The impact of mental health and substance abuse coverage on self-insured plans

The issue of mental health in the United State is significant.  An estimated 26.2% of Americans ages 18 and older suffer from a diagnosable mental disorder in a given year according to the National Institute of Mental Health.[i]  Statistically, therefore, it would be a fair statement that nearly every employer in the US with more than a few people has employees with mental health issues. 

And yet, 60% of people with mental health conditions and nearly 90% of people with substance use disorders don’t receive the care they need according to the Department of Health and Human Services.[ii]

So what should employers know about compliance and the cost associated with mental and substance abuse coverage?

COMPLIANCE:

The Department of Health and Human Services provides this overview of the Affordable Care Act changes with regard to mental health and addiction coverage:  “The Affordable Care Act builds on the Mental Health Parity and Addiction Equity Act of 2008 to extend federal parity protections to 62 million Americans. The parity law aims to ensure that when coverage for mental health and substance use conditions is provided, it is generally comparable to coverage for medical and surgical care.”[iii]  Note that the ACA does not require mental health and addiction coverage, only that when provided it be comparable to health coverage if offered.

This may partially account for the decline in the number of plans that offer mental health coverage from 2013 to 2014.  The Society of Human Resource Management (SHRM) released the results of their 2014 SHRM Employee Benefits report which showed that 87% of employers offer mental health coverage in 2014, down slightly from 89% in 2013.[iv]

There are limits to parity however, two notable exceptions are small employer plans created before March 23, 2010 (these will be “grandfathered,” and therefore exempt from the requirements of parity) and self-insured plans sponsored by state and local governments[v]

COST:

The following is from the US Department of Health and Human Services:

  • Healthcare costs for employees with alcohol problems are twice as high as those for other employees.
  • People who abuse drugs or alcohol are 3.5x more likely to be involved in a workplace accident, resulting in increased workers’ compensation and disability claims.
  • 14% of employees in one survey said they had to re-do work within the preceding year because of a co-worker’s drinking.[vi]

This issue is global.  For instance, speaking in Parliament Norman Lamb, the UK Minister for Care and Support, commented that mental illness is now the cause of over 40% of sickness benefit claims. The average cost of poor mental health to business is nearly £26 billion in the UK.[vii]

Conversely, taking a long term view, a NY Times article says “better care could cure enough people to save billions of dollars a year in medical costs, lost wages and reduced productivity associated with alcoholism and other addictions.”[viii]

CONCLUSION:

At Stop Loss Insurance Brokers, Inc. we are qualitatively noticing an increase in the number of mental health and addiction related claims.  Perhaps this will level out and create a new normal and perhaps there is a backlog of people needing extra support and it will decline to pre-Parity Act levels.  Only time will tell.   In the meantime, employers should maintain their compliance with the ACA and keep a watchful eye on costs.