By:
Victor L. Gunderson,
CLU, ChFC
Understanding AB 88 is essential for California employers, because the law requires medical parity provision in employer health coverage plans. AB 88 goes into effect upon contract renewals beginning July 1, 2000, and applies to all commercial health plan members regardless of group size. It requires that all terms and conditions of medical plans be applied equally to the following Severe Mental Illness (SMI) and Serious Emotional Disturbances (SED) under the plan contract, including co-payments, lifetime benefits and deductibles:
Schizophrenia
Schizoaffective Disorder
Bipolar Disorder
Major Depressive Disorder
Panic Disorder
Obsessive-Compulsive Disorder
Pervasive Developmental Disorders (PDD) including Autism
Anorexia Nervosa
Bulimia Nervosa
The Law also mandates equal coverage for:
Serious Emotional Disturbances of Children (SED)
How does parity affect rates?
For the past 10 years, mental health costs have actually decreased in proportion to medical costs, largely attributable to managed behavioral health plans. Although many insurance providers support mental health on par with physical health benefits, parity legislation creates several situations that contribute to higher rates:
Diagnoses that previously were either exclusions or limitations are now mandated benefits. These complex and chronic disorders include autism, eating disorders and SED. Of these three disorders, autism is the most costly to treat. Estimates indicate there are nearly 400,000 people in the United States with some form of autism. Annual costs range from $ 80,000 to $ 100,000 to treat one individual. In addition, autism is a lifelong condition, and there is no cure or proven method of truly effective treatment.
With the absence of a limit on benefits for individuals with SMI and SED, health care insurance providers expect inpatient and outpatient utilization to increase, along with higher claims costs. This has proven to be the case in the two years that mental health parity has been in effect in other states. And these states' mandated parity benefits do not include autism.
Without benefit limits, health care insurance providers anticipate that a significant number of individuals with severe and chronic disorders such as autism and SED who have been receiving long-term residential care and lifelong treatment under public programs will move to care under the private sector.
Most plans anticipate costs to increase a minimum of 3 - 5 %.
For
more information, type "AB 88" in the search field on the following sites:
www.ca.gov
This article should not be used as a basis for legal or tax advice. In any specific case, the parties involved should seek the guidance and advice of their own legal and tax counsel.