Evaluation of Parity in the Federal Employees Health Benefits (FEHB) Program: Final Report. Federal Employees Health Benefits Parity Reporting Requirement for All Plans

12/31/2004

As part of the Office of Personnel Management’s (OPM’s) contract with the FEHB plans, each health plan was required to submit to the OPM a report on implementing mental health and substance abuse (MH/SA) parity in the first quarter of 2002 and in the first quarter of 2003.12 The report, The Parity Reporting Requirement (PRR), designed by PERT investigators, focused on delivering MH/SA benefits in the year before parity implementation (2000), in the year of parity implementation (2001), and two years afterwards (2003).

Key Research Questions

In response to the OPM’s parity policy, the PERT developed the following research questions about FEHB health plans’ behavior:

Nominal Benefit Design

  • Will health plans expand the amount, scope, and duration of MH/SA benefits to be equivalent to those for general medical care?
  • Will health plans change deductible, copay, and coinsurance on MH/SA benefits to be equivalent to those for general medical care?
  • Will health plans add new MH/SA benefits?

Effective Benefit Design

  • Will health plans that contracted with managed behavioral health care organizations (MBHOs) pre-parity continue to carve out post-parity?
  • Will health plans that did not carve out pre-parity carve out post-parity?
  • Will health plans carve out substance abuse as well as mental health benefits post-parity?
  • Will health plans move to risk-based contracting with vendors post-parity?
  • Will health plans change financial incentives for their providers post-parity?
  • Will health plans expand the number and disciplinary mix of MH/SA providers post-parity?
  • Will health plans increase the number or mix of utilization controls they employ post-parity?

Implementation Experience

  • Will health plans incur modest administrative costs in implementing parity?
  • Will health plans report increased MH/SA benefits costs for their FEHB product?

Data Collection

The PERT collaborated with OPM to choose a limited number of implementation domains to make up a PRR that OPM would include in its annual reporting requirements for FEHB health plans. OPM has legislative authority to require FEHB health plans to “furnish such reasonable reports as the Office determines to be necessary to enable it to carry out its functions…” Contracts between OPM and the FEHB health plans stipulate that health plans will furnish reports requested by OPM.

PRR Instrument

PERT researchers developed closed-ended, fixed-choice survey items for the PRR that were FEHB-specific. Because the PERT was unable to use previously field-tested items, it conducted cognitive testing of the instrument with the nine FEHB plans.

A mix of plans were selected that varied on the basis of:

  • size of plan,
  • type of plan (health maintenance organization [HMO] and fee-for-service [FFS] plans), and
  • geographic area.

OPM distributed the draft PRR to representatives of the nine plans and obtained feedback. PERT researchers also sought and received feedback from U.S. Department of Health and Human Services (HHS) project officers and other HHS-funded investigators working in the field of managed behavioral health care (i.e., Brandeis investigators Drs. Constance Horgan and Deborah Garnick). Suggested revisions were incorporated into the final version of the PRR. The relevant PERT organizations’ institutional review board reviewed and approved the PRR data collection plan.

Administering the PRR to the Association Plans

The “Association” is a national, fee-for-service plan administered jointly by the Association and 64 participating Association licensees across the country. All Federal employees and annuitants who are eligible for the FEHB Program may enroll in the Association. Enrollment in the Association represents over 50% of the total FEHB Program enrollment.

A national contract is negotiated between the Association and OPM but local Association plans underwrite the risk. Therefore, decisions about health care delivery, such as whether to contract with an MBHO, are local Association plan decisions. While the Association is subject to OPM’s regular reporting requirements, individual local Association plans do not individually report to OPM, but are accounted for in the Association reports.

For the PRR data collection, in collaboration with the Association, the PERT constructed a short form of the PRR to be administered at a single point in time (2003) to the Association plans. The short-form PRR included only questions on the use of MBHOs and utilization management. Respondents provided retrospective (pre- and post-parity) and current (2003) information in 2003.

The short-form PRR was sent by e-mail attachment to Association plans with instructions to return the completed PRR to OPM. All copies were forwarded to the PERT for data entry, cleaning, and analysis. The response rate for the Association plans was 100%, largely due to the active follow-up efforts of Association staff. (Note that the responses from two of the Association plans were dropped from the analysis because those plans shared responsibility for coverage of FEHB enrollees with other Association licensees in their jurisdiction. To avoid duplication, we report the responses only for the other Association licensee.)

Administering the PRR to the Other FEHB Plans

For the 156 other FEHB plans that were not part of the Association, OPM staff again fielded the PRR for plans that were active in 2002.13 The PRR was distributed to the other FEHB plans in electronic form by e-mail attachment. These plans were instructed to:

  • download the electronic copy of the PRR,
  • click on the relevant boxes to provide their answers,
  • save the document, and
  • return it to OPM by e-mail attachment.

A few plans had problems with the electronic version of the PRR and were instructed to print a copy of their responses and fax it back to OPM. OPM staff also conducted aggressive follow-up of non-respondents.

Data were collected at two points in time:

  • At Time 1 (January 2002), the other FEHB health plans were asked to provide pre- (2000) and post-parity (2001) implementation data.
  • At Time 2 (January 2003), they were asked to describe their current implementation.

In the 2003 version of the PRR, the response categories for one of the questions were modified slightly and another question dropped because it yielded little useful information at Time 1. Otherwise, the items on the two PRRs were identical.

Electronic copies of the completed PRRs were sent from the OPM to the PERT. The PRRs were logged in at a PERT organization and PERT investigators entered, cleaned, and analyzed the data. The response rate at Time 1 was 98% (n = 175) and at Time 2 it was 99% (n = 159), for a total of 156 out of a possible 158 other FEHB plans responding to the PRR at two points in time.

Analytic Methods

RAND researchers analyzed the PRR responses to assess changes in nominal and effective plan benefits after the implementation of the FEHB parity policy. The PRR focused on the year immediately before the implementation of the parity policy (2000) and at two points in time (2001 and 2003) after the implementation.

The PRR provided information on plans’ behavior and explanations for changes made in nominal and effective benefits. For example, the PRR asked if the plans carved out, and if so, whether this decision was in response to the parity policy. Although these reports addressed only a small subset of the issues covered in the site-visit discussion guide administered to eight selected plans (discussed later in this chapter and included as Appendix B, Site Visit Discussion Guide), having a minimum dataset on all FEHB plans allowed PERT investigators to assess whether the parity implementation experiences of the eight plans (studied in depth) were generalizable to the larger FEHB program.

Findings

This section of the report describes the experience of the FEHB parity implementation in the 62 Association member plans and 156 other FEHB plans that participated in the FEHB Program in the years 2002 (reporting on the pre- and post-parity years) and 2003 (two years after FEHB parity implementation). The PRR data collected by OPM describe plan structure, policies, and procedures and whether these changed in response to the implementation of parity.

The Association reported on two issues of interest: whether the plan contracted with an MBHO and the utilization of management techniques employed to limit service utilization. The other FEHB plans reported on a broader range of policies and procedures related to MH/SA. We first report on changes that the FEHB plans made in nominal benefit design, then on the use of contracts with MBHOs and other managed care techniques (such as increasing the use of utilization management or changing financial incentives for providers). We then present administrative and premium costs in the post-parity periods. Findings are shown separately for Association plans, where applicable.

Nominal Benefit Design Changes

Change in Amount, Scope, and Duration Limits on MH/SA Benefits

FEHB plans (n = 156) were asked to report to OPM whether the plan had changed amount, scope, or duration limits for in-network MH, SA, or general medical care benefits as a response to the implementation of FEHB parity (see Table III-1).

Of the 141 plans reporting, 83.7 % reported changing these limits for MH benefits; 73.0% of plans reported making such changes for SA benefits; and only 17.7% of plans reported changing the amount, scope, or duration limits for general medical care benefits post-parity. Although in 2003, an additional 13 health plans reported that they changed limits for general medical care benefits, these additional changes were probably unrelated to MH/SA parity as health plans are continually modifying their benefit packages.

Table III-1. Changes in nominal benefits (2001, 2003)

Health plans (N = 141) Yes No
2001 only 2003 only 2001 & 2003
Changed amount, scope, or duration limits – Mental Health No. of plans
% of plans
114
80.9
0
0.0
4
2.8
23
16.3
Changed amount, scope, or duration limits – Substance Abuse No. of plans
% of plans
99
70.2
0
0.0
4
2.8
38
27.0
Changed amount, scope, or duration limits – General Medical No. of plans
% of plans
11
7.8
13
9.2
1
0.7
116
82.3
Changed deductibles, copays, or coinsurance – Mental Health No. of plans
% of plans
56
39.7
15
10.6
35
24.8
35
24.8
Changed deductibles, copays, or coinsurance – Substance Abuse No. of plans
% of plans
49
34.8
17
12.1
24
17.0
51
36.2
Changed deductibles, copays, or coinsurance – General Medical No. of plans
% of plans
6
4.3
57
40.4
8
5.7
70
49.7
Added new benefits – Mental Health No. of plans
% of plans
16
11.4
1
0.7
0
0.0
124
87.9
Added new benefits – Substance Abuse No. of plans
% of plans
17
12.1
0
0.0
0
0.0
124
87.9

Removing Deductible, Copay, and Coinsurance Limits

Table III-1 also reports changes in deductible, copay, and coinsurance limits on MH, SA, and general medical care benefits in 2001 and 2003. Of the 141 plans, 75.2% reported making such changes for the MH benefit and 63.8% for the SA benefit. While only six plans (4.3%) reported changing these limits for the general medical care benefit in 2001, an additional 57 plans (40.4%) reported making these changes in 2003. Again, these additional 2003 changes were probably part of the plans’ ongoing modifications to their benefits packages and unrelated to the parity policy.

New MH/SA Benefits

Health plans also reported to OPM on whether they had added new MH or SA benefits to comply with the FEHB parity policy. As reported in Table III-1, only 11.4% of plans reported adding new MH benefits in 2001, with one additional plan reporting adding such benefits in 2003. For SA benefits, 12.1% of plans reported adding new SA benefits in 2001 with no plans adding new SA benefits in 2003.

Summary

The majority of plans moved in the expected direction post-parity--that is, most plans removed traditional demand side limits from their nominal benefit design. Those plans that did not report making such changes had already been offering a parity benefit, as there is no evidence of failure to comply with the OPM directive. (See section below, Effective Benefit Design Changes, for more details.) Small numbers of plans reported making additional changes two years after implementing parity. Plans reported that they expanded their MH/SA benefit by removing limits rather than adding new benefits.

Effective Benefit Design Changes

Contracting with MBHOs

Health plans reported to OPM on their use of vendors to manage MH/SA benefits. The PRR asked plans to report “whether [the] health plan contracts with a vendor--such as a managed behavioral health organization--for management of behavioral health benefits.”

If the plan responded in the affirmative, the PRR queried whether this arrangement was a pre-existing (pre-parity) or new (post-parity) arrangement, and whether the arrangement was a response to the implementation of FEHB parity. Table III-2 presents the health plans’ PRR responses for pre- and post-parity periods.

Table III-2. Contracts with behavioral health vendors (2001, 2003)

  Pre-existing behavioral health vendor Pre-existing, in anticipation of parity New vendor in response to parity New vendor other than parity Other No behavioral health vendor
2001 2003 2001 2003 2001 2003 2001 2003 2001 2003 2001 2003
Association Plans (N = 62) No. of plans
% of plans
21
33.9
3.8
66.1
1
1.6
0
0
15
24.2
0
0
3
4.8
0
0
1
1.6
0
0
21
33.9
24
38.7
Other FEHB Health Plans (N = 156) No. of plans
% of plans
81
51.9
103
65.1
2
1.3
0
0
10
6.4
0
0
10
6.4
0
0
0
0
0
0
53
34.0
53
34.0

Association Plans: In 2001, 41 of the 62 responding Association plans reported contracting with an MBHO for management of behavioral health benefits (see Table III-2). Of this number, 21 (34%) were pre-existing carve-outs that were implemented for reasons other than FEHB parity. Twenty-one Association plans (34%) reported no carve-outs in either the pre- or post-parity period. Sixteen Association plans (26%) evidenced an effect of FEHB parity, reporting that the plans carved out either in anticipation of, or in response to, FEHB parity.

Other FEHB Plans: As indicated in Table III-2, 103 of the 156 other FEHB health plans (66%) reported having a contract with an MBHO for managing behavioral health benefits in 2001. Of this number, 81 were pre-existing carve-outs that were implemented for reasons other than FEHB parity. The majority of these FEHB health plans had already carved out before implementing FEHB parity and continued those relationships in the post-parity period. Fifty-three plans (34%) reported no carve-outs in either the pre- or post-parity period.

Carving Out Post-parity

Table III-2 also indicates that a number of health plans carved out in the post-parity period (2001). Twenty of the 156 other FEHB health plans reported new carve-outs in 2001, but only half of those plans reported making that decision in direct response to FEHB parity. Two of the 81 with pre-existing carve-outs reported having carved out in anticipation of parity. Taken together, 12 of 156 health plans (7.7%) reported to OPM that the FEHB parity policy was the impetus for their decision to carve out their behavioral health benefits.

Benefits Managed by MBHO Vendor

The PRR asked plans that reported carve-outs in 2001 to indicate what benefits (MH, SA, pharmacy, or other) were being managed by the MBHO vendor. One hundred percent of the plans included the MH benefit in the carve-out in 2001 and 2003. By 2003, 100% of health plans reported that the SA benefit in 2001 was also being managed by the MBHO. Table III-3 presents the findings for the pharmacy benefit.

Table III-3. Pharmacy benefits managed by behavioral health vendors

Health plans (N = 96)1 Yes No
2001 only 2003 only 2001 and 2003
  1. 103 plans carved out and 7 plans had missing data resulting in N = 96.
No. of plans
% of plans
6
6.3
2
2.1
2
2.1
86
89.6

Across all reporting plans (n = 96), 89.6% indicated that the pharmacy benefit was not included in the carve-out at either point in time post-parity (2001 or 2003). Only 2.1% of the plans reported carving out pharmacy benefits at both points in time but two health plans added the pharmacy benefit to their carve-out in 2003.

Using Risk-based Contracting with Vendors

FEHB health plans that reported using MBHOs were asked to indicate what type of contract the health plan had with MBHO vendors in 2000 (pre-parity), 2001 (post-parity), and 2003. Table III-4 shows the type of vendor contracts used in the pre- and post-parity periods and changes over time from pre-parity (2000) to 2003.

Table III-4. Type of behavioral health vendor contract

  Full-risk
2000, 2001, 2003
Partial-risk
2000, 2001, 2003
ASO**
2000, 2001, 2003
Increase in risk in
2001
Increase in risk in
2003
Decrease in risk in
2001
Decrease in risk in
2003
*Plans reporting behavioral health vendors at three points in time
**ASO=Administrative services only
Association Plans (N = 22) No. of plans
% of plans
2
9.1
1
4.6
18
81.8
0
0.0
0
0.0
1
4.6
0
0.0
Other FEHB Health Plans (N = 79*) No. of plans
% of plans
57
72.2
1
1.3
6
7.6
0
0.0
9
11.4
1
1.3
5
6.3

No clear pattern of effects existed on the use of risk-based contracting with vendors. Association plans and other FEHB plans used risk-based and administrative services only (ASO) contracts in both the pre- and post-parity periods. Of the Association plans reporting carve-outs in both the pre- (2000) and post- (2001) periods, 18 of 22 contracts were ASO contracts (81.8%), while 6 of 79 (7.6%) of the other FEHB plans used ASO contracts. Only two of the Association plans (9.1%) reported using full-risk contracts with MBHOs, while fifty-seven of the 79 other FEHB health plans that reported a vendor (72.2%) used full-risk contracts at all three points in time (pre, post, and in 2003). Only one plan reported using partial capitation contracts at all three points in time. Table III-4 also indicates changes made by plans to increase or decrease the amount of risk assigned to vendors in 2001 and 2003.

Provider Networks and Financial Incentives for Providers

OPM asked representatives of health plans to report whether the health plan or their vendor had changed financial incentives (e.g., level of payment, withholds, or bonuses) for specialty behavioral health providers from 2000 to 2001. Table III-5 reports the findings for individual and institutional MH and SA providers in 2001. As can be seen in Table III-5, the majority of plans report no change in provider networks or financial incentives in any single category.

Table III-5. Changes in provider networks and financial incentives for providers

 

Health plans (N = 149)1 Changes in 2001 Changes in 2003
  1. Of the 218 plans reporting, 69 plans had missing data resulting in N = 149.
Financial incentives for individual mental health providers No. of plans
% of plans
8
6.3
23
17.3
Financial incentives for individual substance abuse providers No. of plans
% of plans
8
5.6
17
12.6
Financial incentives for institutional mental health providers No. of plans
% of plans
8
6.3
22
16.3
Financial incentives for institutional substance abuse providers No. of plans
% of plans
8
6.3
17
12.6
Mental health specialty providers in network increased > 5% No. of plans
% of plans
38
27.0
46
32.6
Substance abuse specialty providers in network increased > 5% No. of plans
% of plans
24
17.0
36
23.4
Geographic area of network expanded No. of plans
% of plans
24
17.0
21
15.9

By 2003, two years after implementing FEHB parity, twice as many health plans (12.6%) reported a change in financial incentives for SA specialty providers (individual and institutional) and institutional MH providers (16.3%), and three times as many health plans reported a change in financial incentives for individual MH providers (17.3%) than in 2001. Two years after implementing parity, it appears that health plans were changing the financial incentives for the providers in their networks. It is difficult to say whether this is an effect of parity, some other specific policy in the FEHB Program of which we are unaware, or a secular trend.

OPM asked health plans to report whether they had expanded or narrowed the scope of their specialty provider networks from 2000 to 2001. In particular, OPM asked whether health plans had increased the number and/or disciplinary mix of providers and/or expanded or narrowed the geographic area of their provider networks. Table III-5 reports the findings from 2001 and 2003.

Across all reporting FEHB health plans (n = 149), 27.09% reported that they increased the number of MH specialty providers by more than 5% in 2001. Fewer plans (17%) reported an increase in the number of SA specialty providers. Only 2-3% of plans reported that they decreased the number of specialty providers in their networks in the post-parity period (data not shown). By 2003, 32.69% of health plans reported increasing the number of MH specialty providers and 23.4% of health plans reported increasing the number of specialty SA providers in their networks.

While health plans were increasing the size of their provider networks, they were not changing the disciplinary mix of providers (data not shown). The majority of health plans (92%) reported no changes in disciplinary mix for either MH or SA providers at either 2001 or 2003.

Some health plans also reported changes in the geographic area of their provider networks for 2001 and 2003. Sixteen percent of health plans reporting expanding their networks in 2001 and 16% in 2003. Only 1% of health plans in 2001 and 2003 reported narrowing their geographic networks (data not shown).

Utilization Controls

The PRR asked health plans to report on their use of seven specific approaches to control MH/SA service utilization, i.e., utilization management techniques, in the pre (2000), post (2001), and 2003 periods. Table III-6 reports on the use of utilization management techniques by the 62 Association plans. Table III-7 reports on the other FEHB health plans.

According to the findings from the PRR, gatekeeping by primary care providers, prior authorization, concurrent review, retrospective review, and disease management programs did not figure prominently in parity implementation. The findings on these five utilization control mechanisms are reported only in the tables. The text focuses on treatment plan requirements and provider panels, as these two mechanisms emerged from the data as two important issues in parity implementation.

Table III-6. Use of behavioral health utilization controls by Association plans

Utilization controls by Association Plans (N=62) No in 2000, 2001, 2003 Yes in 2000, 2001, 2003 No in 2000;
Yes in 2001 and/or 2003
Yes in 2000;
No in 2001 and/or 2003
Primary care provider gatekeeping No. of plans
% of plans
53
85.5
5
8.1
4
6.5
0
0.0
Provider treatment plan No. of plans
% of plans
4
6.5
22
35.5
32
51.6
4
6.5
Prior authorization No. of plans
% of plans
4
6.5
34
54.8
19
30.7
5
8.1
Concurrent review No. of plans
% of plans
3
4.8
46
74.2
8
12.9
5
8.1
Retrospective review No. of plans
% of plans
15
24.2
36
58.1
6
9.7
5
8.1
Closed or preferred provider panels No. of plans
% of plans
12
19.4
33
53.2
17
27.4
0
0.0
Disease management programs No. of plans
% of plans
49
79.0
8
12.9
5
8.1
0
0.0

 

Table III-7. Use of behavioral health utilization control by other FEHB health plans

Utilization control by other FEHB health plans (N = 152)1 No in 2000, 2001, 2003 Yes in 2000, 2001, 2003 No in 2000;
Yes in 2001 and/or 2003
Yes in 2000;
No in 2001 and/or 2003
  1. Of the 158 plans, 6 had missing data, resulting in N = 152.
Primary care physician gatekeeping No. of plans
% of plans
93
61.2
16
10.5
17
11.2
26
17.1
Provider treatment plan No. of plans
% of plans
23
15.1
89
58.6
15
9.9
25
16.5
Prior authorization No. of plans
% of plans
6
4.0
122
80.3
14
9.2
10
6.6
Concurrent review No. of plans
% of plans
2
1.3
123
80.9
18
11.9
9
5.9
Retrospective review No. of plans
% of plans
26
17.1
64
42.1
32
21.1
30
19.7
Closed or preferred provider panels No. of plans
% of plans
28
18.4
79
52.0
26
17.1
19
12.5
Disease management programs No. of plans
% of plans
52
34.2
53
34.9
24
15.8
23
15.1

Treatment Plan Requirements

Twenty-two Association plans (35.5%) reported that treatment plans were required at all three points in time. An additional 32 plans (51.6%) reported that as a direct result of parity, treatment plans were required for the first time in the post-parity period (either in 2001 or 2003). Fifty-nine percent of other FEHB health plans required treatment plans from their providers at all three points in time. In addition, 15 plans (9.9%) reported a parity effect by 2001 or 2003, but a greater number of plans (25 plans or 16.5% of the total) stopped requiring provider treatment plans in the post-parity period (in 2001).

Closed or Preferred Provider Panels

Closed or preferred provider panels can be used to control utilization and/or costs by preferentially referring patients to providers that have practice patterns that conform with plan expectations or have agreed to discounted fee schedules. Over 50% of Association plans reported using closed or preferred provider panels at all three points in time. An additional 27.4% of Association plans reported that they used closed or preferred provider panels for the first time post-parity.

Fifty-two percent of the other FEHB plans used closed panels at all three points in time. An additional 17.1% reported using closed or preferred panels for the first time post-parity. As with retrospective review, however, plans also moved away from using closed or preferred panels in the post-parity periods (26 and 19 plans, respectively).

Plans’ Administrative and Benefit Costs

Administrative Costs

The majority of health plans (68%) reported that they did not incur administrative costs in implementing FEHB parity in 2001.

MH/SA Benefits Costs

Health plans were also asked to report whether they estimated increased MH/SA benefit costs for their FEHB product from 2000 to 2001 and from 2002 to 2003. Forty-two percent of health plans reported increased benefit costs in the immediate post-parity period (2001), but not in the 2002-2003 post-parity period. An additional 20% of plans reported increased benefit costs in both time periods post-parity. However, at least a quarter of the plans reported no increased benefit costs during either time period.

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