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Addiction Treatment and Insurance Coverage

The Uncertain Present and Future of Addiction Treatment and Insurance Coverage under Mental Health Parity and Addiction Equity Act (MHPAEA) and Affordable Care Act (ACA)

With the provisions of the Affordable Care Act (ACA), popularly known as Obamacare, and the Mental Health Parity and Addiction Equity Act (MPHAEA) phasing in over the next few months, there are questions as to how these changes will be accommodated by a system which currently strains and often fails to support those who are able to access care now.

"We don't have enough capacity right now," said Becky Vaughn, executive director of State Associations of Addiction Services in Washington, D.C., referring to the current state of addiction services nationally. [1] More than 23 million Americans needed treatment for an alcohol or drug problem in 2012, but only about 11 percent received it, according to estimates from the federal Substance Abuse and Mental Health Services Administration (SAMHSA).[2]

According to the Treatment Research Institute in Philadelphia [3], there are approximately 12,0000 addiction treatment programs nationally. Of these programs, 80% are outpatient based, 10% are residential, and 10% are methadone clinics. 66% of the programs are non-profit and often dependent on government block grants to help cover the actual costs of providing services. When grant monies are reduced, waiting lists or even closures may occur.

If you are currently covered under insurance and looking to use it as part of the coverage for the cost of your program, it is helpful to confer with your insurer and look at your policy for guidelines of coverage but that is all you will receive--guidance. The actual coverage will likely be determined prior to, during, or even after your stay. Many insurance policies will state they cover 30 days of inpatient treatment but no one gets all 30 days covered says A. Thomas McLellan, CEO of the Treatment Research Institute (TRI). [4] The average days of stay covered under insurance are currently between 11-14 days of that 30 days often identified in policies. Average costs of out-patient treatment starting at $1000/monthly, $3,000-$5000 for a 3-5 day heroin detox and a 30 day inpatient program stay--without detox services- is expected to cost $30,000. [5]

In a survey in March 2014 of National Association of Addiction Treatment Providers (NAATP) [6], 63% of insurance coverage denials concerned what is the definition of "medically necessary" treatment and many treatment providers are finding days of coverage in programs are shrinking-- leaving people the choice of deciding to stay in treatment and face high out-of-pocket costs or leave when their insurance coverage ends and with their needs for help unmet.

Although you will be asking for coverage from your insurance provider just as you have in the past, there are some extra happenings behind the scenes with SUD treatment determinations. The key is to know what type of plan you have in order to know whether MHPAEA or ACA governs and what your route in appeals would be, if necessary.


The Mental Health Parity and Addiction Equity Act (MHPAEA), also known as PL110-343 or the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, covers employer based health plans of 51 employees or greater and health insurance issuers.

The MHPAEA is intended to end discriminatory actions on the part of insurers that restrict or deny access and coverage of treatment and services for mental health and substance use disorders(SUD). Parts of the MHPAEA were phased in during 2010 when the Interim Final Rules (IFR) were issued to help insurers and agencies start to move into compliance. Final Regulations for MHPAEA were released on 11/8/2013 and these Final Regulations will take effect in July 2014 for plans whose years begin on or after 7/1/14. If your current plan year ends December 31, 2014--as most plans do---the regulations will actually take effect for your plan on 1/1/15. In the meantime, IFR will govern most people's plans until January 2015.

Affordable Care Act (ACA)

There are some plans that are not covered or can be exempted under MHPAEA such as employee based plans with under 50 employees, retiree-only plans, state and local government self-funded plans, Tricare, Medicare, and traditional Medicaid. The Affordable Care Act (ACA) seeks to extend the benefits of the MHPAEA to members of most of these groups by mandating essential coverage in 10 areas including mental health and substance use.

Who's In Charge?

The Federal Departments of Labor, the Treasury, and Health and Human Services are all charged with administering the regulations of MHPAEA as well as the individual states. The states can add to the regulations on their own. At this time, Oregon is the only state which has chosen to put in place Non-Quantitative Treatment Limitation (NTQL) provisions.

Your state of residence is responsible for taking the lead in monitoring and enforcing MPHAEA with health insurers. The federal Department of Health and Human Services, through its Center for Medicare and Medicaid Services (CMS), can enforce the law directly if a state has failed in enforcing the regulations or CMS can ask the state's department of insurance to work collaboratively with them to provide enforcement. If you are covered under Medicaid plans or Children's Health Insurance Program (CHIP), CMS has released guidance on how to apply the provisions of the law but these programs are brought into compliance under ACA. Department of Labor will enforce compliance of self-insured Employee Retired Income Security Act (ERISA) plans.

Is Your Substance Use Program REALLY Covered Under MHPAEA and ACA?

Yes and No--Under the MHPAEA, insurance plans are not required to offer coverage for substance use needs in general or for specific conditions. Instead they are required to offer parity in coverage for treatment of mental health and substance use disorders. Your insurance plan has services for medical and surgical issues that fall under benefit categories. These categories of health benefits can also be applied to substance use disorder services. If your plan provides coverage for a service to treat a medical condition, the MHPAEA states there must be a similar service in that same category to treat substance use. The substance use service coverage must be equal to the medical or surgical service coverage in that category. Gaining access to coverage for substance use disorder services can't be more difficult, limited, or delayed longer than the process used to determine coverage for the medical or surgical benefit.

What are Parity Regulations?

The idea of parity regulations is that there are currently discriminatory limitations on access and coverage of services and treatments for substance use disorders in the way insurance plans are administered. The MHPAEA seeks to remove discriminatory practices and make access and coverage equal for substance use and mental health treatment. The issues for parity are divided into two categories: financial requirements and treatment limitations. Financial requirements may include issues concerning co-pays, deductibles, and out-of-pocket cost assessments. Treatment limitations are divided into two categories: Quantitative (QTL) and Non-Quantitative (NQTL) and these will be discussed below.

When a determination needs to be made regarding access and coverage for services or treatment for substance use disorders, a parity analysis must be completed. The insurance plan's services and treatments covered under substance use, along with any treatment limitations and financial requirements associated with them, are compared to similar covered medical or surgical benefits with their associated treatment limitations and financial requirements. Whatever limitations and requirements apply to substance use disorders to gain access and coverage for treatment and services can't be more extensive or more rigorously applied than whatever are the limitations and requirements to gain medical or surgical treatment and service access and coverage.

The MHPAEA doesn't mean there is a mandate for substance use disorders to be covered under insurance or if there is coverage, that there can't be restrictions and limitations. Insurers can put in place policies and procedures that are equal or comparable to those that govern similar medical and surgical conditions.

How Does This Parity Work?

There were 6 categories of benefits listed in the 2010 IFR to include:

  1. in-patient care in-network,
  2. in-patient care out-of-network,
  3. out-patient care in-network,
  4. out-patient care out-of-network,
  5. emergency care and
  6. prescription drugs.

If a benefit is provided in a category for a medical/surgical condition, it must also be provided for substance use disorders in that category. The final regulations are clear that "intermediate levels of care" are included for substance use disorders such as intensive out-patient, partial hospitalization, and residential treatment. Depending on how a plan classifies intermediate services for medical and surgical conditions would determine how that plan classifies intermediate services.

If you are seeking to have a residential stay for substance use covered under your insurance, under the final regulations, that service is included as an intermediate level of care. Your particular plan will define residential treatment, for example, as an inpatient or out-patient benefit based on how the plan categorizes similar services for medical or surgical conditions. The resulting policies and rules of the plan would apply based on what category residential treatment was determined to fall under. These policies and procedures must be equal or similar in scope to those used to determine coverage for services in the same category under medical and surgical benefits.

Quantitative Limitations

These limitations are based on frequency of patient visits or services, annual or lifetime caps of service delivery, etc., that are discriminatory in practice as compared to service frequency limitations for medical and surgical conditions.

Non-Quantitative Treatment Limitations (NQTL)

NQTLs, often described as medical management tools, are varied and may include restrictions on location, facility type, provider specialities, reimbursement rates, and any criteria, procedure, or policy that may be used to limit the "scope or duration" of services.

The standard for determining Non-Quantitative Limitations (NQTL) under MHPAEA is "comparable and no more stringently" however, at this time, the legal definition of how this standard will be applied hasn't been defined. Insurance plans do have to let claimants know the "processes, strategies, evidentiary standards and other factors used by the plan or issuer to determine whether and to what extent a benefit is subject to an NQTL be comparable and applied no more stringently for MH/SUD than for medical/surgical." You have the ability to request this information as a member of a plan or if you anticipate being a member of a plan and you have the right to this information in a timely manner so you can appeal decisions quickly and effectively.

Medical Necessity

Medical necessity is currently used in making determinations for medical and surgical as well as substance use disorder determinations. Medical necessity is a request by the insurer for a provider to show there is a demonstrated or documented need for a service prior to deciding whether to cover or authorize a service. Medical necessity can take many forms but it is a form of scrutiny by the insurer that delays treatment in some way.

There are concerns that medical necessity is one tool that has been used to unnecessarily delay or deny treatment and services for substance use disorders. Medical necessity has legitimate purposes but advocates fear it has been and may continue to be used to delay or deny services for substance users to a greater degree than those seeking services for medical needs. The parity analysis must show that any process, criteria, evidentiary standards, and procedures used to decide if a service will be covered is similar to, and not higher standard, than the standards and processes that would be used to make a medical or surgical medical necessity determination. A parity analysis will help to give consumers and advocates more information to be able to decide if an insurer is using a higher standard required for services to treat substance use disorders to be approved than medical services and how it is being accomplished if that is the case.

Medical detoxification for heroin use is often denied by insurers. Many facilities will not even attempt to admit a heroin user for detox knowing it is an almost certain denial. Whereas detoxification from alcohol and benzodiazepines can cause life threatening side effects which may require medical monitoring and intervention, heroin detox does not have these medical consequences. Insurers will, therefore, often cite a lack of medical necessity to deny coverage for detoxification services. Insurance companies are not wrong in that medical consideration as far as it goes. What insurers are not considering in this equation is the fact that heroin users are at greater risk to overdose when there has been a break in the use of heroin through detoxification or continued access to treatment. When a heroin user detoxes, starts treatment, and then has to leave when the insurance coverage runs out, they may choose to use heroin again. Substance users are more likely to overdose at this point as their bodies can't handle the drug in the same way as before. Heroin users starting up using again at a similar level can yield disastrous, even fatal, results.

Prior Approvals and Pre-authorizations

Although substance use itself is no longer allowed to be treated as a pre-existing medical condition and, therefore, a barrier to coverage of services, other barriers to gaining help still exist including requiring prior approvals and authorizations. As many families know, when a loved one is at the point of agreeing to seek help, the window of hope may be short in duration and that is not the time to put timing roadblocks in place.

When your loved one finally agrees to commit to getting help for substance use, adding in the timing needed for a prior approval or pre-authorization to grind its way through the system may be the hassle and length of time between a person remaining resolved to get help and becoming too frustrated, angry, or embarrassed to go through the referral, assessment, and authorization processes that go before gaining access and coverage. These systems are already in place for medical and surgical conditions so insurance companies may use them with substance use disorder treatment determinations as long as the pre-authorizations and prior approval policies and procedures are equal to the timing and procedures used with comparable medical or surgical conditions.

Fail First Requirements

Another significant barrier to gaining help for substance use disorders are the "fail first" requirements. This policy requires people to fail first at less intensive and often less expensive treatments and programs, such as outpatient programs or counseling, before more intensive programs, including residential programs, may be looked at for insurance coverage. The need to fail requirement allows the insurer to determine if a less expensive method that may deliver similar effectiveness will work prior to moving up the ladder of treatment options and, for some, less intensive options maywork.

The added burden of making a person fail a program or treatment prior to moving on may add to their sense of helplessness and hopelessness. Why try again if you've failed already? Families and providers are concerned that the need to try and fail multiple treatments and providers may exhaust the substance user and reinforce the idea that they are unable to change. As of yet there are no provisions or regulations which would allow certain conditions, such as length of use, previous treatment attempts, or severity of use to be assessed or met to make recommendations for treatment and allow for a bypass of this provision. Additionally there are concerns that if a substance user had to change insurance carriers while in the midst of determining appropriate treatments options, there is no guarantee that they might not have to start at the bottom of the ladder and fail again treatments with the new company before proceeding to more intensive treatment. These are still questions that are untried, untested and yet to be determined but concern substance users, families and advocates that people may have intolerable delays in gaining the right level of treatment with potentially devastating consequences.

NY Attorney General's Findings of Insurer's Parity Violations

In March 2014, the NY Attorney General Eric Schneiderman successfully settled with insurer MVP Health Care and the managed behavioral healthcare company, ValueOptions, after an investigation finding NQTL and QTL parity violations under the New York State's Timothy's Law of 2006 requiring mental health parity [7]. Although Timothy's Law is a NY state law, this investigation gives some insight into the future of parity regulations and investigations which will arise under the MHPAEA and ACA regulations. Additionally, states are allowed to add to the parity regulations if they wish so favorable outcomes in these early investigations may have some state legislatures considering beefing up their state parity laws as well.

Under investigation with MVP was an allegation of over an 40% higher denial rate for substance use disorder/mental health claims than medical/surgical claims with discriminatory limits on patient visits and more frequent authorization reviews by ValueOptions for MVP. The result is MVP will pay a $300,000 civil fine, submit to monitoring, hire full-time behavioral health advocates to help members submit claims, and make extensive reforms of the substance use disorder/mental health review process including:

A review of claims or requests that were denied as not "medically necessary" from 2011 through present will be conducted by an independent reviewer which could result in more than $6 million in reimbursement to an estimated 3,000 MVP members. The plan will also allow members to submit claims for reimbursement for residential treatment services received since 2011, which could result in up to $1.5 million being refunded to members. MVP did not cover residential claims until 2014 even though such treatment is considered a standard of care in the industry. The investigation revealed that over 47% of claims for in-patient substance abuse treatment were denied, a rate more than double the denial of medical claims and an obvious, even egregious, disparity rate.

New York is also considering a bill currently in the Legislature to allow doctors to make referrals for SUD treatment. [8] This would mean a determination of medically necessity would be as simple as a doctor agreeing that a patient is in need of treatment and being willing to make that referral thereby decreasing the red tape and timing issues of access to treatment significantly. A similar bill in Pennsylvania has helped increase access to services. States may add to regulations and more states may consider such measures if settlements such as the current one with MVP and ValueOptions and other similar avenues prove successful.

I'm Covered So I Can Use My Insurance, Right?

As more Americans are covered under ACA and MPHAEA provisions for substance use treatment and services, facilities which are already unable to meet the current need will be overloaded further. Common approaches of determining how to manage limited resources, such as waiting lists, assessments to determine the severity of need and therefore one's position in getting access to treatment, also known as rationing, will likely need to be considered. A rising need for substance use services and a probable drop in reimbursement rates for these services make the likelihood of more providers and facilities rushing in to fill the gap between growing eligibility for services and the already overtaxed system unlikely. Access to care may be further limited by the system's need to accommodate the parity analysis and appeals process, even assuming the process is accomplished within limited timeframes.

Insurers and providers are aware that they will need to have more service access, more treatment facilities, and more providers available as the pool of persons eligible to receive services and treatment grows but the future is uncertain. Many of the actual working methods and ways of determining whether compliance is met are being formulated and interpreted in the MPHAEA and ACA regulations. This leaves insurers and providers uncertain of how to proceed yet scrambling to gear up to the challenge. Consumers are left with very little actual guidance and often more questions than answers.

"These rules are...a sea change in the way health plans approach the coverage of mental health and substance abuse disorder benefits," said Alden Bianchi, an employment benefits attorney who wrote a review of the final regulations for National Law Review. [9] Although advocates, providers, and consumers are encouraged by the implementation of MHPAEA and ACA to expand the provision of substance use services, it is wise to be cautious. The funding and payment sources are changing and a significant scaling up of providers is required for the newly eligible with little to no idea who or what is needed to provide services and maintain funding. There are opportunities for new growth and alternatives measures to support the system but also great crises in store. How will insurers and providers decide to manage this influx of eligible substance users seeking treatment with so many variables yet to be determined? The future of insurance coverage for substance use disorders remains very uncertain.


The New Language of Insurance

References for MHPAEA and Parity Regulations