Copyright 1999 Federal News Service, Inc.
Federal News Service
OCTOBER 21, 1999, THURSDAY
SECTION: IN THE NEWS
LENGTH:
2381 words
HEADLINE: PREPARED STATEMENT OF
CHARLES
N. KAHN III
PRESIDENT
HEALTH INSURANCE ASSOCIATION OF AMERICA
BEFORE
THE HOUSE COMMITTEE ON GOVERNMENT REFORM
SUBCOMMITTEE ON
CRIMINAL JUSTICE,
DRAG POLICY, AND HUMAN RESOURCES
SUBJECT - SUBSTANCE
ABUSE PARITY: PROMOTING TREATMENT OPTIONS
BODY:
Mr. Chairman and members of this distinguished committee, I am
Charles N. Kahn III, president of the Health Insurance
Association of America (HIAA). HIAA is the nation's most prominent trade
association representing the private health care system. Its
members provide health, longterm care, disability, dental, and
supplemental coverage to more than 123 million Americans.
I am pleased to be
able to address your committee today on the issue of parity for
substance abuse in health coverage.
We are all too aware of
the problem of drug abuse and addiction in our country and the problems that
substance abuse causes in the workforce, in families, and in our communities. A
1998 report by the General Accounting Office (GAO) estimated that the total
annual cost of illicit drug use to society is estimated at nearly $70 billion.
Treatment Options Raise a Host of Complex Issues
The issue of
parity for substance abuse coverage is complex. On the one
hand, advocates believe coverage for treatment of substance abuse should be
equal with other areas of coverage. On the other hand, the issue of
parity is difficult because substance abuse involves a long
list of conditions and, for many of these conditions, there is not always a
defined list of proven "cures" nor any assurance of effective treatment. I do
not mean to imply that treatments are wasteful or ineffective in all cases.
However, I am aware that the issue of repeated courses of treatment is not
uncommon with many cases of addiction.
The health insurance
industry has come a long way in offering coverage for both mental
health as well as substance abuse (although mental
health coverage is somewhat more widespread than substance abuse
coverage). This is due in large part to the fact that unlimited substance abuse
coverage can be quite costly for consumers. We are aware of only half a dozen
states that have mandated comprehensive substance abuse parity
laws. Among these laws, requirements vary as to who is eligible for the
expansion in benefits and what benefit levels are required to be covered.The
industry is also continuing to recognize that mental health and
substance abuse are two separate and distinct areas. Mental
health treatment may not involve substance abuse treatment, although
treatment of substance abuse often involves the need for mental
health services. Also detoxification is sometimes paid for under
"medical" benefits, not "substance abuse" benefits. After detoxification,
however, comes rehabilitation and the question of whether rehabilitation should
be done on an outpatient basis, or through a long-term residential program, or
through community based programs, and so on is debated among experts in
addiction treatment. Treating substance abuse is complex, varied, and often
involves the patient's family.
Current State of Coverage Among Private Firma
According to the Employee Benefit Research Institute, coverage for substance
abuse benefits for private employers is roughly equivalent to that provided by
public employers, such as state and local governments. While small employers
typically offer somewhat less comprehensive coverage, these differences are
marginal. Nearly all large, medium, and small firms offer coverage for inpatient
detoxification; over 80 percent offer coverage for inpatient rehabilitation; and
about 84 percent offer coverage for outpatient drag and alcohol treatment,
according to the latest available data.
Large employers have moved in the
past decade to organize benefits for mental health and
substance abuse into more specialized settings. It is estimated that almost 150
million people are served by behavioral health programs,
organized or sponsored by their employers. Some of these managed behavioral
health organizations actually are subsidiaries of major
health insurers and are organized as "carve outs" or specialty
organizations that are designed to bring concentrated services and care
management skills to the benefits and services provided to employees and family
members of employer- sponsored plans.Costs of Mental Health
Parity Mandates Would be Borne by Consumers and Employers
While
treatment helps many, it is not always effective. Parity in
benefit coverage would mandate coverage for repeated treatments. Whether this is
an effective approach is not my call. However, we need to be cognizant of the
cost factors and of who will pay for repeated treatments. There is no doubt it
will be the purchasers of coverage-- employers and consumers.
Substance
abuse treatment has predictable high costs and those costs would have to be
shared by employers and individual consumers. In 1997, the National Center for
Policy Analysis estimated that a benefit mandate for treatment of alcoholism, a
condition far narrower than the general area of substance abuse, would raise the
annual cost of a $3,500 standard family insurance policy by up to 3 percent. And
all too often we are reminded of the fact that the higher the costs of
health coverage, the more consumers elect not to have coverage.
Substance abuse parity would have the unintended consequence of
making health care coverage more available to those who need
coverage for these services but less available for the hundreds of thousands, or
even millions, who pay in general for health coverage.
To
quote R. Lucia Riddle, vice president for Government Relations of The Principal
Financial Group, in a recent Milbank Memorial Fund study on mental
health parity, "Each mandate is discussed as though it is being
proposed in a vacuumm--that it will increase premiums only 1 percent or 2
percent. But we get hit with a number of mandates, and those costs do add up."
Ms. Riddle also states that "... one recent study estimated that about 30
percent of every premium dollar in state regulated plans is attributable to
mandates." I should add that this 30 percent is not just benefit mandates, but
other administrative requirements that may be imposed on health
plans. Benefit Mandates Drive Up Costs and Increase the Number of Uninsured
Americans
HIAA is opposed to federal legislation that mandates benefit
coverage. While we recognize that not all of the needs of any given patient may
be taken care of by his or her health plan, we also need to
have benefits determined by the purchaser. Health plans,
whether they are health maintenance organizations (HMOs),
preferred provider organizations (PPOs), point-of-service (POS) options, managed
indemnity options, or fee-for-service plans need to offer the benefits and
services that meet the needs of their purchasers in terms of coverage as well as
cost. The industry strives for a balance in cost and coverage so that the
largest number of persons may have meaningful health coverage
at an affordable price. In the case of parity for substance
abuse, the costs would almost certainly tip that balance and result in declining
overall coverage. In a voluntary marketplace for health
coverage, the consumer is the driving force behind change and innovation.
We would not have some of the products and services in the market today
if it were not for the flexibility and innovation that is allowed in the private
health care system-products such as point-of- service options,
"open access" HMOs, and even PPOs. Adding benefit mandates, whether at the
federal or state level, will add to the cost of coverage. Each group, no matter
how well intended, that advances one level of benefits may fail to see the
effects of its advocacy for extended coverage as it relates to the efforts of
other groups.
Mandates can impose significant burdens on
health insurance carders and drive up costs for consumers. A
recent (1999) study by Gall A. Jensen, Ph.D., and Michael A. Morrisey, Ph.D.,
showed that the number of state mandates has increased 25-fold during the last
two decades, making health insurance disproportionately more
expensive for small companies and causing as many as one in four Americans to be
uninsured. According to Jensen and Morrisey, mandates accounted for 21 percent
of health insurance claims in Virginia, 11 to 22 percent of
claims in Maryland, and 13 percent of claims costs in Massachusetts.
Several
benefits are particularly expensive. According to Jensen and Morrisey, chemical
dependency treatment coverage increases insurance premiums by 9 percent on
average; coveragefor psychiatric hospital stays increases premiums by 13
percent; coverage for psychologist visits increases premiums by 12 percent; and
coverage for routine dental services raised premiums by 15 percent. A 1998 study
by William Custer, Ph.D, showed that people living in states with mandated
mental health coverage were nearly 6 percent more likely to be
uninsured than people in states without this mandated benefit. Copies of both
the Jensen-Morrisey study and the Custer study are attached to my testimony and
I would like to ask that they be made part of the record.
It is important to
note that mandates also can affect health care plans
differently depending on their organizational structure. In a tightly controlled
managed care setting, such as an HMO, substance abuse parity
would be subject to utilization review mechanisms that would allow for
appropriate treatments after application of clinical guidelines to the patient's
care. In a PPO option or traditional fee- for-service plan, the care may be
"less managed" and therefore could tend to result in benefit mandates having a
higher cost impact than on an HMO. Recent studies show that mental
health parity in tightly managed plans can be less expensive than in
PPO or fee-for-service plans. Yet, in the current legislative debate, cost
containment features of many managed care plans have been under criticism.
Often, policy makers want to undermine the very managed care components that are
designed to assure the appropriateness of the services provided. So on the one
hand Congress wants more coverage, yet, with private health
care plans, there is always the lingering criticism when plans take steps
necessary to manage benefit coverage.
Benefit Mandates and Federal
Government Programs
It is surprising to me that Congress continues to
propose certain mandated benefits and then excludes the mandates from some of
the programs for which Congress is responsible - Medicare, Medicaid, the Federal
Employees Health Benefits Program, and so on. Let's look at the
Federal Employees Health Benefits Program (FEHBP), which
currently is viewed as a model health benefits program. FEHBP
provides benefits and services to more than nine million federal employees,
annuitants, and their family members. There is no mandate for these plans to
offer substance abuse benefits on the same level as benefits for other medical
conditions. Although the Office of Personnel Management has prodded plans to
have adequate mental health and substance abuse services, there
has been no mandate for parity in substance abuse. The same
holds true for Medicare, which has different benefit and cost- sharing levels
for substance abuse and mental health services levels than for
services for other medical conditions (as well as different caps for psychiatric
hospital stays). This is also true within the Department of Defense
Health System. Why, then, should the private
health care market become a target for increased coverage when
federally sponsored programs are treated differently? The answer most likely is
cost---costs to federal employees, costs to the Medicare and Medicaid programs,
costs to DOD, etc.
Even when President Clinton proposed extensive
health care reform in 1993 and subsequently introduced his
"Health Security Act," the actual legislative language had some
15 pages devoted to mental health and substance abuse benefit
descriptions with inpatient or residential treatment limitations (30 days) and
aggregate annual limits (60 days). Inpatient hospital treatment for substance
abuse was limited to detoxification only. Limits were also placed on group
therapy visits for substance abuse counseling and relapse prevention (30
visits).
There is a perception that private health care
plans have unlimited dollars for coverage, and therefore, expansions of benefit
plans are an acceptable way to bring more services to insured persons. However,
we must understand that not everyone has the high level of employer
contributions that federal employees enjoy, nor do businesses have unlimited
dollars for the health benefits programs that they voluntarily
offer to their employees, nor does the paying consumer have unlimited dollars
for health care coverage given other demands on their dollar,
especially those in lower to middle income categories.
And let me add one
additional note on the issue of mandated benefits. All too often when a mandated
benefit is proposed, the benefit mandated can become far more extensive in scope
than originally intended. Take the current discussions in both houses of
Congress on the issue of emergency room services. The original intent of many
legislative proposals was to guarantee insured persons the right to payment for
their emergency care services if their condition, or their perception of their
condition, warranted a trip to an emergency facility. Now, however, when we talk
about mandates on emergency care, we include payments for post-stabilization
services as well as maintenance. All too often legislative proposals dictate not
only the benefit required but the terms of the service, how it must be provided,
whether it can be exempt from any utilization review or plan oversight, and so
on. Benefit mandates can end up doing more than just providing a new service.
Mr. Chairman, I understand the problems with substance abuse as it affects
patients, their families, their employers, and our society. However, extending
benefits for such a complex area of care can only drive up the costs of coverage
without, at this point, known quantifiable results being derived from those
increased expenditures. We must exercise responsibility and not impose
requirements on private health care plans that will only lead
to more uninsured persons. We must work together to continue to bring affordable
coverage to as many consumers as possible. Benefit mandates work against that
objective.
Thank you.
END
LOAD-DATE:
October 23, 1999 
