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National Estimates of Mental Health Insurance Benefits

IV. Parity in Mental Health Benefits

This section presents estimates of the number of individuals with parity in mental health benefits and those potentially subject to parity laws. Full financial parity requires mental health benefits to be the same as medical and surgical benefits in relation to dollar limits, utilization limits, and cost-sharing requirements, if mental health services are covered. It is possible that a benefit package can meet the requirements of parity without meeting the benchmark benefit package discussed earlier. For example, a health plan could have a 20-day limit on inpatient hospital care for both medical and mental health stays, qualifying the plan for parity coverage without meeting the benchmark.

Following a discussion of the number of individuals reporting parity in mental health benefits in 1999, the focus turns to mental health parity laws-one way in which both Federal and state governments have acted to ensure access to mental health benefits. Estimates of the number of individuals in 1999 covered by state mental health parity laws and the now sunsetted Federal Mental Health Parity Act of 1996 (MHPA) are provided.

A. Individuals With Parity in Mental Health Benefits in 1999

Most research concerning parity in mental health coverage has focused on the private, employer-sponsored market, excluding many public programs. This section describes the mental health benefits available from all insurers in relation to full financial parity.

1. Private, Employer-Sponsored Health Insurance
In 1999, approximately 14 percent of individuals with private, employer-sponsored health insurance provided through a firm with 10 or more employees had full parity in their mental health benefits (see Table IV.1). Parity in mental health benefits, as well as generosity of mental health benefits, varies by firm size. As firm size increases, generosity of benefits increases, but the reverse is true for mental health parity. As firm size increases, firms are less likely to provide parity in mental health benefits.

Approximately 23 to 24 percent of individuals who received health insurance through a firm of 10 to 499 employees had mental health benefits equal to those of their medical benefits. In contrast, just 6 to 8 percent of individuals with health insurance through a firm of 500 or more employees had full mental health parity.

Table IV.1. Full, Financial Parity in Mental Health Benefits Among Individuals With Private, Employer-Sponsored Insurance Provided By Firms With 10 or More Employees, 1999

Firm Size	Total Population (millions)	Percentage With Parity in Mental Health Benefits	Percentage With Mental Health Benefits Less Than Parity	Percentage With Health Insurance But No Mental Health Benefits
10 to 49 Employees	17.3	24.2	67.5	8.3
50 to 499 Employees	28.8	22.5	72.5	5.1
500 to 999 Employees	8	6.2	91.1	2.7
1,000 or More Employees	54.4	8.2	88.9	2.8
Total for Firms With 10 or More Employees	108.5	14.4	81.3	4.3
Source: Mercer Worldwide Survey of Employer-Sponsored Health Plans combined with March 2000 Current Population Survey, conducted by the Bureau of the Census.

One possible explanation for the fact that larger firms are less likely to provide parity in mental health benefits has to do with whether health plans are self-insured. Buck et al. (1999) found that self-insured plans are less likely to have mental health benefits on par with medical/surgical benefits. Under the Employment Retirement Income Security Act of 1974 (ERISA), self-insured plans are not subject to state mental health parity laws. Since fewer small firms are self-insured, smaller firms are more likely to be subject to state parity laws. However, although more small firms may offer parity in mental health benefits, it should be noted that the percentage of small firms that do not provide mental health benefits at all is higher than that of large firms.

2. Federal Public Programs
Coverage of mental health benefits in public programs varies considerably. Although many of the programs cover mental health benefits at parity with medical/surgical benefits, some important exceptions are noted. Table IV.2 briefly describes the benefits in Federal and state programs and whether the benefits achieve parity.

Medicare, which covered roughly 36 million individuals in 1999, does not offer parity in mental health benefits. Although most outpatient services require 20 percent patient cost sharing, mental health outpatient services have 50 percent cost sharing. Medicaid, the Nation's program for the poor and disabled, does offer parity in mental health benefits, despite the limitation that inpatient psychiatric care be provided in general hospitals. However, states opting to offer S-SCHIP programs can, and often do, offer benefit packages that provide less mental health coverage than is available under Medicaid. Ten of the 33 state S-SCHIP programs, which represent just 5 percent of S-SCHIP enrollees, provide parity in mental health coverage. (Two additional states have one or more plan options at parity.)

Table IV.2. Parity of Mental Health Coverage in Public Sources of Mental Health Insurance, 1999

Program	Benefit Summary	Relationship to Full Parity
Medicare	Inpatient: 190-day lifetime limit on psychiatric hospital days, same as medical benefit for psychiatric care in general hospital. Cost sharing same as medical benefit. Outpatient: No limit on utilization. Most mental health doctor and professional services have 50 percent co-insurance, compared with medical services that have 20 percent co-insurance. Also covers partial hospitalization and occupational therapy.	Does not meet parity due to differential cost sharing requirement for outpatient mental and medical services.
Medicaid Children 0 to 21 years of age	Technically, Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) requirement provides for all medically necessary inpatient and outpatient care in all states.^a Optional services that may be part of a state plan include residential care, partial hospitalization, clinic services, and case management.	Meets Parity requirement.
Medicaid Adults 22 years and older	Benefit varies by state, but generally includes physician services, outpatient hospital services, partial hospitalization, rehabilitative services, and occupational therapy. Federal exclusion of inpatient care provided in Institutions for Mental Disease (IMDs) generally precludes care in psychiatric hospitals. However, states provide inpatient psychiatric care in general acute hospitals.	Meets Parity requirement.
SCHIP^b Medicaid Expansion (M-SCHIP)	Same benefit as that available in state Medicaid program.	Meets Parity requirement.
SCHIP Separate Program Expasion (S-SCHIP)	Benefits vary by state but generally just cover inpatient and outpatient services. (Appendix D).	Twenty three of 33 states with S-SCHIP program do not meet parity requirement.
Federal Employee Health Benefit Program^c	Inpatient: Minimum benefit of 30 mental health days per year at 50 percent cost sharing. Outpatient: Minimum benefit of 20 outpatient mental health visits per year at 50 percent cost sharing.	Minimum benefit does not meet parity requirement.
TRICARE	Inpatient: Generally, for children under age 19, 45 inpatient mental health days per year. For adults, 30 inpatient mental health days per year. Outpatient: Approval needed for more than eight visits per fiscal year. Partial hospitalization limited to 60 days per year. Cost sharing for inpatient and outpatient services depends on eligibility category and whether individual is enrolled in TRICARE Prime, Standard, or Extra.	Does not meet parity due to utilization limits for inpatient mental health and differential cost sharing for some eligible groups.
Veterans Affairs (VA)	No limits on inpatient or outpatient services. Also covers rehabilitative services, partial hospitalization, and preventive services. Cost-sharing the same as for medical services.	Meets parity requirement.
Civilian Health and Medical Program of the Department of Veteran Affairs (CHAMPVA)	Inpatient: 45 inpatient mental health days per year for children, 30 inpatient days per year for adults. Outpatient: 23 outpatient visits per year. Also covers crisis intervention and 60 days per year of partial hospitalization. Cost sharing is same as for medical benefits.	Does not meet parity requirement due to utilization limits.
Indian Health Service (IHS)	No special limits.	Meets parity requirement.
Source: Program information materials. ^a Many states are not yet in full compliance with EPSDT requirements; however, all children are technically eligible for such services. ^b In 1999, only children were enrolled in SCHIP. Since that time, some states have allowed adults to enroll. ^c In 2001, FEHBP mandated mental health parity for all participating health plans.

FEHBP did not require its contractors to provide parity in mental health benefits in 1999, although it since has adopted a full financial mental health parity policy. Two other programs that do not have parity in mental health benefits are TRICARE and CHAMPVA.

3. Other Sources of Health Insurance
Although it is estimated that 98 percent of individuals with health insurance sponsored by state and local governments have mental health benefits, comprehensive data on the generosity of coverage in state and local plans are not available. In 1999, two states, North Carolina and Texas, required full mental health parity for state employees. Since 1999, Indiana (2000) and South Carolina (2002) also have required full parity in their state employee health plans.

No information on mental health benefits, including whether mental conditions are covered, is available for retired individuals with insurance from their previous employer (3.7 million), individuals with insurance from a source outside the household (4.6 million), or those with individually purchased health insurance policies (9.6 million).

4. Estimates of Number of Individuals With Full Financial Parity in Mental Health Benefits
Nearly 38 percent of individuals with health insurance had full financial parity in mental health benefits in 1999 (see Table IV.3). The private, employer-sponsored health insurance market and Medicaid were the two foremost insurers offering parity in benefits. Another 38 percent of those with health insurance did not have equal mental health and medical benefits. Many of these individuals received their insurance through public sources, including Medicare, S-SCHIP, and TRICARE. At least 3 percent of individuals with health insurance had no mental health benefits. Insufficient data prevented estimates of mental health parity in the remaining 21 percent of individuals with health insurance, including those with mental health benefits of unknown generosity (14 percent), and those with insurance whose health benefits, including coverage of mental health services, was unknown. Figure IV.1 provides a picture of parity in mental health coverage among the entire U.S. population, including those who were uninsured.

B. State Mental Health Parity Laws

A number of states have enacted laws that require full mental health parity. All of the state laws apply to the private, employer-sponsored health insurance market; some states also require parity in the individual market. Parity laws vary significantly in scope and application, but full parity requires mental health benefits to be the same as medical and surgical benefits with respect to dollar limits, utilization limits, and cost-sharing requirements, if covered. As of 2002, 24 states had enacted laws that meet the definition of full mental health parity (National Conference of State Legislatures, 2001; National Alliance for the Mentally Ill, 2002).

1. Exemptions From State Parity Laws
A number of factors limit the number of insurers subject to state mental health parity laws, in effect limiting the number of individuals protected by these laws. Most state parity laws focus on the private employer-sponsored insurance market, but even within this market, states are not able to require all insurers to comply with parity laws.

Table IV.3. Financial Parity in Mental Health Benefits Among Those With Health Insurance, 1999

Individuals With Health Insurance Through:	Total Insured Population (millions)	Parity in Mental Health Benefits (percent)	Mental Health Benefits Less Than Parity (percent)	Mental Health Benefits of Unknown Generosity (percent)	Health Insurance But No Mental Health Benefits (percent)	Health Insurance With Unknown Mental Health Benefits (percent)
Employer-Sponsored Insurance Through a Firm of: 1 to 9 Employees	12.5	N/A	N/A	87.1	12.9	0
Employer-Sponsored Insurance Through a Firm of: 10 or More Employees	108.5	59.3	36.4	0	4.3	0
Employer-Sponsored Insurance Through a Firm of: Non-Working Employer-Based^b	3.7	N/A	N/A	N/A	N/A	100
Medicare	36.1	0	100	0	0	0
Medicaid: Children birth to 17 years	12.2	100	0	0	0	0
Medicaid: Adults 18 years or older^a	9	100	0	0	0	0
SCHIP^b (M-SCHIP)	0.7	100	0	0	0	0
SCHIP (S-SCHIP)	1.3	5.2	94.8	0	0	0
Federal Employee Health Benefit Plan (FEHBP)	5.2	0	100	0	0	0
State/Local Government	22.5	N/A	N/A	98.3	1.7	0
TRICARE	4.9	0	100	0	0	0
CHAMP/VA	0.3	0	100	0	0	0
Veterans Affairs (VA)	0.5	100	0	0	0	0
Indian Health System (IHS)	0.3	100	0	0	0	0
Individual Purchased	9.6	N/A	N/A	N/A	N/A	100
Coverage From Outside the Household	4.6	N/A	N/A	N/A	N/A	100
Total	231.9	37.6	37.6	14.2	2.9	7.7
Source: MPR calculations based on the Current Population Survey, the Medical Expenditure Panel Survey-Insurance Component (MEPS-IC), the Mercer Worldwide Survey of Employer-Sponsored Health Plans, and program information materials. N/A: Not Available ^a All states met the benchmark except Alabama, Arkansas, Mississippi, Oklahoma, West Virginia, and Wyoming. Estimates of the percentage of adult Medicaid recipients from these states were derived from CMS's Medicaid enrollment files for 1999. ^b Enrollment information for M-SCHIP and S-SCHIP programs is from Centers for Medicare and Medicaid Services (2000b). Benefit information for S-SCHIP programs is from the National Conference of State Legislatures (2001) and does not include cost sharing (see Appendix D).

Figure IV.1. Individuals in U.S. Population With Parity in Mental Health Benefits, 1999

Source: MPR calculations based on data from the Current Population Survey, the Medical Expenditure Panel Survey-Insurance Component (MEPS-IC), the Mercer Worldwide Survey of Employer-Sponsored Health Plans, and program materials.

ERISA provides the biggest exemption of health plans from state parity laws. ERISA was enacted primarily to establish uniform standards for private employee pension plans so employers with operations in more than one state would not be forced to comply separately with each state law (Butler, 2000). In addition to employee pension plans, ERISA also covers employee health plans. ERISA prohibits states from regulating self-insured employer-sponsored health plans. A self-insured health plan is one in which the employer bears the insurance risk rather than contracting it out to a third-party insurer, such as a Blue Cross organization or an HMO. The employer can administer self-insured plans directly or can contract out administrative services-such as setting up a provider network or conducting utilization review-to a third-party administrative services organization. As long as the employer retains the insurance risk, the health plan is considered a self-insured plan for the purposes of ERISA.

The ERISA preemption for self-insured employer-sponsored health plans means these health plans are subject only to Federal regulation. Any state regulation, such as a state parity law that goes further than the Mental Health Parity Act (MHPA), does not apply to these employer-sponsored plans. The estimates show that nearly 49 million individuals-approximately 39 percent of the employer-sponsored health insurance market-are in self-insured plans. Detailed state-by-state data tables on 1) health insurance by primary source and on 2) private employer-sponsored health insurance by firm size and self-insured status are available from the authors at Mathematica Policy Research, Inc. upon request. Since larger firms are in a better position to assume risk, it is not surprising that larger firms also are more likely to self-insure than smaller ones. Only about 12 percent of individuals with insurance through a firm with fewer than 50 employees were in a self-insured firm in 1999, compared with nearly 50 percent for individuals insured through a firm with 50 or more employees.

Some states either exempt small groups from compliance with parity statutes or require only partial parity for these businesses. Nine states with mental health parity laws in 2002 provided small-employer exemptions. Most states use 50 employees as the break point for small employers, but Maine uses 20 employees, while Virginia and Hawaii use 25.

Arkansas, Indiana, New Mexico, and Oklahoma have built cost exemptions into their statutes. Under these exemptions, if a plan can prove that its costs increased more than an established percentage after implementing the law, it may be exempted from the law's requirements.

2. Parity in 1999
In 1999, 13 states had mental health parity laws that meet this study's definition of full mental health parity (see Table IV.4), requiring all insurers that offer mental health benefits to apply the same annual and lifetime dollar limits, utilization limits, and cost-sharing standards to mental health benefits as those that apply to medical/surgical benefits. (Some of these states also require insurers to provide mental health benefits as part of their benefit package.) This study includes states with laws applying either to serious mental illnesses only, or to all mental illnesses. State laws that apply only to serious or biologically based mental illness typically cover schizophrenia, schizoaffective disorder, bipolar disorder, major depressive disorders, obsessive-compulsive disorder, and panic disorders. For states with such laws, the applicable statutes lay out the exact illnesses covered by the law, usually those illnesses delineated above. State parity laws that apply to the general category of mental illnesses usually cover any illness listed in the International Classification of Diseases Manual 9 and/or the American Psychiatric Association's Diagnostic and Statistical Manual of Mental Disorders IV). (National Conference of State Legislatures, 2001; The National Alliance on Mental Illness, 2002).

In 1999, state mental health parity laws covered approximately 9.8 million individuals. The percentage of individuals in the private employer-sponsored market subject to state parity laws varied significantly from state to state, ranging from 39 percent in Arkansas to 67 percent in Vermont. The variation largely can be attributed to two factors: variation in the proportion of firms that self-insure, and the provision of a small-employer exemption.

Table IV.4. States With Full Mental Health Parity Laws for the Private Group Health Insurance Market, 1999

State	Year Effective	Firm Size Eligible for Small-Employer Exemption	Diseases Covered^f	Estimated Number of Individuals Covered (millions)	Estimated Percentage of Individuals With Private, Employer-Sponsored Health Insurance Covered by Law
Estimates for States With Parity Laws Effective in 1999 and Before
Arkansas^a	1997	50 or fewer	MI	0.4	39.1
Colorado	1998	None	SMI	1.1	55.4
Connecticut^b	1997	None	MI	1.1	61.1
Delaware^a,c	1999	None	SMI	0.2	60
Hawaii^d	1999	25 or fewer	SMI	0.2	40.9
Maine^d	1996	20 or fewer	SMI	0.3	48.9
Maryland^e	1994	None	MI, ED	1.4	64.1
Minnesota	1995	None	MI	1.4	51
New Hampshire^a,c	1995	None	SMI	0.5	64.7
New Jersey	1999	None	SMI	2.5	62.1
Rhode Island^a,e	1995	None	MI	0.3	59.2
South Dakota^a,c	1998	None	SMI	0.2	66.3
Vermont	1998	None	MI	0.2	67.2
Total Across All States With Parity Laws				9.8	57.2
Source: Information about state mental health parity laws comes from the National Conference of State Legislatures (2001) and the National Alliance for the Mentally Ill (2002). Information also was verified by looking up the pertinent state statutes. Estimates of the number of individuals covered by state laws are MPR calculations based on CPS estimates of the number of individuals with employer-sponsored health insurance combined with MEPS-IC calculations of the self-insured status of firms, by firm size. ^a These states are among 14 states for which the MEPS-IC is unable to produce state-level estimates of the percentage of firms that were self-insured. For a rough estimate of the number of individuals covered under the state laws in these states, the national rates of self-insurance for firms with fewer or more than 50 employees can be applied to these states. ^b Effective 1999, Connecticut expanded its law to cover all mental disorders. Similarly, Rhode Island expanded its law to cover all mental disorders, effective 2002. ^c These states were among 11 without state-level estimates in the 1999 MEPS-IC. National estimates of the percentage of firms with 10 to 49 employees and 50 to 99 employees were applied to these states. ^d These data overestimate the number of individuals exempted through the state small-employer exemption. MEPS-IC does not allow for estimates of self-insured status for firms with fewer than 25 employees. For these states, a small-employer exemption for firms with 50 or fewer employees was assumed. ^e Maryland allows maximum co-insurance for outpatient mental health visits of 20 percent for visits one through five, 35 percent for visits six through 30, and 50 percent for visits 31 and over in a calendar year. Copayments cannot be higher than those for physical illnesses. ^f MI: mental illnesses; SMI: serious mental illnesses or biologically based illnesses; ED: emotional disorders.

Arkansas and Vermont, for example, illustrate both reasons for variation in the penetration rate of parity laws in the private employer-sponsored market. In Vermont, self-insured firms employ 32 percent of individuals with private employer-sponsored health insurance, compared with 41 percent in Arkansas. Therefore, firms exempt from the state law pursuant to ERISA employ a greater percentage of individuals in Arkansas than in Vermont. Furthermore, Arkansas has a small-employer exemption for firms with 50 or fewer employees, thus exempting an additional 18 percent of the state's population with private employer-sponsored insurance. Detailed state-by-state data tables on private employer-sponsored health insurance by firm size and self-insured status are available from the authors at Mathematica Policy Research, Inc., upon request.

In 1999, approximately 8 percent of individuals with private employer-sponsored health insurance were enrolled in health plans subject to state mental health parity laws (see Table IV.5 and Figure IV.2). Approximately 6 percent lived in a state with a mental health parity law but participated in a plan exempt from the law due to the firm's self-insured status or small size. The majority of individuals with private, employer-sponsored insurance (83 percent) live in a state without a full financial mental health parity law. Data are insufficient to estimate whether the remaining three percent-non-working individuals with employer-sponsored insurance-were subject to state parity laws.

Between 1999 and 2002, 11 states enacted parity laws, bringing the total number of states with parity laws to 24. Because 2002 data are not yet available, estimates of the sources of health insurance and the self-insurance status of firms in 2002 also are not available. However, to provide a rough estimate of the effects of recent changes in state law, this study estimated the number of individuals who would have been covered by the new laws had the laws been in effect in 1999. If the 2002 state parity laws were applied to 1999 state populations, it was estimated that an additional 18.7 million individuals (or 15 percent of the population with employer-sponsored heath insurance) would have become subject to mental health parity laws since 1999, for a total of 28.5 million (22.9 percent) in 2002.

3. State Parity Laws in the Individual Insurance Market
Thirteen states require full parity in mental health benefits in individually purchased insurance plans (National Conference of State Legislatures, 2001; National Alliance for the Mentally Ill, 2002). The laws in California, Delaware, Hawaii, Massachusetts, Montana, New Jersey, and South Dakota cover serious or biologically based mental illnesses. The laws in Connecticut, Indiana, Maine, Maryland, Minnesota, Rhode Island, and Vermont cover all mental illnesses (see Table IV.6).

These state laws cover the individual market, but the degree of insurer compliance with the parity requirements is unclear. A review of several individual policies for the individual markets in those states revealed that at least some of the policies offered did not appear to be in compliance with state requirements (ehealthinsurance.com, 2002). However, the level of compliance varied by state. For instance, all of the policies offered in Connecticut appeared to be in compliance.

Table IV.5. U.S. Population With Employer-Sponsored Health Insurance Covered by State Mental Health Parity Laws, 1999

Category of Private, Employer-Based Coverage	Total Population With Private, Employer-Sponsored Health Insurance (millions)	Total Population With Private, Employer-Sponsored Health Insurance (percent)
Within State With Parity Law	17.1	13.7
Subject to Parity Law	9.8	7.9
Exempt Due to Self-Insured Status of Firm	6.3	5.1
Exempt Due to Small Employer Size	0.5	0.4
Non-Working Employer-Based	0.5	0.4

Within State Without Full Parity Law	107.6	86.4
Coverage Through Self-Insured Firm	42.2	33.9
Firm Purchases Coverage and Has Fewer Than 50 Employees	22.4	18
Firm Purchases Coverage and Has 50 or More Employees	39.8	31.9
Non-Working Employer-Based	3.2	2.6
Total	124.6	100
Source: CPS estimates of the number of people covered through employer-sponsored health insurance combined with MEPS-IC calculations of the self-insured status of firms, by firm size. Notes: Information is not available about the benefits of those classified as "non-working employer-based." These people are assumed to have coverage through a retirement plan but are ineligible for Medicare. Due to sample size limitations, the MEPS-IC is able to provide only state-specific estimates of self-insured status among firms for 37 states. For the remaining states, national numbers were used to estimate the percentage of firms self-insuring. Detailed state-by-state data tables on 1) health insurance by primary source and on 2) private employer-sponsored health insurance by firm size and self-insured status are available from the authors at Mathematica Policy Research, Inc. upon request. Table IV.4 includes notes on how the population subject to state mental health parity laws was calculated.

Figure IV.2. U.S. Population With Private, Employer-Sponsored Health Insurance Covered by State Mental Health Parity Laws, 1999

Source: CPS estimates of the number of individuals covered through employer-sponsored health insurance combined with MEPS-IC calculations of the self-insured status of firms, by firm size. Information on state parity laws from the National Conference of State Legislatures (2001) and The National Alliance on Mental Illness (2002).

Note: Unknown includes non-working individuals with private, employer-sponsored insurance. An unknown amount would be covered by state laws.

Table IV.6. State Parity Laws in the Individually Insured Market in 1999

State	Year Requirement Became Effective	Diseases Covered^c	Individually Insured Population in State, 1999 (millions)
Connecticut^a	1997	MI	0.1
Delaware	1999	SMI	<0.1
Maine	1996	MI	0.1
Maryland	1994	MI,ED	0.2
Minnesota	1995	MI	0.2
New Jersey	1999	SMI	0.3
Rhode Island^b	1995	SMI	<0.1
South Dakota	1998	SMI	0.1
Vermont	1998	MI	<0.1
Source: National Conference of State Legislatures (2001) and National Alliance for the Mentally Ill (2002) charts on state parity laws. ^a From 1997 to 1998, Connecticut's law covered serious mental illnesses. Effective 1999, the law was expanded to cover all mental illnesses. ^b From 1995 to 2001, Rhode Island's law covered serious mental illnesses. Effective 2002, the law was expanded to cover all mental illnesses. ^c MI: mental illnesses; SMI: serious mental illnesses or biologically based illnesses; ED: emotional disorders.

4. Potential Effects of State Mental Health Parity Laws
Even if all states had a full financial mental health parity law in effect in 1999, with a small employer exemption for firms with 50 or fewer employees, the laws ultimately would have reached only 36 percent of individuals with private, employer-sponsored health insurance (see Figure IV.3). Nineteen percent of individuals with this type of insurance coverage would have been exempt under state small business exclusions. The ERISA preemption would have exempted another 38 percent of individuals with private, employer-sponsored insurance; an additional 5 percent would have been exempt because their employer did not offer mental health benefits. Data are insufficient to determine whether the remaining 3 percent-non-working individuals with employer-sponsored insurance-would have been subject to state laws.

If all states had implemented full, financial mental health parity laws without small business exclusions, only an additional 19 percent would have been covered, bringing the total covered by the law to 55 percent of individuals with private, employer-sponsored health insurance.

Figure IV.3. Individuals With Private, Employer-Sponsored Insurance Who Would Have Been Subject to Full Financial Mental Health Parity Laws in 1999 if All States Had a Parity Law With a Small-Business Exclusion for Firms With 50 or Fewer Employees

Source: CPS estimates of the number of individuals covered through employer-sponsored health insurance combined with MEPS-IC calculations of the self-insured status of firms, by firm size.

Note: Unknown includes non-working individuals with private, employer-sponsored insurance. An unknown amount would be covered by state laws.

In addition to the ERISA preemption, state parity laws also are limited in their reach since they cannot affect Federal health insurance programs. Federal and state programs account for a large share of health insurance coverage in the United States. Assuming all states had a full financial mental health parity law in 1999, with no small employer exemption, approximately 25 percent of the U.S. population would be subject to those laws (Figure IV.4). Approximately 17 percent of individuals would have been exempt due to the ERISA preemption. Two percent would have been exempt because their private, employer-based insurance does not cover mental health benefits. Roughly 26 percent of the U.S. population is in a Federal or state program such as Medicare, Medicaid, SCHIP, or TRICARE, all of which would not be subject to state parity laws. Although some of these programs already have parity of coverage (e.g., Medicaid) others, including Medicare and TRICARE, do not. The individual insurance market, which insures 4 percent of the U.S. population, generally would not be covered by state parity laws unless states chose to include these insurers. Historically, they have chosen not to do so. It is unknown whether an additional 11 percent of the population would have been subject to the laws. These individuals include participants in state/local government health plans (which states could exempt from their laws), those with insurance from a source outside the household, and non-workers with employer-sponsored coverage. Finally, state laws would not have covered the uninsured-the remaining 15 percent of the population.

Figure IV.4. Percentage of U.S. Population Covered by State Full Financial Mental Health Parity Laws in 1999 if Each State Had a Parity Law With No Small Employer Exemption

Pie chart: Figure IV.4. Percentage of U.S. Population Covered by State Full Financial Mental Health Parity Laws in 1999 if Each State Had a Parity Law With No Small Employer Exemption

Source: CPS estimates of the number of individuals covered through employer-sponsored health insurance combined with MEPS-IC calculations of the self-insured status of firms, by firm size.

Note: Unknown includes non-working individuals with private, employer-sponsored insurance. An unknown amount would be covered by state laws.

C. Mental Health Parity Act of 1996 (MHPA)

Although MHPA did not require full financial mental health parity-it did not require equalized cost sharing or utilization limits-it is informative to look at the reach of this Federal law. The MHPA applied to group insurance plans. The law also included exemptions for small employer plans (50 or fewer employees) and businesses that could demonstrate a 1 percent increase in costs. Health plans that did not cover mental health benefits were not required to begin covering these benefits.

1. Coverage as a Proportion of Those With Private, Employer-Sponsored Insurance
Of approximately 124.7 million individuals in the private, employer-sponsored insurance market in 1999, 87.9 million (70 percent) had health insurance through firms with 50 or more employees that covered mental health benefits, and therefore were subject to the MHPA (Figure IV.5). Approximately 26.9 million (22 percent) were in a health plan exempt from the law's provisions because of the small business exclusion. Yet another 6.2 million (5 percent) individuals with private, employer-sponsored insurance were exempt because their coverage did not include mental health benefits at all. The final 3.7 million (3 percent) were non-working with employer-based insurance-many of whom are probably retirees not yet eligible for Medicare. It is reasonable to assume that some portion of these individuals receive their insurance through a firm of more than 50 employees, and therefore were subject to the MHPA, but the CPS does not provide firm sizes for these individuals. Thus, it is not possible to know how many would be covered or whether these individuals were subject to the law.

2. Coverage as a Proportion of the Total U.S. Population
The primary population subject to the MHPA's provisions was the private, employer-sponsored group market, as the previous sections noted, but the total picture of U.S health insurance contains many more sources of coverage. This section estimates the percentage of the total U.S. population with health insurance subject to the MHPA.

The 70 percent of individuals covered by the MHPA in the private employer-sponsored market in 1999 represents roughly 32 percent of the total U.S. population. Those with health insurance through the FEHBP (2 percent) also were covered by the MHPA. State and local government employee health plans were allowed to opt out of the law, but only a negligible number did so. Individuals in state/local government health plans with mental health benefits totaled 22.1 million (8 percent). Added together, approximately 42 percent of the U.S. population were subject to the MHPA in 1999 (Figure II.6). Another 12 percent were exempt from the law based on the small employer exemption (10 percent) or because the individual's plan did not cover mental health (2 percent). Enrollees in Federal and Federal/state programs exempted from the law, such as Medicare, Medicaid, SCHIP, and TRICARE, accounted for another 24 percent of the U.S. population.

Although some of these programs already offered full parity in mental health benefits, some did not. Individuals with individually purchased insurance, also not under the scope of MHPA, accounted for 4 percent of the U.S. population in 1999. It is unknown whether an additional 3 percent of the U.S. population would have been subject to MHPA because these individuals either had insurance from a source outside of the household (2 percent) or were non-working individuals with employer-sponsored health insurance (1 percent). The remaining 15 percent of the population was uninsured.

Figure IV.5. Private, Employer-Sponsored Health Insurance Market Subject to Mental Health Parity Act of 1996, in 1999
Pie chart: Figure IV.5. Private, Employer-Sponsored Health Insurance Market Subject to Mental Health Parity Act of 1996, in 1999
Source: 2000 Current Population Survey, MEPS-IC, and Mercer Worldwide Survey. "Unknown" includes individuals with insurance from a source outside the household (2 percent) and non-working individuals with employer-sponsored insurance (1 percent).

Figure IV.6. U.S. Population Subject to the Mental Health Parity Act of 1996, 1999

Source: 2000 Current Population Survey, MEPS-IC, and Mercer Worldwide Survey. "Unknown" includes individuals with insurance from a source outside the household (2 percent) and non-working individuals with employer-sponsored insurance (1 percent).

D. Summary

Nearly 38 percent of individuals with health insurance had full financial parity in mental health benefits in 1999. The private, employer-sponsored health insurance market and Medicaid were the two main insurers offering parity in benefits. Additionally, in 1999, 13 states had full mental health parity laws. However, because of the ERISA exclusion of self-insured employers and small group exemptions, state laws often do not cover large numbers of those who have health insurance through employer-sponsored plans, the main focus of such laws. In fact, just 8 percent of those with health insurance from a private, employer-sponsored plan were subject to a parity law in 1999. State mental health parity laws also generally do not cover individuals with insurance from a source outside the private, employer-sponsored market. If each state had a mental health parity law in 1999, with no small employer exemption, approximately 55 percent of the private, employer-sponsored market would have been covered-just 25 percent of the total U.S. population. Federal parity laws have the potential to cover more individuals. MPHA, with its small business exemption for firms with 50 or fewer employees, provided partial parity protection to approximately 42 percent of the U.S. population in 1999.

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