Organization & Financing

New Study Examines Expansion Of Mental Health/Substance Abuse Insurance Benefits

For Immediate Release
Contact: Press Office
Tuesday, March 24, 1998
Phone: (301) 443-5052

Rockville, Md. -- A new study released today by the Substance Abuse and Mental Health Services Administration (SAMHSA) estimates that full parity for mental health and substance abuse services in private health insurance plans that tightly manage care would increase family insurance premiums less than one percent.

The premium increase for a composite of health plans that reflect insurance coverage nationwide (e.g. Fee For Service, Preferred Provider Organization, Health Maintenance Organization) would average 3.6 percent. In this composite, parity limited to substance abuse treatment only would raise premiums 0.2 percent, while parity for mental health services only would raise premiums by 3.4 percent.

The estimated premium increase varies greatly depending on the extent to which the plan utilizes managed care. For example, full mental health and substance abuse parity is estimated to increase premiums by 5.0 percent in fee for service plans.

"Mental and addictive disorders are among the most prevalent and most often neglected health problems in our Nation. Almost a third of all people ages 15-54 experience one or more mental or addictive disorders in a given year, and just under one half experience one or more during their lifetimes," said Nelba Chavez, Ph.D., SAMHSA's Administrator. "All Americans need to know that appropriate mental health services and drug and alcohol treatment programs improve lives and increase productivity. Yet, health insurance plans typically provide less coverage for mental health and substance abuse treatment than for general medical and surgical services. Equal access to these services is a sound, rational investment."

The study, The Cost and Effects of Parity for Mental Health and Substance Abuse Insurance Benefits, provides a literature review on mental health and substance abuse parity, discusses state parity laws, includes case study reports from five states with parity laws, and estimates premium increases for full and partial parity options. The study was guided by an advisory panel consisting of representatives of the mental health and substance abuse fields, federal government agencies, employers, insurers and managed care organizations. A second expert panel consisting of actuaries and economists provided technical advice for the cost estimates.

In the study, "full parity" means that insurance benefits for any group of mental health and substance abuse diagnoses are the same as insurance benefits for medical/surgical diagnoses with respect to cost sharing, service limits, and annual or lifetime spending limits.

SAMHSA's Center for Mental Health Services (CMHS) Director, Bernard S. Arons, M.D., said: "We commissioned this study to learn more about the effects of state parity mandates, and to provide improved estimates of the costs of parity, based on recent data and the best advice of actuaries and economists. The new data will provide us, along with legislative staffs and others, a foundation for the development of future policies related to health insurance benefits.

Acting Director of SAMHSA's Center for Substance Abuse Treatment (CSAT) Camille Barry, Ph.D., R.N., noted that "seventy three percent of current drug users are employed. Treatment of drug and alcohol problems not only reduces drug use, but leads to increased productivity and better physical and mental health. Providing parity for substance abuse treatment in family health insurance coverage is both affordable and a very smart investment."

Key findings from the study are:

State parity laws have had a small effect on premiums. The increases in cost have been the lowest in systems with tightly managed care and generous baseline benefits.
Employers have not attempted to avoid parity laws by becoming self-insured. None of the employers studied identified their state parity laws as a consideration to self-insure.
Based on an updated actuarial model, full parity for mental health and substance abuse services is estimated to increase premiums an average of 3.6 percent. Increases for mandates limited to parity in cost sharing or service limits will be lower. (See table below)

AVERAGE PREMIUM INCREASE DUE TO PARITY
TYPE OF SERVICE	PARITY IN COST SHARING	PARITY IN SERVICE LIMITS	FULL PARITY
MH/SA	0.4%	1.2%	3.6%
MH only	0.3%	1.1%	3.4%
SA only	0.1%	0.03%	0.2%

States and the Federal government have begun to require that mental health and substance abuse services are treated the same way as other medical care. The "Mental Health Parity Act," passed by Congress in 1996, and signed into law by President Clinton, became effective on January 1, 1998. The legislation requires health plans to provide the same annual and lifetime limits for mental health benefits as they do for other health care benefits. In addition to the federal legislation, 84 parity bills were introduced in 37 states during 1997, some of which included substance abuse services.

SAMHSA, a public health agency within the U.S. Department of Health and Human Services, is the federal government's lead agency for improving the quality and availability of substance abuse prevention, addiction treatment, and mental health services in the United States.

A copy of this press release is available on the Internet via: http://www.samhsa.gov
CMHS 03-98