Effects of the Vermont Mental Health and Substance Abuse Parity Law

Executive Summary

Vermont implemented the Nation's most comprehensive parity law in 1998, extending equality of health insurance coverage to both mental health and substance abuse (MH/SA) services. This evaluation sought to determine how implementation of parity in Vermont affected major stakeholders: employers, health plans, providers, and consumers. The evaluation included an implementation case study, an employer survey, and an analysis of health plan claims/encounter data. Much of the analysis focused on the experiences of two health plans - Kaiser/Community Health Plan (Kaiser/CHP) and Blue Cross/Blue Shield of Vermont (BCBSVT). These plans covered nearly 80 percent of the privately insured population at the time parity was implemented.

Major Findings

Both health plans made changes in the way they managed mental health and substance abuse (MH/SA) services. Before parity, BCBSVT provided MH/SA services primarily through indemnity contracts; after parity, most members received MH/SA services through a managed care carve-out. In contrast, Kaiser/CHP had a managed care system prior to parity; following parity, the health plan implemented hospital diversion and step-down programs that increased the use of partial hospitalization treatment and group therapy and reduced the use of inpatient treatment.
Only 0.3 percent of Vermont employers reported that they dropped health coverage for their employees mainly because of the parity law. Only 0.1 percent of employers reported that parity played a role in the decision to self-insure.
More people received outpatient MH services following implementation of parity. The percentage of users per 1,000 members increased 6 to 8 percent across the two health plans. In contrast, fewer people received any SA treatment after parity was implemented. The percentage of users per 1,000 members decreased by 16 to 29 percent.
Consumers paid a smaller share of the total amount spent on MH/SA services following implementation of parity. For example, the share paid out-of-pocket by BCBSVT members fell from 27 percent to 16 percent of total MH/SA spending. Among those with serious mental health conditions, the proportion spending more than $1,000 out-of-pocket annually was cut by more than half.
Spending by BCBSVT for MH/SA services increased by 4 percent following implementation of parity. In other words, the amount spent by BCBSVT for MH/SA services increased 19 cents per member per month. Relative to BCBSVT spending for all services, MH/SA services accounted for 2.47 percent of the total after parity, up from 2.30 percent pre-parity.
Cost data for Kaiser/CHP were more limited. However, it was estimated that health plan spending for MH/SA services decreased by 9 percent following parity. This appeared to be due primarily to decreases in utilization of SA treatment services.
Managed care for MH/SA services was an important factor in controlling costs following implementation of parity. For those BCBSVT members who received their benefits through a carve-out, both the likelihood of obtaining MH treatment and the average number of outpatient MH visits per user declined.
Both consumer and employer awareness of parity in Vermont was low. As a result, stakeholders felt that some difficulties could have been avoided if there had been a proactive education campaign concerning the law.

Conclusions

This study reflects experiences during the first 2 to 3 years of parity in Vermont. It is possible that a longer study period might yield different results. Further, the study is limited to a single State, and the results may not be generalizable to other States in which the mix of providers or services differs. Despite these qualifications, the study shows that parity for MH/SA benefits was achieved in Vermont. Increased use of managed care helped make parity affordable but may have reduced access and utilization for some services and beneficiaries. Limited knowledge of the law complicated implementation for employers, providers, and consumers. Vermont stakeholders recommended that more attention be paid to education and other proactive efforts to better prepare for a change of this magnitude.

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