Mandated Mental Health Benefits for Children

The first of two parts

As many as 7.5 million (12 percent) youths in the United States have mental, behavioral, or developmental disorders according to the National Alliance for the Mentally Ill (NAMI). NAMI also estimates that treatment success rates for many mental disorders are high (schizophrenia 60 percent, major depression 65 percent, and bipolar disorder 80 percent). Approximately 150,000-200,000 individuals with severe mental illness are homeless.

A number of states are considering legislation that would require health insurance plans to provide mental health benefits for children. Some proponents of mandated mental health coverage for children argue that with early and adequate treatment of mental illness, future hospitalization costs would decrease, and homelessness, incarceration, suicide, and other social problems would be reduced. Opponents of mandated health insurance benefits legislation in general argue that mandates increase the cost of premiums and cause a corresponding increase in the number of uninsured individuals.

With regard to the effect on premiums, a RAND Corporation study published in the Journal of the American Medical Association on November 12, 1997, found that the financial impact of improved mental health coverage under managed care was minor. Researchers examined first-year cost and utilization data from 24 managed care behavioral health carve-out plans that had no limits on mental health coverage. They found that the costs of unlimited mental health care coverage under managed care were lower than other studies had indicated because hospitalization rates were reduced, patients shifted to more outpatient care, and payments per service were reduced. The researchers estimated that removing the annual limit for mental health care for all enrollees would increase insurance payments by only $1 per enrollee with children being the main beneficiaries of the expanded coverage.

A December 1998 report to the Legislature by the Texas Department of Insurance addressed the impact of mandated health benefits and found that a number of studies conclude that factors other than mandated benefits are mainly responsible for increasing uninsured rates.

In 1996, the federal Mental Health Parity Act was signed into law, providing that health insurers offering mental health benefits may not set annual or lifetime dollar limits on mental health benefits that are lower than any such dollar limits for medical and surgical benefits. State laws that require more favorable treatment of mental health benefits under coverage offered by health insurers are not preempted by the provisions of the federal parity law. At least 17 states had passed some form of mental health parity legislation by the end of 1998, and numerous others are considering such legislation. In 1991, Texas mental health parity legislation covering state government employees passed. Broader parity legislation passed the Texas Legislature in 1997.

- Melanie R. Margolis
  Research Professor

(To be continued in the June 1st Issue)

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©2006 Texas Medical Center

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