Lack of Mental Health Care Coverage Costs Employers

Mental illness costs U.S. businesses $113 billion every year, according to one estimate. But paying for treatment up front could save money in the long run.

Thirty percent of the non-institutionalized population in the country age 15 to 54 have a mental disorder of some kind, according to the U.S. Department of Health and Human Services.

But many people don’t seek mental health treatment because they are either underinsured or have no mental health insurance at all.

“[Employers] may think [depression] is just a personal issue, but people are missing work,” said Gary Ferrier, the Lewis E. Epley professor of economics at the University of Arkansas. “People are not focused when they’re at work, and they don’t have the energy. It’s costing employers directly.”

The Legislature passed the Arkansas Mental Health Parity Act in 1997 to ensure parity between mental health coverage and physical health coverage. But there are loopholes, said David Williams, president and CEO of Ozark Guidance in Springdale. And those loopholes do nothing about the caps on coverage.

“You have to ask: ‘Parity on what?'” Williams said. “Is it on pre-existing conditions, total amount of services, on different levels of service?”

Employers

Employers may not realize how little the extra cost would be to add mental health coverage to their plans.

The Congressional Budget Office said in 1996 that the estimated increase in premiums due to the parity act would result in a 0.4 percent increase initially and a 0.16 percent increase after employer contributions. Coopers and Lybrand LLP, during the same year, found that the increase would be 0.3 percent for indemnity plans and 0.12 percent for composite of fee-for-service, preferred provider organization (PPO), point-of-service (POS) and health maintenance organization (HMO) plans.

Implementing full parity, which is what the Domenci-Wellstone Act in 1996 would have done if it had passed, could increase premium costs anywhere from 3.2 percent to 8.7 percent, according to several different studies.

But mental health is a long-term commitment. Policies may have caps on the number of treatments or total cost of treatments. William Symes, a licensed professional counselor in Fayetteville, said caps can range from 10 to 30 sessions, depending on the type of insurance.

Symes said there are three different types of therapy: situational, which can be caused by a death; structural, which can be from depression; and medical, which can be from having manic depression.

Situational therapy can range from six to 10 sessions a year, he said. But structural therapy is usually once a week for one to three years. That’s 52 sessions per year. If a policy caps coverage at 30 sessions, that’s still 22 that the patient will have to pay for out of pocket.

Symes said a one-hour session averages about $180. That means 22 sessions not covered by insurance would cost about $3,960. However, medical therapy usually classifies under medical treatment, so it would be covered by major medical insurance.

Ferrier said a survey conducted by Pew Charitable Trusts asked why people don’t seek mental health services. About 90 percent said lack of health insurance, and more than 80 percent said lack of money.

“A lot of people choose between bread on the table and mental health,” Williams said. “We really don’t have a real systematic approach to people getting good timely mental health care.”

In 1996, $69 billion was spent for diagnosis and treatment of mental illnesses, according to a report by the Surgeon General. Between 1986 and 1996, mental health expenditures grew at an average annual rate of 7 percent.

And it’s not just adults who suffer. One-fifth of the children in the U.S. have a diagnosable mental disorder.

Question of Parity

In 1996, Congress passed the Mental Health Parity Act stating that for companies with more than 50 employees it is unlawful to set annual and lifetime dollar insurance limits for mental health care unless it is the same dollar limit applied to medical and surgical health care.

But loopholes in the law allowed employers to set higher deductibles, apply separate cost-sharing arrangements and include certain limitations on mental health benefits. Most people don’t visit a physician for general health 10 to 15 times a year, Ferrier said. But someone might need counseling 10 to 15 times a year. If the cap is set at 10, then everything after that is an out-of-pocket expense.

“Insurance coverage with mental health is not on parity with physical health,” Williams said.

At the same time, Congress pushed for states to adopt their own mental health parity laws. Arkansas did so in 1997.

“About two-thirds of the states have passed some kind of state mental health parity law,” Ferrier said. “Some states are much closer to true parity than other states. Arkansas is somewhere in the middle.”

In Arkansas, the law: doesn’t specify minimum benefit requirements; doesn’t specify providers who may offer services under the mandate; doesn’t cover state employees; doesn’t cover health benefit plans if provisions would result in a premium cost increase of 1.5 percent or more;

doesn’t apply to individual plans; and exempts businesses with less than 50 employees as long as they offer the parity provisions as an option.

The Arkansas law does cover substance abuse, though, which many states don’t cover.

The Cost of Parity

Employers aren’t the only ones worried about the health care cost increase.

Aetna Inc., one of Arkansas’s leading insurance providers, stated on its Web site that it “supports the current ability of health plans to customize mental health benefits that suit the needs of customer’s enrolled population … [but] if Congress chooses to mandate wide-ranging mental health coverage for America’s consumers, it likely will end up hurting the very people it is trying to help.”

The company said the mandate would lead to cost increases that would be passed along to plan sponsors and enrollees and that would lead to more uninsured consumers.

But then there are studies on how much physical health care costs would go down when there is mental health parity.

“There’s some [experts] that have advocated that if you have more mental health coverage, your physical health cost would go down,” Ferrier said.

That’s because behind many physical illnesses are found to be anxiety or depression, Williams said.

The National Advisory Mental Health Council’s Interim Report on Parity Costs in 1997 showed that Maryland, which adopted a full mental health parity mandate, had a 0.2 percent decrease in total health care costs after the implementation. Rhode Island had a 0.3 percent increase of total plan costs under its state parity, and Texas had a 47.9 percent decrease in costs for state employees enrolled in its managed care plan — which are PPO, HMO and POS — under parity.

But having a good benefits package that appeals to employees and their families can also help a company be competitive in the job market. In Northwest Arkansas, Williams said employers’ benefits packages are about equal to others in the U.S.

Williams said it really is a long-term payoff for employers to have healthier and more productive employees.

“We’d have mentally healthier people and get better bang with our insurance buck if there were better mental health policies,” he said.

Mental Health Facts

During any given year, 30 percent of the non-institutionalized population age 15 to 54 will have a mental disorder.

Over their lifetime, 48 percent of the non-institutionalized population age 15 to 54 have had at least one disorder, and 27 percent have had two or more disorders.

The most common mental disorders among people ages 15 to 54 are depression, anxiety and substance abuse.

One-fifth of the children in the United States have a diagnosable mental disorder, and 5 percent to 9 percent have a severe emotional disturbance with extreme functional impairment.

Two of the most common disorders among children are attention-deficit hyperactivity disorder, found in 3 percent to 5 percent of the school-age population, and major depressive disorder, which affects 2 percent to 5 percent of adolescents.

One 1990 study estimated that absenteeism and reduced productivity resulting from depression accounted for $24 billion in financial losses to the economy.

(Source: U.S. Department of Health and Human Services’ Substance Abuse and Mental Health Services Administration)