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A new study shows that employers that use managed care controls can achieve mental health parity and reduce overall costs.
The survey, which was commissioned by the National Alliance on Mental Illness (NAMI), found that 25 percent of the responding employers were already in compliance with the 1996 Mental Health Parity Act, which goes into effect next January.
The law prohibits employer-sponsored health plans covering 50 or more employees from having lower annual and lifetime dollar limits for mental illness treatment than for other disorders covered under the health plan.
The six companies reported that using managed care techniques, such as gatekeeping and utilization review, along with the presence of an employee assistance program (EAP) made them more comfortable with the concept of parity, according to the report by William M. Mercer Inc., an employee benefits and human resources consulting firm.
NAMI commissioned the study as part of its ongoing grass-roots effort to obtain parity at the state and federal levels.
Mercer interviewed benefits managers at 24 companies selected from a proprietary database. They were chosen to reflect broad variations in geographic location, type of industry, size, and benefits design.
Eight of the 24 companies offered some elements of parity but fell short of being in compliance with the new law. For example, they added inpatient day limits along with annual or lifetime limits.
The remaining 10 companies were not in compliance with the law because of numerous limitations on the treatment of mental illness that were not applied to physical illness.
The report noted that even the six companies that complied with the new parity law tended to have a limited number of outpatient visits, higher outpatient copayments, and diminished out-of-network coverage.
Cristi Cohn, head of the National Behavioral Health Consulting Practice for William M. Mercer Inc. in Phoenix, commented to Psychiatric News, "Mental health parity doesn’t cost employers more money when benefits are managed. However, this doesn’t necessarily mean greater quality of care or access to care."
She observed that employers that switched from indemnity coverage to behavioral health care carveouts were able to offer a wider array of mental health benefits to employees and remove inpatient and outpatient limits.
Cohn referred to three case studies in the report of companies that "wanted to do more for their employees than just meet the requirements of the law."
For example, Black and Decker, an international manufacturer of home and commercial products, has used a carveout since 1991 to manage behavioral health benefits.
This change has resulted in unlimited inpatient network days and outpatient visits for mental illness or substance abuse treatment. However, there are cost-sharing provisions, such as 10 percent for inpatient care and flat copayments for individual and group outpatient therapy.
Mercer found that between 1993 and 1996, the percentage of total medical claims paid for behavioral illness dropped from 6.6 percent to 3.4 percent. Moreover, the per employee annual claims expense declined from $190 to $101 during the same period.
In general, mental health costs account for between 12 percent and 15 percent of total medical costs in a typical indemnity plan, compared with between 4 percent and 7 percent of total medical costs in a highly managed PPO, the report noted.
Annual per-employee costs average from $90 and $110 for closely managed plans, $110 and $200 for moderately managed plans, to more than $200 for unmanaged plans.