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How to comply with state’s new Mental Health Parity Law

by on
in Employee Benefits Program,Human Resources

Shortly before leaving office, Gov. Pataki signed New York’s Mental Health Parity Law, which requires insurers to provide mental health benefits in all health insurance policies issued in the state.

Although the law technically took effect Jan. 1, 2007, the signing date of Dec. 22, 2006, left little time for state agencies to gear up. So implementation will be an ongoing process over the coming months.

Expect higher health costs

Employer groups and insurers have long opposed mental-health-parity legislation because of the costs it adds to coverage. The Conference of Blue Cross and Blue Shield Plans estimates the new legislation will increase the cost of plans by 1.5 percent. Other industry-watchers place the additional costs at between 3 and 10 percent.

Wherever those figures come in, they will be on top of the 12 percent of current premiums that are due to state legislative mandates.

Fear of higher costs effectively kept Republican legislators from backing the law. But facing tough re-election campaigns, state Republican senators began negotiating a compromise bill that would not overburden small businesses. The resulting legislation provides a $50 million fund to assist small businesses in complying with the law.

A tale of two children

The Mental Health Parity Act also is known as “Timothy’s Law” after Timothy O’Clair, a Schenectady 12-year-old who killed himself in 2001. Timothy’s father did not have mental health coverage and could not afford proper psychiatric care for his troubled son.

After his son’s death, Mr. O’Clair worked the halls of New York’s state legislature in hopes of passing legislation that would require mental health coverage.

Mr. O’Clair met a kindred spirit in Senate Majority Leader Joseph Bruno (R-Brunswick), whose granddaughter suffered from anorexia. Bruno worked with senators to craft a bill that would contain costs.

Once the assistance for small businesses was put in place, the bill had the votes to pass and the governor’s agreement to sign it. Upon signing, New York became the forty-fourth state to have some sort of legislation on mental health insurance.

Specifics of the law

Insurers offering health coverage in New York state now must cover 30 inpatient days and 20 outpatient days for mental illness. Under the law, mental illnesses include:

  • Depression.
  • Obsessive-compulsive disorder.
  • Anorexia.
  • Binge eating.
  • Attention deficit disorder.
  • Disruptive behavior disorders.
  • Other disorders that have suicidal symptoms.

Employers with fewer than 50 employees are eligible for state money to cover increased premiums.

Although critics note the law does not provide true mental health parity, it does avoid the pitfall that sunk the federal Mental Health Parity Bill of 1996. That legislation mandated that all caps on the dollar amount of coverage for mental and physical health be equal. Insurers simply capped the number of treatments available, effectively gutting the law.

Implementation

Exactly how the law will affect employers is unclear. Gov. Spitzer and the current legislature must work out how to allocate the $50 million in small business assistance funds. Although the law took effect Jan. 1, it will take some time for state government to get up to speed on administering the law.

Several questions remain unanswered concerning this law: How will premium increases attributable to the new mental-health coverage be calculated? How are employers who already had mental health coverage affected? How do small businesses actually get their portion of the $50 million? Expect these details to be worked out over the next few months.

With the bill signing coming so late in the year, many insurers may not have had compliant products ready for market on Jan. 1. Employers and insurers will be waiting for direction from the state government over the next several months. 

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