SOA provides clarity regarding law's consequences on existing health insurance plans, benefits

With the approaching national implementation of The Mental Health Parity and Addiction Equity Act (MHPAEA) on July 1, 2010, members of the Society of Actuaries (SOA) are providing clarity regarding the law's potential unintended consequences on consumers' existing health insurance plans and benefits. While the law is intended to provide non-discriminatory mental health coverage, members of the SOA are helping consumers and large and small employers understand what effects the law will have on current health plan offerings, and what individuals can do to help avoid higher out-of-pocket costs.

"We are in favor of the law because it is intended to 'level the playing field' between benefits for physical health conditions and that of mental health and substance use disorders," says Sara Teppema, FSA, Health Staff Fellow for the SOA. "However, as actuaries, we have been performing many of the tests of healthcare plans for parity, and we have found that the way the Mental Health Parity and Addiction Equity Act has been interpreted, each employer may need to re-evaluate their existing health plans."

The Mental Health Parity and Addiction Equity Act , which was passed into law in 2008, was designed to end health insurance inequity between mental health/substance use disorders, and medical and surgical benefits, for group health plans with more than 50 employees. For example, in the past, a visit to an internist for physical health issues may have required a $20 co-pay, but weekly therapy sessions with a social worker may have required a $30 co-pay. So, in this example, the mental health co-pay would need to be reduced from $30 to $20.

The SOA hosted a nationally representative online survey of 1,000 individuals over the age of 18 to gauge their awareness on this topic, and found that 89 percent weren't familiar with the details of The Mental Health Parity and Addiction Equity Act. What's more, the survey found that more than one-third of Americans aren't aware of how their health benefits could change after July 1, even after being given a real-world explanation on how the law will affect their out-of-pocket costs.

According to Teppema, "The majority of consumers covered by their employer may find that not only do they not get more benefits and broader access to mental health and substance use disorder care through the new law, but their benefits for all other medical care may also change. With the law taking effect within the next month, it's important for consumers to start thinking about how the impending change to their health benefits may affect their pocketbooks."

Certain rules put forth by the Mental Health Parity and Addiction Equity Act may impact how employers manage and structure their employee health insurance plans and benefits. Due to restraints placed on insurers in setting co-payments and deductibles on mental health benefits that differ from those of physical illnesses, changes for the consumer may include the following:

• Employers may need to combine once-separate deductibles into a single, potentially costly deductible for all benefits, regardless of whether or not mental benefits are used. This could mean a surprise up-front deductible at the beginning of next year for a patient who is used to a moderate co-pay for mental health services.
• Office visit co-pays for all medical services could be eliminated and all types of office visits could instead be subject to deductibles and coinsurances.
• Employers could cut employee medical benefits to match the mental health benefits.
• Employers could eliminate mental health and substance abuse benefits altogether.

"While larger employers are already preparing for this change, many smaller employers may not be aware of the changes and impact on services for their employees," says Brian Renshaw, FSA, MAAA, Staff Vice President & Actuary II for WellPoint. "As actuaries, we're hoping to provide some clarity to employers so they can inform their employees of the potential changes to health benefits once the law goes into effect."

To help prepare and plan for potential higher out-of-pocket costs, actuaries recommend individual consumers also take steps to become educated on their current mental health and medical plans. While some plans may enhance mental health coverage to meet parity requirements, Renshaw suggests consumers ask specific questions, such as:

• Will I be required to pay a higher deductible, and what exactly will it cover?
• Will my medical benefits be reduced, and if so, how?
• Is there anything I can do to prevent my mental health benefits from being reduced or eliminated, or can I avoid paying higher co-pays and deductibles?