This Web site is a component of the SAMHSA Health Information Network
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This Web site is a component of the SAMHSA Health Information Network. |
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Effects of the Vermont Mental Health and Substance Abuse Parity LawImplementation of Vermont's Mental Health/Substance Abuse Parity LawImplementation of Vermont's mental health/substance abuse (MH/SA) parity law began in January 1998, a little more than 6 months after it was signed into law. The law resulted in significant changes in the nature of MH/SA coverage, particularly in terms of the increased use of managed care for MH/SA services. This chapter describes the early implementation experiences in Vermont - the transitions and challenges, and how stakeholders responded to those challenges. Such background information is key to understanding the effects of parity, as described in subsequent chapters, from the perspectives of health plans (Chapter III) and employers (Chapter IV). The findings presented in this chapter are based on information gathered during two site visits to Vermont, the first in July 1998 - about 7 months after the law went into effect - and the second in October 2000. Taken together, these two site visits provide insights into the early implementation experiences and transitions, as well as the longer-term effects of parity on stakeholders. Findings from the two site visits were augmented by information gathered from a review of written public documents and ongoing telephone interviews with key stakeholders over the past several years. Appendix B contains background information on the context leading to Vermont's parity law, including the legislative history. A. Early Implementation ExperiencesTo a large extent, the experiences of the State's two largest health insurers - Blue Cross Blue Shield of Vermont (BCBSVT) and Kaiser/Community Health Plan (Kaiser/CHP) - shaped the early implementation of Vermont's parity law. BCBSVT rapidly moved most of its enrollees into managed behavioral health care in response to the parity law and encountered administrative difficulties; in contrast, Kaiser/CHP continued to use its existing managed care model and experienced few changes. The next three sections describe the early implementation experiences of BCBSVT, Kaiser/CHP, and other health plans. 1. Blue Cross Blue Shield of Vermont With the implementation of parity, and as employer contracts subject to parity were renewed over the course of the year, BCBSVT began transferring nearly all of its covered lives in fee-for-service products into a new "carve-out" arrangement with Merit Behavioral Care (MBC). BCBSVT transferred financial risk for all MH/SA services to MBC through a capitation arrangement, while physical health services continued to be covered on an indemnity basis.4 MBC developed a narrower provider network than that of BCBSVT and used managed care techniques to contain costs. According to BCBSVT representatives, the carveout arrangement was created specifically to comply with the parity law and to contain the cost of the expanded MH/SA benefit. By nearly all accounts, this initial transition to a carve-out arrangement did not go smoothly. First, BCBSVT officials indicated that they did not inform their members of changes in benefits and service delivery because they had assumed that employers would communicate this information to their employees. Second, patient-provider relationships initially were disrupted, since many existing BCBSVT providers were not in MBC's network. These disruptions ultimately were addressed by allowing enrollees six transitional visits to out-of-network providers and by expanding the provider network to ensure adequate geographic coverage. A management change further complicated MBC's effort to develop its provider network because it was purchased by another firm, Magellan Health Services, during the transition.5 Third, BCBSVT experienced significant computer problems related to revamping its claims adjudication process to reflect the new benefit structure. Finally, the "rolling" implementation of parity within BCBSVT - at the time of contract renewals on or after January 1, 1998 - both complicated the communication process and limited the visibility of parity-related changes among BCBSVT enrollees across the State. In response to the initial transition difficulties, BCBSVT collaborated with other stakeholders - including State regulatory officials, provider groups, and advocacy groups - to address the communication and provider network problems that followed implementation of parity. The Department of Banking, Insurance, Securities, and Health Care Administration (BISHCA), the State agency charged with overseeing the implementation of the parity law, hosted a parity implementation conference involving all interested stakeholders in June 1998. In addition, the Vermont Association for Mental Health hosted a series of public forums in 1998, to which all stakeholders were invited to discuss the goals of the parity law and to identify solutions to problems encountered during the early transition process (BISHCA, 1999). In response to stakeholder concerns, BCBSVT produced two brochures - one for providers and one for consumers - that explained the changes made as a result of the parity law. These brochures were distributed to all BCBSVT enrollees and MH/SA providers. The plan also took steps to ensure that MBC increased the size of its provider network, allowing a period of several months during which all nonparticipating providers were invited to apply for membership in MBC's network. The State government also took steps to improve public awareness of the law. For example, State officials developed and disseminated 12,000 flyers that described the reform, wrote opinion pieces and editorials in local newspapers, and sought other news coverage of the parity law. Through a preexisting consumer hotline established to assist consumers with a wide range of health care issues, BISHCA received telephone calls from consumers with concerns related to MH/SA parity and resolved consumer complaints (BISHCA, 1999). Kaiser/CHP simplified its transition to MH/SA parity by changing its benefits for all contracts in January 1998, regardless of the contract renewal date. Mental health and substance abuse copayments were brought in line with those for physical health benefits, and the 20-visit outpatient and 30-day inpatient limits were dropped from the typical benefit packages the plan offered. Mental health benefits already were managed tightly prior to parity, especially in comparison to the traditional indemnity products offered by BCBSVT. According to health plan officials, Kaiser/CHP enrollees experienced relatively little change in the management of MH/SA services following implementation of the parity law. To manage hospital costs under the parity mandate, Kaiser/CHP implemented hospital diversion and step-down programs and increased the use of partial hospitalization treatment and group therapy. In 1999, Kaiser/CHP announced that it was pulling out of the Vermont market as part of the plan's wider withdrawal from the entire Northeast region. (The plan ceased operations in Vermont in March 2000.) A large portion of Kaiser/CHP enrollees chose to enroll in MVP Health Plan, a health maintenance organization (HMO) operating in the Vermont market with a similar managed care approach, while a smaller portion chose BCBSVT or other plans. As a result of this change, MVP captured almost a quarter of the privately insured market in Vermont by 2000, after accounting for less than 3 percent of the market in 1998. The transition of enrollment to MVP and other plans was reported generally to be smooth, although MVP did have to expand its MH/SA provider network substantially to provide care to the large influx of new enrollees. Other health plans expanded their in-network benefits to comply with the parity law, but little evidence suggests that they implemented other significant changes to their health insurance products (BISHCA, 1999). In 2000, one health plan participating in the individual market - Fortis - withdrew from the Vermont market, attributing its decision, in part, to the requirements of the parity law. Interviews with Fortis executives indicated that the plan was poorly positioned to respond to parity because it lacked an existing managed care product and provider network, focused on the individual market, and represented only a small market share. To remain in the Vermont market, Fortis executives believed that they faced a decision either to build a costly managed care provider network for delivering MH/SA services or to experience a large increase in overall MH/SA utilization and costs. Since neither option was considered viable in a market that represented a small portion of their national business, Fortis chose to pull out of Vermont. B. Early Effects on Vermont's MH/SA Delivery System1. Perspectives on the Introduction of Managed Care for MH/SA Services Perhaps the strongest point of contention among stakeholders in Vermont concerned the implementation of managed care for MH/SA services coincident with the benefit expansion under parity. Health plan and employer representatives viewed the use of managed care as a key condition to maintain the cost-effectiveness of an expanded MH/SA benefit package. These stakeholders perceive that the use of managed care arrangements was the main reason premiums and utilization have not risen dramatically during the first few years following parity implementation. Health plan representatives also believe that the use of managed care arrangements has not diminished access to or quality of care. They maintain that managed care approaches might improve quality by imposing rigorous, uniform standards for delivering services through the development of practice guidelines, determinations of medical necessity, and reviews of provider practice patterns. Some stakeholders noted that providers unrealistically might have expected that benefits for mental health truly would be unlimited, and that they never really foresaw the emergence of managed care for MH/SA services. Providers who delivered MH/SA services to BCBSVT's fee-for-service enrollees prior to parity were surprised by the immediate imposition of a more restrictive provider network for their BCBSVT patients. Providers expressed concern about the potential discontinuity in care for BCBSVT enrollees and the adequacy of MBC's provider network to meet enrollees' needs. Some believed that use of a carve-out arrangement disrupted well-established referral patterns, particularly between primary care providers and mental health professionals. Many providers also objected to the terms of MBC's contracts (including utilization review and reduced fees) and to the credentialing process required to join the network. In particular, they were not happy with MBC's use of medical-necessity criteria to make coverage decisions, arguing that it primarily is a cost-containment strategy with little clinical validity. Furthermore, some provider representatives were not pleased that an organization perceived as a "newcomer" in the State (MBC/Magellan) was now dictating payment terms and practice patterns to local providers who wished to participate in the network. Consumer representatives echoed many of the providers' concerns. They reported that the rapid transition of BCBSVT to managed behavioral health was poorly coordinated and communicated to consumers, resulting in confusion about benefits and coverage. Consumer representatives also expressed concern about the loss of choice of providers and modes of treatment. They reported that consumers experienced discontinuities in provider relationships and that, in some areas, provider networks did not include appropriately skilled providers to meet the complex needs of some consumers. 2. Effects on the Public Sector Stakeholders in both the private and public sectors agreed that the implementation of parity had little noticeable effect on the public delivery system or on the extent of public-private sector coordination of care for those with MH/SA conditions. Prior to parity, private health plans usually provided coverage for mental health services to people with severe mental illness for only a limited time period. When patients exceeded pre-parity coverage limits and could not pay for services out-of-pocket, they usually switched to public sector providers. As a result, the public system became the main provider of longer-term treatment for patients with chronic conditions who originally had been covered by private insurance. Some advocates anticipated that parity would increase the role of the private sector in providing care for patients with chronic conditions (and thus reduce public sector costs). They also expected that private plans would pay for more MH/SA services previously provided only by public sector providers. However, health plans believed that the parity law was not intended to give private health plans added responsibility for the coverage of public sector services. They noted that medical insurance benefits were not intended to cover custodial services or services that support daily functioning, but that do not address underlying illness. In response to this argument, proponents of expanding health plans' responsibilities indicated that the plans often cover services related to chronic medical conditions that maintain functioning and thus should take the same approach to treating chronic mental illness or chemical dependency.3 C. Stakeholder Reflections on the Effectiveness of Vermont's Parity Law1. How Well Did Consumers Understand Vermont's Parity Law? After 3 years of implementation experience, a strong consensus emerged that communication and education efforts should have been stronger, especially during the first year of implementation. Many stakeholders acknowledged that, prior to passage of the parity law, they were not sufficiently aware of the importance of a coherent education and communication effort to minimize confusion and disruptions in service delivery, especially given the changes BCBSVT made in the coverage and treatment of MH/SA services. Many stakeholders noted that responsibility for communication was not assigned clearly at the outset, and thus it was not until several months after parity was implemented that more extensive communication efforts were undertaken. Many stakeholders also agreed that, despite outreach and education efforts, many consumers continue to be unaware of the law or the expanded MH/SA benefits. Stakeholders, however, disagreed about the relative importance of undertaking broader outreach efforts in the future. Consumer advocates and providers generally believe that access to MH/SA services can only be improved significantly with ongoing education efforts. Health plan representatives, however, express skepticism about the efficacy of broad-based education efforts, noting that consumers ignore most educational material, especially when they do not believe that they will need MH/SA services in the near future. 2. Did Vermont's Parity Law Achieve Its Objectives? Stakeholders identified several objectives of Vermont's parity law, including making MH/SA benefits equal to physical health benefits; reducing financial hardships for consumers and their families; and reducing discrimination and stigma associated with MH/SA services. Stakeholders expected that, by meeting these objectives, access to MH/SA services would improve and utilization would increase. There were mixed opinions about whether Vermont's parity law achieved these objectives. In the view of most stakeholders, parity achieved the explicit goal of expanding benefits (including the elimination of discriminatory financial and benefit limits for MH/SA services), and, thus, removed substantial financial barriers to care for many consumers. Some also believe that the publicity surrounding the parity law increased awareness of the importance of MH/SA services and removed some of the stigma associated with MH/SA conditions. Yet, many viewed the introduction of managed care for MH/SA services as a significant obstacle to achieving the goal of increased access to care, because of the limited provider networks and utilization review procedures. However, many respondents noted in the Fall 2000 interviews that it was too early to tell whether parity can achieve the goal of increasing access with the managed care arrangements that have been put in place. State officials, consumer advocates, and provider association representatives consistently noted that the longstanding shortage of certain types of providers, as well as the geographic maldistribution of existing providers, potentially limited achievement of the goals of the parity law. These stakeholders noted, for example, that shortages of child psychiatrists and psychiatric hospital beds in Vermont placed constraints on the parity law's ability to expand access to care for children with serious emotional disturbances. Moreover, some raised concern that general provider shortages in rural areas might constrain access and utilization despite the benefit expansion. Some stakeholders expressed hope that the parity reforms would highlight the need to address existing provider shortages - especially in children's services. Health plan and employer representatives generally believed that the parity law had little effect on premiums or the costs of care during the first few years, especially when compared to other, more significant, health care cost "drivers" such as rising prescription drug costs. Although employers, health plans, and health insurance agents remained concerned about the cumulative effects of state-mandated health insurance benefits, they did not believe that the parity law itself was a significant contributor to premium increases in the first few years. The introduction of managed care arrangements in MH/SA services was cited as an important reason for the small effects on costs. However, some also said that costs could increase if more consumers became aware of expanded benefits and sought MH/SA services from health plans. Stakeholders also generally agreed that, despite renewed efforts at education and communication, most privately insured Vermont residents are unaware of the parity reforms and expanded benefits mandated under the law. For these reasons, many respondents had now turned their attention to additional reforms to improve the quality of MH/SA services. D. Development of New State-Level InitiativesIn the context of the new - and, in some cases, unforeseen - managed care environment, many provider groups and consumer advocates saw the Vermont parity law as only the first step toward improved quality and access to MH/SA services. In response to continuing concerns about the effects of a shift to managed care for MH/SA services, the Vermont legislature passed Act 129 in 2000, which mandated new annual reporting requirements and quality standards for the five largest health plans operating in Vermont (see Appendix B; Table B.1).4 The goal of the law was to gather information showing health plans' performance in delivering MH/SA services. These reports also were intended to serve as a "barometer" for the quality effects of the parity law. Proponents of the new law wanted to address concerns about the potential for excessively low "medical loss ratios" (health care claims expenses divided by premium revenues) among health plans or their contracted MH/SA carve-out organizations. Some speculated that low ratios could indicate high profits and/or administrative costs, signifying a diversion of resources away from direct service delivery. The law created a task force to oversee implementation of the Act, including representatives from BISHCA and other State agencies, health plans, consumers, providers, and the business community. According to State officials, the task force deliberations provided an opportunity to educate providers and consumers about how health plans operate and the intricacies of measuring health plan performance. E. DiscussionThis chapter has described the rollout of parity in Vermont, including early transitions and more recent legislative efforts to extend the reforms to ensure the quality of MH/SA services. The results are based on experiences during the first few years following implementation of parity. As such, the results reflect the initial stages of parity implementation, and a longer study period would be required to learn about the effects of a more mature parity policy. This implementation case study demonstrated contrasting health plan experiences in response to parity. At one extreme, Kaiser/CHP, an HMO, exhibited relative stability in the management of MH/SA services before and after parity (until its withdrawal from the Vermont market in March 2000). At the other extreme, BCBSVT shifted most of its fee-for-service enrollees to a managed care carve-out for MH/SA services, concurrent with the implementation of parity, resulting in widespread reports of discontinuities for consumers and providers. The State regulatory agency, consumer advocates, and providers were proactive in working with BCBSVT to address problems resulting from changes in its MH/SA delivery system. The experiences of BCBSVT provide important insights into what can happen when parity and managed care are implemented concurrently, especially in a State with a relatively low managed care presence. There was broad agreement that parity had not caused substantial increases in premium costs in the first few years, largely due to the widespread use of managed care for MH/SA services. Most stakeholders also recognized that education and communication efforts about parity were inadequate, resulting in heightened expectations among providers and confusion among consumers. There was less agreement, however, about whether parity had achieved the goals of expanding access to care and providing financial protections to consumers and their families. Many now see the parity law as a first step to improve the status of MH/SA services in Vermont, acknowledging that some effects will be longer-term as consumers gradually become aware of expanded benefits under the parity law. |
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