Mandated Mental Health Benefits for Children

By Melanie R. Margolis

As many as 7.5 million (12%) 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%, major depression 65%, and bipolar disorder 80%). 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.

A study by the U.S. Department of Health and Human Service's Office of Managed Care, Center for Mental Health Services, Substance Abuse and Mental Health Services Administration, indicates that parity would increase premiums by an average of 3.6%, and such increases would be higher for plans that are limited to coverage of children. The study estimated, therefore, that parity in plans funded by the Children's Health Insurance Program (CHIP) would likely increase premiums more than in plans that cover adults, though the differences would be minimal in a managed care setting.

At least five states are considering legislation mandating some form of mental health coverage for children by health insurers. Two bills have been filed in the Texas Legislature this session that would mandate children's mental health coverage. Texas House Bill 1406 would require health benefit plans to cover persons under age 19 for treatment of serious mental illness. Texas House Bill 1650 would require health benefit plans to cover self-inflicted injuries for persons up to age 18 who have a serious mentally illness or who have tried to commit suicide.

The other states' bills (California AB 88 and SB 468, Maine HB 835, Missouri HB 894, SB 338, and Virginia SB 430) differ from the Texas bills because they do not apply exclusively to children, but instead provide more extensive coverage for children than for adults.

The California bills would require health care service plans to provide coverage for the diagnosis and medically necessary treatment of "mental disorders and illnesses" of a person of any age and of an additional category of disorders, "serious emotional disturbances," of a child.

Maine HB 835 would provide for coverage of certain listed mental illnesses and includes a separate provision applying to children up to 18 years of age, which covers additional mental health conditions.

Missouri's bills require that plans offer coverage of recognized mental illnesses. The individual or group policyholder can decline such coverage, but if coverage is declined, plans must provide certain specified minimum catastrophic mental health coverage. Such catastrophic coverage includes: 1) for children up to age 18, a diagnosable mental, behavioral, or emotional Axis I disorder resulting in functional impairment which interferes substantially with the child's functioning in family, school, or community activities; and 2) for adults, a diagnosable mental, behavioral, or emotional Axis I disorder resulting in functional impairment which interferes substantially with one or more of the adult's major life activities.

Virginia SB 430 provides that health maintenance organizations shall provide coverage for biologically-based mental illnesses, including a list of disorders, which covers, for example, attention deficit hyperactivity disorder and serious emotional behavioral disorders in children.