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The mental health parity will take effect January 1, 2010. The new legislation requires employer-sponsored health insurance with behavioral health benefits to ensure equality between physical and mental health treatment in copayment, coinsurance, deductible, out-of-pocket expense, and days of coverage, frequency of visits, and frequency of treatment. However, the legislation does not apply to health insurance plans offered by employers with 50 or fewer employees or to health insurance plans that provide no behavioral health benefits. Plans that experience a cost increase attributable to parity of more than two percent in the first year or one percent in subsequent years can obtain a short-term exemption that must be re-established regularly and supported by actuarial data.
The legislation affects health insurance plans provided by employers with 51 or more employees and self-funded plans regulated under the Employee Retirement Income Security Act. The plans must ensure equality of out-of-network benefits for mental health and addiction treatment services and equality in treatment limitations and financial requirements. The parity provisions only apply to insurance plans that provide mental health coverage. Plans that experience a cost increase of more than 2% in the first year, or 1% in subsequent years, will be able to apply for an exemption.
What will the parity legislation mean for the field? It will be immense. Consider:
* Limited benefits for mental health and addiction treatment cause this niche of the health care field to be unattractive to health care provider organizations.
* People with addictions and mental illnesses leave their places of employment in order to become eligible for Medicaid and eligible for treatment benefits because they either do not have employer-sponsored health insurance or their insurance coverage for their behavioral disorders is inadequate.
* Health insurers create benefit plan designs with very limited mental health and addiction treatment benefits, which result in cost shifting to the consumer or state or county governments.
* Lack of availability of mental health and addiction treatment causes “miscoded” service delivery in many other systems — primary care, child welfare, juvenile corrections, and more.
* Inadequate addiction treatment and mental health benefits create overutilization of emergency rooms. (More clinical crises result from lack of timely, appropriate treatment — and emergency rooms are the only treatment site for most of those folks.)
* Our prisons are populated with untreated, undertreated, and ineffectively treated people with behavioral disorders.
* Limited benefits for mental health and addiction treatment make this niche of health care unattractive to investments dollars — in software and systems, in clinical technologies, and in facilities.Overall, the major industry effect of the parity legislation is that mental health and addiction treatment spending in the health and human services system — currently distributed in miscoded general health care spending in primary care and emergency rooms and pushed to the social service system — will be correctly classified as spending on treatment for behavioral disorders. This will have a number of key market effects. First, the parity legislation will change how we account for health care spending resulting from behavioral disorders. A number of actuaries predict that the health insurance premiums will rise 1% to 2% in total as a result of the parity legislation. This translates into a 30% increase in mental health and addiction treatment spending within health plans affected by the legislation (assuming a national average premium for treatment of behavioral disorders of 6.2% of total health plan spending).
The increase in funding for treatment of mental illnesses and addictions brought about by parity will make the treatment of these disorders attractive to a wide range of provider organizations and health care systems. For consumers, this will be a boon — more choices from a wider range of treatment providers. Look for a reversal in the current trends for community hospitals to abandon psychiatric programs. However, for current specialty provider organizations, this change will mean more competition for consumers.
More people with mental illnesses and addictive disorders will stay in the workplace and employed — though these market effects will be limited by the bill’s provision exempting self-funded health plans (which includes most large employer plans). The combination of the newly-expanded Americans with Disabilities Act, better treatment tools, and equity in treatment benefits mean that more treatment will occur in the employer-sponsored health plans than ever before. This will take some of the pressure off of state and county mental health and substance abuse budgets, which have been the recipients of planned cost shifting from health insurance plans.
All of these changes to the delivery system resulting from the market effects of parity will likely increase the integration of the treatment of mental illnesses and addictions into the primary care system. As primary care provider organizations see the ability to provide treatment services that are reimbursed by insurers, their interest in integrating these services into their practices will increase.
The parity legislation should have positive effects–lower spending– on budgets for hospital emergency rooms, child welfare agencies, and the juvenile and adult corrections systems. It will take at least five years to see these shifts in service utilization due to lack of access to treatment — but they are likely to happen over time.
With these changes in the field, we should see an increase in investment dollars in areas focused on treatment of mental illness and addiction treatment. This area of health and human services has been capital deprived due to the very correct perception that the field had lots of demand but limited payment for treatment services. There should be increasing capital available for biotechnology, software, and facilities focused on behavioral health disorders.
For provider organizations with large portions of their budget dependent on “safety net” types of funding (state block grants, federal program grants, etc.), look for a reduction in “safety net” funding specific to mental health and addictions — with an increase in safety net funding for the uninsured in general.
