Act.

9 (b) AUDITS.—The Secretary of Labor and the Sec10 retary of Health and Human Services shall each provide

11 for the conduct of random audits of group health plans

12 (and health insurance coverage offered in connection with

13 such plans) to ensure that such plans are in compliance

14 with this Act (and the amendments made by this Act).

15 (c) GOVERNMENT ACCOUNTABILITY OFFICE

16 STUDY.—

17 (1) STUDY.—The Comptroller General shall

18 conduct a study that evaluates the effect of the im19 plementation of the amendments made by this Act

20 on the cost of health insurance coverage, access to

21 health insurance coverage (including the availability

22 of in-network providers), the quality of health care,

23 the impact on benefits and coverage for mental

24 health and substance use disorders, the impact of

25 any additional cost or savings to the plan, the im-
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1 pact on out-of-network coverage for mental health

2 benefits (including substance use disorder treat3 ment), the impact on State mental health benefit

4 mandate laws, other impact on the business commu5 nity and the Federal Government, and other issues

6 as determined appropriate by the Comptroller Gen7 eral.

8 (2) REPORT.—Not later than 2 years after the

9 date of enactment of this Act, the Comptroller Gen10 eral shall prepare and submit to the appropriate

11 committees of Congress a report containing the re12 sults of the study conducted under paragraph (1).

13 (d) REGULATIONS.—Not later than 1 year after the

14 date of enactment of this Act, the Secretary of Labor and

15 the Secretary of Health and Human Services shall jointly

16 promulgate final regulations to carry out this Act.

Passed the Senate September 18, 2007.

Attest:

Secretary.
110TH CONGRESS

1ST SESSION S. 558

AN ACT

To provide parity between health insurance covmedical and surgical services. erage of mental health benefits and benefits for