Why Parity Makes Fiscal Sense
The attitude toward addiction has led to discrimination ways,
particularly when it comes to health insurance coverage for treatment.
We know that addiction is a disease, yet we still have not integrated
it into the health insurance system in a way that is meaningful. People
run out of benefits too early due to limits, caps or subjective management
of benefits. Generally, a person's policy will state they have 7 days
detox, 30 days inpatient rehab and/or 60 days of outpatient treatment.
Sounds very reasonable, right? The catch is that insurance companies
will not allow access to these available benefits even though they have
been bought and paid for!! This is clearly discrimination against the
suffering addict and alcoholic.
Insurers clearly have ambivalence about the efficacy of treatment despite
study after study that supports the position that treatment works and
addiction parity makes fiscal sense!
Opponents of passage of a fair and equitable Parity Bill state that
parity for addiction and mental health will force people off the insurance
rolls as business' will drop health benefits due to increased costs.
The facts tell a different story:
• Failure to treat addiction costs the U.S. over $300 billion dollars
annually. (Columbia University Study)
• $10.00 are saved for every $1.00 spent on addiction treatment.
(Chevron Corporation)
• Treatment works! A one year follow up study of adults who completed
addiction treatment showed a dramatic reduction in hospital use when
compared to the year before treatment. These included 50% reduction
for medical services, 60% reduction for psychiatric services, 30% reduction
in emergency psychiatric admissions and a 75% reduction in admission
for detoxification services. On average, 75% of individuals who successfully
complete a comprehensive course of treatment remain drug/alcohol free
six months later and 63% are abstinent one year later. (Chevron Corporation)
• Unlimited Substance Abuse benefits cost employers only 43 cents
per month. (Rand Corporation)
• Untreated addiction incurs general health care costs at least
100% higher than those of non-addicted persons. (Rutgers University
Study)
• An estimated 10% of all U.S. workers have a substance abuse problem
which causes $500 million lost work days annually. (U.S. Government
statistics)
• State parity laws have had a small effect on premiums. Full parity
for substance abuse raised premiums less than half of one percent or
an average of 43 cents per employee per month!
• The low costs of adopting parity allows employers to keep employee
health care contributions at the same level they were before parity.
• Managed care and competition will continue to contain costs.
Opponents of providing reasonable and equitable coverage state that
parity will increase costs by 20%. This may well be true, but we need
to take an honest look at how a 20% increase in substance abuse and
mental health costs results in an actual 1% overall increase in costs
-- and this is not factoring in the savings as outlined above.
According to government and insurance industry statistics, mental health
and substance abuse (MH/SA) expenditures account for 5% of the current
expenditures. Therefore:
BASELINE PREMIUM = baseline medical/surgical expenditures + baseline
MH/SA expenditures, which means:
INCREASING COVERAGE FOR MH/SA SERVICES which results in an increase
in MH/SA service use and an increase in MH/SA expenditures, which results
in:
NEW PREMIUM = Increase in MH/SA expenditures + baseline medical/surgical
expenditures + baseline MH/SA expenditures, which means:
PERCENTAGE PREMIUM INCREASE = New premium - baseline premium x 100 baseline
premium.
So let's do some math:
If
the baseline medical/surgical expenditure = $ 95.00
and the baseline MH/SA expenditure = $ 5.00
and the baseline premium = $100.00
an increase of 20% in MH/SA expenditures = $ 1.00
Therefore,
the new premium = $101.00
If MH/SA expenditures increase by 20%, the total premium increases by
only 1% -- which is why parity makes fiscal sense!