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Prepared by Christina Enders Rachel Moskowitz Michael Pancook Carrie Schneck

Does Mental Health Parity Make Economic Sense for Wisconsin? An evaluation of the effects of mental health parity in the commercial insurance market. Prepared for Office of Policy Initiatives and Budget Wisconsin Department of Health and Family Services. Prepared by Christina Enders

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Prepared by Christina Enders Rachel Moskowitz Michael Pancook Carrie Schneck

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  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 for Office of Policy Initiatives and Budget Wisconsin Department of Health and Family Services Prepared by Christina Enders Rachel Moskowitz Michael Pancook Carrie Schneck La Follette School of Public Affairs

  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 Care’s 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 report’s 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 care’s cost control strategies that affect utilization of services

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