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More than nine months after many employers were required by federal law to remove discriminatory dollar limits on mental health benefits, they are finding that other approaches are effective in controlling costs.
What most employers have done in complying with the Mental Health Parity Act is to translate the dollar caps they had on outpatient sessions and inpatient days for mental health care to limits on the number of outpatient sessions and inpatient days, according to consultants.
"Most employers are making cost-neutral decisions," said Ed Kaplan, vp-health practice for The Segal Co. in New York.
But Joan Pearson, a principal with Towers Perrin in Seattle, said a number of the consultant's clients who had mature managed mental health plans, specifically specialized carve-out plans, have had such a good claims cost experience that they eliminated the dollar limit and did not replace it with a day or visit limit. Many of those employers simply use the dollar maximum in the medical plan for mental health. Other clients without managed mental health plans in effect converted the dollar limit to day or visit limits, Ms. Pearson said.
Under the act, employers cannot place discriminatory dollar caps on mental health care treatment compared with treatment for physical illnesses. They can, however, maintain annual and lifetime caps on the number of outpatient sessions and inpatient days available for mental health treatment. Employers also can impose higher co-payments on mental health care. Those employers whose health care costs increase at least 1% after complying with the law are entitled to an exemption.
An employer's plan year start date determined the date by which it had to comply with the parity law. Those employers that had to meet the Jan. 1 compliance date were able to apply for the 1% exemption after July 1.
Several consultants interviewed were unaware of any employer that filed for an exemption. Towers Perrin estimated that to meet the 1% exemption, "mental health costs would have to increase $35 per employee per year," Ms. Pearson said.
However, consultants and employers say it's too early to attach a dollar cost to the parity mandate. Many variables, such as what the employer was offering prior to the law; the employer's size; and even the employer's industry, which can influence usage of the benefits, can determine the effect of the law.
Mr. Kaplan said it will take 18 months of data to see the full impact of compliance. Increased frequency among an employer's general population is not an issue, he said. The issue is that a small or midsize employer can be significantly hurt by having one or two chronic users of the benefits, he said.
Yet, for larger employers with managed care, the cost may not prove worrisome. "Our clients are spending relatively small amounts of money for mental health and chemical dependency compared with medical care," Ms. Pearson said.
"What we've seen over the last few years for a lot of clients is that costs were stabilized at $135 per employee per year" for mental health care and substance abuse treatment, she said. Some of those clients initially had costs as high as $500 per employee per year.
"You can control costs almost as efficiently with day and visit limits as with dollar limits," Ms. Pearson said.
Arlene Westbrook, director of employee benefits at the Chicago Mercantile Exchange, said the Merc's mental health care costs have remained stable for the past two or three years. Because use of the benefits remains at pre-1998 levels, she is expecting cost stability even after having amended the plan to comply with the law Jan. 1. The upcoming renewal process will give her a better indication on claims costs so far, she said.
The commodities exchange removed the $50,000 dollar lifetime limit for inpatient treatment for mental and nervous disorders. Now, the Merc's 1,000 or so employees are entitled to a lifetime maximum of 60 days inpatient treatment through the preferred provider network reimbursed at 85% with no limit. Those seeking inpatient treatment out of the network are reimbursed at 70%.
Outpatient treatment remained the same as it was prior to the Jan. 1 compliance date. Employees seeking outpatient therapy through the PPO are entitled to 40 visits yearly, with the same $15 copayment as for physical care. Employees that go out of the network are entitled to 20 visits reimbursed at 70% after meeting a deductible.
The Merc also has an employee assistance plan, which provides a range of services from health-related counseling to child care and elder care assistance and legal help. For general services, employees are entitled to three free sessions. For specialized services, they may receive one or two free sessions.
While the benefits department hopes costs stay stable, the department also promotes the benefits so that employees who need them can access them, Ms. Westbrook said.
Some employers reassessed the value of mental health benefits prior to the parity act, and the law has given many others an opportunity to look at their mental health benefits and see if they make sense, said Michael Jeffrey, a principal at William M. Mercer Inc. in Baltimore.
Companies are becoming more aware that behavioral health plans are part of the overall strategy to keep people at work and productive. "It's not a throwaway benefit any more," Mr. Jeffrey said. "There's more of an understanding that if you have an employee with a mental health or chemical dependency problem and you address it early, that helps the bottom line."
The key is to strike that right balance of management of these benefits so that employees have enough flexibility to get what they need from the plan and the employer can continue to afford to provide the services, said Wendy Miller, senior director, benefits planning and research for Merck & Co. Inc. in Whitehouse Station, N.J. "I want people, if they need help, to get the help at the right time, at the right place, at the right cost," Ms. Miller said.
Merck always has had parity between treatment for physical illnesses and treatment for mental health problems.
"Mental illness is not something people have voluntarily, and it should not be arbitrarily limited," Ms. Miller said.
Mental health care falls under the same $1 million lifetime maximum as physical health care, though inpatient chemical dependency treatment is limited to two treatments per lifetime. That limit helps ensure that participants make an effort to change their behavior rather than routinely seek treatment, Ms. Miller said.
Under the carve-out mental health benefit program, outpatient counseling costs $10 a visit in the network, with no limit on the number of visits and no deductible. Inpatient treatment received in the network is paid at 90% after the deductible. It's paid at 60% out of the network.
But having some mechanism of control over the benefits such as a network is imperative, or providers may be tempted to take advantage of the plan, she said. Also, incentives to keep people in the network help avoid other problems particular to mental health treatment, including inpatient stays that exceed what's right for the patient or an unhealthy mutual dependence that could develop between participants and their outpatient providers, she said.
The carve-out plan and the EAP is used by about 14% of the 17,000 participants in point-of-service and indemnity plans and those receiving benefits under a union contract. Another 7,000 employees in HMOs, who are not covered by the carve-out plan, can use the EAP at no cost for up to eight visits.
"Benefit design structures of an organization are driven primarily by the historical philosophy of the client," said John Vlajkovic, a consultant with Hewitt Associates L.L.C. in Lincolnshire, Ill. The parity law "highlighted the possibility that this represents something significant in an organization."
Between 3% and 5% of a covered population generally use the benefits, he said, yet studies show that probably 10% of the population suffers from depression or other mental health problems and could benefit from treatment.
"If the population were treated properly for behavioral health, there could be an offset to other expenses" such as absenteeism and treatment for physical illnesses, Mr. Vlajkovic said.
Eileen Settineri, a New York-based consultant with Watson Wyatt Worldwide, said some employers have implemented a plan design style similar to health maintenance organizations that have a higher copayment for mental health care visits in addition to the cap on the number of visits. Some HMOs have a flat copayment for mental health care visits, while others have a copayment schedule that varies with the number of visits, she said.
Mercer's Mr. Jeffrey said the consultant encourages clients to improve outpatient coverage so that people aren't driven to seek inpatient care. By improving outpatient coverage through such means as not attaching a high coinsurance to the benefit, employees' access to care is improved and they may seek treatment earlier, he said.
Employers can use other approaches to tailor a mental health benefits plan to meet company and employee needs. Those employers that use specialized mental health care providers may want to offer participants a trade-off in the plan between inpatient hospital days and alternative care options, such as usage of a day treatment facility. A plan might be designed so that a participant could trade two units of care at a day treatment facility for one inpatient day.
Or an employer might design a plan to say that exceptions to the caps are subject to case management, Mr. Vlajkovic said. "A lot of employers fear hard caps," he said.
A trend being seen in HMO plans is outpatient visit flexibility, said Ms. Settineri. That approach adjusts copayments or allows different numbers of visits for individual therapy, group therapy or medication checks. "Some HMOs have adopted that, and I think we may see more of that," she said. "Carve-out plans may start adopting these features as well."
More employers are showing an interest in EAPs and carve-out plans, consultants say. Some employers will now offer up to six free EAP visits, said Mr. Jeffrey. While some employers are using the EAP as a gatekeeper to mental health care, "that defeats the purpose," Mr. Jeffrey said. Employees should view EAPs as a confidential source of advice and access to treatment rather than as an obstacle to getting services paid for, he said.
When it comes to chemical dependency treatment, employers are taking different stances. The federal law did not require the removal of dollar limits on chemical dependency treatment.
Many employers are treating chemical dependency the same as mental health because it simplifies administration and sometimes overlaps treatment for other psychiatric disorders, said Ms. Pearson.
However, she said, "Quite a number of clients want to have a lifetime limit on chemical dependency treatment.
The AFTRA Health & Retirement Funds in New York, which serves members of the American Federation of Television and Radio Artists, must comply with the law on Dec. 1. "We were concerned about increasing costs dramatically" because part of the ability to control costs was removed, said Dina Goldman, fund director.
"We're very aware of participants' need to have choices," Ms. Goldman said. However, "we still have to find some way of controlling our costs so we can deliver as much to our participants as possible."
Approximately 16,700 participants in the AFTRA health plan receive inpatient and outpatient treatment through Value Behavioral Health. Prior to this program being implemented in 1996, participants had access to only 30 days of hospitalization coverage for inpatient treatment. Full benefits that had been offered long ago were cut because of high costs.
The managed mental health benefit requires pre-authorization through Value Behavioral Health. Inpatient treatment has a cap of 30 days and must be in a network facility. Plan participants can have 20 outpatient visits a year in the network and 10 out of network. Currently, network visits are paid 100% up to $100, with an annual limit of $2,000. Out-of-network visits are paid at a rate of 50% up to $50, with a $500 annual limit. The annual dollar limits will be removed Dec. 1. A 50% co-insurance based on a schedule of reasonable and customary fees still will be charged for non-network visits.
In 1997, the funds' cost of mental health benefits -- not including prescription drugs or chemical dependency treatment, which falls under a different program for members of AFTRA -- was $120 per participant. Ms. Goldman said. For the 12-month period ending March 31, 1998, participants used 571 inpatient days and 13,500 sessions for outpatient therapy.
Hewitt's Mr. Vlajkovic breaks down the impact of mental health benefits this way: when an employer does little to manage care, behavioral health will account for 8% to 9% of total medical costs. When there is some managed care in place, behavioral health accounts for 6% to 7% of the total. Under a carve-out program, behavioral health may account for between 3% and 5% of total medical costs.
Mr. Vlajkovic said most employers recognize that future legislative changes might require greater parity between treatment for physical conditions and mental conditions. "That argues for a well-managed environment, because it eliminates the potential for abuse," he said.