Effects of the Vermont Mental Health and Substance Abuse Parity Law

Synthesis of Major Findings

Vermont implemented the Nation's most comprehensive parity law in 1998, extending full parity to both mental health and substance abuse (MH/SA) services. This study sought to determine how the implementation of parity affected major stakeholders: health plans, employers, providers, and consumers. The evaluation took a multifaceted approach - including an implementation case study, claims/encounter data analysis, and employer survey. 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). Together, these plans covered nearly 80 percent of the privately insured population at the time parity was implemented.

Findings from this study reflect experiences during the first two to three years of parity in Vermont. It is possible that a longer study period might yield different results, especially as the effects of managed care transitions stabilize. This study also 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.

A. Summary of Major Conclusions

1. Parity Did Not Cause Employers to Drop Coverage or Switch to Self-Insured Products

The survey of Vermont employers revealed that employers did not drop health insurance coverage in response to parity. Of the employers offering insurance coverage when parity went into effect (January 1, 1998), just 0.3 percent (accounting for 0.07 percent of Vermont employees) reported dropping coverage because of parity. This result is consistent with evidence that, within the timeframe of this study, parity did not have a sizable effect on health plan spending for MH/SA services.

Similarly, there was no evidence that a significant number of employers chose to self-insure to avoid the parity mandate. Since the implementation of parity, about 4 percent of Vermont employers (accounting for about 8 percent of Vermont employees) switched one or more of their health plans to a self-insured product. However, only 3 percent of those who had switched reported parity as a factor. Nevertheless, even if parity was not the driving force in the decision to self-insure, fewer employees were covered by parity than might have been anticipated.

2. Access to Outpatient Mental Health Services Improved With Parity

The likelihood of obtaining mental health services rose between 18 and 24 percent in the two health plans as a result of parity. The average number of outpatient visits per user increased as well. Thus, parity improved access to and intensity of outpatient mental health services among many health plan members in Vermont. However, for BCBSVT members who received their MH/SA benefits through the carve-out, the use of managed care arrangements offset the effect of parity. For these members, both the odds of obtaining treatment and the average number of outpatient visits per user declined.

Access to inpatient or partial treatment fell sharply among Kaiser/CHP members. There was a 32 percent lower likelihood of obtaining inpatient or partial MH treatment following parity, as Kaiser/CHP attempted to target inpatient care more efficiently, increasing the use of step-down or diversion programs as an alternative to hospitalization.

3. Access to Substance Abuse Treatment Was More Limited After Parity

The likelihood of inpatient or partial substance abuse treatment was much lower after the implementation of parity - in Kaiser/CHP, 51 percent lower and in BCBSVT, 34 percent lower. At the same time, BCBSVT members experienced an increase in the duration of inpatient or partial treatment, but given the marked reduction in access to such treatment, this may have reflected the targeting of more intensive treatment to a higher-severity case mix. As a result of these changes in patterns of access and use, average SA spending per BCBSVT member per quarter was nearly halved after parity.

4. Spending for Covered MH/SA Services Declined After Parity

MH/SA spending fell by 8 to 18 percent after parity was implemented, despite lower consumer cost sharing and higher limits on use of MH/SA care. Spending includes two components: health plan payments and consumer out-of-pocket payments for deductibles, coinsurance, and copayments.

Health plan spending for MH/SA services rose slightly for BCBSVT, but spending appears to have declined for Kaiser/CHP. It is estimated that health plan spending rose by 4.4 percent for BCBSVT, equal to about 19 cents per member per month ($ 2.32 per member per year). BCBSVT spending for MH/SA services accounted for 2.47 percent of total health plan spending after parity, up from 2.30 percent pre-parity. This 0.17 percentage point increase reflects a 0.26 point increase for MH services and a 0.09 point decrease for SA services. Health plan spending was estimated to decrease by nearly 9 percent for Kaiser/CHP.

5. Consumers Paid a Smaller Share of Total Spending for Covered MH/SA Treatment After Parity

In BCBSVT plans, consumer cost sharing fell sharply, from 27 percent to 16 percent of total spending for covered MH/SA services. The entire gain was on the mental health side where, pre-parity, consumers had paid 30 percent of the total and post-parity, they paid 17 percent. The consumer share for SA services held steady at about 13 percent, both pre-and post-parity. Consumers benefited from the reductions in cost sharing for mental health services as a result of parity, and this may account, at least in part, for the increased access to and intensity of outpatient mental health services following parity.

6. Managed Care for MH/SA Services Was an Important Factor in Controlling Costs

Both health plans relied on managed care to contain the costs of MH/SA services following the implementation of parity. The use of managed care made parity affordable by shifting the locus of decision making primarily from the demand side (based on consumer cost sharing and coverage limits) to the supply side (based on the use of provider networks and medical-necessity criteria).

Both health plans approved only a limited number of outpatient sessions at one time and required prior approval and concurrent review for inpatient or partial treatment. Before approving more sessions, both required providers to set treatment goals and document progress toward meeting those goals.

7. Awareness of Parity Was Relatively Low Among Consumers

The low level of consumer awareness about parity also may have affected the growth of MH/SA access, utilization, and spending. A strong consensus had emerged among stakeholders that communication and education efforts could have been better during the first year of implementation. Prior to passage of the parity law, stakeholders were not sufficiently aware of the importance of a well-defined education and communication effort for minimizing confusion and disruptions in service delivery, especially given the coverage changes made by BCBSVT. There was a sense that many consumers remain unaware of the law or their expanded MH/SA benefits.

B. Concluding Remarks

Vermont stakeholders identified two areas in which early implementation could have been improved. First, they recommended a proactive education campaign about parity - with clear designation of roles and responsibilities among the various stakeholders - to raise awareness about parity and avoid confusion. Such a campaign could have helped consumers and providers develop more realistic expectations about the effects of the law, particularly in an environment where the implementation of parity coincided with a shift to managed care for MH/SA services and where consumers and providers had little prior experience with managed care.

Second, they recommended proactive (rather than reactive) strategies to ensure smooth transitions of patient care when health plans shift to more tightly managed provider networks. For example, in response to initial disruptions of care, BCBSVT required that its carve-out plan expand the MH/SA provider network and authorize six visits to a non-network provider during the transition. Proactive efforts to ease managed care transitions may have minimized the confusion and disruptions that occurred.

By all accounts, parity in benefit design for MH/SA services has been achieved in Vermont. However, the increased use of managed care that accompanied implementation of parity has introduced new issues with service delivery. As a result, state officials and legislators have turned their attention to monitoring the performance of health plans in delivering MH/SA services.

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