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Mental Health

Full Parity: Steps Toward Treatment Equity For Mental And Addictive Disorders

Abstract

 
The 1996 Mental Health Parity Act requiring equal annual and lifetime dollar limits for mental health benefits is to sunset 30 September 2001.This paper reviews the impact and limitations of both this law and existing state provisions and describes recent research on the actual and projected costs associated with such laws. We contend that full parity provided within the context of managed care not only is possible, but represents a "sequential" rather than a final step toward the broader goal of achieving equity in the treatment of persons with mental and addictive disorders.

However, this Congress is confronted with a circumstance in which failure to act will result in the erosion of benefits that were previously mandated. Without further legislation, the Mental Health Parity Act, enacted in 1996 and implemented in 1998, will automatically sunset 30 September 2001.² As of that date, the federal requirements for equivalent annual and lifetime dollar limits for mental versus all other benefits within group health plans that offer mental health benefits will cease to exist.

Given the current time frame, it is prudent to assess what we know about the effect of the Mental Health Parity Act, and perhaps parity laws more generally. In the coming months Congress may consider options ranging from allowing the law to sunset, at one extreme, through expanding the current provision to include "full parity" (that is, equivalence in deductibles, cost sharing, and day/visit limits) for mental health as well as substance abuse benefits, at the other. At a minimum, these deliberations must be informed by available knowledge regarding both the actual and projected impacts of existing parity laws.

However, equally important in these congressional discussions is a full appreciation of both the practical and symbolic importance of a federal parity law in reducing inequities for persons seeking and receiving treatment for mental and addictive disorders. It is somewhat ironic that as parity laws have increasingly advanced at both the federal and state levels, a growing disparity has emerged between nominal benefits (coverage described in a plan’s written policy) and effective benefits (coverage actually received by a beneficiary) for behavioral health services. Although the application of managed care strategies has made parity more affordable and hence more achievable, it has also greatly diminished the impact that benefit design features such as parity ultimately may have on ensuring access to and appropriate use of mental health and substance abuse benefits.³ In effect, parity has become a critically necessary but insufficient goal in advancing toward equitable and nondiscriminatory coverage for persons with mental and addictive disorders. A central objective of this essay is to describe for policymakers why an expansion to full parity for mental health and substance abuse is affordable and why it represents, at best, a "sequential step" toward the broader goal of achieving equity in the treatment of mental and addictive disorders in this country.⁴

Existing Parity Laws

Top Existing Parity Laws Parity And Equity Concluding Comments NOTES

 
Mental Health Parity Act. At the time of its passage in September 1996, the federal Mental Health Parity Act (MHPA) represented a substantial legislative achievement.⁵ After a more comprehensive mental health parity bill was passed by the Senate earlier that year but subsequently rejected in conference committee, Senators Pete Domenici (R-NM) and Paul Wellstone (D-MN) (the original bill’s cosponsors) advanced a more limited version of parity that was passed by Congress as an amendment to the annual appropriations bill for the Departments of Veterans Affairs and Housing and Urban Development. The MHPA stipulates that group health plans providing both medical/surgical and mental health benefits must not impose annual or lifetime dollar limits on mental health benefits that are less than those applied to medical/surgical benefits.⁶ The MHPA is scheduled to sunset 30 September 2001.

The provisions of this act are limited.⁷ Health plans that do not already provide mental health benefits are not required to add them, and employers with fifty or fewer employees are exempt. Moreover, the act does not apply to substance abuse treatment. Perhaps most important, the act does not preclude affected plans from using other structural benefit limitations, such as differential cost sharing or day and visit limits, for mental health relative to medical/surgical benefits.

Surveys of employers have confirmed general compliance with the MHPA, while concurrently underscoring the act’s limitations. A study sponsored by the Substance Abuse and Mental Health Services Administration (SAMHSA), using the Mercer/Foster Higgins National Survey of Employer-Sponsored Health Plans, found that approximately half of all employers subject to the act were in compliance with its provisions prior to its 1 January 1998 effective date. Fewer than 20 percent of employers reported making any changes in their benefit package as a result of the law, with most introducing or modifying day or visit limits. More than two-thirds of all plans surveyed reported no benefit changes and did not anticipate increased costs related to compliance with the act. Moreover, virtually no plans (fewer than 1 percent) chose to drop mental health coverage rather than comply with the federal law.⁸

Similar findings emerged from a U.S. General Accounting Office (GAO) report that surveyed approximately 900 employers in the twenty-six states without a parity law in 1999.⁹ The report noted that although 86 percent of responding employers reported compliance with the act, the overwhelming majority of these plans (87percent) maintain at least one other plan design feature (such as day or visit limits) that is more restrictive for mental health benefits than for medical/surgical benefits. Further evidence of the act’s limitations was the GAO finding that most of the newly compliant employers introduced at least one more-restrictive benefit design feature specifically to offset the more-generous dollar limits resulting from the federal law. Consistent with the SAMHSA-sponsored study, most employers had not examined the impact of the law on their plans’ claims costs; however, only 3 percent reported increased claims costs attributable to the act.¹⁰

State laws. As of November 2000 thirty-two states had passed laws that address some aspect of mental health and/or substance abuse parity.¹¹ However, as noted in the National Advisory Mental Health Council’s (NAMHC’s) final report to Congress on insurance parity, there is much variation among these laws with respect to several key dimensions.¹² While most of these state laws mandate certain minimum coverage standards for all employers and insurers (typically that the terms and conditions for mental health benefits be the same as those offered for the treatment of other physical illnesses), half a dozen state laws parallel the federal statute in mandating certain benefits only if the employer or insurer chooses to offer mental health coverage. In addition, although nine of the thirty-two states provide coverage for most if not all of the psychiatric disorders included in either the Diagnostic and Statistical Manual, Fourth Edition (DSM-IV), or the International Statistical Classification of Diseases and Related Health Problems, Tenth Revision (ICD-10), most of the states require parity coverage only for a smaller number of "serious" or "biologically based" mental illnesses. Further, while approximately half of the states with a parity law are similar to the federal statute in permitting an exemption for small employers (commonly defined as fewer than twenty-five or fifty employees), only a handful of states have provisions similar to the federal statute that permit an employer experiencing premium increases above a certain percentage to be exempted from parity requirements.¹³

Although a more detailed comparison of state parity laws is beyond the scope of this paper, several points are notable. First, the passage of the federal MHPA appears to have provided some necessary momentum to the passage of state parity laws, as evidence by the fact that twenty-seven of the thirty-two states with some form of parity provision enacted their law after passage of the federal law in 1996.¹⁴ Second, although fourteen states passed parity provisions that essentially mirror the MHPA, seven of these states later strengthened their existing parity law to exceed the provisions of the federal law.¹⁵ Thus, what initially appeared as a somewhat redundant action on the part of fourteen states could be seen as an effort to introduce incrementally more comprehensive parity provisions —an approach that arguably appears to have succeeded in at least half of these states. Overall, while these differences among states could reflect a lack of consensus in defining the parity concept, it is equally if not more likely that these variations are a product of political realities: namely, that certain provisions either were or were not acceptable or feasible to political decision makers and/or influential stakeholders within a given state.¹⁶

Although many state laws provide more comprehensive coverage than that of the federal parity law (the latter does not preclude enactment of stronger state parity legislation), the "patchwork quilt" of state laws leaves countless individuals unprotected by virtue of their diagnosis: Those with schizophrenia or bipolar disorder merit coverage, while those with post-traumatic stress disorder or autism do not. Moreover, very few of the state laws extend parity to persons with drug and/or alcohol addictions, despite the substantial and growing research literature that confirms both the biological underpinnings of these conditions and their comparatively high rates of treatment success.¹⁷ However, even the most comprehensive state laws can offer no parity protections to the more than 130 million persons enrolled in self-insured plans that are exempt from state mandates under the Employee Retirement Income Security Act (ERISA) of 1974.¹⁸ Although the passage of state parity laws clearly has enhanced mental health benefits for many, the inherent limitations of state mandates suggest that the absence of a strong federal parity provision will ultimately preclude efforts to achieve equal coverage for all persons with mental and addictive disorders.

Costs of parity. The area of greatest concern and uncertainty relative to parity was, and remains, the overall costs of such provisions. Efforts to project the costs associated with the more comprehensive, and ultimately unsuccessful, Domenici-Wellstone parity proposal produced wide variations, ranging from increases of 2. percent to approximately 8–11 percent.¹⁹ However, since the 1996 passage of the MHPA, significant advances have been made in the actuarial and economic forecasting models used to predict parity costs, and the baseline data included in these projections have greatly improved. As a result, the most recent NAMHC Report to Congress projects that cost increases associated with full parity for mental health benefits would represent 1.4 percent of total health benefits.²⁰

The NAMHC report further postulates that because the forecasting models do not account adequately for recent changes in the mental health care delivery system—most notably, the impact on and response of managed care systems to benefit changes—even the most recent cost projection of a 1.4 percent increase may overestimate the true cost of parity. The report concludes that "as more results from State and large-employer parity experiences are being published, the need to use projection models to predict the cost of parity becomes less critical."²¹

Consistent with the NAMHC report’s hypothesis, empirical studies of parity implementation have documented that cost increases associated with these provisions are minimal. An earlier NAMHC report issued in 1998 examined data from three states’ actual experiences with parity. In Texas the concurrent implementation of parity and managed care led to a net reduction in costs (inpatient costs fell, outpatient costs rose), while in both Maryland and Rhode Island the introduction of parity within systems already influenced by managed care produced cost increases of less than 1 percent of the total health benefit.²² Although this is not explicitly discussed in any of these reports, it is nonetheless reasonable to assert that because managed care relies greatly on approval and reimbursement of only medically necessary or appropriate care, full parity within this context is unlikely to result in much, if any, expansion of discretionary service use by persons who do not have mental disorders.

Additional research has explored the costs associated with removing all benefit limits for behavioral health services. In analyzing the experiences of more than twenty managed behavioral health care plans with approximately 140,000 covered lives, Roland Sturm and his colleagues found that removing common and arbitrary dollar and other limits and carefully managing mental health and substance abuse services would result in premium increases of only pennies per member per month.²³ Similarly, in examining forty-six managed behavioral health plans with approximately 500,000 covered lives, Pamela Peele and her colleagues concluded that "the overall increase in health spending that would result from removing benefit limits in plans that already impose them would be very small."²⁴ Interestingly, while these authors found that very few persons encounter or even approach benefit limits, a disproportionate number of those who do are children needing inpatient care.

In sum, the results of a number of important studies suggest that through the application of managed care practices, the offering of parity-level benefits for both mental and addictive disorders can occur with minimal cost to both purchasers and beneficiaries. Nevertheless, it would be unrealistic to assume that benefit parity for both mental health and substance abuse services could be achieved without any increase in costs whatsoever.

It is noteworthy that the existing research was instrumental in influencing the Clinton administration to direct the Office of Personnel Management to implement full parity of both mental health and substance abuse benefits for the approximately nine million persons covered by the Federal Employees Health Benefits Program (FEHBP) beginning in 2001.²⁵ An evaluation of the implementation and impact of this policy change is under way, enhancing further the opportunity to understand the effect of full parity on mental health and substance abuse benefit and service costs.

Parity And Equity

Top Existing Parity Laws Parity And Equity Concluding Comments NOTES

 
A thoughtful essay by Audrey Burnam and José Escarce in an earlier volume of Health Affairs contends that the debates around parity in insurance benefits are the latest manifestations of a longer-standing policy issue regarding equity of mental health care relative to general medical care. These authors argue that in an era of managed care, benefit parity is an insufficient mechanism for ensuring equity for those with a mental illness.²⁶ Put another way, full benefit parity is an important "sequential" step toward the broader goal of ensuring that persons with a mental illness or addiction have the same opportunities for seeking and receiving appropriate treatment as those with a physical illness.

Importantly, a sequential approach to promoting treatment equity implies a recognition that full parity resolves some, but far from all, obstacles to access and use of appropriate services among persons with mental and addictive disorders. On the supply side, full parity generally indicates a nominal expansion of benefits. However, parity also has yielded increased management of care, and such management can be differentially applied in ways that produce unequal treatment opportunities (through either initial access or intensity and/or duration of services) for those with psychiatric versus general medical conditions. On the demand side, full parity results in the removal of arbitrary and inequitable limits to treatment. However, removal of these limits under parity may have little effect on the concomitant stigma that keeps many who need mental health and substance abuse services from seeking such care. In short, legislating full parity will promote, but not achieve, treatment equity for those with mental and addictive disorders. Nevertheless, without such action, the goal of equity will continue to remain elusive.

Given both the existing data and the assumptions underlying parity cost projections available in 1996, it is understandable that most legislators were reluctant to adopt a policy mandating full parity for mental health benefits. Since that time, however, the accumulated evidence suggests that full parity implemented within the context of managed care is both realistic and affordable. Ironically, the evolution of managed care and the subsequent differentiation between nominal and effective benefits may have helped to produce a political climate in which adoption of full parity can be accurately perceived as a reasonable, cost-effective, yet sequential step toward ensuring that those who need mental health or substance abuse treatment are just as likely to seek and receive such care as those requiring physical health services are.

Concluding Comments

Top Existing Parity Laws Parity And Equity Concluding Comments NOTES

 
It is well established that the majority of persons suffering from a mental illness or addiction do not seek or receive treatment for their condition.²⁷ While full parity in benefits may clearly encourage service use for some, such provisions will do little for those who lack health insurance entirely—a population currently estimated at more than forty million.²⁸ Efforts to expand health insurance coverage for these persons almost certainly will address a substantial portion of the unmet need for mental health and substance abuse treatment within this population.

Nevertheless, from a clinical perspective, the reasons for failing to seek needed treatment can be complex. For some they reside deep within and become expressed through shame, fear, ignorance, denial, resistance, or profound hopelessness. In many respects, the internal obstacles created by individuals are many times more powerful and prohibitive of treatment-seeking behavior than are any external obstacles associated with benefit design or coverage. Unfortunately, however, such external obstacles can be easily embraced by these individuals as further evidence of society’s belief that their illness is somehow less real, less debilitating, and less worthy of treatment than is the illness of someone with a physical health condition.

The recent surgeon general’s report on mental health provides important evidence to counter outdated beliefs that mental illnesses are somehow less real than physical ones, or that mental health treatments are ineffective.²⁹ Decades of careful research clearly document that mental disorders can be treated effectively and that persons with mental illnesses who receive such treatments can lead productive and satisfying lives. Continuing to maintain differential benefits for these treatments in the face of such evidence is, at best, unenlightened and, at worst, discriminatory.

Members of the 107th Congress are faced with an interesting choice. Inaction on parity legislation may unwittingly reinforce for millions of persons that those with a mental illness or substance abuse disorder do not merit the same attention, concern, or empathic respect accorded to persons with other physical conditions. However, congressional passage of full parity for mental and addictive disorders would likely confirm for these same persons that their illnesses are real and worthy of adequate treatment on a par with those suffering from any other physical disorder. For the more than one in four Americans who suffer from mental and/or addictive disorders each year, the choice of responses in this debate is relatively easy.

Editor's Notes

 
Kevin Hennessy, a clinical psychologist, is a senior health policy analyst, Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services. Howard Goldman is professor of psychiatry at the University of Maryland Medical School. Goldman was senior scientific editor for the December 1999 publication, Mental Health: A Report of the Surgeon General; Hennessy was on the Planning Board.

The views expressed in this paper are those of the authors and do not necessarily represent the views of the U.S. Department of Health and Human Services or the University of Maryland School of Medicine. The authors thank Eileen Salinsky version.

NOTES

Top Existing Parity Laws Parity And Equity Concluding Comments NOTES

 

1. J. Eliperin and E. Pianin, "On Capitol Hill: A Limited Agenda," Washington Post, 15 November 2000, A1; D. Brown, "Issue Guide: Trying to Cover the Bases with a Light Federal Hand," Washington Post, 26 October 2000, A25; and M. Vita and H. Dewar, "Local Issues Outweigh ‘Mediocre’ Congressional Session," Washington Post, 21 October 2000, A15.
2. Mental Health Parity Act of 1996, 42 U.S. Code, sec. 201.
3. R.G. Frank et al., "The Politics and Economics of Mental Health ‘Parity’ Laws," Health Affairs (July/Aug 1997): 108–119; M.A. Burnam and J.J. Escarce, "Equity in Managed Care for Mental Disorders," Health Affairs (Sep/Oct 1999): 22–31; and A.L. Otten, Mental Health Parity: What Can It Accomplish in a Market Dominated by Managed Care? (New York: Milbank Memorial Fund, 1998).
4. The term sequentialism refers to a pattern of incremental changes intended to reach a specific goal and was introduced at a conference on health care reform sponsored by the Washington Business Group on Health and the Bazelon Center for Mental Health Law, Elkridge, Maryland, 1 May 2000. The term is cited by Paul Starr in "Health Care Reformin the New Economy," Health Affairs (Nov/Dec 2000): 23–32.
5. Frank et al., "The Politics and Economics of Mental Health ‘Parity’ Laws."
6. 42 U.S. Code, sec. 201.
7. E. Goode, "9 Million Gaining Upgraded Benefit for Mental Care," New York Times, 1 January 2001, A1; D. Mechanic, "Emerging Trends in Mental Health Policy and Practice," Health Affairs (Nov/Dec 1998): 82–98; and G.A. Jensen etal., "Mental Health Insurance in the 1990s: Are Employers Offering Less to More?" Health Affairs (May/June 1998): 201–208.
8. Substance Abuse and Mental Health Services Administration, Background Report: Effects of the Mental Health Parity Act of 1996 (Rockville, Md.: U.S. Department of Health and Human Services, 1999).
9. U.S. General Accounting Office, Mental Health Parity Act: Despite New Federal Standards, Mental Health Benefits Remain Limited (Washington: GAO, May 2000).
10. Ibid.
11. Current information on existing state parity laws is available on the National Alliance for the Mentally Ill (NAMI) Web site, <www.nami.org/campaign/statepar.htm> (19March 2001).
12. R.M. Scheffler, D.P. Gitterman, and M.C. Peck, "The Political Economy of Mental Health Insurance in the United States," report prepared under NIMH Grant no. MH-18828-11. Findings are available in R.L. Kirschstein, Insurance Parity for Mental Health: Cost, Access, and Quality, Final Report to Congress by the National Advisory Mental Health Council, NIH Pub. no. 00-4787 (Bethesda, Md.: National Institutes of Health, June 2000). See also W. Goldman et al., "More Evidence for the Insurability of Managed Behavioral Health Care," Health Affairs (Sep/Oct 1999): 172–181; and R. Sturm and R.L. Pacula, "State Mental Health Parity Laws: Cause or Consequence of Differences in Use?" Health Affairs (Sep/Oct 1999): 182–192.
13. Kirschstein, Insurance Parity for Mental Health.
14. Ibid.
15. Ibid.
16. K.D. Hennessy and S. Stephens, "Mental Health Parity: Clarifying Our Objectives," Psychiatric Services 48, no. 2 (1997): 161–164.[Free Full Text]
17. A.I. Leshner, "Addiction Is a Brain Disease, and It Matters," Science 278, no. 5335 (1997): 45–47[Abstract/Free Full Text]; A.I. Leshner, "Science-Based Views of Drug Addiction and Its Treatment," Journal of the American Medical Association 282, no. 14 (1999): 1314–1316[Free Full Text]; C.P. O’Brien, "A Range of Research-Based Pharmaco therapies for Addiction," Science 278, no. 5335 (1997): 66–70[Abstract/Free Full Text]; C.P. O’Brien, "Myths about the Treatment of Addiction," Lancet 347, no. 8996 (1996): 237–240[Medline]; and A.T. McLellan et al., "Evaluating the Effectiveness of Addiction Treatments: Reasonable Expectations, Appropriate Comparisons," Milbank Quarterly 74, no. 1 (1996): 51–85.[Medline]
18. Estimates generated from the U.S. Department of Labor’s analysis of the insurance-related questions from the March 1998 Current Population Survey; see also J.A. Buck et al., "Behavioral Health Benefits in Employer-Sponsored Health Plans, 1997," Health Affairs (Mar/Apr 1999): 67–78.
19. Frank et al., "The Politics and Economics of Mental Health ‘Parity’ Laws"; and Otten, Mental Health Parity.
20. Kirschstein, Insurance Parity for Mental Health.
21. Ibid., 12.
22. National Institutes of Health, Parity in Financing Mental Health Services: Managed Care Effects on Cost, Access, and Quality (Rockville, Md.: DHHS, April 1998).
23. R. Sturm, "How Expensive Is Unlimited Mental Health Care Coverage under Managed Care?" Journal of the American Medical Association 278, no. 18 (1997): 1533–1537[Abstract]; and R. Sturm et al., "How Expensive Are Unlimited Substance Abuse Benefits under Managed Care?" Journal of Behavioral Health Services and Research 26, no. 2 (1999): 203–210.
24. P.B. Peele, "Benefit Limits in Managed Behavioral Health Care: Do They Matter?" Journal of Behavioral Health Services and Research 26, no. 4 (1999): 438.
25. FEHB Carrier Letter no. 1999-027, 7 June 1999; and Goode, "9 Million Gaining Upgraded Benefit for Mental Care."
26. Burnam and Escarce, "Equity in Managed Care for Mental Disorders."
27. Substance Abuse and Mental Health Services Administration and National Institutes of Health, Mental Health: A Report of the Surgeon General (Rockville, Md.: DHHS, 1999).
28. C. Hoffman and M. Pohl, Health Insurance Coverage in America: 1999 Data Update (Washington: Kaiser Commission on Medicaid and the Uninsured, 2000).
29. SAMHSA and NIH, Mental Health: A Report of the Surgeon General.

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