Parity for Mental Health: History and Consequences

By Ginger L. Pomiecko

Introduction

The problem of mental health. Mental illness has a long history of being somehow different from medical illness.  Mental illness has been recognized as an a true illness only a relatively short time, and only an even shorter time, have we been able to make strides in actually treating it.  Perhaps due to our lack of knowledge, our inability to understand and outright fear of the mentally ill, mental disorders are still deeply rooted in social stigma.  There are some people even today who feel that some mental illness are just the result of character flaws that should be overcome with sheer willpower.  A recent survey of Americans found that some feelings towards people with mental illness have not changed much since the 1950’s.[i] Furthermore, doctors are often not able to treat mental disorders with a simple one-time visit to the doctor and a prescription; they often require long-term and expensive care.  With this in mind, it is no surprise that coverage for mental health is often not equal to that for traditional, physical illnesses. 

This difference in coverage does not, however, reflect a lack of need.  The National Advisory Mental Health Council reports that each year 22% of the adult population in the United States is affected with a mental disorder, and 2-3% of the adult population is affected with a serious mental disorder each year.[ii]  In addition to the suffering these illnesses cause, they also contribute to widespread societal effects including lost productivity in the workplace, crime, and poor performance in school.  Depressive illnesses alone in the United States annually cost the nation billions of dollars, according to the National Institute of Mental Health.[iii]  But mental illness can be treated.  A recent report of the Surgeon General emphasized the great progress science has made in not only understanding the biological bases of many mental illnesses, but also or new ability to treat them.[iv] 

If mental illness has a biological basis and can often be treated, then why shouldn’t health insurance plans cover its treatment like it does other illness?  In the last fifteen years both state and federal governments have tried to address this through the enactment of mental health parity laws.  Mental health parity laws prevent health insurance plans from discriminating between mental health and other kinds of illness in determining coverage.  Parity can take many forms; it may: 

·        Exclude substance abuse treatment.

·        Only apply to annual or lifetime benefit limits, meaning that there may be differences in the number of outpatient or inpatient visits allowed or amount of copays.

·        Be limited to “biologically based illnesses” which usually include schizophrenia, major depression, paranoia, developmental disorders like autism, and others that are clearly linked to chemical or developmental irregularities.[v]

·        Not apply to employers who are self-insured if it is a state law.

·        Include exemptions for smaller businesses.

Full parity usually refers to a law that does not allow any discrimination based on mental health care versus other kinds of health care.

The Roots of Parity

Treating mental illness. Mental health care was traditionally the role of the state.  In fact, approximately 85% of mental health care costs were paid for by the state in 1956, who not only supplied treatment, but also housing, food, and employment opportunities.[vi]  Over the years, however, financial support for mental health care started to come less from the state and more from private sources.[vii]

In the 70’s and 80’s, before the growth of managed care, costs for treating mental illness and substance abuse of employees and their families began to climb.  According to some estimates, the cost of treating mental health and substance abuse problems was rising at a rate almost double than the rate of other kinds of health care.[viii]  Although very high priced services, like detoxification and long-term psychotherapy were responsible for a large part of this rate increase, many insurance plans began to cut benefits for all mental health and substance abuse services.  These cuts in benefits were further rationalized by many employers’ attitudes about mental illness.[ix] 

There were several reasons in addition to cost that may have made it easier for insurers to decrease mental health coverage.  First, some believed that some people were taking advantage of mental health services by getting long courses of therapy when they may not have needed it.  Secondly, others may have felt that chronic mental health problems and addiction should be public health responsibilities of the state, or perhaps they didn’t feel that mental illness was a real disease at all.  Lastly, still others may have felt that not enough was known to successfully treat mental illness, so any care would be wasteful.

The first parity laws. At the same time insurers were reducing mental health coverage, more and more states were introducing health insurance mandates, which placed certain restrictions and requirements on all employer health plans. (State laws, however, are unable to apply to self-insured employers due to the federal Employee Retirement Income Security Act (ERISA) of 1974, which prohibits the state regulation of self-insured companies.) The growth of mandates, in conjunction with the growing organization on health care advocates encouraged various forms of parity in a handful of states.  Maryland, Minnesota, Maine, New Hampshire, and Rhode Island had put parity laws in place requiring similar benefits for mental illness as for other kinds of illness by 1995. In addition, some states, including Texas, North Carolina, Ohio, and Massachusetts created varying degrees of parity for some or all of their state employees.

Even some employers began to look into parity, before any laws were passed.  Some of them felt that treatment of mental illness and substance abuse in their employees and employees’ family members would be cost effective.  A Digital Equipment Company official says regarding its 54-page “Standards for HMO Performance”, “We believe this provides real mental health parity.”[x] However, most states and employers in the mid-1990’s still did not have any form of mental health parity, and those state parity laws that did exist did not apply to employers who were self-insured. Without federal action, many people were left with diminishing benefits.

The MHPA

Federal Legislation. In April 1996, Senators Pete Domenici (R-MN) and Paul Wellstone (D-MN) first introduced the forerunner of the Mental Health Parity Act (MHPA) as an amendment to the Kassebaum-Kennedy bill for healthcare portability.  These two senators came together to create this bill due to their respective personal experiences with mental illness.[xi]  Senator Domenici is the father of an adult daughter who had chronic schizophrenia that was being treated successfully at the time of the bill, and Senator Wellstone also was acquainted with mental health disorders through his family; his brother was struggling with drug addiction and bipolar disorder at the time.

The large advocacy group for those in need of mental health care, National Alliance for the Mentally Ill (NAMI; for whom Senator Dominica’s wife also happened to be a board member), as well as the Coalition for Fairness in Mental Illness Coverage helped to push forward mental health parity, citing public support.[xii]

Although mental health parity passed the Senate as an amendment to the Kassebaum-Kennedy bill, Senators Kassebaum and Kennedy eventually removed all the amendments from their bill so that it could pass more easily, causing Domenici and Wellstone to have to start over again.  They soon attached the MHPA to the VA/HUD Appropriations bill, HR 3666. Those in support of the MHPA threatened to filibuster if the amendment was removed, but still faced opposition from Republicans. The vote on this bill, with or without amendments was going to be right before an election, making congressmen very careful of how they voted.  Therefore, those in favor of the parity act agreed to some compromises in order gain the support of their opposition.  The final bill included a sunset provision (the act would automatically expire September 30, 2001 if not renewed), a one year wait before the act would go into effect, exemptions for certain kinds of businesses, and other limitations that appeased opponents.[xiii]  The act was passed and signed by President Clinton in September of 1996 and went into effect January 1, 1998.

What does the MHPA do? The MHPA is a very simple parity law: It prohibits employers from having different annual or lifetime benefit limits for mental illness versus those for medical and surgical.  However, there are some limitations to which plans this applies.

Limitations. First, the MHPA only applies to policies that already offer mental health coverage; if an employer does not offer mental health coverage, it is not forced to add it.  Secondly, employers with 50 or fewer employees are also exempt. Finally, if a company can show that adhering to the law had raised their health care costs by more than 1%, they can apply for an exemption.

The last provision was added partially to quell the fears of rising costs to businesses.  Although many would have liked to be granted this exemption prospectively, it is only given once evidence is shown that there has been a true increase in health care costs due to the MHPA.  It was estimated that approximately 10% of plans that had to adhere to the MHPA might experience an increase in costs above 1% (approximately 11 million workers and dependents)[xiv] and according to a survey by William M. Mercer of over 300 major employers, fewer than 2% intended to try to claim the 1% rule exemption.[xv] 

In addition to these exemptions the MHPA does not apply to substance abuse treatment at all. Because substance abuse and other mental illness are often tied, the lack of inclusion for substance abuse treatment may make parity laws more expensive in the long run, rather than less.[xvi]  The senior vice president for medical affairs of Harvard Pilgrim Health Care states, “Most of the folly of mental health parity laws is that they don’t apply to substance abuse.  Many people with major mental illnesses have substance abuse problems as well. And proper treatment of substance abuse is something we can do relatively effectively in a relatively short period of time.”[xvii]

Parity would also give insurers a large incentive to create new restrictions to mental health care through managed care.  If a company felt that the MHPA was going to increase its health care costs, it could respond in several ways. First, the MHPA did not prevent the overall decrease in annual or lifetime ceilings for both mental and medical/surgical health benefits, or the creation of one universal set of limits including both mental as well as medical and surgical benefits.  Secondly, the insurer could still increase co-payments or deductibles for mental health visits to be more than those for other kinds of healthcare visits.  Third, the insurer could place an unequal limit on the number of mental health care visits versus other kinds of visits.  Lastly, insurers could raise insurance premiums.

Advantages.  Despite the above weaknesses, advocates had many reasons to support the MHPA.  One had to do with the nature of the competitive market place of health care.[xviii]  Generally, health insurance plans want to attract healthy patients in order to keep down costs, however, because people with mental illness often have a chronic need for care, they are naturally attracted to plans with better mental health coverage.  Because mental health is so much more expensive to treat, mental health patients are the last kind of patient an insurance plan would want to attract.  Therefore, the only way to get insurance plans to start offering better mental health care would be by insuring the level playing field of a mandate.

Another reason to support the MHPA also had to do with the chronic nature of mental illness.  Even though the MHPA would not keep insurance plans from creating new financial burdens for patients, it would help to increase annual and lifetime benefits.  For people who are chronically ill, especially those using inpatient care, this could prevent tremendous costs.  In fact, Ronald Sturm found that children and adolescents have higher inpatient costs for mental illness and thus these families would get a greater benefit from an increase in annual and lifetime benefits.[xix]  This is a particularly vulnerable population whose increase in care opponents would have difficulty publicly denying.

Lastly, there is no doubt that part of the push towards parity was a desire for validation on behalf of those suffering from mental illness. As pointed out by Hennessy and Goldman (2001), it is already difficult for a person suffering from a mental disorder to seek help if that disorder in fact, impairs their view of the world.  What is worse, however, is the reinforcement of the idea that those with mental illness are not actually sick, and in need of care, as is demonstrated by discriminating between mental illness and “real” illness.[xx] The MHPA could be a first step to reducing the stigma of seeking help for mental illness.

Opposition to Parity

Concerns over costs. The cost estimates of the original Domenici-Wellstone proposal ranged from an increase of 2.5% to 11.4%[xxi] Many retorted though, that these estimates represented costs to the older indemnity plans that did not control costs as well as the more modern managed care plans.  Parity advocates believed that with the newer, more cost effective health care management plans, increases in costs would be minimal if at all.[xxii]  Furthermore, they stated, that even minimal costs would be offset by gains made from the reduced absenteeism and greater productivity that would result from increased access to mental health services for employees.[xxiii]

The predictions of three major studies and state experience did not, however, support the idea that costs would rise significantly.  First, The Congressional Budget Office predicted a cost increase of .4% as a result of the final Domenici-Wellstone proposal and possibly as low as .16% if employers reduced certain other mental health benefits to compensate for the cost of adjusting cost ceilings of their mental health coverage.[xxiv]

Secondly, the federal government’s Substance Abuse and Mental Health Services Administration (SAMHSA) commissioned a study done by Mathematica researchers[xxv].  They found after looking at the experiences of two employers and five states with parity in effect for at least a year that parity laws affected premiums very little, especially in managed care plans.  In their estimates, full parity for both mental health and substance abuse services would, in the beginning, increase premiums 3.6 on average, with lower increases correlating with a higher degree of plan management.

Finally, one of the most famous studies around the time parity was being debated used data from 24 managed behavioral health care plans with 140,000 enrollees and concluded that the federal law’s removal of dollar ceilings would increase costs for a plan with a $25,000 annual limit only by $1 per enrollee per year.  This same study also found that for a plan with no deductible and small co-payments, allowing unlimited inpatient days and outpatient visits would only cost enrollees an additional $7 per year.[xxvi]  Roland Sturm, the author of the study felt that costs for parity in the form of managed care, “(were) not going to go through the roof.”[xxvii]

The experiences of states that had already experimented with parity also supplied helpful information.  Minnesota, which had extensive managed care at the time of the introduction of mental health parity on copayments, deductibles, lifetime limits, as well as substance abuse, saw no significant increase in coverage premiums.[xxviii]  Rhode Island state officials’ estimates show only a .33% in mental health costs since introducing parity.[xxix]  A managed care company in Maryland reported small levels of cost increases the first year of mental health parity; these costs fell back to previous levels the second year.[xxx]  Massachusetts demonstrated the importance of managed care on keeping mental health care costs down in 1993.  That year Massachusetts Group Insurance Commission created a managed behavioral care care-out for state employees and removed its annual dollar limits on outpatient patient care.  They experienced a 20% drop in outpatient costs the first year this strategy was implemented.[xxxi]

These reassurances that costs would not go up significantly, may have seemed fairly convincing, but the research done so far at this point in the debate was confounded by the introduction of managed care. As pointed out by a report by the National Advisory Mental Health Council, “Because in all cases to date parity was implemented in conjunction with managed care, it is difficult to assess the effects of parity alone.”[xxxii] 

 No more Mandates! Another objection to parity was the increasing intrusion by the government on health insurance industry.  R. Lucia Riddle, vice president for government relations of the Principal Financial Group warned that even if the cost of the MHPA is small, it is just one of many present and possibly future mandates.  “…We get hit with a number of mandates, and those costs do add up.”  She pointed out that a study that showed that about 30% of every premium dollar in state-regulated plans were due to mandates.[xxxiii]  In 1998, it was estimated by one health insurance official that the total number of all state mandates was near 1,300.[xxxiv] Advocates for mental health parity questioned if the increasing number of mandates did not just strengthen their case that regulation is necessary to ensure proper health coverage.[xxxv]

Push towards more managed care. When parity was first being introduced in many states, managed care was not as ubiquitous or as tight as it is now, and many people were happy with that. The introduction of mandates like parity fueled the growing trend toward managed care.  At least one study showed that in the states that adopted parity laws, a switch to managed care soon followed in almost every occasion in which parity was adopted.[xxxvi] The Mathematica study which looked at the experiences of states who adopted various forms of parity before the MHPA found that not only did the introduction of managed care at the same time as parity prevent an increase in costs, but it also greatly decreased the amount of mental health and substance abuse services.[xxxvii]  It could have been argued that if costs due to parity were kept down through restricting access to mental health services or otherwise discouraging them, then parity may not really be as helpful as lawmakers meant it to be.

The Aftermath of Federal Parity

The management of care.  As was seen in other states, and as predicted by some involved in the federal debate, managed care found ways to circumvent increased costs due to parity.  For example,  major report by Mercer/Foster Higgins found Since the introduction of the MHPA,  one third of firms with more than 500 employees introduced changes in day or visit limits.[xxxviii] In addition, according to the U.S. General Accounting Office report issued in May of 2000, 14% of employers had yet to comply with the MHPA, and of those who did comply, 87% continued to limit their mental health benefits in some other way.[xxxix]

Do these changes made by managed care negatively affect access to mental health care? Yes, according to Sturm, et al., who conducted a national household survey.  They found that although those in managed care are less likely to receive no mental health care at all, they experience more delays in treatment or less treatment than desired, than those in unmanaged care practices.[xl]  A NIMH study supports this; they found that while the number of people seeking outpatient care increased, the number of visits per person did not increase, and the use of inpatient mental health services declined.[xli]

Costs. The National Institute of Mental Health assessed the findings of many large studies, including that of a large state that introduced parity.  They determined that parity contributes little if at all to total health care costs.  NIMH is thus far unable to determine, however, to what degree costs were shifted between different health care sectors due to parity.[xlii] The Surgeon General also found no reason to fear parity, characterizing it as, “an affordable and effective objective.”[xliii]

Getting the ball rolling. The enactment of Federal Parity may have been the impetus for more states to enact their own parity laws, some of which are even more powerful than the MHPA.  The NIMH (2000) report states:

“Following the 1996 MHPA, 14 States also enacted statutes to match the federal parity statute including: in 1997, Alaska, Arizona, Delaware, Indiana, Kansas, Louisiana, Montana, Nevada, North Carolina, South Carolina, Tennessee, and West Virginia; and in 1998, Florida and New Mexico. Of the 14, seven States matched the federal statute in 1997 or 1998, and then opted to have a "stronger" State parity statute: Delaware (1998), Indiana (1999), Louisiana (1999), Montana (1999), Nevada (1999), New Mexico (2000) and Tennessee (1998). In addition, five States included mental health parity for their State employees: Ohio (1990), Texas (1991), North Carolina (1991), Massachusetts (1994), and Indiana (1997).”[xliv]

Different states enacting different parity laws give rise to the opportunity for researchers to look at the effects of a variety of legislation on health care.  This could provide the federal government with valuable ideas for parity policy that are actually backed up with data.

The MHPA also may have influenced increased parity for about 9 million employees covered by the Federal Employees Health Benefits Program.  In 1999, President Clinton had the Office of Personnel Management benefit federal employees with not only full mental health parity, but also full parity for substance abuse services.[xlv]

Current Legislation

The Mental Health Equitable Treatment Act. Recognizing the setting of the sun on the MHPA, in  March of 2001, Senators Domenici and Wellstone once again introduced an amendment enforcing parity for mental health.  The Mental Health Equitable Treatment Act of 2001 (S. 543), is much closer to full parity than is the MHPA.  This piece of legislation mandates that health plans that provide mental health coverage cannot provide different regulations between mental health coverage and medical or surgical coverage for the following: frequency of treatment, number of visits or days in the hospital, general duration of treatment, deductibles, coinsurance, copayments, or other costs to the consumer.

S. 543 passed the Senate committee of Health, Education, Labor, and Pensions, and was attached by the Senate to a fiscal year 2002 Labor-HHS appropriations bill in October of 2001.  However, S. 543 did the place of the expiring MHPA as hoped; this bill was removed from the appropriations bill, and President George W. Bush signed a one-year extension to the MHPA into law instead. The MHPA is now scheduled to expire December 31, 2002. 

The potential for expanded federal parity is far from over.  As of this writing, S. 543 is still alive in the Senate, awaiting passage.  Furthermore, on March 13, 2002, the U.S. House of Representatives Committee on Education and the Workforce Subcommittee on Employer-Employee Relations held a hearing entitled,  "Assessing Mental Health Parity: Implications for Patients and Employers", the first House hearing ever on parity. Shortly after this hearing, on March 20, 2002, Reps. Marge Roukema (RNJ) and Patrick Kennedy (D-RI) introduced a version of S. 543 to the House: The Mental Health Equitable Treatment Act of 2002.[xlvi]  This bill is very similar to its version in the Senate, but it goes even further in that it includes a provision for studying the cost of including substance abuse in federal parity regulations.

Conclusion

Despite the current push for stronger federal parity, the question still remains how effective it really is.  Even when the original MHPA was first introduced, many believed that parity would not actually benefit consumers because in order to comply with the new requirements, managed health care plans would just cut back in other areas.[xlvii]  The Mercer/Foster Higgins and the General Accounting Office reports mentioned above both bear this out.  Furthermore, substance abuse is still not included as a mental illness under the MHPA. The House version of the Mental Health Equitable Treatment Act of 2002 may move in this direction, but only by very little.

Lastly, there are still more than forty million Americans have no health insurance at all.[xlviii]  Some feel that we ought to be focusing first on finding a way to grant access to basic health care for the many before we start spending money as a nation to give better health care to the few.[xlix]

In contrast to these arguments, modern advances in the understanding and treatment of mental illness begs the question, why should mental illness be treated differently?  The 1999 Surgeon General Report on Mental Illness clearly showed with a preponderance of evidence that mental illness is real illness that can treated. Millions of people who are currently suffering could be leading much more satisfying and productive lives, to the benefit of us all.[l]  If parity laws do not actually help the mentally ill in the short run with improved access to services, perhaps they will help in the long run as a symbolic gesture that mental illness is just that, an illness, and it can be treated.

Endnotes