SEC. 3. AMENDMENT TO THE PUBLIC HEALTH SERVICE ACT 
RELATING TO THE GROUP MARKET. 
(a) IN GENERAL.—Section 2705 of the Public Health 
Service Act (42 U.S.C. 300gg–5) is amended to read as 
follows: 
‘‘SEC. 2705. MENTAL HEALTH PARITY. 
‘‘(a) IN GENERAL.—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 mental health benefits, such plan or coverage 
shall not impose any treatment limitations or financial re-
quirements with respect to the coverage of benefits for 
mental illnesses unless comparable treatment limitations 
or financial requirements are imposed on medical and sur-
gical benefits. 
‘‘(b) CONSTRUCTION.—
‘‘(1) IN
GENERAL.—Nothing in this section 
shall be construed as requiring a group health plan 
(or health insurance coverage offered in connection 
with such a plan) to provide any mental health bene-
fits. 
‘‘(2) MEDICAL
MANAGEMENT
OF
MENTAL 
HEALTH BENEFITS.—Consistent with subsection (a), 
nothing in this section shall be construed to prevent 
the medical management of mental health benefits, 
including through concurrent and retrospective utili-
zation review and utilization management practices, 
preauthorization, and the application of medical ne-
cessity and appropriateness criteria applicable to be-
havioral health and the contracting and use of a net-
work of participating providers. 
‘‘(3) NO
REQUIREMENT
OF
SPECIFIC
SERV-
ICES.—Nothing in this section shall be construed as 
requiring a group health plan (or health insurance 
coverage offered in connection with such a plan) to 
provide coverage for specific mental health services, 
except to the extent that the failure to cover such 
services would result in a disparity between the cov-
erage of mental health and medical and surgical 
benefits. 
‘‘(c) SMALL EMPLOYER EXEMPTION.—
‘‘(1) IN GENERAL.—This section shall not apply 
to any group health plan (and group health insur-
ance coverage offered in connection with a group 
health plan) for any plan year of any employer who 
employed an average of at least 2 but not more than 
50 employees on business days during the preceding 
calendar year. 
‘‘(2) APPLICATION OF CERTAIN RULES IN DE-
TERMINATION OF EMPLOYER SIZE.—For purposes of 
this subsection—
‘‘(A) APPLICATION OF AGGREGATION RULE 
FOR EMPLOYERS.—Rules similar to the rules 
under subsections (b), (c), (m), and (o) of sec-
tion 414 of the Internal Revenue Code of 1986 
shall apply for purposes of treating persons as 
a single employer. 
‘‘(B) EMPLOYERS NOT IN EXISTENCE IN 
PRECEDING YEAR.—In the case of an employer 
which was not in existence throughout the pre-
ceding calendar year, the determination of 
whether such employer is a small employer shall 
be based on the average number of employees 
that it is reasonably expected such employer 
will employ on business days in the current cal-
endar year. 
‘‘(C) PREDECESSORS.—Any reference in 
this paragraph to an employer shall include a 
reference to any predecessor of such employer. 
‘‘(d) SEPARATE APPLICATION TO EACH OPTION OF-
FERED.—In the case of a group health plan that offers 
a participant or beneficiary two or more benefit package 
options under the plan, the requirements of this section 
shall be applied separately with respect to each such op-
tion.
‘‘(e) 
IN-NETWORK
AND
OUT-OF-NETWORK 
RULES.—In the case of a plan or coverage option that 
provides in-network mental health benefits, out-of-network 
mental health benefits may be provided using treatment 
limitations or financial requirements that are not com-
parable to the limitations and requirements applied to 
medical and surgical benefits if the plan or coverage pro-
vides such in-network mental health benefits in accordance 
with subsection (a) and provides reasonable access to in-
network providers and facilities. 
‘‘(f) DEFINITIONS.—For purposes of this section—
‘‘(1) FINANCIAL
REQUIREMENTS.—The term 
‘financial requirements’ includes deductibles, coin-
surance, co-payments, other cost sharing, and limita-
tions on the total amount that may be paid by a 
participant, beneficiary or enrollee with respect to 
benefits under the plan or health insurance coverage 
and shall include the application of annual and life-
time limits. 
‘‘(2) MEDICAL OR SURGICAL BENEFITS.—The 
term ‘medical or surgical benefits’ means benefits 
with respect to medical or surgical services, as de-
fined under the terms of the plan or coverage (as the 
case may be), but does not include mental health 
benefits.
‘‘(3) MENTAL HEALTH BENEFITS.—The term 
‘mental health benefits’ means benefits with respect 
to services, as defined under the terms and condi-
tions of the plan or coverage (as the case may be), 
for all categories of mental health conditions listed 
in the Diagnostic and Statistical Manual of Mental 
Disorders, Fourth Edition (DSM IV–TR), or the 
most recent edition if different than the Fourth Edi-
tion, if such services are included as part of an au-
thorized treatment plan that is in accordance with 
standard protocols and such services meet the plan 
or issuer’s medical necessity criteria. Such term does 
not include benefits with respect to the treatment of 
substance abuse or chemical dependency. 
‘‘(4) TREATMENT
LIMITATIONS.—The term 
‘treatment limitations’ means limitations on the fre-
quency of treatment, number of visits or days of cov-
erage, or other similar limits on the duration or 
scope of treatment under the plan or coverage.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply with respect to plan years begin-
ning on or after January 1, 2004. 
SEC. 4. PREEMPTION. 
Nothing in the amendments made by this Act shall 
be construed to preempt any provision of State law, with
respect to health insurance coverage offered by a health 
insurance issuer in connection with a group health plan, 
that provides protections to enrollees that are greater than 
the protections provided under such amendments. Nothing 
in the amendments made by this Act shall be construed 
to affect or modify section 514 of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C. 1144). 
SEC. 5. GENERAL ACCOUNTING OFFICE STUDY. 
(a) STUDY.—The Comptroller General shall conduct 
a study that evaluates the effect of the implementation 
of the amendments made by this Act on the cost of health 
insurance coverage, access to health insurance coverage 
(including the availability of in-network providers), the 
quality of health care, and other issues as determined ap-
propriate by the Comptroller General. Such study also 
shall include an estimation of the costs of extending the 
provisions of such amendments to treatment of substance 
abuse and chemical dependency. 
(b) 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 Con-
gress a report containing the results of the study con-
ducted under subsection (a).
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