State Health Lawmakers' Digest: Mental Health Parity (Vol. 1, No. 2), In the Abstract

IN THE ABSTRACT

EFFECT OF PARITY LAWS
COSTS OF NEW COVERAGE
STUDIES IN STATES
OTHER STATE STUDIES

The Costs and Effects of Parity for Mental Health and Substance Abuse Insurance Benefits

STUDY AND RESULTS This report presents findings on the costs and effects of providing parity for mental and substance abuse (MH/SA) benefits.

FINDINGS Since 1994, at least 40 states and the U.S. Congress have considered mental health and substance abuse parity bills. The federal Mental Health Parity Act of 1996 imposed the first national minimum benefit standard for mental health benefits on employer-sponsored health insurance.

WHAT'S IMPORTANT This analysis of state MH/SA parity laws and case studies in five states (Maryland, Minnesota, New Hampshire, Rhode Island and Texas) found that most parity laws are limited in scope or application. State parity laws have had a minimal effect on premiums. Employers have not attempted to avoid parity laws by becoming self-insured, and they do not tend to pass the costs of parity to employees. Costs for MH/SA services have not shifted from the public to the private sector.

FIND THIS STUDY The Costs and Effects of Parity for Mental Health and Substance Abuse Insurance Benefits, by Merrile Sing, Steven Hill, Suzanne Smolkin and Nancy Heiser can be accessed electronically at http://www.mentalhealth.org. For additional copies of this document or associated background reports, write or call the Knowledge Exchange Network, 11426-28 Rockville Pike, Suite 405, Rockville, MD 20852, (800) 790-2647.

Mental Health Parity Act: Despite New Federal Standards, Mental Health Benefits Remain Limited

STUDY AND RESULTS This report presents findings of a survey sent to employers in the District of Columbia and 28 states that were identified as having mental health parity laws similar to the federal law or that were mandated to follow the federal act because no state law was in effect.

FINDINGS Eighty-six percent of the responding employers reported that, as of December 1999, their plans were in compliance with the federal parity requirement that annual and lifetime dollar limits for mental health benefits be no more restrictive than those for all medical and surgical benefits. However, 87 percent of the employers reporting compliance include in their plans at least one other plan design feature that is more restrictive for mental health benefits than for medical and surgical benefits.

WHAT'S IMPORTANT Mental health restrictions commonly found in private health insurance plans are 1) lower service limits---such as the number of covered hospital days or outpatient office visits---for mental health benefits, and 2) higher cost-sharing features, such as deductibles, copayments, or coinsurance for mental health benefits.

FIND THIS STUDY Mental Health Parity Act: Despite New Federal Standards, Mental Health Benefits Remain Limited, by the United States General Accounting Office (GAO/HEHS-00-95, May 2000).

COSTS OF NEW COVERAGE

Mental Health Parity Legislation: Much Ado About Nothing?

STUDY AND RESULTS Rosalie Liccardo Pacula and Roland Sturm examined the effects of state parity legislation on the utilization of mental health services. The researchers first identified factors such as state demographics, the supply of medical and mental health providers, and the existence of other health mandates that make a state more or less likely to enact parity legislation. They then evaluated the effects of parity legislation (both comprehensive and limited forms of parity) on the utilization of mental health services.

FINDINGS The study determined that parity legislation at the state level is not associated with a significant increase in the utilization of mental health services.

WHAT'S IMPORTANT States that can pass parity legislation (either comprehensive or limited) do not experience a significant increase in the use of mental health services among the privately insured. However, in states with comprehensive parity legislation, there is a slight increase in the utilization of services among those in poor mental health.

FIND THIS STUDY Mental Health Parity Legislation: Much Ado About Nothing? originally was published in Health Services Research, 35, 1 (Part II, 2000), pp. 263-275 and was reprinted in 2000 by RAND Health. To order, contact Distribution Services: Telephone (310) 451-7002; Fax (310) 451-6915; Internet: order@rand.org.

How Expensive Is Unlimited Mental Health Care Coverage under Managed Care?

STUDY AND RESULTS Roland Sturm of the RAND Corporation looked at data from 24 newly formed fee-for-service managed care companies that offered generous mental health benefits with no annual or lifetime limits. Sturm found that providing unlimited benefits would be more expensive by about $1 per enrollee per year than setting a $25,000 annual limit. Similarly, plans with benefit limits of 30 inpatient days and 20 outpatient visits cost only about $7 per enrollee per year less than those plans would be without limits.

WHAT'S IMPORTANT Previous estimates of the cost of parity showed effects that were four to eight times higher than these figures. Although enrollees may use mental health services more often under plans with mental health parity, the additional expense of greater use may be offset by an enrollee's improved physical health.

FIND THIS STUDY How Expensive Is Unlimited Mental Health Care Coverage Under Managed Care? (RAND/RP-659), published in 1997 by RAND, can be ordered free of charge by calling (310) 451-7002. Alternatively, this document was printed in the November 12, 1997, issue of The Journal of the American Medical Association (Vol. 278, no. 18, pp. 1533-1537).

How Expensive Are Unlimited Substance Abuse Benefits under Managed Care?

STUDY AND RESULTS Roland Sturm, Weiying Zhang and Michael Schoenbaum studied utilization in 25 managed care plans with unlimited substance abuse benefits. The authors calculated that removing a $10,000 annual limit on substance abuse benefits would result in a cost increase of 6 cents per member per year, and removing a $1,000 limit would merit an increase of $3.39 per member per year.

WHAT'S IMPORTANT The study suggests that the cost increases associated with substance abuse parity would not be high, although it also projects that substance abuse parity would be more expensive for health plans than mental health parity because most substance abuse patients require more intensive treatment than most patients who seek mental health care.

FIND THIS STUDY How Expensive Are Unlimited Substance Abuse Benefits Under Managed Care? (RAND/RP-782), published in 1999 by RAND, can be ordered free of charge by calling (310) 451-7002 or visiting http://www.rand.org/organization/health/healthpubnav.html. It also was published in The Journal of Behavioral Health Services & Research (Vol. 26, No. 2, May 1999, pp. 203-210).

STUDIES IN STATES

Study of Proposed Mandated Additional Mental Health and Alcohol and Drug Abuse Insurance Benefits

STUDY AND RESULTS Marion M. Higa, the Hawaii state auditor, evaluated the social and financial effects of mandating mental health and substance abuse services parity in 1997. Higa found that fewer than 5 percent of those insured by a sample of the state's largest insurers use mental health or substance abuse benefits in a given year and, of those, fewer than 7 percent ever reach benefit limits. Public demand for parity also was low, as evaluated by communications with five labor unions. The report did not evaluate the potential financial effects quantitatively, and the auditor noted that analysts she consulted had vastly conflicting views about whether parity would increase or decrease costs.

WHAT'S IMPORTANT The author found that need and demand were not significant enough in Hawaii to warrant mandating parity.

FIND THIS STUDY Study of Proposed Mandated Additional Mental Health and Alcohol and Drug Abuse Insurance Benefits, State Report 97-19. Contact the Hawaii State Auditor's Office, 465 South King Street, Room 500, Honolulu, HI 96813, or call (808) 587-0800.

OTHER STATE STUDIES

Actuarial analyses of comprehensive mental health and substance abuse parity and other options for improved coverages are available for Vermont, Georgia and Massachusetts. To obtain the studies of Vermont and Georgia, contact Coopers and Lybrand, Ronald E. Bachman, Principal at (404) 870-1388.

For the study of Massachusetts, contact the American Psychological Association at (202) 336-5500, or Ronald E. Bachman at (404) 870-1388.

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