Mental Health and Substance Abuse Benefits in Carve-Out Plans and the Mental Health Parity Act of 1996

Published in: Journal of Health Care Finance, v. 24, no. 3, Spring 1998, p. 82-92

Posted on RAND.org on December 31, 1997

by Roland Sturm, Joyce McCulloch

Read More

Access further information on this document at www.aspenpublishers.com

This article was published outside of RAND. The full text of the article can be found at the link above.

Legislation passed in the fall of 1996 required employers and insurers offering mental health benefits to raise dollar coverage limits on mental health services to the level of medical services. The authors analyze the benefit designs of 4,000 current behavioral health carve-out plans and contrast them to medical benefits. They find that almost 90 percent of all plans are inconsistent with the current legislation and need to be rewritten in the coming year. The restructuring of designs required by the Parity Act provides a unique opportunity because plans often are inconsistent and unnecessarily complex, a legacy of past attempts by employers to contain costs and control adverse selection and moral hazard in an unmanaged fee-for-service environment. Under managed care, the need for deductibles, limits, or other demand-side cost-sharing mechanisms may have diminished and restructuring outdated designs could benefit both enrollees and employers.

This report is part of the RAND Corporation external publication series. Many RAND studies are published in peer-reviewed scholarly journals, as chapters in commercial books, or as documents published by other organizations.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.