States Find Parity Affordable: Managed Care Gets Credit
Richard Harding, M.D.: “Parity. . . for treatment of mental illnesses, including substance abuse, is providing improved care without the sky falling, as the insurance industry predicted.”
Data recently reported from both states show that those alarms were false, though both states attribute parity’s minimal cost increases to the implementation, along with parity benefits, of plans to manage mental health and substance abuse care.
In July South Carolina released data comparing the claims experience in its first parity year—2002—with those of the last mandate-free year.
State officials reported that adding a mental health care parity requirement that included cost controls through managed care did not even add 1 percent to the costs incurred by the insurance plan.
The annual dollar increase attributable to the parity mandate was $16.65 per insured person, which translates to an overall cost increase of just .76 percent.
The total costs for all types of services covered by the state-sponsored health insurance plan increased by 8.86 percent in the first year of parity coverage. Without the mental health care mandate included, the increase would have been 8.10 percent.
This low percentage increase is significant because the statute establishing South Carolina’s parity plan set a cost-increase threshold of 3.39 percent. If cost increases linked to the added mental health care coverage had exceeded this amount, the parity mandate would have come to an end. Since the ceiling was not breached, the mandate remains in effect at least through the 2004 plan year.
Sky Did Not Fall
The first-year data show that parity “for state employees for treatment of mental illnesses, including substance abuse, is providing improved care without the sky falling, as the insurance industry predicted,” Richard Harding, M.D., professor and interim chair of the department of neuropsychiatry and behavioral sciences at the University of South Carolina School of Medicine, told Psychiatric News. Harding is also a former president of APA.
“The increase in utilization is marginal and doesn’t even take into account the offset [in reduced usage] of other medical services,” Harding said.
When the parity law went into effect on January 1, 2002, state officials contracted with the mental health carveout firm APS Healthcare to manage the health insurance company’s mental health care component. The managed care company is responsible for all services that beneficiaries obtain through psychiatrists and mental health professionals or from hospitals that provide mental health care services.
The plan’s medical claims administrator, Blue Cross and Blue Shield of South Carolina, continues to have responsibility for mental illness treatment claims if the services are provided by a physician who is not a psychiatrist or mental health specialist.
State officials attribute the minimal cost increases linked to the parity mandate to the decision to use a “behavioral health management firm” to control mental health care.
“It is thought that the ‘managed care’ approach taken by the plan with respect to mental health parity—hiring a separate administrator and requiring authorization of all services through that administrator—is responsible for the incremental costs falling well below the estimate embodied in the statute,” said Rob Tester, assistant director of the South Carolina Budget and Control Board’s Office of Insurance Services.
He added, however, that the second year in which a new insurance benefit is offered is when costs often show a substantial increase, so the next years’ claims experience for mental health care will be closely monitored.
Despite the encouraging first-year cost data, the parity mandate will expire at the end of 2004 unless the state legislature votes to extend it. Harding noted that the South Carolina Psychiatric Association has already begun working with lawmakers, advocacy groups, and other professional groups to ensure that the mandate is made permanent. South Carolina does not have a law requiring mental health care parity for citizens other than state employees.
Mixed News in Vermont
In Vermont state officials earlier this month received a report by the federal Substance Abuse and Mental Health Services Administration that reviews the first three years of the state’s parity mandate. There, too, warnings of skyrocketing costs and a rush of employers to self-insure to avoid the mandate turned out to be groundless.
The report studied the experience of the two insurers—Blue Cross/Blue Shield of Vermont (BCBSVT) and Kaiser/Community Health Plan—that covered 80 percent of Vermont’s privately insured population when the parity law took effect on January 1, 1998.
Following parity, BCBSVT saw the cost of providing mental health and substance abuse treatment increase from 2.3 percent of spending for all services to 2.47 percent, an increase of about 4 percent. Monthly costs per beneficiary increased by 19 cents.
At Kaiser, the smaller of the two insurance plans, spending on mental health and substance abuse services decreased by an impressive 9 percent after the parity mandate’s implementation. The bad news for parity advocates in that statistic, however, is that “decreases in utilization of [substance abuse] treatment services” accounted for almost all of this spending reduction, the report pointed out.
In terms of access to care, parity significantly improved the likelihood of insured individuals obtaining mental health treatment, with increases ranging from 18 percent to 24 percent, the report noted. There was also an increase in the number of outpatient visits per use.
Again, however, the sword turns out to be two-edged. “For BCBSVT members who received the [mental health/substance abuse] benefits through the carveout, the use of managed care arrangements offset the effect of parity. For these members, the odds of obtaining treatment and the average number of outpatient visits per user declined,” the report stated. BCBSVT had turned to a mental health carveout to manage its beneficiaries’ use of mental health and substance abuse services. (Kaiser kept its previous managed-care plan in place when it added benefits to comply with the parity law.)
At Kaiser, access to inpatient or partial treatment saw a substantial drop. “There was a 32 percent lower likelihood of obtaining inpatient or partial MH treatment following parity,” the report stated, “as Kaiser attempted to target inpatient care more efficiently, increasing the use of step-down or diversion programs as an alternative to hospitalization.” Use of outpatient services, however, increased under parity.
Substance abuse treatment was more difficult to access in both health plans after parity—51 percent lower in Kaiser and 34 percent lower in BCBSVT.
The Vermont report stated that “managed care. . .was an important factor in controlling costs following implementation of parity. . . . Increased use of managed care helped make parity affordable, but may have reduced access and utilization for some services and beneficiaries.”
As for the warnings that employers would stop insuring workers at all as a way to avoid the parity mandate, only 0.3 percent of employers dropped coverage in reaction to the parity law, and “there was no evidence that a significant number of employers chose to self-insure to avoid the parity mandate,” the report noted. Only 3 percent of employers turned to self-insurance for this reason.
“Both the South Carolina and Vermont experiences show that the cost of parity is easily achievable without breaking the bank. The data are in keeping with three reports to the Senate Appropriations Committee since 1997” showing that parity will involve only minimal cost increases, emphasized Darrel Regier, M.D., director of APA’s Division of Research and the American Psychiatric Institute for Research and Education, in an interview with Psychiatric News. It is troubling, he added, that “the level of care management in administering this benefit may be reducing access unnecessarily. We have to keep monitoring both quality of and access to care under parity laws, particularly for people with less-severe illnesses.” ▪
