Despite an increased demand for mental health and substance use disorder (MH/SUD) treatment even before the COVID-19 pandemic, certain local and state governments have decided to opt out of the Mental Health Parity and Addiction Equity Act of 2008 (Federal Parity Act)—a law that requires most insurers to cover illnesses of the brain, such as depression or addiction, no more restrictively than illnesses of the body, such as diabetes or cancer.

Now, as Americans face increasing rates of depression and anxiety and record high overdose deaths, these protections are more important than ever.

Are Opt Outs legal?

Federal law permits non-federal government plans (e.g., city, county, school district, public university, and state plans) that are self-funded (meaning they government pays for services rather than the insurance company that is administering the health plan) to opt out of four federal coverage requirements. There are nearly 35,000 self-funded non-federal government plans, and only about one half of one percent have chosen to opt out, as the majority of plans recognize the invaluable protections that the Federal Parity Act afford employees. However, the 181 plans nationwide that have utilized this loophole in federal law are stripping employees and their family members of rights in the following areas:

• Parity protections requiring equitable mental health and addiction coverage. The Federal Parity Act broadly prohibits discrimination in the coverage of mental health and substance use disorder services (180 plans, or all but one).  
• Protections for women after childbirth. The Newborns and Mothers Health Protection Act of 1996 prohibits plans from restricting benefits for a hospital stay within 48 hours after a vaginal delivery and with 96 hours after a cesarean section (43 plans).
• Protections for reconstructive surgery after a mastectomy. The Women’s Health and Cancer Rights Act of 1998 requires coverage for reconstructive surgery after a mastectomy if mastectomies are covered, which nearly all health plans cover (40 plans).
• Protections for students during medical leave from college. Michelle’s Law passed to protect students who were forced to choose between fighting serious illness or maintain full-time status as a student (37 plans).

Each of these areas provides critical protections, yet because of where these requirements are located in the U.S. Code, state and local government plans can opt into denying their employees and their family members these rights.  

Large state/local government plans that have opted out, include:

• University of Alabama
• Tucson, AZ
• Orange County, CA
• Chicago, IL
• State of Michigan
• State of Mississippi
• New Mexico Public Schools Insurance Authority
• University of Texas
• University of Virginia
• Milwaukee Public Schools

(See full table below)

Many health plans that opt out often claim doing so has little impact on plan enrollees. This is simply untrue. Opting out strips covered employees and family members of their federal rights under the most important anti-discrimination law governing mental health and addiction treatment coverage. There are very real consequences:

• When individuals have been wrongly denied coverage, using the Federal Parity Act to challenge the denial is often the only recourse families have. If enrollees believe their coverage limitation or denial is unjust, they have no ability to take action or appeal the decision.

• Government plans that have chosen to opt out of the Federal Parity Act often say the MH/SUD benefits they provide are enough. However, it is impossible to determine parity compliance simply by looking at a plan’s covered benefits on paper. The inequities often exist in how benefits are actually administered. This is particularly true when it comes to non-quantitative treatment limitations (NQTL)s, which are non-numerical limits on the scope or direction of benefits for treatment (e.g., medical necessity criteria and network admission standards). The most profound and consequential barriers to mental health and addiction coverage occur in plans’ NQTLs. An opt out from parity removes any mechanism to assess those NQTLs, hence the danger.

• Opted out plans most often want to be free from the burden of regulatory oversight or giving plan enrollees the ability to challenge denials on the basis of parity. Consequently, the burden is shifted directly to enrollees and their families when they are left paying out of pocket for care. Many families end up depleting their life savings or going into debt to get help for their loved one. This is especially concerning for parents, given that the American Academy of Pediatrics, American Academy of Child and Adolescent Psychiatry, and Children’s Hospital Association recently declared a national emergency in children’s mental health, and the U.S. Surgeon General Vivek Murthy issued a public health advisory on the same topic.

• While the pandemic has taken a toll on all Americans, the effects on first responders and other public workers have been particularly dire. Many of these workers are employed by state and local governments who have opted out of parity. How is it fair that the very people who put their lives on the line for others aren’t afforded the fundamental rights protected by the Federal Parity Act?

What can we do?

The Kennedy Forum is working hard to discourage state and local governments from opting out of the Federal Parity Act. In 2021, we spoke out against those who encouraged parity opt outs and worked closely with a New York Times journalist to inform an August 2021 article on the topic.

Please join us in spreading the word about this alarming issue so we can work toward a future where those with mental health and addiction challenges are no longer discriminated against—a future where the brain is valued the same as the body and everyone has access to whole person care.  

Full list of the state and local government plans that are currently opted out of the Federal Parity Act: