Health Insurance and You!

President Obama’s health care reform includes provisions for how insurance companies pay for mental illness conditions. Following the lead of the federal government’s health parity practice, established in 2001, a similar law was passed in 2008 affecting millions more Americans. The Mental Health Parity and Addiction Equity Act of 2008 applies directly to mental illness and all conditions in the category, including substance abuse.

Mental Health Parity and Addiction Equity Act of 2008

The Mental Health Parity and Addiction Equity Act of 2008 is a federal mandate to ensure the same health insurance coverage for treatment of mental health illnesses as medical and surgical conditions. Mental health illness includes psychiatric illnesses, and drug and alcohol disorders. On Jan. 1, 2010, millions of Americans received additional insurance coverage for drug abuse treatment at the same rate as medical treatment.

The Mental Health Parity and Addiction Equity Act of 2008 requires any group health insurance plan, with 50 or more members, to cover substance abuse treatment at the same rate it covers medical treatment. A few key points of the Act are:

• It does not require insurance carriers to cover substance abuse treatment (although just like some auto insurance companies specialize in substandard auto insurance while other companies avoid offering the coverage, there are also health insurance companies that may offer coverage for substance abuse treatment while others elect not to).
• The Act states if a carrier chooses to cover mental illness treatment, it must do so at a rate equal to that of medical treatments. This includes deductibles, copayments, cost sharing, annual or lifetime service limits, annual or lifetime payouts, or any combination of these.
• If plans cover out-of-network medical and surgical benefits they must also cover out-of-network mental health and substance abuse benefits.
• Insurers must disclose criteria used to determine medical necessity of treatment, and why benefits are denied.
• It will not replace existing states’ parity laws, in effect prior to 2008, that offer benefits above and beyond the Mental Health Parity Act.

Before the Mental Health Parity Act went into effect, many insurers:

1. Paid less for psychiatric and drug abuse treatments.


2. Set higher copayments on treatment.


3. Set strict limits on inpatient and outpatient treatment.

Coverage, or lack of, was determined by the insurance carrier, or state law. Differences in parity laws from state to state, without a national minimum standard of coverage, left many in need of drug treatment out in the cold. Those in need of coverage will do well to follow the general guideline of shopping around for coverage and comparing rates and policies from many different insurance providers just the same as shopping for auto insurance quotes or other types of insurance coverage.

Since the law allows insurers the option of offering drug abuse treatment coverage, it has a long way to go in providing coverage to all Americans. But the statistics offer a daunting view of drug use in America:

• Nearly 1/3 of Americans had past drug and alcohol abuse in their immediate families.
• Nearly 1/3 of Americans report 3 or more members of their immediate and extended families had drug and alcohol abuse problems.
• 9% of Americans have a substance abuse problem.
• 90% of substance abusers don’t seek treatment because of lack of insurance coverage.

Why are Private Insurers Reluctant to Cover Drug Treatment Programs?

Cost is one reason why treatments are not covered, or covered at a lower rate than medical treatment. In an environment where health care costs are increasingly scrutinized, coverage is cut, or services withdrawn, to keep costs low. Many who cannot afford to pay for private treatment end up in public treatment programs that are paid for by taxpayers. Poorly managed public programs increase the cost of treatment. For example, Massachusetts taxpayers:

• Pay more than 75% of state substance abuse service costs.
• Bear the increase of costs for treatment at an increase of 6.8% annually while private insurance payments decreased 1.1% between 1991-2001.

Millions of Americans have been touched by drug and alcohol use. Though 1) 77% of Americans agree that treatment of addiction should be a part of health care reform 2) 78% understand drug addiction is a chronic disease 3) 77% believe treatment helps people to live productive lives, there is still a stigma attached to substance abuse. People still carry a subconscious layer of embarrassment, or think drug abuse is a moral failing, preventing consumers from going public and demanding coverage from health insurance carriers.

Substance Abuse Treatment Coverage Post January 2010

Many major national insurance carriers offer coverage for mental illness. To date, studies have shown no increase in insurance costs for substance abuse treatment, and no increase in people seeking treatment. Factors possibly affecting use of the benefit include:

1. Unawareness – many Americans simply may not know.


2. Stigma – the Mental Health Parity Act alone is not enough to make people step out of the shadows of drug abuse.


3. Fear – employees don’t want their employers to find out and risk losing their jobs.

In 2014 the Mental Health Parity Act’s reach will extend to include:

• Small group insurance plans with less than 50 members.
• Plans offered on the individual market.

Advocates of different aspects of health care are cooperatively working to strengthen weak spots in the Act. As health care distribution spreads, and attitudes change, parity of care will be seen as a right, not a privilege. Consumers who want to know if their insurance carrier covers treatment for drug disorders should contact their insurance provider, and request a copy of their treatment criteria.