State Parity Law Doesn't Cause Health Care Costs to Head Upward

If Oregon's experience is any indication, parity coverage of treatment for mental illness and substance abuse will not "break the bank."

An analysis appearing online in AJP in Advance on September 2 found that increases in spending on mental health and substance abuse services after implementation of Oregon's parity law in 2007 were associated with a general trend toward increasing costs observed among individuals with and without parity, and so could not be associated with parity itself.

That's important because Oregon's parity law—alone among the states—mirrors the federal parity law by prohibiting the use of "nonquantifiable treatment limits (NQTLs) unless they are also applied to general medical and surgical services." NQTLs are distinct from quantitative treatment limitations that can be measured numerically—such as annual and lifetime dollar limits and limits on office visits per year—and refer to a range of practices that have been used to manage behavioral health care costs (see Why Is Oregon Study Important?).

Such practices include medical management standards, prescription drug formulary design, standards for provider admission to networks, fail-first policies or step-therapy protocols, and benefits conditioned on completion of a course of treatment.

The analysis showing no increase in cost related to parity indicates that the same is likely to be true of the federal parity law. "The take-home message is that Oregon's parity law, which is pretty restrictive on what managed care companies can do to limit access to care, didn't [lead to] large increases in spending," said John McConnell, Ph.D., of the Oregon Health and Sciences University. "For people who care about parity and who are concerned about costs, it doesn't look like parity is going to drive costs up."

In the study, McConnell and colleagues compared expenditures for commercially insured individuals in four Oregon health plans from 2005 through 2008 and a matched group of commercially insured individuals in Oregon who were exempt from parity. Using statistical analyses, the authors analyzed the effect of comprehensive parity on spending for mental health and substance abuse services.

Among the four plans studied, none required preauthorization for outpatient mental health or substance abuse services after the implementation of parity. Only two of the four preferred provider organizations (PPOs) required treatment plans for outpatient mental health services, and only one PPO required treatment plans for outpatient substance abuse services. Nonetheless, there was considerable variation in the extent to which plans attempted to manage the behavioral health benefits, and compliance and interpretation of the parity law were inconsistent across plans, according to the authors.

McConnell and colleagues found that increases in spending on mental health and substance abuse services after implementation of Oregon's parity law were almost entirely the result of a general trend observed among individuals in plans with and without parity. Expenditures per enrollee for mental health and substance abuse services attributable to parity were positive, but they did not differ significantly from zero in any of the four plans.

The overall estimate of the effect of parity on total behavioral health spending was moderate, ranging from $12 to $26 per year and did not differ significantly from zero. Furthermore, the increases in spending were not necessarily smaller for plans that required treatment plans or carved out behavioral health care.

At the same time, parity in Oregon did help to decrease out-of-pocket costs for people who used mental health and substance abuse treatment services. In two of the four plans, parity was associated with a small but statistically significant decrease in out-of pocket spending, according to the authors.

Howard Goldman, M.D., who has published several studies of the economic effects of parity, told Psychiatric News that the current analysis is important because of the similarity of Oregon's law to federal parity rules with respect to NQTLs.

"The findings are also similar to the findings from the parity study of the Federal Employees Health Benefits Plan in terms of no increase in costs, but also no increase in utilization attributable to parity," said Goldman, who is also editor of Psychiatric Services. "Based on these findings, it appears that managed care can be applied in a fashion that is not more restrictive than management of med/surg care and still control utilization and costs."

He added, "But though parity may not have increased use or costs, it did reduce out-of-pocket costs—which is the main purpose of the parity legislation—and did increase financial protection for individuals who need and use services, which is the purpose of insurance."