Parity is Coming
Parity is Coming | Human Resource Executive Online
Many employer groups -- particularly self-insured employers -- are concerned the Mental Health Parity Act may increase their healthcare costs. Even small percentage hikes can be daunting in this economic climate. Those most affected will be plans that now offer limited services or have high co-pays and deductibles.
By John Kamilis
The Paul Wellstone-Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 prohibits employers' health plans from imposing any caps or limitations on mental-health treatment or substance-use disorder benefits that aren't applied to medical and surgical benefits.
This legislation, also known as the Mental Health Parity Act, was passed as part of the $700 billion economic recovery package in October 2008. It goes into effect for plans with an effective date on or after Oct. 3, 2009.
Potential Financial Impact
This law is causing many employer groups, particularly those that are self-insured, to be concerned about the potential increases in their healthcare spend. In an era where the challenging economic climate is forcing most companies to reduce expenses wherever possible, even a small increase will not be met with open arms.
In 2008, the Congressional Budget Office estimated the act will "increase premiums for group health insurance by an average of about 0.4 percent." According to the National Business Group on Health, treatment for mental illness and substance abuse in 2001 totaled $104 billion, which is less than 8 percent of the $1.4 trillion spent on overall healthcare in the United States.
On an employer-by-employer basis, the financial impact of the act can be evaluated by considering two factors: the current level of mental-health and substance-abuse coverage; and the percentage of covered members reaching the current treatment limits.
Plans that have comprehensive mental-health and substance-abuse benefits in place already will be less likely to experience an increase in costs than plans that offer limited services or have high co-pays and deductibles.
Plans that have an unusually high percentage of members with acute mental-health and substance-abuse claims are also more likely to see an increase than plans with a low percentage of acute claims.
In short, companies that provide mental-health and substance-abuse services whose plans currently do not provide parity, or near-parity, should expect an increase at or above the level estimated by the CBO.
History of the Act
Up until the mid-to-late 1990s, health plans typically supplied modest mental-health and substance-abuse benefits, if they provided any at all. The vast majority of plans that did include mental health and substance abuse coverage capped the annual and lifetime dollar limits and imposed separate deductibles and coinsurance rates, compared to general medical benefits.
Because there was no federal parity mandate, states began passing "one-off" parity laws. Unfortunately, the state laws only applied to fully insured contracts. From a federal perspective, the hurdle to applying parity to self-insured plans was the Employee Retirement Income Security Act.
ERISA limited the application of state-insurance laws to an employee-benefit plan at the employer level. A self-insured ERISA plan was not required to comply with state-parity legislation and, as expected, most plans did not.
The first Mental Health Parity Act that was passed in 1996 amended ERISA and forced plans that offered mental-health benefits to provide parity with regard to annual and lifetime dollar limits only.
However, because the 1996 act allowed limits to be placed on inpatient days and outpatient visits for mental-health services, it was deemed to be relatively ineffective. Furthermore, the 1996 iteration of the act only covered mental-health diagnoses and omitted parity for substance-abuse services.
Cost-sharing mechanisms, such as deductibles and co-pays, were also still acceptable, as well. The response from most plans was to develop limits on inpatient days and outpatient visits, which provided a de facto limit on dollar amounts and circumvented the spirit of the act altogether.
Proponents wanted "true" parity between mental-health and substance-abuse coverage and general medical coverage, which was the intent (but not the result) of the 1996 act.
In late 2008, the latest iteration of the Mental Health Parity Act was passed as part of the economic-stimulus package. This version, unlike the previous federal law, applies to both mental-health and substance-abuse services.
It forces plans that offer mental-health and substance-abuse coverage to provide parity with respect to financial requirements (deductibles, coinsurance, co-payments, etc.) and treatment limits (inpatient days, outpatient visits, etc.). It also requires all out-of-network coverage for mental-health and substance-abuse services to be consistent with out-of-network coverage for general medical benefits.
The 2008 law is not without its limitations. The latest iteration still does not mandate that health plans offer mental-health and/or substance-abuse services and, assuming these services are offered, it allows the plan to define which diagnoses will be covered.
It does contain a couple of exemptions. An unrealistic exception is available for employers who can actuarially demonstrate that the act has caused a cost increase (applied to all health benefits) of 2 percent or more after six months of experience. In addition, employers with 50 or fewer employees are exempt from the law.
Plan Design
According to the Employee Assistance Professionals Association, more than 90 percent of employer-sponsored health plans include coverage for mental-health and substance-abuse services. Companies that opt to maintain their coverage for these services will lean heavily on their employee-assistance-program providers to play an important role in cost containment and risk avoidance.
Should employers and plans opt to maintain their mental-health and substance-abuse benefits, EAPs can enhance the program by providing "gate keeping" and case-management services that will help prevent any significant cost increases.
The gate-keeping function will allow the EAPs to act as a first stop for all mental-health and substance-abuse cases. Nearly 90 percent of such cases require non-medical outpatient care, according to a recent study by CuraLinc Healthcare.
Depending on the EAP session model, the majority of these issues can be resolved within the framework of the program. For acute conditions requiring inpatient care, an intensive outpatient program, long-term outpatient care or medication management, the EAP clinician will act as an advocate for the member by guiding them to the most appropriate in-network resource and working with the network provider to ensure the best treatment and after-care plan.
Employers and plans that decide to eliminate mental-health and substance-abuse coverage altogether face a variety of direct and indirect risks. While many short-term counseling needs will still be resolved within the EAP, there is no mechanism in place to address acute conditions.
Many high-risk mental-health and substance-abuse conditions will go untreated, which may lead to absenteeism, workplace accidents and, potentially, disability claims. Emergency-room visits will increase, as members may opt for the ER for detoxification or psychiatric conditions that would have otherwise been addressed within the less-expensive mental-health and substance-abuse components of the plan.
Finally, members may turn to their medical benefits to offset the lack of mental-health coverage by seeing a general practitioner for behavioral-medication prescriptions. Over-treatment and misdiagnosis, which is common when GPs prescribe psychotropic medication, may lead to higher prescription-drug claims and a drop in productivity.
The Mental Health Parity Act forces employee-assistance-program providers to take an active role in cost containment and member advocacy for their clients. With the proper plan design and service provider, these programs can provide their members with a higher level of service at a lower cost to the client organization.
John Kamilis, MA, LCPC, is the director of clinical services with
CuraLinc Healthcare
, a suburban Chicago-based national provider of employee-assistance and wellness programs. For more information, visit www.curalinc.com/parity.htm or call 800-490-1585.
June 15, 2009 Copyright 2009© LRP Publications
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