does mental health parity make economic sense for wisconsin? an evaluation of the effects of mental...
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Does Mental Health Parity Make Economic Sense for Wisconsin?An evaluation of the effects of mental
health parity in the commercial insurance market
Prepared by Christina EndersRachel MoskowitzMichael PancookCarrie Schneck
La Follette School of Public Affairs
Prepared for Office of Policy Initiatives
and Budget
Wisconsin Department of Health and Family Services
Barriers to Mental HealthParity Social barriers
Stigma Concern over increased financial costs
resulting from additional coverage
Economic barriers Adverse selection
Prevalence of Mental Illness in Wisconsin
1.8 million Wisconsin residents
266,000 Children1,534,000 Adults
Target Population of Parity
Uninsured5%
Government30%
Commercial 26%
Self-Funded39%
No Mental Illness, 19.27%
Mental Illness, Did not seek
treatment, 4%
Mental Illness, Sought
Treatment, 2.73%
Federal Mental Health Mandate
Federal Mental Health Parity Act of 1996
Mandates benefits if plans offer mental health coverage
Has limitations
Wisconsin Mental Health Mandate Mandates minimum coverage of mental
health benefits
Coverage levels: Inpatient - $7,000 Outpatient - $2,000 Transitional - $3,000
Levels set in 1985, last revised in 1991
Evidence of Gap in Coverage
48.1% of adults with an unmet mental health need cited cost of insurance as a barrier
31.2% of adults with an unmet need for substance abuse cited cost of insurance as a barrier
Costs of Inpatient Services in Wisconsin
Average Charge
Charges Above Mandate($7,000)
Schizophrenia $16,837 $9,837
Depression $5,816 --
Bipolar Disorder $10,549 $3,549
Alcohol Abuse / Dependence $6,352 --
Substance Abuse / Dependence (with Rehabilitation and/or Detoxification)
$8,232 $1,232
Childhood Mental Disorders $14,166 $7,166
Average $9,831 $2,831
Mental Health Parity Mandate Evaluated Equality in cost-sharing provisions between
physical and mental health coverage: Co-payments Deductibles Lifetime and annual benefit limits
Mental illness: All major classes of DSM-IV disorders Childhood mental disorders Substance abuse
Methodology for Cost Estimates
Includes policyholders in group and individual market
Relies on other state estimates and actuarial analysis of premium increases
Criteria for Cost Estimates
Comparable parity mandate
Account for impact of managed care
Assume existing level of coverage for mental health services
Estimates of Total Annual Premium Increases Under Parity
Range of cost increase:0.4 to 2.0 percent
Total Annual Increase:$33 million to $165 million
Estimates of Premium Increases Under Parity, Group Market
Total Annual Increase Per Policy: $43 to $214
Monthly increase for Employers:
$2.82 to $14.11 per employee
Monthly increase for Employees:
$0.75 to $3.75
Total Annual Increase:$6.6 million to $33.2 million
Estimates of Premium Increases Under Parity, Individual Market
Total Annual Increase Per Policy: $7 to $67
Monthly increase for Single Plan:
$0.59 to $2.97
Monthly increase for Family Plan:
$1.12 to $5.62
Other Impacts of Parity
Decreases out-of-pocket costs for mental health care consumers
Employers are unlikely to alter health insurance coverage
A small number of policyholders may drop insurance coverage
Utilization of mental health care services may not change significantly
The Role of Managed Care
Managed Care penetration rate in Wisconsin: 90.9 percent in group market 93.8 percent in individual market
Managed Care’s cost-control techniques may also impact utilization
Projected Benefits of Parity, Individuals with Mental Illness
Receiving optimal level of treatment
Reduced out-of-pocket costs for services
Projected Benefits of Parity, Employers
Reduced absenteeism
Increased on-the-job productivity
Reduced short-term disability claims
Others including lower turnover and workplace accidents
Projected Benefits of Parity, Health Insurance Companies
May have reduced expenditures on claims for physical health services as mental health concerns are better addressed
Projected Benefits of Parity, Society
Reduced crime
Reduced incarceration costs
Fewer traffic accidents
Increased human capital development for children
Political Feasibility
Health insurance consumersModerately supportive of equalized
benefits
Insurance consumers with a mental illness
Supportive of parity policy
EmployersOppose because of cost increases
and perceived limitations on choice of plans
Health insurance companiesOppose additional mandates on
insurance market
Wisconsin State GovernmentParity legislation has failed in past
years with only incremental changes occurring
Recommendation
Future discussions of a mental health parity mandate should
incorporate the report’s thorough examination of cost increases, potential benefits,
and political feasibility.
Other Considerations
Parity in State Employee Health Plans
Parity in the BadgerCare Plus benchmark plan
Explore managed care’s cost control strategies that affect utilization of services