You’ve had a year to get ready, and now the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA), signed into law by President George W. Bush in the waning months of his presidency, is about to go into effect.
The MHPAEA, which applies to both self-funded and insured group health plans, prohibits those plans from imposing financial requirements or treatment limitations on mental-health and substance-abuse benefits that are more restrictive than the predominant requirements and limitations imposed on medical and surgical benefits.
“Many employers offered limited substance-abuse and out-of-network coverage, as a way to contain costs,” said Stella Antonakis, senior consultant in the national clinical practice of San Francisco-based Buck Consultants. “That is no longer allowed.”
“Historically, employers have implemented annual day and visit maximums, lifetime maximums and sometimes dollar maximums on substance-abuse benefits,” said Kathleen Mahieu, a principal in Hewitt’s Health Management consulting practice. “These limits were implemented to combat a perceived abuse of the benefit through the 1980s. Many employer plans have also had lower reimbursement levels for out-of-network treatment than medical. For example, medical benefits may cover out-of-network service
at 70 percent, while mental health/substance abuse (MH/SA) services covered out-of-network at 50 percent. The federal parity legislation now requires employers to ensure that the benefits provided for MH/SA are not more financially restrictive than medical/surgical benefits and do not contain limits that are more restrictive than medical/surgical benefits.”
Of course, Mahieu said, the goal of the legislation is that employees “will generally
see fewer financial barriers seeking MH/SA treatment. By removing the financial barriers
and limitations, it is expected that individuals who need care, and may not have obtained it in the past due to the cost, will now receive the treatment they need.”
The downside, for employers trying to keep a tight rein on health insurance costs, is that “now that these limits must be removed to comply with parity, utilization under the plan will increase significantly and therefore drive an increase in program costs. The design
limitations have historically been one of the ways to manage utilization under the plan. Without those limitations, employers have to rely on their behavioral health-care vendor to manage the benefit much more heavily. It is critical that employers work with their behavioral health-care vendor to ensure they have robust medical-necessity, utilization-management and care-management processes in place.”
Another issue with this legislation is what exactly compliance means. According to Terry Cahill, co-owner and senior vice president at Perspectives Ltd., headquartered in Chicago, “The biggest problem is that the federal government hasn’t delivered guidelines for compliance, which it was supposed to do in October,” he said. “Employers are required to be in compliance beginning in January, but no one knows exactly what that means. Furthermore, even when the guidance comes, it will be difficult to do an apples-to-apples comparison between mental health and substance-abuse treatments and medical/surgical. Some things are not comparable. For example: There
are residential treatment centers on the substance-abuse side. What do you
compare that to? A nursing home? What about intensive outpatient treatment for
substance abuse, where people come three or four times a week for three or
four hours at a time? What on the medical side fits that?”
Another question plaguing people, Cahill said, is around deductibles: “Do medical
and mental-health/substance-abuse expenditures count toward one deductible
or toward separate deductibles?”
How to solve such puzzles?
“The best advice I’ve heard so far is to have a solid rational for everything you
put in your benefit,” he said. “Then, if you need to change things when the
guidance comes out, fine. But at least you have a good argument for the choices
And there is another potential problem to avoid. “One of the biggest pitfalls for employers will be when the employer is in a state where there is an existing parity law,” noted attorney Sheryl Willert, managing director of Williams Kastner, working out of its Seattle office. “Some employers may believe that there is no requirement to comply with the federal law if there is a state law. They should not be fooled. Unless there is a specific statement in the state law that says it pre-empts the federal law, the federal law
must be followed. “
In terms of measuring the costs of the new law, Hewitt’s Mahieu advises employers
to start compiling data.
“As employers implement these changes, we recommend that they monitor program utilization and cost pre- and post-parity changes,” she said. “We suggest that employers obtain detailed MH/SA utilization and cost data from their behavioral health care vendor now.This can be used to establish a baseline pre-parity and can be used in future years to determine the impact on cost and utilization as a result of the parity changes. For many employers, detailed MH/SA data has not been available from their health plans. So, we would encourage them to work with their vendor now to obtain this data”
Although the law requires parity in almost every aspect of health insurance, the act does not mandate MH/SA coverage. So perhaps dropping all such coverage is a cost-saving solution? Think again, and think long-term, said Dr. Robert M. Kramer, senior director of business development for Ceridian’s WorkLife Division.
“Mental-health benefits have demonstrated the ability to reduce medical costs for
disorders related to depression and anxiety. This can include cardiovascular, gastrointestinal and even immune disorders.”
Antonakis agrees. “Even though the Parity Act does not mandate mentalhealth/
substance-abuse coverage, employers need to understand that the danger in not providing such coverage is that they could see a significant increase in their medical spending. Recent studies indicate that mental-health issues are among the leading causes of disability. All this directly contributes to rising health care costs, particularly when left untreated. And the indirect costs—like excess turnover, lost productivity, short- and long-term disability, presenteeism and absenteeism—are just as significant.”