In order to understand how health insurance works in regard to drug and alcohol rehabilitation, it’s important to have an understanding of federal and state parity laws. What are these laws and how do they affect health insurance coverage for rehab? Below, we’ll explain these laws so you can find out how they affect you.
Federal Parity Laws
It used to be that health insurance plans offered very limited, if any, coverage for substance abuse and addiction treatment. On October 3, 2008, that changed. It was then that President George W Bush approved the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (often simply referred to as the Parity Act). On January 1, 2010, this federal law became effective for most health insurance plans.
Under the Parity Act, companies that employ 50 or more people and offer group health insurance plans that provide benefits for mental illness, as well as addiction rehabilitation, to offer said benefits so that they are not as restrictive than the coverage that insurance plans offer for other medical needs.
While group health plans are not required to offer mental health and addiction treatment under the Parity Act, if they do cover this type of treatment, they are required to do so with “parity”; in such a way that is equal to how the plan provides coverage for medical and surgical care.
The purpose of this law is to highlight the connection that exists between an individual’s mental health and his or her overall health and well-being. By illustrating this connection, those that are suffering from substance addiction disorder can get the treatment that they need to recover from addiction.
The Parity Act does not apply to smaller employers. Furthermore, it does not apply to individual health insurance plan, Medicare, or Medicaid. However, depending on how these plans are handled, some exceptions to exist.
State Parity Laws
In many states, similar laws had already been passed prior to the passage of Federal Parity Laws. As such, the majority of large employers in the states that had passed these laws were covering benefits for substance abuse and addiction treatment in ways that were similar to how they covered other medical needs. With that said, some employers that offered self-insured healthcare plans (organizations that paid for benefits with their own money instead of using the money provided by the insurer) do not have to abide by laws that are mandated by the state; however, they are required to comply with the Parity Act. Nevertheless, a self-insured organization could still decide whether or not their health insurance would cover substance abuse; if the employer chose not to offer such coverage, then it didn’t’ have to comply with federal or state Parity Laws.
With that said, 96% of employers report that they include coverage for drug rehab, as well as mental health. When a plan falls under both Federal and State Parity Laws, whichever option offers more benefits will apply.