<nobr>Aug 5, 2008</nobr>

Senate Blocked from Considering Tax Extenders Legislation with Mental Health Parity Compromise

After weeks of negotiations, a compromise mental health parity bill was inserted into an omnibus tax and energy extenders package (S.3335, The Jobs, Energy, Families, and Disaster Relief Act of 2008) that stalled last week after Senate Democrats failed to break a Republican filibuster.

The Senate failed for the fourth time in the last two months to generate 60 votes needed to overcome a procedural hurdle to consider legislation that would extend the expiring (or soon-to-be-expiring) energy and tax provisions and provide a one-year patch for the AMT. With Congress now in recess until the second week of September, the legislation will have to be re-visited in the fall and could set up another end-of-the-session showdown between the two parties and two chambers.

Mental Health Parity Legislation Added

House and Senate negotiators reached agreement on the mental health legislation in June, and were looking to act on the compromise legislation. Earlier last week, Senate Finance Committee Chairman Max Baucus (D-MT) added a compromise version of the mental health parity legislation (H.R. 1424 and S. 558) to the tax and energy extender bill.

The House in March 2008 approved its versions of the mental health parity legislation, and the Senate approved its bill in September 2007. The legislation would require health plans offering mental health coverage to provide the same benefits for mental illness as they do for other medical conditions. Employers with fewer than 50 workers would be exempt under the legislation.

Although the compromise version included in S.3335 is less onerous than prior incarnations, it is still uncertain what impact the parity requirements will have on group health plans, if the legislation is eventually signed into law. The bill mandates that financial requirements associated with the provision of mental health benefits be "no more restrictive than the predominant financial requirements applied to substantially all medical and surgical benefits covered by the plan." Conceivably, a beneficiary's visit to a mental health specialist could be prohibited from being assessed a co-pay higher than would be assessed for a primary care physician visit, if primary care physician consults were the "predominant" medical benefit.

ERIC remains opposed to any new mental health mandates.

Jockeying Over Offsets and Other Issues

Meanwhile, the two parties and the two chambers have been deadlocked for months over whether to offset the extenders legislation and a one-year patch for the alternative minimum tax. House Democrats are insisting on completely offsetting the AMT and extender legislation, while Senate Finance Chairman Baucus would partially offset the extenders.

The latest offsets proposed by Baucus includes imposing an immediate tax on nonqualified deferred compensation paid by certain foreign entities, delaying implementation of worldwide allocation of interest expenses until 2019, requiring broker reporting of customer's basis in securities transactions, and modifying the timing for corporate estimated tax payments.

The House in May approved H.R. 6049 to extend for one year the approximately three-dozen tax provisions, which also includes a provision that would change the tax treatment of deferred compensation paid by managers of offshore hedge funds, in which the Bush Administration issued a veto threat, saying that it opposes the revenue offsets.

The AMT and extender provisions are routinely extended each year, and because the legislation is viewed as "must-pass," it generally becomes a vehicle for other important legislation. But whether or not the mental health parity legislation has any future as part of the tax extenders package remains to be seen.

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Websites:

Summary of S. 3335

S. 3335

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