A story in the National Underwriter last week raises an important point about the reach, and cost, of the House version of the new federal mental health parity act that Congress is working to hammer out.
It is very clear that state mental health parity acts have a limited impact because they can mandate benefits only for insured ERISA plans operating in the states in which the parity law is passed. Employers who sponsor health benefits that are self funded, as opposed to insured, are untouched by those mental health parity statutes because ERISA completely preempts state laws that "relate to" self funded medical benefit plans.
But that isn’t true when we’re talking about a federal mental health parity statute. ERISA specifically states that it does not preempt other federal statutes. 29 U.S.C. §1144(d). Interestingly, the House version of the mental health parity act also specifically addresses its preemption relationship to ERISA’s savings clause by allowing state mental health parity statutes that are more generous to employees and their dependents to retain their effect. See pp. 17-18 of a PDF format of the bill for language on the preemptive effects of the House version of the bill. In addition, the House version of the bill amends the Public Health Service Act as well as ERISA.
So the bottom line is that if Congress passes a federal mental health parity act, it will apply to all medical benefits plans, both insured and self funded, both non-governmental and governmental, and will likely leave intact efforts by states to enforce more generous state mental health parity statutes as those laws apply to insured employee welfare benefit plans. In short, a federal mental health parity act will have a powerful impact on the availability of mental health benefits