Effects of the Vermont Mental Health and Substance Abuse Parity Law

Appendix B: The Context for Vermont's Parity Law

This appendix provides background information for the implementation case study presented in Chapter II. Section A discusses the legislative history and Section B describes the market and policy environment in Vermont. This information sets the context for the implementation of Vermont's parity law.

A. Legislative History

Prior to the enactment of the Vermont parity law in 1997, State law specified certain minimum requirements for health insurance coverage for mental health and alcoholism services. In 1976, the State required health plans licensed in Vermont to offer mental health benefits as an option for purchasers, including at least 45 days of annual inpatient coverage and $500 of annual outpatient coverage. Outpatient visits were to be covered at 100 percent of costs for the first five visits, with at least 80 percent coverage thereafter. In 1986, the State mandated that alcoholism benefits include at least 5 days of detoxification services per occurrence, a lifetime minimum of 56 days of inpatient and partial institutional rehabilitation, and a lifetime minimum of 180 hours of outpatient rehabilitation. The alcoholism benefits were "subject to the durational limits, dollar limits, deductibles and coinsurance factors of the basic insurance policy or coverage" (Vermont State Legislature, 2000). Neither of these laws achieved parity between MH/SA and physical health benefits, nor did they require coverage of other drug abuse treatment.

Vermont's mental health and substance abuse (MH/SA) parity law - known as Act 25 - was enacted in 1997, following passage of a less comprehensive Federal mental health parity law in 1996.²⁷ Enactment of Vermont's parity law was the result of the efforts of a broad coalition of Vermont stakeholders who sought to remove the remaining limits placed on MH/SA coverage, including separate outpatient visit or inpatient day limits and higher deductibles and coinsurance rates. The Vermont law also extended parity to substance abuse benefits. Led by the Vermont Association for Mental Health and other prominent provider and consumer advocacy organizations, the Vermont Parity Coalition successfully engaged the Vermont business and health plan communities in the reform debate, convincing them that the reform would not have substantially adverse impacts on overall health care costs or premiums (Libertoff, 1999).

The lack of significant anticipated effects on costs was an important factor in the decision by the business community not to strongly oppose passage of the law. An actuarial study conducted by Coopers and Lybrand in 1996 predicted that a comprehensive parity law in Vermont would have a small impact on overall premiums (ranging from an increase of 1 to 5 percent), particularly for benefits offered in managed care products (Bachman, 1997). Cognizant of the potential importance of managed care in limiting the cost impacts, health plan and business representatives successfully sought to ensure that the parity law would allow for the use of managed care in providing MH/SA services. In particular, Act 25 states:

A health insurance plan... may provide coverage for treatment of mental health conditions through a managed care organization provided that the managed care organization is in compliance with the rules adopted by the commissioner that assure that the system for delivery of treatment for mental health conditions does not diminish or negate the purpose of [the law].

B. Market and Policy Environment

Vermont's market for MH/SA services and its health care policy environment provided a unique context for the implementation of the parity law. Prior to the enactment of parity, MH/SA services were considered to be in higher demand and in greater supply than in most other parts of the United States. In addition, the health insurance market was highly consolidated, with two major health plans dominating the private insurance market. Because of the State's small size, leadership and decisionmaking about MH/SA policies were guided by a relatively small number of actors who were generally well known to one another. These characteristics appear to have contributed to the passage of a comprehensive parity law; these characteristics also appear to have fostered an expeditious, coordinated response to initial implementation challenges.

1. Demand for and Supply of MH/SA Services

During the case study interviews, many stakeholders contended that, prior to parity, consumers in Vermont valued MH/SA counseling services and other therapies highly and used them more frequently than consumers in most States. Some felt that there was unnecessary use of services by the "worried well," while others argued that Vermont consumers were well educated about mental health issues and understood the importance of counseling and other services for improving or maintaining their mental health. For those with severe mental illness, however, stakeholders agreed that access was constrained by financial barriers because of discriminatory benefit limits for MH/SA services, as well as a remaining stigma associated with seeking treatment for MH/SA conditions.

In comparison to other States, Vermont has a relatively large number of MH/SA providers - including psychiatrists, psychologists, licensed social workers, and other types of MH/SA counselors or therapists who specialize in treating specific problems or diagnoses. In 1998, 116 psychiatrists, 360 psychologists, and 1,680 social workers were practicing in the State, ranking Vermont fourth among States in the number of psychiatrists, first in the number of psychologists, and tenth in the number of social workers, on a per capita basis (HRSA, 2000).
Vermont also has several prominent institutional providers of MH/SA services, including the Fletcher Allen hospital system, affiliated with the University of Vermont, and the Brattleboro Retreat.

Despite the relatively high overall supply and diversity of MH/SA providers, Vermont was perceived to have significant shortages in selected specialties, including child psychiatrists and specialized inpatient and outpatient programs to treat conditions common among children and adolescents. A number of interviewees said that the small, rural nature of the State presented unique challenges for recruiting certain types of MH/SA specialists.

A substantial portion of MH/SA services is provided through the county mental health system, especially for consumers without private health insurance coverage. These services are coordinated and sponsored by various State agencies, including the Department of Developmental and Mental Health Services and the Office of Alcohol and Drug Abuse Programs.

2. The Health Insurance Market

Like most States, Vermont has a highly consolidated insurance market. In 1998, about two-thirds of Vermont's population had private health insurance.²⁸ At that time, two major health plans dominated Vermont's private insurance market, accounting for about four-fifths of the privately insured, primarily through small and large employer group contracts (Table B.1). The larger of the two plans, Blue Cross Blue Shield of Vermont (BCBSVT), primarily offered traditional indemnity health insurance coverage.²⁹ The second largest plan, Kaiser/Community Health Plan (Kaiser/CHP), offered a health maintenance organization (HMO) product with services provided through a network of providers.

The rest of the private health insurance market consisted of a large number of health plans with much smaller market shares; no plan had more than 5 percent. A small portion of people who were privately insured in Vermont were covered through individual insurance policies, primarily offered by multistate carriers.

3. The State Health Policy Environment

According to most stakeholders, Vermont has had an activist approach to health policy, inclined to pursue legislation to improve access to and quality of health care services for its residents. Consistent with this orientation, the State has taken a comprehensive approach to regulating managed care. Vermont regulates more areas of managed care than any other State in the Nation, despite the fact that most Vermont residents with private coverage historically have not enrolled in managed care plans (Families USA, 1998; Gentry, 1998). Rule 10, for example, mandated the filing of performance report cards for HMOs and established quality standards in such areas as utilization management, provider network adequacy, and preventive-service delivery. A separate regulation established a consumer appeals process with independent review of coverage denials for mental health services that occurred as a result of utilization review. In addition, reforms in 1992 and 1993 regulated insurance benefits in the small group and individual markets, including guaranteed issue of insurance coverage and community rating (Hall, 2000). The legislature has enacted a variety of benefit mandates, including coverage of chiropractic services, contraceptive services, maternity length of stay, and mammography.

Although the State has taken an activist approach toward health policy reforms, most stakeholders do not perceive the State as being overly aggressive in enforcement. The Department of Banking, Insurance, Securities, and Health Care Administration (BISHCA) is charged with overseeing implementation of the parity law, as well as health care consumer protection laws. BISHCA views its role as monitoring health plans' compliance with relevant laws and ensuring that the processes mandated by consumer protection laws are in place to deal with access or quality problems. Unless major problems have been identified, the agency generally does not attempt to intervene in the daily operations of health plans, the clinical decisions of providers, or the negotiations or routine interactions between health plans and providers. To ensure overall compliance with the parity law, BISHCA requires insurers to submit rate and form filings that clearly indicate changes in MH/SA coverage and then tracks these filings for individual health plans (BISHCA, 1999).

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