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110th Congress                                            Rept. 110-374
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 2

======================================================================



 
     PAUL WELLSTONE MENTAL HEALTH AND ADDICTION EQUITY ACT OF 2007

                                _______
                                

                October 15, 2007.--Ordered to be printed

                                _______
                                

    Mr. Rangel, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 1424]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Ways and Means, to whom was referred the 
bill (H.R. 1424) to amend section 712 of the Employee 
Retirement Income Security Act of 1974, section 2705 of the 
Public Health Service Act, and section 9812 of the Internal 
Revenue Code of 1986 to require equity in the provision of 
mental health and substance-related disorder benefits under 
group health plans, having considered the same, report 
favorably thereon with an amendment and recommend that the bill 
as amended do pass.
  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Paul Wellstone 
Mental Health and Addiction Equity Act of 2007''.
  (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Amendments to the Employee Retirement Income Security Act of 
1974.
Sec. 3. Amendments to the Public Health Service Act relating to the 
group market.
Sec. 4. Amendments to the Internal Revenue Code of 1986.
Sec. 5. Government Accountability Office studies and reports.

SEC. 2. AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 
                    1974.

  (a) Extension of Parity to Treatment Limits and Beneficiary Financial 
Requirements.--Section 712 of the Employee Retirement Income Security 
Act of 1974 (29 U.S.C. 1185a) is amended--
          (1) in subsection (a), by adding at the end the following new 
        paragraphs:
          ``(3) Treatment limits.--
                  ``(A) No treatment limit.--If the plan or coverage 
                does not include a treatment limit (as defined in 
                subparagraph (D)) on substantially all medical and 
                surgical benefits in any category of items or services, 
                the plan or coverage may not impose any treatment limit 
                on mental health and substance-related disorder 
                benefits that are classified in the same category of 
                items or services.
                  ``(B) Treatment limit.--If the plan or coverage 
                includes a treatment limit on substantially all medical 
                and surgical benefits in any category of items or 
                services, the plan or coverage may not impose such a 
                treatment limit on mental health and substance-related 
                disorder benefits for items and services within such 
                category that are more restrictive than the predominant 
                treatment limit that is applicable to medical and 
                surgical benefits for items and services within such 
                category.
                  ``(C) Categories of items and services for 
                application of treatment limits and beneficiary 
                financial requirements.--For purposes of this paragraph 
                and paragraph (4), there shall be the following four 
                categories of items and services for benefits, whether 
                medical and surgical benefits or mental health and 
                substance-related disorder benefits, and all medical 
                and surgical benefits and all mental health and 
                substance related benefits shall be classified into one 
                of the following categories:
                          ``(i) Inpatient, in-network.--Items and 
                        services furnished on an inpatient basis and 
                        within a network of providers established or 
                        recognized under such plan or coverage.
                          ``(ii) Inpatient, out-of-network.--Items and 
                        services furnished on an inpatient basis and 
                        outside any network of providers established or 
                        recognized under such plan or coverage.
                          ``(iii) Outpatient, in-network.--Items and 
                        services furnished on an outpatient basis and 
                        within a network of providers established or 
                        recognized under such plan or coverage.
                          ``(iv) Outpatient, out-of-network.--Items and 
                        services furnished on an outpatient basis and 
                        outside any network of providers established or 
                        recognized under such plan or coverage.
                  ``(D) Treatment limit defined.--For purposes of this 
                paragraph, the term `treatment limit' means, with 
                respect to a plan or coverage, limitation on the 
                frequency of treatment, number of visits or days of 
                coverage, or other similar limit on the duration or 
                scope of treatment under the plan or coverage.
                  ``(E) Predominance.--For purposes of this subsection, 
                a treatment limit or financial requirement with respect 
                to a category of items and services is considered to be 
                predominant if it is the most common or frequent of 
                such type of limit or requirement with respect to such 
                category of items and services.
          ``(4) Beneficiary financial requirements.--
                  ``(A) No beneficiary financial requirement.--If the 
                plan or coverage does not include a beneficiary 
                financial requirement (as defined in subparagraph (C)) 
                on substantially all medical and surgical benefits 
                within a category of items and services (specified 
                under paragraph (3)(C)), the plan or coverage may not 
                impose such a beneficiary financial requirement on 
                mental health and substance-related disorder benefits 
                for items and services within such category.
                  ``(B) Beneficiary financial requirement.--
                          ``(i) Treatment of deductibles, out-of-pocket 
                        limits, and similar financial requirements.--If 
                        the plan or coverage includes a deductible, a 
                        limitation on out-of-pocket expenses, or 
                        similar beneficiary financial requirement that 
                        does not apply separately to individual items 
                        and services on substantially all medical and 
                        surgical benefits within a category of items 
                        and services (as specified in paragraph 
                        (3)(C)), the plan or coverage shall apply such 
                        requirement (or, if there is more than one such 
                        requirement for such category of items and 
                        services, the predominant requirement for such 
                        category) both to medical and surgical benefits 
                        within such category and to mental health and 
                        substance-related disorder benefits within such 
                        category and shall not distinguish in the 
                        application of such requirement between such 
                        medical and surgical benefits and such mental 
                        health and substance-related disorder benefits.
                          ``(ii) Other financial requirements.--If the 
                        plan or coverage includes a beneficiary 
                        financial requirement not described in clause 
                        (i) on substantially all medical and surgical 
                        benefits within a category of items and 
                        services, the plan or coverage may not impose 
                        such financial requirement on mental health and 
                        substance-related disorder benefits for items 
                        and services within such category in a way that 
                        is more costly to the participant or 
                        beneficiary than the predominant beneficiary 
                        financial requirement applicable to medical and 
                        surgical benefits for items and services within 
                        such category.
                  ``(C) Beneficiary financial requirement defined.--For 
                purposes of this paragraph, the term `beneficiary 
                financial requirement' includes, with respect to a plan 
                or coverage, any deductible, coinsurance, co-payment, 
                other cost sharing, and limitation on the total amount 
                that may be paid by a participant or beneficiary with 
                respect to benefits under the plan or coverage, but 
                does not include the application of any aggregate 
                lifetime limit or annual limit.''; and
          (2) in subsection (b)--
                  (A) by striking ``construed--'' and all that follows 
                through ``(1) as requiring'' and inserting ``construed 
                as requiring'';
                  (B) by striking ``; or'' and inserting a period; and
                  (C) by striking paragraph (2).
  (b) Expansion to Substance-Related Disorder Benefits and Revision of 
Definition.--Such section is further amended--
          (1) by striking ``mental health benefits'' and inserting 
        ``mental health and substance-related disorder benefits'' each 
        place it appears; and
          (2) in paragraph (4) of subsection (e)--
                  (A) by striking ``Mental health benefits'' and 
                inserting ``Mental health and substance-related 
                disorder benefits'';
                  (B) by striking ``benefits with respect to mental 
                health services'' and inserting ``benefits with respect 
                to services for mental health conditions or substance-
                related disorders''; and
                  (C) by striking ``, but does not include benefits 
                with respect to treatment of substances abuse or 
                chemical dependency''.
  (c) Availability of Plan Information About Criteria for Medical 
Necessity.--Subsection (a) of such section, as amended by subsection 
(a)(1), is further amended by adding at the end the following new 
paragraph:
          ``(5) Availability of plan information.--The criteria for 
        medical necessity determinations made under the plan with 
        respect to mental health and substance-related disorder 
        benefits (or the health insurance coverage offered in 
        connection with the plan with respect to such benefits) shall 
        be made available by the plan administrator (or the health 
        insurance issuer offering such coverage) to any current or 
        potential participant, beneficiary, or contracting provider 
        upon request. The reason for any denial under the plan (or 
        coverage) of reimbursement or payment for services with respect 
        to mental health and substance-related disorder benefits in the 
        case of any participant or beneficiary shall, upon request, be 
        made available by the plan administrator (or the health 
        insurance issuer offering such coverage) to the participant or 
        beneficiary.''.
  (d) Minimum Benefit Requirements.--Subsection (a) of such section is 
further amended by adding at the end the following new paragraph:
          ``(6) Minimum scope of coverage and equity in out-of-network 
        benefits.--
                  ``(A) Minimum scope of mental health and substance-
                related disorder benefits.--In the case of a group 
                health plan (or health insurance coverage offered in 
                connection with such a plan) that provides any mental 
                health and substance-related disorder benefits, the 
                plan or coverage shall include benefits for any mental 
                health condition or substance-related disorder for 
                which benefits are provided under the benefit plan 
                option offered under chapter 89 of title 5, United 
                States Code, with the highest average enrollment as of 
                the beginning of the most recent year beginning on or 
                before the beginning of the plan year involved.
                  ``(B) Equity in coverage of out-of-network 
                benefits.--
                          ``(i) In general.--In the case of a plan or 
                        coverage that provides both medical and 
                        surgical benefits and mental health and 
                        substance-related disorder benefits, if medical 
                        and surgical benefits are provided for 
                        substantially all items and services in a 
                        category specified in clause (ii) furnished 
                        outside any network of providers established or 
                        recognized under such plan or coverage, the 
                        mental health and substance-related disorder 
                        benefits shall also be provided for items and 
                        services in such category furnished outside any 
                        network of providers established or recognized 
                        under such plan or coverage in accordance with 
                        the requirements of this section.
                          ``(ii) Categories of items and services.--For 
                        purposes of clause (i), there shall be the 
                        following three categories of items and 
                        services for benefits, whether medical and 
                        surgical benefits or mental health and 
                        substance-related disorder benefits, and all 
                        medical and surgical benefits and all mental 
                        health and substance-related disorder benefits 
                        shall be classified into one of the following 
                        categories:
                                  ``(I) Emergency.--Items and services, 
                                whether furnished on an inpatient or 
                                outpatient basis, required for the 
                                treatment of an emergency medical 
                                condition (including an emergency 
                                condition relating to mental health and 
                                substance-related disorders).
                                  ``(II) Inpatient.--Items and services 
                                not described in subclause (I) 
                                furnished on an inpatient basis.
                                  ``(III) Outpatient.--Items and 
                                services not described in subclause (I) 
                                furnished on an outpatient basis.''.
  (e) Revision of Increased Cost Exemption.--Paragraph (2) of 
subsection (c) of such section is amended to read as follows:
          ``(2) Increased cost exemption.--
                  ``(A) In general.--With respect to a group health 
                plan (or health insurance coverage offered in 
                connection with such a plan), if the application of 
                this section to such plan (or coverage) results in an 
                increase for the plan year involved of the actual total 
                costs of coverage with respect to medical and surgical 
                benefits and mental health and substance-related 
                disorder benefits under the plan (as determined and 
                certified under subparagraph (C)) by an amount that 
                exceeds the applicable percentage described in 
                subparagraph (B) of the actual total plan costs, the 
                provisions of this section shall not apply to such plan 
                (or coverage) during the following plan year, and such 
                exemption shall apply to the plan (or coverage) for 1 
                plan year.
                  ``(B) Applicable percentage.--With respect to a plan 
                (or coverage), the applicable percentage described in 
                this paragraph shall be--
                          ``(i) 2 percent in the case of the first plan 
                        year which begins after the date of the 
                        enactment of the Paul Wellstone Mental Health 
                        and Addiction Equity Act of 2007; and
                          ``(ii) 1 percent in the case of each 
                        subsequent plan year.
                  ``(C) Determinations by actuaries.--Determinations as 
                to increases in actual costs under a plan (or coverage) 
                for purposes of this subsection shall be made by a 
                qualified actuary who is a member in good standing of 
                the American Academy of Actuaries. Such determinations 
                shall be certified by the actuary and be made available 
                to the general public.
                  ``(D) 6-month determinations.--If a group health plan 
                (or a health insurance issuer offering coverage in 
                connection with such a plan) seeks an exemption under 
                this paragraph, determinations under subparagraph (A) 
                shall be made after such plan (or coverage) has 
                complied with this section for the first 6 months of 
                the plan year involved.
                  ``(E) Notification.--An election to modify coverage 
                of mental health and substance-related disorder 
                benefits as permitted under this paragraph shall be 
                treated as a material modification in the terms of the 
                plan as described in section 102(a)(1) and shall be 
                subject to the applicable notice requirements under 
                section 104(b)(1).''.
  (f) Change in Exclusion for Smallest Employers.--Subsection (c)(1)(B) 
of such section is amended--
          (1) by inserting ``(or 1 in the case of an employer residing 
        in a State that permits small groups to include a single 
        individual)'' after ``at least 2'' the first place it appears; 
        and
          (2) by striking ``and who employs at least 2 employees on the 
        first day of the plan year''.
  (g) Elimination of Sunset Provision.--Such section is amended by 
striking out subsection (f).
  (h) Clarification Regarding Preemption.--Such section is further 
amended by inserting after subsection (e) the following new subsection:
  ``(f) Preemption, Relation to State Laws.--
          ``(1) In general.--Nothing in this section shall be construed 
        to preempt any State law that provides greater consumer 
        protections, benefits, methods of access to benefits, rights or 
        remedies that are greater than the protections, benefits, 
        methods of access to benefits, rights or remedies provided 
        under this section.
          ``(2) ERISA.--Nothing in this section shall be construed to 
        affect or modify the provisions of section 514 with respect to 
        group health plans.''.
  (i) Conforming Amendments to Heading.--
          (1) In general.--The heading of such section is amended to 
        read as follows:

``SEC. 712. EQUITY IN MENTAL HEALTH AND SUBSTANCE-RELATED DISORDER 
                    BENEFITS.''.

          (2) Clerical amendment.--The table of contents in section 1 
        of such Act is amended by striking the item relating to section 
        712 and inserting the following new item:

``Sec. 712. Equity in mental health and substance-related disorder 
benefits.''.

  (j) Effective Date.--The amendments made by this section shall apply 
with respect to plan years beginning on or after January 1, 2008.

SEC. 3. AMENDMENTS TO THE PUBLIC HEALTH SERVICE ACT RELATING TO THE 
                    GROUP MARKET.

  (a) Extension of Parity to Treatment Limits and Beneficiary Financial 
Requirements.--Section 2705 of the Public Health Service Act (42 U.S.C. 
300gg-5) is amended--
          (1) in subsection (a), by adding at the end the following new 
        paragraphs:
          ``(3) Treatment limits.--
                  ``(A) No treatment limit.--If the plan or coverage 
                does not include a treatment limit (as defined in 
                subparagraph (D)) on substantially all medical and 
                surgical benefits in any category of items or services 
                (specified in subparagraph (C)), the plan or coverage 
                may not impose any treatment limit on mental health and 
                substance-related disorder benefits that are classified 
                in the same category of items or services.
                  ``(B) Treatment limit.--If the plan or coverage 
                includes a treatment limit on substantially all medical 
                and surgical benefits in any category of items or 
                services, the plan or coverage may not impose such a 
                treatment limit on mental health and substance-related 
                disorder benefits for items and services within such 
                category that are more restrictive than the predominant 
                treatment limit that is applicable to medical and 
                surgical benefits for items and services within such 
                category.
                  ``(C) Categories of items and services for 
                application of treatment limits and beneficiary 
                financial requirements.--For purposes of this paragraph 
                and paragraph (4), there shall be the following four 
                categories of items and services for benefits, whether 
                medical and surgical benefits or mental health and 
                substance-related disorder benefits, and all medical 
                and surgical benefits and all mental health and 
                substance related benefits shall be classified into one 
                of the following categories:
                          ``(i) Inpatient, in-network.--Items and 
                        services furnished on an inpatient basis and 
                        within a network of providers established or 
                        recognized under such plan or coverage.
                          ``(ii) Inpatient, out-of-network.--Items and 
                        services furnished on an inpatient basis and 
                        outside any network of providers established or 
                        recognized under such plan or coverage.
                          ``(iii) Outpatient, in-network.--Items and 
                        services furnished on an outpatient basis and 
                        within a network of providers established or 
                        recognized under such plan or coverage.
                          ``(iv) Outpatient, out-of-network.--Items and 
                        services furnished on an outpatient basis and 
                        outside any network of providers established or 
                        recognized under such plan or coverage.
                  ``(D) Treatment limit defined.--For purposes of this 
                paragraph, the term `treatment limit' means, with 
                respect to a plan or coverage, limitation on the 
                frequency of treatment, number of visits or days of 
                coverage, or other similar limit on the duration or 
                scope of treatment under the plan or coverage.
                  ``(E) Predominance.--For purposes of this subsection, 
                a treatment limit or financial requirement with respect 
                to a category of items and services is considered to be 
                predominant if it is the most common or frequent of 
                such type of limit or requirement with respect to such 
                category of items and services.
          ``(4) Beneficiary financial requirements.--
                  ``(A) No beneficiary financial requirement.--If the 
                plan or coverage does not include a beneficiary 
                financial requirement (as defined in subparagraph (C)) 
                on substantially all medical and surgical benefits 
                within a category of items and services (specified in 
                paragraph (3)(C)), the plan or coverage may not impose 
                such a beneficiary financial requirement on mental 
                health and substance-related disorder benefits for 
                items and services within such category.
                  ``(B) Beneficiary financial requirement.--
                          ``(i) Treatment of deductibles, out-of-pocket 
                        limits, and similar financial requirements.--If 
                        the plan or coverage includes a deductible, a 
                        limitation on out-of-pocket expenses, or 
                        similar beneficiary financial requirement that 
                        does not apply separately to individual items 
                        and services on substantially all medical and 
                        surgical benefits within a category of items 
                        and services, the plan or coverage shall apply 
                        such requirement (or, if there is more than one 
                        such requirement for such category of items and 
                        services, the predominant requirement for such 
                        category) both to medical and surgical benefits 
                        within such category and to mental health and 
                        substance-related disorder benefits within such 
                        category and shall not distinguish in the 
                        application of such requirement between such 
                        medical and surgical benefits and such mental 
                        health and substance-related disorder benefits.
                          ``(ii) Other financial requirements.--If the 
                        plan or coverage includes a beneficiary 
                        financial requirement not described in clause 
                        (i) on substantially all medical and surgical 
                        benefits within a category of items and 
                        services, the plan or coverage may not impose 
                        such financial requirement on mental health and 
                        substance-related disorder benefits for items 
                        and services within such category in a way that 
                        is more costly to the participant or 
                        beneficiary than the predominant beneficiary 
                        financial requirement applicable to medical and 
                        surgical benefits for items and services within 
                        such category.
                  ``(C) Beneficiary financial requirement defined.--For 
                purposes of this paragraph, the term `beneficiary 
                financial requirement' includes, with respect to a plan 
                or coverage, any deductible, coinsurance, co-payment, 
                other cost sharing, and limitation on the total amount 
                that may be paid by a participant or beneficiary with 
                respect to benefits under the plan or coverage, but 
                does not include the application of any aggregate 
                lifetime limit or annual limit.''; and
          (2) in subsection (b)--
                  (A) by striking ``construed--'' and all that follows 
                through ``(1) as requiring'' and inserting ``construed 
                as requiring'';
                  (B) by striking ``; or'' and inserting a period; and
                  (C) by striking paragraph (2).
  (b) Expansion to Substance-Related Disorder Benefits and Revision of 
Definition.--Such section is further amended--
          (1) by striking ``mental health benefits'' and inserting 
        ``mental health and substance-related disorder benefits'' each 
        place it appears; and
          (2) in paragraph (4) of subsection (e)--
                  (A) by striking ``Mental health benefits'' and 
                inserting ``Mental health and substance-related 
                disorder benefits'';
                  (B) by striking ``benefits with respect to mental 
                health services'' and inserting ``benefits with respect 
                to services for mental health conditions or substance-
                related disorders''; and
                  (C) by striking ``, but does not include benefits 
                with respect to treatment of substances abuse or 
                chemical dependency''.
  (c) Availability of Plan Information About Criteria for Medical 
Necessity.--Subsection (a) of such section, as amended by subsection 
(a)(1), is further amended by adding at the end the following new 
paragraph:
          ``(5) Availability of plan information.--The criteria for 
        medical necessity determinations made under the plan with 
        respect to mental health and substance-related disorder 
        benefits (or the health insurance coverage offered in 
        connection with the plan with respect to such benefits) shall 
        be made available by the plan administrator (or the health 
        insurance issuer offering such coverage) to any current or 
        potential participant, beneficiary, or contracting provider 
        upon request. The reason for any denial under the plan (or 
        coverage) of reimbursement or payment for services with respect 
        to mental health and substance-related disorder benefits in the 
        case of any participant or beneficiary shall, upon request, be 
        made available by the plan administrator (or the health 
        insurance issuer offering such coverage) to the participant or 
        beneficiary.''.
  (d) Minimum Benefit Requirements.--Subsection (a) of such section is 
further amended by adding at the end the following new paragraph:
          ``(6) Minimum scope of coverage and equity in out-of-network 
        benefits.--
                  ``(A) Minimum scope of mental health and substance-
                related disorder benefits.--In the case of a group 
                health plan (or health insurance coverage offered in 
                connection with such a plan) that provides any mental 
                health and substance-related disorder benefits, the 
                plan or coverage shall include benefits for any mental 
                health condition or substance-related disorder for 
                which benefits are provided under the benefit plan 
                option offered under chapter 89 of title 5, United 
                States Code, with the highest average enrollment as of 
                the beginning of the most recent year beginning on or 
                before the beginning of the plan year involved.
                  ``(B) Equity in coverage of out-of-network 
                benefits.--
                          ``(i) In general.--In the case of a plan or 
                        coverage that provides both medical and 
                        surgical benefits and mental health and 
                        substance-related disorder benefits, if medical 
                        and surgical benefits are provided for 
                        substantially all items and services in a 
                        category specified in clause (ii) furnished 
                        outside any network of providers established or 
                        recognized under such plan or coverage, the 
                        mental health and substance-related disorder 
                        benefits shall also be provided for items and 
                        services in such category furnished outside any 
                        network of providers established or recognized 
                        under such plan or coverage in accordance with 
                        the requirements of this section.
                          ``(ii) Categories of items and services.--For 
                        purposes of clause (i), there shall be the 
                        following three categories of items and 
                        services for benefits, whether medical and 
                        surgical benefits or mental health and 
                        substance-related disorder benefits, and all 
                        medical and surgical benefits and all mental 
                        health and substance-related disorder benefits 
                        shall be classified into one of the following 
                        categories:
                                  ``(I) Emergency.--Items and services, 
                                whether furnished on an inpatient or 
                                outpatient basis, required for the 
                                treatment of an emergency medical 
                                condition (including an emergency 
                                condition relating to mental health and 
                                substance-related disorders).
                                  ``(II) Inpatient.--Items and services 
                                not described in subclause (I) 
                                furnished on an inpatient basis.
                                  ``(III) Outpatient.--Items and 
                                services not described in subclause (I) 
                                furnished on an outpatient basis.''.
  (e) Revision of Increased Cost Exemption.--Paragraph (2) of 
subsection (c) of such section is amended to read as follows:
          ``(2) Increased cost exemption.--
                  ``(A) In general.--With respect to a group health 
                plan (or health insurance coverage offered in 
                connection with such a plan), if the application of 
                this section to such plan (or coverage) results in an 
                increase for the plan year involved of the actual total 
                costs of coverage with respect to medical and surgical 
                benefits and mental health and substance-related 
                disorder benefits under the plan (as determined and 
                certified under subparagraph (C)) by an amount that 
                exceeds the applicable percentage described in 
                subparagraph (B) of the actual total plan costs, the 
                provisions of this section shall not apply to such plan 
                (or coverage) during the following plan year, and such 
                exemption shall apply to the plan (or coverage) for 1 
                plan year.
                  ``(B) Applicable percentage.--With respect to a plan 
                (or coverage), the applicable percentage described in 
                this paragraph shall be--
                          ``(i) 2 percent in the case of the first plan 
                        year which begins after the date of the 
                        enactment of the Paul Wellstone Mental Health 
                        and Addiction Equity Act of 2007; and
                          ``(ii) 1 percent in the case of each 
                        subsequent plan year.
                  ``(C) Determinations by actuaries.--Determinations as 
                to increases in actual costs under a plan (or coverage) 
                for purposes of this subsection shall be made by a 
                qualified actuary who is a member in good standing of 
                the American Academy of Actuaries. Such determinations 
                shall be certified by the actuary and be made available 
                to the general public.
                  ``(D) 6-month determinations.--If a group health plan 
                (or a health insurance issuer offering coverage in 
                connection with such a plan) seeks an exemption under 
                this paragraph, determinations under subparagraph (A) 
                shall be made after such plan (or coverage) has 
                complied with this section for the first 6 months of 
                the plan year involved.
                  ``(E) Notification.--A group health plan under this 
                part shall comply with the notice requirement under 
                section 712(c)(2)(E) of the Employee Retirement Income 
                Security Act of 1974 with respect to the a modification 
                of mental health and substance-related disorder 
                benefits as permitted under this paragraph as if such 
                section applied to such plan.''.
  (f) Change in Exclusion for Smallest Employers.--Subsection (c)(1)(B) 
of such section is amended--
          (1) by inserting ``(or 1 in the case of an employer residing 
        in a State that permits small groups to include a single 
        individual)'' after ``at least 2'' the first place it appears; 
        and
          (2) by striking ``and who employs at least 2 employees on the 
        first day of the plan year''.
  (g) Elimination of Sunset Provision.--Such section is amended by 
striking out subsection (f).
  (h) Clarification Regarding Preemption.--Such section is further 
amended by inserting after subsection (e) the following new subsection:
  ``(f) Preemption, Relation to State Laws.--
          ``(1) In general.--Nothing in this section shall be construed 
        to preempt any State law that provides greater consumer 
        protections, benefits, methods of access to benefits, rights or 
        remedies that are greater than the protections, benefits, 
        methods of access to benefits, rights or remedies provided 
        under this section.
          ``(2) Construction.--Nothing in this section shall be 
        construed to affect or modify the provisions of section 2723 
        with respect to group health plans.''.
  (i) Conforming Amendment to Heading.--The heading of such section is 
amended to read as follows:

``SEC. 2705.''.

  (j) Effective Date.--The amendments made by this section shall apply 
with respect to plan years beginning on or after January 1, 2008.

SEC. 4. AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986.

  (a) Extension of Parity to Treatment Limits and Beneficiary Financial 
Requirements.--Section 9812 of the Internal Revenue Code of 1986 is 
amended--
          (1) in subsection (a), by adding at the end the following new 
        paragraphs:
          ``(3) Treatment limits.--In the case of a group health plan 
        that provides both medical and surgical benefits and mental 
        health or substance-related disorder benefits--
                  ``(A) No treatment limit.--If the plan does not 
                include a treatment limit (as defined in subparagraph 
                (D)) on substantially all medical and surgical benefits 
                in any category of items or services (specified in 
                subparagraph (C)), the plan may not impose any 
                treatment limit on mental health or substance-related 
                disorder benefits that are classified in the same 
                category of items or services.
                  ``(B) Treatment limit.--If the plan includes a 
                treatment limit on substantially all medical and 
                surgical benefits in any category of items or services, 
                the plan may not impose such a treatment limit on 
                mental health or substance-related disorder benefits 
                for items and services within such category that is 
                more restrictive than the predominant treatment limit 
                that is applicable to medical and surgical benefits for 
                items and services within such category.
                  ``(C) Categories of items and services for 
                application of treatment limits and beneficiary 
                financial requirements.--For purposes of this paragraph 
                and paragraph (4), there shall be the following five 
                categories of items and services for benefits, whether 
                medical and surgical benefits or mental health and 
                substance-related disorder benefits, and all medical 
                and surgical benefits and all mental health and 
                substance related benefits shall be classified into one 
                of the following categories:
                          ``(i) Inpatient, in-network.--Items and 
                        services not described in clause (v) furnished 
                        on an inpatient basis and within a network of 
                        providers established or recognized under such 
                        plan.
                          ``(ii) Inpatient, out-of-network.--Items and 
                        services not described in clause (v) furnished 
                        on an inpatient basis and outside any network 
                        of providers established or recognized under 
                        such plan.
                          ``(iii) Outpatient, in-network.--Items and 
                        services not described in clause (v) furnished 
                        on an outpatient basis and within a network of 
                        providers established or recognized under such 
                        plan.
                          ``(iv) Outpatient, out-of-network.--Items and 
                        services not described in clause (v) furnished 
                        on an outpatient basis and outside any network 
                        of providers established or recognized under 
                        such plan.
                          ``(v) Emergency care.--Items and services, 
                        whether furnished on an inpatient or outpatient 
                        basis or within or outside any network of 
                        providers, required for the treatment of an 
                        emergency medical condition (including an 
                        emergency condition relating to mental health 
                        or substance-related disorders).
                  ``(D) Treatment limit defined.--For purposes of this 
                paragraph, the term `treatment limit' means, with 
                respect to a plan, limitation on the frequency of 
                treatment, number of visits or days of coverage, or 
                other similar limit on the duration or scope of 
                treatment under the plan.
                  ``(E) Predominance.--For purposes of this subsection, 
                a treatment limit or financial requirement with respect 
                to a category of items and services is considered to be 
                predominant if it is the most common or frequent of 
                such type of limit or requirement with respect to such 
                category of items and services.
          ``(4) Beneficiary financial requirements.--In the case of a 
        group health plan that provides both medical and surgical 
        benefits and mental health or substance-related disorder 
        benefits--
                  ``(A) No beneficiary financial requirement.--If the 
                plan does not include a beneficiary financial 
                requirement (as defined in subparagraph (C)) on 
                substantially all medical and surgical benefits within 
                a category of items and services (specified in 
                paragraph (3)(C)), the plan may not impose such a 
                beneficiary financial requirement on mental health or 
                substance-related disorder benefits for items and 
                services within such category.
                  ``(B) Beneficiary financial requirement.--
                          ``(i) Treatment of deductibles, out-of-pocket 
                        limits, and similar financial requirements.--If 
                        the plan includes a deductible, a limitation on 
                        out-of-pocket expenses, or similar beneficiary 
                        financial requirement that does not apply 
                        separately to individual items and services on 
                        substantially all medical and surgical benefits 
                        within a category of items and services, the 
                        plan shall apply such requirement (or, if there 
                        is more than one such requirement for such 
                        category of items and services, the predominant 
                        requirement for such category) both to medical 
                        and surgical benefits within such category and 
                        to mental health and substance-related disorder 
                        benefits within such category and shall not 
                        distinguish in the application of such 
                        requirement between such medical and surgical 
                        benefits and such mental health and substance-
                        related disorder benefits.
                          ``(ii) Other financial requirements.--If the 
                        plan includes a beneficiary financial 
                        requirement not described in clause (i) on 
                        substantially all medical and surgical benefits 
                        within a category of items and services, the 
                        plan may not impose such financial requirement 
                        on mental health or substance-related disorder 
                        benefits for items and services within such 
                        category in a way that results in greater out-
                        of-pocket expenses to the participant or 
                        beneficiary than the predominant beneficiary 
                        financial requirement applicable to medical and 
                        surgical benefits for items and services within 
                        such category.
                          ``(iii) Construction.--Nothing in this 
                        subparagraph shall be construed as prohibiting 
                        the plan from waiving the application of any 
                        deductible for mental health benefits or 
                        substance-related disorder benefits or both.
                  ``(C) Beneficiary financial requirement defined.--For 
                purposes of this paragraph, the term `beneficiary 
                financial requirement' includes, with respect to a 
                plan, any deductible, coinsurance, co-payment, other 
                cost sharing, and limitation on the total amount that 
                may be paid by a participant or beneficiary with 
                respect to benefits under the plan, but does not 
                include the application of any aggregate lifetime limit 
                or annual limit.'', and
          (2) in subsection (b)--
                  (A) by striking ``construed--'' and all that follows 
                through ``(1) as requiring'' and inserting ``construed 
                as requiring'',
                  (B) by striking ``; or'' and inserting a period, and
                  (C) by striking paragraph (2).
  (b) Expansion to Substance-Related Disorder Benefits and Revision of 
Definition.--Section 9812 of such Code is further amended--
          (1) by striking ``mental health benefits'' each place it 
        appears (other than in any provision amended by paragraph (2)) 
        and inserting ``mental health or substance-related disorder 
        benefits'',
          (2) by striking ``mental health benefits'' each place it 
        appears in subsections (a)(1)(B)(i), (a)(1)(C), (a)(2)(B)(i), 
        and (a)(2)(C) and inserting ``mental health and substance-
        related disorder benefits'', and
          (3) in subsection (e), by striking paragraph (4) and 
        inserting the following new paragraphs:
          ``(4) Mental health benefits.--The term `mental health 
        benefits' means benefits with respect to services for mental 
        health conditions, as defined under the terms of the plan, but 
        does not include substance-related disorder benefits.
          ``(5) Substance-related disorder benefits.--The term 
        `substance-related disorder benefits' means benefits with 
        respect to services for substance-related disorders, as defined 
        under the terms of the plan.''.
  (c) Availability of Plan Information About Criteria for Medical 
Necessity.--Subsection (a) of section 9812 of such Code, as amended by 
subsection (a)(1), is further amended by adding at the end the 
following new paragraph:
          ``(5) Availability of plan information.--The criteria for 
        medical necessity determinations made under the plan with 
        respect to mental health and substance-related disorder 
        benefits shall be made available by the plan administrator to 
        any current or potential participant, beneficiary, or 
        contracting provider upon request. The reason for any denial 
        under the plan of reimbursement or payment for services with 
        respect to mental health and substance-related disorder 
        benefits in the case of any participant or beneficiary shall, 
        upon request, be made available by the plan administrator to 
        the participant or beneficiary.''.
  (d) Minimum Benefit Requirements.--Subsection (a) of section 9812 of 
such Code is further amended by adding at the end the following new 
paragraph:
          ``(6) Minimum scope of coverage and equity in out-of-network 
        benefits.--
                  ``(A) Minimum scope of mental health and substance-
                related disorder benefits.--In the case of a group 
                health plan that provides any mental health or 
                substance-related disorder benefits, the plan shall 
                include benefits for any mental health condition or 
                substance-related disorder included in the most recent 
                edition of the Diagnostic and Statistical Manual of 
                Mental Disorders published by the American Psychiatric 
                Association.
                  ``(B) Equity in coverage of out-of-network 
                benefits.--
                          ``(i) In general.--In the case of a group 
                        health plan that provides both medical and 
                        surgical benefits and mental health or 
                        substance-related disorder benefits, if medical 
                        and surgical benefits are provided for 
                        substantially all items and services in a 
                        category specified in clause (ii) furnished 
                        outside any network of providers established or 
                        recognized under such plan, the mental health 
                        and substance-related disorder benefits shall 
                        also be provided for items and services in such 
                        category furnished outside any network of 
                        providers established or recognized under such 
                        plan in accordance with the requirements of 
                        this section.
                          ``(ii) Categories of items and services.--For 
                        purposes of clause (i), there shall be the 
                        following three categories of items and 
                        services for benefits, whether medical and 
                        surgical benefits or mental health and 
                        substance-related disorder benefits, and all 
                        medical and surgical benefits and all mental 
                        health and substance-related disorder benefits 
                        shall be classified into one of the following 
                        categories:
                                  ``(I) Emergency.--Items and services, 
                                whether furnished on an inpatient or 
                                outpatient basis, required for the 
                                treatment of an emergency medical 
                                condition (including an emergency 
                                condition relating to mental health or 
                                substance-related disorders).
                                  ``(II) Inpatient.--Items and services 
                                not described in subclause (I) 
                                furnished on an inpatient basis.
                                  ``(III) Outpatient.--Items and 
                                services not described in subclause (I) 
                                furnished on an outpatient basis.''.
  (e) Revision of Increased Cost Exemption.--Paragraph (2) of section 
9812(c) of such Code is amended to read as follows:
          ``(2) Increased cost exemption.--
                  ``(A) In general.--With respect to a group health 
                plan, if the application of this section to such plan 
                results in an increase for the plan year involved of 
                the actual total costs of coverage with respect to 
                medical and surgical benefits and mental health and 
                substance-related disorder benefits under the plan (as 
                determined and certified under subparagraph (C)) by an 
                amount that exceeds the applicable percentage described 
                in subparagraph (B) of the actual total plan costs, the 
                provisions of this section shall not apply to such plan 
                during the following plan year, and such exemption 
                shall apply to the plan for 1 plan year.
                  ``(B) Applicable percentage.--With respect to a plan, 
                the applicable percentage described in this paragraph 
                shall be--
                          ``(i) 2 percent in the case of the first plan 
                        year to which this paragraph applies, and
                          ``(ii) 1 percent in the case of each 
                        subsequent plan year.
                  ``(C) Determinations by actuaries.--Determinations as 
                to increases in actual costs under a plan for purposes 
                of this subsection shall be made by a qualified and 
                licensed actuary who is a member in good standing of 
                the American Academy of Actuaries. Such determinations 
                shall be certified by the actuary and be made available 
                to the general public.
                  ``(D) 6-month determinations.--If a group health plan 
                seeks an exemption under this paragraph, determinations 
                under subparagraph (A) shall be made after such plan 
                has complied with this section for the first 6 months 
                of the plan year involved.''.
  (f) Change in Exclusion for Smallest Employers.--Paragraph (1) of 
section 9812(c) of such Code is amended to read as follows:
          ``(1) Small employer exemption.--
                  ``(A) In general.--This section shall not apply to 
                any group health plan for any plan year of a small 
                employer.
                  ``(B) Small employer.--For purposes of subparagraph 
                (A), the term `small employer' means, with respect to a 
                calendar year and a plan year, an employer who employed 
                an average of at least 2 (or 1 in the case of an 
                employer residing in a State that permits small groups 
                to include a single individual) but not more than 50 
                employees on business days during the preceding 
                calendar year. For purposes of the preceding sentence, 
                all persons treated as a single employer under 
                subsection (b), (c), (m), or (o) of section 414 shall 
                be treated as 1 employer and rules similar to rules of 
                subparagraphs (B) and (C) of section 4980D(d)(2) shall 
                apply.''.
  (g) Elimination of Sunset Provision.--Section 9812 of such Code is 
amended by striking subsection (f).
  (h) Conforming Amendments to Heading.--
          (1) In general.--The heading of section 9812 of such Code is 
        amended to read as follows:

``SEC. 9812. EQUITY IN MENTAL HEALTH AND SUBSTANCE-RELATED DISORDER 
                    BENEFITS.''.

          (2) Clerical amendment.--The table of sections for subchapter 
        B of chapter 100 of such Code is amended by striking the item 
        relating to section 9812 and inserting the following new item:

``Sec. 9812. Equity in mental health and substance-related disorder 
benefits.''.

  (i) Effective Date.--
          (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply 
        with respect to plan years beginning on or after January 1, 
        2008.
          (2) Elimination of sunset.--The amendment made by subsection 
        (g) shall apply to benefits for services furnished after 
        December 31, 2007.
          (3) Special rule for collective bargaining agreements.--In 
        the case of a group health plan maintained pursuant to one or 
        more collective bargaining agreements between employee 
        representatives and one or more employers ratified before the 
        date of the enactment of this Act, the amendments made by this 
        section (other than subsection (g)) shall not apply to plan 
        years beginning before the later of--
                  (A) the date on which the last of the collective 
                bargaining agreements relating to the plan terminates 
                (determined without regard to any extension thereof 
                agreed to after the date of the enactment of this Act), 
                or
                  (B) January 1, 2010.
        For purposes of subparagraph (A), any plan amendment made 
        pursuant to a collective bargaining agreement relating to the 
        plan which amends the plan solely to conform to any requirement 
        imposed under an amendment under this section shall not be 
        treated as a termination of such collective bargaining 
        agreement.

SEC. 5. GOVERNMENT ACCOUNTABILITY OFFICE STUDIES AND REPORTS.

  (a) Implementation of Act.--
          (1) Study.--The Comptroller General of the United States 
        shall conduct a study that evaluates the effect of the 
        implementation of the amendments made by this Act on--
                  (A) the cost of health insurance coverage;
                  (B) access to health insurance coverage (including 
                the availability of in-network providers);
                  (C) the quality of health care;
                  (D) Medicare, Medicaid, and State and local mental 
                health and substance abuse treatment spending;
                  (E) the number of individuals with private insurance 
                who received publicly funded health care for mental 
                health and substance-related disorders;
                  (F) spending on public services, such as the criminal 
                justice system, special education, and income 
                assistance programs;
                  (G) the use of medical management of mental health 
                and substance-related disorder benefits and medical 
                necessity determinations by group health plans (and 
                health insurance issuers offering health insurance 
                coverage in connection with such plans) and timely 
                access by participants and beneficiaries to clinically-
                indicated care for mental health and substance-use 
                disorders; and
                  (H) other matters as determined appropriate by the 
                Comptroller General.
          (2) Report.--Not later than 2 years after the date of 
        enactment of this Act, the Comptroller General shall prepare 
        and submit to the appropriate committees of the Congress a 
        report containing the results of the study conducted under 
        paragraph (1).
  (b) Biannual Report on Obstacles in Obtaining Coverage.--Every two 
years, the Comptroller General shall submit to each House of the 
Congress a report on obstacles that individuals face in obtaining 
mental health and substance-related disorder care under their health 
plans.
  (c) Uniform Patient Placement Criteria.--Not later than 18 months 
after the date of the enactment of this Act, the Comptroller General 
shall submit to each House of the Congress a report on availability of 
uniform patient placement criteria for mental health and substance-
related disorders that could be used by group health plans and health 
insurance issuers to guide determinations of medical necessity and the 
extent to which health plans utilize such critiera. If such criteria do 
not exist, the report shall include recommendations on a process for 
developing such criteria.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary


                                PURPOSE

    The bill modifies the mental health parity requirements 
under the Employee Retirement Income Security Act of 1974 
(ERISA), the Public Health Service Act, and the Internal 
Revenue Code and expands such requirements to substance-related 
disorder benefits. The requirements under the bill will result 
in true parity in the way that physical and mental health 
benefits are provided under group health plans. The provisions 
of the bill are necessary to end the discrimination that exists 
under many group health plans with respect to mental health and 
substance-related disorder benefits.

                                SUMMARY

    The provisions of the bill, H.R. 1424, as adopted by the 
Subcommittee, are as follows:
     Section 4 modifies the mental health parity 
requirements under the Internal Revenue Code and applies such 
requirements to substance-related disorder benefits. Section 4 
expands the present law parity requirements to treatment limits 
and beneficiary financial requirements. Section 4 also provides 
minimum benefits that must be provided in the case of a plan 
that offers mental health or substance-related disorder 
benefits. Section 4 also eliminates the sunset under present 
law, making the parity requirements for mental health and 
substance-related disorders permanent.

                 B. Background and Need for Legislation

    Many group health plans are discriminatory with respect to 
the benefits provided for mental health and substance-related 
disorder benefits. Many plans offer better treatment benefits 
for physical health conditions than for mental health 
conditions. Because of this discriminatory treatment, many 
individuals with mental illness or chemical dependency are 
unable to receive treatment for their conditions.

                         C. Legislative History


Background

    H.R. 1424 was introduced in the House of Representatives on 
March 8, 2007, and was referred to the Committee on Education 
and Labor, the Committee on Energy and Commerce, and the 
Committee on Ways and Means for a period to be determined by 
the Speaker of the House, in each case for consideration of 
such provisions as fall within the jurisdiction of the 
Committee concerned. The bill, as amended, was ordered to be 
reported by the Committee on Education and Labor on July 18, 
2007.

Subcommittee hearings

    The Subcommittee on Health of the Committee on Ways and 
Means conducted a hearing on the bill on March 27, 2007.

Subcommittee action

    The Subcommittee on Health of the Committee on Ways and 
Means marked up the bill on September 19, 2007, and ordered the 
bill, as amended, favorably reported to the full Committee on 
Ways and Means.

Committee action

    The Committee on Ways and Means marked up the bill on 
September 26, 2007, and ordered the bill, as amended, favorably 
reported.

                      II. EXPLANATION OF THE BILL


  A. Expansion of Mental Health Parity Requirements (Sec. 9812 of the 
                                 Code)


                              PRESENT LAW

    The Code, the Employee Retirement Income Security Act of 
1974 (``ERISA'') and the Public Health Service Act (``PHSA'') 
contain provisions under which group health plans that provide 
both medical and surgical benefits and mental health benefits 
cannot impose aggregate lifetime or annual dollar limits on 
mental health benefits that are not imposed on substantially 
all medical and surgical benefits (``mental health parity 
requirements''). In the case of a group health plan which 
provides benefits for mental health, the mental health parity 
requirements do not affect the terms and conditions (including 
cost sharing, limits on numbers of visits or days of coverage, 
and requirements relating to medical necessity) relating to the 
amount, duration, or scope of mental health benefits under the 
plan, except as specifically provided in regard to parity in 
the imposition of aggregate lifetime limits and annual limits.
    The Code imposes an excise tax on group health plans which 
fail to meet the mental health parity requirements. The excise 
tax is equal to $100 per day during the period of noncompliance 
and is generally imposed on the employer sponsoring the plan if 
the plan fails to meet the requirements. In the case of 
violations which are not corrected before the date a notice of 
examination is sent to the employer and which occurred or 
continued during the period under examination, the excise tax 
cannot be less than the lesser of $2,500 or the amount of tax 
imposed under the general rule. In the case that violations are 
more than de minimis, the tax cannot be less than the lesser of 
$15,000 or the amount imposed under the general rule. The 
maximum tax that can be imposed during a taxable year cannot 
exceed the lesser of 10 percent of the employer's group health 
plan expenses for the prior year or $500,000. No tax is imposed 
if the Secretary determines that the employer did not know, and 
in exercising reasonable diligence would not have known, that 
the failure existed.
    The mental health parity requirements do not apply to group 
health plans of small employers. A small employer generally 
includes an employer who employs at least two, but no more than 
50 employees on business days during the preceding calendar 
year and who employs at least two employees on the first day of 
the plan year.\1\ The mental parity requirements also do not 
apply if their application results in an increase in the cost 
under a group health plan of at least one percent. Further, the 
mental health parity requirements do not require group health 
plans to provide mental health benefits.
---------------------------------------------------------------------------
    \1\The group health plan requirements do not apply to any group 
health plan for any plan year if, on the first day of such plan year, 
such plan has less than two participants who are current employees.
---------------------------------------------------------------------------
    The Code, ERISA and PHSA mental health parity requirements 
are scheduled to expire with respect to benefits for services 
furnished after December 31, 2007.

                           REASONS FOR CHANGE

    Employers and insurance companies routinely discriminate 
against persons struggling with mental illness and addiction by 
denying coverage for mental health and substance abuse 
treatments. In addition, insurers often increase patients' 
costs for mental health treatment by limiting inpatient days, 
capping outpatient visits, and requiring higher co-payments 
than for physical illnesses. It is estimated that over 90 
percent of workers with employer-sponsored health insurance are 
enrolled in plans that impose higher costs in at least one of 
these ways. Furthermore, 48 percent are enrolled in plans that 
impose all three Limitations.\2\ These unfair treatment 
limitations are a major barrier to receiving care. Many 
individuals cannot afford to pay out-of-pocket for such 
treatment which results in many mental health and substance-
related disorder conditions going untreated.
---------------------------------------------------------------------------
    \2\Colleen Barry et al., ``Design of Mental Health Benefits: Still 
Unequal After All These Years,'' Health Affairs, September/October 
2003.
---------------------------------------------------------------------------
    The Committee believes that the discrimination that exists 
under many group health plans with respect to mental health and 
substance-related disorder benefits must be prohibited. 
Diseases of the mind should be afforded the same treatment as 
diseases of the body. The bill will end this discrimination by 
prohibiting health insurers from placing discriminatory 
restrictions on treatment and cost sharing. Extending these 
requirements to out-of-network services is necessary to achieve 
true parity. If a plan covers out-of-network services for 
physical health, it should also provide out-of-network services 
for mental health. Furthermore, restricting access to services 
provided ``in-network'' seriously limits treatment options and 
availability of appropriate providers.
    The Committee believes that in the case of a plan that 
provides mental health or substance-related disorder benefits, 
certain minimum benefits must be provided. Recognizing the 
Diagnostic and Statistical Manual (DSM) as the minimum benefit 
standard ensures appropriate, scientifically-based coverage of 
these conditions. The DSM was developed by more than 1,000 
national and international health care researchers and 
clinicians drawn from a wide range of mental and general health 
fields and is widely acknowledged as the empirical guide for 
diagnosing mental health disorders. Without this standard, 
plans could continue the practice of using arbitrary, non-
scientific criteria in determining what mental illnesses and 
addictive disorders they cover.
    Mental health and substance abuse conditions are the only 
disorders that have been systematically and unfairly excluded 
from equal coverage. Unlike mental health, the usual medical/
surgical categorical exclusions made by insurers are for 
treatments or procedures such as cosmetic surgery, not for a 
whole class of diagnoses. Because of the historical precedence 
of exclusion and discrimination, H.R. 1424 takes necessary 
steps to clarify and require that such exclusions are no longer 
acceptable or legal.
    Finally, the Committee believes that the parity 
requirements should be permanent to provide certainty as to the 
applicable requirements.

                        EXPLANATION OF PROVISION

In general

    The provision modifies the mental health parity 
requirements under the Code and also expands the application of 
such requirements to substance-related disorder benefits.\3\ 
This expansion applies to the rules under present law and to 
the changes under the provision.
---------------------------------------------------------------------------
    \3\The term ``substance related disorder benefits'' means benefits 
with respect to services for substance-related disorders, as defined 
under the terms of the plan.
---------------------------------------------------------------------------
    The provision also eliminates the sunset under present law 
and makes the requirements for group health plans relating to 
mental health and substance-related disorder benefits 
permanent.

Treatment limits and beneficiary financial requirements

            Treatment limits
    Under the provision, in the case of a group health plan 
that provides both medical and surgical and mental health or 
substance-related disorder benefits, if the plan does not 
include a treatment limit on substantially all medical and 
surgical benefits in any category of items or services, the 
plan may not impose any treatment limit on mental health and 
substance-related disorder benefits that are classified in the 
same category of items or services. A treatment limit means, 
with respect to a plan, limitation on the frequency of 
treatment, number of visits or days of coverage, or other 
similar limit on the duration or scope of treatment under the 
plan.
    If the plan includes a treatment limit on substantially all 
medical and surgical benefits in any category of items or 
services, the plan may not impose such a treatment limit on 
mental health or substance-related disorder benefits for items 
and services within such category that is more restrictive than 
the predominant\4\ treatment limit that is applicable to 
medical and surgical benefits for items and services within 
such category.
---------------------------------------------------------------------------
    \4\A treatment limit with respect to a category of items and 
services is considered to be predominant if it is the most common or 
frequent of such type of limit with respect to such category of items 
and services.
---------------------------------------------------------------------------
    The provision provides five categories of items and 
services for benefits. All medical and surgical benefits and 
all mental health and substance-related disorder benefits must 
be classified into one of the five categories. The five 
categories are as follows:
    1. Inpatient, in-network--Items and services, not described 
in (5) below, furnished on an inpatient basis and within a 
network of providers established or recognized under such plan.
    2. Inpatient, out-of-network--Items and services, not 
described in (5) below, furnished on an inpatient basis and 
outside any network of providers established or recognized 
under such plan.
    3. Outpatient, in-network--Items and services, not 
described in (5) below, furnished on an outpatient basis and 
within a network of providers established or recognized under 
such plan.
    4. Outpatient, out-of-network--Items and services, not 
described in (5) below, furnished on an outpatient basis and 
outside any network of providers established or recognized 
under such plan.
    5. Emergency care--Items and services, whether furnished on 
an inpatient or outpatient basis or within or outside any 
network of providers, required for the treatment of an 
emergency medical condition (including an emergency medical 
condition relating to mental health or substance-related 
disorders).
            Beneficiary financial requirements
    The provision provides that in the case of a group health 
plan that provides both medical and surgical benefits and 
mental health or substance-related disorder benefits, if the 
plan does not include a beneficiary financial requirement on 
substantially all medical and surgical benefits within a 
category of items and services (listed above), the plan may not 
impose such a beneficiary financial requirement on mental 
health or substance-related disorder benefits for items and 
services within such category.
    A beneficiary financial requirement includes, with respect 
to a plan, any deductible, coinsurance, co-payment, other cost 
sharing, and limitation on the total amount that may be paid by 
a participant or beneficiary with respect to benefits under the 
plan. A beneficiary financial requirement does not include the 
application of any aggregate lifetime limit or annual limit.
    If a plan includes a deductible, a limitation on out-of-
pocket expenses, or similar beneficiary financial requirement 
that does not apply separately to individual items and 
serviceson substantially all medical and surgical benefits within a 
category of items and services, the plan must apply such 
requirements\5\ both to medical and surgical benefits within such 
category and mental health and substance-related disorder benefits 
within such category and may not distinguish in the application of such 
requirement between such medical and surgical benefits and such mental 
health and substance-related disorder benefits.
---------------------------------------------------------------------------
    \5\If there is more than one such requirement for such category of 
items and services, the rule applies to the predominate requirement for 
such category. A financial requirement with respect to a category of 
items and services is considered to be predominant if it is the most 
common or frequent of such type of requirement with respect to such 
category of items and services.
---------------------------------------------------------------------------
    If a plan includes a beneficiary financial requirement not 
described in the preceding paragraph on substantially all 
medical and surgical benefits within a category of items and 
services, the plan may not impose such financial requirement on 
mental health or substance-related disorder benefits for items 
and services within such category in a way that results in 
greater out-of-pocket expenses to the participant or 
beneficiary than the predominate beneficiary financial 
requirement applicable to medical and surgical benefits for 
items and services within such category. The provision does not 
prohibit the plan from waiving the application of any 
deductible for mental health benefits or substance-related 
disorder benefits (or both).
    The provision deletes the present law rule that the mental 
health parity requirements should not be construed as affecting 
the terms and conditions of mental health benefits under a 
plan.

Availability of plan information regarding criteria for medical 
        necessity

    The provision also provides that the criteria for medical 
necessity determinations made under the plan with respect to 
mental health and substance-related disorder benefits must be 
made available by the plan administrator to any current or 
potential participant, beneficiary, or contract provider upon 
request. The reason for any denial under the plan of 
reimbursement or payment for services with respect to mental 
health and substance-related disorder benefits in the case of 
any participant or beneficiary must be made available by the 
plan administrator to the participant or beneficiary upon 
request.

Minimum benefit requirements

    The provision provides rules for the minimum benefits that 
must be provided in the case of a plan that provides mental 
health and substance-related disorder benefits. Under the 
provision, in the case of a group health plan that provides any 
mental health or substance-related disorder benefits, the plan 
must include benefits for any mental health condition or 
substance-related disorder included in the most recent edition 
of the Diagnostic and Statistical Manual of Mental Disorders 
published by the American Psychiatric Association (currently 
DSM-IV).
    In the case of a plan that provides both medical and 
surgical benefits and mental health or substance-related 
disorder benefits, if medical and surgical benefits are 
provided for substantially all items and services in a category 
specified below furnished outside any network of providers 
established or recognized under such plan, the mental health 
and substance-related disorder benefits must also be provided 
for items and services in such category furnished outside any 
network of providers established or recognized under such plan 
in accordance with the requirements under the provision. The 
three categories are as follows:
    1. Emergency--Items and services, whether furnished on an 
inpatient or outpatient basis, required for the treatment of an 
emergency medical condition (including an emergency condition 
relating to mental health or substance-related disorders).
    2. Inpatient--Items and services not described in (1) 
furnished on an inpatient basis.
    3. Outpatient--Items and services not described in (1) 
furnished on an outpatient basis.

Increased cost exception

    The provision modifies the increased cost exemption under 
present law. Under the provision, if the application of the 
mental health and substance-related disorder parity 
requirements results in an increase for the plan year involved 
of the actual total costs of coverage\6\ by an amount that 
exceeds one percent (two percent in the case of the first plan 
year to which the provision applies) of the actual total plan 
costs, such requirements do not apply to the plan during the 
following plan year. This exception applies to the plan for one 
plan year. If a plan seeks use of the exemption, the 
determination whether the exemption applies must be made after 
the plan has complied with the rules for the first six months 
of the plan year involved.
---------------------------------------------------------------------------
    \6\Coverage refers to medical and surgical benefits and mental 
health and substance-related disorder benefits under the plan.
---------------------------------------------------------------------------
    Determinations as to increases in actual costs under a plan 
for purposes of this exemption must be made by a qualified and 
licensed actuary who is a member in good standing of the 
American Academy of Actuaries. The determination must be 
certified by the actuary and made available to the general 
public.
    The provision does not affect the application of State law 
requirements or exceptions.

Small employer exception

    The provision also modifies the small employer exemption. 
Under the provision, a small employer is an employer who 
employed an average of at least two but not more than 50 
employees on business days during the preceding calendar year. 
Under the provision, a small employer also includes an employer 
who employed on average at least one employee during such 
period in the case of an employer residing in a State that 
permits small groups to include a single individual.

Effective date

    The provision is effective with respect to plan years 
beginning on or after January 1, 2008.
    The elimination of the sunset of the present law mental 
health parity requirements is effective for benefits for 
services furnished after December 31, 2007.
    In the case of a group health plan maintained pursuant to 
one or more collective bargaining agreements between employee 
representatives and one or more employers ratified before the 
date of enactment, the provision (other than the elimination of 
the sunset) does not apply to plan years beginning before the 
later of (1) the date on which the last collective bargaining 
agreement relating to the plan terminates (determined without 
regard to any extension thereof agreed to after the date of 
enactment), or (2) January 1, 2010. Any plan amendment made 
pursuant to a collective bargaining agreement relating to the 
plan which amends the plan solely to conform to any requirement 
imposed under the provision is not treated as a termination of 
such collective bargaining agreement.

                      III. VOTES OF THE COMMITTEE


                      A. Motion To Report the Bill

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the votes of the Committee on Ways and Means in its 
consideration of the bill, H.R. 1424, the ``Paul Wellstone 
Mental Health and Addiction Equity Act of 2007.''
    The bill, H.R. 1424, as amended, was ordered favorably 
reported by recorded vote of 27 yeas to 13 nays (with a quorum 
being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
        Representatives             Yea       Nay     Present    Representatives      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel.....................        X   ........  .........  Mr. McCrery......  ........        X   .........
Mr. Stark......................        X   ........  .........  Mr. Herger.......  ........        X   .........
Mr. Levin......................        X   ........  .........  Mr. Camp.........  ........        X   .........
Mr. McDermott..................        X   ........  .........  Mr. Ramstad......        X   ........  .........
Mr. Lewis (GA).................        X   ........  .........  Mr. Johnson......  ........        X   .........
Mr. Neal.......................        X   ........  .........  Mr. English......        X   ........  .........
Mr. McNulty....................        X   ........  .........  Mr. Weller.......        X   ........  .........
Mr. Tanner.....................        X   ........  .........  Mr. Hulshof......  ........        X   .........
Mr. Becerra....................        X   ........  .........  Mr. Lewis (KY)...  ........        X   .........
Mr. Doggett....................        X   ........  .........  Mr. Brady........  ........        X   .........
Mr. Pomeroy....................        X   ........  .........  Mr. Reynolds.....  ........        X   .........
Ms. Tubbs Jones................        X   ........  .........  Mr. Ryan.........  ........        X   .........
Mr. Thompson...................        X   ........  .........  Mr. Cantor.......  ........        X   .........
Mr. Larson.....................        X   ........  .........  Mr. Linder.......  ........        X   .........
Mr. Emanuel....................        X   ........  .........  Mr. Nunes........  ........        X   .........
Mr. Blumenauer.................        X   ........  .........  Mr. Tiberi.......  ........        X   .........
Mr. Kind.......................        X   ........  .........  Mr. Porter.......  ........        X   .........
Mr. Pascrell...................        X   ........  .........
Ms. Berkley....................        X   ........  .........
Mr. Crowley....................        X   ........  .........
Mr. Van Hollen.................        X   ........  .........
Mr. Meek.......................        X   ........  .........
Ms. Schwartz...................        X   ........  .........
Mr. Davis......................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

                         B. Votes on Amendments

    A rollcall vote was conducted on the following amendments 
to the Chairman's amendment in the nature of a substitute.
    An amendment by Mr. Hulshof, which would modify the minimum 
benefit standards under the bill, was defeated by a rollcall 
vote of 12 yeas to 26 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
        Representatives             Yea       Nay     Present    Representatives      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel.....................  ........        X   .........  Mr. McCrery......        X   ........  .........
Mr. Stark......................  ........        X   .........  Mr. Herger.......        X   ........  .........
Mr. Levin......................  ........        X   .........  Mr. Camp.........        X   ........  .........
Mr. McDermott..................  ........        X   .........  Mr. Ramstad......  ........        X   .........
Mr. Lewis (GA).................  ........        X   .........  Mr. Johnson......        X   ........  .........
Mr. Neal.......................  ........        X   .........  Mr. English......  ........        X   .........
Mr. McNulty....................  ........        X   .........  Mr. Weller.......  ........        X   .........
Mr. Tanner.....................  ........  ........  .........  Mr. Hulshof......        X   ........  .........
Mr. Becerra....................  ........        X   .........  Mr. Lewis (KY)...        X   ........  .........
Mr. Doggett....................  ........        X   .........  Mr. Brady........        X   ........  .........
Mr. Pomeroy....................  ........        X   .........  Mr. Reynolds.....        X   ........  .........
Ms. Tubbs Jones................  ........        X   .........  Mr. Ryan.........        X   ........  .........
Mr. Thompson...................  ........        X   .........  Mr. Cantor.......        X   ........  .........
Mr. Larson.....................  ........        X   .........  Mr. Linder.......        X   ........  .........
Mr. Emanuel....................  ........        X   .........  Mr. Nunes........        X   ........  .........
Mr. Blumenauer.................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
Mr. Kind.......................  ........        X   .........  Mr. Porter.......        X   ........  .........
Mr. Pascrell...................  ........        X   .........
Ms. Berkley....................  ........        X   .........
Mr. Crowley....................  ........        X   .........
Mr. Van Hollen.................  ........        X   .........
Mr. Meek.......................  ........        X   .........
Ms. Schwartz...................  ........        X   .........
Mr. Davis......................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment by Mr. Camp, which would modify certain 
provisions with respect to out-of-network coverage, was 
defeated by a rollcall vote of 15 yeas to 25 nays. The vote was 
as follows:

----------------------------------------------------------------------------------------------------------------
        Representatives             Yea       Nay     Present    Representatives      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel.....................  ........        X   .........  Mr. McCrery......        X   ........  .........
Mr. Stark......................  ........        X   .........  Mr. Herger.......  ........  ........  .........
Mr. Levin......................  ........        X   .........  Mr. Camp.........        X   ........  .........
Mr. McDermott..................  ........        X   .........  Mr. Ramstad......  ........        X   .........
Mr. Lewis (GA).................  ........        X   .........  Mr. Johnson......        X   ........  .........
Mr. Neal.......................  ........        X   .........  Mr. English......        X   ........  .........
Mr. McNulty....................  ........        X   .........  Mr. Weller.......        X   ........  .........
Mr. Tanner.....................  ........        X   .........  Mr. Hulshof......        X   ........  .........
Mr. Becerra....................  ........        X   .........  Mr. Lewis (KY)...        X   ........  .........
Mr. Doggett....................  ........        X   .........  Mr. Brady........        X   ........  .........
Mr. Pomeroy....................  ........        X   .........  Mr. Reynolds.....        X   ........  .........
Ms. Tubbs Jones................  ........        X   .........  Mr. Ryan.........        X   ........  .........
Mr. Thompson...................  ........        X   .........  Mr. Cantor.......        X   ........  .........
Mr. Larson.....................  ........        X   .........  Mr. Linder.......        X   ........  .........
Mr. Emanuel....................  ........        X   .........  Mr. Nunes........        X   ........  .........
Mr. Blumenauer.................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
Mr. Kind.......................  ........        X   .........  Mr. Porter.......        X   ........  .........
Mr. Pascrell...................  ........        X   .........
Ms. Berkley....................  ........        X   .........
Mr. Crowley....................  ........        X   .........
Mr. Van Hollen.................  ........        X   .........
Mr. Meek.......................  ........        X   .........
Ms. Schwartz...................  ........        X   .........
Mr. Davis......................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment by Mr. Hulshof, which would provide rules 
relating to medical management, was defeated by a rollcall vote 
of 15 yeas to 25 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
        Representatives             Yea       Nay     Present    Representatives      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel.....................  ........        X   .........  Mr. McCrery......        X   ........  .........
Mr. Stark......................  ........        X   .........  Mr. Herger.......  ........  ........  .........
Mr. Levin......................  ........        X   .........  Mr. Camp.........        X   ........  .........
Mr. McDermott..................  ........        X   .........  Mr. Ramstad......  ........        X   .........
Mr. Lewis (GA).................  ........        X   .........  Mr. Johnson......        X   ........  .........
Mr. Neal.......................  ........        X   .........  Mr. English......        X   ........  .........
Mr. McNulty....................  ........        X   .........  Mr. Weller.......        X   ........  .........
Mr. Tanner.....................  ........        X   .........  Mr. Hulshof......        X   ........  .........
Mr. Becerra....................  ........        X   .........  Mr. Lewis (KY)...        X   ........  .........
Mr. Doggett....................  ........        X   .........  Mr. Brady........        X   ........  .........
Mr. Pomeroy....................  ........        X   .........  Mr. Reynolds.....        X   ........  .........
Ms. Tubbs Jones................  ........        X   .........  Mr. Ryan.........        X   ........  .........
Mr. Thompson...................  ........        X   .........  Mr. Cantor.......        X   ........  .........
Mr. Larson.....................  ........        X   .........  Mr. Linder.......        X   ........  .........
Mr. Emanuel....................  ........        X   .........  Mr. Nunes........        X   ........  .........
Mr. Blumenauer.................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
Mr. Kind.......................  ........        X   .........  Mr. Porter.......        X   ........  .........
Mr. Pascrell...................  ........        X   .........
Ms. Berkley....................  ........        X   .........
Mr. Crowley....................  ........        X   .........
Mr. Van Hollen.................  ........        X   .........
Mr. Meek.......................  ........        X   .........
Ms. Schwartz...................  ........        X   .........
Mr. Davis......................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment by Mr. Lewis of Kentucky, which would modify 
the increased cost exemption, was defeated by a rollcall vote 
of 15 yeas to 25 nays. The vote was as follows:

----------------------------------------------------------------------------------------------------------------
        Representatives             Yea       Nay     Present    Representatives      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel.....................  ........        X   .........  Mr. McCrery......        X   ........  .........
Mr. Stark......................  ........        X   .........  Mr. Herger.......  ........  ........  .........
Mr. Levin......................  ........        X   .........  Mr. Camp.........        X   ........  .........
Mr. McDermott..................  ........        X   .........  Mr. Ramstad......  ........        X   .........
Mr. Lewis (GA).................  ........        X   .........  Mr. Johnson......        X   ........  .........
Mr. Neal.......................  ........        X   .........  Mr. English......        X   ........  .........
Mr. McNulty....................  ........        X   .........  Mr. Weller.......        X   ........  .........
Mr. Tanner.....................  ........        X   .........  Mr. Hulshof......        X   ........  .........
Mr. Becerra....................  ........        X   .........  Mr. Lewis (KY)...        X   ........  .........
Mr. Doggett....................  ........        X   .........  Mr. Brady........        X   ........  .........
Mr. Pomeroy....................  ........        X   .........  Mr. Reynolds.....        X   ........  .........
Ms. Tubbs Jones................  ........        X   .........  Mr. Ryan.........        X   ........  .........
Mr. Thompson...................  ........        X   .........  Mr. Cantor.......        X   ........  .........
Mr. Larson.....................  ........        X   .........  Mr. Linder.......        X   ........  .........
Mr. Emanuel....................  ........        X   .........  Mr. Nunes........        X   ........  .........
Mr. Blumenauer.................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
Mr. Kind.......................  ........        X   .........  Mr. Porter.......        X   ........  .........
Mr. Pascrell...................  ........        X   .........
Ms. Berkley....................  ........        X   .........
Mr. Crowley....................  ........        X   .........
Mr. Van Hollen.................  ........        X   .........
Mr. Meek.......................  ........        X   .........
Ms. Schwartz...................  ........        X   .........
Mr. Davis......................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    An amendment by Mr. Camp, which would substitute the 
language in the Chairman's amendment with language from S. 558, 
was defeated by a rollcall vote of 13 yeas to 26 nays. The vote 
was as follows:

----------------------------------------------------------------------------------------------------------------
        Representatives             Yea       Nay     Present    Representatives      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel.....................  ........        X   .........  Mr. McCrery......        X   ........  .........
Mr. Stark......................  ........        X   .........  Mr. Herger.......  ........  ........  .........
Mr. Levin......................  ........        X   .........  Mr. Camp.........        X   ........  .........
Mr. McDermott..................  ........        X   .........  Mr. Ramstad......  ........        X   .........
Mr. Lewis (GA).................  ........        X   .........  Mr. Johnson......        X   ........  .........
Mr. Neal.......................  ........        X   .........  Mr. English......  ........        X   .........
Mr. McNulty....................  ........        X   .........  Mr. Weller.......  ........        X   .........
Mr. Tanner.....................  ........        X   .........  Mr. Hulshof......        X   ........  .........
Mr. Becerra....................  ........        X   .........  Mr. Lewis (KY)...        X   ........  .........
Mr. Doggett....................  ........        X   .........  Mr. Brady........        X   ........  .........
Mr. Pomeroy....................  ........        X   .........  Mr. Reynolds.....        X   ........  .........
Ms. Tubbs Jones................  ........        X   .........  Mr. Ryan.........        X   ........  .........
Mr. Thompson...................  ........        X   .........  Mr. Cantor.......        X   ........  .........
Mr. Larson.....................  ........        X   .........  Mr. Linder.......        X   ........  .........
Mr. Emanuel....................  ........        X   .........  Mr. Nunes........        X   ........  .........
Mr. Blumenauer.................  ........        X   .........  Mr. Tiberi.......        X   ........  .........
Mr. Kind.......................  ........        X   .........  Mr. Porter.......        X   ........  .........
Mr. Pascrell...................  ........        X   .........
Ms. Berkley....................  ........        X   .........
Mr. Crowley....................  ........        X   .........
Mr. Van Hollen.................  ........        X   .........
Mr. Meek.......................  ........        X   .........
Ms. Schwartz...................  ........        X   .........
Mr. Davis......................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

                     IV. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d)(2) of rule XIII of the Rules 
of the House of Representatives, the following statement is 
made concerning the effects on the budget of the revenue 
provisions of the bill, H.R. 1424 as reported.
    The effects of the bill on Federal budget receipts is 
presented in the cost estimate provided by the Congressional 
Budget Office (see below).

B. Statement Regarding New Budget Authority and Tax Expenditures Budget 
                               Authority

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves no new or increased budget authority.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the CBO, the following statement by CBO is 
provided.

H.R. 1424--Paul Wellstone Mental Health and Addiction Equity Act of 
        2007

    Summary: H.R. 1424 would prohibit group health plans and 
group health insurance issuers that provide both medical and 
surgical benefits and mental health benefits from imposing 
treatment limitations or financial requirements for coverage of 
mental health benefits (including benefits for substance abuse 
treatment) that are different from those used for medical and 
surgical benefits.
    Enacting the bill would affect both federal revenues and 
direct spending for Medicaid, beginning in 2008. The bill would 
result in higher premiums for employer-sponsored health 
benefits. Higher premiums, in turn, would result in more of an 
employee's compensation being received in the form of 
nontaxable employer-paid premiums, and less in the form of 
taxable wages. As a result of this shift, federal income and 
payroll tax revenues would decline. The Congressional Budget 
Office estimates that the proposal would reduce federal tax 
revenues by $1.1 billion over the 2008-2012 period and by $3.1 
billion over the 2008-2017 period. Social Security payroll 
taxes, which are off-budget, would account for about 35 percent 
of those totals.
    The bill's requirements for issuers of group health 
insurance would apply to managed care plans in the Medicaid 
program. CBO estimates that enacting H.R. 1424 would increase 
federal direct spending for Medicaid by $310 million over the 
2008-2012 period and by $820 million over the 2008-2017 period.
    CBO has reviewed the non-tax provisions of the bill 
(sections 2, 3, and 5) and has determined that sections 2 and 3 
contain intergovernmental mandates as defined in the Unfunded 
Mandates Reform Act (UMRA). The bill would preempt state laws 
governing mental health coverage that conflict with those in 
this bill. However, because the preemption only would prohibit 
the application of state regulatory law, CBO estimates that the 
costs of the mandate to state, local, or tribal governments 
would not exceed the threshold established by UMRA ($66 million 
in 2007, adjusted annually for inflation).
    As a result of this legislation, some state, local, and 
tribal governments would pay higher health insurance premiums 
for their employees. However, these costs would not result from 
intergovernmental mandates, but would be costs passed on to 
them by private insurers who would face a private-sector 
mandate to comply with the requirements of the bill.
    The bill would impose a private-sector mandate on group 
health plans and group health insurance issuers by prohibiting 
them from imposing treatment limitations or financial 
requirements for mental health benefits that differ from those 
placed on medical and surgical benefits. Under current law, the 
Mental Health Parity Act of 1996 requires a more-limited form 
of parity between mental health and medical and surgical 
coverage. That mandate is set to expire at the end of 2007. 
Thus, H.R. 1424 would both extend and expand the existing 
mandate requiring mental health parity. CBO estimates that the 
direct costs of the private-sector mandate in the bill would 
total about $1.3 billion in 2008, and would grow in later 
years. That amount would significantly exceed the annual 
threshold established by UMRA ($131 million in 2007, adjusted 
for inflation) in each of the years that the mandate would be 
in effect.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 1424 is shown in the following table. 
The costs of this legislation fall within budget function 550 
(health).

                                                        ESTIMATED BUDGETARY EFFECTS OF H.R. 1424
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             By fiscal year, in millions of dollars--
                                         ---------------------------------------------------------------------------------------------------------------
                                            2008     2009     2010     2011     2012     2013     2014     2015     2016     2017   2008-2012  2008-2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   CHANGES IN REVENUES

Income and HI Payroll Taxes:
    (on-budget).........................      -20     -120     -170     -190     -210     -230     -250     -260     -280     -300       -710     -2,030
Social Security Payroll Taxes:
    (off-budget)........................      -10      -70     -100     -100     -110     -120     -130     -140     -150     -160       -390     -1,090
                                         ---------------------------------------------------------------------------------------------------------------
        Total Changes...................      -30     -190     -270     -290     -320     -350     -380     -400     -430     -460     -1,100     -3,120

                                                               CHANGES IN DIRECT SPENDING

Medicaid:
    Estimated Budget Authority..........       30       60       70       70       80       90       90      100      110      120        310        820
    Estimated Outlays...................       30       60       70       70       80       90       90      100      110      120        310       820
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: HI = Hospital Insurance (Part A of Medicare)

    Basis of estimate: H.R. 1424 would prohibit group health 
plans and group health insurance issuers who offer mental 
health benefits (including benefits for substance abuse 
treatment) from imposing treatment limitations or financial 
requirements for those benefits that are different from those 
used for medical and surgical benefits. For plans that offer 
mental health benefits through a network of mental health 
providers, the requirement for parity of benefits would be 
established by comparing in-network medical and surgical 
benefits with in-network mental health benefits, and comparing 
out-of-network medical and surgical benefits with out-of-
network mental health benefits. The provision would apply to 
benefits for any mental health condition that is covered under 
the group health plan.
    The bill would not require plans to offer mental health 
benefits. It would, however, amend the Employee Retirement 
Income Security Act of 1974 (ERISA) and the Public Health 
Service Act (PHSA) to require mental health benefits of plans 
that choose to offer such benefits to be at least as generous 
as the Federal Employees Health Benefits Plan (FEHBP) with the 
highest average enrollment as of the beginning of the most 
recent plan year involved. It also would amend the Internal 
Revenue Code (IRC) to require that the mental health benefits 
of plans that choose to offer such benefits to include benefits 
for any mental health condition or substance-related disorder 
included in the most recent edition of the Diagnostic and 
Statistical Manual (DSM) of Mental Disorders published by the 
American Psychiatric Association (APA). CBO assumed that those 
standards would not be materially different and would have a 
negligible budgetary effect. In addition, existing laws in some 
states require that plans cover all types of mental health 
services or ailments, which would reduce the potential impact 
of this bill on health plan premiums.

Revenues

    The provisions of the bill would apply to both self-insured 
and fully insured group health plans. Small employers (those 
employing fewer than 50 employees in a year) would be exempt 
from the bill's requirements, as would individuals purchasing 
insurance in the individual market. The bill also would exempt 
group health plans for whom the cost of complying with the 
requirements would increase total plan costs (for medical and 
surgical benefits and mental health benefits) by more than 2 
percent in the first plan year following enactment, and 1 
percent in subsequent plan years. In general, H.R. 1424 would 
not preempt state laws regarding parity of mental health 
benefits except to the extent that state laws prohibit the 
application of a requirement of the bill.
    CBO's estimate of the cost of this bill is based in part on 
published results of a model developed by the Hay Group. That 
model relies on data from several sources, including the claims 
experience of private health insurers and the Medical 
Expenditure Panel Survey. CBO adjusted those results to account 
for the current and future use of managed care arrangements for 
providing mental health benefits and the increased use of 
prescription drugs that mental health parity would be likely to 
induce. Also, CBO took account of the effects of existing state 
and federal rules that place requirements similar to those in 
the bill on certain entities. (For example, the Office of 
Personnel Management implemented mental health and substance 
abuse parity in the FEHBP in January 2001.)
    CBO estimates that H.R. 1424, if enacted, would increase 
premiums for group health insurance by an average of about 0.4 
percent, before accounting for the responses of health plans, 
employers, and workers to the higher premiums that would likely 
be charged under the bill. Those responses would include 
reductions in the number of employers offering insurance to 
their employees and in the number of employees enrolling in 
employer-sponsored insurance, changes in the types of health 
plans that are offered (including eliminating coverage for 
mental health benefits and/or substance benefits), and 
reductions in the scope or generosity of health insurance 
benefits, such as increased deductibles or higher copayments. 
CBO expects that those behavioral responses would offset 60 
percent of the potential impact of the bill on total health 
plan costs.
    The remaining 40 percent of the potential increase in 
costs--less than 0.2 percent of group health insurance 
premiums--would occur in the form of higher spending for health 
insurance.
    Those costs would be passed through to workers, reducing 
both their taxable compensation and other fringe benefits. For 
employees of private firms, CBO assumes that all of that 
increase would ultimately be passed through to workers. State, 
local, and tribal governments are assumed to absorb 75 percent 
of the increase and to reduce their workers' taxable income and 
other fringe benefits to offset the remaining one-quarter of 
the increase. CBO estimates that the resulting reduction in 
taxable income would grow from $400 million in 2008 to $4.5 
billion in 2017.
    Those reductions in workers' taxable compensation would 
lead to lower federal tax revenues. CBO estimates that federal 
tax revenues would fall by $30 million in 2008 and by $3.1 
billion over the 2008-2017 period if H.R. 1424 were enacted. 
Social Security payroll taxes, which are off-budget, would 
account for about 35 percent of those totals.

Direct spending

    The bill's requirements for issuers of group health 
insurance would apply to managed care plans in the Medicaid 
program. CBO estimates that enacting H.R. 1424 would increase 
Medicaid payments to managed care plans by about 0.2 percent. 
That is less than the 0.4 percent increase in the estimated 
increase in spending for employer-sponsored health insurance 
because Medicaid programs offer broader coverage of mental 
health benefits than the private sector. CBO estimates that 
enacting H.R. 1424 would increase federal spending for Medicaid 
by $310 million over the 2008-2012 period and $820 million over 
the 2008-2017 period.
    Estimated impact on state, local, and tribal governments: 
H.R. 1424 would preempt state laws governing mental health 
coverage that conflict with those in this bill. That preemption 
would be an intergovernmental mandate as defined in UMRA. 
However, because the preemption would simply prohibit the 
application of state regulatory laws that conflict with the new 
federal standards, CBO estimates that the mandate would impose 
no significant costs on state, local, or tribal governments.
    An existing provision in the PHSA would allow state, local, 
and tribal governments, as employers that provide health 
benefits to their employees, to opt out of the requirements of 
this bill. Consequently, the bill's requirements for mental 
health parity would not be intergovernmental mandates as 
defined in UMRA, and the bill would affect the budgets of those 
governments only if they choose to comply with the requirements 
on group health plans. Roughly two-thirds of employees in 
state, local, and tribal governments are enrolled in self-
insured plans.
    The remaining governmental employees are enrolled in fully 
insured plans. Governments purchase health insurance for those 
employees through private insurers and would face increased 
premiums as a result of higher costs passed on to them by those 
insurers. The increased costs, however, would not result from 
intergovernmental mandates. Rather, they would be part of the 
mandate costs initially borne by the private sector and then 
passed on to the governments as purchasers of insurance. CBO 
estimates that state, local, and tribal governments would face 
additional costs of about $10 million in 2008, increasing to 
about $155 million in 2012. This estimate reflects the 
assumption that governments would shift roughly 25 percent of 
the additional costs to their employees.
    Because the bill's requirements would apply to managed care 
plans in the Medicaid program, CBO estimates that state 
spending for Medicaid also would increase by about $235 million 
over the 2008-2012 period.
    Estimated impact on the private sector: The bill would 
impose a private-sector mandate on group health plans and 
issuers of group health insurance that provide medical and 
surgical benefits as well as mental health benefits (including 
benefits for substance abuse treatment). H.R. 1424 would 
prohibit those entities from imposing treatment limitations or 
financial requirements for mental health benefits that differ 
from those placed on medical and surgical benefits. The 
requirements would not apply to coverage purchased by employer 
groups with fewer than 50 employees. For plans that offer 
mental health benefits through a network of mental health 
providers, the requirement for parity of benefits would be 
established by comparing in-network medical and surgical 
benefits with in-network mental health benefits, and comparing 
out-of-network medical and surgical benefits with out-of-
network mental health benefits.
    Under current law, the Mental Health Parity Act of 1996 
prohibits group health plans and group health insurance issuers 
from imposing annual and lifetime dollar limits on mental 
health coverage that are more restrictive than limits imposed 
on medical and surgical coverage. The current mandate is set to 
expire at the end of calendar year 2007. Consequently, H.R. 
1424 would both extend and expand the current mandate requiring 
mental health parity.
    CBO's estimate of the direct costs of the mandate assumes 
that affected entities would comply with H.R. 1424 by further 
increasing the generosity of their mental health benefits. Many 
plans currently offer mental health benefits that are less 
generous than their medical and surgical benefits. We estimate 
that the direct costs of the additional services that would be 
newly covered by insurance because of the mandate would equal 
about 0.4 percent of employer-sponsored health insurance 
premiums compared to having no mandate at all.
    CBO estimates that the direct costs of the mandate in H.R. 
1424 would be $1.3 billion in 2008, rising to $3.0 billion in 
2012. Those costs would exceed the threshold specified in UMRA 
($131 million in 2007, adjusted annually for inflation) in each 
year the mandate would be in effect.
    Previous CBO estimates: On March 20, 2007, CBO transmitted 
a cost estimate for S. 558, the Mental Health Parity Act of 
2007, as ordered reported by the Senate Committee on Health, 
Education, Labor, and Pensions on February 14, 2007. On 
September 7, 2007, CBO transmitted a cost estimate for H.R. 
1424, the Paul Wellstone Mental Health and Addiction Equity Act 
of 2007, as ordered reported by the House Committee on 
Education and Labor on July 18, 2007.
    The Ways and Means Committee's version of H.R. 1424 differs 
from the previous version in that it would not include a 
mechanism for auditing group health plans or for providing 
assistance to beneficiaries of such plans. In addition, it 
would amend the IRC to require mental health benefits of plans 
that choose to offer such benefits to include benefits that are 
included in the most recent edition of the DSM of Mental 
Disorders published by the APA. Because this change would not 
be materially different from the requirement that such benefits 
be at least as generous as the FEHBP with the highest average 
enrollment as of the beginning of the most recent plan year, 
CBO estimated that this would have a negligible budgetary 
effect.
    Both versions of H.R. 1424 differ from S. 558 in several 
ways. H.R. 1424 would: (1) require mental health benefits of 
plans that choose to offer such benefits to meet a minimum 
benefits requirement; (2) exempt group health plans with 
collective bargaining agreements from the requirements of the 
bill until the later of the expiration of such agreements or 
January 1, 2010; (3) make conforming modifications to the 
Internal Revenue Code; and (4) apply to group health plans 
beginning January 1, 2008 (while S. 558 specified that the 
policy would be effective more than one year after the date of 
the enactment, affecting plans beginning on or after January 1, 
2009).
    CBO estimates the minimum benefit requirement and exception 
for the collective bargaining agreements under H.R. 1424 would 
have no significant budgetary effect, while the difference in 
the effective dates would affect our estimate in 2008 and 2009. 
CBO and the Joint Committee on Taxation estimate that 
conforming modifications to the IRC would result in a 
negligible impact on excise tax revenue collected from 
employers who fail to comply with the requirements of the bill.
    Estimate prepared by: Federal costs: Jeanne De Sa and 
Shinobu Suzuki; Impact on state, local, and tribal governments: 
Lisa Ramirez-Branum; Impact on the private sector: Stuart 
Hagen.
    Estimate approved by: Keith J. Fontenot, Deputy Assistant 
Director for Health and Human Resources, Budget Analysis 
Division.

                    D. Macroeconomic Impact Analysis

    In compliance with clause 3(h)(2) of rule XIII of the Rules 
of the House of Representatives, the following statement is 
made by the Joint Committee on Taxation with respect to the 
provisions of the bill amending the Internal Revenue Code of 
1986: The effects of the bill on economic activity are so small 
as to be incalculable within the context of a model of the 
aggregate economy.

                             E. PAY-GO Rule

    In compliance with clause 10 of rule XXI of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the revenue provisions 
of the bill, H.R. 1424, as reported: The provisions of the bill 
affecting revenues have the following net effect on the deficit 
or surplus: (1) the bill would not increase the deficit or 
reduce the surplus in fiscal year 2007; (2) the bill would 
increase the deficit or reduce the surplus by $1.1 billion over 
the fiscal year 2008-2012 period; and (2) the bill would 
increase the deficit or reduce the surplus by $3.12 billion 
over the fiscal year 2008-2017 period.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE


          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee advises that it is appropriate and timely to 
enact the provisions included in the bill as reported.

        B. Statement of General Performance Goals and Objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill contains no measure that authorizes funding, so no 
statement of general performance goals and objectives for which 
any measure authorizes funding is required.

                 C. Constitutional Authority Statement

    With respect to clause 3(d)(1) of rule XIII of the Rules of 
the House of Representatives (relating to Constitutional 
Authority), the Committee states that the Committee's action in 
reporting this bill is derived from Article I of the 
Constitution, Section 8 (``The Congress shall have Power To lay 
and collect Taxes, Duties, Imposts and Excises . . .''), and 
from the 16th Amendment to the Constitution.

              D. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4). CBO has reviewed the non-tax provisions of the bill 
(sections 2, 3, and 5) and has determined that sections 2 and 3 
contain intergovernmental mandates as defined in the Unfunded 
Mandates Reform Act (UMRA). The bill would preempt state laws 
governing mental health coverage that conflict with those in 
this bill. However, because the preemption would only prohibit 
the application of state regulatory law, CBO estimates that the 
costs of the mandate to state, local or tribal governments 
would not exceed the threshold established by UMRA ($66 million 
in 2007, adjusted annually for inflation).
    As a result of this legislation, some state, local and 
tribal governments would pay higher health insurance premiums 
for their employees. However, these costs would not result from 
intergovernmental mandates, but would be costs passed on to 
them by private insurers who would face a private-sector 
mandate to comply with requirements of the bill.
    The bill would impose a private-sector mandate on group 
health plans and group health insurance issuers by prohibiting 
them from imposing treatment limitations or financial 
requirements for mental health benefits that differ from those 
placed on medical and surgical benefits. Under current law, the 
Mental Health Parity Act of 1996 requires a more-limited form 
of parity between mental health and medical and surgical 
coverage. That mandate is set to expire at the end of 2007. 
Thus, H.R. 1424 would both extend and expand the existing 
mandate requiring mental health parity. CBO estimates that the 
direct costs of the private-sector mandate in the bill would be 
about $1.3 billion in 2008, and would grow in later years. That 
amount would significantly exceed the threshold established by 
UMRA ($131 million in 2007, adjusted for inflation) in each of 
the years that the mandate would be in effect.

                E. Applicability of House Rule XXI 5(b)

    Clause 5 of rule XXI of the Rules of the House of 
Representatives provides, in part, that ``A bill or joint 
resolution, amendment, or conference report carrying a Federal 
income tax rate increase may not be considered as passed or 
agreed to unless so determined by a vote of not less than 
three-fifths of the Members voting, a quorum being present.'' 
The Committee has carefully reviewed the provisions of the 
bill, and states that the provisions of the bill do not involve 
any Federal income tax rate increases within the meaning of the 
rule.

                       F. Tax Complexity Analysis

    Section 4022(b) of the Internal Revenue Service Reform and 
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the 
Joint Committee on Taxation (in consultation with the Internal 
Revenue Service and the Department of the Treasury) to provide 
a tax complexity analysis. The complexity analysis is required 
for all legislation reported by the Senate Committee on 
Finance, the House Committee on Ways and Means, or any 
committee of conference if the legislation includes a provision 
that directly or indirectly amends the Internal Revenue Code 
and has widespread applicability to individuals or small 
businesses.
    The staff of the Joint Committee on Taxation has determined 
that a complexity analysis is not required under section 
4022(b) of the IRS Reform Act because the bill contains no 
provisions that amend the Code and that have ``widespread 
applicability'' to individuals or small businesses.

                        G. Limited Tax Benefits

    Pursuant to clause 9 of rule XXI of the Rules of the House 
of Representatives, the Ways and Means Committee has determined 
that the bill as reported contains no congressional earmarks, 
limited tax benefits, or limited tariff benefits within the 
meaning of that Rule.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

            EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974


                   SHORT TITLE AND TABLE OF CONTENTS

  Section 1. This Act may be cited as the ``Employee Retirement 
Income Security Act of 1974''.

                            TABLE OF CONTENTS

Sec. 1. Short title and table of contents.

             TITLE I--PROTECTION OF EMPLOYEE BENEFIT RIGHTS

     * * * * * * *

                 Part 7--Group Health Plan Requirements

     * * * * * * *

      Subpart A--Requirements Relating to Portability, Access, and 
                              Renewability

[Sec. 712. Parity in the application of certain limits to mental health 
          benefits.]
Sec. 712. Equity in mental health and substance-related disorder 
          benefits.
     * * * * * * *

TITLE I--PROTECTION OF EMPLOYEE BENEFIT RIGHTS

           *       *       *       *       *       *       *


Subtitle B--Regulatory Provisions

           *       *       *       *       *       *       *


PART 7--Group Health Plan Requirements

           *       *       *       *       *       *       *


Subpart B--Other Requirements

           *       *       *       *       *       *       *


[SEC. 712. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO MENTAL HEALTH 
                    BENEFITS.]

SEC. 712. EQUITY IN MENTAL HEALTH AND SUBSTANCE-RELATED DISORDER 
                    BENEFITS.

  (a) In General.--
          (1) Aggregate lifetime limits.--In the case of a 
        group health plan (or health insurance coverage offered 
        in connection with such a plan) that provides both 
        medical and surgical benefits and [mental health 
        benefits] mental health and substance-related disorder 
        benefits--
                  (A) No lifetime limit.--If the plan or 
                coverage does not include an aggregate lifetime 
                limit on substantially all medical and surgical 
                benefits, the plan or coverage may not impose 
                any aggregate lifetime limit on [mental health 
                benefits] mental health and substance-related 
                disorder benefits.
                  (B) Lifetime limit.--If the plan or coverage 
                includes an aggregate lifetime limit on 
                substantially all medical and surgical benefits 
                (in this paragraph referred to as the 
                ``applicable lifetime limit''), the plan or 
                coverage shall either--
                          (i) apply the applicable lifetime 
                        limit both to the medical and surgical 
                        benefits to which it otherwise would 
                        apply and to [mental health benefits] 
                        mental health and substance-related 
                        disorder benefits and not distinguish 
                        in the application of such limit 
                        between such medical and surgical 
                        benefits and [mental health benefits] 
                        mental health and substance-related 
                        disorder benefits; or
                          (ii) not include any aggregate 
                        lifetime limit on [mental health 
                        benefits] mental health and substance-
                        related disorder benefits that is less 
                        than the applicable lifetime limit.
                  (C) Rule in case of different limits.--In the 
                case of a plan or coverage that is not 
                described in subparagraph (A) or (B) and that 
                includes no or different aggregate lifetime 
                limits on different categories of medical and 
                surgical benefits, the Secretary shall 
                establish rules under which subparagraph (B) is 
                applied to such plan or coverage with respect 
                to [mental health benefits] mental health and 
                substance-related disorder benefits by 
                substituting for the applicable lifetime limit 
                an average aggregate lifetime limit that is 
                computed taking into account the weighted 
                average of the aggregate lifetime limits 
                applicable to such categories.
          (2) Annual limits.--In the case of a group health 
        plan (or health insurance coverage offered in 
        connection with such a plan) that provides both medical 
        and surgical benefits and [mental health benefits] 
        mental health and substance-related disorder benefits--
                  (A) No annual limit.--If the plan or coverage 
                does not include an annual limit on 
                substantially all medical and surgical 
                benefits, the plan or coverage may not impose 
                any annual limit on [mental health benefits] 
                mental health and substance-related disorder 
                benefits.
                  (B) Annual limit.--If the plan or coverage 
                includes an annual limit on substantially all 
                medical and surgical benefits (in this 
                paragraph referred to as the ``applicable 
                annual limit''), the plan or coverage shall 
                either--
                          (i) apply the applicable annual limit 
                        both to medical and surgical benefits 
                        to which it otherwise would apply and 
                        to [mental health benefits] mental 
                        health and substance-related disorder 
                        benefits and not distinguish in the 
                        application of such limit between such 
                        medical and surgical benefits and 
                        [mental health benefits] mental health 
                        and substance-related disorder 
                        benefits; or
                          (ii) not include any annual limit on 
                        [mental health benefits] mental health 
                        and substance-related disorder benefits 
                        that is less than the applicable annual 
                        limit.
                  (C) Rule in case of different limits.--In the 
                case of a plan or coverage that is not 
                described in subparagraph (A) or (B) and that 
                includes no or different annual limits on 
                different categories of medical and surgical 
                benefits, the Secretary shall establish rules 
                under which subparagraph (B) is applied to such 
                plan or coverage with respect to [mental health 
                benefits] mental health and substance-related 
                disorder benefits by substituting for the 
                applicable annual limit an average annual limit 
                that is computed taking into account the 
                weighted average of the annual limits 
                applicable to such categories.
          (3) Treatment limits.--
                  (A) No treatment limit.--If the plan or 
                coverage does not include a treatment limit (as 
                defined in subparagraph (D)) on substantially 
                all medical and surgical benefits in any 
                category of items or services, the plan or 
                coverage may not impose any treatment limit on 
                mental health and substance-related disorder 
                benefits that are classified in the same 
                category of items or services.
                  (B) Treatment limit.--If the plan or coverage 
                includes a treatment limit on substantially all 
                medical and surgical benefits in any category 
                of items or services, the plan or coverage may 
                not impose such a treatment limit on mental 
                health and substance-related disorder benefits 
                for items and services within such category 
                that are more restrictive than the predominant 
                treatment limit that is applicable to medical 
                and surgical benefits for items and services 
                within such category.
                  (C) Categories of items and services for 
                application of treatment limits and beneficiary 
                financial requirements.--For purposes of this 
                paragraph and paragraph (4), there shall be the 
                following four categories of items and services 
                for benefits, whether medical and surgical 
                benefits or mental health and substance-related 
                disorder benefits, and all medical and surgical 
                benefits and all mental health and substance 
                related benefits shall be classified into one 
                of the following categories:
                          (i) Inpatient, in-network.--Items and 
                        services furnished on an inpatient 
                        basis and within a network of providers 
                        established or recognized under such 
                        plan or coverage.
                          (ii) Inpatient, out-of-network.--
                        Items and services furnished on an 
                        inpatient basis and outside any network 
                        of providers established or recognized 
                        under such plan or coverage.
                          (iii) Outpatient, in-network.--Items 
                        and services furnished on an outpatient 
                        basis and within a network of providers 
                        established or recognized under such 
                        plan or coverage.
                          (iv) Outpatient, out-of-network.--
                        Items and services furnished on an 
                        outpatient basis and outside any 
                        network of providers established or 
                        recognized under such plan or coverage.
                  (D) Treatment limit defined.--For purposes of 
                this paragraph, the term ``treatment limit'' 
                means, with respect to a plan or coverage, 
                limitation on the frequency of treatment, 
                number of visits or days of coverage, or other 
                similar limit on the duration or scope of 
                treatment under the plan or coverage.
                  (E) Predominance.--For purposes of this 
                subsection, a treatment limit or financial 
                requirement with respect to a category of items 
                and services is considered to be predominant if 
                it is the most common or frequent of such type 
                of limit or requirement with respect to such 
                category of items and services.
          (4) Beneficiary financial requirements.--
                  (A) No beneficiary financial requirement.--If 
                the plan or coverage does not include a 
                beneficiary financial requirement (as defined 
                in subparagraph (C)) on substantially all 
                medical and surgical benefits within a category 
                of items and services (specified under 
                paragraph (3)(C)), the plan or coverage may not 
                impose such a beneficiary financial requirement 
                on mental health and substance-related disorder 
                benefits for items and services within such 
                category.
                  (B) Beneficiary financial requirement.--
                          (i) Treatment of deductibles, out-of-
                        pocket limits, and similar financial 
                        requirements.--If the plan or coverage 
                        includes a deductible, a limitation on 
                        out-of-pocket expenses, or similar 
                        beneficiary financial requirement that 
                        does not apply separately to individual 
                        items and services on substantially all 
                        medical and surgical benefits within a 
                        category of items and services (as 
                        specified in paragraph (3)(C)), the 
                        plan or coverage shall apply such 
                        requirement (or, if there is more than 
                        one such requirement for such category 
                        of items and services, the predominant 
                        requirement for such category) both to 
                        medical and surgical benefits within 
                        such category and to mental health and 
                        substance-related disorder benefits 
                        within such category and shall not 
                        distinguish in the application of such 
                        requirement between such medical and 
                        surgical benefits and such mental 
                        health and substance-related disorder 
                        benefits.
                          (ii) Other financial requirements.--
                        If the plan or coverage includes a 
                        beneficiary financial requirement not 
                        described in clause (i) on 
                        substantially all medical and surgical 
                        benefits within a category of items and 
                        services, the plan or coverage may not 
                        impose such financial requirement on 
                        mental health and substance-related 
                        disorder benefits for items and 
                        services within such category in a way 
                        that is more costly to the participant 
                        or beneficiary than the predominant 
                        beneficiary financial requirement 
                        applicable to medical and surgical 
                        benefits for items and services within 
                        such category.
                  (C) Beneficiary financial requirement 
                defined.--For purposes of this paragraph, the 
                term ``beneficiary financial requirement'' 
                includes, with respect to a plan or coverage, 
                any deductible, coinsurance, co-payment, other 
                cost sharing, and limitation on the total 
                amount that may be paid by a participant or 
                beneficiary with respect to benefits under the 
                plan or coverage, but does not include the 
                application of any aggregate lifetime limit or 
                annual limit.
          (5) Availability of plan information.--The criteria 
        for medical necessity determinations made under the 
        plan with respect to mental health and substance-
        related disorder benefits (or the health insurance 
        coverage offered in connection with the plan with 
        respect to such benefits) shall be made available by 
        the plan administrator (or the health insurance issuer 
        offering such coverage) to any current or potential 
        participant, beneficiary, or contracting provider upon 
        request. The reason for any denial under the plan (or 
        coverage) of reimbursement or payment for services with 
        respect to mental health and substance-related disorder 
        benefits in the case of any participant or beneficiary 
        shall, upon request, be made available by the plan 
        administrator (or the health insurance issuer offering 
        such coverage) to the participant or beneficiary.
          (6) Minimum scope of coverage and equity in out-of-
        network benefits.--
                  (A) Minimum scope of mental health and 
                substance-related disorder benefits.--In the 
                case of a group health plan (or health 
                insurance coverage offered in connection with 
                such a plan) that provides any mental health 
                and substance-related disorder benefits, the 
                plan or coverage shall include benefits for any 
                mental health condition or substance-related 
                disorder for which benefits are provided under 
                the benefit plan option offered under chapter 
                89 of title 5, United States Code, with the 
                highest average enrollment as of the beginning 
                of the most recent year beginning on or before 
                the beginning of the plan year involved.
                  (B) Equity in coverage of out-of-network 
                benefits.--
                          (i) In general.--In the case of a 
                        plan or coverage that provides both 
                        medical and surgical benefits and 
                        mental health and substance-related 
                        disorder benefits, if medical and 
                        surgical benefits are provided for 
                        substantially all items and services in 
                        a category specified in clause (ii) 
                        furnished outside any network of 
                        providers established or recognized 
                        under such plan or coverage, the mental 
                        health and substance-related disorder 
                        benefits shall also be provided for 
                        items and services in such category 
                        furnished outside any network of 
                        providers established or recognized 
                        under such plan or coverage in 
                        accordance with the requirements of 
                        this section.
                          (ii) Categories of items and 
                        services.--For purposes of clause (i), 
                        there shall be the following three 
                        categories of items and services for 
                        benefits, whether medical and surgical 
                        benefits or mental health and 
                        substance-related disorder benefits, 
                        and all medical and surgical benefits 
                        and all mental health and substance-
                        related disorder benefits shall be 
                        classified into one of the following 
                        categories:
                                  (I) Emergency.--Items and 
                                services, whether furnished on 
                                an inpatient or outpatient 
                                basis, required for the 
                                treatment of an emergency 
                                medical condition (including an 
                                emergency condition relating to 
                                mental health and substance-
                                related disorders).
                                  (II) Inpatient.--Items and 
                                services not described in 
                                subclause (I) furnished on an 
                                inpatient basis.
                                  (III) Outpatient.--Items and 
                                services not described in 
                                subclause (I) furnished on an 
                                outpatient basis.
  (b) Construction.--Nothing in this section shall be 
[construed--
          [(1) as requiring] construed as requiring a group 
        health plan (or health insurance coverage offered in 
        connection with such a plan) to provide any [mental 
        health benefits; or] mental health and substance-
        related disorder benefits.
          [(2) in the case of a group health plan (or health 
        insurance coverage offered in connection with such a 
        plan) that provides mental health benefits, as 
        affecting the terms and conditions (including cost 
        sharing, limits on numbers of visits or days of 
        coverage, and requirements relating to medical 
        necessity) relating to the amount, duration, or scope 
        of mental health benefits under the plan or coverage, 
        except as specifically provided in subsection (a) (in 
        regard to parity in the imposition of aggregate 
        lifetime limits and annual limits for mental health 
        benefits).]
  (c) Exemptions.--
          (1) Small employer exemption.--
                  (A) * * *
                  (B) Small employer.--For purposes of 
                subparagraph (A), the term ``small employer'' 
                means, in connection with a group health plan 
                with respect to a calendar year and a plan 
                year, an employer who employed an average of at 
                least 2 (or 1 in the case of an employer 
                residing in a State that permits small groups 
                to include a single individual) but not more 
                than 50 employees on business days during the 
                preceding calendar year [and who employs at 
                least 2 employees on the first day of the plan 
                year].

           *       *       *       *       *       *       *

          [(2) Increased cost exemption.--This section shall 
        not apply with respect to a group health plan (or 
        health insurance coverage offered in connection with a 
        group health plan) if the application of this section 
        to such plan (or to such coverage) results in an 
        increase in the cost under the plan (or for such 
        coverage) of at least 1 percent.]
          (2) Increased cost exemption.--
                  (A) In general.--With respect to a group 
                health plan (or health insurance coverage 
                offered in connection with such a plan), if the 
                application of this section to such plan (or 
                coverage) results in an increase for the plan 
                year involved of the actual total costs of 
                coverage with respect to medical and surgical 
                benefits and mental health and substance-
                related disorder benefits under the plan (as 
                determined and certified under subparagraph 
                (C)) by an amount that exceeds the applicable 
                percentage described in subparagraph (B) of the 
                actual total plan costs, the provisions of this 
                section shall not apply to such plan (or 
                coverage) during the following plan year, and 
                such exemption shall apply to the plan (or 
                coverage) for 1 plan year.
                  (B) Applicable percentage.--With respect to a 
                plan (or coverage), the applicable percentage 
                described in this paragraph shall be--
                          (i) 2 percent in the case of the 
                        first plan year which begins after the 
                        date of the enactment of the Paul 
                        Wellstone Mental Health and Addiction 
                        Equity Act of 2007; and
                          (ii) 1 percent in the case of each 
                        subsequent plan year.
                  (C) Determinations by actuaries.--
                Determinations as to increases in actual costs 
                under a plan (or coverage) for purposes of this 
                subsection shall be made by a qualified actuary 
                who is a member in good standing of the 
                American Academy of Actuaries. Such 
                determinations shall be certified by the 
                actuary and be made available to the general 
                public.
                  (D) 6-month determinations.--If a group 
                health plan (or a health insurance issuer 
                offering coverage in connection with such a 
                plan) seeks an exemption under this paragraph, 
                determinations under subparagraph (A) shall be 
                made after such plan (or coverage) has complied 
                with this section for the first 6 months of the 
                plan year involved.
                  (E) Notification.--An election to modify 
                coverage of mental health and substance-related 
                disorder benefits as permitted under this 
                paragraph shall be treated as a material 
                modification in the terms of the plan as 
                described in section 102(a)(1) and shall be 
                subject to the applicable notice requirements 
                under section 104(b)(1).

           *       *       *       *       *       *       *

  (e) Definitions.--For purposes of this section--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Medical or surgical benefits.--The term ``medical 
        or surgical benefits'' means benefits with respect to 
        medical or surgical services, as defined under the 
        terms of the plan or coverage (as the case may be), but 
        does not include [mental health benefits] mental health 
        and substance-related disorder benefits.
          (4) [Mental health benefits] Mental health and 
        substance-related disorder benefits.--The term 
        ``[mental health benefits] mental health and substance-
        related disorder benefits'' means [benefits with 
        respect to mental health services] benefits with 
        respect to services for mental health conditions or 
        substance-related disorders, as defined under the terms 
        of the plan or coverage (as the case may be)[, but does 
        not include benefits with respect to treatment of 
        substance abuse or chemical dependency].
  [(f) Sunset.--This section shall not apply to benefits for 
services furnished after December 31, 2007.]
  (f) Preemption, Relation to State Laws.--
          (1) In general.--Nothing in this section shall be 
        construed to preempt any State law that provides 
        greater consumer protections, benefits, methods of 
        access to benefits, rights or remedies that are greater 
        than the protections, benefits, methods of access to 
        benefits, rights or remedies provided under this 
        section.
          (2) ERISA.--Nothing in this section shall be 
        construed to affect or modify the provisions of section 
        514 with respect to group health plans.

           *       *       *       *       *       *       *

                              ----------                              


PUBLIC HEALTH SERVICE ACT

           *       *       *       *       *       *       *


    TITLE XXVII--REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE

Part A--Group Market Reforms

           *       *       *       *       *       *       *


Subpart 2--Other Requirements

           *       *       *       *       *       *       *


[SEC. 2705. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO MENTAL 
                    HEALTH BENEFITS.]

SEC. 2705.

  (a) In General.--
          (1) Aggregate lifetime limits.--In the case of a 
        group health plan (or health insurance coverage offered 
        in connection with such a plan) that provides both 
        medical and surgical benefits and [mental health 
        benefits] mental health and substance-related disorder 
        benefits--
                  (A) No lifetime limit.--If the plan or 
                coverage does not include an aggregate lifetime 
                limit on substantially all medical and surgical 
                benefits, the plan or coverage may not impose 
                any aggregate lifetime limit on [mental health 
                benefits] mental health and substance-related 
                disorder benefits.
                  (B) Lifetime limit.--If the plan or coverage 
                includes an aggregate lifetime limit on 
                substantially all medical and surgical benefits 
                (in this paragraph referred to as the 
                ``applicable lifetime limit''), the plan or 
                coverage shall either--
                          (i) apply the applicable lifetime 
                        limit both to the medical and surgical 
                        benefits to which it otherwise would 
                        apply and to [mental health benefits] 
                        mental health and substance-related 
                        disorder benefits and not distinguish 
                        in the application of such limit 
                        between such medical and surgical 
                        benefits and [mental health benefits] 
                        mental health and substance-related 
                        disorder benefits; or
                          (ii) not include any aggregate 
                        lifetime limit on [mental health 
                        benefits] mental health and substance-
                        related disorder benefits that is less 
                        than the applicable lifetime limit.
                  (C) Rule in case of different limits.--In the 
                case of a plan or coverage that is not 
                described in subparagraph (A) or (B) and that 
                includes no or different aggregate lifetime 
                limits on different categories of medical and 
                surgical benefits, the Secretary shall 
                establish rules under which subparagraph (B) is 
                applied to such plan or coverage with respect 
                to [mental health benefits] mental health and 
                substance-related disorder benefits by 
                substituting for the applicable lifetime limit 
                an average aggregate lifetime limit that is 
                computed taking into account the weighted 
                average of the aggregate lifetime limits 
                applicable to such categories.
          (2) Annual limits.--In the case of a group health 
        plan (or health insurance coverage offered in 
        connection with such a plan) that provides both medical 
        and surgical benefits and [mental health benefits] 
        mental health and substance-related disorder benefits--
                  (A) No annual limit.--If the plan or coverage 
                does not include an annual limit on 
                substantially all medical and surgical 
                benefits, the plan or coverage may not impose 
                any annual limit on [mental health benefits] 
                mental health and substance-related disorder 
                benefits.
                  (B) Annual limit.--If the plan or coverage 
                includes an annual limit on substantially all 
                medical and surgical benefits (in this 
                paragraph referred to as the ``applicable 
                annual limit''), the plan or coverage shall 
                either--
                          (i) apply the applicable annual limit 
                        both to medical and surgical benefits 
                        to which it otherwise would apply and 
                        to [mental health benefits] mental 
                        health and substance-related disorder 
                        benefits and not distinguish in the 
                        application of such limit between such 
                        medical and surgical benefits and 
                        [mental health benefits] mental health 
                        and substance-related disorder 
                        benefits; or
                          (ii) not include any annual limit on 
                        [mental health benefits] mental health 
                        and substance-related disorder benefits 
                        that is less than the applicable annual 
                        limit.
                  (C) Rule in case of different limits.--In the 
                case of a plan or coverage that is not 
                described in subparagraph (A) or (B) and that 
                includes no or different annual limits on 
                different categories of medical and surgical 
                benefits, the Secretary shall establish rules 
                under which subparagraph (B) is applied to such 
                plan or coverage with respect to [mental health 
                benefits] mental health and substance-related 
                disorder benefits by substituting for the 
                applicable annual limit an average annual limit 
                that is computed taking into account the 
                weighted average of the annual limits 
                applicable to such categories.
          (3) Treatment limits.--
                  (A) No treatment limit.--If the plan or 
                coverage does not include a treatment limit (as 
                defined in subparagraph (D)) on substantially 
                all medical and surgical benefits in any 
                category of items or services (specified in 
                subparagraph (C)), the plan or coverage may not 
                impose any treatment limit on mental health and 
                substance-related disorder benefits that are 
                classified in the same category of items or 
                services.
                  (B) Treatment limit.--If the plan or coverage 
                includes a treatment limit on substantially all 
                medical and surgical benefits in any category 
                of items or services, the plan or coverage may 
                not impose such a treatment limit on mental 
                health and substance-related disorder benefits 
                for items and services within such category 
                that are more restrictive than the predominant 
                treatment limit that is applicable to medical 
                and surgical benefits for items and services 
                within such category.
                  (C) Categories of items and services for 
                application of treatment limits and beneficiary 
                financial requirements.--For purposes of this 
                paragraph and paragraph (4), there shall be the 
                following four categories of items and services 
                for benefits, whether medical and surgical 
                benefits or mental health and substance-related 
                disorder benefits, and all medical and surgical 
                benefits and all mental health and substance 
                related benefits shall be classified into one 
                of the following categories:
                          (i) Inpatient, in-network.--Items and 
                        services furnished on an inpatient 
                        basis and within a network of providers 
                        established or recognized under such 
                        plan or coverage.
                          (ii) Inpatient, out-of-network.--
                        Items and services furnished on an 
                        inpatient basis and outside any network 
                        of providers established or recognized 
                        under such plan or coverage.
                          (iii) Outpatient, in-network.--Items 
                        and services furnished on an outpatient 
                        basis and within a network of providers 
                        established or recognized under such 
                        plan or coverage.
                          (iv) Outpatient, out-of-network.--
                        Items and services furnished on an 
                        outpatient basis and outside any 
                        network of providers established or 
                        recognized under such plan or coverage.
                  (D) Treatment limit defined.--For purposes of 
                this paragraph, the term ``treatment limit'' 
                means, with respect to a plan or coverage, 
                limitation on the frequency of treatment, 
                number of visits or days of coverage, or other 
                similar limit on the duration or scope of 
                treatment under the plan or coverage.
                  (E) Predominance.--For purposes of this 
                subsection, a treatment limit or financial 
                requirement with respect to a category of items 
                and services is considered to be predominant if 
                it is the most common or frequent of such type 
                of limit or requirement with respect to such 
                category of items and services.
          (4) Beneficiary financial requirements.--
                  (A) No beneficiary financial requirement.--If 
                the plan or coverage does not include a 
                beneficiary financial requirement (as defined 
                in subparagraph (C)) on substantially all 
                medical and surgical benefits within a category 
                of items and services (specified in paragraph 
                (3)(C)), the plan or coverage may not impose 
                such a beneficiary financial requirement on 
                mental health and substance-related disorder 
                benefits for items and services within such 
                category.
                  (B) Beneficiary financial requirement.--
                          (i) Treatment of deductibles, out-of-
                        pocket limits, and similar financial 
                        requirements.--If the plan or coverage 
                        includes a deductible, a limitation on 
                        out-of-pocket expenses, or similar 
                        beneficiary financial requirement that 
                        does not apply separately to individual 
                        items and services on substantially all 
                        medical and surgical benefits within a 
                        category of items and services, the 
                        plan or coverage shall apply such 
                        requirement (or, if there is more than 
                        one such requirement for such category 
                        of items and services, the predominant 
                        requirement for such category) both to 
                        medical and surgical benefits within 
                        such category and to mental health and 
                        substance-related disorder benefits 
                        within such category and shall not 
                        distinguish in the application of such 
                        requirement between such medical and 
                        surgical benefits and such mental 
                        health and substance-related disorder 
                        benefits.
                          (ii) Other financial requirements.--
                        If the plan or coverage includes a 
                        beneficiary financial requirement not 
                        described in clause (i) on 
                        substantially all medical and surgical 
                        benefits within a category of items and 
                        services, the plan or coverage may not 
                        impose such financial requirement on 
                        mental health and substance-related 
                        disorder benefits for items and 
                        services within such category in a way 
                        that is more costly to the participant 
                        or beneficiary than the predominant 
                        beneficiary financial requirement 
                        applicable to medical and surgical 
                        benefits for items and services within 
                        such category.
                  (C) Beneficiary financial requirement 
                defined.--For purposes of this paragraph, the 
                term ``beneficiary financial requirement'' 
                includes, with respect to a plan or coverage, 
                any deductible, coinsurance, co-payment, other 
                cost sharing, and limitation on the total 
                amount that may be paid by a participant or 
                beneficiary with respect to benefits under the 
                plan or coverage, but does not include the 
                application of any aggregate lifetime limit or 
                annual limit.
          (5) Availability of plan information.--The criteria 
        for medical necessity determinations made under the 
        plan with respect to mental health and substance-
        related disorder benefits (or the health insurance 
        coverage offered in connection with the plan with 
        respect to such benefits) shall be made available by 
        the plan administrator (or the health insurance issuer 
        offering such coverage) to any current or potential 
        participant, beneficiary, or contracting provider upon 
        request. The reason for any denial under the plan (or 
        coverage) of reimbursement or payment for services with 
        respect to mental health and substance-related disorder 
        benefits in the case of any participant or beneficiary 
        shall, upon request, be made available by the plan 
        administrator (or the health insurance issuer offering 
        such coverage) to the participant or beneficiary.
          (6) Minimum scope of coverage and equity in out-of-
        network benefits.--
                  (A) Minimum scope of mental health and 
                substance-related disorder benefits.--In the 
                case of a group health plan (or health 
                insurance coverage offered in connection with 
                such a plan) that provides any mental health 
                and substance-related disorder benefits, the 
                plan or coverage shall include benefits for any 
                mental health condition or substance-related 
                disorder for which benefits are provided under 
                the benefit plan option offered under chapter 
                89 of title 5, United States Code, with the 
                highest average enrollment as of the beginning 
                of the most recent year beginning on or before 
                the beginning of the plan year involved.
                  (B) Equity in coverage of out-of-network 
                benefits.--
                          (i) In general.--In the case of a 
                        plan or coverage that provides both 
                        medical and surgical benefits and 
                        mental health and substance-related 
                        disorder benefits, if medical and 
                        surgical benefits are provided for 
                        substantially all items and services in 
                        a category specified in clause (ii) 
                        furnished outside any network of 
                        providers established or recognized 
                        under such plan or coverage, the mental 
                        health and substance-related disorder 
                        benefits shall also be provided for 
                        items and services in such category 
                        furnished outside any network of 
                        providers established or recognized 
                        under such plan or coverage in 
                        accordance with the requirements of 
                        this section.
                          (ii) Categories of items and 
                        services.--For purposes of clause (i), 
                        there shall be the following three 
                        categories of items and services for 
                        benefits, whether medical and surgical 
                        benefits or mental health and 
                        substance-related disorder benefits, 
                        and all medical and surgical benefits 
                        and all mental health and substance-
                        related disorder benefits shall be 
                        classified into one of the following 
                        categories:
                                  (I) Emergency.--Items and 
                                services, whether furnished on 
                                an inpatient or outpatient 
                                basis, required for the 
                                treatment of an emergency 
                                medical condition (including an 
                                emergency condition relating to 
                                mental health and substance-
                                related disorders).
                                  (II) Inpatient.--Items and 
                                services not described in 
                                subclause (I) furnished on an 
                                inpatient basis.
                                  (III) Outpatient.--Items and 
                                services not described in 
                                subclause (I) furnished on an 
                                outpatient basis.
  (b) Construction.--Nothing in this section shall be 
[construed--
          [(1) as requiring] construed as requiring a group 
        health plan (or health insurance coverage offered in 
        connection with such a plan) to provide any [mental 
        health benefits; or] mental health and substance-
        related disorder benefits.
          [(2) in the case of a group health plan (or health 
        insurance coverage offered in connection with such a 
        plan) that provides mental health benefits, as 
        affecting the terms and conditions (including cost 
        sharing, limits on numbers of visits or days of 
        coverage, and requirements relating to medical 
        necessity) relating to the amount, duration, or scope 
        of mental health benefits under the plan or coverage, 
        except as specifically provided in subsection (a) (in 
        regard to parity in the imposition of aggregate 
        lifetime limits and annual limits for mental health 
        benefits).]
  (c) Exemptions.--
          (1) Small employer exemption.--This section shall not 
        apply to any group health plan (and group health 
        insurance coverage offered in connection with a group 
        health plan) for any plan year of a small employer.
          [(2) Increased cost exemption.--This section shall 
        not apply with respect to a group health plan (or 
        health insurance coverage offered in connection with a 
        group health plan) if the application of this section 
        to such plan (or to such coverage) results in an 
        increase in the cost under the plan (or for such 
        coverage) of at least 1 percent.]
          (2) Increased cost exemption.--
                  (A) In general.--With respect to a group 
                health plan (or health insurance coverage 
                offered in connection with such a plan), if the 
                application of this section to such plan (or 
                coverage) results in an increase for the plan 
                year involved of the actual total costs of 
                coverage with respect to medical and surgical 
                benefits and mental health and substance-
                related disorder benefits under the plan (as 
                determined and certified under subparagraph 
                (C)) by an amount that exceeds the applicable 
                percentage described in subparagraph (B) of the 
                actual total plan costs, the provisions of this 
                section shall not apply to such plan (or 
                coverage) during the following plan year, and 
                such exemption shall apply to the plan (or 
                coverage) for 1 plan year.
                  (B) Applicable percentage.--With respect to a 
                plan (or coverage), the applicable percentage 
                described in this paragraph shall be--
                          (i) 2 percent in the case of the 
                        first plan year which begins after the 
                        date of the enactment of the Paul 
                        Wellstone Mental Health and Addiction 
                        Equity Act of 2007; and
                          (ii) 1 percent in the case of each 
                        subsequent plan year.
                  (C) Determinations by actuaries.--
                Determinations as to increases in actual costs 
                under a plan (or coverage) for purposes of this 
                subsection shall be made by a qualified actuary 
                who is a member in good standing of the 
                American Academy of Actuaries. Such 
                determinations shall be certified by the 
                actuary and be made available to the general 
                public.
                  (D) 6-month determinations.--If a group 
                health plan (or a health insurance issuer 
                offering coverage in connection with such a 
                plan) seeks an exemption under this paragraph, 
                determinations under subparagraph (A) shall be 
                made after such plan (or coverage) has complied 
                with this section for the first 6 months of the 
                plan year involved.
                  (E) Notification.--A group health plan under 
                this part shall comply with the notice 
                requirement under section 712(c)(2)(E) of the 
                Employee Retirement Income Security Act of 1974 
                with respect to the a modification of mental 
                health and substance-related disorder benefits 
                as permitted under this paragraph as if such 
                section applied to such plan.
  (d) Separate Application to Each Option Offered.--In the case 
of a group health plan that offers a participant or beneficiary 
two or more benefit package options under the plan, the 
requirements of this section shall be applied separately with 
respect to each such option.
  (e) Definitions.--For purposes of this section--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Medical or surgical benefits.--The term ``medical 
        or surgical benefits'' means benefits with respect to 
        medical or surgical services, as defined under the 
        terms of the plan or coverage (as the case may be), but 
        does not include [mental health benefits] mental health 
        and substance-related disorder benefits.
          (4) [Mental health benefits] Mental health and 
        substance-related disorder benefits.--The term 
        ``[mental health benefits] mental health and substance-
        related disorder benefits'' means [benefits with 
        respect to mental health services] benefits with 
        respect to services for mental health conditions or 
        substance-related disorders, as defined under the terms 
        of the plan or coverage (as the case may be)[, but does 
        not include benefits with respect to treatment of 
        substance abuse or chemical dependency].
  [(f) Sunset.--This section shall not apply to benefits for 
services furnished after December 31, 2007.]
  (f) Preemption, Relation to State Laws.--
          (1) In general.--Nothing in this section shall be 
        construed to preempt any State law that provides 
        greater consumer protections, benefits, methods of 
        access to benefits, rights or remedies that are greater 
        than the protections, benefits, methods of access to 
        benefits, rights or remedies provided under this 
        section.
          (2) Construction.--Nothing in this section shall be 
        construed to affect or modify the provisions of section 
        2723 with respect to group health plans.

           *       *       *       *       *       *       *

                              ----------                              


INTERNAL REVENUE CODE OF 1986

           *       *       *       *       *       *       *


Subtitle K--Group Health Plan Requirements

           *       *       *       *       *       *       *


CHAPTER 100 GROUP HEALTH PLAN REQUIREMENTS

           *       *       *       *       *       *       *


Subchapter B--Other Requirements

           *       *       *       *       *       *       *


Sec. 9811. Standards relating to benefits for mothers and newborns.
[Sec. 9812. Parity in the application of certain limits to mental health 
          benefits.]
Sec. 9812. Equity in mental health and substance-related disorder 
          benefits.

           *       *       *       *       *       *       *


[SEC. 9812. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO MENTAL 
                    HEALTH BENEFITS.]

SEC. 9812. EQUITY IN MENTAL HEALTH AND SUBSTANCE-RELATED DISORDER 
                    BENEFITS.

  (a) In General.--
          (1) Aggregate lifetime limits.--In the case of a 
        group health plan that provides both medical and 
        surgical benefits and [mental health benefits] mental 
        health or substance-related disorder benefits--
                  (A) No lifetime limit.--If the plan does not 
                include an aggregate lifetime limit on 
                substantially all medical and surgical 
                benefits, the plan may not impose any aggregate 
                lifetime limit on [mental health benefits] 
                mental health or substance-related disorder 
                benefits.
                  (B) Lifetime limit.--If the plan includes an 
                aggregate lifetime limit on substantially all 
                medical and surgical benefits (in this 
                paragraph referred to as the ``applicable 
                lifetime limit''), the plan shall either--
                          (i) apply the applicable lifetime 
                        limit both to the medical and surgical 
                        benefits to which it otherwise would 
                        apply and to [mental health benefits] 
                        mental health and substance-related 
                        disorder benefits and not distinguish 
                        in the application of such limit 
                        between such medical and surgical 
                        benefits and [mental health benefits] 
                        mental health and substance-related 
                        disorder benefits; or
                          (ii) not include any aggregate 
                        lifetime limit on [mental health 
                        benefits] mental health or substance-
                        related disorder benefits that is less 
                        than the applicable lifetime limit.
                  (C) Rule in case of different limits.--In the 
                case of a plan that is not described in 
                subparagraph (A) or (B) and that includes no or 
                different aggregate lifetime limits on 
                different categories of medical and surgical 
                benefits, the Secretary shall establish rules 
                under which subparagraph (B) is applied to such 
                plan with respect to [mental health benefits] 
                mental health and substance-related disorder 
                benefits by substituting for the applicable 
                lifetime limit an average aggregate lifetime 
                limit that is computed taking into account the 
                weighted average of the aggregate lifetime 
                limits applicable to such categories.
          (2) Annual limits.--In the case of a group health 
        plan that provides both medical and surgical benefits 
        and [mental health benefits] mental health or 
        substance-related disorder benefits--
                  (A) No annual limit.--If the plan does not 
                include an annual limit on substantially all 
                medical and surgical benefits, the plan may not 
                impose any annual limit on [mental health 
                benefits] mental health or substance-related 
                disorder benefits.
                  (B) Annual limit.--If the plan includes an 
                annual limit on substantially all medical and 
                surgical benefits (in this paragraph referred 
                to as the ``applicable annual limit''), the 
                plan shall either--
                          (i) apply the applicable annual limit 
                        both to medical and surgical benefits 
                        to which it otherwise would apply and 
                        to [mental health benefits] mental 
                        health and substance-related disorder 
                        benefits and not distinguish in the 
                        application of such limit between such 
                        medical and surgical benefits and 
                        [mental health benefits] mental health 
                        and substance-related disorder 
                        benefits; or
                          (ii) not include any annual limit on 
                        [mental health benefits] mental health 
                        or substance-related disorder benefits 
                        that is less than the applicable annual 
                        limit.
                  (C) Rule in case of different limits.--In the 
                case of a plan that is not described in 
                subparagraph (A) or (B) and that includes no or 
                different annual limits on different categories 
                of medical and surgical benefits, the Secretary 
                shall establish rules under which subparagraph 
                (B) is applied to such plan with respect to 
                [mental health benefits] mental health and 
                substance-related disorder benefits by 
                substituting for the applicable annual limit an 
                average annual limit that is computed taking 
                into account the weighted average of the annual 
                limits applicable to such categories.
          (3) Treatment limits.--In the case of a group health 
        plan that provides both medical and surgical benefits 
        and mental health or substance-related disorder 
        benefits--
                  (A) No treatment limit.--If the plan does not 
                include a treatment limit (as defined in 
                subparagraph (D)) on substantially all medical 
                and surgical benefits in any category of items 
                or services (specified in subparagraph (C)), 
                the plan may not impose any treatment limit on 
                mental health or substance-related disorder 
                benefits that are classified in the same 
                category of items or services.
                  (B) Treatment limit.--If the plan includes a 
                treatment limit on substantially all medical 
                and surgical benefits in any category of items 
                or services, the plan may not impose such a 
                treatment limit on mental health or substance-
                related disorder benefits for items and 
                services within such category that is more 
                restrictive than the predominant treatment 
                limit that is applicable to medical and 
                surgical benefits for items and services within 
                such category.
                  (C) Categories of items and services for 
                application of treatment limits and beneficiary 
                financial requirements.--For purposes of this 
                paragraph and paragraph (4), there shall be the 
                following five categories of items and services 
                for benefits, whether medical and surgical 
                benefits or mental health and substance-related 
                disorder benefits, and all medical and surgical 
                benefits and all mental health and substance 
                related benefits shall be classified into one 
                of the following categories:
                          (i) Inpatient, in-network.--Items and 
                        services not described in clause (v) 
                        furnished on an inpatient basis and 
                        within a network of providers 
                        established or recognized under such 
                        plan.
                          (ii) Inpatient, out-of-network.--
                        Items and services not described in 
                        clause (v) furnished on an inpatient 
                        basis and outside any network of 
                        providers established or recognized 
                        under such plan.
                          (iii) Outpatient, in-network.--Items 
                        and services not described in clause 
                        (v) furnished on an outpatient basis 
                        and within a network of providers 
                        established or recognized under such 
                        plan.
                          (iv) Outpatient, out-of-network.--
                        Items and services not described in 
                        clause (v) furnished on an outpatient 
                        basis and outside any network of 
                        providers established or recognized 
                        under such plan.
                          (v) Emergency care.--Items and 
                        services, whether furnished on an 
                        inpatient or outpatient basis or within 
                        or outside any network of providers, 
                        required for the treatment of an 
                        emergency medical condition (including 
                        an emergency condition relating to 
                        mental health or substance-related 
                        disorders).
                  (D) Treatment limit defined.--For purposes of 
                this paragraph, the term ``treatment limit'' 
                means, with respect to a plan, limitation on 
                the frequency of treatment, number of visits or 
                days of coverage, or other similar limit on the 
                duration or scope of treatment under the plan.
                  (E) Predominance.--For purposes of this 
                subsection, a treatment limit or financial 
                requirement with respect to a category of items 
                and services is considered to be predominant if 
                it is the most common or frequent of such type 
                of limit or requirement with respect to such 
                category of items and services.
          (4) Beneficiary financial requirements.--In the case 
        of a group health plan that provides both medical and 
        surgical benefits and mental health or substance-
        related disorder benefits--
                  (A) No beneficiary financial requirement.--If 
                the plan does not include a beneficiary 
                financial requirement (as defined in 
                subparagraph (C)) on substantially all medical 
                and surgical benefits within a category of 
                items and services (specified in paragraph 
                (3)(C)), the plan may not impose such a 
                beneficiary financial requirement on mental 
                health or substance-related disorder benefits 
                for items and services within such category.
                  (B) Beneficiary financial requirement.--
                          (i) Treatment of deductibles, out-of-
                        pocket limits, and similar financial 
                        requirements.--If the plan includes a 
                        deductible, a limitation on out-of-
                        pocket expenses, or similar beneficiary 
                        financial requirement that does not 
                        apply separately to individual items 
                        and services on substantially all 
                        medical and surgical benefits within a 
                        category of items and services, the 
                        plan shall apply such requirement (or, 
                        if there is more than one such 
                        requirement for such category of items 
                        and services, the predominant 
                        requirement for such category) both to 
                        medical and surgical benefits within 
                        such category and to mental health and 
                        substance-related disorder benefits 
                        within such category and shall not 
                        distinguish in the application of such 
                        requirement between such medical and 
                        surgical benefits and such mental 
                        health and substance-related disorder 
                        benefits.
                          (ii) Other financial requirements.--
                        If the plan includes a beneficiary 
                        financial requirement not described in 
                        clause (i) on substantially all medical 
                        and surgical benefits within a category 
                        of items and services, the plan may not 
                        impose such financial requirement on 
                        mental health or substance-related 
                        disorder benefits for items and 
                        services within such category in a way 
                        that results in greater out-of-pocket 
                        expenses to the participant or 
                        beneficiary than the predominant 
                        beneficiary financial requirement 
                        applicable to medical and surgical 
                        benefits for items and services within 
                        such category.
                          (iii) Construction.--Nothing in this 
                        subparagraph shall be construed as 
                        prohibiting the plan from waiving the 
                        application of any deductible for 
                        mental health benefits or substance-
                        related disorder benefits or both.
                  (C) Beneficiary financial requirement 
                defined.--For purposes of this paragraph, the 
                term ``beneficiary financial requirement'' 
                includes, with respect to a plan, any 
                deductible, coinsurance, co-payment, other cost 
                sharing, and limitation on the total amount 
                that may be paid by a participant or 
                beneficiary with respect to benefits under the 
                plan, but does not include the application of 
                any aggregate lifetime limit or annual limit.
          (5) Availability of plan information.--The criteria 
        for medical necessity determinations made under the 
        plan with respect to mental health and substance-
        related disorder benefits shall be made available by 
        the plan administrator to any current or potential 
        participant, beneficiary, or contracting provider upon 
        request. The reason for any denial under the plan of 
        reimbursement or payment for services with respect to 
        mental health and substance-related disorder benefits 
        in the case of any participant or beneficiary shall, 
        upon request, be made available by the plan 
        administrator to the participant or beneficiary.
          (6) Minimum scope of coverage and equity in out-of-
        network benefits.--
                  (A) Minimum scope of mental health and 
                substance-related disorder benefits.--In the 
                case of a group health plan that provides any 
                mental health or substance-related disorder 
                benefits, the plan shall include benefits for 
                any mental health condition or substance-
                related disorder included in the most recent 
                edition of the Diagnostic and Statistical 
                Manual of Mental Disorders published by the 
                American Psychiatric Association.
                  (B) Equity in coverage of out-of-network 
                benefits.--
                          (i) In general.--In the case of a 
                        group health plan that provides both 
                        medical and surgical benefits and 
                        mental health or substance-related 
                        disorder benefits, if medical and 
                        surgical benefits are provided for 
                        substantially all items and services in 
                        a category specified in clause (ii) 
                        furnished outside any network of 
                        providers established or recognized 
                        under such plan, the mental health and 
                        substance-related disorder benefits 
                        shall also be provided for items and 
                        services in such category furnished 
                        outside any network of providers 
                        established or recognized under such 
                        plan in accordance with the 
                        requirements of this section.
                          (ii) Categories of items and 
                        services.--For purposes of clause (i), 
                        there shall be the following three 
                        categories of items and services for 
                        benefits, whether medical and surgical 
                        benefits or mental health and 
                        substance-related disorder benefits, 
                        and all medical and surgical benefits 
                        and all mental health and substance-
                        related disorder benefits shall be 
                        classified into one of the following 
                        categories:
                                  (I) Emergency.--Items and 
                                services, whether furnished on 
                                an inpatient or outpatient 
                                basis, required for the 
                                treatment of an emergency 
                                medical condition (including an 
                                emergency condition relating to 
                                mental health or substance-
                                related disorders).
                                  (II) Inpatient.--Items and 
                                services not described in 
                                subclause (I) furnished on an 
                                inpatient basis.
                                  (III) Outpatient.--Items and 
                                services not described in 
                                subclause (I) furnished on an 
                                outpatient basis.
  (b) Construction.--Nothing in this section shall be 
[construed--
          [(1) as requiring] construed as requiring a group 
        health plan to provide any [mental health benefits; or] 
        mental health or substance-related disorder benefits.
          [(2) in the case of a group health plan that provides 
        mental health benefits, as affecting the terms and 
        conditions (including cost sharing, limits on numbers 
        of visits or days of coverage, and requirements 
        relating to medical necessity) relating to the amount, 
        duration, or scope of mental health benefits under the 
        plan, except as specifically provided in subsection (a) 
        (in regard to parity in the imposition of aggregate 
        lifetime limits and annual limits for mental health 
        benefits).]
  (c) Exemptions.--
          [(1) Small employer exemption.--This section shall 
        not apply to any group health plan for any plan year of 
        a small employer (as defined in section 4980D(d)(2)).
          [(2) Increased cost exemption.--This section shall 
        not apply with respect to a group health plan if the 
        application of this section to such plan results in an 
        increase in the cost under the plan of at least 1 
        percent.]
          (1) Small employer exemption.--
                  (A) In general.--This section shall not apply 
                to any group health plan for any plan year of a 
                small employer.
                  (B) Small employer.--For purposes of 
                subparagraph (A), the term ``small employer'' 
                means, with respect to a calendar year and a 
                plan year, an employer who employed an average 
                of at least 2 (or 1 in the case of an employer 
                residing in a State that permits small groups 
                to include a single individual) but not more 
                than 50 employees on business days during the 
                preceding calendar year. For purposes of the 
                preceding sentence, all persons treated as a 
                single employer under subsection (b), (c), (m), 
                or (o) of section 414 shall be treated as 1 
                employer and rules similar to rules of 
                subparagraphs (B) and (C) of section 
                4980D(d)(2) shall apply.
          (2) Increased cost exemption.--
                  (A) In general.--With respect to a group 
                health plan, if the application of this section 
                to such plan results in an increase for the 
                plan year involved of the actual total costs of 
                coverage with respect to medical and surgical 
                benefits and mental health and substance-
                related disorder benefits under the plan (as 
                determined and certified under subparagraph 
                (C)) by an amount that exceeds the applicable 
                percentage described in subparagraph (B) of the 
                actual total plan costs, the provisions of this 
                section shall not apply to such plan during the 
                following plan year, and such exemption shall 
                apply to the plan for 1 plan year.
                  (B) Applicable percentage.--With respect to a 
                plan, the applicable percentage described in 
                this paragraph shall be--
                          (i) 2 percent in the case of the 
                        first plan year to which this paragraph 
                        applies, and
                          (ii) 1 percent in the case of each 
                        subsequent plan year.
                  (C) Determinations by actuaries.--
                Determinations as to increases in actual costs 
                under a plan for purposes of this subsection 
                shall be made by a qualified and licensed 
                actuary who is a member in good standing of the 
                American Academy of Actuaries. Such 
                determinations shall be certified by the 
                actuary and be made available to the general 
                public.
                  (D) 6-month determinations.--If a group 
                health plan seeks an exemption under this 
                paragraph, determinations under subparagraph 
                (A) shall be made after such plan has complied 
                with this section for the first 6 months of the 
                plan year involved.

           *       *       *       *       *       *       *

  (e) Definitions.--For purposes of this section:
          (1) * * *

           *       *       *       *       *       *       *

          (3) Medical or surgical benefits.--The term ``medical 
        or surgical benefits'' means benefits with respect to 
        medical or surgical services, as defined under the 
        terms of the plan, but does not include [mental health 
        benefits] mental health or substance-related disorder 
        benefits.
          [(4) Mental health benefits.--The term ``mental 
        health benefits'' means benefits with respect to mental 
        health services, as defined under the terms of the 
        plan, but does not include benefits with respect to 
        treatment of substance abuse or chemical dependency.]
          (4) Mental health benefits.--The term ``mental health 
        benefits'' means benefits with respect to services for 
        mental health conditions, as defined under the terms of 
        the plan, but does not include substance-related 
        disorder benefits.
          (5) Substance-related disorder benefits.--The term 
        ``substance-related disorder benefits'' means benefits 
        with respect to services for substance-related 
        disorders, as defined under the terms of the plan.
  [(f) Application of Section.--This section shall not apply to 
benefits for services furnished--
          [(1) on or after September 30, 2001, and before 
        January 10, 2002,
          [(2) on or after January 1, 2004, and before the date 
        of the enactment of the Working Families Tax Relief Act 
        of 2004, and
          [(3) after December 31, 2007.]

           *       *       *       *       *       *       *


                         VII. DISSENTING VIEWS

  MINORITY VIEWS ON H.R. 1424, THE ``PAUL WELLSTONE MENTAL HEALTH AND 
                     ADDICTION EQUITY ACT OF 2007''

                              INTRODUCTION

    Republican members of the Committee support providing 
parity between mental health benefits and other medical 
benefits provided under employer-sponsored health coverage. In 
the 110th Congress, the House and Senate are offering two 
different approaches in addressing this issue. The proposal 
advancing in the Senate achieves the goal of parity and also 
has the support of both the business and mental health 
communities. Accordingly, we set forth these views to express 
our concerns with the House bill, and urge that as the 
legislative process moves forward, the House brings its efforts 
in line with that of the other body.
    Mental health parity bills have been introduced in prior 
Congresses, but have not been enacted into law in part because 
of serious concerns associated with these proposals and the 
opposition to additional federal coverage mandates on 
employers. Employers continue to struggle to provide 
affordable, high-quality coverage to their employees. According 
to the Congressional Budget Office (CBO), the House bill 
``would result in higher premiums for employer-sponsored health 
benefits.'' CBO also notes that this bill will lead to 
reductions in the number of employers offering health insurance 
and could cause health plans to eliminate coverage for mental 
health benefits andlor substance benefits.
    The current parity bills, H.R. 1424 in the House and S. 558 
in the Senate, represent two different approaches to the issue 
of achieving mental health parity. H.R. 1424, as reported by 
the Committee, reflects prior legislative efforts and does not 
address the concerns raised by those parties who will be 
required to comply with the new mandates. In contrast, the 
Senate bill reflects a carefully negotiated consensus of all 
major stakeholders on all sides of the mental health parity 
debate.

                      FEDERAL LEGISLATIVE ACTIVITY

Senate legislation
    In the 110th Congress, the Mental Health Parity Act of 
2007, S. 558, was introduced by Senators Pete Domenici (R-NM), 
Ted Kennedy (D-MA), and Mike Enzi (R-WY) on February 12, 2007. 
The Senate Health, Education, Labor, and Pensions (``HELP'') 
Committee approved the measure, as amended, on February 14, 
2007. On September 18, 2007 the Senate passed S. 558 by 
Unanimous Consent. The Senate bill was the product of 
negotiations between patient advocates, behavioral health 
providers, insurers, and business groups.
    S. 558 requires health insurance plans that offer mental 
health coverage to provide that coverage on par with other 
physical illnesses. The Senate bill would not mandate that 
plans provide specific mental health benefits, but rather only 
require that plans still comply with state-specific benefit 
requirements where applicable. S. 558 also would specifically 
ensure that medical management of mental health benefits and 
negotiation of separate reimbursement or provider payment rates 
is not prohibited, meaning that employers and health plans 
could maintain flexibility in forming behavioral health care 
provider networks.
    CBO scored S. 558 and concluded that it would result in a 
0.4 percent increase in employer-sponsored premiums. This was 
estimated to amount to $1.5 billion in 2009 and $3.4 billion in 
2013. Also, for the five-year period, 2008-2012, CBO estimated 
a $1 billion decrease in direct revenues (resulting from 
increased premium deductions), $280 million in increased direct 
spending, and $150 million in increased appropriations.
House legislation
    H.R. 1424 attempts to achieve mental health parity by 
prohibiting group health plans from imposing treatment limits 
or financial requirements on mental health and substance-
related disorder benefits, if those requirements and 
limitations are not similarly imposed on medical and surgical 
benefits under such plans. The bill would also require that 
where a plan covers any behavioral health disorder, it must 
cover all currently recognized conditions listed in the DSM-IV. 
This mandate would potentially require coverage for certain 
disorders, such as ``caffeine intoxication'' and ``circadian 
rhythm sleep disorder (jet lag),'' and eliminate a plan's 
flexibility to determine its covered benefits. Under the bill, 
plans would not be specifically permitted to engage in medical 
management practices and negotiate separate reimbursement or 
provider payment rates. Given the number of states that have 
already taken action, this ambiguity raises concerns that other 
states may limit medical management. H.R. 1424 would mandate 
out-of-network coverage for mental health and substance-related 
disorders, if such coverage is provided for emergency, 
inpatient or outpatient services.
    Finally, H.R. 1424 would give states the authority to enact 
greater rights or remedies than those contained under current 
federal statute. The bill, if enacted, would establish a 
benefit ``floor'' while permitting states to impose broader 
mental health coverage mandates, creating inconsistent and 
confusing regulatory schemes. At the same time, this provision 
allows state enforcement action and remedies to be established, 
which would apply to mental health benefits but not other 
medical benefits. Under current law, plans have operated under 
the rights and remedies set forth under ERISA for over three 
decades.
    CBO scored H.R. 1424 and concluded that it would result in 
a 0.4 percent increase in employer-sponsored premiums. This 
bill will increase mandatory spending by $310 million and 
further reduce federal revenues by $1.1 billion. These amounts 
are not offset, and will raise a budget point of order if this 
bill is brought to the House floor. We believe that any mental 
health parity bill should be fully paid for, and any offsets 
should be fully vetted through the Committee process.

                    LEGISLATIVE HEARING ON H.R. 1424

    On March 27, 2007, the Committee on Ways and Means, 
Subcommittee on Health, held a legislative hearing on H.R. 
1424. The hearing featured the testimony of Representatives 
Kennedy and Ramstad, along with mental health advocates, 
including Dr. Michael Quirk and Dr. Henry Harbin, who is a 
former director of the State of Maryland Mental Health 
Authority. The hearing focused on the specific provisions of 
the House bill, but also included discussion of the Senate 
proposal.
    Dr. Quirk, who is the director of Behavioral Health 
Services at Group Health Cooperative, testified about specific 
concerns with the House bill. Other witnesses, including Mr. 
Breyfogle, testified that national mental health parity policy 
will work best if it allows carriers the flexibility to design 
coverage and services that will benefit both individual 
patients and whole populations of people with similar problems. 
He also said that federal legislation should allow carriers 
like Group Health the flexibility to make reasonable 
determinations of medical necessity in order to determine who 
will benefit from care. Dr. Quirk stressed the importance of 
medical management, citing this as the tool that allows 
providers to make appropriate clinical decisions about 
patients.

                         FULL COMMITTEE MARKUP

    On Wednesday, September 26, 2007, the full Committee on 
Ways and Means met to consider and mark up H.R. 1424. The 
following amendments were voted on during mark up.
Hulshof Amendment:
    Mr. Hulshof offered an amendment that struck the 
requirement that plans must cover all conditions specified in 
the DSM-IV. His amendment instead would allow health plans and 
state laws to determine what mental health benefits are 
covered. This amendment would have aligned the House version of 
the bill to that of the Senate. The amendment was defeated by a 
rollcall vote of 12-26.
Johnson Amendment:
    Mr. Johnson offered an amendment that would have 
incorporated the Senate's effective date, moving it from 
January 1, 2008 to January 1st of the year following the date 
of enactment. The amendment was withdrawn.
Camp Amendment:
    Mr. Camp offered an amendment that struck the language 
requiring plans to provide out-of-network mental health 
benefits if the plan also provides out-of-network medical and 
surgical benefits. This would have brought the bill in line 
with the Senate bill and current FEHBP requirements. The 
amendment was defeated by a rollcall vote with a final tally of 
15-25.
Weller Amendment:
    Mr. Weller offered an amendment that would change the title 
of the bill to add Mr. Ramstad's name. At Mr. Ramstad's 
request, Mr. Weller withdrew the amendment.
Hulshof #2 Amendment:
    Mr. Hulshof's second amendment would have clarified health 
plans' ability to offer medical management of mental health 
benefits. The ability to effectively manage mental health 
benefits is essential to provide high quality care and 
appropriately manage costs. This amendment wouldbring the House 
bill in line with the Senate bill and current FEHBP coverage. The 
amendment was defeated by a rollcall vote of 15-25.

Lewis Amendment:

    Mr. Lewis offered an amendment that would protect patients 
from substantial premium increases. The amendment would provide 
patients with the same protections that this bill provides to 
health plans. Under the amendment, the amount that beneficiary 
premiums increased could not exceed the cap on allowable cost 
increases for plans. The amendment was defeated by a rollcall 
vote of 15-25.

Camp #2 Amendment: 

    Finally, Mr. Camp offered an amendment that would strike 
Section 4 and replace it with language from the Senate bill. 
This amendment would essentially replace the House version of 
the bill with the Senate version. The amendment was defeated by 
a rollcall vote of 13-26.

                            REPUBLICAN VIEWS

    H.R. 1424 would require group health plans to provide 
significantly greater mental health and substance abuse 
benefits, as compared to other medical benefits. This raises a 
question of fundamental fairness. Parity equalizes care between 
mental health and medical benefits, yet H.R. 1424 goes beyond 
parity by imposing federal mandates on coverage.
    As set forth below, there are several concerns with 
provisions of H.R. 1424. As such, it should be rejected by the 
House.

H.R. 1424 IMPOSES A BENEFIT MANDATE THAT DEFINES COVERED ILLNESSES TOO 
                                BROADLY

    Under H.R. 1424, every mental illness identified in the 
DSM-IV would be required to be covered by health plans. Current 
federal law generally does not apply any similar requirement 
that group health plans cover broad categories of medical 
benefits, such as hospital services, physician services, or 
drug benefits.

            H.R. 1424 SIGNIFICANTLY WEAKENS ERISA PREEMPTION

    Under H.R. 1424, states would be authorized to enact 
``greater consumer protections, benefits, and methods of access 
to benefits, rights or remedies'' than the provisions set in 
the legislation. This change would create a new legal basis to 
allow states to take actions against ERISA plans. The Supreme 
Court has consistently concluded that states may not establish 
their own rights or remedies for enrollees under ERISA plans. 
Instead, federal rights and remedies exclusively apply to ERISA 
health plan participants and their benefits. If states can 
apply their own remedies to mental health benefits (but not 
other categories of benefits), ERISA health plan participants 
would have different rights and remedies depending on the type 
of benefits.

   H.R. 1424 DOES NOT ADEQUATELY ADDRESS MEDICAL MANAGEMENT OF CLAIMS

    H.R. 1424 does not make clear that group health plans are 
not prohibited from negotiating separate reimbursement or 
provider payment rates and service delivery systems for 
different benefits. This provision, combined with the specific 
authorization of medical management practices, would serve to 
provide group health plans with the tools necessary to 
appropriately manage and deliver mental and behavioral health 
care benefits. In fact, FEHBP uses these practices to control 
the cost and quality of their benefits.

               H.R. 1424 MANDATES OUT-OF-NETWORK COVERAGE

    H.R. 1424 mandates out-of-network coverage if a plan 
provides coverage for substantially all medical and surgical 
services in either emergency, inpatient or outpatient services. 
It exceeds the FEHBP requirement to provide parity only for in-
network services. Although the Majority references the FEHBP 
program as the standard by which private plans should operate, 
this bill ignores significant portions of the FEHBP program.

                               CONCLUSION

    We agree that there have been significant advances in 
diagnosis and treatment of mental, behavioral and substance 
abuse disorders. We believe that mental health benefits should 
be provided on the same terms as medical and surgical benefits. 
We also recognize the two current legislative proposals, H.R. 
1424 and S. 558, offer substantially different approaches 
toward achieving parity.
    However, only the Senate bill achieves true parity and 
represents the product of two years of negotiation and 
agreement among a diverse group of interested stakeholders. 
Although attempts were made at the full Committee markup to 
improve the bill, H.R. 1424 continues to have significant 
concerns. For this reason, we oppose passage of H.R. 1424.
                                   Jim McCrery.
                                   Wally Herger.
                                   Dave Camp.
                                   Sam Johnson.
                                   Kenny Hulshof.
                                   Ron Lewis.
                                   Kevin Brady.
                                   Tom Reynolds.
                                   Devin Nunes.
                                   Jon Porter.