Special Provisions | Managed Care Plan Designs

Mental Health/Substance Abuse Benefits

Special provisions and limitat ions historically have applied to mental illness and substance abuse (drug/alcohol treatment) benefits. These limitations were a very common plan design feature. In 1993 for example, 97 percent of participants in medium and large private establishment health plans were eligible for some level of outpatient mental health services, while only three percent had the same benefits as those for other illnesses. Similarly, while 98 percent of full-time participants in medium and large private establishment medical plans in 1993 were covered for inpatient detoxification for alcohol and drug abuse treatment, 28 percent and 29 percent, respectively, had the same level of coverage for these illnesses as they had for other illnesses. However, on September 26, 1996, the Mental Health Parity Act (MHPA) was signed into law. The MHPA required that annual or lifetime limits on mental health benefits be no lower than the dollar limits for medical and surgical benefits offered by the group health plan. The MHPA applied to group health plans for plan years beginning on or after January 1, 1998 and contained a "sunset" provision providing that the parity requirements did not apply to benefits received on or after September 30, 2001. These parity requirements were subsequently extended. The MHPA does not apply to benefits for substance abuse or chemical dependency.

In the past, substance abuse benefits were not separately delineated in many plans but covered under mental and nervous benefits. However, because new treatment approaches have been developed and because the federal government and some states have enacted legislation mandating minimum levels of treatment for mental and nervous benefits, more plans separate these benefits today into distinct categories. Most plans in the past had limitations on both mental/nervous and drug/alcohol benefits that resulted in greater cost sharing by the participant. There were two common forms of limitations on these benefits. The first was to set the coinsurance at a higher level, say 50 percent in a 20 percent reimbursement plan, and establish an annual maximum for this benefit, such as $1,500. Additionally, a different lifetime maximum applied to this benefit, say $10,000. A second form of limitation was to set a maximum number of outpatient visits per year, such as 20 visits, with a maximum covered charge, such as $50. Similarly with inpatient coverage on the basic hospitalization portion of the plan, it was common to have a lifetime cap on this specific type of care and a maximum number of days allowable per plan year or calendar year. Since the MHPA prohibited specific dollar limitations for mental and nervous benefits different from other medical and surgical benefits offered by the plan, many plans eliminated such provisions but kept limitations in terms of days of treatment and outpatient visits. Some plans have used this same approach for substance abuse benefits although dollar limitations are still permissible.

"Carve Out" and Separate Management of Costly Expense Items

Many organizations have "carved out" prescription drug benefits from their plans and are managing those benefits on a separate basis. This is because prescription drugs have been among the fastest growing cost components in many medical plans. The emergence of drug management firms provides opportunities for cost savings through pharmacy networks, mail-order discount programs, inclusion of generic drug substitutes, drug formulary management, prescription utilization review, and disease management programs. Mental health and substance abuse benefits also have been carved out and are separately managed by many medical plans.