Labor Market Consequences of State Mental Health Parity Mandates

This paper analyzes the effects of state mental health parity mandates on the labor and insurance markets. In particular, I investigate the effect of parity regulations along five margins: having employer provided health insurance coverage, employer contributions to health insurance premiums, the probability of full-time employment, working hours, and wages for a sample of private workers in firms with less than 100 employees using the Annual Demographic Surveys (March CPS) for the years 1999-2004 (and also in an extended sample of CPS 1992-2004). It is hypothesized that if parity mandates are costly they will have an impact on at least one of the above margins. I find no evidence for any of the most feared impact: a reduction in the probability of having employer-provided health insurance coverage or that state mental health parity mandates have decreased the generosity of employers' contributions to health insurance premiums. The results also lack any evidence of an impact on labor market composition or of costs having been passed onto workers in terms of lower wages.