APRIL 2007 HOT TOPICS

Behavioral Health Parity: Consequences for Federal Employee Health Plans

The push for behavioral health parity—health coverage for mental health and substance abuse care that equals coverage for general health care—has been a long-standing issue for policymakers and is regaining momentum in the 110th Congress. Recently, the Senate Health, Education, Labor, and Pensions (HELP) Committee reported out mental health parity legislation, the Senate Budget Committee included a mental health parity provision in the 2008 budget, and the House has introduced several pieces of legislation addressing mental health parity in the private system and in Medicare. In addition to federal action, 38 states have passed some form of parity legislation. There are concerns, however, that parity could invite overuse of services and drive up costs. To date, there has been no national assessment of how parity affects utilization and costs, and little is known about how insurers implement parity rules.

In 2001, the U.S. government required the Federal Employees Health Benefits (FEHB) Program to provide behavioral health benefits (which include mental health and substance abuse coverage) equal to its general health benefits. The FEHB Program insures 8.5 million federal workers, retirees, spouses, and dependents. Because it affects such a large group of beneficiaries nationwide, the FEHB experience provides an important test case for understanding the effects of behavioral health parity. A team of researchers from RAND Health, Harvard University, the University of Maryland, and Northrop Grumman Information Technology assessed the effects of the FEHB parity requirement on insurers and evaluated consumers' use of services and spending.

How did insurers respond?

RAND analyzed the experience of 156 health plans as well as the government-wide BlueCross and BlueShield Service Benefit Plan.

• Nearly all insurers complied with parity requirements by dropping cost-restraining benefit limits on behavioral health services.
• Parity did not dramatically change most health plan operations because the majority of HMOs and PPOs were already using “carve-outs” to manage behavioral care. The term carve-out refer to an arrangement in which a specific health benefit—in this case, behavioral health—is managed separately from the general medical benefit.
• However, the move to carve-outs affected large numbers of beneficiaries because more than half belonged to the fee-for-service BlueCross and BlueShield Service Benefit Plan, and those plans switched to carve-outs in higher numbers.
• A smaller number of plans also changed the way they managed benefits to increase their use of specific managed-care mechanisms, such as utilization review and prior authorization requirements. The parity effect in this area was smaller than expected because many plans were already using these management techniques prior to the introduction of parity. Again, changes were more apparent in the fee-for-service BlueCross and BlueShield Service Benefit Plan than in the HMOs and PPOs.

Effects on service use and spending

How did these changes affect beneficiaries' use of behavioral health services and associated costs? The research team examined utilization and spending patterns in seven of the largest FEHB plans and compared these with patterns under a matched set of health plans serving large, privately insured populations but without parity benefits.

• Results showed that the rate of use of mental health and substance abuse services increased at rates similar to those observed in comparison plans.
• Total spending on services for beneficiaries decreased significantly for three plans and did not change significantly for four of the seven plans relative to the non-parity plans.
• Out-of-pocket spending by beneficiaries also decreased under five of the seven plans, again relative to the non-parity plans.

Conclusion

These studies suggest that parity and managed care in combination can work to improve behavioral health care protection without increasing total costs.

This Fact Sheet is Based On

Please contact Kristy Anderson at kristy_anderson@rand.org if you would like an electronic copy of the articles listed above.

RAND Health conducts objective research on health, health behavior, and health policy. Access to all RAND Health research is available at www.rand.org/health/.

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