There has been a problem for mental health patients for a long time. Instead of getting the same benefits as those with physical problems under medical plans they would only get 50 percent. This inequality has been changed with the passage of the Parity Law.
Why did mental health create such a problem for the insurance industry?
The reason the insurance industry had a difficult time with mental health conditions. It was because a person who had a mental condition could not be “quantified.” A person who had a physical condition such as a broken leg went to the emergency room, had the leg put in a cast and ultimately recovered. However a person with a mental illness may or may not admit they need treatment. Mental conditions are not always easy to identify and further progress of treatment is not always measurable. Also it was possible for a person to fake mental illness much easier than a physical condition.
How did the insurance companies react?
The decision of the insurance companies at that point was to limit the amount of the benefit payable to 50% of what typically would be paid for a claim that involved the physical body. That was to limit visits with a psychiatrist or limit visits with a counselor. There was a flat payment made for each specific type of mental condition and the policy would not go beyond that. Insurance companies were unable to come up with a satisfactory exclusion such as “no coverage for mental health” because there is not a definition of mental health that is specific enough.
Obviously that presented a problem for someone who needed to get extensive care and as a result many people ended up in homes, jail, and rehabilitation and they might even commit suicide. That has all chanced with something called the Parity Law.
On October 3, 2008 the Parity Law was signed into law. What it means is that “the annual and lifetime limits co-payments, co-insurance, requirements, and deductibles and out-of-pocket expenses for mental health and substance abuse services may not be more restrictive than those for medical services”. What this means to people that have insurance and have a mental claim is that they are to get the same financial benefit as someone who files a claim for a physical problem.
What does this mean to the health industry?
It is hard to say at this point because we have had recent monumental health insurance reform and we really do not understand how it will work yet. There is no doubt there will be an increase in claims and one would think there would then be an increase in average cost of health insurance. However, over the long haul I would expect this situation would be a positive one because of a decrease in ancillary claims such as suicide and behavioral problems that come from non-treatment of mental conditions.
“Parity; What Does the New Law Mean?” Booklet, “SAMHSA News,” November/December 2008