The concerns of state insurance regulators that federal standards on mental health parity legislation serve as a floor and not as a ceiling to state action constitute a major barrier to enactment of such legislation, according to testimony at a House hearing last week.

The fault lines, between business interests as represented in the Senate bill, and consumer interests, as represented in the proposed House bill, were exposed at the hearing on July 10 before the Education and Labor Health, Employment, Labor, and Pensions Subcommittee of the House Education and Labor Committee.

The differences sets up difficult negotiations on final legislation, talks that are unlikely to occur before next year, according to Rep. Patrick Kennedy, D-R.I., a sponsor, along with Rep. Jim Ramstad, R-Minn., of the House bill.

A critical concern is that the Senate bill–supported by business interests–allows states to continue regulating insurance plans as they do now, but it would not permit new state laws.

By contrast, the House bill gives states some leeway to impose new laws on insurers and employers, such as requiring certain coverages or limiting insurers’ oversight abilities.

The Senate bill, S. 558, was reported out by the Senate Health, Education, Labor and Pension Committee earlier this year. It is sponsored by Sen. Ted Kennedy, D-Mass., chairman of the committee, and Sen. PeteDomenici, R-N.M.

House Committee officials hope the Kennedy-Ramsted House bill, H.R. 1424, the Paul Wellstone Mental Health and Addiction Equity Act, is acted upon, at least by the committee, before the August recess, according to officials at the American Benefits Council, which strongly supports the Senate bill.

The concerns of insurance regulators with the Senate bill were voiced at the hearing by Sean Dilweg, Wisconsin insurance commissioner.

“It would be very problematic for Wisconsin and other states if the House were to move in the direction of the Senate with regard to preemption,” Dilweg said.

He said the Senate version preempts, subject to certain exceptions, any state mental health parity standard or requirement which differs from the mental health parity standards or requirements as defined in a provision of the Senate bill.

The NAIC has written to both committees about the Senate bill, noting that it would completely preempt all state protections in such areas as parity in financial requirements, i.e. coverage limits, co-pays, deductions exemptions in parity requirements due to increase costs, Dilweg said.

“Wisconsin and other states are struggling to predict how the preemption language might impact current parity laws,” he said. “Short of litigation in federal court, it is unclear who decides if the state law differs from the federal law and what a state’s options are if the state disagrees with that decision.”

He said there are 46 states with laws requiring some level of mental health coverage and 27 states have full parity laws, requiring insurers to provide the same level of mental health benefits as medical and surgical benefits.

At the same time, business interests voiced support for the Senate bill. Jon Breyfogle, executive principal with Groom Law Group, Washington, D.C., testified on behalf of the American Benefits Council.

He told the panel that, “Because of the importance Council members place on all employee health benefits, we have repeatedly urged Congress not to expand the current federal parity requirements in a way that would add to plan costs or increase the complexity of plan administration.”

He called the Senate bill a “balanced legislative approach that has gained the support of mental health parity proponents as well as organizations representing employers and insurers.

Mr. Breyfogle said, “The Senate bill is unique.”

He added, “We hope this good faith effort sends an important message that employers will support legislation where their priority concerns are addressed in a thoughtful manner and with careful attention to details.”

He said the Senate bill allows employers the flexibility to design plans; makes clear that medical management of these important benefits may not be prohibited; and ensures uniformity between federal and state parity requirements while maintaining states’ current authority to regulate insurance.

“Unfortunately, The Paul Wellstone Mental Health and Addiction Equity Act (H.R. 1424) does not address the issues of key concern to employers in the same balanced fashion as the Senate bill,” Breyfogle said.