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Old game, new rules

March 1, 2010
by Patrick Gauthier, Charles G. Ray, and Kathryn Alexandrei
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How will payers react to new limits imposed by parity regulations?

As a fundamental health insurance reform, The Mental Health Parity and Addiction Equity Act (MHPAEA) of 2008 has far-reaching effects and implications for as many as one in three Americans. A hard-won product of vision, advocacy, cooperation, and compromise, the Act's enabling regulations, also known as the Interim Final Rule (IFR), were released Jan. 29 with an immediate impact on health insurance companies, managed care and managed behavioral health organizations, self-insured employers, and a variety of administrative service providers. Additional regulations that apply to Medicaid managed care plans are expected in the coming months.

Although the MHPAEA may appear complex, it was designed to preserve consumer rights and interests. But in many respects, the MHPAEA was crafted with health plans and payers in mind-a perspective far removed from the primary concerns of government programs, community mental health and substance abuse treatment providers, and consumers.

The unexpected

Despite nearly 14 years of debate and negotiation in the legislative process, many details of the IFR developed by the U.S. Departments of HHS, Labor, and Treasury were unexpected. Among those most surprised were health plans, payers, and insurers, who thought that the details of the IFR differed from the law that Congress had developed and President Bush signed in October 2008.

Throughout the long legislative process, these plans and payer groups were slow to accept the parity proposition, but ultimately concluded that their key concerns and needs had been addressed in the bill. Many thought that the language of the bill made it likely that the MHPAEA and its IFR would allow them to:

  • Maintain access and cost controls specific to mental health and substance use treatment benefits, including separate deductibles;

  • Continue to select and cover the conditions and diagnoses they deem appropriate, in light of applicable state law; and,

  • Continue to manage mental health and substance use treatment benefits with only minor changes necessary to eliminate any real or perceived discriminatory practices.

Clearly, many plans were expecting that parity could be implemented with essentially the same underwriting variables as before-and without any “meaningful” additional costs. Several prominent and reliable claims experience studies conducted by independent consultants and the Congressional Budget Office modeled a future for parity that projected cost increases of less than two percent using traditional managed care approaches. Many plans banked on the belief that the IFR would preserve the behavioral health-specific benefit management practices that have evolved in the past 25 years, practices that have been proven effective in managing costs.

The IFR released by the Departments of HHS, Labor, and Treasury in late January would put an end to speculation by laying out clear nationwide guidance for medical management criteria, scope of services, and covered conditions-at least, provider and consumer groups hoped it would. However, the IFR offered relatively little guidance in these three areas, instead deferring to health plan policies and state law. Its guidance was restricted to creating six Classifications of Benefits where parity would apply and to defining allowable quantitative and non-quantitative limitations on coverage.

Reaction to the IFR was primarily positive from advocates of mental health and substance abuse treatment. But recent questions and comments from advocacy groups demonstrate that they are concerned about the absence of detail regarding the scope of services. Conversely, plans and payers have found the IFR to be quite different from what they had expected, involving a new and unanticipated set of underwriting assumptions and, perhaps, much less latitude in determining the scope and standards of care.

These reactions shouldn't come as a surprise to anyone. Both sides clearly hoped for and expected widely divergent outcomes. Advocates sought greater specificity and conditions that would support greater access and consumption of services, while insurers and payers sought to retain flexibility and self-determination in managing costs associated with consumption. The tension is understandable.

Health plan and employer concerns

Traditional health insurance plans have based coverage decisions on a long-standing medical model of people's needs, centered around maintaining physical health. Mental health advocates have argued that the medical model is limited, pointing to a model that views the individual as a broad constellation of strengths and issues, shaped by a complex web of factors including brain chemistry, family of origin, early childhood development, access to education, economic strata, and other environmental factors.

To overcome the limitations of medically-based models of care, behavioral health advocates argued that the “generally recognized independent standards of current medical practice” described in the IFR should be expanded in order to avoid processes and practices that impose limitations on care. They suggested that guidelines for medically accepted standards of care include conditions defined in the current Diagnostic and Statistical Manual of Mental Disorders (DSM) or the World Health Organization's International Statistical Classification of Diseases and Related Health Problems (ICD).