Health Care Plan Design and Cost Trends - 1988 through 1998
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Prepared for: National
Association of Psychiatric Health Systems April 1999 by:
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I. Executive Summary
The National Association of Psychiatric Health Systems (NAPHS) and the Association of Behavioral Group Practices (ABGP) asked the Hay Group to analyze trends in the proportion of employer health care dollars spent on behavioral health care. This report is an update of Hay’s initial May 1998 report. It amends the initial report with benefit trend data through the end of 1998.
We used the Hay Benefits Reports from 1988 to 1998 to determine trends in plan design for both general and behavioral health care. Then, using our Mental Health Benefits Value Comparison (MHBVC) model, we determined the average value of benefits offered by medium and large employers in the United States for each year.
Since 1987, there has been a dramatic change in the way health care services are managed. Ninety-two percent of employers reported fee-for-service plans as the most prevalent plan type in 1987. By 1998, fee-for-service plans were reported as the most prevalent plan by only 14 percent of employers. In 1998, the most popular plan type is the Preferred Provider Organization, which is reported as the most prevalent plan by 40 percent of employers. Health Maintenance Organizations and Point of Service Plans were reported as the most prevalent plan type by 26 percent and 21 percent of organizations, respectively.
The total value of employer provided health care benefits, in constant dollars, decreased by 14.2 percent over the last eleven years. The value of general health care benefits decreased by 11.5 percent since 1988, while the value of behavioral health care benefits decreased by 54.7 percent. As a proportion of the total health care costs, behavioral health care benefits decreased from 6.1 percent in 1988 to 3.2 percent in 1998.
In addition to tighter management controls, behavioral health care benefits have become more limited since 1988. In 1988, 38 percent of plans imposed a day limit on inpatient psychiatric care. By 1998, limits were imposed by 62 percent of plans. The most prevalent limit remained 30 days during this time. The number of plans imposing any type of limit on inpatient psychiatric care increased from 63 percent in 1990 to 88 percent in 1998.
Outpatient behavioral health care limits have also changed. Twenty-six percent of plans imposed an annual visit limit in 1988. In 1998, such limits were imposed by 57 percent of plans. In addition to an increase in the number of plans imposing a limit, the limit has decreased. In 1988, 46 percent of plans imposing a limit allowed a maximum of 50 visits. In 1998, only 14 percent of plans with a limit allow 50 visits. The most prevalent limit is 20 visits, which is imposed by 39 percent of plans with a limit.
In addition to annual visit limits, many plans impose per visit dollar limits and annual dollar limits. In 1988, 45 percent of plans imposed annual dollar limits on outpatient psychiatric care. By 1998, the number of plans imposing these limits had decreased to 35 percent. However, the dollar limits imposed by these plans have not kept pace with inflation. Most plans imposed a limit of $2,500 or less in 1988 and 1998. To keep pace with inflation, a limit of $2,500 in 1988 would have to be increased to $5,028 in 1998.
Data from Mutual of Omaha show a four percent increase in outpatient utilization for mental and behavioral services from 1988 to 1997, but a 24.6 percent decline in encounters per 1,000 people from 1993 through 1997. In contrast, there was an increase of 57.7 percent in general medical outpatient encounters per 1,000 during the period from 1988 through 1997. For inpatient utilization, Mutual of Omaha data indicate that the number of mental and behavioral admissions per 1,000 did not decline as precipitously as for general health diagnoses (19.0 percent compared with 28.8 percent for general), but the number of inpatient days per 1,000 declined by 69 percent for mental and behavioral diagnoses compared with 36.1 percent for general health diagnoses.
It is important to note that some of the data for 1998 may not reflect implementation of the Mental Health Parity Act of 1996 (MHPA). The law was effective with plan years beginning on or after January 1, 1998. If an employer’s plan year began both after the law’s effective date and after the 1998 benefits data were collected, the data may reflect a mental health benefit that was not then in compliance with MHPA.
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