November 8, 2013 in Op-Ed
There is a new regulation going into effect on the national level that is going to help millions upon millions of Americans: insurance companies will be required to treat mental health and substance abuse the same as general physical ailments.
This is huge. And it makes me want to tell you a story, because this is something I have personal experience in:
My first job out of college was working for a California company that provided mental health case management and claims administration as a carveout to local HMO providers for professional services. Mental health is a very nuanced field in healthcare, and at the time, most HMOs would contract with a company that specialized in that area to handle their members’ needs. The HMOs would pay either as a fee-for-service (which is to say, the carveout would receive a certain amount of money per procedure), or, they would pay a monthly capitation rate (which is a lump sum estimated on the number of lives covered). To make money on a fee-for-service, the carveout simply had to pay the provider of the service less than what they received from the HMO. To make money on capitation, the carveout had to make sure that payments to providers each month were less than what they received from the HMO each month. Of course, the providers had to be contracted with the carveout, so those rates were previously negotiated. This is a fairly predictable thing, as the carveouts typically only handled professional fees (doctor’s/therapist’s visits), which means they were shielded from those huge-dollar, unpredictable hospital bills.
With all of the problems I saw in the company I worked for, I can honestly say that despite the obvious temptation to shortchange care for a larger profit margin, I never saw them do this. They’d cut corners in every way imaginable, but in the end if someone needed care, they got care. That said, I saw a system that was designed to fail: the Pre-Parity California System.
At that time, all mental health was considered a “specialist” benefit. You know how on the back of your insurance card, you have a lower copay for general office visits and OB/GYN visits, but a higher copay for specialists? Mental health providers fell under that specialist category. If you had schizophrenia, bipolar disorder, severe depression, or any other mental illness, you had to pay that higher copay whenever you saw your mental health providers. In these more serious instances, that meant you had to pay a copay once a month for your 15-minute medication management session with a psychiatrist, and you had to pay a copay no less than once a week for your 45 minute counseling session with your therapist. With things like severe depression or anxiety, it’s not unheard of to have a therapy session two or three times a week. Keep in mind, if you were on an HMO like our patients were, your doc had to obtain an authorization to see you, and “renew” that authorization every 6 visits (which is why so many providers hate HMOs; on the other side, it does provide a check that can ensure a provider isn’t fraudulently billing or just dicking around in their sessions).
The worst example of this process I’ve seen came from an insurance I’m going to call Acme Health. This is a huge national provider that had and has a presence in California. Their specialist visit copay in 1999 was…get ready for this…$50/visit. Fifty damn dollars. Now here’s the kicker – due to our agreement with the HMO group connected to Acme Health, we were contractually obligated to take that full copay amount from the member. Why is that worth mentioning? Because our medication management reimbursed at $45. So because the patient was using their insurance, they actually paid more out-of-pocket than what we charged for the session. Once a month, for a session that lasted up to 15 minutes, no more. If you did medication management, you almost always had to supplement it with counseling, so add $50 per week to a counseling session with a masters-level therapist, who was reimbursed at $65 per session. So in one month, you, a person who is schizophrenic or severely depressed or what have you, just spent $250 on your mental health on top of what you pay monthly for your premium. Your insurance paid $60. Do you see where this comes across as somewhat immoral and outrageous?
I was working for the company when California passed their own Parity Act. The act stated that any treatment for specific diagnoses (all severe mental illnesses, like schizophrenia or severe depression) had to be handled the way a general office visit would, meaning members only had to pay their office visit copay and not their specialist copay. Those people who were paying $50 a visit, now only had to pay $10 a visit. Rather than spending $250 a month on their care, they were now only spending $50 a month (plus that premium, of course). Think about that when you hear Big Insurance panic – and they will. They were making a fortune off of the mentally ill in California, and then they were cut off.
The Parity Act killed businesses like the one I worked for – why pay someone to manage something that you are now managing like a regular office visit? We folded in under a year due to the passage of that act. I had no problem with that. When you hear Big Insurance say they can’t stay in business because of this government interference? Just look at Acme Health – they are still in business today, and are one of the largest and most profitable insurance providers not only in California, but in the nation.