Parity Law's Next Hurdle: Working Out Fine Print

The extent to which the recently enacted mental health parity law (PL 110-343) will expand access to mental health care nationwide will be impacted by the reaction of insurance companies and employers to how the law is implemented and any additional costs that might arise from the benefit (see Experts Disagree Over Future of MH Care Spending).

Mental health advocates including APA, who have battled to improve insurance coverage for psychiatric illnesses since the 1970s, achieved a substantial victory when the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 was signed by President George W. Bush in October. The law requires health plans that offer mental health coverage to have the same benefits, copayments, and treatment limits as other types of health care (Psychiatric News, October 17 and November 7).

“It took a long time to get Congress to learn that mental illnesses are no-fault illnesses and people who have them deserve help,” said Carolyn Robinowitz, M.D., immediate past president of APA.

Supporters said as many as 113 million people could have access to expanded mental health and substance abuse treatment coverage under the new law, which will fully take effect by January 1, 2010. That expansion stemmed from many rounds of protracted negotiations between mental health advocates and employer and insurance groups.

“Everyone involved in the negotiations got what they felt they could reasonably expect at this point,” said Nicholas Meyers, director of APA's Department of Government Relations.

The law's advocates overcame the early objections of many insurers and employer groups that were concerned that parity would increase premiums for all insurance holders. A critical development was the conclusion of the Congressional Budget Office that parity legislation would increase premiums for group health insurance policies by an average of only 0.4 percent.

A study led by psychiatrist Howard Goldman, M.D., Ph.D., and published in the March 30, 2006, New England Journal of Medicine also found that the provision of mental health parity coverage for federal employees under the Federal Employees Health Benefits (FEHB) program resulted in no statistically significant increase in spending (Psychiatric News, November 3, 2006). Goldman, a health policy expert, is a professor of psychiatry at the University of Maryland and editor of the APA journal Psychiatric Services.

“If business and insurance groups had been adamantly opposed, it would have been difficult, if not impossible, to get this passed,” Meyers said.

Among the provisions that employers and insurers demanded and got are ones that exempt businesses with 50 or fewer workers and allow plans to seek an exemption if an audit determines that parity causes costs to rise by more than 2 percent in the first year or more than 1 percent in any subsequent year. Another critical point was that the law would not define mental illness based on conditions listed in DSM, a provision included in the House-passed version of the bill last March.

The concerns of employers and insurers stemmed from research that had reached conflicting conclusions on parity's cost. Insurance industry observers have estimated that costs could increase between 2 percent and 3 percent, depending on the type of plan offered.

Regarding the impact on premiums, a study released in March 1998 by the Substance Abuse and Mental Health Services Administration (SAMHSA) estimated that parity limited to substance abuse treatment would raise premiums 0.2 percent, while parity for all mental health treatment would raise premiums by only 3.4 percent.

Conversely, other research had concluded that managed behavioral health care can restrain and often reduce mental health and substance abuse (MH/SA) treatment costs. A study by Samuel Zuvekas and colleagues published in the May/June 2002 Health Affairs examined the impact of a state mental health parity mandate on a large employer group and found that MH/SA treatment costs dropped 39 percent in the first three years, while managed care offset increases in demand stemming from parity coverage.

The 1999 Surgeon General's report on mental illness estimated to $70 billion annually as the direct business cost stemming from a lack of parity coverage of mental illness care. The costs mainly stemmed from lost productivity through absenteeism and “presenteeism” (employees come to work but their productivity is compromised by mental health problems) and an increased use of sick leave. Other studies have concluded that employees with inadequate psychiatric illness coverage tend to use many more general health care services.

Insurers will be carefully watching for cost increases, according to insurance industry consultants, which could lead to shifting more costs to consumers or downgrading all health benefits in a plan. A more remote possibility is that small, self-insured companies could drop mental health coverage rather than spend the money needed to bring mental health services in line with the law.

The new law also lacks parity coverage requirements for people insured through individual health plans.

Some of the law's specifics on what insurers must cover will be decided by federal regulators, who in the coming months will be promulgating specific language governing implementation of the law's provisions. The law states that health plans must provide to patients upon request the criteria used to determine whether a mental health procedure is “medically necessary.” Research by the National Alliance on Mental Illness concluded, however, that most insurance plans with mental health benefits will continue to cover “medically necessary services” for disorders in DSM.

“The legislation provides the skeleton, and the regulations provide the muscle and sinew,” Meyers said. “We will need our members to be very engaged in the regulatory process.”

Regulators also will have wide latitude in deciding how to interpret the law's cost-exemption provisions.

Regulators will define exactly how the federal parity requirements will wrap around existing state parity laws. As enacted, the federal measure establishes a floor of benefits while protecting stronger state mental health parity laws, including state coverage mandates. Until draft regulations are issued, it will remain unclear what specific provisions of various state laws will be overridden by the federal law, according to Meyers. The ultimate impact on state laws is expected to be a major source of discussion during the regulatory process, he said.

“The regulatory process will be very demanding and intense,” Meyers said. “We will keep members fully apprised because we will need their help” in urging strong parity protections during the public comment period on draft regulations.

APA President Nada Stotland, M.D., urged members to monitor the regulatory implementation and make sure it follows the spirit of the law.

“It's no time to relax,” she said.

The SAMHSA study, “The Cost and Effects of Parity for Mental Health and Substance Abuse Insurance Benefits,” is posted at<http://mentalhealth.samhsa.gov/publications/allpubs/Mc99-80/Prtyfnix.asp>. The NEJM study “Behavioral Health Insurance Parity for Federal Employees” is posted at<http://content.nejm.org/cgi/content/abstract/354/13/1378>. The Congressional Budget Office estimate is posted at<www.cbo.gov/ftpdocs/88xx/doc8837/hr1424ec.pdf>.▪