Government News
California Finds Parity Affordable, But More Patients Forced Into Carveouts
Psychiatric News
Volume 37 Number 11 page 4-4

An evaluation of the implementation of California’s mental health parity law contains plenty of good news but also some not-so-good news.

Project director Timothy Lake and his colleagues at Mathematica Policy Research Inc. (MPR) found that premiums did not increase substantially in the year following implementation of the law, and employers did not drop coverage or switch to self-insured plans to avoid its mandate. (Mental health coverage must be offered if coverage for other health problems is offered.)

The law, which became effective in July 2000, requires all private health insurance plans to provide equal coverage for physical health and selected mental health conditions, including serious mental illnesses in adults and serious emotional disturbances in children.

The California HealthCare Foundation commissioned MPR to conduct the study, "A Snapshot of the Implementation of California’s Mental Health Parity Law," which was published in February.

Despite the positive findings concerning premiums and maintenance of coverage, researchers identified several problems in implementing the parity mandate:

• Some consumers experienced disruptions in psychiatric care resulting from a shift by the insurance plans to managed behavioral health organizations.

• Implementation of parity for selected conditions, rather than all mental health diagnoses, created administrative challenges and confusion.

• Consumers were not well informed about the changes.

Lawrence Lurie, M.D., chair of APA’s Managed Care Committee and a California psychiatrist, told Psychiatric News, "The California Psychiatric Association worked very hard for five years in support of the legislation, and we were delighted when it passed. Overall the impact has been good, but the law did have some unintended consequences."


With little warning, several large health insurance companies, he said, switched coverage to managed behavioral health organizations (MBHOs) from integrated physician services.

As a result, in some cases, patients had to change doctors or were left without care while the MBHOs established or expanded their provider networks. According to the report, physicians often had to act as intermediaries for patients, helping them obtain appointments with clinicians in the new networks.

Several medical groups documented a surge in telephone calls during the first six months of parity implementation from people who did not know how to access care or who experienced waits of up to two hours to speak to a customer-service representative using the MBHO toll-free lines. Another issue, according to Lurie, is the impact the shift to MBHOs has had on integrated care.

"Despite the administrative hassles and low pay," he said, "the psychiatrists in my group, Brown and Toland, took managed care patients because we all believe in the concept of integrated medical services."

However, when the insurance companies moved to carve out mental health benefits, the group lost 80 percent of its mental health business and could not survive effectively as an integrated practice. A number of integrated medical practices greatly reduced the role of psychiatrists as a result of the increased use of MBHOs, according to Lurie.

In March the Executive Committee of APA’s Board of Trustees approved a position statement about the harmful effects of carveouts.

According to the statement, "The separation of the funding and delivery of psychiatric and/or substance abuse services (carveouts) from general medical services is detrimental to providing high-quality comprehensive care. The carveout mechanism leads to stigmatization of psychiatric patients and the marginalization of psychiatric treatment."


Lake and his colleagues said that people interviewed for the study frequently cited the generally inadequate supply of psychiatrists in California, noting an especially severe shortage of child psychiatrists.

The problem is exacerbated, according to the report, by previous reimbursement reductions. Lurie concurred with the observation in the report that psychiatrists are in such high demand by patients that many of them do not need to participate in MBHO networks to maintain viable practices.

Thirty-four states have mental health parity laws. California’s law is similar to those of 18 states that have restricted their parity laws to cover either serious mental illnesses or "biologically based" conditions. The California law, as do many of the other state parity laws, excludes treatment for substance abuse.

At press time, President George W. Bush, who last month endorsed a federal parity law, had not addressed the issue of whether he favors a bill that covers all mental illnesses or only the most serious disorders. The Senate’s Domenici-Wellstone bill (S 543) would mandate parity for every disorder listed in APA’s Diagnostic and Statistical Manual (DSM) (Psychiatric News, May 17).

The report, "A Snapshot of the Implementation of California’s Mental Health Parity Law," is posted on the Web at www.mathematica-mpr.com/PDFs/snapshot.pdf.

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