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.

The Managed Behavioral Health Market Today

Market Size

Of an estimated 250 million Americans with health insurance, approximately 66 percent are enrolled in some type of managed behavioral healthcare program. This figure does not include individuals who receive behavioral coverage through a health maintenance organization that manages behavioral healthcare benefits without the assistance of a specialty MBHO. During 2002/2003, enrollment in MBHOs and EAPs rose to 227 million, according to Open Minds, a behavioral health and social service industry research and management consulting firm in Gettysburg, PA. This represents a two-percent growth over 2001. Over a 10-year period (between 1993 and 2002), the total number of enrollees in these programs rose 163 percent—from 86.3 million in 1993 to 227 million in 2002.See Figure 1.

 
Figure 1: Total Enrollment by Year in Managed Behavioral Health and Employee Assistance Programs in Millions of Covered Lives 1993–2002

Market Composition

The majority of behavioral healthcare benefits sold in the United States today are purchased by large groups that buy comprehensive healthcare and other insurance benefits for their covered members. Purchasing groups for behavioral carve-outs include self-funded and other large employers, health plans, union trust and Taft-Hartley trust funds, school districts and educational coalitions, state and county mental health agencies supported by public funds, and the government's Federal Employees Health Benefits Program (FEHBP). The smaller the groups the more likely it is that behavioral benefits are sold as an integrated part of a general health plan, which may or may not have a specialty MBHO provide the behavioral benefit.

The Sales Environment

Behavioral benefits are sold through multiple channels. Large brokerage and consulting firms often serve as the go-between for behavioral benefit purchasers, helping them locate and negotiate insurance contracts. A broker or consultant may also be an agent for an MBHO, delivering policies and collecting premiums. Brokers generally work on commission; consultants, on a fixed retainer. In addition, most large MBHOs employ sales forces that sell directly to purchasers or through brokers and consultants and generally are compensated on a combined base salary and commission pay structure. Since many MBHOs are subsidiaries of health plans, health plan sales forces also sell behavioral benefits as part of the plans they offer.

Changing Market Landscape

As with other segments of the managed care industry, MBHOs are rapidly evolving in response to payer, member, legislative, and market demands. MBHOs in the past decade went through a period of consolidation, using mergers, joint ventures, and other strategies to attract investors and capital. Four factors have been cited as drivers of behavioral healthcare mergers and acquisitions:

1. Payers are demanding greater capital reserves to pay providers more quickly and cover risk adequately.
2. Greater investment is required in management information systems to meet accountability and accreditation requirements.
3. Premium and capitation payments are stagnant, meaning that managed care companies are not seeing increases in revenues through existing business.
4. The costs involved in developing public procurement bids, especially for statewide contracts, can be large.

Merger and Acquisition Activity

Today approximately three-quarters of the market is controlled by the 10 largest companies with three companies comprising a little more than half of the market according to 2002 data. In large part, this is a result of merger and acquisition activity. Magellan Behavioral Health, a publicly traded MBHO with 69 million members, currently dominates the market, capturing 30.3 percent of total enrollment as of 2002. In addition to Magellan's acquisitions, MBHO merger and acquisition activity throughout the 1990s was rampant. During the early years of the 21st century, merger and acquisition activity briefly slowed down, but it will likely ramp up again because of continuing price pressures and economy of scale issues.

Health Savings Accounts

In 1997, Congress waded timidly into tax-favored medical savings accounts (MSAs) that could be carried forward from year to year, if coupled with a high deductible health insurance policy. No other health coverage could be offered by the employer. But these Archer MSAs, named for their chief proponent in the Congress, House Ways and Means Committee Chair Bill Archer, were limited to small employers. Congress also originally limited the number of MSAs to no more than 600,000 accounts in the entire country and imposed numerous other limitations. In 2000, the restriction on the number of MSAs was dropped, but in fact the number of MSAs never approached even the legally permitted number of accounts.

Proponents of consumer-driven health care plans were able to move forward using the IRS-authorized HRAs, but these accounts had the considerable disadvantage of permitting only employer funding. Employees who needed more tax-favored money to pay out-of-pocket expenses could not supplement the employer account with pretax dollars. Consumer-driven health care proponents were finally able to convince Congress that an account funded by either employers or employees or both on essentially a tax-free basis could truly provide a boost to consumer-driven health care and increase participants' active involvement because the participant would see the account as "my money" not the employers. Congress adopted HSAs as part of the Medicare Modernization Act (MMA) and the IRS has moved quickly to provide additional guidance on their usage.

Because HSAs offer much more flexibility in funding and encourage participant savings, most employers are likely to want to use an HSA, rather than an HRA or a traditional health care flexible spending account offered under a cafeteria plan. Unlike HRAs and health FSAs, which by law can be coupled with any type of health plan or insurance or stand alone as the only employer health benefit, an HSA can be used only if it is coupled with a high deductible plan that meets specific criteria.

The high deductible plan's annual deductible must be at least $1,000 for individual coverage or $2,000 for family coverage. Out-of-pocket limits, excluding premiums, cannot exceed $5,000 for an individual policy or $10,000 for a family policy in 2004. (This amount will be adjusted for inflation annually.) These out-of-pocket limits could provide for higher deductibles than the $1,000 and $2,000 deductible limit, so long as the combined deductible and copay limits do not exceed the out-of-pocket limits.

Table 1 compares the features of the HSAs (first made available in 2004), the IRS-authorized HRAs, and the long-established health FSAs.

Table 1: Comparisons of Health Care Savings, Reimbursement, and Flexible Spending Accounts

	Health Savings Accounts (HSA) (Medicare Act of 2003)	Health Reimbursement Arrangements (HRA)	Cafeteria Plan Health Flexible Spending Arrangements (FSA)
Eligibility Requirements
Who Can Set Up the Account	Individuals or employers, if the account holder is covered by a "high deductible plan" and no other health insurance, except specifically listed coverages.	Only employers.	Only employers.
Funding
Who Can Contribute	Employers and employees.	Only employers.	Employers and employees.
Carry Over of Unused Balances from Year to Year	Yes. No annual or lifetime limits on the amount that can be carried over or accumulated.	Yes. In employer plans, employers may impose annual or lifetime carryover limits.	No.
Transfer of Account Balances	HSAs can accept rollovers from other HSAs and Archer MSAs.	There is no specific mechanism for HRA rollovers, although employers could agree by contract to do so.	No.
Permissible Reimbursements
General Coverage	HSAs can pay for "qualified medical expenses" incurred by the account holder, his or her spouse, and dependents.	Same as HSAs.	Same as HSAs.
Health Insurance Premiums	HSAs generally may not pay other health insurance premiums on a tax-favored basis, except certain premiums paid by. COBRA beneficiaries; individuals receiving federal or state unemployment benefits; and Medicare-eligible individuals (The exception for Medicare-eligible individuals does not apply to Medigap premiums.)	Yes.	No.
Payment for Long-Term Care Insurance Premiums	Yes.	Yes.	No.
Payment for Long-Term Care Services	Yes.	No.	No.
Over-the-Counter Drugs	HSAs may pay if the expense is a qualified medical expense.	Same.	Same.
Tax Treatment
Tax Status of Employer Contributions	No federal income or employment taxes on amount up to funding limits (see below).	Not subject to federal income or employment taxes.	Same as HRAs.
Tax Status of Contributions by Individual	Subject to funding limits, contributions are deductible even if the individual does not itemize deductions Employers can allow employees to make pretax, contributions using IRC §125 cafeteria plans. No deduction for individuals enrolled in Medicare Part A or B or dependents claimed on another's tax return.	Employees cannot contribute to HRAs.	Employee contributions to health FSAs generally are made on a pretax, salary-reduction basis and are not subject to employment taxes.
Tax-Favored Funding Limits	In 2004, the lesser of: The annual deductible under the individual's high deductible health plan, or $2,600 ($5,150 if family coverage), indexed for inflation each year, reduced by the individual's contributions (if any) to Archer MSAs for the year. The funding limit will be increased for individuals age 55 and older by $500 in 2004 and increased by $100 per year to a maximum of $1,000 in 2009.	No limits.(Employers may impose a limit.)	No limits. Employers may set plan-specific limits.(The fact that participants forfeit unused account balances each year imposes de facto limit and the FSA plan document may impose a limit.)
Earnings on Accounts	Earnings generally are not taxable, but may be subject to the IRC § 511 unrelated business income tax rules.	Employers generally maintain HRAs as notional accounts so there are no earnings.	Same as HRAs.
Distributions	No income tax on medical reimbursements or on timely distributions of excess contributions. All other distributions are subject to federal income tax plus a 10% penalty tax, but no penalty tax is applied to distributions after the account beneficiary becomes Medicare eligible, disabled, or dies.	Only to reimburse qualified medical expenses.	Only to reimburse qualified medical expenses.
Employer Compliance Issues
ERISA	Not ERISA plans, even if funded by employers, unless (1) ERISA generally applies to the employer, and (2) the employer limits the employees' ability to move their funds to other HSAs beyond restrictions imposed by IRC; restricts the use of HSA funds beyond restrictions permitted by tax law; makes or influences HSA fund investment decisions; represents the HSAs are ERISA plans; or receives any payment or compensation in connection with HSAs.	HRAs sponsored by employers subject to ERISA generally are ERISA plans.	Same as HRAs.
Nondiscrimination Rules	Comparable employer HSA contributions to all comparable employees participating in an HSA for each coverage period; HSA contributions made through a cafeteria plan are subject to the cafeteria nondiscrimination rules, not the general HSA comparability rules.	HRAs are subject to the general nondiscrimination requirements for self-insured medical expense reimbursement plans.	Health FSAs are subject to both the general nondiscrimination requirements for self-insured medical expense reimbursement plans, and to the cafeteria plan nondiscrimination rules.
COBRA Health Continuation	Not subject to COBRA.	COBRA continuation coverage rules apply.	Same as HRAs.
Trust Requirement	HSA assets must be held in a trust or custodial account.	No trust required.	Same as HRAs.
Vesting Requirement	HSA beneficiaries must be 100% vested in their account balances at all times.	No vesting requirements.	Same as HRAs.