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Beware parity's "fine print"

January 14, 2010
by Stephen A. Odom, MS, MFT, Southern California Recovery Consulting
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History shows that insurers and businesses will test boundaries of new parity rules

Opponents argue that increased coverage offered by parity reduce the price paid by consumers and create a moral hazard that consumers will take advantage of greater affordability and availability of benefits to overuse their benefits, even though there may be significant cost increases to the insurer—and ultimately to themselves.10 Businesses argue that mandated benefits affect the labor market by lowering wages, since wages would fall in order to offset the rising cost of employee benefits. Increased moral hazard, they say, could lead benefit costs to spiral out of control.

Parity proponents counter that untreated mental health disorders increase direct and indirect costs borne by businesses and society through premature mortality, absenteeism and lost productivity due to illness and family care giving, and governmental public assistance and disability claims. Actuarial projections and a growing body of research evidence even suggest that, with managed care in place, mental health insurance coverage may be increased without significant cost increases.2

Effective January 1, 2010, the 2008 Mental Health and Addiction Equity Act:

• Applies to employers with 50 or more employees (the previous small employer exemption remains in place).3
• Requires group health plans that provide MH/SA benefits to do so at parity with medical/surgical benefits.
• Eliminates deductibles, co-payments, or out-of-pocket limits that apply only to MH/SA benefits.
• Corrects “out of network” disparities, stating that plans must offer “out of network” MH/SA benefits at parity with medical/surgical benefits.
• Requires that when states have existing parity requirements, they must now apply the stronger of the two (federal vs. state) parity definitions. In other words, states may not “reduce” their existing parity requirements to comply with the new federal requirements.

The United States is on the verge of creating equality among illnesses, yet questions of cost and cause cloud the issue. Insurers need to review the results that disagree with their contention that parity will increase costs. If managed effectively, costs to payers will either remain static or actually decrease. Science will undoubtedly find biological correlates to mental illness and substance abuse, so it is only a matter of time until MH/SA conditions are recognized as biologically-based illnesses. In many ways, the real issue remains the fear and stigma that accompany mental illness. The net result of full mental health and substance abuse parity—if the regulations are a step forward from the 1996 Act—will be a victory for every constituency.

Stephen A. Odom, MS, MFT, is CEO of Southern California Recovery Consulting in Newport Beach, CA.

References
1. Arey, D. (1997, August 4). Read fine print of mental health care coverage. Crain's Chicago Business, 20(31), H2.

2. Barry, C. (2006, July). The Political Evolution of Mental Health Parity. Harvard Review of Psychiatry, 14(4), 185-194.

3. Luongo, T. (2008). The mental health parity and addiction equity act of 2008: equal footing for those suffering from mental health and addiction disorders. HRtutor.com. Retrieved from http://www.hrtutor.com/en/news_rss/articles/2008/12-02-Mental-Health-Parity-and-Addiction-Equity-Act-of-2008.aspx.

4. Allen, K. (2000, May 10). Mental Health Parity Act: Despite New Federal Standards, Mental Health Benefits Remain Limited: HEHS-00-95. GAO Reports.

5. National Institute of Mental Health (2009). Statistics. Retrieved from http://www.nimh.nih.gov/health/topics/statistics/index.shtml.

6. Atkins, G. (2001, Winter2001). Mental Health Parity: Federal Law May trump the States. Benefits Law Journal, 14(4), 105.

7. Barry, C., Gabel, J., Frank, R., Hawkins, S., Whitmore, H., & Pickreign, J. (2003, September). Design Of Mental Health Benefits: Still Unequal After All These Years. Health Affairs, 22(5), 127-137.

8. Fitts v. Unum Life Ins. Co. of America. 2006 U.S. Dist. LEXIS 9235 (Feb. 23, 2006).

9. Amaro, H. (1999, May). An Expensive Policy: The Impact of Inadequate Funding for Substance Abuse Treatment. American Journal of Public Health, pp. 657,659. Retrieved August 16, 2009, from Academic Search Premier database.

10. Barry, C., & Ridgely, M. (2008). Mental Health and Substance Abuse Insurance Parity for Federal Employees: How Did Health Plans Respond? Journal of Policy Analysis & Management, 27(1), 155-170.

11. Barry, C., Frank, R., & McGuire, T. (2006, May). The Costs of Mental Health Parity: Still an Impediment? Health Affairs, 25(3), 623-634.

12. Office of Civil Rights (2003). Department of Health and Human Services. Summary of the HIPAA privacy rule. Retrieved from http://www.hhs.gov/ocr/privacy/hipaa/understanding/summary/index.html.

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