Employers or plan sponsors who are trying to design health plans to be in compliance with the Mental Health Parity law were struggling with government rules issued in February. The rules would have required many to change their plan design to comply by July 1 of this year and, in doing so, possibly lose their “grandfathered” status under the health care reform law. It was a “Catch-22” situation, but in early July, the Department of Labor provided some relief.
First, what is the Mental Health Parity law and why do employers have to change their plan designs to comply? The Mental Health Parity and Addiction Equity Act of 2008 was designed to ensure that employers and group health plans cannot provide less coverage for mental health care than for the treatment of physical conditions like cancer or heart disease. However, like many laws and the rules that govern their practical application, it is difficult for employers to simply make coverage equitable. The difficulty is in the way such items are reimbursed. It’s like trying to compare the process of purchasing a car to purchasing a car wash.
Many employers use co-payments for medical office visits. This is where employees pay, say, $20 for the visit and the employer or plan sponsor pays the rest of the tab. But for other kinds of outpatient services, many plans are designed with a co-insurance formula where the employee might pay 20 percent of the cost of the visit and the employer or plan sponsor pays the remaining 80 percent.
Rich Stover, a consulting actuary with Buck Consultants, told Business Insurance that one estimate is 58 percent of all large employees fall into this kind of cost-sharing model, which “would have required them to either provide 100 percent mental health benefits or change their medical design, which would have resulted in loss of grandfathering under health reform.”
Grandfathering is a provision in the new The Patient Protection and Affordable Care Act that allows exemption from certain requirements, like 100 percent coverage of preventive services, and extended deadlines for others. It is an advantage for most large employers to try to keep their plans in “grandfathered” status until they better understand the rules and financial impact of health care reform.
On July 2, the Department of Labor said it will not enforce the provisions for employers or plan sponsors who divide outpatient mental health benefits office visits and all other outpatient items and services – as long as that arrangement applies to “substantially all” outpatient medical / surgical benefits as well – until final Mental Health Parity rules are issued. The DOL said separate subclassifications are still not permitted for generalists and specialists. And, employers may not impose additional fees or treatment limitations on mental health or substance abuse benefits.
Employers still need to work with their plan consultants and advisers on a final solution as final rules are issued, but it does provide some relief to many who were impacted by this “Catch-22.”
And, there is also the opportunity for employers to design more effective treatment options under the parity rules. For example, creating plan designs that nudge employees toward integrating care for treating conditions such as depression. When medication is combined with treatment from a mental health specialist, it produces more positive outcomes. Yet, CIGNA reports that 80 percent of people who are treated with prescription drugs for depression are not also receiving mental health care. This could be partly due to restrictions or unappealing reimbursement models for mental health care.
So, during this reprieve, employers should remember that careful plan design considerations around both the Mental Health Parity law and health care reform can help them design plans that result in better quality outcomes with potentially lower costs in the long run.
Michelle Hicks is a communications consultant with Buck Consultants. Contact her at email@example.com.