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Employers weigh the costs and return on investment of mental health benefits parity.
Less than a year after the Mental Health Parity and Addiction Equity Act (MHPAEA) went into effect in 2010, a Wall Street Journal headline noted that the "Law Prompts Some Health Plans to Cut Mental-Health Benefits."
The Screen Actors Guild was dropping mental health and substance abuse coverage for about 12,000 members. Doing so allowed it to avoid the law's requirement that organizations providing those benefits must offer them with the same limits, deductibles and co-payments as their medical and surgical health coverage.
Woodman's Food Market, a Wisconsin-based grocer with about 2,200 employees, had announced a year earlier that it would eliminate mental health benefits, citing the unknown costs of removing the limits on coverage. Weeks later, the City of La Crosse, Wis., used an exemption for local governments, opting to continue its limited mental health benefits plan rather than expanding benefits. Other local governments followed suit.
Was the MHPAEA an object lesson in the law of unintended consequences? According to the Kaiser Family Foundation's 2010 Employer Health Benefits Survey, released in September of that year, 5 percent of companies with 51 or more employees—those not exempt from the law—had dropped mental health coverage in the previous year as a result of the federal mental health parity act.
The Case for Parity
When her company's HR team was discussing the benefits plan adjustments needed to comply with the Mental Health Parity and Addiction Equity Act of 2008, training and development specialist Jessica Wheeling (not her real name) brought a compelling perspective to the conversation: She is bipolar.
"Everyone was focusing on the costs," she recalls. "They were concerned, and convinced, that it would drive our costs up. I took the opposite position—that it could drive our costs down."
Wheeling made the case that making it easier for employees to treat mental illness or substance abuse would increase productivity. Wheeling's company, an electromechanical manufacturing company in the Midwest, has several thousand employees worldwide, with 150 at her division.
Wheeling says her mental health benefits help "keep me normal. People around me have no idea I suffer a mental illness unless I tell them. I make it to work every day, I am productive, I can handle all of the curve balls being in HR can throw me in a day, and I maintain my working relationships. The benefits work."
High out-of-pocket costs have traditionally been a significant barrier for employees needing mental health services. Wheeling's own experience bears this out. Before mental health parity existed, her in-network co-payment was 20 percent and she was limited to 20 visits per year. Once the benefit was exhausted, all expenses were out-of-pocket, and that affected her ability to get treatment.
"It could be very difficult. When I need my meds adjusted, sometimes I have to go in every week. Sometimes I would stretch the time between appointments because the out-of-pocket costs were so high," Wheeling says.
"Most people with mental illness can function perfectly normally," she says. "If you have proper treatment, proper medication and you're monitored, then you're a normally functioning adult. You only 'see' mental illness when it's not treated."
The law requires parity between mental health benefits and physical health benefits. It also bars the use of an employee assistance program (EAP) as a gatekeeper, where participants must take advantage of EAP services before accessing mental health and substance abuse benefits under the employer's insurance plan, unless a similar requirement applies to medical benefits.
But the statute does not require employers to offer mental health benefits at all. Overall, 15 percent of U.S. employers do not offer mental health coverage to employees, according to the 2012 Employee Benefits research report from the Society for Human Resource Management.
For some employers, it appears, opting not to provide mental health coverage is a simple way out of the law's requirements.
Costs Drive Decisions
When the MHPAEA was enacted in 2008, the Congressional Budget Office estimated that it would have a minimal impact on group health insurance premiums—an average increase of 0.4 percent. Health care premiums, however, have increased significantly in the past two years, continuing their longtime upward trend.
The average annual premium for employer-sponsored health insurance in 2011 was $5,429 for single coverage, up 8 percent since 2010, according to the Kaiser Family Foundation's 2011 Employer Health Benefits Survey. The average annual premium for family coverage was $15,073, up 9 percent over 2010. Between 2009 and 2010, the increases were 5 percent and 3 percent, respectively.
"The rising cost of providing health insurance is our members' No. 1 concern," says Kevin Kuhlman, manager of legislative affairs for the National Federation of Independent Business, which has 350,000 members.
Kuhlman says leaders of many small businesses, which often lack an HR function, rely on brokers, agents, advisors and accountants for advice about and access to employee health insurance. "Because most are in the small-business insurance market or in the individual market, where the most expensive policies are, any mandate can make it less affordable for employers to cover their employees," he says.
Some employers are excluding diagnoses and treatments for mental health disorders from their benefits.
In a 2011 survey by Kuhlman's organization, 20 percent of small employers currently offering employee health insurance said they expect to significantly change their benefits packages the next time they renew their health insurance plans. Almost all the anticipated changes involve decreased benefits, increased employee cost-sharing or both.
Some employers are excluding diagnoses and treatments for mental health disorders from their benefits, according to the U.S. Government Accountability Office. A November 2011 report on the implementation of the MHPAEA found that 41 percent of responding employers reported excluding a specific treatment related to mental health conditions and substance abuse disorders from their most popular health plan in the 2010 or 2011 plan year. That was up from 33 percent in the 2008 plan year.
In 2005, Oregon passed one of the most comprehensive state mental health parity laws, which took effect in 2007. It defines mental health broadly, requires coverage for alcohol and substance abuse, and does not exempt small businesses.
A group of researchers led by K. John McConnell, a research associate professor in the department of emergency medicine at Oregon Health & Science University in Portland, studied four years of expenditures for mental health and substance abuse services. The study period included the two years before the state parity law took effect and the first two years after.
Researchers compared expenditures for more than 100,000 people in plans subject to the law with those for nearly 19,000 people whose self-insured plans were exempt. Self-funded plans, which fall under federal regulation, are generally exempt from state parity laws.
The findings, published in the January 2012 American Journal of Psychiatry, showed a statistically insignificant increase of $15 per beneficiary covered by the state parity law.
The results surprised the research team. "We expected to see a larger increase in costs," McConnell says. He said the findings suggest that the impact of the MHPAEA on total health care spending could be relatively small.
McConnell notes that behavioral health spending is a fairly small part of overall health care spending. "In our study, expenditures for mental health and substance abuse services accounted for 6 percent to 7.4 percent of total expenditures, depending on the health plan," he says.
A Sept. 18, 2011, editorial in The Oregonian newspaper provides a pithy summary: "Oregon has demonstrated that a fair and humane insurance system is no more expensive than a cruel and discriminatory one."
The Cost to Employers
Untreated or undertreated mental illness carries significant financial burdens for employers, according to a January 2010 fact sheet from the National Alliance on Mental Illness:
Each year, 217 million workdays are completely or partially lost due to mental disorders.
Workers with depression lose an average of 5.6 productive hours per week, compared with 1.5 hours per week for workers without the condition. This costs employers $44 billion per year in lost productive time.
Employees with co-occurring medical and mental health conditions use more health care resources and have longer durations of disability.
Absence, disability and lost productivity related to mental illness cost employers more than four times the cost of employee medical treatment.
Source: "The High Costs of Cutting Mental Health: Mental Illness and the Workplace," National Alliance on Mental Illness, Arlington, Va.
At the Pawtucket Credit Union in Pawtucket, R.I., employee wellness remains a high priority and mental health has become an important factor in the wellness equation for the credit union's 235 employees, according to Anne Bernier-LaFleur, SPHR, vice president of human resources.
"We've always understood that mental health benefits are vital to our employees and their families," she says. When the MHPAEA was enacted, the credit union met the requirements without any reductions in coverage.
Bernier-LaFleur is convinced that removing the limits on mental health services ensures access to services that she considers a necessity in the same category as medical and surgical benefits. "If we invest in the physical and mental health of our employees, we will reap the benefits," she says. "Good mental health decreases absenteeism and presenteeism. For example, people suffering from depression can oftentimes come to work, but their attention span is lowered, their engagement is missing, and errors can increase." The bottom line for the credit union is the service it provides to members, according to Bernier-LaFleur, who adds that there is a link between healthy, engaged employees and great customer service.
She compares the effects of treating and managing mental illnesses to a common physical ailment. "It's the same as someone needing treatment for early onset diabetes," she says. "If treatment is sought, the condition can be controlled and the end outcome is better. The key is access."
Parity for Caregivers
In North Carolina, state law mandates that all group insurance plans offer full coverage for nine severe mental health conditions: bipolar disorder, major depressive disorder, obsessive-compulsive disorder, paranoid and other psychotic disorder, schizoaffective disorder, schizophrenia, post-traumatic stress disorder, anorexia nervosa, and bulimia. Coverage of all other conditions listed in the Diagnostic and Statistical Manual of Mental Disorders must include no fewer than 30 office visits and 30 inpatient or outpatient days per year.
At Top Priority Care Services, a Winston-Salem, N.C.-based provider of mental health, developmental disability and substance abuse services, mental health parity laws are as important to employees as they are to patients.
Low participation by small businesses in states that don't mandate coverage may be due to the high cost of health care insurance.
"Working in mental health care can be very stressful for employees," says Orielle Hope, director of human resources/quality improvement and training. "Having mental health coverage allows employees to seek counseling for stress management or other issues such as depression that may arise out of the helping profession."
Employees at the organization work one-on-one with clients and help them manage symptoms, build skills, and live as independently and normally as possible.
Hope noted another outcome of mental health parity: reduced stigma in seeking help. "Having this coverage included in group health plans leads more people to live better and more productive lives as a result of adequate and affordable mental health care."
Hope says her organization has increased co-payments and adjusted its deductible to ensure that employee coverage remains affordable while covering the extra expense of mental health and substance abuse coverage.
Small Businesses Lag
Researchers for the National Center for Policy Analysis find that only 42.6 percent of people working for businesses with 50 or fewer employees receive health insurance from their employers, compared with 95.6 of those working for companies with more than 50 employees.
While the MHPAEA exempts businesses with 50 or fewer employees, many state mental health parity laws do not. The Dallas-based think tank attributes low participation in health care plans by small businesses in states that do not mandate coverage to the high cost of purchasing small-group insurance.
But not all small-business leaders look at mental health benefits strictly from a cost perspective. Alexandria, Va.-based Tutor.com, which provides online tutoring and homework help, offers mental health benefits to employees because "it's the right thing to do," says Bart Epstein, senior vice president and general manager of the 42-employee firm.
"When we're large enough to be subject to the law, I expect we will absolutely not scale back or drop mental health benefits," he says. "Relatively few people need them, and those who are suffering need help just as those who are suffering from more observably physical manifestations of illness."
Epstein says many objections to mental health coverage are rooted in the often difficult process of diagnosis, which he expects will improve—just as it has for many physical conditions.
Mental illness can happen to anyone, Epstein notes, adding, "It would be a cruel irony to find someone who made the decision to not cover mental illness and then developed one himself."
The author is a freelance writer in Arlington, Va.
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