Parity

Our November 2008 Policy Digest discusses recent changes in insurance coverage for substance abuse disorders. Private health plans have frequently provided less coverage for substance abuse and mental health treatment than is offered for other health care services. Parity exists when substance abuse and mental health treatment are covered in the exactly the same way as other medical care.

Why is Parity Important?

• Equity – Substance abuse and mental illness are treatable diseases. Health plan exclusions or limitations on coverage for these diseases are discriminatory and create health disparities.

• Cost Savings - When substance abuse and mental health services are not covered, the illness does not go away. A 2001 study conducted by Kaiser Permanente found that treating substance abuse reduced costs for these patients in emergency room and hospital utilization. Other studies on medical cost offsets that have shown alcohol and drug abusers have higher medical costs and receive more medical treatment before substance abuse treatment than after.

The Cost of Parity

• Cost is the most frequently mentioned reason for not instituting parity. The California Health Benefits Review Program (CHBRP) estimated that a parity bill introduced in 2008 (AB 1887-Beall) would increase annual health care expenditures by $104.43 million. However this represents a percentage increase of only 0.14%.

• The CHBRP estimated increases in premiums for private employers at 0.17% and increases in enrollee contributions at 0.23%. Per member per month premiums would range from $.34 to $1.66.