Many self-insured employers are concerned the Mental Health Parity Act may increase their healthcare costs. Currently, those most affected will be plans that now offer limited services or have high co-pays and deductibles. The legislation, known as the Mental Health Parity Act, was passed as part of the $700 billion economic recovery package in October 2008. It goes into effect for plans with an effective date on or after Oct. 3, 2009. In an era where the challenging economic climate is forcing most companies to reduce expenses wherever possible, even a small increase will not be met with open arms.

In 2008, the Congressional Budget Office estimated the act will increase premiums for group health insurance by an average of about 0.4%. According to the National Business Group on Health, treatment for mental illness and substance abuse in 2001 totaled $104 billion, which is less than 8 percent of the $1.4 trillion spent on overall healthcare in the United States.

Plans that have comprehensive mental health and substance abuse benefits in place already will be less likely to experience an increase in costs than plans that offer limited services or have high co-pays and deductibles.

Until the late 1990s, the vast majority of plans that did include mental health and substance abuse coverage capped the annual and lifetime dollar limits and imposed separate deductibles and coinsurance rates, compared to general medical benefits. Since there was no federal parity mandate, states began passing their own parity laws. A self-insured ERISA plan was not required to comply with state-parity legislation and most didn’t.

The first Mental Health Parity Act that was passed in 1996 amended ERISA and forced plans that offered mental health benefits to provide parity with regard to annual and lifetime dollar limits only. However, because the 1996 act allowed limits to be placed on inpatient days and outpatient visits for mental-health services, it was deemed to be relatively ineffective. Proponents wanted “true” parity between mental health and substance abuse coverage and general medical coverage, which was the intent of the 1996 act.

The 2008 Act forces plans that offer mental-health and substance-abuse coverage to provide parity with respect to financial requirements (deductibles, coinsurance, co-payments, etc.) and treatment limits (inpatient days, outpatient visits, etc.). It also requires all out-of-network coverage for mental-health and substance-abuse services to be consistent with out-of-network coverage for general medical benefits.

Over 90% of employer-sponsored health plans include coverage for mental-health and substance-abuse services. Employers and plans that decide to eliminate mental-health and substance-abuse coverage altogether face a variety of direct and indirect risks. Many high-risk mental-health and substance-abuse conditions will go untreated, which may lead to absenteeism, workplace accidents and, potentially, disability claims. Emergency-room visits will increase, as members may opt for the ER for detoxification or psychiatric conditions that would have otherwise been addressed within the less-expensive mental-health and substance-abuse components of the plan.

Members may turn to their medical benefits to offset the lack of mental-health coverage by seeing a general practitioner for behavioral-medication prescriptions. This may lead to higher prescription-drug claims and a drop in productivity.

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This entry was posted by Adam V. Russo on Friday, June 26th, 2009 at 3:38 pm and is filed under Mental Health Parity. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.