Why is LTC A Pressing Issue?

Long-term care is an important concern for several reasons:

• The demographics of the baby boom lead to projections of a population explosion in the higher age groups. In 2000, approximately 34 million Americans, 12.6 percent of the population, were older than age 65. By 2030, that age group will have grown to over 70 million, more than 20 percent of the population. Further, the population at greatest risk of needing LTC, those 85 years old and older, is expected to grow in number from 4.3 million in 2000 to between 8.9 and 10.1 million in 2030.
• Medical advances, ironically, have helped to convert many critical short-term health problems into long-term health problems. New techniques and technology save the lives of heart attack and stroke victims, premature babies, and many other people whose diseases or injuries would have been fatal in the past. Yet, while modern medicine prevents death, it often cannot restore health. Particularly for older people, life-saving medical treatment often is the threshold to months or years of custodial care. And even without a major health "event," some people's health and strength deteriorate slowly and steadily. Those who think the need for long-term care "won't happen to me" stand on shaky ground; for example, at age 65, there is a 40 percent probability of staying in a nursing home sometime before death. More will need some type of support at home.
• Changes in family structure have made it less likely that long-term care can be provided at home by the patient's family. Few people enjoy the built-in support system of a large, local extended family to provide help with occasional nonmedical affairs, such as financial paperwork, meal preparation, or transportation, much less physical care or 24-hour supervision. And now, women, who were the traditional informal caregivers, regularly work outside the home for pay. Women who work outside the home, some 59.5 percent of women age 16 and over in 2003, cannot necessarily be counted on to care for their ailing parents, in-laws or husbands. Even if family members and friends are able to provide LTC, there are other costs to consider such as personal stress, the need to reduce or terminate employment, and out-of-pocket expenses for travel, supplies and babysitting for other dependents.
• The high charges for LTC services are surprising, if not shocking. Long-term care costs vary considerably depending on location, and are beyond the means of many Americans. (See Table 1.)

  Table 13–1: Privately Paid LTC Costs in Selected U.S. Cities, Mid-2004

  	Annual Cost of Nursing Home Confinement (semi-private rooms)	Annual Cost of Five Four-Hour Home Health Aid Visits/Week (at average hourly rate)
  Atlanta, GA	$49,275	$17,680
  Chicago, IL	$45,260	$16,640
  Dallas/Fort Worth, TX	$39,785	$16,640
  Milwaukee, WI	$63,510	$22,880
  New York City, NY	$109,865	$15,600
  Philadelphia, PA	$76,650	$18,720
  Phoenix, AZ	$51,465	$19,760
  San Francisco, CA	$74,825	$21,840
  Seattle, WA	$69,715	$21,840
  Based on daily and hourly data from the MetLife Market Survey of Nursing Home and Home Care Costs, September 2004.

• Existing medical coverage is inadequate to pay for long-term care. Government and private medical insurance programs cover nursing home care and home health care, but generally for limited time periods or as a response to an acute medical problem. Such benefits generally are capped. For example, Medicare covers up to 100 days in a skilled nursing facility per "benefit period" (effectively a service interval involving an illness or injury requiring hospitalization) and in very restricted circumstances, and Medicaid is only available to individuals below certain income thresholds and those who have "spent down their assets." Other coverages such as long-term disability insurance and pension plans are typically not structured to pay the significant out-of-pocket costs associated with purchased LTC services. Since most insurance plans provide little or no coverage for LTC expenses while traditional sources of LTC caregiving are contracting, individuals and families are exposed to a potentially huge financial risk.
• Low public awareness about the risks and costs of long-term care has been an ongoing concern for policymakers and industry experts. Unless someone's family or friends have had to address a long-term care situation, he or she is unlikely to recognize the amount of physical and emotional attention required, may underestimate actual LTC charges, and may believe that Medicare, Medigap or other insurance policies will cover the full cost of long-term care. In the past, surveys found that about half the population had the misconception that traditional insurance products would cover this care although this is now changing.
• Government help is limited. The 2002 offering by the federal government of a private, participant-paid group LTC insurance (LTCI) plan for its workforce, retirees and their families sent the message that government would not provide broad, publicly financed LTCI for all citizens. And it is unlikely that this will change in the foreseeable future because of the high cost of such programs.

Since most people cannot save enough money to cover ongoing LTC costs, private LTC insurance may serve as the only realistic option for people to pay for personal care and certain health care services if and when they are needed. More Americans are recognizing this need—from 1987 through 2001, almost 8.3 million LTC insurance policies had been sold.^[7] And at the end of 2003, over six million persons retained LTC coverage, almost one-third of whom were in group (typically employer-sponsored) plans.

Future Developments in Behavioral Health Care

Recent survey results indicate that as many as 24 million Americans may need mental health treatment but are not getting it. Some of the reasons for this are cost, lack of insurance, stigma, and not understanding what behavioral insurance covers. Although the stigma associated with mental health care is fading, some individuals are still concerned that employers, coworkers, or friends will think less of them for seeing a therapist. Others are skeptical that therapy is effective and actually solves problems. And some people simply cannot find, or do not know how to find a therapist who works well with them.

The costs for not accessing needed behavioral treatment are many. Depression can complicate a patient's recovery from a major illness. Patients with chronic or serious mental illnesses who do not have appropriate outpatient care can bounce in and out of inpatient facilities, while families and patients suffer from poor outcomes and mounting insurance bills. Finally, lack of care can lead to the most serious outcome possible: death of the patient through suicide.

Broadening Care Access

Radical new approaches to reaching those in need of mental health care are needed—and fortunately, are either in development or in use already. They include:

• Proactive disease management programs that operate on several fronts: working with employers to reach out to employees through the workplace, and with health plans to identify patients taking psychotropic medications who need additional support; and reaching out to patients with other diseases like diabetes or cardiac conditions who may also suffer from mental illness.
• Outreach to people who want treatment but do not know how to access it or to find a therapist who is best for them. One's choice of a psychotherapist is primarily impacted by a physician's recommendation, the health plan network, and the location of the clinician's office. Offering information about clinicians online, even identifying those within a network with specializations or a track record of producing the best outcomes, can help people make more informed choices. Just as health plans publish physician "report cards" to educate consumers, so psychotherapist report cards might help people choose the best therapist for their needs.
• New ways of delivering therapy that are more accessible and cost effective. For example, patients with mild to moderate levels of distress can benefit from a "coach" who offers counseling over the telephone or via the Internet. The Internet can also play an important role in promoting compliance with treatment, and augment other treatment offerings.

Productivity

One of the challenges of managed behavioral healthcare organizations is the ability to demonstrate to purchasers that the benefits they deliver result in increased workplace productivity. Studies of this type are usually collaborative efforts between an employer group and MBHO, and results are often skewed by nuances of the individual group. In 2003, PacifiCare Behavioral Health, a leading national managed behavioral health care organization, reported the results of a four-year study of nearly 20,000 of its members in behavioral treatment representing multiple employer groups and health plans across the country. By measuring the degree of work impairment through a patient survey tool administered in clinicians' offices at the beginning and at multiple points during psychotherapy, the MBHO was able to track patient improvement. Five questions on the survey assessed degrees of work impairment. The MBHO found that 31 percent of people accessing behavioral services met criteria for being work impaired—meaning their day-to-day functioning was impaired. After only three weeks of treatment, the percentage of work-impaired patients dropped to 18 percent, and after nine weeks, it dropped to 15 percent. Generally, patients who still appear work-impaired after a few months of treatment are those with chronic behavioral health conditions that need more intensive services with careful monitoring and typically are enrolled in a disease management program.

If an employer knew that nearly one-third of its employees accessing its behavioral health benefits were work-impaired, that employer would undoubtedly see treatment as a worthwhile investment if half of those starting treatment work-impaired are able to return to nonimpaired status. U.S. employers report that they suffer $24 billion a year in losses due to absenteeism and presenteeism (working, but not functioning at full capacity) from depression in the workforce, while the cost of substance use disorders is estimated at $100 billion. If these costs can be reduced substantially with treatment, then behavioral health care services would rank as one of the most worthwhile investments an organization's management can make.

Utilization Review Accreditation Commission [URAC]

URAC was originally incorporated under the name "Utilization Review Accreditation Commission," however that name was shortened to just the acronym "URAC" in 1996 when it began accrediting organizations such as health plans and preferred provider organizations. URAC offers 15 accreditation programs, the most common for MBHOs being Core Accreditation and Health Utilization Management Accreditation. Core Accreditation standards are the foundation of URAC accreditation, and include organizational structure, staff qualifications, training and management, oversight of delegated activities, quality management and consumer protection. URAC Health Utilization Management Accreditation standards ensure that MBHO follow clinically sound UM processes, respect patients' and providers' rights, maintain confidentiality, give payers reasonable guidelines, and are compatible with the 2002 U.S. Department of Labor claims regulations.

Joint Commission on Accreditations of Healthcare Organizations

The Joint Commission on Accreditations of Healthcare Organizations (JCAHO) originated as the accrediting body for hospitals, but JCAHO has been active in behavioral health care accreditation since 1972. It started offering specialized accreditation services to managed behavioral health plans and integrated delivery systems in 1994. Currently, JCAHO accredits more than 1,600 behavioral health care organizations and more than 25 behavioral health plans/integrated delivery systems. To be eligible for a JCAHO accreditation survey, a behavioral health plan or integrated system must provide for health care services to a defined population of individuals, offer comprehensive and/or specialty services, and have both a centralized, integrated structure and contract with, or manage, actual care delivery sites, which include practitioner offices and/or components that deliver care

Care Management and Cost Control | Managed Behavioral Health

Care Access

MBHOs traditionally require preauthorization to access treatment. MBHOs generally operate their own customer service centers, and when a member calls for a referral, an intake specialist asks the member a series of questions to establish the reason for the call, assess risk, acuity, specialty needs and member preference. After listening to the caller's concerns and explaining the nature of the caller's benefits, the intake specialist separates routine from urgent and emergency situations. More than 80 percent of incoming calls are generally for routine referrals; industry standards dictate that members receiving routine referrals must be seen by a provider within 10 business days. If a member's needs are urgent, an appointment is arranged within 48 hours, although the more stringent standard of 24 hours is adopted for some contracts. If an individual requires immediate, emergency services (e.g., he or she is suicidal or homicidal), referral is generally made to a hospital or inpatient facility if an immediate appointment is not available with a network practitioner. Most MBHOs employ a dedicated team of licensed crisis care managers, who are specially trained in emergency protocol, active listening, diffusing, and referral. Use of ambulance services and/or police may also be involved in diffusing hostile situations and transferring an individual to psychiatric facilities.

Predictive Modeling and Risk Assessment

High-service utilizers—generally individuals with severe and persistent mental illnesses such as schizophrenia and major recurrent depression—represent a small percentage of overall service users but account for a disproportionate, higher percentage of treatment resources and claims costs. MBHOs analyze claims and treatment data to identify high-risk members who have a history of high utilization and repeated hospitalizations.

Predictive modeling is the ability to forecast who those high-risk, potentially high-cost members are, and intervene in time to avoid preventable treatment costs. The degree of risk can be identified and members stratified accordingly, so care management resources can be applied most effectively and efficiently. MBHO care management resources tend to be in short supply, so it pays to use those limited resources to deliver the best clinical and economic value to both the member and the payer.

Performance Measurement

MBHOs typically measure provider network performance through a number of variables that include accessibility, utilization, and adequacy and appropriateness of treatment. Traditionally these performance data are collected after-the-fact through provider assessment reports and claims data. Today, however, some MBHOs are collecting member-reported and provider-reported data earlier on in the process to guide timely treatment interventions that can avert unnecessary emergency hospitalizations and contribute to more effective treatment outcomes. Profiling provider performance on clinical outcomes is an important step forward in the performance measurement arena.

Case Management

Case management is a term that refers to oversight of an MBHO member's treatment to ensure it is appropriate. Case managers employed by the MBHO coordinate the member's care in collaboration with treating providers, facilities and community resources, and often work with members and their families to ensure they continue to receive the appropriate level of care for their fluctuating needs. This ensures a cost-effective course of treatment in an appropriate setting. Potentially high service utilizers are identified so case managers can focus on those individuals with the greatest needs to ensure they continually receive appropriate treatment levels. Most MBHOs use an escalating series of models or protocols based on the patient's level of acuity and chronicity, which determine how frequently case managers monitor treatment. Case management goals are crisis stabilization, prevention of long-term disability, and reduced reliance on hospital care by facilitating patient engagement in outpatient treatment and community resources.

Utilization Review and Management

Utilization review is an activity that determines the medical necessity and appropriateness of treatment being provided, and is performed at various times including at the point of care (prospective review), during care (con-current review) and after treatment (retrospective review). While MBHOs generally perform this function, self-funded employers and health plans may purchase this service from stand-alone utilization review organizations. MBHOs utilize written criteria based on clinical evidence to guide the evaluation of the medical necessity, appropriateness, and efficiency of mental health and chemical dependency services.

Outcomes Management

In recent years, MBHOs have developed tools to assess treatment effectiveness and quantify outcomes, bringing technology, data, and increased objectivity to a field once dominated by subjective assessment. The measurement of outcomes concurrent with the treatment process is the most powerful approach to outcomes management because feedback to clinicians can shape care as it is being delivered. The objectives of outcomes management are to identify risks early so treatment interventions contribute to more positive outcomes, as well as prevent emergencies and unnecessary hospitalizations.

Coordination of Care

Behavioral disorders often coexist with each other (e.g., depression and substance abuse), and with medical disorders (e.g., depression and chronic heart disease). An individual may be seeing his or her primary care doctor for treatment of a physical disorder and a behavioral specialist for treatment of a mental disorder. Coordination of medical and behavioral health care services results in improved treatment outcomes for patients. When coordination of care does not take place, there are increased risks such as repeated or unnecessary testing and adverse drug reactions. A consumer in today's complex health care environment is faced with a mind-boggling array of organizations, programs, services, and providers, each of which can play a vital role in his or her care and successful recovery. Patients benefit from an interconnected series of care coordination protocols between behavioral health specialists, primary care/medical doctors, medical plans, MBHOs, pharmacy benefit managers and community affiliates.

Health care accrediting and regulatory bodies are pressing the managed care industry to integrate behavioral care into medical delivery systems. Even though progress has been made, much work is needed to create a truly integrated health care system.

Depression Disease Management Programs

Depression is a mental illness that often goes unnoticed, and it co-occurs with many physical illnesses such as diabetes and heart disease. It is increasingly a focus of disease management initiatives because of its chronic nature and large economic impact. MBHO depression disease management programs support the clinician–patient relationship and plan of care, and emphasize prevention of disease-related exacerbations and complications using evidence-based guidelines and patient empowerment tools. These programs require coordination among health plans, physicians, pharmacists, and patients. Disease management can improve patient outcomes and quality of life while potentially reducing overall health care costs.

Substance Abuse Relapse Programs

Addiction to alcohol and other drugs is a chronic condition, characterized by relapses. Therefore, the prevention of relapse is one of the critical elements in successful treatment. Standard chemical dependency treatment was once a 28-day inpatient treatment program. Since detoxification on an outpatient basis is more often recommended today than in the 1980s, only persons with severe withdrawal and other medical complications now require hospitalization (IOM, 1990a). Most substance abuse treatment experts today consider intensive outpatient treatment more effective for most patients in treating chemical dependency. Outpatient programs encourage individuals to remain sober while confronting their day-to-day living situations. In addition, most MBHOs today offer after-care programs to their members who complete a course of chemical dependency treatment. The programs are aimed at preventing relapse and often include telephonic support and self-help tools.

Behavioral Provider Payment Arrangements

Fee-for-Service (FFS)

The most widely used payment arrangement today is fee-for-service. A fee-for-service arrangement means that there is payment for individual services at an established contract rate which is often negotiated and discounted based on the promise of a large volume of services. The length and intensity of behavioral services are managed by an MBHO through various utilization and quality control mechanisms.

Capitation

Capitation is a fixed payment, usually calculated on a per-member per-month basis, for the delivery of a defined range of behavioral services to a defined member population. Financial risk is assumed by the provider and the provider's profit is contingent on expending less money on caring for the capitated population than is received in capitation fees. Organized group practitioners are more likely to handle capitation arrangements than are solo practitioners.

Per Diem and Case Rates

The most common payment arrangements for facilities and organized programs are per diem and case rates. A per diem rate is a negotiated and contracted daily rate for all services provided while a patient is in an inpatient program. A case rate, essentially a capitated arrangement for individual cases, is no longer common except in chemical dependency treatment, where an MBHO may contract with a treatment facility or program to pay a flat fee for the treatment episode.

Behavioral Health Providers

The Specialty Network

A behavioral specialty network must cover a wide range of behavioral treatment needs and levels of care. A typical behavioral health specialty network includes individual (solo) practitioners and multispecialty group practices consisting of clinical psychologists (PhDs, PsyDs, EdDs), social workers (LCSWs, LISWs, ACSWs, MSWs, CISWs), masters-level therapists (MPSYs, MFTs, MFCCs, LMFTs, LPCs), psychiatric nurses (ANRPs, RNs), and psychiatrists. A network may also include medical doctors who specialize in addictionology, and developmental behavioral pediatricians (DBPs) to improve access for children with special needs.

In addition to behavioral specialists, the network includes inpatient facilities and programs that accommodate the broad spectrum of treatment needs. Acute inpatient facilities are designated for the most acute treatment needs, meaning individuals who are unable to care for themselves in some way and may be suicidal or homicidal. Partial hospital programs (sometimes called day treatment) offer intensive treatment during the day, but patients return home overnight. Finally, intensive outpatient programs are designed for patients who need more intensive treatment than weekly outpatient therapy provides, but they require fewer hours each day than partial or day facilities provide. Each program or facility may specialize in a certain age group (adult, geriatric, adolescent, child), while some programs focus on mental illnesses only, others on chemical dependency, and a few specialize in co-occurring disorders. MBHOs employ specific criteria to authorize facility-based care and treatment programs for their members, and licensed care managers provide oversight to ensure treatment plans and lengths of stay are appropriate.

Provider Qualification: The Credentialing Process

MBHOs perform primary source verification of practitioners' credentials before they are accepted to practice in their network and serve their members. Areas of scrutiny include investigation into a provider's education, board certification, background and work history, liability insurance and malpractice coverage, practice information (addresses/hours/facility description), population, language and treatment specialties, and hospital admitting privileges. MBHOs conduct recredentialing—typically every two to three years—to ensure that providers maintain quality standards.

Meeting Group Needs: Customized Networks

MBHOs often custom-build behavioral provider networks to meet a group's diverse geographic, cultural, language and specialty needs, as well as member preferences. Standards for member access and availability to services are designed to ensure that members have a choice of providers—outpatient practitioners, inpatient facilities and specialized treatment programs—across the continuum of care, within an acceptable travel distance, and with appropriate clinical subspecialties. Most MBHOs forge alliances with community-based mental health and substance abuse treatment providers to provide both covered services and as referral sources for noncovered services, and they develop these linkages based on the particular needs of the membership being served. Rural areas often have a limited number and diversity of practitioners and facilities. Consequently, Medicaid-supported community mental health centers often dominate as the de facto service provider for a wide range of treatment needs. To increase access to treatment in rural areas, MBHOs may at times work with Medicaid-supported providers to establish these centers as referral options for their members. In addition, MBHOs are beginning to consider telephonic or web based psychiatry to serve rural populations that do not have access to local professionals.

How Behavioral Health Benefits Work Together

An effective behavioral health program should include an integrated mental health/chemical dependency benefit that includes inpatient and outpatient services as well as an EAP. This combination of relatively low-cost benefits provides a "safety net" for the wide range of behavioral disorders suffered by a worker population and its dependents. But a behavioral program's effectiveness relies on (1) employee and employer awareness of the program's services and value, (2) appropriate use of the benefits, and (3) how well the behavioral vendor and its network providers prevent and manage costly disorders.

Even when people access their behavioral benefits by calling for a referral, the "presenting symptom"—such as the need for divorce counseling—is often the tip of the iceberg.

A typical example is "Jim"—recently divorced, he is having excessive difficulty adjusting to the situation. Jim calls his MBHO and is asked a series of questions to ensure he receives a referral to appropriate services. Jim is referred to a specialist in marriage and family therapy (MFT). After an initial assessment the therapist determines that his patient is experiencing adjustment disorder with depressed mood. As therapy progresses, additional factors come to light. The therapist finds out that the primary reason for the marital breakup was financial—apparently Jim had been—and still is—abusing cocaine and depleting the couple's bank account to support his habit. The therapist calls the MBHO, and the licensed professional who takes the call refers Jim into a chemical dependency intensive outpatient treatment program. The MBHO case manager also recommends Jim use his EAP benefit for financial counseling. Fortunately Jim had access to a full behavioral program, because each one of his behavioral benefits was essential to a successful recovery.

Even seemingly obvious EAP situations, such as a need for referral to childcare, can turn into a need for more extensive mental health benefits. Often individuals will begin EAP counseling for this type of situation only to run out of visits. Take a look at how this can occur:

"Mary," a production worker in a large manufacturing plant, is divorced and the mother of two children, ages three and six. She is living paycheck to paycheck and works from 7:30 a.m. to 4:30 p.m. Monday through Friday. She has her childcare down to a "science." Before work she drops off her three-year-old at a day care facility near her house, then swings by school to drop off her six-year-old. Mary enjoys a reputation as a loyal, dependable and productive worker. Suddenly Mary begins coming into work late, is frequently absent and the quality of her work slips. When her supervisor confronts her, she breaks down in tears, confessing that her three-year-old has a recurring illness and the day care center will not watch her. She's been relying on the goodwill of neighbors, which is often sporadic. The supervisor recommends that Mary contact her EAP for a referral to a childcare facility that takes sick children, which she does. But her childcare issues are only the tip of the iceberg. Because Mary's an hourly employee and has missed work, her income has fallen and she is behind on her rent and other bills. In addition, the new childcare facility is expensive and adds to her financial problems, compounding her stress. She contacts her EAP, receives a referral to consumer credit counseling and also makes an appointment for emotional counseling because she is deeply concerned about both her daughter and her job. She forges a bond with her counselor and begins making progress.

Basic Eap Types

EAP

Full-service EAPs offer a pre-determined number of face-to-face counseling visits, generally from three to eight per year (sometimes per incident). EAP counselors are community-based, licensed mental health professionals that contract with an MBHO or stand-alone EAP company. In addition to counseling visits, which are free to EAP members, the full-service EAP includes a full array of work/life referral services (referrals are free, but services incur costs), free information resources (Web-based and hard-copy books, pamphlets, videotapes), as well as management consultation services.

Work Life Benefits

A stepped-down version of the full-service EAP described above includes all EAP services except for the face-to-face counseling visits; these are often replaced with telephonic or Web-based access to EAP counselors.

Advantages of an EAP

EAPs offer easy access to timely problem resolution, and utilization tends to be high because accessing employee assistance carries less stigma than accessing behavioral healthcare benefits. An EAP is also a proven cost-management tool because of its focus on early resolution and its high utilization. Studies have shown that, after implementing an EAP, a plan can expect savings in the form of fewer and less expensive medical claims and reduced mental health and substance abuse costs. The U.S. Department of Labor reports that for every dollar invested in an EAP, employers generally save anywhere from $5 to $16.^[14] Successful EAP implementation relies on maintaining continuing visibility, and so EAP providers generally distribute a stream of regular communications to their EAP members, including onsite posters, newsletters, premium items, special mailings and email blasts.

Behavioral Healthcare Benefit Plan Designs

Behavioral healthcare benefit plan designs are closely aligned with medical plan designs. As with medical plans, behavioral benefit plans are either network-based (HMO, POS or PPO), or non-network based (indemnity). A large employer or purchasing group often will customize a behavioral healthcare carve-out plan to provide a standard plan design to all members regardless of their medical coverage. This greatly facilitates plan administration, but insurance and utilization review laws, and third-party administrator licenses vary from state to state, complicating behavioral plan administration. To fully understand behavioral health-care benefit plan design, it is essential to first understand funding arrangements.

Fully Insured Arrangements

In a fully insured funding arrangement, often called "full risk" or "risk-based," MBHOs assume the financial risk for providing behavioral services paying the claims submitted by providers for behavioral services rendered. Financial risk falls on the MBHO. When service utilization and corresponding claims costs exceed expected levels, the MBHO absorbs those increased costs. Purchasers pay MBHOs a predetermined, fixed (usually monthly) premium for assuming financial risk for behavioral treatment costs. On average, a monthly premium for a fully insured, full-risk behavioral plan, excluding EAP, ranges between 3 and 6 percent of a medical plan's premium, although rates can vary depending upon a group's utilization experience, number of members, geographic location, benefit plan, and state parity laws. The two primary cost drivers for a fully insured funding arrangement are group utilization rates and unit costs for practitioner and facility care.

A variation of a fully insured funding arrangement is a shared-risk arrangement, in which purchasers agree to assume financial risk for claims payment up to a certain amount. Premiums are based on projected claims costs. If claims exceed a prespecified amount, the MBHO assumes those claims costs or a percentage of those costs. If claims come in below the targeted amount, the balance can be shared by the MBHO and client or refunded to the client. There are many iterations of these shared agreements.

Administrative Services Only

Under an administrative services only (ASO) arrangement, an MBHO, for a fee, will handle medical management, utilization review, benefit and other administrative functions, such as claims payment (although some ASO contracts do not include claims payment). Often called a "self-funded" or "self-insured" arrangement, the purchaser assumes the financial risk for the health care costs for its members. Self-funded plans may also be administered by independent organizations called third party administrators (TPAs), which often provide administrative and medical management services in addition to claims processing. The larger the group, the more likely it is to self-fund because the financial risk is spread across more employees and its budget is large enough to absorb the risk. Self-funded groups typically have stop-loss insurance, which protects them from catastrophic losses.

A key advantage of an ASO arrangement is that employers can offer the same benefit to employees working in different states. Because ERISA exempts self-funded health plans from compliance with state laws and regulations, employers that self-fund can avoid individual state regulations such as diverse state mental health parity laws. Self-funded employers may also be able to save money because they can limit the risk pool to their own employees, avoid state taxes on insurance company premium revenues, and have complete control over benefit packages. In addition, some employers may self-fund to access claims data, allowing them to understand the true costs of their health care plans and tailor their plans accordingly. Figure 1 outlines benefit plan design and funding arrangement options.

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Benefit Plan Design	Funding Arrangement
Network Providers (HMO, PPO, POS)	Fully Insured Shared-risk
Non-network Providers (Indemnity)	Administrative Services Only (ASO) Network Management Claims Payment

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Figure 1: Behavioral Health Care Benefit Plan Funding Arrangements

Sample Managed Behavioral Healthcare Benefit Plan Design

Figure  shows an example of a managed behavioral healthcare combined HMO/POS plan design that complies with California's mental health parity legislation.

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Services	HMO	POS[*]
		In-Network	Out-of-Network
Mental Health
Inpatient deductible	None	None	N/A
Inpatient per admission fee	None	None	N/A
Inpatient treatment annual maximum benefit including partial and day treatment	Unlimited days at 100% based on medical necessity	Maximum of 30 days (combined with chemical dependency)	Not covered
Outpatient treatment	30 visits at $0 copayment	40 visits (combined with out-of network) at $0 copayment	40 visits (combined with in-network) per calendar year 50% of UCR up to $40 per visit
Chemical Dependency/Substance Abuse
Inpatient and outpatient (includes detox)	$25,000 per calendar year	Maximum of 30 days (combined with mental health)	$200 deductible per calendar year 50% of UCR up to a maximum of $1,000 per calendar year
Severe Mental Illness Benefit[**]
Inpatient deductible	None	None	N/A
Inpatient per admission fee	None	None	N/A
Inpatient, partial and day treatment	Unlimited days covered at 100%	Unlimited days covered at 100%	N/A
Outpatient mental health visits	Unlimited visits at $0 copayment	Unlimited visits covered at $0 copayment	N/A
[*] Pre-authorization required for all in-network and in-patient services both in and out of network. Chemical dependency and substance abuse combined in- and out-of-network maximum of $35,000 per calendar year. Chemical dependency and substance abuse combined in- and out-of-network maximum of $50,000 per lifetime. [**] Severe mental illness diagnoses include: anorexia nervosa, bipolar disorder, bulimia nervosa, major depressive disorder, obsessive-compulsive disorder, panic disorder, pervasive developmental disorder or autism, schizoaffective disorder, schizophrenia. In addition, the Severe Mental Illness Benefit includes coverage of serious emotional disturbance of children (SED).

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Figure 2: Sample Managed Behavioral Healthcare Combined HMO/POS Plan Design With A Typical Mental Health Parity Benefit

An employee assistance program is a confidential, short-term counseling service to assist employees and their family members with personal problems that negatively affect their job performance. These programs vary considerably in design and scope, and are offered by MBHOs, stand-alone EAP companies, and work/life companies. EAPs originally focused on substance abuse problems, but most today take a comprehensive approach to support members with a range of employee and family issues. Some include proactive prevention and health and wellness programs, and may even be linked to the health plan and MBHO benefit structure. While most EAPs offer a wide range of services, they generally refer members to other professionals or agencies that can offer more, or extended, help in particular areas. EAPs also provide human resource support through management consultation, on-site employee and employer seminars and critical incident stress management after catastrophic workplace events. The average utilization rate for an EAP ranges between six to seven percent, but it jumps to between seven and 10 percent when adding work/life programs. 

Figure 3 shows the benefits offered by a typical EAP.

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24-hour toll-free access to the EAP

Confidential services

Available to all household and dependent family members

Unlimited calls

Five face-to-face counseling sessions (per incident) with EAP provider

Child and elder care referral services

Legal assistance and referral

Financial counseling and debt management

Alternative medicine referral

Concierge services

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Figure 3: Typical Employee Assistance Program Benefit Summary