States have in recent years taken a more prominent role in social policy, including health care and welfare programs that were previously administered at the federal level (the so called “new federalism”). In the arena of health care policy, new federalism often takes the form of health insurance mandates. While some applaud the increased activism of states in health policy, others criticize state legislation as creating an impenetrable jungle of regulations that increases health care costs, possibly causing employers (usually of small firms) to drop insurance benefits and therefore increasing the uninsurance rate. Therefore the overall question of policy interest is whether state legislation can make a substantial difference at the population level and serve as a substitute for federal legislation. This study focuses on one area that has been prominent in the past decade: mental health benefits.

Traditionally, insurance benefits for mental health care have been more restrictive than benefits for medical and surgical services. The 1996 federal Mental Health Parity Act (MHPA; see, e.g., http://www.cms.hhs.gov/hipaa/ hipaa1, for a summary of the legislation and the statutory text) was an attempt to address this discrepancy and prohibited differential dollar limits for mental health and medical care in employer-sponsored insurance plans, but allowed differential limits in terms of hospital days and outpatient visits as well as differential cost-sharing features such as copayments, coinsurance, or deductibles. Thus, this legislation resulted in virtually no substantial changes in consumers’ health benefits, their access to mental health care, or health care costs related to the parity bill (General Accounting Office 2000). However, the federal legislation may have had an important symbolic value and encouraged many states to follow up with stronger mandates. By 2001, 31 states passed some form of parity legislation (National Advisory Mental Health Council 2001; Gitterman et al. 2001). In this article, we study the question to what extent recent state parity legislation changed perceived health insurance benefits, perceived access to care, and use of mental health specialty care, using survey data from 1998 and 2001.