House Democrats on March 5 passed HB 1424, the mental health parity bill. The legislation, sponsored by Reps. Patrick Kennedy (D-R.I.) and Jim Ramstad (R-Minn.), would require most health insurers to provide equal levels of coverage for physical and mental illnesses. Under the bill, health insurers could not require larger copayments or implement lower reimbursement caps for mental illnesses. In addition, the bill would require health insurers to cover all mental illnesses and substance abuse disorders listed in the Diagnostic and Statistical Manual of Mental Disorders compiled by the American Psychiatric Association. The legislation would apply to group health plans and would not affect plans for employers with 50 or fewer employees. According to reports, the $2.4 billion gap (over 10 years) created by the legislation would be financed by limits on the growth of physician-owned specialty hospitals. Under the provision, physicians could not refer patients to hospitals in which they have a financial interest. However, this provision has met opposition, notably from the Bush administration, and critics maintain that, "physicians’ ownership interest gives them an incentive to refer patients to the facility and to increase volume unnecessarily" and that a, "ban on referrals to new specialty hospitals would reduce the number of medical procedures being performed, which would result in savings."

However, the House-passed legislation must now be reconciled with a mental health parity bill that was passed by the Senate (S 558). According to reports, S 558 is viewed more favorably by insurance carriers, companies and the Bush administration.