Special Report:
Improving Mental Health
Insurance Benefits Without
Increasing Costs
U.S. Department of Health and Human Services
Substance Abuse and Mental Health Services Administration
Center for Mental Health Services
Office of the Associate Director for Organization and Financing
Appendix A: The Hay Group’s Mental Health Benefit Value Comparison Model
The Hay Group’s Mental Health Benefit Value Comparison (MHBVC) model estimates the value of mental health and substance abuse (MH/SA) insurance benefits on the basis of assumptions about the delivery, management, and use of MH/SA services. This appendix describes the key assumptions for this model.
Types of Cost Sharing and Maximum Benefit Limits
Patient out-of-pocket costs in a benefits package can be
expressed in terms of coinsurance rates or copayments (fixed dollar amounts).
In addition, some plans have a maximum fee that they will pay per visit, which
is sometimes called a maximum allowable charge. The MHBVC model converts
copayments and maximum fees per visit into effective coinsurance rates. The
effective coinsurance rate is based on the average charge per visit:
(A.1) Effective coinsurance rate = coinsurance rate x (maximum fee per visit ÷ average per visit charge)
and
(A.2) Effective coinsurance rate = copayment ÷average charge per visit
The MHBVC converts maximum dollar limits to effective visit
limits using the same per visit charge:
(A.3) Effective visit limit = maximum dollar limit ÷ average charge per visit
The model uses an average charge per visit of $109 for outpatient psychiatric visits.
Some plans in the Hay Group survey have lower dollar limits for mental health services than for medical/surgical services. There are two reasons for this. First, the Mental Health Parity Act of 1996 became effective for plan years starting January 1, 1998, or later, and not all of the plans in the Hay Group survey had begun new plan years. Second, some of the employers were exempt because they had 50 or fewer employees or were government agencies.
Similarities in Substance Abuse and Mental Health Benefits
The Hay Group survey collects detailed information about the
coverage of mental health benefits and also asks whether coverage for inpatient
substance abuse treatment is the same as coverage for inpatient mental health
care. If they are different, the survey asks for the maximum benefit limits for
substance abuse. Substance abuse and mental health benefits are almost always
the same for plans in the Hay Group survey. Therefore, the typical benefits
packages presented in Tables 1 through 4 do not have different benefits for mental
health and substance abuse services.
PPO and POS Plans
The model incorporates three features of PPO and POS plans:
(1) coverage of both in-network and out-of-network services, (2) network
provider discounts, and (3) effects of utilization management by POS
gatekeepers. Enrollees in PPOs and POS plans pay lower out-of-pocket costs when
they use network providers, and these lower costs are incentives to remain in
network. The Hay Group survey does not collect information about out-of-pocket
cost sharing in these plans. Therefore, the model assumes that coinsurance is
20 percent lower for out-of-network services. For plans with a general
deductible, the model assumes the deductible doubles for out-of-network
services. For plans without a deductible, the model assumes the out-of-network
deductible is $100. The MHBVC model assumes that 70 percent of care is from
network providers.
Providers in PPO and POS networks agree to charge a discounted
price for the services they provide to enrollees. The model assumes that this
discount is 15 percent, which is consistent with discounts of 10 to 20 percent
obtained by PPOs offered by two large national insurers (Verri & Zuckerman,
1996).
Many enrollees in POS plans are assigned a primary care provider
called a gatekeeper. The gatekeeper must authorize all in-network services
(Jensen et al., 1997). The model assumes that POS plans reduce in-network
service use by 12 percent as a result of services denied by gatekeepers. It
also assumes that out-of-network service use increases by 15 percent because
some POS plan enrollees will seek treatment out of network (and pay higher
cost-sharing amounts) when the gatekeeper denies in-network treatment.
Enrollees in PPOs can self-refer to any provider they wish to see.
Amount of Utilization Management
The model assumes that management of MH/”SA services is more
aggressive than management of medical/surgical services. For indemnity, PPO,
and POS plans, the model assumes that, on average, the management of MH/SA
services leads to a 25-percent reduction in costs compared with no management.
The model assumes that HMO’s subcontract with managed behavioral
health organizations that aggressively manage care and yield large cost
savings. To compute the actuarial values of HMO benefits packages, the model
uses different data on the distribution of health care expenditures by type of
service compared with indemnity, PPO, and POS plans. A utilization management
factor is not needed to compute the value of HMO benefits packages because the
health expenditure data used to compute the value of HMO benefits already
incorporate the effects of utilization management.
These assumptions are consistent with the broad range of
experience with managed behavioral health organizations. Frank and McGuire
(1995) and Frank et al. (1995) discuss the literature on the impact of managed
care on MH/SA expenditures and conclude that much uncertainty remains. Some
large employers that had high MH/SA expenditures before subcontracting with a
managed behavioral health organization, such as Xerox, realized significant
savings (Xerox cut costs by about 40 percent). Frank and McGuire (1995) doubt
that most employers would have such large cost reductions, because case studies
that find large savings often reflect experiences of employers that had the
highest costs and little or no utilization management before subcontracting.
Consumers’ Responses to Changes in Their Out-of-Pocket Costs
People enrolled in plans with relatively low copayments or
low coinsurance rates pay a lower price for the use of MH/SA services than do
people in plans with higher copayments or coinsurance rates. The “induced
demand” effect is the extent to which consumers use more MH/SA services in
response to lower prices for these services (or use fewer services when the
price is higher). In the MHBVC model, the Hay Group bases its assumptions about
the extent of induced demand on data from the RAND Health Insurance Experiment
(Newhouse, 1993). The RAND experiment measured consumer
responsiveness to changes in the prices of medical/surgical and MH/SA services
in unmanaged indemnity plans. Indemnity plans were the predominant delivery
system in the 1970’s when the RAND experiment was
conducted, but today, managed care plans such as HMO, PPO, and POS plans are
more prevalent. The measures of consumer responsiveness to price changes
computed from the RAND experiment overstate consumer
responsiveness in managed care systems in which consumer demand for health
services is constrained by the utilization management efforts of managed care
plans.
Medical Cost Offset Effect
A medical cost offset effect occurs when treatment of an MH/SA disorder leads to a reduction in expenditures for medical/surgical services and when a portion of medical care use is driven
by psychological or psychiatric factors. On the basis of a literature review
conducted by Olfson et al. (1999) for this project, the model assumes there is
no aggregate medical cost offset when someone switches from a median MH/SA
benefits package to a more generous MH/SA benefits package.
Administrative Costs
The MHBVC’s assumptions about administrative costs are based
on a 1994 Hay Group study for the Congressional Research Service (Hay/Huggins
Company, Inc., 1997). For indemnity, PPO, and POS plans, administrative
expenses are assumed to be 11 percent above expenditures for services. On
advice from experts, it is assumed that HMOs have higher administrative
costs—especially for MH/SA treatment services—that average 20 percent above
expenditures for services (Sing & Hill, 1998).
Limitations of the Survey Data
The Hay Group survey was mailed to firms that had
participated in previous surveys as well as other firms that the Hay Group
thought might be interested in participating. Although respondents represent a
variety of industries, regions, and firm sizes, the results are not necessarily
representative of the distribution of employer-sponsored health insurance
plans nationwide. This is because the Hay Group survey was not mailed to a
representative sample of firms drawn from a nationally representative list of
firms (such as a list of firms compiled by Dunn and Bradstreet). Furthermore,
because of limited project resources, the data were not weighted by number of
employees in each firm or by other firm characteristics.
TOC | Previous | Next
|
