Volume 9 - August 5, 2009

Mental Health Parity: A Great Opportunity

An opinion piece by

Stephen P. Melek, FSA, MAAA

Steve is a principal and consulting actuary with the Denver office of Milliman. Steve has advised HMOs, PPOs, managed care organizations, behavioral healthcare firms and associations, insurance companies, employers, hospitals, physician groups, PHOs, and state insurance companies.   He currently serves on IHPM's Behavioral Health Workplace Center Advisory Board.    More on Mr. Melek at the end of this article.

The Troubled Asset Relief Program (TARP) was not just a bailout of the banking system; it also contained an amendment that is bringing about major changes in the world of health insurance.

Who is Affected?

The new rules apply to any group health or self-insured plan covering more than 50 employees and require coverage of mental health and substance use disorders on par with medical and surgical benefits. This means that deductibles, copays, cost sharing, out-of-pocket limits, and treatment limits must be the same for any behavioral disorders that the plan or employer chooses to cover as they are for physical conditions.

Plans and employers can choose which disorders to cover; they are not required to cover the entire spectrum of illnesses identified by the American Psychiatric Association in the DSM-IV (Diagnostic and Statistical Manual of Mental Disorders). The rules will take effect during annual plan renewals beginning on or after October 3, 2009.

The law does include a cost-based exemption. If the new parity provisions raise the total costs of any group health plan by 2% or more in the first year (and 1% in following years), the plan can seek a one-year exemption. However, these cost increases are likely to be the exception rather than the rule.

An Opportunity for Effective Investment in Mental Health

Huge opportunities exist to continue to improve mental healthcare -- in both clinical and financial terms. Consider the following:

    Diagnosable behavioral disorders are prevalent in about 1 in every 4 Americans in any given year.
    In any year, only 10% of those suffering from such disorders receive treatment from behavioral specialists; one-third seek treatment from primary care providers, while the rest go untreated (though many seek treatment for physical symptoms of these disorders).
    Untreated behavioral disorders result in significant amounts of symptomatic treatment by primary care physicians (PCPs). Depression first manifests itself as pain in 80% of cases, and many PCPs spend numerous office visits treating patients looking for symptomatic relief from pain. A direct correlation exists between increasing numbers of physical symptoms and the likelihood of psychological disorders, and PCPs are ill-equipped to identify and treat these disorders.
    PCPs prescribe the vast majority of all psychotropic drugs, but such treatment is at best minimally adequate in only 13% of these treated cases (even though the use of psychotropic drugs can be highly effective in treating these disorders). 
    When behavioral disorders are co-morbid with chronic or severe physical conditions, the costs of the physical conditions are greatly increased. Members with such co-morbid conditions incur very large healthcare costs.
    When patients needing treatment get help from specialists, treatment effectiveness is greatly improved. 
    New innovations in medical-behavioral integration, preventive care, lifestyle management, and proactive identification of members needing mental health treatment are showing great promise, both clinically and financially.

    While limited behavioral healthcare benefits have historically been available in most benefit plans, the clinical and financial outcomes have been far from optimal. No one would argue that the results described above are desirable. They are largely a result of what we have created—an environment where behavioral conditions are still stigmatized, where hurdles, both in terms of cost and access, exist for obtaining specialized treatment, where primary care treatment is regularly preferred yet ineffective, and where psychotropic drugs are overused and ineffectively managed.

    Now is a great opportunity to make changes for the better. Making an investment in more effective behavioral healthcare is an opportunity to improve not only mental health but also physical health in our insured populations. Such health improvements can lead not only to lower healthcare costs, but greater productivity, fewer sick days, and lower disability costs for employers. While there is no guarantee such an investment will lead to reduced costs, the emerging evidence suggests that this is the case.

    NOTE: Recent Milliman estimates put the industry-wide cost impact of parity at 0.1%, if health plans increase their utilization management (UM), and 0.6%, if plans continue with current levels of UM. These estimates do not consider the potential cost offsets from reduced demand for other health services once behavioral illnesses are treated.

    Steve is a principal and consulting actuary with the Denver office of Milliman. He joined the firm in 1990. His areas of expertise include healthcare product development, management, and financial analyses. He has worked extensively in the behavioral healthcare specialty field. He has worked with many managed behavioral healthcare organizations, parity issues and cost analyses, mental health utilization and costs in primary care settings, psychotropic drug treatment patterns, and strategic behavioral healthcare system design.

    IHPM’s web site is located at www.ihpm.org.

    If you are interested in contacting Stephen P. Melek contact Deborah Love at deborah@ihpm.org or call 480.305.2100.

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