SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Mental Health Parity Act of 1996''.

SEC. 2. PLAN PROTECTIONS FOR INDIVIDUALS WITH A MENTAL ILLNESS.

    (a) Permissible Coverage Limits Under a Group Health Plan.--
            (1) Aggregate lifetime limits.--
                    (A) In general.--With respect to a group health 
                plan offered by a health insurance issuer, that applies 
                an aggregate lifetime limit to plan payments for 
                medical or surgical services covered under the plan, if 
                such plan also provides a mental health benefit such 
                plan shall--
                            (i) include plan payments made for mental 
                        health services under the plan in such 
                        aggregate lifetime limit; or
                            (ii) establish a separate aggregate 
                        lifetime limit applicable to plan payments for 
                        mental health services under which the dollar 
                        amount of such limit (with respect to mental 
                        health services) is equal to or greater than 
                        the dollar amount of the aggregate lifetime 
                        limit on plan payments for medical or surgical 
                        services.
                    (B) No lifetime limit.--With respect to a group 
                health plan offered by a health insurance issuer, that 
                does not apply an aggregate lifetime limit to plan 
                payments for medical or surgical services covered under 
                the plan, such plan may not apply an aggregate lifetime 
                limit to plan payments for mental health services 
                covered under the plan.
            (2) Annual limits.--
                    (A) In general.--With respect to a group health 
                plan offered by a health insurance issuer, that applies 
                an annual limit to plan payments for medical or 
                surgical services covered under the plan, if such plan 
                also provides a mental health benefit such plan shall--
                            (i) include plan payments made for mental 
                        health services under the plan in such annual 
                        limit; or
                            (ii) establish a separate annual limit 
                        applicable to plan payments for mental health 
                        services under which the dollar amount of such 
                        limit (with respect to mental health services) 
                        is equal to or greater than the dollar amount 
                        of the annual limit on plan payments for 
                        medical or surgical services.
                    (B) No annual limit.--With respect to a group 
                health plan offered by a health insurance issuer, that 
                does not apply an annual limit to plan payments for 
                medical or surgical services covered under the plan, 
                such plan may not apply an annual limit to plan 
                payments for mental health services covered under the 
                plan.
    (b) Rule of Construction.--
            (1) In general.--Nothing in this section shall be construed 
        as prohibiting a group health plan offered by a health 
        insurance issuer, from--
                    (A) utilizing other forms of cost containment not 
                prohibited under subsection (a); or
                    (B) applying requirements that make distinctions 
                between acute care and chronic care.
            (2) Nonapplicability.--This section shall not apply to--
                    (A) substance abuse or chemical dependency 
                benefits; or
                    (B) health benefits or health plans paid for under 
                title XVIII or XIX of the Social Security Act.
            (3) State law.--Nothing in this section shall be construed 
        to preempt any State law that provides for greater parity with 
        respect to mental health benefits than that required under this 
        section.
    (c) Small Employer Exemption.--
            (1) In general.--This section shall not apply to plans 
        maintained by employers that employ less than 26 employees.
            (2) Application of certain rules in determination of 
        employer size.--For purposes of this subsection--
                    (A) Application of aggregation rule for 
                employers.--All persons treated as a single employer 
                under subsection (b), (c), (m), or (o) of section 414 
                of the Internal Revenue Code of 1986 shall be treated 
                as 1 employer.
                    (B) Employers not in existence in preceding year.--
                In the case of an employer which was not in existence 
                throughout the preceding 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 calendar 
                year.
                    (C) Predecessors.--Any reference in this subsection 
                to an employer shall include a reference to any 
                predecessor of such employer.

SEC. 3. DEFINITIONS.

    For purposes of this Act:
            (1) Group health plan.--
                    (A) In general.--The term ``group health plan'' 
                means an employee welfare benefit plan (as defined in 
                section 3(1) of the Employee Retirement Income Security 
                Act of 1974) to the extent that the plan provides 
                medical care (as defined in paragraph (2)) and 
                including items and services paid for as medical care) 
                to employees or their dependents (as defined under the 
                terms of the plan) directly or through insurance, 
                reimbursement, or otherwise.
                    (B) Medical care.--The term ``medical care'' means 
                amounts paid for--
                            (i) the diagnosis, cure, mitigation, 
                        treatment, or prevention of disease, or amounts 
                        paid for the purpose of affecting any structure 
                        or function of the body,
                            (ii) amounts paid for transportation 
                        primarily for and essential to medical care 
                        referred to in clause (i), and
                            (iii) amounts paid for insurance covering 
                        medical care referred to in clauses (i) and 
                        (ii).
            (2) Health insurance coverage.--The term ``health insurance 
        coverage'' means benefits consisting of medical care (provided 
        directly, through insurance or reimbursement, or otherwise and 
        including items and services paid for as medical care) under 
        any hospital or medical service policy or certificate, hospital 
        or medical service plan contract, or health maintenance 
        organization contract offered by a health insurance issuer.
            (3) Health insurance issuer.--The term ``health insurance 
        issuer'' means an insurance company, insurance service, or 
        insurance organization (including a health maintenance 
        organization, as defined in paragraph (4)) which is licensed to 
        engage in the business of insurance in a State and which is 
        subject to State law which regulates insurance (within the 
        meaning of section 514(b)(2) of the Employee Retirement Income 
        Security Act of 1974), and includes a plan sponsor described in 
        section 3(16)(B) of the Employee Retirement Income Security Act 
        of 1974 in the case of a group health plan which is an employee 
        welfare benefit plan (as defined in section 3(1) of such Act). 
        Such term does not include a group health plan.
            (4) Health maintenance organization.--The term ``health 
        maintenance organization'' means--
                    (A) a federally qualified health maintenance 
                organization (as defined in section 1301(a) of the 
                Public Health Service Act),
                    (B) an organization recognized under State law as a 
                health maintenance organization, or
                    (C) a similar organization regulated under State 
                law for solvency in the same manner and to the same 
                extent as such a health maintenance organization.
            (5) State.--The term ``State'' means each of the several 
        States, the District of Columbia, Puerto Rico, the Virgin 
        Islands, Guam, American Samoa, and the Northern Mariana 
        Islands.

SEC. 4. SUNSET.

    Section 2 shall cease to be effective on September 30, 2001.

SEC. 5. FEDERAL EMPLOYEE HEALTH BENEFIT PROGRAM.

    For the Federal Employee Health Benefit Program, sections 2 and 3 
will take effect on October 1, 1997.

SEC. 6. EXEMPTION.

    Notwithstanding the provisions of this Act, if the provisions of 
this Act result in a 1 percent or greater increase in the cost of a 
group health plan's premiums, the purchaser is exempt from the 
provisions of this Act.
Output: Mental Health Parity Act of 1996 - Requires a group health plan that applies an aggregate lifetime (or annual) limit for medical or surgical services, if the plan also provides a mental health benefit, to include mental health payments in that limit or establish a separate aggregate lifetime (or annual) limit for mental health services, with the mental health limit not less than the medical or surgical limit.  Prohibits a group health plan that does not apply a medical or surgical limit from applying a mental health limit.  Exempts employers with fewer than 26 employees.  Makes this Act ineffective after September 30, 2001.  Exempts a purchaser from this Act if the Act's provisions result in a one percent or greater increase in the cost of a group health plan's premiums.