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INSURANCE CARRIER/HEALTH PLAN VIEWS ON IMPACT OF NEW HAMPSHIRE PARITY LEGISLATION
Submitted to: The National Alliance for the Mentally III
By: The Lewin Group, Inc.
The National Alliance for the Mentally III contracted with The Lewin Group to conduct an independent study to explore the impact of the 1994 New Hampshire legislation to mandate insurance parity for selected mental illness diagnoses. The Lewin Group conducted interviews with insurance carriers and health plans that do business in the State of New Hampshire, inquiring about their experience since the legislation was implemented in January, 1995. Questions addressed their experience with service utilization, costs, premiums, change in care management/utilization control procedures, and the extent to which mental health parity arose as an issue in negotiations with employers and in complaints from employers and consumers.
SUMMARY OF FINDINGS
The limited mental health parity legislation implemented in 1995 was viewed by all respondents as an incremental change in state insurance policy in a state with a history of insurance mandates. Other factors, such as increased enrollment in managed care plans and use of managed care methods, were viewed as central to changes in management procedures and employer contracting. Since the parity legislation impacts all carriers and health plans in the state, it was not viewed as the source of changes that would affect competition. Carriers and health plans reported varying experience with changes in premiums ranging from "remaining flat," to small and moderate increases, to decreases for managed care products; but none of the respondents attributed a change in premium to the limited parity legislation. Respondents indicated that new legislation was not a factor in negotiating premiums or benefits with employers, and none could report concerns expressed by either employers or consumers related to the implementation of the new legislation. These findings reflect the views expressed by the insurers and HMOs that cover the vast majority of commercially covered lives in New Hampshire.
In 1975 New Hampshire was among the first states1 to require limited mandatory insurance benefits for mental health. The state law required coverage of mental health hospital benefits on par with other illnesses under major medical coverage, partial hospitalization (unspecified amount) and at least 15 hours of treatment (after 2 visits) on an outpatient basis (non-major medical) for group insurance and HMO providers. This legislation was in place almost 20 years before being modified through Enrolled Senate Bill 767,2 effective on January 1, 1995. The new law and regulations apply to all categories of insured covered under state law as described in regulations RSA 419, 420 and 420B (but not the self-insured employers under ERISA).
The incremental change implemented in 1995 requires insurers and plans to "provide benefits for treatment and diagnosis of certain biologically based mental illnesses [8 specified] under the same terms and conditions and which are no less extensive than coverage provided for any other type of health care for physical illness" The 1975 minimum coverage floor for insured benefits of $3,000 for annual care and $25,000 for lifetime benefits continues as well as those certified providers of mental health services.
Other insurance legislation in New Hampshire impacted the ability of carriers to enter the small employer market (1 - 100 employees) by changing community rating; Senate 71 1 (Chapter 294 of 1994 laws) required associations or trusts to be in existence for ten years. In 1995 and 1996 other related legislation was introduced but not passed - these bills dealt with: mental health practitioners (HB 357 to recodify the Mental Health Practice Act was sent to committee for reconsideration in 1997); and insurance riders for coverage of mental health professionals (HB 1269 was strongly defeated).
The Lewin Group contacted the New Hampshire Insurance Bureau to obtain related regulations and to identify licensed carriers. We attempted to contact all health insurers and managed care organizations doing business in the State. Letters of invitation for interviews began to reach the chief executives of each company on January 15 and subsequent referrals and interviews occurred over the next eight weeks. Prospective respondents were assured that the names of key informants, company identification and all information discussed would not be attributed.
1From information within The Coverage Catalog: Coverage for Mental and Nervous Disorders, 3rd ed., by Patricia Scheidemandel, 1993, Washington, DC: American Psychological Association.
2As codified in Titles 37 and 38 of New Hampshire Revised Statutes Annotated, Cumulative Supplement 1994 (p.50).
Of the 20 insurance carriers/health plans identified and contacted, two had left the New Hampshire market in the last three years due, in part, to long-standing concerns about the general regulatory environment of the State. Of the remaining 18, nine are traditional indemnity carriers (many of whom now offer multiple products), five are managed care firms, and four are behavioral managed care firms.
All interviews were conducted by one interviewer using a standardized structured interview guide. A total of 57 persons representing insurance carriers/health plans served as the informants for the structured interview. The interview was designed to take approximately 30 minutes to complete. Not all questions could be answered by the individual identified by the CEO and some key informants referred us to others within the company for additional detail. The greatest number of informants per carrier was six. Eleven of the 18 targeted organizations responded to our requests for interviews. Substantial information was provided for seven respondent organizations, including all four of the organizations that have the greatest number of covered lives in New Hampshire. The other respondent organizations either provided behavioral health services for the same population covered by one of the major insurers in the state, or insured a relatively small number of lives.
The respondent organizations providing the greatest amount of information included: three traditional insurance carriers; three managed care organizations; and one behavioral health managed care firm. The informants included executives, behavioral health specialists, and regional managers. Of the seven organizations providing the most information, three are national firms headquartered outside of the state, one is a regional firm, and the other three firms are locally based. One insurer with moderate market penetration indicated it was too new in the market to address the questions, and one insurer with relatively low market penetration declined to participate without reason. Other organizations were contacted repeatedly without success in reaching an individual who would either grant or decline participation.
Respondent views need to be interpreted with an understanding that the New Hampshire parity legislation passed in 1994 was incremental in nature, building upon a history of previous mandates for mental health coverage.
Respondents noted that health insurance products offered to New Hampshire employers are not significantly different from those in the rest of the New England area. New Hampshire has a moderate enrollment in HMOs relative to other New England states. Respondent insurers did not appear to specialize in any particular industry, and all contracted with both self-insured and non-self-insured employers. When asked if their employer customer base changed at all in the last two years, few mentioned any change and those reporting changes attributed them to the
increase in managed care in the State. Respondents indicated that New Hampshire is a "small group" state, with a small group defined as 100 employees or less. Most "large" employers have between 100 and 300 employees and there are few very large groups. There have been new entrants to the insurance market and increasing competition over the course of the last three years.
Respondents reported different experiences with premium changes: some reported no change; others reported increases. Respondents did not attribute any change in premium to the mental health parity legislation. Major insurers noted that prior to 1995, there was little HMO business in the State and premiums tracked the indemnity market. With increased HMO enrollment and competition, premiums have reportedly decreased for managed care products.
Benefit packages were changed to comply with the 1994 State law by all but one respondent organization, which was already in compliance at the time the law was passed. One respondent summarized the change in benefits: "Before 1995 they had benefit limitations on mental illness treatment regardless of diagnosis and that generally patients were allowed 20 outpatient visits with a co-payment and 35 days of inpatient care per year. Since the 1994 legislation was implemented, patients diagnosed with one of the biologically based mental illnesses are allowed essentially unlimited care based on medical necessity. Other mental illnesses (outside of the 8 provided in the law) are dealt with in the same manner that they were prior to the legislation." Other respondent organizations reported that they have standardized procedures for authorizing outpatient visits.
The possibility of "upcoming3"was raised by two respondents who had not researched the concern. Determining the extent of the practice of upcoding requires careful study and should not be assumed without evidence. The issue is complicated by historical practices of deferring mental illness diagnoses because of associated stigma. These practices may be reevaluated by individual physicians and their patients as coverage and attitudes change.
Respondents reported that employers have not made changes in benefits because of the new parity legislation. The respondents did not report changes to deductibles, cost-based changes, or medical management in response to this law. Respondents indicated that the 1994 parity legislation impacts relatively few people at the employer group level, so it is not a major topic of discussion or concern.
Respondent insurers are dealing with the new parity law by expanding case management protocols for serious illness. After the first five visits to a mental health professional authorized
3Upcoding is the practice of assigning a particular diagnostic code because it results in higher coverage or payment levels, when another code might otherwise be used.
without review for medical necessity, some respondent organizations report assigning the patient to a case manager who conducts periodic reviews for medically necessary treatment. Long-term treatment plans, regardless of whether they are for physical or mental illness, may go to a case manager for concurrent utilization management and case review. Respondents indicated that case management may even occur before the five visits are complete if the patient is diagnosed with a biologically based mental illness (one of the eight specified by law). In some situations, the insurer has required that the patient obtain a second medical opinion.
It appears that pharmacy benefits are not affected by the 1994 law. They are usually a separate benefit package, and distinctions are not made between medications issued for serious mental illness and those for physical illness. In New Hampshire, psychiatrists, primary care providers, and nurse practitioners can issue prescriptions for psychiatric drugs.
Most respondents reported that they had not conducted any analyses of the impact of the 1994 law on expenditures for serious mental illness treatment. A few respondents were either not aware of such data or would not discuss it. National and regional carriers may not separate costs and utilization data by state, particularly in small states, or where they have small enrollments. Locally based carriers had examined overall behavioral health costs, but had not isolated the eight conditions covered by the parity legislation. Mental health services utilization and mental illness expenditures are reportedly tracked by insurers, but none were willing to disclose the specifics of their data.
The mental health parity law passed in New Hampshire in 1994, has not instigated many comments, concerns, or complaints from either employers or consumers according to respondents.