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U.S. Master™ Pension Guide, 2009 Edition
Revised for 2009 to include relevant provisions of the Heroes Earnings Assistance Relief Tax (HEART) Act and the Emergency Economic Stabilization Act.

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CCH® BENEFITS — 12/13/07

Mental Health Parity May Lower Total Cost: Milliman

From Spencer's Benefits Reports: Full parity in health insurance coverage between behavioral and physical illnesses would raise costs by a minimal amount while resulting in savings several times over for other resulting medical costs and indirect costs. This was the conclusion of a Milliman Perspective article, “The Mental Health Divide: Mending The Split Between Mind and Body,” by Stephen P. Melek, a Milliman principal and consulting actuary.

“Evidence has emerged about the adverse long-term medical effects of untreated behavioral disorders,” Mr. Melek wrote. “These two dynamics now combine to suggest that parity in mental and physical health coverage—essentially, financing both on the same basis—would result in a very small added health care cost at worst, and quite possibly, a net reduction in total costs.

“Only eight out of 100 patients suffering from behavioral disorders receive minimally effective treatment in the dual system that exists today,” Mr. Melek explained. Sixty percent of these patients receive no treatment for their behavioral disorders. In addition, because behavioral disorders very often manifest through pain and other physical symptoms, patients often seek treatments for such physical ailments in general medical settings, without effective treatment for the root cause. In general medical settings, the percentage of patients that receive minimally effective treatment for their behavioral disorders is only 13%.

Untreated behavioral disorders not only lead to increased use of regular medical services, but also to lower work productivity and greater use of sick time and disability benefits, as well as to more accidents in the workplace, Mr. Melek pointed out.

“Estimates of the potential industrywide cost increases from mandated behavioral health care parity have fallen from 3% or 4% in the early 1990s to 0.6% or lower today, based on a recent Milliman study,” Mr. Melek added. “The 0.6% cost impact of parity is based on a scenario that assumes plans do not increase their utilization management of behavioral benefits. If all plans increased their utilization management in response to mandated parity, costs could rise by less than 0.1%.”

Although many have objected to the two competing mental health parity bills in Congress, S. 558 and H.R. 1424 (the Wellstone Act), claiming that parity would result in runaway costs, Milliman’s analysis has shown that the more extensive Wellstone Act would raise individual premiums by between $0.03 and $2.40 per insured person per month.

“Twenty-five percent to 40% of patients with a chronic, costly physical condition also have a diagnosable psychological disorder—that’s a rate 50% to 100% higher than in the general population, and these are often severe cases,” Mr. Melek explained. “What’s more, a disorder like depression can exacerbate a physical illness and lead to increased medical costs.” Parity would integrate health care delivery and allow for better coordinated care, he asserted.

“Fully integrating the behavioral health system with the rest of the mainstream health care system could take a generation to complete, just as it took a generation for the managed behavioral health organizations to prove that specialty behavioral health care could be provided at a reasonable cost,” Mr. Melek concluded. “But for the time being, the 92 patients out of 100 diagnosable ones who aren’t getting minimally effective treatment are adding costs to health plans and the employers who sponsor them.”

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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