Mental Health Parity Studies

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Mental Health Parity Studies

    Mental Health Parity Studies A Summary of Findings

    Study/Authors/State Findings

    Federal Employees Health Benefits Researchers examined results of the elimination of caps on mental health coverage by health plans in the Federal Program/Howard Goldman, M.D., Employees Health Benefits Program (FEHBP) in 2001. The plans used managed care restrictions on mental health University of Maryland School of Medicine coverages. The researchers compared claims data from random samples of 20,000 members in each of seven FEHBP

    et. al. (Reported in New England Journal health plans submitted two years before and two years after the elimination of the caps. In addition, researchers

    of Medicine, March 2006) examined claims data from a matched comparison group of members in health plans offered by large private employers

    that did not eliminate the caps. According to the study, the proportion of participants in FEHBP health plans who used

    mental health services increased from 1.35 percent to 2.75 percent of members in the two years after the elimination of

    the caps. However, use of mental health services also increased among participants in private health plans. In addition,

    the study found that, although spending for mental health services increased among participants in FEHBP health plans,

    the increase was similar to that for participants in private plans and "was not attributable to the requirement for parity.

    Researchers attributed the increased spending for mental health services to inflation and increased use of services. The

    study also found that out-of-pocket spending for mental health services for participants in all but one of the FEHBP health

    plans decreased after the elimination of the caps, with individual savings that ranged from $8.78 to $87.06 annually. The

    researchers concluded that the “HMO-like care management ... appeared to be an important element in controlling

    spending" and "a reduction in co-payments and other out-of-pocket charges to patients means that insurance premiums

    might increase slightly. Study co-author Richard Frank, a health care economist from Harvard University, estimated the

    potential increase in health insurance premiums at less than half of 1%.

    Substance Abuse and Mental Health Mathematica Policy Research Institute conducted four analyses for SAMHSA: a comparison of state parity laws; a case Services Administration [SAMHSA], study of analyses in five states with parity laws to determine the early experiences of key stakeholders (representatives

    Department of Health and Human from 47 organizations in the study states, including insurers, employers, employer associations, and insurance Services, March 1998 (Study Conducted regulators); a review of actuarial studies conducted in 1995 and 1996 of the costs of federal parity legislation; and

    by Mathematica Policy Research development of an updated actuarial model to predict the costs of several full and partial parity benefit options. The

    Institute) study concluded that under an HMO-administered plan, parity in cost sharing would increase average premiums

    by .3%, parity in service coverages would increase average premiums by .2% and full parity would

    increase average premiums by .6%. The study also found that parity laws seemed to have had only a small

    impact on premiums, with increases particularly limited in plans using managed care.

    Mercer/Foster Higgins, National Survey of A nationwide survey by Mercer/Foster Higgins benefit consultants found that as a result of tighter management of mental

    Employer-Sponsored Health Plans (Meta health and substance abuse benefits, mental health and substance abuse spending had dropped to 3 percent of Analysis), 1997 employers' total medical plan outlays in 1997, compared to about 10 percent in 1988.

    Congressional Budget Office, 1996 The Congressional Budget Office, which had forecast a 4 percent increase for the original broad Domenici-Wellstone

    proposal, estimated that the finally enacted law would result in a cost increase of only four-tenths of 1 percent.

    Moreover, it said, after many employers reduce other mental health benefits to compensate for the cost of removing the

    dollar ceilings, the law would increase employer costs only sixteen hundredths of 1 percent.

    Alan L. Otten, Milbank Memorial Fund, Otten reported on parity findings in three states. A Rhode Island behavioral managed care company claimed its costs

    June 1998, Rhode Island, Maryland, increased less than 25 cents per member per month, and state officials estimated mental health costs rising

    Minnesota overall only one third of 1 percent. In the first year that Maryland's parity law was in effect, one managed care

    company saw a small increase in costs; costs fell back the second year to the pre-parity level; and another

    Maryland company reported increased costs of less than 1 percent. When the Massachusetts Group Insurance

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    Mental Health Parity Studies A Summary of Findings

    Study/Authors/State Findings

     1993 put in a managed behavioral health care carve-out for state employees, it removed annual Alan L. Otten, Milbank Memorial Fund, Commission in July

    dollar limits on outpatient care and reduced the co-payments required from workers - in the first year, outpatient costs June 1998, Rhode Island, Maryland,

    dropped 20 percent. In Minnesota, which mandates parity on co-payments, deductibles, and other insurance elements Minnesota

    as well as on lifetime limits and which also covers substance abuse, there were no significant increase in premiums

    since parity went into effect. In the year after the parity law went into effect, a major Minnesota health plan said the

    parity law would increase premiums only 26 cents per member per month, and the Minnesota Department of

    Employee Relations put the cost of the mandate at only a 1 percent to 2 percent increase in premiums for state

    employees. Costs of Mental Health Parity, Colleen L. The researchers concluded that newer evidence suggests thatcost control techniques associated with managed care give Barry, Richard G. Frank, and Thomas G. healthplans alternatives to discriminatory coverage for containingcosts. They reviewed various research on mental McGuire, Health Affairs, Vol. 25, No. 3, health insuranceand concluded that comprehensive parity implemented in the contextof managed care would 2006 have little impact on total spending.

    Roland Sturm et al, RAND-UCLA The researchers evaluated the 1995-96 experience of 24 managed behavioral health care plans with 140,000 enrollees Research Center on Managed Care for and found that the federal law's removal of dollar ceilings would increase costs only $1 per enrollee per year for a

    Psychiatric Disorders, Journal of the plan with a $25,000 annual limit and $4 a year for a plan with a low $10,000 annual limit. Even removing all limits on American Medical Association, Vol. 278, the number of inpatient days and outpatient visits would bring a cost increase of only $7 per enrollee per year in a 1997 managed plan that had no deductible and minimal co-payments.

    National Advisory Mental Health Council A 1998 study sponsored by the National Advisory Mental Health Council (NAMHC) Parity Workgroup, a division of the

    (NAMHC), National Institute of Mental federal National Institute of Mental Health, estimated that mental health parity would add less than 1 percent to the Health, 1998 cost of a health insurance policy for an HMO. Another analysis requested by the NAMHC Workgroup looked at the

    effects of a state mental health parity mandate (in conjunction with carve-out managed care) for a large employer group.

    Costs per member were reduced by 39% from pre-parity to the third year of parity, and the portion of the

    population receiving mental health services increased. Costs dropped by 9% between Year 1 and Year 4 for

    adults, and by 75% for dependent children, mostly because of decreases in pediatric inpatient stays.

    Agency for Healthcare Research and Using a managed care "carve-out" arrangement to provide equal coverage for mental health services did not raise costs

    Quality, Samuel H. Zuvekas et. al., 2002 for one large employer, according to the findings of a 2002 case study (May/June 2002 issue of Health Affairs).

    Researchers, led by Samuel H. Zuvekas, Ph.D., of the Agency for Healthcare Research and Quality, examined the impact

    of a state's mental health parity mandate on a large employer group that simultaneously implemented a managed care

    "carve-out" for its mental health and substance abuse benefits. Carve-outs are services provided within a standard

    health benefit package but delivered and managed by a separate organization. The researchers, who included current

    and former researchers at the National Institute of Mental Health, compared plan costs, use patterns, and access in the

    year prior to the changes with those in the 3 years following the changes. Due to confidentiality issues, the name of the

    large employer group, the state in which it is located, and the specific years of the study could not be provided.

    Although the number of people treated for mental health problems increased nearly 50 percent, the costs to the plan for

    mental health services declined by almost 40 percent over the 4-year study period. Costs for employees and spouses

    together remained flat over the study period, while costs for children and adolescents declined by 64 percent. Most

    of this decline was due to reducing the lengths of stay for inpatient mental health treatment.

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    Mental Health Parity Studies A Summary of Findings

    Study/Authors/State Findings

    Agency for Healthcare Research and Managed care did not limit access to outpatient treatment. There was nearly a 50 percent increase in the number of Quality, Samuel H. Zuvekas et. al., 2002 people using outpatient treatment with no change in the average number of visits.

    John Hopkins University/UNUM Life A 1998 study by the UNUM Life Insurance Company and Johns Hopkins University found that employer plans with Insurance Company Study, 1999 good access to outpatient mental health services have lower psychiatric disability claims costs than plans

    with more restrictive arrangements (Salkever, 1998; also Frank, 1999).

    Delta Airlines Testimony, 2000 implemented

    generous mental health and substance abuse benefits for our employees and their families, not in response to legislative

    mandate, but because it improves our corporate ‘bottom line’” (Delta Air Lines testimony, May 18, 2000).

    McDonnell Douglas Study, 1999 A four-year study of program effectiveness of offering mental health benefits to McDonnell Douglas employees yielded a

    four-to-one return on investment after considering medical claims, absenteeism and turnover” (Wall Street Journal;

    June 11, 1999).

    Kennecott Cooper Corporation Study, When the Kennecott Copper Corporation provided mental health counseling for employees, its hospital,

    2000 medical, and surgical costs decreased 48.9 percent (GWCMHPC, Inc., 2000).

    Mental Health: A Report of the Surgeon The 1999 Surgeon General’s report on mental health estimated the direct business costs of the lack of parity coverage of General (1999) mental illness treatment of at least $70 billion per year, mostly in the form of lost productivity (absenteeism and

    “presenteeism”) and increased use of sick leave. The report also indicated that other studies have shown that

    employees with inadequate mental health coverage resort to increased use of general health care services.

    Sloan School of Management, A report by the MIT Sloan School of Management showed that clinical depression costs American businesses Massachusetts Institute of Technology $28.8 billion a year in lost productivity and worker absenteeism. Depressed workers have between 1.5 and (1995) 3.2 more short-term work disability days in a given thirty-day period than other workers. The average

    salary equivalent disability costs of these days range between $182 and $395 per depressed worker

    (reported in Health Affairs; Volume 18, Number 5, 1999).

    U.S. Office of Personnel Management, The U.S. Office of Personnel Management, which administers FEHBP, testified in July 2006 that parity for in-network 2006 use for both mental health and substance abuse costs only 1.3 percent.

    PricewaterhouseCoopers Analysis, 2001 Mental health coverage on par with physical health coverage will cost employers just 1 percent, or $1.32 per

    enrollee per month, according to a PricewaterhouseCoopers (PwC) actuarial analysis of S. 543, the Mental Health

    Equitable Treatment Act of 2001.

    Congressional Budget Office Analysis, In August 2001, the Congressional Budget Office (CBO) projected that enacting S. 543 would on average increase 2001 insurance premiums by less than one percent.

    U.S. General Accounting Office, 2001 A 2001 report by the U.S. General Accounting Office on employers in states without parity legislation (and therefore

    affected only by the 1996 federal parity law) found that only 3% of responding employers claimed that

    compliance increased their claims costs. Almost no employers had eliminated their mental health benefits in

    response to the law (GAO, “Mental Health Parity Act: Despite New Federal Standards, Mental Health Benefits Remain

    Limited,” GAO/HEHS-00-95, May 2000).

    Ronald Branstrom and Roland Sturm, A study of two large employer groups in California that implemented mental health parity on January 1, 2001 showed

    2002, California decreases or only mild increases in overall health care costs. Employer A, which had overall service utilization rates

    higher than other employer populations both before and after parity, experienced a 1.9% decline in total mental

    health spending and large reductions in the use of outpatient, intermediate-care, and inpatient services.

    Employer B started out with lower rates of utilization before parity, and saw substantial increases in service use and

    spending. However, the increase in mental health care spending was still less than 1% of total health care

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    Mental Health Parity Studies A Summary of Findings

    Study/Authors/State Findings

    Ronald Branstrom and Roland Sturm, spending for Employer B (Ronald Branstrom and Roland Sturm, “An Early Case Study of the Effects of California’s 2002, California Mental Health Parity Legislation,” Psychiatric Services, October 2002).

    William Goldman et al, 1999 Researchers analyzing thirty medium- and large-size private and public self-insured employers with carve-out benefits

    through United Behavioral Health found reductions in costs ($0.28/member/year) combined with consistent

    treatment prevalence, indicating that reductions in spending weren't the result of a loss of access to care. Instead, the

    cost reductions were linked with increased use of UBH's mental health provider network. Outpatient costs remained

    fairly constant overall, with a decrease in outpatient episode length and an increase in outpatient users. Inpatient

    costs decreased by over $2000/year per 1000 members, and inpatient days decreased by 2.5/year per

    1000 members. This study addresses many limitations of earlier studies supporting the affordability of mental health

    care: the scope was national, the employers represented a range of sizes, and actuarial models used were updated to

    reflect the managed care context (William Goldman, Joyce McCulloch, Brian Cuffel, and Danah Kozma. "More Evidence

    for the Insurability of Managed Behavioral Health Care," 18 Health Affairs 5 (Sept/Oct 1999), 172-181).

    Ronald Bachman, 1997, Vermont During their efforts to secure parity legislation, Vermont advocates commissioned an actuarial report on the predicted

    impact of a mental health and substance abuse parity bill. The overall finding was that the average premium increase

    would be 3.4%. Because of likely employer responses to limit these increases, the expected premium increase was

    estimated at only 1.4%. (Ronald Bachman, “An Actuarial Analysis of Comprehensive Mental Health and Substance

    Abuse Parity and Other Options for Improved Coverage in the State of Vermont,” Coopers and Lybrand, January, 1997).

    SAMHSA, Mathematica Policy Research SAMHSA and its contractor, Mathematica, conducted a study of the effects of mental health parity legislation adopted by

    Institute, 2003, Vermont Vermont (the most comprehensive parity legislation at the time). Much of the evaluation focused on the experiences pf

    two health plans Kaiser/Community Health Plan and Blue Cross/Blue Shield of Vermont (BCBSVT). Major study findings

    included the following: (1) only 0.3 percent of Vermont employers reported that they dropped health

    coverage for their employees mainly because of the parity law; (2) only 0.1 percent of employers reported that

    parity played a role in the decision to self-insure; (3) more people received outpatient mental health services following

    implementation of parity; (4) consumers paid a smaller share of the total amount spent on mental health and substance

    abuse services following the implementation of parity; (5) spending by BCBSVT for MH/SA services increased by 4

    percent following implementation of parity, or 19 cents per member per month; spending by Kaiser/CHP

    decreased by 9 percent following parity because of improved managed care controls.

    Statement of the Washington Business The President of the Washington Business Group on Health stated that the cost offsets of mental health benefits

    Group on Health, 1999 extend far beyond reductions in medical costs or in inpatient mental health costs. She noted that costs of

    absenteeism and decreased productivity due to unmet mental health needs are far higher than direct spending for

    mental health care (Mary Jane England, "Capturing Mental Health Cost Offsets" 18 Health Affairs 2 (March/April 1999),


    California Healthcare Foundation, In 2001, the California Healthcare Foundation commissioned the Mathematica Policy Research Institute to conduct an Mathematica Policy Research Institute, early “snapshot’ study of the implementation of California’s mental health parity law. The study’s purpose was to assess March 2002, California the perceived objectives, initial experiences, and anticipated outcomes of the new law after its first year of

    implementation. The study found that health insurance benefits for mental health services were expanded in compliance

    with the law and that law does not appear to have had any adverse consequences on the health insurance

    market, such as large increases in health insurance premiums or decreases in health insurance offerings

    by employers.

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    Mental Health Parity Studies A Summary of Findings

    Study/Authors/State Findings

    Wang et. al., Harvard Medical School, The study found that patients who lack coverage for mental health disorders were only 24 percent to 36 2000 percent as likely to receive adequate care as patients with coverage (May 2000 Journal of General Internal

    Medicine Vol. 15, No. 5).

    Yuhua Bao and Roland Sturm, Health In this study, the researchers assessed to what extent state parity legislation changed perceived health insurance

    Services Research, October 2004 (Review benefits, perceived access to care, and use of mental health specialty care, using survey data from 1998 and 2001.

    of Literature) Preliminary evaluations of early state parity legislation suggested that at least the short-term effects were minimal

    or nonexistent (Sturm 2000; Pacula and Sturm 2000). Strong parity legislation seemed to have a larger effect (both in

    absolute and relative terms) on perceived insurance coverage quality and access to needed health care than medium

    parity. The researchers also concluded that parity legislation may have accelerated the development of

    managed care in the mental health care arena.

    2004 Catastrophic Mental Health Report, In this assessment of parity in Utah, the authors summarized previous studies of the costs of parity enacted in several

    Utah Department of Insurance, Utah, states. The summary reported that: (1) in Vermont, the cost of implementing full mental health parity was estimated to Vermont, Maine, Texas, Maryland, Rhode be less than 1 percent (Rosenbach, Lake, Young, Conroy, Quinn, Ingels, Cox, Peterson, & Crozier, 2003); (2) in Maine,

    Island, Minnesota which implemented full mental health parity in 1996, costs for mental health services increased less than 1 percent

    (Bachman, 2000); (3) an actuarial study conducted by Milliman & Robertson for the state of Texas, estimated the cost of

    providing a mandated benefit for serious mental illness was estimated to be 2.0 percent of premium (Albee, Blount,

    Lee, Litow, & Sturm, 2000); (4) other reviews of mental health parity at the state level, including Maryland, Rhode

    Island, and Minnesota, have concluded that implementing parity increased costs about 1.0 percent or less

    (Bachman, 2000). In Utah, partial parity was estimated to increase costs by approximately 0.7 percent,

    whereas parity for serious mental illness was estimated to increase costs by approximately 1.9 percent

    (Bachman). The Utah Insurance Department estimated a cost increase of 0.9 percent attributable to parity.

    Statement of Aetna, February 14, 2007 Aetna announced its support for the Mental Health Parity Act of 2007 (S.558) proposed by U.S. Senators Pete V.

    Domenici, Michael B. Enzi and Edward M. Kennedy. “As a leading health insurer that provides the full spectrum of health

    benefits to more than 35 million Americans, Aetna believes that this legislation will promote timely and

    appropriate care for mental health, which is an essential component of effective health care. Aetna said the federal

    legislation will create a national solution to inconsistent behavioral health care regulation, inconsistencies that can be a

    threat to Americans’ overall health. Aetna supports this legislation and will work with Congress to see that it is enacted

    without modifications that undermine the compromise forged by Senators Kennedy, Domenici and Enzi," said Mary Fox,

    head of Medical Related Products, which includes the behavioral health and pharmacy businesses. "Aetna is supportive of

    the principles and approach embodied in this legislation. If passed, we believe our members will benefit by being better

    able to achieve their optimal health through more integrated health and behavioral programs, benefits and

    services. Aetna also applauds the parameters spelled out in the Mental Health Parity Act of 2007. These parameters are

    important for the administration of mental health benefits, including creating national standards for the country and

    strengthening the ability of health plans to apply medical management programs to help members navigate the health

    care system.”

    Statement of National Retail Federation, The National Retail Federation stated that it welcomed mental health parity legislation unveiled today after

    February 12, 2007 negotiations between lawmakers, mental health advocates and the business and insurance communities, but cautioned

    that support hinges on passage of the bill without additional substantive changes. “NRF is pleased to support this

    carefully crafted legislation,” NRF Senior Vice President for Government Relations, Steve Pfister said. “We are greatly

    encouraged by the carefully targeted preemption of inconsistent state laws, the clear protection for medical management

    of the benefit and the preservation of employer control over benefit and network design.” Pfister said NRF has

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    Mental Health Parity Studies A Summary of Findings

    Study/Authors/State Findings

    Statement of National Retail Federation, traditionally opposed most health care mandates, saying mandates and restrictions on health care plans drive up the cost February 12, 2007 of coverage. NRF has played a leading role in negotiating with Kennedy, Enzi and Domenici on the new legislation and

    believes that it strikes a reasonable balance.

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