Deadlines Loom for Parity In Mental Health Benefits

Plans can no longer require higher co-pays, higher deductibles, or lower lifetime or annual dollar limits for mental health than for physical and surgical coverage.

Since provisions of the new mental-health-parity law apply to benefit-plan years beginning in January 2010, companies should assess their benefits this summer and make the necessary adjustments in time for fall open-enrollment periods, experts suggest.

Yet amid the bailout hubbub last fall, many CFOs may have missed the fact that the equalization of mental-health benefits was a feature of the Emergency Economic Stabilization Act, signed by President Bush in October 2008. Besides authorizing $700 billion for the purchase of bank assets, the act also included amendments to the 1996 Mental Health Parity Act that will require many employers to make changes to their health plans to ensure equality between mental and physical health benefits.

While the legislation does not require that employers provide mental heath coverage, it does mandate equality in coverage at those companies with more than 50 employees who already offer both kinds of benefits.  Plans can no longer require higher co-pays, higher deductibles, or lower lifetime or annual dollar limits for mental health than for physical and surgical coverage.

“There are many plans that cap mental health and substance abuse visits in many different ways,” says Amy Gordon, a partner in Chicago with McDermott Will & Emery, a law firm. “Some will cap the benefit at 20 visits per year, and after that the plan just no longer provides coverage. Many do not provide access to out-of-network providers, although they do on the medical and surgical side of the house.”

Ed Kaplan, the national health practice leader at The Segal Company, a benefits consulting firm, says that many employers will need to review their benefits. “The average employer today does have some limits in their mental health plan,” he says, noting that the average plan typically covers 30 days of outpatient counseling per year.

In a random sample of 100 Segal clients, Kaplan said, however, that he found about 20% with very restrictive plans or low benefit coverage, covering anywhere from 15% to 50% of the cost of mental health visits after a co-pay. “Those companies will see a substantial impact on their budgets as they bring those plans into compliance,” he says.

The jury is still out on the dollar effect the new rules will have on most employers, however. A recent Segal survey suggests, on one hand, that compliance should be not especially costly. A recent Segal survey of 22 national and regional health insurers, who together represent about 80% of the total group health insurance market, found that compliance should result in less than a 1% increase in overall medical costs for the majority of plan sponsors.

Kaplan attributes the small price tag to the fact that most mental health claims — both outpatient and inpatient — are resolved prior to reaching the coverage limit. Behavioral health costs also comprise just 5% of overall health costs, so even if they increase, the impact will still be relatively small. He adds that, for as many employees as will take full advantage of expanded mental health benefits, there may be an equal number who will never seek treatment.

But Gordon is skeptical. “Some of the clients I’ve spoken with are really concerned that there will be no limits on out-of-network visits, which can make it hard to keep a handle on costs,” she says. “There also may be a lot of people who weren’t seeking care because they were responsible for a huge chunk of the cost. It’s hard to quantify the impact of the change because there are so many unknowns.” 

Despite the widespread benefit belt-tightening underway at many companies, Kaplan says, most of his clients are taking the changes in stride. “It’s one more thing in the soup,” he says. “Overall budgets are very tight, and this just adds to it. It results in squeezing the insurance companies harder, squeezing the pharmacy benefit managers harder, and more requests for benefit redesign options.” Kaplan says companies who do offer limited mental health coverage and need to make major adjustments may make across-the-board changes to their plans-raising co-pays from $20 to $25 for all kinds of coverage, for example-to help cover the added expense.

No one has mentioned dropping mental health coverage entirely, says Kaplan, an option that, while clearly contrary to the spirit of the new law, would be a legal way to avoid the parity requirements. As Gordon notes, “You don’t want to be known as the company that discriminates against the mentally ill.”

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