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The Costs and Effects of Parity for Mental Health
and Substance Abuse Insurance Benefits
INTRODUCTION
Employment-based health insurance plans typically provide less coverage for mental health and substance abuse (MH/SA) services than for medical/surgical services. Some states and the federal government, and some employers, have begun to require that mental health and/or substance abuse treatment be covered in the same way as other medical care. This concept is known as "parity."
This report presents findings from a project conducted by Mathematica Policy Research, Inc. for the Substance Abuse and Mental Health Services Administration (SAMHSA) on the costs and effects of providing parity for MH/SA benefits. Primary funding for the report was provided by the Center for Mental Health Services (CMHS) and the Center for Substance Abuse Treatment (CSAT). Additional support was provided by other SAMHSA components, as part of the agency's managed care initiative.
This project sought to answer the following questions:
- Which states passed MH/SA parity laws? What are the provisions of the state parity laws?
- What are the effects of state parity laws on health insurance premiums, employers, insurers, and employees? How do employers and insurers respond to MH/SA parity laws?
- Why do existing actuarial predictions of health insurance premium increases due to parity differ so much?
- What are the predicted increases in health insurance premiums due to limited and comprehensive MH/SA parity benefit options?
To answer these questions, we conducted four analyses. First, we described and compared state parity laws (Heiser, et al., 1998). Second, we performed a case study analysis in five states that have parity laws to determine the early experiences of key stakeholders. We spoke with representatives from 47 organizations in the study states, including insurers, employers, employer associations, and insurance regulators (Hill, et al., 1998).
Third, we reviewed actuarial studies conducted in 1995 and 1996 of the costs of federal parity legislation (Sing and Hill, 1998b). Finally, we used an updated actuarial model to predict the costs of several full and partial parity benefit options (Sing and Hill, 1998a). The partial and full benefit options were developed with the help of a policy advisory panel that included representatives from the business community and from mental health, substance abuse, and managed care organizations in the public and private sectors (see Appendix C). The assumptions we used in the cost estimates were reviewed by an expert panel of actuaries and economists (see Appendix D).
This report is organized as follows. In chapter 1, we describe the policy context for the debate about parity and summarize federal and state parity laws. We present findings from the case study analysis in chapter 2. In chapter 3, we summarize previous actuarial studies of parity, and, in chapter 4, we present updated predictions of the premium increases for full and partial mental health and substance abuse parity.
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