Health & Human Services

Piecemeal Parity

When it comes to health insurance for mental illness, states are still wary of full coverage.
by | February 2006

Governor Linda Lingle can talk tough. She has dealt with hostile questioners during public appearances and doesn't shy away from difficult subjects. But when she appeared before her state's Senate Health Committee three years ago, the toughness unraveled.

The subject was mental health, and it literally hit home. Lingle's mother has battled mental illness since Lingle was eight years old. So the governor's heart was in it when she testified that it didn't make sense for health insurance companies to treat mental disorders differently from physical illnesses. A mental disorder "is a sickness. It's an illness," she pointed out. "We don't come and testify for diabetes or high blood pressure, and yet you'll prescribe medicine for those for years, for decades, if that's what it takes."

When Lingle testified, Hawaii had a mental health parity law. But it pertained to only three illnesses: schizophrenia, schizo-affective disorder and bipolar disorder. If Hawaii residents suffered from one of those, they were able to get health coverage from their employer equal to that of a physical ailment. But residents who were experiencing other mental illnesses, such as depression or delusion or obsessive-compulsive disorder, were relegated to another class of coverage, with more limits on doctor visits and other inpatient care services.

Hawaii's patchwork parity system is no anomaly. About 40 states have passed mental health parity laws, but that doesn't mean a high percentage of the mentally ill are covered for treatment in the same way that the physically ill are. State mental health laws vary widely and only a handful of states mandate comprehensive mental health parity.

Most of the rest provide pieces of parity. Some laws limit coverage to a few diseases, and are known as "diagnosis-based" laws. Most do not include illnesses stemming from substance abuse. In a number of states, such as Arizona, Illinois, Iowa and Massachusetts, small businesses (fewer than 50 employees) are exempt from parity laws, which eliminates a lot of employees. And in several states, only state employees are covered by parity laws.

DEFINING MOMENTS

The arguments against comprehensive coverage have been about cost and where to draw the line on which ailments should be mandated for coverage. There is wide agreement that there should be coverage for such major illnesses as schizophrenia and bi-polar disease--ailments that have a biological base and can be treated with prescription medication. Where there is less accord is at the other end of the spectrum, on disorders that might fall closer to the category of the "worried well" and not be as amenable to medication--that might, in fact, end up with insurance companies paying for years of talk therapy.

Health insurance companies worry about definitions of mental health so "expansive" that would make it difficult for employers, health care purchasers and health insurance plans to determine what's covered and what's not. If states were to include all the illnesses in the "Diagnostic and Statistical Manual of Mental Disorders IV," known as the DSM-IV, "it would be so expansive it would be meaningless," says Larry Akey, spokesman for America's Health Insurance Plans, a trade association. Akers points out that caffeine addiction and jet lag are listed as mental concerns in the manual. So far, he concedes, states have not called for coverage of those conditions in parity laws.

For the past decade, as states have passed various versions of parity laws, businesses and insurers--worried about the cost of broad mental health coverage--have been allies in opposing a comprehensive approach, while mental health advocates--concerned about the well being of the mentally ill and their families--have continued to push for greater parity. Several states or pilot programs with broad-based mental health coverage have become test cases--studied and analyzed by health care experts to assess their impacts on care and, among other things, to look at the cost question.

ANALYZE THIS

Vermont, which passed a comprehensive parity law in 1997, requires all employers who provide health insurance to offer a plan that covers mental health and substance abuse disorders to the same extent as physical illnesses. No business, however small, is exempt from the parity regulation.

About a year after Vermont's program went into effect, the U.S. Department of Health and Human Services put the state's parity law under a microscope, studying its effects during the first two or three years of its life. One of the researchers' findings had to do with the price tag: Parity for mental health and substance abuse was achieved without a large increase in the cost of premiums. Moreover, only 0.3 percent of Vermont employers said they dropped health coverage for employees after the parity law became effective. And only 0.1 percent reported that they decided to self-insure because of the new law.

As to expenses for insurance companies, the findings ran counter to fears about runaway costs. The amount Blue Cross Blue Shield of Vermont ended up spending after parity was passed increased by 4 percent. That came to 19 cents per member per month. Mental health substance abuse coverage was a rather small percentage--2.47 percent-- of the company's overall increase in costs for health care coverage.

As to the impact on individual health, the report found that many more Vermonters sought outpatient treatment once they had insurance coverage. Not surprisingly, compared with out-of-pocket costs before 1997, they were paying less personally for mental health and substance abuse services. The number of people who spent more than $1,000 a year of their own money for treatment for serious mental illnesses was slashed in half.

North Carolina's comprehensive mental health parity law has also been studied and analyzed--and over a longer period of time. The mandate has been in place for nearly 14 years. However, it is a pilot program that covers only state employees. Nonetheless, the results on cost and utilization have been similar to those in Vermont. Among other findings, there was a 70 percent reduction in hospital days for mental illnesses, which suggests that state employees and their families were not waiting for a psychotic break or a suicide attempt before seeking treatment for a family member.

Oregon legislators approved a comprehensive parity program this year, and they looked to the experience of the state Public Employees' Benefit Board in designing it. Several years ago, the Board opted to provide parity for mental health and substance abuse for its employees and has been tracking how the program affects premiums, service utilization and other aspects of its health care plans.

The findings are similar to those in Vermont and North Carolina. Premium increases came to less than 0.5 percent in the first two years and are expected to be even lower when calculations are available for the following two years. Board analysts figure there is pent-up demand after a new benefit is offered and that the initial bulge in demand will even out.

One of the more controversial aspects of the Board's--and now Oregon's--program is that it includes coverage for substance abuse disorders. Many people consider substance abuse a matter of personal responsibility--or irresponsibility--and therefore not something for which others should pick up the tab.

That is not the tack that David Pollack, medical director for Oregon's Office of Mental Health and Addiction Services, takes. "It's a terrible hill to climb getting people to understand it's an illness and that people shouldn't be punished for it," he says. He agrees that people should take responsibility for their actions but that certain people have a predisposition to developing disorders from using alcohol, drugs or other prescribed substances and that they should be able to get coverage for their ailments.

GETTING HELP

States can only do so much on their own. Some 85 million people are covered by self-insured plans, and no matter what kind of parity law a state has, it won't help provide coverage for people who hold those policies. Nor do state parity laws cover Medicaid beneficiaries or those enrolled in other federal programs. The federal government passed a parity law in 1996 but left many loopholes in it.

As for Hawaii, whether or not Lingle made the difference, the legislature two years later increased the number of mental illnesses covered by the parity law to nine. All the ailments fall into the biologically based category, including major depression. In addition, illnesses arising from substance abuse are now covered.

As it adds pieces to its parity law, Hawaii is edging closer to a comprehensive program. The state has "taken an incremental approach to parity," says Michael Wiley, a professor and director of mental health research at the University of Hawaii. He expects mental health stakeholders to continue to fight for further expansion of parity. And that piecemeal approach--rather than Vermont's full-blown program--may be the way most states eventually get to real parity.

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