Parity

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 require 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.

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Federal Parity Legislation

Subtitle B of H.R. 1424, the Federal Emergency Economic Stabilization Act is titled the, "Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008." This act implements longstanding congressional efforts to correct inequities in insurance coverage for mental health and substance abuse disorders. The Act establishes parity standards that address factors above and beyond the annual and lifetime limits addressed in the Mental Health Parity Act of 1996. Over 100 million persons will benefit from these changes in law.

 

Key provisions of the Act are the following –

• Group health plans that provide both medical and surgical benefits and mental health or substance use disorder benefits must ensure that financial requirements such as deductibles, copayments, coinsurance, and out-of-pocket expenses are no more restrictive than those applied to other health care benefits covered by the plan.

 

• There can be no separate treatment limitations that are applicable only with respect to mental health or substance use disorder benefits. Treatment limitations include limits on the frequency of treatment, number of visits, days of coverage, or other similar limits on the scope or duration of treatment.

 

• If the plan provides coverage for medical or surgical benefits provided by out-of-network providers, mental health or substance use disorder benefits shall be similarly covered.

 

• The bill does not mandate that plans provide substance abuse or mental health benefits. However, plans will not be able to impose caps or other conditions on behavioral healthcare services that are different from those applied to other health services.

 

• An exemption is provided for small employers, that is, those with 50 or fewer employees. The bill does not exempt small employers from any applicable requirements contained in state parity laws.

 

• Health plans cannot permanently opt out of compliance with the parity standard. There is however, provision for a one-year exemption in the event costs of coverage exceed 2% of total plan costs in the first year or 1% of such costs in any subsequent year.

 

• The law goes into effect in October 2009. However, since coverage under many insurance policies is based on a calendar year many people will not see a change in their plans until 1 January 2010.

 

• The law requires that the reasons for any denials of reimbursement for mental health or substance abuse disorder benefits are available to participants and beneficiaries upon request.

 

• A small but gratifying detail is that the act, in amending and expanding the provisions of the Mental Health Parity Act of 1996 replaces the term “mental health benefits” with the more explicit reference “mental health and substance use disorder benefits”.