With their actuaries projecting a significant increase in healthcare costs to offer mental-health and substance-abuse coverage, the Screen Actors Guild dropped mental-health coverage for its members. Is that a harbinger of things to come?
I began a self-imposed holiday break on Dec. 23, 2010. I committed to family and friends that -- for one week -- I would stop working. No voicemail, no e-mail, no Twitter and no business-related reading.
I was scanning the Wall Street Journal before putting my laptop on hiatus when the headline jumped off the screen: "Law Prompts Some Health Plans To Cut Mental-Health Benefits."
Unconsciously, I screamed, "What?!" loudly enough that the gathered clan ran to see if the kids were OK.
I went on to read that almost 12,000 participants in the Screen Actors Guild health plan would lose access to mental-health and substance-abuse treatment -- including access to anti-depressants prescribed by primary care physicians -- in mid-2011.
According to the story, the move by the Guild was being made in response to and to circumvent the requirements of the Mental Health Parity and Addiction Equity Act, which was signed into law in 2008 and went into effect for many plans on Jan. 1 of this year.
As Bruce Dow, the chief executive of SAG's Producers Pension and Health Plans, told the Wall Street Journal, "We're not in a position to afford it."
I reflected on a personal memory after reading the article.
I had just started working in the disability insurance industry and was asked to help in a difficult claim situation.
Most long-term disability insurance policies contain a contract limitation known as the "24-month mental and nervous limitation." Basically, that provision entitles a claimant to no more than 24 months of LTD payments when the employee is out of work and being treated on an outpatient basis for mental illness or substance abuse. This stipulation is cumulative and applies for the life of the policy.
A claimant was about to reach his LTD "mental and nervous limit" and benefits were set to terminate. The former employee could no longer work and was only able to afford his living situation with the money he received from his LTD policy and Social Security.
Effectively, the termination of his LTD coverage meant he would have to find a new place to live and he was incapable of figuring that out. The claimant became so desperate that he began to threaten suicide.
We tried every option we knew, but no one would help. Ultimately, we convinced a caseworker from Adult Protective Services to agree to go to the claimant's home and assess him -- even though he didn't meet their traditional client definition.
I never forgot that employee, his situation or how difficult it sometimes is to get people with mental-health issues the help they need.
Dow said, in the closing sentence of the WSJ article: " . . . the plan will begin working with its members to help refer them to community-treatment options."
The challenge for Americans -- employees and others alike -- is that community mental-health programs across the country are significantly underfunded and have been for the last 30 years. SAG members will have a difficult time finding assistance.
The SAG decision stayed with me throughout Dec. 23. So, despite my commitment to remain work-free, I contacted two mental-health experts -- Ben Miller and David Ballard -- to discuss the impact of the SAG health-plan changes.
"As an employer, if you don't want to address mental health, then you're saying you want to pay more for healthcare," says Miller, an assistant professor at the University of Colorado-Denver School of Medicine.
"The cost to treat a patient with diabetes is approximately $4,000 per year and the cost to treat a person with diabetes and a mental-health issue costs about another $1,700 a year," Miller says. "In order to address the employee's full-person needs, you have to address both the physical and the mental components of health."
"Employers dropping mental-health coverage is still a rare occasion," Ballard says. "Only about 1.5 percent of employers dropped coverage. Others already met or adjusted coverage [to meet the mental-health-parity requirements]."
"It was surprising to see the analysis that was given to SAG," he notes. "Their actuaries projected the costs to equalize mental-health and substance-abuse coverage would double [their healthcare spend] -- while the Congressional Budget Office and PriceWaterhouse Coopers estimated premiums for group health insurance would increase by an average of 0.4 percent and less than 1 percent, [respectively]."
Ballard provided four points of advice for employers as they make the necessary adjustments to meet the Mental Health Parity Act's requirements:
1. Keep in mind that the direct financial impact of equalizing coverage is projected to minimally increase healthcare costs -- between 0.4 and 1 percent.
2. If your expenses are higher than anticipated, know there are safeguards in place. If your costs increase 2 or more percent in the first year and 1 percent in subsequent years, you can file for an exemption and adjust your benefits.
3. Consider the real-world experiences of entities that have gone before you. North Carolina, Texas and Ohio have had state-level parity for their employees for well over 10 years. Costs associated with these plans have decreased. Maine, which has had state-parity since 1996, has experienced less than a 1-percent increase in medical costs.
4. Watch for gains in key organizational performance metrics. Research indicates that business performance improves with mental-health parity. Absenteeism goes down and productivity increases.
Miller, whose wife was an HR executive, has this thought: "HR leaders are at the front line of recognizing what's going on in the heart of an organization and know how to provide the most accurate benefits for the population served.
"Realize that we have a healthcare system that is fragmented and we pay more to get less," he says. "HR leaders have the power to heal the divide."
Carol Harnett is a widely respected consultant, speaker, writer and trendspotter in the fields of employee benefits, health and productivity management, health and performance innovation, and value-based health. Follow her on Twitter via @carolharnett and on her video blog, The Work.Love.Play.Daily.
See related story: Employers Adjusting to Mental-Health Parity Act