Implications/Impact of Parity Legislation and Healthcare Reform for Behavioral Health: Systems Perspectives

1. Implications/Impact of Parity Legislation and Healthcare Reform for Behavioral Health: Systems Perspectives Chuck Ingoglia Vice President, Public Policy National Council for Community Behavioral Healthcare

2. Healthcare Reform and the Behavioral Health Safety Net Overview We are on the cusp of the second (and most significant) wave of public behavioral health change in the last 25 years

3. Not a moment too soon...

4. Healthcare Reform and the Behavioral Health Safety Net Overview Where does the Safety Net MH/SU fit into the equation?“Hypothesis #1”: • Due to greater understanding of how manyAmericans suffer from mental health and substance use disorders and how expensive the total healthcare expenditures are for this group... • We have reached a tipping point in understanding the importance of treating the healthcare needs of persons with serious mental illness and the behavioral healthcare needs of all Americans... • Which are creating a set of exciting opportunities for the Community Behavioral Healthcare Organizations in the U.S.

5. Healthcare Reform and the Behavioral Health Safety Net Overview Where does the Safety Net MH/SU fit into the equation?“Hypothesis #2”: • Due to greater understanding of how manyAmericans suffer from mental health and substance use disorders and how expensive the total healthcare expenditures are for thisgroup... • We have reached a tipping point in understanding the importance of treating the healthcare needs of persons with serious mental illness and the behavioral healthcare needs of all Americans... • Which are creating a set of unprecedented threats for the Community Behavioral Healthcare Organizations in the U.S.

6. National Healthcare ReformRoot Cause Analysis • Root Cause Analysis: Wrong incentives and many disincentives that lead to: • Lack of Access due 48 million citizens without insurance and resource misallocation • Overuse of unnecessary, high cost tests and procedures • Underuse of prevention, early intervention primary care and behavioral health services • Medical errors due to poor coordination among providers, poor communication with patients, and more.. • As much as 30 percent of health care costs (over $700 billion per year) could be eliminated without reducing quality

7. National Healthcare ReformFour Key Strategies U.S. health care reform, with or without federal legislation, is moving forward to address key issues

8. Coverage Expansion: Federal Healthcare Bill • The President’s Proposal: • Requires most individuals to have Coverage • Provides Credits & Subsidies up to 400% Poverty • Employer Coverage Requirements (>50 employees) • Small Business Tax Credits • Private Insurance policy costs include $1,000 per year of Uncompensated Care • Creates State Health Insurance Exchanges • Expands Medicaid

9. Coverage Expansion – Parity Legislation • Law: Mental Health and Substance Use Services must be provided at parity with general healthcare services (no discrimination) • Large Employers (Parity Act) • Medicaid (Parity Act & Reform Legislation) • Health Insurance Exchanges for Individual and Small Group Policies (Health Reform Legislation) • Medicare: more to do (Medicare Improvements Act – MIPPA) • The controversial question is whether insurance companies will provide adequate“scope of services” for persons with SMI/SED

10. Coverage Expansion: Most Members of the Safety Net will have Coverage Including MH and SU • 15 Million increase in Medicaid enrollees (43%) • 16 Million increase in Privately Insured • $15 to $23 billion in addedspending for MH/SU from insurance expansion • No credible info yet on $ impact of Parity Act

11. Coverage Expansion: Most Members of the Safety Net will have Coverage Including MH and SU And a much greater demand for service providers Note that these figures are based on closing the gap halfway for just the indigent & uninsured individuals with a SMI/SED

12. Insurance Reform • The President’s Proposal: • Requires guaranteed issue and renewal • Prohibits all annual and lifetime limits • Bans pre-existing condition exclusions • Create an essential health benefits package that provides comprehensive services including MH/SU at Parity • Requires health plans to spend 80%/85% of premiums on clinical services • Creates a new Health Insurance Rate Authority to provide oversight at the Federal level and help States determine how rate review will be enforced

13. Service Delivery Redesign and Payment Reform • $700 Billion Question: Will the current legislative and regulatory tools at our disposal be enough to improve the health status of Americans and bend the cost curve? • MH/SU Question: Is the answer to the above question the same for Americans with mental health and/or substance use disorders?

14. National Healthcare Reform Strategies and the MH/SU Safety Net • 49% of Medicaid beneficiaries with disabilities have a psychiatric illness (this is new information; previous studies that excluded pharmacy claims calculated the rate at 29%); AND this is the most expensive population... The Faces of Medicaid III: Refining the Portrait of People with Multiple Chronic ConditionsCenter for Health Care Strategies, Inc., October 2009

15. National Healthcare Reform Strategies and the MH/SU Safety Net There is huge variation among the states in MH funding Most states have less than half the funding of the average of the 10 most well-funded states How will HC Reform address this?

16. National Healthcare Reform Strategies and the MH/SU Safety Net The underfunding problem is even greater in Substance Use In Treatment: 2.3 million Not in Treatment: Tens of millions (McClellan) 21% + (Willenbring) How do we even begin to address these gaps asstates and health plansrealize they have to provide SU servicesat parity?

17. National Healthcare Reform Strategies and the MH/SU Safety Net Relevance of: • Coverage Expansion: YES, YES, YES • Insurance Reform: YES (dumping); this will become more important as Exchanges cover those between 134% and 400% Poverty Level • Service Delivery Redesign: MAYBE • Will the general healthcare system be willing to treat persons with > Mild MH/SUD? • Will Medical Home Prevention, Early Intervention and Care Management strategies get close to meeting the needs of persons with > Mild MH/SUD? • Will payors support embedding Primary Care in CBHOs to the extent needed to serve those with serious/severe MH/SU disorders? • Will the CBHO system be invited (late) to the $20B HIT Incentives “party”? • Payment Reform: Even more of a MAYBE • Will funding levels (beyond newly insured) come closer to matching need? What about in the states that are 1/3 or 1/4 of the average of the top 10? • Will new payment models be applies to MH/SU and will existing payment barriers be removed?

18. Emerging BH Safety Net Service Delivery Models • This translates into my hypothesis that CBHOs will need to ensure that they meet a set core competencies in order to continue being an important part of the healthcare delivery system. • A full Array of Specialty Behavioral Health Services • A well defined Assessment Process and Level of Care System • A solid approach to Prevention, Early Intervention, and Recovery • The ability to practice as a Team to Coordinate Care • Demonstrated use of Clinical Guidelines • Measurement Systems and Tools that measure consumer improvement • A robust Electronic Health Record that includes Patient Registries • Quality Improvement Processes and supporting Data Systems • Financial Systems to manage Case Rate Payments & the FQBHC Prospective Payment System (see below)

19. Emerging Behavioral Healthcare System Models • Starting with assessing how things will unfold in your state

20. Emerging Behavioral Healthcare System Models Things get really exciting when we think about MH/SU Carve-In and Carve-Out models

21. The Big Transition – In Your State and Community

22. Additional Financing Flow Concept • Assuming that parity will be embedded as a requirement for most health plans in the final healthcare reform legislation and a broader behavioral health benefit will be available for most people with coverage, and … • Drawing on the California Integration Policy Initiative framework of Mild, Moderate, Serious and Severe Levels of Care, and … For example, the new ABD managed care plans should have a MH/SU benefit for primary care-based brief services

23. Introduction • Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) • Generally effective for plan years after October 3, 2009 • Applies to both mental health and substance use disorder (MH/SUD) benefits • Interim Final Regs issued February 2, 2010 (75 Fed. Reg. 5410) • Agencies are requesting comments-- they may issue revisions • Most health plans will need to be reviewed and possibly amended in light of these rules 23

24. Session Overview • Provide an overview of new parity regulations, explaining important components as well as what was left out • Describe how the regulations will impact the benefit plans and policies of Medicaid plans, health insurance exchanges, and private health insurance companies • Discuss the implications for persons with mental health and substance use conditions and organizations that serve them • Impact on access to various services and provider-types • Consider action steps by providers in related to parity regs. 24

25. General Information on Mental Health Parity and Addiction Equity Act • Regulations apply for plan years beginning July 2, 2010 • Collectively bargained plans have slightly different dates • General rule – parity applies to if a plan offers medical/surgical and MH/SUD benefits (> 50 employees) • A plan may not apply any financial requirement or treatment limitation to mental health or substance use disorder benefits requirement or treatment limitation applied to in any classification that is more restrictive than the predominant financial substantially all medical/surgical benefits in the same classification 25

26. Requirements/Limitations • Financial requirements – e.g., deductibles, copayments, coinsurance, out-of-pocket maximums • Treatment limitations – limit benefits based on frequency of treatment, number of visits, days of coverage, days in a waiting period, and “other similar limits on the scope and duration of treatment”. • Quantitative treatment limitation – expressed numerically, e.g., annual limit of 50 outpatient visits • Nonquantitative treatment limitation – not expressed numerically but otherwise limits the scope or duration of benefits 26

27. Classifications of Benefits • 6 classifications of benefits: • Inpatient, in-network • Inpatient, out-of-network • Outpatient, in-network • Outpatient, out-of-network • Emergency care • Prescription drugs • These are the only classifications used for MHPAEA • Distinctions between generalists and specialists are not separate classifications (eg. same copays required) 27

28. Classification of Benefits (cont’d) • A plan must provide MH/SUD benefits in each classification in which it provides medical/surgical benefits • The complete exclusion of coverage in a classification is considered a treatment limitation • Rules do not require an expansion of the range of conditions/disorders covered under the plan • - This is a clear example of the regulations requiring parity in scope of services i.e. all levels and types of care for Med/Surg benefits in these 6 classifications must be provided for MHSUD • Inpatient, outpatient, and emergency care are defined by the plan – must be applied uniformly 28

29. Analyzing Plan Benefits • Part 1 - A requirement/limit applies to substantially all medical/surgical benefits in a classification if it applies to at least 2/3 of the benefits in that classification • If not, it cannot be applied to MH/SUD benefits in that category • Part 2 - Thepredominant level is the one that applies to more than 1/2 of medical/surgical benefits subject to the requirement/limit in that classification • Measurement is performed on medical/surgical benefits alone and then applied to MH/SUD benefits • Type (eg. copays) or level (eg. dollar amount, days, or percent) of limitation or financial requirement 29

30. Analyzing Plan Benefits (cont’d) • Example: - If 70% of the projected payments for inpatient, in-network medical/surgical benefits were subject to a $15 copay…. …then… - No inpatient, in-network MH/SUD could be subject to a copay greater than $15 30

31. Cumulative Requirements • Definitions: • Cumulative financial requirements– e.g., deductibles (excludes lifetime and annual dollar limits) • Cumulative quantitative treatment limitations – e.g., annual or lifetime day or visit limits • MH/SUD and medical/surgical benefits must accumulate toward the same, combined deductible (or other cumulative requirement/limit) within a classification • In other words, separate but equal deductibles are not allowed (even if a plan uses more than one service provider) 31

32. Nonquantitative Treatment Limitations • Definition - Not expressed numerically but otherwise limits the scope or duration of benefits • Non-exhaustive list of examples: • Medical management (e.g., utilization review, preauthorization, concurrent review, retrospective review, case management, etc.) • Prescription drug formulary design • Standards for provider participation in a network, incl, reimb. rates • Determinations of UCR amounts • Fail-first or step therapy protocols • Conditioning benefits on completing a course of treatment 32

33. Nonquantitative Treatment Limitations (cont’d) • Any processes, strategies, evidentiary standards, or other factors used in applying the nonquantitative treatment limitations to MH/SUD benefits in a classification must be comparable to, and applied no more stringently than, those applied to medical/surgical benefits • Plans must use both a comparable test e.g. is medical necessity applied to a Medical benefit within a class e.g. Inpatient but also cannot apply that medical necessity process in a more stringent manner e.g. no precertification for MH inpatient unless Precertification is used for Medical Inpatient • Cannot require to exhaust EAP benefits unless have a similar gatekeeper requirement for medical/surgical benefits 33

34. Prescription Drug Benefits • Tiering: A plan satisfies the parity requirements if it has different levels of financial requirements on different tiers of prescription drugs based on reasonable factors and without regard to whether a drug is generally prescribed with respect to medical/surgical or MH/SUD benefits • Reasonable factors: e.g., cost, efficacy, generic vs. brand, mail order vs. pharmacy • Reasonableness must be determined in accordance with requirements for nonquantitative treatment limitations 34

35. Other Requirements and Provisions • Disclosure of criteria for medically necessary determinations must be made available to participants, beneficiaries, or contracting providers upon request • The reason for any denial of benefits must be made available automatically and free of charge • Exemptions: A group health plan must implement parity requirements for one full plan year. If plan costs increased more than 2%, exempt from parity requirements for one year • A group health plan sponsored by a small employer (<50) does not have to comply with MHPAEA 35

36. Interaction with State Laws • “States may continue to apply State Law requirements except to the extent that such requirements prevent the application of the MHPAEA requirements that are the subject of this rulemaking. State insurance laws that are more stringent than the federal requirements are unlikely to “prevent the application of” MHPAEA, and be preempted. Accordingly, States have significant latitude to impose requirements on health insurance insurers that are more restrictive than the federal law” [p. 5430] • More restrictive in this situation means increased consumer protection 36

37. Interaction with State Laws • MHPAEA applies to both fully insured and self-insured plans--of the plans provide for MH or SUD benefits • Fully insured are subject to state laws • A government employer (nonfederal) can opt-out of the federal parity requirements 37

38. Expect Additional Guidance from Federal Agencies • State law pre-emption • Application to Medicaid managed care plans • Cost exemption--if plan can show 2% increased cost, it can be exempt for one year— • Future Years can be exempted based on a 1% increase • Enforcement: • Private enforcement started Oct 3 ,2009 • Self-insured = Dept. of Labor and IRS • Non-federal government employees: HHS • Fully insured employer plans = State Ins. commissioner & HHS 38