When enacted in 1996, the federal Medical Health Parity Act (MHPA) was expected to increase health insurance premiums by 3.2% to 8.7%. For employers with 50 or more employees, the Act required parity between annual and lifetime dollar limits for mental health and physical health services.
Specifically, the MHPA:
1. Requires parity of mental health benefits with medical and surgical benefits with respect to aggregate lifetime and annual dollar limits under a group health plan.
2. Says that employers still have discretion regarding the scope of mental health benefits offered to employees and their dependents (e.g., cost sharing, limits on number of visits, and medical necessity).
3. Does not apply to benefits for substance abuse or chemical dependency.
4. Does not apply to a coverage if the parity provisions result in an increase in the cost one percent or more.
An excellent new analysis by Steve P. Melek, a principal and consulting actuary with Milliman, shows that the federal mandate did not increase costs as expected. In fact, MHPA had little effect on overall health costs and, in some cases, may have helped save dollars. This is at least partially due to the fact that MHPA came at the same time as a big increase in the use of managed behavioral health care.
Coverage mandates are rarely a good idea, are driven largely by political expediency and health system naivete, and often generate unintended consequences. But Mr. Melek’s analysis shows how health policy and market interventions by the government are not made in a vacuum. Indirectly, it also suggests that employers, health plans, and legislators should focus their attention on what patients need – not on arbitrary or discriminatory limits on access.