Fear Of Rising Claims By Employer, Insurance Companies Have Not Materialized, GAO Reports

By John Thomas, Associate Editor
July 1, 2000



The dire financial predictions made by insurance companies and employers about complying with the 1996 Mental Health Parity Act have not materialized, says a new report by the General Accounting Office (GAO).

In fact, 60 percent of employers responding to a survey to determine compliance with the new law, “did not know whether compliance with the Mental Health Parity Act increased their plans’ claims costs,” a top GAO official told the U.S. Senate Committee on Health, Education, Labor and Pensions.

Ronald Bachman of Pricewaterhouse Coopers, a consultant for the APA Practice Directorate, said the GAO report should end opposition to mental health parity based on cost factors.

“In the federal government’s first baby step toward achieving parity, the GAO report shows that cost increases did not occur. It’s proof that mental health parity does not cost employers much.

“About 37 percent reported that compliance had not raised their claims costs,” Kathryn G. Allen, GAO Associate Director for Health Financing and Public Health Issues, testified.

Allen said only about two percent of the respondents reported that claims costs rose as a result of the act.

The act allows an exemption for group plans that experience an increase in health benefit costs of one percent or more because of compliance with the law’s requirements.

During debate, federal agencies estimated that as many as 10 percent of health plans affected by the law, or 30,000 health plans, could be eligible for the exemption. However, the Department of Labor reported that only nine employers nationally had claimed an exemption.

Another dire prediction made during debate over the measure in 1996 and 1997 was that compliance with the Mental Health Parity Act would force employers to drop mental health coverage.

However, Allen told the committee, “less than one percent of responding employers have actually dropped coverage of mental health benefits or their health benefits plan altogether since the law was enacted.

“Most cited business reasons other than the cost of implementing the act’s requirement for dropping coverage.”

Continuing, Allen said, studies predicting the costs of the federal parity law generally corroborate “our finding that requiring parity only in dollar limits resulted in cost increases of less than 1 percent.”

The Congressional Budget Office estimated that the Mental Health Parity Act would result in claims cost increases of 0.16 percent, and PricewaterhouseCoopers predicted that claims would increase 0.12 percent.

PricewaterhouseCoopers’ Bachman said there is no example in the country that mandating mental health parity has added to employers’ costs in any significant way.”

The GAO’s Allen said one of the reasons that costs have not increased much is because most employers have made their plans more restrictive in the number of hospital days or outpatient visits covered for mental health than for other medical and surgical benefits.

The act requires parity in dollar limits by prohibiting employers from imposing annual and lifetime dollar limits on mental health coverage that are more restrictive than limits imposed on all medical and surgical coverage.

Allen testified that 51 percent of newly compliant employers changed policies to allow fewer covered office visits and 36 percent allowed fewer covered hospital days. Twenty percent of employers increased outpatient office visit copayments, Allen testified.

The GAO report noted that 86 percent of the employers surveyed in 26 states that do not have state laws that are more comprehensive than the federal law reported to be in compliance with the parity act. Fourteen percent reported they were not in compliance.

The act will sunset on Sept. 30, 2001 unless renewed. Congressional backers of mental health parity are considering making the federal law stricter in the next legislative session.

Bachman said he anticipates the act will be renewed, but with not many changes.

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