Insurance Bill Offers Parity for Mentally Ill

As the 104th Congress nears adjournment, legislation that would narrow the gap between coverage of mental and physical health care has gained new life.

The measure would prohibit companies from setting lower lifetime and annual limits on mental health benefits than on other medical benefits and represents the first major step toward requiring parity for treatment of mental and physical disorders.

To advocates for the mentally ill, the bill offers an opportunity to begin reducing the traditional disparity between mental and physical health benefits. But to business and insurance interests, it is viewed as an unwarranted attempt by government to impose an unfunded mandate on private employers.

A critical test of the measure’s prospects could come as early as today, when a conference committee considers whether to leave it in a major appropriation bill headed for final floor votes in the House and Senate.

Although significant--both symbolically and financially--for those who suffer from mental illness, the proposal is less sweeping than a parity measure passed by the Senate earlier this year. That bill would have required parity across the board, mandating, for example, that insurance plans pay 80% of the cost of a psychotherapy session if they pay 80% of the cost of a physical examination. The proposal was scuttled this summer after business and insurance interests convinced House Republicans that it would be too expensive.

The measure currently under consideration requires equality only for annual and lifetime benefit caps, significantly reducing its financial impact. It was approved as an amendment to the Senate version of an unrelated appropriation bill, and it received a surprising boost last week when the House voted overwhelmingly to instruct its members on the conference committee to accept the Senate proposal.

President Clinton is urging Congress to pass the parity proposal. “People with mental illness have faced discrimination in health insurance coverage for far too long,” he said. “It is time that we take steps to end this inequality.”

The new proposal would be much less expensive than the original legislation because companies could continue to impose different restrictions on access to coverage for physical and mental health care. For instance, insurance plans could require higher co-payments and deductibles for mental health care or limit the number of outpatient visits or hospital days for treatment of such problems.

Moreover, companies would not be required to offer mental health coverage at all. But if they do, it would be subject to the same lifetime and annual benefit caps as physical health coverage.

The fact that the proposal has survived in any form is attributable in large part to the passionate, personal advocacy of Sen. Pete V. Domenici (R-N.M.). Domenici, whose daughter is one of the 5 million Americans who suffer from severe mental illness, was a sponsor of the original legislation as well as the scaled-back measure. He was joined by Sen. Paul Wellstone (D-Minn.), whose brother suffers from manic-depressive illness.

“Mental illness is not due to sinful behavior. It is not due to a weakness or frail character,” Domenici said in an emotional appeal to his colleagues this spring to pass the broader bill. “These illnesses are real.”

Earlier this month, the Senate voted, 82 to 15, to attach the scaled-back proposal to next year’s funding bill for veterans, housing and independent agencies. The House voted, 392 to 17, last week to instruct its representatives on the conference committee to accept the Domenici-Wellstone proposal.

“In this political world, it is absolutely the best we could do,” Wellstone said. “It is an astounding victory. Never before has this kind of legislation been passed.”

The biggest beneficiaries would be people who suffer from serious mental illnesses--including schizophrenia, manic-depressive illness and severe depression--and their families. Many insurance plans have comparatively low mental health benefit caps that do not cover the cost of treating severe disorders over long periods of time.

Mental health advocates say that the moral significance of the Domenici-Wellstone measure would be as important as the monetary impact.

“It lifts a whole category of people into the mainstream,” said Laurie Flynn, director of the National Alliance for the Mentally Ill. “Second-class citizenship has been the norm for people with mental illness,”

Alan Katz, principal at Centerstone Insurance in Woodland Hills, one of the nation’s largest and most influential insurance brokers, said the legislation would “be meaningful for many families” but that it would likely raise premiums for most employers and their workers.

“Every insurance carrier I’ve talked to sees this as opening up a tremendous difficulty,” Katz said. “It’s certainly clear . . . when someone needs medical treatment for a mental condition or when someone doesn’t. But the vast majority of cases are in that gray area. Insurance premiums will go up for everyone in order to add this benefit.”

The Congressional Budget Office has estimated that employers’ health insurance expenses would rise by only 0.2% if the legislation becomes law. That represents a 90% reduction from the estimated cost of the original measure, CBO analysts said. An actuarial analysis underwritten by the American Psychological Assn. estimated that the additional financial burden would be even lower: 0.12%.

In case that projection proves too low, the Senate measure includes a provision exempting employers if their cost increase exceeds 1%.

The proposal’s financial impact is limited because few people hit the annual and lifetime limits, said Ronald Bachman, a Coopers & Lybrand actuary who helped prepare the APA analysis.

Fewer than 0.5% of the millions of people whose insurance coverage would be affected by the Domenici-Wellstone proposal would wind up collecting bigger benefits, he said.

Times staff writer David Olmos in Los Angeles contributed to this story.