NCPA - National Center for Policy Analysis

Is Mental Health Parity A Good Idea?

July 1, 1999

In 1996 Congress passed "mental health parity" legislation requiring employers with more than 50 employees whose health plans included mental health coverage to offer the same annual and lifetime benefits for mental health care as for standard care, such as surgery and physician visits.

Mental health proponents believe that the Mental Health Parity Act of 1996 is not working as intended. They support more comprehensive mental health parity legislation.

But the vast majority of insurers and health plans cover at least a limited amount of mental health care. According to a recent employer survey published in the journal Health Affairs, 91 percent of small firms (10-499 employees) and 99 percent of large firms offer mental health and substance abuse coverage in their most used medical plans.

Estimates of the cost of mental health parity legislation vary widely.

  • A 1998 study sponsored by a division of the federal National Institute of Mental Health estimated that mental health parity would add less than 1 percent to the cost of a health insurance policy for a health maintenance organization.
  • A 1998 study by Mathematica estimated a 3.6 percent increase across all types of health plans -- a 0.6 percent increase for HMOs up to a 5 percent increase for fee-for- service plans.
  • A 1997 analysis by the actuarial firm Milliman & Robertson for the National Center for Policy Analysis concluded that mental health parity mandates tend to drive up costs by 5 percent to 10 percent.

Of those already providing mental health benefits, the benefits consulting firm William A. Mercer found that "the median amount spent on mental health and substance abuse services across all plan types in 1997 was 5 percent of total plan costs."

Thus, analysts say that a time when a record 43.4 million people are uninsured -- mostly because health insurance is too expensive -- the last thing Congress should do is make health insurance more expensive.

Source: Merrill Matthews Jr. (NCPA vice president of domestic policy), "Do We Need Mental Health Parity?" Brief Analysis No. 297, June 30, 1999, National Center for Policy Analysis, 12655 N. Central Expy., Suite 720, Dallas, Texas 75251, (972) 386-6272.

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