The Provision of Mental Health Services in Managed Care Organizations

Benefits

The kinds of mental health services that managed care enrollees receive, and the amounts they must pay out of pocket, are influenced by what their insurance covers. In private insurance plans, the benefits package remains an important determinant of service availability, although its impact on access to services has become increasingly influenced by other insurer activities, such as utilization management (Frank & McGuire, 1998), described in Chapters VI and VII. This chapter reports on the types of services covered, the generosity of the benefits offered in terms of annual or lifetime limits, and the level of out-of-pocket expenses (cost sharing) that an enrollee must pay for services. It also discusses the extent to which mental health coverage is less generous than general medical coverage - the "parity" question - which has been a focus of legislative initiatives at the Federal level and in many States (Gitterman, Sturm, & Scheffler, 2001). Finally, the chapter reports on the extent of coverage for prescription drugs, which have become increasingly central to mental health treatment in recent years as a result of pharmaceutical innovations.

Types of Mental Health Services Covered

The great majority of managed care organization (MCO) products (96% or more) cover inpatient hospital, intensive outpatient (including day treatment and partial hospitalization), and regular outpatient care (Figure IV.1). The proportion covering nonhospital residential care, such as group homes or acute residential care, is somewhat lower (71%).

Coverage Limits

Insurers typically only pay for types of care covered in the benefit package, but inclusion does not guarantee that the full cost of treatment will be covered for a particular episode of care. This is because benefit packages often have limits, including annual and lifetime limits, for behavioral health services. These limits can be defined in terms of episodes, days of treatment, or dollar amounts. Limits also may be imposed on specific service types, such as inpatient hospital and regular outpatient care.

About 27% of products use a lifetime limit on mental health benefits: 21% have a lifetime dollar limit, and 6% have a lifetime limit on covered inpatient days (Figure IV.2). Annual limits are imposed by 92% of products and are much more commonly used than lifetime limits. Annual limits for inpatient care usually restrict the number of days (78% of products) rather than the total spending (8% of products). A similar pattern is observed for outpatient care, with limits on visits much more common than limits on spending. These patterns may reflect plans' responses to the Federal 1996 Mental Health Parity Act, which regulated dollar limits but not day and visit limits. The act prohibited insurers from applying lower dollar limits on covered services for mental health than for general medical care (General Accounting Office, 2000).

For this report, variation in the three most commonly used types of limits (outpatient visits, inpatient days, lifetime spending) was examined. Among plans applying annual limits to outpatient visits, the most common limits are 20 visits (found in 41.0% of products) and 30 visits (46.1% of products). Only 2.3% of these products have limits of fewer than 20 visits (Table IV.1). Among products that limited inpatient days, the most common limit is 30 days (56.2% of products). However, 26.8% of these products have limits lower than 30 days (Table IV.2). Among products with lifetime dollar limits, 14.5% have limits of more than $1 million, but most have much lower limits, with 41.3% of these products having limits of $25,000 or less (Table IV.3).

Copayment and Coinsurance Requirements for Outpatient Care

Private insurers often require enrollees to pay part of the cost of care, either as coinsurance (a set percentage of charges) or as copayments (a flat dollar amount per encounter or prescription). Several studies have shown that demand for mental health services is affected by the level of cost sharing (Horgan, 1986; Keeler, Manning, & Wells, 1989; Simon et al., 1996), suggesting that the burden created by high levels of cost sharing may deter enrollees from seeking needed care.

The vast majority of MCO products (97%) require either copayments or coinsurance for outpatient visits (Figure IV. 3). Cost sharing varies widely by product type. Coinsurance is much more common in PPOs (55% of products use it) than in HMOs (12%). Conversely, HMOs and POS plans are much more likely to use copayments. POS plans do not differ significantly from HMOs with respect to the use of coinsurance
or copayments for mental health services. Figure IV.4 shows that those products with specialty contracts for mental health care report a greater use of copayments (84%) than do products with comprehensive (18%) and internal (63%) arrangements.

Among plans with coinsurance for mental health services, consumers were required to pay an average of 35.7% (Table IV.4). Among plans requiring copayments, the mean copayment was $18. Differences in mean cost-sharing by product type are not statistically significant.

Comparison of Cost Sharing for Mental Health and General Medical Care

For outpatient general medical care, the average coinsurance rate is 20% and the average copayment is $12 (Figure IV.5). These levels are substantially lower than those for outpatient mental health care detailed above.

Given policy concerns about the impact of high cost sharing, one should consider not only the mean levels but also the distribution of copayments and coinsurance, including a comparison with coinsurance and copayments for medical services. Forty-six percent of all products require copayments of $20 or more for mental health care, as compared with only 9% of products that have copayments this large for general medical care (Table IV.5). Similarly, 18% of products require enrollees to pay 30% or more for mental health services, compared with only 2.5% of products requiring this much coinsurance for general medical care. These findings highlight the potentially higher burden placed on enrollees seeking mental health services compared with general medical services depending upon the actual cost of services (Hodgkin et al., 2003).

Prescription Drug Cost Sharing

Prescription drugs are an important part of mental health care because of significant advances in the use of pharmaceuticals in the treatment of mental disorders over the past several years, with a corresponding increase in their use and costs (Foote & Etheredge, 2000). Thus, any discussion of the extent of mental health insurance coverage must include information about how prescription drugs are covered.

For prescription drugs, as for other services, plans can choose whether to require enrollees to pay a share of the cost (coinsurance) or a fixed amount (copayment), usually per prescription. Another key issue is that many plans use different cost-sharing levels for brand-name and generic drugs. More recently, many plans have been identifying one brand in a drug class as "preferred," relegating the other brands to a "third tier" with even higher copayments (e. g., $25 rather than $10). This practice was not addressed in this survey, as it was not yet widespread at the time of survey design.

In the study sample, copayments for prescription drugs were much more common than coinsurance. Among products with drug cost sharing, 93% require copayments for generic drugs and 92% for brandname drugs. Most of the remainder require coinsurance. Cost-sharing arrangements are consistently higher for brand-name drugs. Among products requiring copayments, the mean is $8 for generic drugs and $13 for brand-name drugs (Figure IV.6). This reflects a widespread practice among health insurers of using differential cost sharing to steer consumers toward generic drugs. Similarly, the mean coinsurance rate is considerably higher for brand-name drugs (46%) than for generics (34%), although as noted, coinsurance is much less common. The distribution of copayment amounts shows that 93% of products with copayments charge consumers $10 or less per generic prescription, but only 50% charge $10 or less for brand-name prescriptions (Figure IV.7). At the other end, 20% of products charge more than $15 for a branded prescription, but only 1% of products do so for a generic prescription.

Discussion

Substantial restrictions on mental health benefits coverage are common in many managed care plans. This chapter reports that about one-third of products do not cover mental health care in residential facilities. A majority of plans have annual limits on outpatient visits (most often 20 or 30 visits) and on inpatient days (most often 30 days), and dollar limits are less common than was reported in previous studies. Furthermore, outpatient visits are subject to substantial cost sharing, which is notably higher for mental health than for general medical care. Most plans require copayments for prescription drugs, averaging $13 for brand drugs and $8 for generics. These restrictions and limitations exist despite the presumed ability of MCOs to control costs by other means (e. g., precertification, network selection).

Covered Services

It is noteworthy that nearly one-third of products do not cover mental health care in residential facilities. This is an improvement compared with at least one other study, which found that two-thirds of employers in a 1995 survey did not cover nonhospital residential care (Buck & Umland, 1997). The persistence of noncoverage may be because mental health insurance evolved from medical insurance, and not all insurers adapted the benefits to cover settings unique to behavioral health care. In contrast, almost all products cover inpatient and outpatient settings, which are part of traditional medical coverage.

Limits

The study reports less use of dollar limits than in previous research conducted before implementation of the Federal parity law in 1998 (the law was passed in 1996). Only 8% of products in this study used annual dollar limits for inpatient care and for outpatient care; in contrast, a previous study found that in 1997 around a quarter of plans used annual dollar limits in their most prevalent product (Buck et al., 1999). Continued use of dollar limits for mental health was legal under federal law as long as they were not tighter than limits for medical care. It appears that, as reported elsewhere, many plans have moved from using dollar limits to using day or visit limits (Sturm & Pacula, 2000).

MCOs also are subject to State regulation of benefits for their non-self-insured products, and many States have passed their own parity laws. In interviews, one respondent from a multistate MCO expressed concern about the "patchwork" character of State regulation of benefits and that these differences provided an incentive to contract out, allowing the contractor to worry about compliance within States.

Copayments and Coinsurance

The cost-sharing requirements documented here for outpatient mental health care are substantial, with around 46% of products requiring copayments of $20 or more and another 15% of products requiring enrollees to pay half the cost of care (50% coinsurance). Both types of cost sharing tend to discourage people from seeking or continuing treatment, or impose sizable burdens if treatment does continue for long.

Mental Health Versus General Medical Outpatient Cost Sharing

It is not surprising that outpatient cost-sharing requirements are considerably lower for general medical care than for mental health.Cost-sharing differences were not addressed by the 1996 Federal parity law, and although some States have laws that require equal cost sharing, the laws do not apply to self-insured employer plans.

Prescription Drug Cost Sharing

This study finds that among plans that require cost sharing for prescription drugs to treat mental health conditions, most require copayments rather than coinsurance. Apparently, many products require copayments for drugs even though they use coinsurance for visits to providers. The dominance of copayments may have eroded somewhat since our survey, as some plans are reportedly turning to coinsurance for drugs as a way to increase consumer cost-consciousness (Katz, 2001). Copayments in this study were $5 higher on average for brand-name drugs than for generics, foreshadowing the more recent emergence of three-tier plans that charge even higher copayments for nonpreferred brands. One informant noted in an interview that "mental health drugs are more likely to be in the third [i. e., costliest] tier of three-tier programs."

Through a variety of routes - ranging from exclusion of some services from coverage, to limits, to cost sharing - MCOs continue to exercise control on the type and amount of services their enrollees receive. Despite systematic variation in their approaches (with health maintenance organizations and point-of-service products more likely than preferred provider organizations to use copayments, for example), all MCOs use the benefit structure to influence mental health treatment.

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