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November 2008 Feature: Wellstone Act

Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008

Article updated December 23, 2008

On October 3, 2008, as a part of the economic bailout bill, President Bush signed into law the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 ("Wellstone Act" or the "Act"), which provides true parity between mental health/substance abuse benefits and other benefits covered under employer health plans. The Wellstone Act should not be confused with the Mental Health Parity Act ("MHPA") that was enacted in 1997 and that was set to expire this year. The original MHPA prohibited plans from applying specific lower dollar maximums to mental health benefits and did not require parity with regard to other types of plan limitations such as copays, coinsurance, deductibles and out-of-pocket maximums, nor did it apply to substance abuse benefits.

To whom does the Act apply?
To large group health plans (i.e., employers who employ 51 or more employees), including self-funded, fully insured and governmental plans. Small employers do not have to comply with the Act.

What is required by the Act?
While the Wellstone Act does not require group health plans to offer mental health and substance abuse benefits, it does require that if a group offers these benefits, they must offer equivalent benefits for mental illness and substance abuse disorders as they do for other medical conditions. It is important to note that for self-funded plans, substance abuse disorders and mental health conditions are defined as set forth under the terms of the group's plan document.

Some key highlights of the Act are outlined below:

• Substance Abuse Included. The Act extends the current MHPA to include substance abuse.
• Financial Requirements. Financial requirements under an employer's health plan with regard to mental health and substance abuse benefits must be the same or better than the financial requirements for medical and surgical benefits under the plan. The term financial requirement includes deductibles, copays, coinsurance and out-of-pocket expenses. Since the Act uses the word "includes," it is implied that this list is not exclusive, and that other types of financial requirements (e.g., penalties for failure to notify in the event of emergency treatment) may be deemed to be a financial requirement as well. The Department of Labor, Health and Human Services and the Treasury are expected to promulgate regulations regarding the Act. We expect this issue to be clarified in those regulations.
• Treatment Limitations. Treatment limitations for mental health and substance abuse benefits covered under the plan to the extent that medical and surgical treatments are not also similarly limited.
• Out-of-Network Coverage. If plans provide out-of-network coverage for medical and surgical benefits then mental health and substance abuse benefits must be covered out-of-network as well.
• Availability of Plan Information. The criteria for determining whether mental health and substance abuse treatment is "medically necessary" must be provided to participants and contracting providers upon request.

When does the Act go into effect?
On the first day of the plan year beginning one year after the date the Act was enacted (October 3, 2008), which means January 1, 2010 for calendar year plans.

See table below to determine when your plan must comply: 

First day of the plan year	Date you must comply by	First day of the plan year	Date you must comply by
November 1	11/1/09	May 1	5/1/10
December 1	12/1/09	June 1	6/1/10
January 1	1/1/10	July 1	7/1/10
February 1	2/1/10	August 1	8/1/10
March 1	3/1/10	September 1	9/1/10
April 1	4/1/10	October 1	10/1/10

There is a special rule for plans that cover union employees who are covered under a collective bargaining agreement (CBA) that could require compliance as early as January 1, 2010. For plans maintained pursuant to one or more CBA, the Wellstone Act is effective the later of (i) the date on which the CBA relating to the plan terminates (determined without regard to any extension agreed to after the enactment of the Wellstone Act) or (ii) January 1, 2009. We believe that this special rule is intended to provide CBA plans with a longer amount of time for compliance (i.e., until the last CBA relating to the plan terminates). We hope addtional guidance regarding this matter will be issued.

How does the Act impact employers?
This Act has a significant impact on employer health plans that offer mental health and/or substance abuse benefits where the cost and treatment limitations of those benefits are more restrictive when compared to other medical and surgical benefits under the employer's plan.

Most group health plans reimburse mental health and substance abuse benefits at lower levels and also impose calendar or lifetime visit maximums on those benefits that are not imposed on other medical conditions. These separate limits will no longer be permissible. In addition, because the previous MHPA did not apply to substance abuse benefits, there are a number of plans that impose dollar limits on substance abuse benefits; this will no longer be allowed. Employers are going to need to review their plan designs to ensure compliance with this new law and take necessary steps to amend their plan(s) before the compliance date.

Additional information
The Act provides a limited exemption which may apply to certain employers who experience a cost increase provided certain requirements are met. If complying with the Act causes the plan's actual total cost of coverage with respect to medical, surgical, mental health and substance abuse combined to increase by (1) two percent or more in the case of the first plan year, the group must comply with the Act, or (2) one percent in the case of each subsequent plan year, then the plan will be exempt from having to comply with the Wellstone Act for the following plan year. 

In order for a group to take advantage of this one-time exemption, the following steps must be taken:

• Determination by a Qualified and Licensed Actuary. The actuary must be a member in good standing with the American Academy of Actuaries and certify that the plan has experienced a cost increase as a result of the Act.
• Six-Month Rule. Plans must comply with the Act for at least six months before an actuarial determination may be made. Even if a group is eligible for the limited exemption, the exemption will not be applied until the following plan year. For example, a plan that must comply by January 1, 2010 and who receives an actuarial determination, still must comply for the remainder of 2010. The exemption would not go into effect until January 1, 2011 and the plan will again have to comply with the requirements of Act by January 1, 2012.
• Notice. If the plan meets the requirements for this exemption, than the plan must promptly notify the Secretary of Labor, any appropriate state agencies and plan participants and beneficiaries. The notification to the Department of Labor must contain certain required information.
• Audit. The plan must be willing to undergo an audit by the DOL and/or applicable state agency.

This summary was provided in consultation wtih the law firm of Alston & Bird LLP.

Compliance Quarterly is being provided as an informational tool. It is recommended that plans consult with their own experts or counsel to review all applicable federal and state legal requirements that may apply to their group health plan. By providing this publication and any attachments, Meritain Health is not exercising discretionary authority over the plan and is not assuming a plan fiduciary role, nor is Meritain Health providing legal advice.