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110th Congress                                            Rept. 110-374
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 3

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



 
     PAUL WELLSTONE MENTAL HEALTH AND ADDICTION EQUITY ACT OF 2007

                                _______
                                

                 March 4, 2008.--Ordered to be printed

                                _______
                                

 Mr. Dingell, from the Committee on Energy and Commerce, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 1424]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Energy and Commerce, 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.

                                CONTENTS

                                                                   Page
Amendment........................................................     1
Purpose and Summary..............................................    12
Background and Need for Legislation..............................    12
Hearings.........................................................    14
Committee Consideration..........................................    15
Committee Votes..................................................    15
Committee Oversight Findings.....................................    23
Statement of General Performance Goals and Objectives............    23
New Budget Authority, Entitlement Authority, and Tax Expenditures    23
Earmarks and Tax and Tariff Benefits.............................    23
Committee Cost Estimate..........................................    23
Congressional Budget Office Estimate.............................    23
Federal Mandates Statement.......................................    31
Advisory Committee Statement.....................................    31
Constitutional Authority Statement...............................    31
Applicability to Legislative Branch..............................    31
Section-by-Section Analysis of the Legislation...................    32
Changes in Existing Law Made by the Bill, as Reported............    35
Dissenting Views.................................................    56

                               Amendment

  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. 5. 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 or 
                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 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 or coverage.
                          ``(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 or coverage.
                          ``(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 or coverage.
                          ``(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 or coverage.
                          ``(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 (as defined in 
                        section 1867(e) of the Social Security Act, 
                        including an emergency condition relating to 
                        mental health and substance-related disorders).
                  ``(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 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 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 or 
                        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 or 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 substance 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 or substance-related disorder benefits, the plan 
                or coverage 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 (or health insurance coverage 
                        offered in connection with such 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 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 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 
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 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 (or coverage) 
                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 
                (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 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. EQUITY IN MENTAL HEALTH AND SUBSTANCE-RELATED DISORDER 
                    BENEFITS.''.

  (j) 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 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.
  (k) Construction Regarding Use of Medical Management Tools.--Nothing 
in this Act shall be construed to prohibit a group health plan or 
health insurance issuer from using medical management tools as long as 
such management tools are based on valid medical evidence and are 
relevant to the patient whose medical treatment is under review.

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.--
                  ``(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 and 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 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, 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.--
                  ``(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 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 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 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, 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.--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'' in the 
                heading 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 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 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 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 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, 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 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 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 
                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.--Subsection (c)(1) of 
such section 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.--Such section is amended by 
striking subsection (f).
  (h) Conforming Amendments to Heading.--
          (1) In general.--The heading of such section 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 the Internal Revenue Code of 1986 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.--The amendments made by this section shall apply 
with respect to plan years beginning on or after January 1, 2008.

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 criteria. If such criteria do 
not exist, the report shall include recommendations on a process for 
developing such criteria.

                          Purpose and Summary

    The purpose of H.R. 1424, the ``Paul Wellstone Mental 
Health and Addiction Equity Act of 2007'' is to have fairness 
and equity in the coverage of mental health and substance-
related disorders vis-a-vis coverage for medical and surgical 
disorders. This bill expands the Mental Health Parity Act of 
1996 (Public Law 104-204) by requiring group health plans that 
offer benefits for mental health and substance-related 
disorders to do so on similar terms as care for other medical 
and surgical diseases. The legislation ensures that plans do 
not charge higher copayments, coinsurance, deductibles, and 
impose maximum out-of-pocket limits and lower day and visit 
limits on mental health and addiction care than the plan has 
for medical and surgical benefits. After years of 
discriminatory practices in plan design, health plans will be 
required to offer parity in treatment of mental illness and 
medical illness or face penalties by the Department of Health 
and Human Services, the Department of Labor, and the Internal 
Revenue Service.

                  Background and Need for Legislation

    More than 50 million adults, at least 22 percent of the 
U.S. population, suffer from mental disorders or substance 
abuse disorders on an annual basis.\1\ In addition, 1 out of 
every 10 children or adolescents has a serious mental health 
problem, and another 10 percent have mild to moderate 
problems.\2\
---------------------------------------------------------------------------
    \1\Health Care Reform for Americans with Severe Mental Illnesses: 
Report of the National Advisory Mental Health Council, produced in 
response to a request by the Senate Committee on Appropriations, 
American Journal of Psychiatry 150:10, October 1993. The World Health 
Organization. The World Health Report 2004: Changing History; Annex 
Table 3: Burden of disease in Disability-Adjusted-Life-Years (DALY) by 
cause, sex, and mortality stratum in WHO regions, estimates for 2002. 
Geneva (2004).
    \2\American Psychological Association.
---------------------------------------------------------------------------
    The results of untreated mental illness and substance 
related disorders include, but are not limited to, emotionally 
and financially unstable families and children, higher costs 
for businesses, and more criminal activity. Mental disorders 
are the leading cause of disability for individuals ages 15 to 
44 in the United States.\3\ A study sponsored by the National 
Institute of Mental Health revealed that mental and addictive 
disorders cost more than $300 billion annually. This includes 
productivity losses of $150 billion, healthcare costs of $70 
billion, and $80 billion from other costs such as criminal 
justice.\4\ More specifically, mental illnesses cause direct 
business costs of at least $70 billion per year, mostly in the 
form of lost productivity.\5\ For those who suffer from mental 
illness, ``mental disorders are treatable * * * there is 
generally not just one but a range of treatments of proven 
efficacy.''\6\ Unfortunately, less than one-third of people 
with a mental disorder who seek help receive minimally adequate 
care.\7\
---------------------------------------------------------------------------
    \3\The World Health Organization. The World Health Report 2004: 
Changing History; Annex Table 3: Burden of disease in Disability-
Adjusted-Life-Years (DALY) by cause, sex, and mortality stratum in WHO 
regions, estimates for 2002. Geneva (2004).
    \4\The Numbers Count: Mental Disorders in America, NIH Publication 
No. 01-4584, dated 2006 available at http://www.nimh.nih.gov/health/
publications/the-numbers-count-mental-disorders-in-america.shtml.
    \5\Mental Health: A Report of the Surgeon General, 1999.
    \6\U.S. Dept. of Health and Human Services, Mental Health: A Report 
of the Surgeon General 46, 179 (1999) [hereinafter SGRMH].
    \7\Wang PS, et.al., 12-month use of mental health services in the 
United States: results from the National Comorbidity Survey 
Replication, Archives of General Psychiatry, June 2005.
---------------------------------------------------------------------------
    Despite the losses suffered in our society as a result of 
mental illness, national employer survey data indicate that 
mental health coverage is still not offered at a level 
comparable to coverage for other medical conditions.\8\ Even 
after the passage of the 1996 Mental Health Parity Act and 
given parity laws in numerous States, the Government 
Accountability Office found that 87 percent of plans had more 
restrictive design features for mental health benefits than for 
medical and surgical benefits.\9\ In addition, many employers 
had adopted newly restrictive mental health benefit design 
features such as limiting the number of covered outpatient 
office visits for mental illness specifically to offset the 
parity they were required to provide in aggregate and lifetime 
limits.\10\ A former Surgeon General of the United States, Dr. 
David Satcher, found that health insurance plans have unevenly 
imposed higher cost controls for mental health services such as 
placing a 50 percent copayment on outpatient psychotherapy 
visits.\11\ Such inequity results in not only the reduction of 
inappropriate use of services, but also on the appropriate use 
of services. Overall, Surgeon General Satcher stated it is an 
``issue of fairness in coverage policy.''\12\ Similarly, a more 
recent study found that deductibles and outpatient cost-sharing 
for substance abuse were much higher for substance abuse than 
for general medical care in 2006.\13\
---------------------------------------------------------------------------
    \8\Congressional Research Service, Mental Health Parity: Federal 
and State Action and Economic Impact, Updated January 25, 2007.
    \9\Government Accountability Office, Mental Health Parity Act, 
Despite New Federal Standards, Mental Health Benefits Remain Limited, 
GAO/HEHS-00-95, May 2000.
    \10\Government Accountability Office, Mental Health Parity Act, 
Despite New Federal Standards, Mental Health Benefits Remain Limited, 
GAO/HEHS-00-95, May 2000.
    \11\Mental Health: A Report of the Surgeon General, 1999.
    \12\Mental Health: A Report of the Surgeon General, 1999.
    \13\Colleen L. Barry and Jody L. Sindelar, Equity In Private 
Insurance Coverage For Substance Abuse: A Perspective On Parity, 
October 23, 2007.
---------------------------------------------------------------------------
    States began addressing inequities in mental health 
coverage in the 1970s. Currently, most all States have mandated 
some level of parity. State parity laws, however, will have 
limited effect because they do not cover self-insured 
plans.\14\ H.R. 1424 seeks fairness in coverage of mental 
health and substance-related disorders. The bill aims to 
increase access to mental health treatment by prohibiting group 
health plans (or health insurance coverage offered in 
connection with a group health plan) from imposing financial 
requirements (including deductibles, co-payments, coinsurance, 
out-of-pocket expenses, and annual and lifetime limits) or 
treatment limitations (including limitations on the number of 
visits, days of coverage, or frequency of treatment) on mental 
health and substance-related benefits that are more restrictive 
than those restrictions applied to medical and surgical 
benefits. This legislation provides a cost-effective way of 
promoting increased access to mental health care. Such 
conclusions are supported by the implementation and studies of 
parity within the Federal Employee Health Benefits Program. 
Studies found that parity between medical and surgical benefits 
and mental health and substance-related disorders resulted in a 
significant decline in out-of-pocket spending indicating that 
parity protection resulted in improved insurance protection 
against financial risks.\15\ Another study found, ``[t]he more 
generous a state's mental health parity coverage, the greater 
the number of people in the population that receive mental 
health services'' and suggests that addressing discrimination 
in private health insurance by legislating parity could reduce 
depression and its negative consequences.\16\
---------------------------------------------------------------------------
    \14\Ramya Sundararaman, C. Stephen Redhead, Mental Health Parity: 
Federal and State Action and Economic Impact, October 19, 2007.
    \15\Howard H. Goldman, et. al., Behavioral Health Insurance Parity 
for Federal Employees, The New England Journal of Medicine, 354:13, 
March 30, 2006.
    \16\Government Accountability Office, Mental Health Parity Act, 
Despite New Federal Standards, Mental Health Benefits Remain Limited, 
GAO/HEHS-00-95, May 2000.
---------------------------------------------------------------------------

                                Hearings

    On June 15, 2007, the Subcommittee on Health of the 
Committee on Energy and Commerce held a hearing entitled ``H.R. 
1424, the Paul Wellstone Mental Health and Addiction Equity Act 
of 2007''. The witnesses included: Representative Patrick 
Kennedy and Representative Jim Ramstad, chief sponsors of the 
legislation; James Purcell, President and Chief Executive 
Officer of BlueCross & BlueShield of Rhode Island; Marley 
Prunty-Lara; Howard Goldman, Professor of Psychiatry of the 
University of Maryland; Edwina Rogers, Vice President of Health 
Policy for the ERISA Industry Committee; and James Klein, 
President of the American Benefits Council.
     There were also hearings held by the two House Committees 
that received secondary referral of H.R. 1417. The Subcommittee 
on Health of the Ways and Means Committee held a hearing 
entitled ``Mental Health and Substance Abuse Parity'' on March 
27, 2007. On July 10 2007, the Subcommittee on Health, 
Employment, Labor, and Pensions of the Committee on Education 
and Labor held a hearing entitled ``The Paul Wellstone Mental 
Health and Addiction Equity Act of 2007 (H.R. 1424).''

                        Committee Consideration

     On Wednesday, October 10, 2007, the Subcommittee on Health 
met in open markup session and favorably forwarded H.R. 1424, 
amended, to the full Committee for consideration, by a voice 
vote. On Tuesday, October 16, 2007, the full Committee on 
Energy and Commerce met in open markup session and ordered H.R. 
1424 favorably reported to the House, as amended by the 
Subcommittee, by a record vote of 32 yeas and 13 nays. No 
amendments were approved during full Committee consideration.

                            Committee Votes

     Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. 
There were six amendments offered during full Committee 
consideration that were defeated by a recorded vote. A motion 
by Mr. Dingell to order H.R. 1424 favorably reported to the 
House, as amended by the Subcommittee on Health, was agreed to 
by a record vote of 32 yeas and 13 nays. The following are the 
recorded votes taken on the amendments and the Dingell motion, 
including the names of those Members voting for and against:


                      Committee Oversight Findings

     Regarding clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the oversight findings of the 
Committee regarding H.R. 1424 are reflected in this report.

         Statement of General Performance Goals and Objectives

     The purpose of H.R. 1424 is to achieve equity in the 
treatment limits or the imposition of financial requirements on 
mental health and substance-related disorder benefits with 
medical and surgical benefits in group health plans or health 
insurance coverage offered in connection with a group health 
plan. The purpose is to counter a history of discrimination and 
stigma against mental illness and substance-related disorders 
that has resulted in much less access to care.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

     Regarding compliance with clause 3(c)(2) of rule XIII of 
the Rules of the House of Representatives, the Committee finds 
that, over the 2008-2012 period, H.R. 1424 would result in an 
increase of $310 million in direct spending and a decrease of 
$1.1 billion in payroll tax revenue; and over the period of 
2008-2017, an increase of $820 million in direct spending and a 
decrease of $3.1 billion in payroll tax revenue.

                  Earmarks and Tax and Tariff Benefits

     Regarding compliance with clause 9 of rule XXI of the 
Rules of the House of Representatives, H.R. 1424 does not 
contain any congressional earmarks, limited tax benefits, or 
limited tariff benefits as defined in clause 9(d), 9(e), or 
9(f) of rule XXI.

                        Committee Cost Estimate

     The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

     Pursuant to clause 3(c)(3) of rule XIII of the Rules of 
the House of Representatives, the following is the cost 
estimate provided by the Congressional Budget Office pursuant 
to section 402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, November 21, 2007.
 Hon. John D. Dingell,
 Chairman, Committee on Energy and Commerce,
 House of Representatives, Washington, DC.
     Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1424, the Paul 
Wellstone Mental Health and Addiction Equity Act of 2007.
     If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Shinobu 
Suzuki.
             Sincerely,
                                           Peter R. Orszag,
                                                          Director.
     Enclosure.

 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-          -20     -120     -170     -190     -210     -230     -250     -260     -280     -300         -710       -2,030
 budget).............................
Social Security Payroll Taxes (off-       -10      -70     -100     -100     -110     -120     -130     -140     -150     -160         -390       -1,090
 budget).............................
                                      ------------------------------------------------------------------------------------------------------------------
    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 Internal Revenue 
Code (IRC) 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 Public Health Service 
Act (PHSA) to require that the mental health benefits of plans 
that choose to offer such benefits cover treatments 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). Finally, the bill would limit 
plans' methods for managing utilization of mental health and 
substance abuse services to those that are based on valid 
medical evidence and relevant to the patient whose medical 
treatment is under review.

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 the requirement to cover all conditions 
contained in the DSM combined with the limitation on plans' use 
of utilization management would probably result in an increase 
in employer-sponsored health insurance premiums that would be 
larger than if the requirement was for a minimum scope of 
benefits alone. However, because the provision only applies to 
those plans that would be affected by the PHSA, its impact on 
costs would likely be small. 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.
    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--about 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 by $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.
    The bill further amends the PHSA by limiting plans' methods 
for managing utilization of mental health and substance abuse 
services to those that are based on valid medical evidence and 
relevant to the patient whose medical treatment is under 
review. Because the provision applies only to those plans who 
would be affected by the PHSA, its impact on costs would likely 
be small.
    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. On October 4, 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 Ways and Means on September 
26, 2007.
    All three 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 for 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.
    The Ways and Means and Energy and Commerce Committees' 
versions differ from the Education and Labor Committee's 
version in that they would not include a mechanism for auditing 
group health plans or for providing assistance to beneficiaries 
of such plans. In addition, the Ways and Means and Energy and 
Commerce Committees' versions would amend the PHSA 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 alone 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 the estimated budgetary effects of the Ways and Means 
Committee's version would be identical to those of the 
Education and Labor Committee's version.
    The Energy and Commerce Committee's version differs from 
the other two versions in that it would impose a restriction on 
plans' methods for managing utilization of mental health and 
substance abuse services to those that are based on valid 
medical evidence and are relevant to the patient whose medical 
treatment is under review. However, because the provision 
applies only to those plans that would be affected by the 
changes to the Public Health Service Act, its impact on costs 
would probably be small.
    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.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


                           TITLE OF THE BILL

Section 1. Short title; table of contents

    Section 1 establishes the short title of H.R. 1424 as the 
``Paul Wellstone Mental Health and Addiction Equity Act of 
2007'' and provides the table of contents of this Act.

Section 2. Amendments to the Employee Retirement Income Security Act of 
        1974

    Section 2 amends the Employee Retirement Income Security 
Act of 1974 relating to the group market. This section is not 
within the jurisdiction of the Committee.

Section 3. Amendments to the Public Health Service Act relating to the 
        group market

    Section 3(a) is entitled ``Extension of Parity to Treatment 
Limits and Beneficiary Financial Requirements.'' This bill does 
not require group health plans or health insurance coverage 
offered in connection with such plans to offer mental health or 
substance related benefits. If a plan or coverage offers such 
benefits, however, Section 3(a) requires that it must comply 
with parity requirements with regard to treatment limitations 
and beneficiary financial requirements in the plan.
    Section 3(a) amends the Public Health Service Act to 
prohibit group health plans or health insurance coverage 
offered in connection with such plans to have more restrictive 
treatment limitations and beneficiary financial requirements 
for mental health and substance-related disorders than the 
predominant limitation or requirement on medical and surgical 
disorders in specified categories. This parity requirement is 
only applicable in situations where substantially all medical 
and surgical benefits within a category have a treatment 
limitation or beneficiary financial requirement. The categories 
include (1) inpatient, in-network; (2) inpatient, out-of-
network; (3) outpatient, in-network; (4) outpatient, out of 
network; and (5) emergency care.
    In addition, Section 3(a) prohibits group health plans or 
health insurance coverage offered in connection with such plans 
from imposing treatment limits or beneficiary financial 
requirements on mental health services if substantially all of 
the medical and surgical benefits do not include any limit.
    Section 3(a) defines ``treatment limit'' under a health 
plan as a limitation on the number of visits or days of 
coverage, or other similar limit on the duration or scope of 
treatment.
    Section 3(b) is entitled ``Expansion to Substance-Related 
Disorder Benefits and Revision of Definition.'' It includes 
substance-related disorder benefits in the parity requirements 
and definitions used in the Mental Health Parity Act under 
current law.
    Section 3(c) is entitled ``Availability of Plan Information 
About Criteria for Medical Necessity.'' It codifies that 
criteria for determining whether a treatment is medically 
necessary under the plan with respect to mental health and 
substance-related disorder benefits shall be available to 
beneficiaries.
    Section 3(d) is entitled ``Minimum Benefit Requirements.'' 
It requires that group health plans or health insurance 
coverage offered in connection with such plans that provide 
mental health or substance-related disorder benefits shall 
provide coverage of any disorder or condition listed in the 
Diagnostic and Statistical Manual of Mental Disorders (DSM) 
published by the American Psychiatric Association. Insurance 
plans retain the authority in current law to define treatment 
benefits that are covered under the plan and the scope of those 
treatments for the disorders that are defined by the DSM. A 
``mental health benefit'' as defined under current section 
2705(e)(4) of the Public Health Service Act and incorporating 
amendments made under H.R. 1424 means ``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).'' This provision permits a plan to define 
what benefits are available for the disorders listed under the 
DSM that are required.
    In addition, this requirement does not change the current 
ability of an insurer or provider to determine medically 
necessary and appropriate care and treatment for their 
patients. It merely ensures that patients are not denied mental 
health coverage based on the specific disorder they have. For 
example, a person cannot be denied coverage by their health 
plan merely because they have autism. A plan may determine, 
however, whether a treatment is medically necessary or 
appropriate for a given person at a given time based on their 
individual situation.
    This section is limited to whether an insurer covers a 
mental health or substance-related disorder. This bill, 
including the minimum scope of mental health and substance-
related disorder benefits in section (d) ``6(A)'', should not 
be construed to change the question of admissibility of 
documents or other evidence for the purpose of proving or 
disproving mental illness in establishing a defense of a crime. 
The rules of the courts or statutes of the State or the common 
law of the place in which the court sits and which is a part of 
the jurisprudence of the particular place determine the rules 
on admissibility of evidence for the purposes of establishing a 
defense to a crime. Furthermore, this bill should not change 
any requirements for reporting criminal conduct or create a new 
privilege for not reporting criminal conduct.
    This bill, including the minimum scope of mental health and 
substance-related disorder benefits in section (d) ``6(A)'', 
should not be construed to change how determinations of 
disability are made under the Americans with Disabilities Act 
of 1990, or other Federal or State law, or an employee 
substance abuse policy.
    Section 3(d) requires group health plans or health 
insurance coverage offered in connection with such plans that 
provide out-of-network items and services for substantially all 
their medical and surgical benefits within a category to also 
offer mental health and substance related disorder benefits for 
items and services in such categories furnished outside the 
network. The categories include (1) inpatient, (2) outpatient; 
and (3) emergency care.
    Section 3(e) is entitled ``Revision of Increased Cost 
Exemption.'' It permits group health plans or health insurance 
coverage offered in connection with such a plan to be exempt 
from the parity requirements of the bill under certain 
situations. Plans are exempt if there is an increase as a 
result of the mental health parity act requirements in actual 
total costs of coverage for medical and surgical benefits and 
mental health and substance-related disorder benefits for one 
year under the plan of 2 percent or more in the first year 
where the parity requirements apply or 1 percent or more in 
subsequent years. A determination of the increase in actual 
total costs of coverage shall be made by a qualified and 
licensed actuary in good standing with the American Academy of 
Actuaries. Such determinations shall be made based on six 
months of actual cost data while the parity requirements are in 
place. A group health plan shall notify beneficiaries if the 
plan will be exempt from parity requirements.
    Section 3(f) is entitled ``Change in Exclusion for Smallest 
Employers.'' It excludes group health plans or health insurance 
issuers that serve employers with 1 to 50 employees from the 
treatment limitation and beneficiary financial requirement 
parity requirements under this bill and annual and lifetime 
limit parity requirements from the Mental Health Parity Act of 
1996.
    Section 3(g) is entitled ``Elimination of Sunset 
Provision.'' It eliminates the sunset date under this bill and, 
thus, makes the parity requirements permanent.
    Section 3(h) is entitled ``Clarification Regarding 
Preemption.'' It clarifies current law, that nothing in this 
section preempts any State law that provides greater consumer 
protections, benefits, methods of access to benefits, or rights 
or remedies.
    Section 3(i) is entitled ``Conforming Amendment to 
Heading.'' It conforms section 2705 heading to be ``Equity in 
Mental Health and Substance-Related Disorder Benefits.''
    Section 3(j) is entitled ``Effective Date.'' It makes the 
effective date of the parity requirements in section 2705 of 
the Public Health Service Act the plan years beginning on or 
after January 1, 2008. This section also ensures that the 
annual and lifetime parity requirements from the Mental Health 
Parity Act of 1996 continue in effect even when the new parity 
requirements on treatment limitations and beneficiary financial 
requirements are not yet in effect.
    Section 3(j) permits a later implementation of the parity 
requirements with regard to treatment limitations and 
beneficiary financial requirements on plans that have a 
collectively bargained agreement in place. Parity requirements 
will not be effective until the later of the dates on which the 
last of the collective bargaining agreements relating to the 
plan terminates or January 1, 2010. This later implementation 
date is in recognition of the sensitive nature of collective 
bargaining agreements.
    Section 3(k) is entitled ``Construction Regarding Use of 
Medical Management Tools.'' It clarifies that the Mental Health 
Parity Act does not alter or prohibit a health plan or health 
insurance issuer from using medical management tools to manage 
the benefit as long as such management tools are based on valid 
medical evidence and are relevant to the patient whose medical 
treatment is under review. So for example, the parity 
requirements do not prohibit the application of a treatment 
guideline that is based on valid evidence regarding the 
effectiveness and quality of care and is used on a patient 
whose condition fundamentally is the same as the condition 
addressed by the guideline being applied.
    This construction clause applies equally to medical or 
surgical benefits and mental health or substance-related 
disorders. This construction clause should not be construed to 
change the burden of proof on beneficiaries, providers, or 
insurance plans as they exist under current law.

Section 4. Amendments to the Internal Revenue Code of 1986

    Sections 4 amends the Internal Revenue Code of 1986. This 
section is not within the jurisdiction of the Committee.

Section 5. Government Accountability Office studies and reports

    Section 5 directs the Comptroller General to study the 
effect of the implementation of this Act on various aspects of 
the healthcare system, including (1) access to health insurance 
coverage; (2) the quality of such coverage, Medicare, Medicaid, 
and State and local mental health and substance abuse treatment 
spending; (3) the number of individuals with private insurance 
receiving publicly-funded health care for mental health and 
substance-related disorders; (4) spending on public services 
such as the criminal justice system, special education, and 
income assistance programs; (5) the use of medical management 
of mental health and substance-related disorder benefits and 
medical necessity determinations by group health plans; (6) and 
any other matters the Comptroller General believes appropriate. 
The report must be submitted to Congress two years after the 
enactment of H.R. 1424.

         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.
     * * * * * * *

                 Part 7--Group Health Plan Requirements

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

Sec. 701. Increased portability through limitation on preexisting 
          condition exclusions.
     * * * * * * *

                      Subpart B--Other Requirements

Sec. 711. Standards relating to benefits for mothers and newborns.
[Sec. 712. Parity in the application of certain limits to mental health 
          benefits.]
Sec. 712. Equity in mental health and substance-related disorder 
          benefits.

           *       *       *       *       *       *       *


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.
          (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.
                  (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.
  (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.

           *       *       *       *       *       *       *

                              ----------                              


             SECTION 2705 OF THE PUBLIC HEALTH SERVICE ACT

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

SEC. 2705. 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 or 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 or 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 or 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 or 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 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 or 
                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 or 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 or 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 or 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 
                        or 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 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 or 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 or 
                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 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 or coverage.
                          (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 or coverage.
                          (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 or coverage.
                          (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 or coverage.
                          (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 (as defined 
                        in section 1867(e) of the Social 
                        Security Act, including an emergency 
                        condition relating to mental health and 
                        substance-related disorders).
                  (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 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 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 or 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 or 
                substance-related disorder benefits, the plan 
                or coverage 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 (or health insurance 
                        coverage offered in connection with 
                        such 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 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 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 (or health insurance coverage offered in 
        connection with such a plan) to provide any [mental 
        health benefits; or] mental health or 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 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 (or coverage) 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 (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 a modification of mental health 
                and substance-related disorder benefits as 
                permitted under this paragraph as if such 
                section applied to such plan.

           *       *       *       *       *       *       *

  (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 
        or substance-related disorder benefits.
          (4) [Mental health benefits] Mental health and 
        substance-related disorder benefits.--The term 
        ``[mental health benefits] mental health or 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. 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 and 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 and 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 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 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 and 
        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 and 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 
                        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 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.--
                  (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 and 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 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, 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.--
                  (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 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 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 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, 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 (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 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 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 to provide any [mental health benefits; or] 
        mental health and 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 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 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 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 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[, but does not include benefits with 
        respect to treatment of substance abuse or chemical 
        dependency].
  [(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.]

           *       *       *       *       *       *       *


                            DISSENTING VIEWS

    We could not support H.R. 1424 as passed by the Committee 
because it is a seriously flawed bill. If enacted, the bill 
will likely result in fewer employers providing any mental 
health benefits and overly prescriptive rules governing what 
benefits may be provided. Congress should not impose 
complicated decision rules that govern the relationship between 
various categories of items or services in private sector 
health insurance. Micromanaging private sector health insurance 
will result in mediocrity in mental health services, increased 
costs, and more uninsured individuals.
    The free market is capable of forming appropriate financial 
requirements and other limitations in health insurance that 
produce the best combination of price structure and value for 
consumers in an ever-changing medical world. The practice of 
psychology and psychiatry and its relationship to physical 
health is very different today than a decade ago; this will 
undoubtedly be true a decade from now as well. The lines 
between mental health and physical health often blur. The lines 
between behavior that is criminal, social, medical, and non-
medical will change over time. For insurance companies to 
effect quality control, proper pricing, and the best value, 
insurance policies must also adjust with these shifting lines. 
The more we restrict the marketplace from adjusting 
accordingly, the more we replace common sense and market 
expertise with political judgment.
    Health benefits, including mental health benefits, fall 
into different categories for purposes of insurance coverage. 
These categories may have different financial requirements, 
treatment limitations, or exclusions from coverage. Even 
outside of mental health benefits, health plans do not treat 
all categories of health benefits alike. For example, 
outpatient physical therapy, emergency care, specialty care, 
speech therapy, occupational care, chiropractic care, and 
preventive care often have different limitations than other 
services. Prescription drugs may also have different categories 
of co-payments. The fact that there are requirements tailored 
by category is not a civil rights issue. Micromanaging these 
categories into columns and applying complicated rules to such 
categories has no rational basis. And yet that is exactly what 
this bill will do. Will Congress turn next to oncology parity, 
dental parity, physical therapy parity, laboratory parity, 
payment parity, training parity, or medical evidence parity? 
One need only look at the extraordinarily complicated rules of 
the 1996 Mental Health Parity Act to understand that their 
application to each and every financial requirement and each 
and every treatment limit makes little sense. It is hard to see 
why Congressional intervention in such a complicated and 
dynamic area as mental health coverage is helpful or wise.

The Majority Has Provided No Budget Offset and the Congressional Budget 
   Office States That Some Employers Will Drop Insurance and Reduce 
                                Benefits

    The Congressional Budget Office (CBO) currently scores the 
bill as increasing direct spending by $310 million over the 
2008-2012 period and $820 million over the 2008-2017 period. 
There would also be a reduction in federal tax revenues of $3.1 
billion over the 2008-2017 period. The Majority has not 
proposed an offset. Before we vote on items that have budget 
impacts, we would like to know from where the money will come. 
The last time the Majority searched for an offset, they 
proposed to cut seniors' Medicare coverage by $193 billion.
    The CBO projects this bill will result in people losing 
health insurance benefits and some employers terminating mental 
health benefits altogether. The CBO also estimates that H.R. 
1424 will 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. These responses would include ``reductions 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 benefits, such as increased deductibles or 
higher co-payments''.

   Protagonists Have Made Little Attempt To Address the Concerns of 
               Employers, Insurers, or the Administration

    Setting aside the question of the wisdom of this approach, 
it is hard to imagine a more poorly drafted piece of 
legislation than H.R. 1424 as reported out of the Committee. We 
offered many amendments that would have improved this piece of 
legislation. The Democrat majority rejected each of these 
amendments. This approach is in marked contrast to the Senate, 
which went through a long process of negotiations that included 
employers, insurers, the National Alliance for the Mentally 
Ill, the Fairness Coalition, and many other groups to achieve a 
balanced and more workable proposal. We are unaware of any 
attempt to work with employers and insurers to address their 
concerns. The House bill is simply a way for the Democrat 
Majority to challenge the more balanced Senate agreement.
    Employers, insurers, and human resource groups oppose H.R. 
1424. For example, the National Retail Federation, Aetna, the 
American Benefits Council, the U.S. Chamber of Commerce, the 
Blue Cross Blue Shield Association, the National Association of 
Health Underwriters, the National Association of Wholesaler-
Distributors, the Society for Human Resource Management, the 
National Association of Manufacturers, the Retail Industry 
Leaders Association, the National Business Group on Health, the 
National Restaurant Association, and the Corporate Health Care 
Coalition have all signed a letter in opposition to H.R. 1424. 
Many members of these groups voluntarily provide health 
insurance benefits as a form of compensation. They do not have 
to provide mental health benefits if the costs are 
unreasonable, the regulations too onerous, or the liabilities 
too great. They stated:

          We write in joint and strong opposition to H.R. 1424, 
        the Paul Wellstone Mental Health and Addiction Equity 
        Act of 2007. We urge you to adopt the language of the 
        Senate passed parity bill, S. 558, the Mental Health 
        Parity Act, in its stead. We strongly oppose H.R. 1424, 
        principally because of its broad benefit mandate 
        (DSMIV), its lack of adequate protection for the 
        medical management of benefits, provisions allowing the 
        states to enact more extensive provisions including an 
        alternative remedy structure, and provisions mandating 
        out-of-network coverage. The substitute amendment 
        adopted during the Health Subcommittee markup on 
        October 10, 2007 has made this legislation 
        significantly worse. Protecting only medical management 
        techniques which ``are based on valid medical 
        evidence'' establishes a vague standard which is 
        certain to invite litigation. In addition, the 
        substitute amendment explicitly confirms the DSM-IV 
        mandate and applies the mandate to emergency services. 
        Further, the subcommittee substitute amendment failed 
        to eliminate the bill's out-of-network mandate or the 
        authority for states to establish new remedies, both of 
        which remain key concerns for employers and health 
        plans. The undersigned organizations supported the 
        bipartisan Senate negotiations which resulted in a more 
        balanced compromise proposal. We cannot support and 
        will continue to work to defeat H.R. 1424 as introduced 
        and subsequently amended. Again, we strongly oppose the 
        House bill, H.R. 1424, and urge its defeat in the full 
        House Energy and Commerce Committee. We urge your 
        support instead for individual or substitute amendments 
        containing the language of the parity bill passed by a 
        unanimous Senate: S. 558, the Mental Health Parity Act.

    The ERISA Industry Committee, also composed of groups who 
provide voluntary coverage, testified:

          ERIC members are broadly in favor of expanding 
        coverage, but the approach contained within H.R. 1424 
        is fundamentally flawed. The bill fails to incentivize 
        better coverage options, instead injecting government 
        into the world of voluntary benefits, creating 
        mandates, micromanaging the distribution of benefits, 
        failing to protect plan sponsors from burdensome and 
        costly administrative quagmires, and failing to keep up 
        with innovations and demands already widely accepted in 
        the private health benefits marketplace.

    In a letter dated September 26, 2007, Department of Labor 
Secretary Chao and Department of Health and Human Services 
Secretary Leavitt, the heads of the two Departments charged 
with administering the parity program, wrote:

          We are concerned that competing proposals, such H.R. 
        1424, could have a negative effect on the accessibility 
        and affordability of employer-provided health benefits. 
        These proposals would mandate coverage of a broad range 
        of diseases and conditions and undermine current law 
        that provides for the uniform administration of 
        employee benefit plans.

    The Senate worked with the Administration to craft its 
policy. We should do the same. In both the subcommittee and 
full committee markups, Ms. Wilson offered an amendment to 
replace the parity rule in H.R. 1424 pertaining to plans that 
fall under both the Public Health Service Act and the 
jurisdiction of this committee with the parity rule from S. 
558. Her amendments were defeated, largely along party lines.

   Delegating the Power To Expand Coverage Mandates to the American 
   Psychiatric Association Is a Fundamental Conflict of Interest and 
                       Probably Unconstitutional

    H.R. 1424 as reported delegates the potential expansion of 
coverage requirements in the private sector to the American 
Psychiatric Association (APA). Under the bill, no Executive or 
Congressional action would intercede between the decisions of 
the American Psychiatric Association and future legal 
requirements with which employers and insurers must comply 
under penalty of Federal law. Not only does the Committee 
amendment reflect a failure to recognize a basic conflict of 
interest, it also likely presents a Constitutional conflict 
under the Delegations doctrine. The bill appears to leave any 
update of what qualifies as conditions and, therefore, coverage 
to the APA. There are no criteria for judicial review. There 
are no opportunities for notice and comment required. There are 
no Federal restrictions on conflict of interest. There are no 
requirements to distinguish between mental disorders and 
conditions of clinical focus. The Committee amendment is an 
abrogation of both Legislative branch and Executive branch 
roles to a group lobbying for this bill.

  The Majority Amendment Fails To Reflect That Conditions of Clinical 
 Focus Are Not Mental Disorders Per Se and Are Not Based on Diagnostic 
                                Criteria

    The adoption of an over 880-page manual produces numerous 
problems. The Majority fails to understand or recognize the 
difference between a mental disorder and a condition of 
clinical focus. Then Chairman Bilirakis of the Health 
Subcommittee asked about this issue in a 2002 hearing. The APA 
witness answered, among other things that:

          This question focuses on a section of the DSM-IV that 
        is called ``Other Conditions That May be a Focus of 
        Clinical Attention.'' Only a general description of 
        these conditions is provided because these conditions 
        are not mental disorders per se and thus do not have 
        specific criteria governing their inclusion or 
        exclusion. . . . [I]nclusion of the V Codes is provided 
        as a courtesy to facilitate coding and crosswalking 
        between ICD and DSM and allows clinicians an 
        opportunity to identify the types of ``non-diagnostic'' 
        problems that are brought to their attention . . .
          . . . While it is true that no specific scientific 
        evidence is provided in DSM-IV or ICD-9-CM for 
        conditions that are the focus of clinical attention, 
        the V-code conditions are simply lists that have been 
        accumulated over the years to describe the reasons why 
        patients might come to a physician or other health care 
        provider's office. They are coded and given a number so 
        that statistical analyses can be made for research that 
        is intended to improve the organization and 
        effectiveness of meeting patient needs and requests. 
        [emphasis added].

    So exactly what is the mandate for ``non-diagnostic 
problems'' that are not mental disorders? The Majority's 
approach places conditions of focus at the same level as mental 
disorders. This is not supported by science or medical 
evidence. Mr. Burgess offered an amendment to address this 
issue which the Majority defeated. To be clear, the purpose of 
the amendment is not to enable insurers' denial of claims 
because a provider also cites a condition of clinical focus; 
rather, it would clarify that a condition of clinical focus 
should not itself be the basis of a Congressional coverage 
mandate.
    The Majority fails to understand that mental disorders 
under DSM IV are essentially defined by diagnostic criteria. 
That means Congress is incorporating by reference actual mental 
health diagnostic criteria as a provision of Federal law. Even 
within each diagnostic criterion for the disorders there are 
statements about what represents clinical significance. We are 
unaware of a precedent for Congress defining diagnostic 
criteria.

   The Majority's Blanket Inclusion of DSM-IV Conditions May Expand 
     Criminal Defenses and Affect Criminal Reporting Requirements, 
        Disabilities Laws, and Employee Substance Abuse Policies

    The Majority would have Congress codify DSM-IV in three 
separate Federal statutes. It is true these statutes are not 
themselves general criminal statutes, disabilities laws, or 
substance abuse policies. However, make no mistake about it, 
criminal defense lawyers and disabilities lawyers will cite the 
codification of DSM-IV as Congressional intention that all DSM-
IV conditions have a legal status under Federal law, lending 
additional weight to their pleadings. Other lawyers will claim 
the inclusion of these categories in statute means certain 
information is restricted under medial privacy laws, or that 
DSM-IV conditions are all disabilities requiring coverage.
    For instance, criminal conduct forms the basis of the 
category ``V 71.01 Adult Antisocial Behavior'':

          This category can be used when the focus of clinical 
        attention is adult antisocial behavior that is not due 
        to a mental disorder (e.g., Conduct Disorder, 
        Antisocial Personality Disorder, or Impulse-Control 
        Disorder). Examples include the behavior of 
        professional thieves, racketeers, or dealers in illegal 
        substances.

    ``V. 61.21, Physical Abuse of Children and Sexual Abuse of 
Children'' is a similar example. Again, these categories 
include criminal behavior and no further diagnostic criterion 
remains necessary.
    What is a court to conclude? That Congress appears to 
expand or lend support to the frequent claim that criminal 
behavior is essentially a mental health condition requiring 
treatment. Why would a court conclude this? Because of the rule 
of construction on which courts sometimes rely, called in pari 
materia, which means ``upon the same matter or subject.'' When 
a statute is ambiguous, its meaning may be determined in light 
of other statutes on the same subject matter. We do not want a 
defense lawyer citing the Congressional decision to codify DSM 
conditions as an element of the defense to a crime, but that 
will be an inevitable result of H.R. 1424.
    Mr. Stearns offered a common sense amendment, which 
provided that the act of codification of DSM would not create a 
defense in a criminal case, including cases of child abuse. The 
amendment also provided the act of codification of DSM would 
not override any requirements for reporting criminal conduct, 
including child abuse, nor create any new privilege against 
disclosure. Unfortunately, the Majority voted down this 
important amendment as well.
    Mr. Rogers of Michigan offered a similar rule of 
construction as an amendment to ensure that no provision of the 
Act would restrict a plan from denying a claim for any person 
convicted of child abuse or other criminal activity who cites 
that conviction as the basis of a mental health condition 
claim. The Majority voted down this amendment, too.
    In addition to codes based on criminal conduct, the DSM-IV 
contains codes based on other non-medical issues:

                         V62.3 ACADEMIC PROBLEM

          This category can be used when the focus of clinical 
        attention is an academic problem that is not due to a 
        mental disorder or, if due to a mental disorder, is 
        sufficiently severe to warrant independent clinical 
        attention. An example is a pattern of failing grades or 
        of significant underachievement in a person with 
        adequate intellectual capacity in the absence of a 
        Learning or Communication Disorder or any other mental 
        disorder that would account for this problem.

                 V62.89 RELIGIOUS OR SPIRITUAL PROBLEM

          This category can be used when the focus of clinical 
        attention is a religious or spiritual problem. Examples 
        include distressing experiences that involve loss or 
        questioning of problems associated with conversion to a 
        new faith, or questioning of spiritual values that may 
        not necessarily be related to an organized church or 
        religious institution.

                     V. 62.4 ACCULTURATION PROBLEM

          This category can be used when the focus of clinical 
        attention is a problem involving adjustment to a 
        different culture (e.g., following migration).

    Under the Majority's formulation, H.R. 1424 would require 
an insurance policy cover these non-medical problems. There are 
no diagnostic criteria in these conditions. Part of why the 
private sector and public sector have developed financial 
requirements and treatment limits by categories is to provide 
value and ensure quality. Employers negotiate on behalf of 
beneficiaries for a balanced package of health care coverage. 
Insurers negotiate under free market competition to get the 
best packages. The cornerstone of this approach is to focus on 
serious medical conditions. Less serious or mild versions of 
items listed in the DSM are just not the same as serious 
medical conditions such as heart attacks, cancer, or severe 
mental illnesses. If companies are forced to spend more money 
on items like spiritual problems, academic problems, or a wide 
range of other items that may not be medically-based, we will 
undermine this system.
    If by passing H.R. 1424, Congress is mandating coverage for 
these non-medical problems, are we also saying the same non-
medical problems could constitute disabilities for other 
purposes? There are plenty of creative disabilities lawyers. 
These lawyers could say ``my client has serious religious 
problem or a serious acculturation problem and accommodations 
under the law must be made accordingly.'' We need to make 
absolutely sure that we are not expanding the universe of 
claims under disabilities law. A clear savings clause in the 
text would accomplish that goal. Mr. Burgess offered such an 
amendment. That language should be included in the bill before 
this measure reaches the House floor.
    Turning to the concern about employee substance abuse 
policies, is it the position of the Majority that an employee 
can continue to violate a company's substance abuse policy and 
be rewarded for it merely because the DSM-IV cites substance 
abuse as a condition? Explain this to the small business owner 
or his employees when he or she is forced to increase premiums, 
or drop health insurance coverage altogether, because Federal 
law forces him or her to pay for people in violation of the 
company substance abuse policy. All of these clarifications 
need to be addressed in the text of the legislation, not simply 
legislative history.

The Complicated Decision Rules Under H.R. 1424 Do Not Match the Parity 
  Guidance Under the Federal Employee Benefits Plan and Will Produce 
                           Irrational Results

    Despite the claims of protagonists, it is clear from the 
text as well as the answers to questions during the markup that 
H.R. 1424 is not a set of parity rules at all. The provisions 
do not operate like the parity guidance from the Federal 
Employees Health Benefit Plans (FEHBP). Under the FEHBP parity 
guidance, a plan can satisfy parity if a subcategory of items 
or services does not make a distinction in its application 
between mental health benefits or non-mental health benefits, 
or where subcategories of mental health benefits have the same 
requirements as comparable subcategories of non-mental health 
benefits. We read the rules proposed by H.R. 1424 as 
potentially trumping this common sense FEHBP rule. As we review 
proposed paragraphs 2705(a)(3)(A) and (4)(A) of the Public 
Health Service Act, we find situations where a plan may not 
impose ANY financial requirement or treatment limitation unless 
such requirement or limitation is imposed on substantially all 
items in distinct super categories defined by the bill. This 
means even if a subcategory of mental health benefits has the 
same requirements as a comparable category of non-mental health 
benefits, a plan may still be in violation of (3)(A) and 
(4)(A). What is the policy rationale for this rule? We are not 
aware of any.
    A similar problem exists under proposed 2105(a)(3)(B) and 
(4)(B). For example under (4)(B) a mental health benefit cannot 
have a more costly requirement than what applies to the 
predominant requirement for items or services within the 
specified super categories. Since the predominant requirement 
is not necessarily from a comparable subcategory this means 
identical requirements from similar subcategories may fail to 
satisfy the tests of (3)(B) and (4)(B).
    We understand that under (3)(A) and (4)(A) a plan may then 
not be able to apply any financial requirements or treatment 
limitations to mental health benefits if the frequency of items 
or services is not sufficiently large to meet a certain level. 
So how would that apply here? Such a rule would seem to suggest 
that even if there are identical requirements for similar 
subcategories a plan may still be in violation of (3)(A) and 
(4)(A).
    We also asked if a psychiatrist is generally considered a 
specialist, but the $15 co-pay is the most frequent in out-
patient in-network coverage and it is considered predominant, 
would this bill end up saying the $15 co-pay or the $50 co-pay 
applies? We had hoped the answer would be that similar 
subcategories, like co-pays for specialist could be treated 
similarly. However, H.R. 1424 would ensure the predominance 
rule would trump the rule about similar categories. This is not 
parity.
    We specifically queried the Office of Personnel Management 
regarding this issue. They responded with the following 
technical comments:

          H.R. 1424 lists 5 major (predominant) categories of 
        items and services where treatment limits and financial 
        requirements for mental health and substance disorder 
        benefits can be no more restrictive for patients than 
        the predominant benefit categories. These predominant 
        categories are not used to describe benefits in FEHB 
        plans and do not take into consideration sub-categories 
        of benefits where treatment limits and financial 
        requirements typically vary. OPM has not estimated the 
        financial impact that the ``predominant'' provision 
        would have on FEHB premiums, because we do not know how 
        the legislation would be implemented in practice. 
        However, we believe premium costs would increase as a 
        result.
          Under the FEHB Program, the common categories of 
        items and services for the purpose of applying 
        treatment limits and financial requirements of medical 
        and surgical benefits to mental health and substance 
        abuse benefits are: Inpatient hospital, Outpatient 
        hospital, Outpatient specialist physician 
        (professional), Laboratory and X-ray tests, Surgical 
        services, Prescription drugs, and Emergency services. 
        Generally, benefits are provided based on type of 
        provider and place of service. Type of provider 
        includes the contractual relationship the provider has 
        with the health plan (e.g. preferred provider).
          Under the FEHB Program, health plans may use managed 
        care techniques, such as authorizing treatment plans, 
        to ensure the most cost-efficient delivery of benefits 
        for mental health and substance abuse services. Patient 
        treatment plans are developed by providers and are 
        subject to review and approval by the health plan.
          H.R. 1424, as passed by the House Committee on Energy 
        & Commerce on October 16th, would impact the FEHB 
        Program in one key area, the addition of parity out-of-
        network mental health and substance abuse benefits for 
        those health plans that offer out-of-network benefits. 
        Under FEHB, health plans are not required to provide 
        parity for out-of-network mental health and substance 
        abuse benefits. OPM estimates that requiring out-of-
        network parity will increase costs to the FEHB Program 
        by $50 million. We believe we have successfully met the 
        needs of the Federal population through our approach to 
        offering parity on an in-network basis.

    Mr. Deal offered a simple amendment, which ensured a plan 
following the current FEHBP guidelines would satisfy the parity 
requirements under the bill. The Majority rejected the 
amendment. Apparently, the program available to Members of 
Congress was not good enough.

 Arguments Regarding the Discretion of Plans To Manage Treatment Plans 
  and the Burden of Producing Medical Evidence Will Be the Source of 
                           Endless Litigation

    Under FEHBP, plan benefits are payable only when the plan 
determines the care is clinically appropriate and approved in a 
treatment plan. Insurers may limit parity benefits when 
patients do not substantially follow their treatment plans. 
Providers need to show that a medical diagnosis is supported by 
medical evidence and that a proposed treatment is medically 
necessary and appropriate. That is a proper obligation. Payors 
and insurers should not be forced to disprove the negative. It 
is not the job of insurers to show by medical evidence that a 
patient does not have mental health problem. It is not the job 
of insurers to show by medical evidence that a treatment is not 
medically necessary. Switching this presumption from providers 
to insurers is no small matter and is not good policy.

      The Cost Exemption Under H.R. 1424 Is Not a Realistic Option

    Under the language of the bill, once it is proven through 
actual cost increases that plan costs are above a certain 
percentage, an employer could have a waiver of the parity 
requirement. But that would only be available for 1 year. After 
1 year, the employer or insurer must go back to the parity rule 
and suffer the cost increase for another period of time. After 
that second period of time, the employer or insurer could then 
get a waiver for the following year. The employer's or 
insurer's eligibility for a waiver would continue to alternate 
every other year.
    This is a policy that works like a yo-yo: 1 year in, 1 year 
out, followed by another year in. It is very difficult to 
imagine any business exercising this option, with all of its 
attendant administrative burdens, in the real world. It seems 
far more likely employers will either absorb elevated costs on 
a permanent basis or drop mental health coverage altogether. 
That will hurt both businesses and beneficiaries who lose 
mental health coverage.

                  A Lot of Work Is Needed on This Bill

    We submit a substantial list of dissenting views in order 
to prompt Members to think about the drafting of this 
legislation and its potential unintended consequences. There 
are other problems we have not discussed in these views. For 
instance, if Congress is serious about addressing treatment 
disparities for Americans with severe mental illnesses such as 
bipolar disorder, schizophrenia, and depression, we should 
focus on legislation that would bolster this coverage rather 
than insisting on full coverage of the DSM-IV, which will drive 
some employers to drop benefits. It would be smarter to craft a 
policy that would address the most severe mental illnesses with 
sufficient support from employers to counter CBO's projections 
about lost coverage and benefits. We think the best approach is 
to engage stakeholders--employers, insurers, the 
Administration, and other parties--to solve the problems of the 
H.R. 1424 text before the bill reaches the House floor. We know 
the House and the Committee can do a much better job.

                                   Joe Barton.
                                   Nathan Deal.
                                   Cliff Stearns.
                                   Joseph R. Pitts.
                                   Michael Burgess.
                                   Mike Rogers (MI).