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Does Mental Health Parity Make Economic Sense for Wisconsin An evaluation of the effects of mental h

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Title: Does Mental Health Parity Make Economic Sense for Wisconsin An evaluation of the effects of mental h


1
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 Enders
  • Rachel Moskowitz
  • Michael Pancook
  • Carrie Schneck
  • La Follette School of Public Affairs

Prepared for Office of Policy Initiatives and
Budget Wisconsin Department of Health and Family
Services
2
Barriers to Mental HealthParity
  • Social barriers
  • Stigma
  • Concern over increased financial costs resulting
    from additional coverage
  • Economic barriers
  • Adverse selection

3
Prevalence of Mental Illness in Wisconsin
  • 266,000 Children
  • 1,534,000 Adults

1.8 million Wisconsin residents
4
Target Population of Parity
5
Federal Mental Health Mandate
  • Federal Mental Health Parity Act of 1996
  • Mandates benefits if plans offer mental health
    coverage
  • Has limitations

6
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

7
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

8
Costs of Inpatient Services in Wisconsin
9
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

10
Methodology for Cost Estimates
  • Includes policyholders in group and individual
    market
  • Relies on other state estimates and actuarial
    analysis of premium increases

11
Criteria for Cost Estimates
  • Comparable parity mandate
  • Account for impact of managed care
  • Assume existing level of coverage for mental
    health services

12
Estimates of Total Annual Premium Increases Under
Parity
  • Range of cost increase
  • 0.4 to 2.0 percent

13
Estimates of Premium Increases Under Parity,
Group Market
  • Total Annual Increase
  • 33 million to 165 million

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
14
Estimates of Premium Increases Under Parity,
Individual Market
  • Total Annual Increase
  • 6.6 million to 33.2 million

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
15
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

16
The Role of Managed Care
  • Managed Care penetration rate in Wisconsin
  • 90.9 percent in group market
  • 93.8 percent in individual market
  • Managed Cares cost-control techniques may also
    impact utilization

17
Projected Benefits of Parity, Individuals with
Mental Illness
  • Receiving optimal level of treatment
  • Reduced out-of-pocket costs for services

18
Projected Benefits of Parity, Employers
  • Reduced absenteeism
  • Increased on-the-job productivity
  • Reduced short-term disability claims
  • Others including lower turnover and workplace
    accidents

19
Projected Benefits of Parity, Health Insurance
Companies
  • May have reduced expenditures on claims for
    physical health services as mental health
    concerns are better addressed

20
Projected Benefits of Parity, Society
  • Reduced crime
  • Reduced incarceration costs
  • Fewer traffic accidents
  • Increased human capital development for children

21
Political Feasibility
22
Recommendation
  • Future discussions of a mental health parity
    mandate should incorporate the reports thorough
    examination of cost increases, potential
    benefits, and
  • political feasibility.

23
Other Considerations
  • Parity in State Employee Health Plans
  • Parity in the BadgerCare Plus benchmark plan
  • Explore managed cares cost control strategies
    that affect utilization of services
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