The pros and cons of state laws mandating mental health insurance are discussed in this report. The history of a 1985 Supreme Court case which held that states could mandate mental health benefits introduces the report. In an overview of the issue, the long-standing argument between the insurance industry and the mental health establishment is discussed, including their disagreements on consumer choice in a free market system, potential increases in service utilization and costs, and the appropriateness of the legislative arena deciding the issue. Legislative guidelines are presented for the topics of minimum benefits, persons covered, types of treatment covered, treatment settings, professionals authorized for service, and cost containment measures. Specific state laws are presented with a chart listing 26 states which mandate mental health insurance with their services, policies, and providers covered. The increased interest in mental health insurance by states and the private sector is discussed with implications for the future. A New Hampshire case study and references are included. (ABL)