Loss of Maternity Care and Mental Health Coverage Would Burden Those in Greatest Need

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    Removing maternity and mental health care from coverage would likely lower premiums by about 5%
    Out-of-pocket spending for a woman in need of maternity care could rise by $7,000 if maternity benefits were dropped

The Affordable Care Act (ACA) required most individual and small-group health insurers to cover 10 “essential health benefits,” including outpatient services such as office visits, hospitalization, emergency department visits, prescription drugs, and other specific types of care.1 By requiring insurance coverage for these services, the ACA ensures that everyone who enrolls in insurance receives a standard benefit package that covers, at a minimum, commonly used services. However, the requirement may raise insurance premiums relative to what would be expected if coverage of these services were not required. The American Health Care Act recently passed by the U.S. House of Representatives to repeal and replace the ACA allows states to waive such benefits.

Prior to the ACA, several of the essential health benefits, including maternity care, mental health and substance abuse treatment, and prescription drugs, were commonly excluded from individual market coverage. In this blog post, we use data from the 2014 Medical Expenditure Panel Survey (MEPS) to analyze how much the requirement to cover these benefits adds to overall insurer spending. We also assess the potential impact of eliminating these services from the required health benefits package on consumers’ spending. Our analysis focuses on MEPS respondents who reported being enrolled in any private insurance, including both individual market (both on and off the marketplaces) and employer-sponsored plans. (See the technical appendix for details about the study methods.)

Changes in Insurer Spending and Premiums

We analyzed average insurer spending in 2014 for all privately insured enrollees under age 65 for maternity care, mental health and substance abuse treatment, prescription drugs, and all other services (Exhibit 1). We found each of these benefits account for only a small share of insurer spending. In 2014, maternity care accounted for 4 percent of per capita insurer spending, and mental health and substance abuse treatment accounted for 1 percent of per capita insurer spending. Prescription drug spending was more substantial, representing approximately 22 percent of per capita insurer spending. These results are similar to those reported in a recent issue brief by the actuarial firm Milliman.

Because premiums are based on per capita insurer spending plus administrative costs, the spending amounts in Exhibit 1 illustrate how premiums might change if coverage for select essential health benefits were excluded from the benefits package.2 If we assume that administrative costs are proportional to spending on services, eliminating maternity, mental health and substance abuse treatment would reduce premiums by 5 percent. Because prescription drugs encompass a larger share of total spending, eliminating this benefit would lead to a larger reduction in premiums—decreasing them by 22 percent.

Eliminating the essential health benefits requirement also could have secondary effects on premiums. First, the lower premiums that result from eliminating certain benefits could encourage healthier people to enroll in individual-market coverage and improve the overall risk pool. Such an effect would likely be small if maternity care or mental health and substance abuse treatment were eliminated, given that these services account for a relatively small share of insurer spending. However, the effect might be larger if coverage for prescription drugs were removed given that these benefits represent a larger share of insurer spending. Second, eliminating certain benefits could lead to higher spending on covered services. For example, poorly managed depression may increase medical spending among those with chronic conditions,3 and lack of access to prescription drugs may lead to costly complications for some patients.4 Our analysis does not take these spillover effects into account.

Changes in Consumer Out-of-Pocket Spending

Our analysis also considered how eliminating these benefits might affect consumer out-of-pocket spending relative to current law for all individuals who used the services in 2014 and for “high-need users” (Exhibit 2). The “high-need” users were defined as:

  • High-need maternity care users: Women who had a complicated pregnancy or delivery.
  • High-need mental health and substance abuse treatment users: Those who experienced a hospital inpatient stay related to a mental health or substance abuse condition.
  • High-need prescription drug users: Those with a chronic condition including cancer, diabetes, emphysema, high cholesterol, coronary heart disease, arthritis, attention deficit and hyperactivity disorder, asthma, or a previous heart attack or stroke.5

Current law spending represents average out-of-pocket spending for privately insured individuals in the 2014 MEPS who report using these services. To estimate the change in out-of-pocket spending if the service were removed from the requirements, we assumed that plan spending on these services would fall to zero and that consumers would bear the full additional costs.6 As a result, the estimates should be interpreted as the impact on consumers if they lost access to the benefit but continued to use the same level of care. (Sample sizes in MEPS are small for the subset of people who use maternity, mental health, and substance abuse care, particularly when we restrict the analysis to high-need users.7)

In all cases, eliminating the benefit substantially increases costs for people who use these services. For example, out-of-pocket spending for a woman in need of maternity care could rise from an average of $644 if the benefit were covered to $7,546 if the benefit were eliminated, resulting in an increase in spending of $6,902. For consumers in high need of care, eliminating the essential health benefit has a larger effect. For example, spending among those with a mental health or substance abuse-related inpatient stay could increase by over $12,000. Eliminating the benefits therefore leads to large out-of-pocket spending increases for those who use services, and reduces premiums by a smaller amount for everyone enrolled in the market. This finding reflects that, by incorporating these benefits into the standard premium, costs are redistributed so that each enrollee pays a little bit more to offset treatment costs for those who need care.

Mixed Conclusions

These analyses lead to mixed conclusions about the effectiveness of eliminating essential health benefits as an approach for reducing premiums. Our analysis suggests that eliminating maternity care coverage or mental health and substance abuse treatment coverage would reduce premiums by about 5 percent, assuming administrative costs are proportional to insurer spending, and without accounting for spillover effects. Eliminating coverage for prescription drugs could have a larger effect on premiums, potentially reducing them by 22 percent, in part because many patients use prescription drugs. However, eliminating insurance coverage for any of these services would substantially increase out-of-pocket costs for people who need maternity care, have a mental health condition, or need prescription drugs. Such changes could lead to financial hardship for those in the greatest need of care, reducing the usefulness of insurance as a mechanism to guard against financial risk.


Notes

1 Grandfathered plans,” which existed before the ACA was signed into law and which have not made major changes since that time, are exempt from this requirement. More information can be found at the following links: https://www.cms.gov/cciio/resources/data-resources/ehb.html and https://www.federalregister.gov/documents/2010/06/17/2010-14488/interim-final-rules-for-group-health-plans-and-health-insurance-coverage-relating-to-status-as-a.

2 The reduction in premiums would correspond to the reduction in per capita insurer spending, plus the reduction in associated administrative costs. Given medical loss ratio requirements included in the ACA, administrative costs can be no more than 25 percent of covered expenditures for individual market plans. So, under the assumption that administrative costs are equivalent for all essential health benefit categories, a $100 reduction in spending would correspond to a $125 reduction in premiums.

3 See, for example, W. Katon J. Russo, E. Lin et al., “Cost-Effectiveness of a Multicondition Collaborative Care Intervention: A Randomized-Control Trial,” Archives of General Psychiatry, May 2012 69(5):506–14.

4 See, for example, M. C. Sokol, K. A. McGuigan, R. R. Verbrugge et al., “Impact of Medicaid Adherence on Hospitalization Risk and Healthcare Cost,” Medical Care, June 2005 43(6):521–30.

5 These conditions are defined as priority conditions by MEPS because they have a relatively high prevalence and because generally accepted standards of care for these conditions have been developed. See https://meps.ahrq.gov/data_stats/download_data/pufs/h171/h171doc.shtml.

6 Our analysis assumes that insurers drop coverage for excluded essential health benefits. In theory it would be possible for insurers to continue to offer these benefits with a requirement to do so. However, it is unclear whether that approach would be sustainable from a business standpoint. If some plans offered coverage for excluded services while others did not, people in need of the services would disproportionately enroll in the plans that offered these services. This would lead users in need of care to become concentrated in plans that offered coverage for excluded services, raising premiums in these plans.

7 For example, in the maternity care row of Exhibit 2, out-of-pocket spending under current law for those in high-need (column 2) is lower than out-of-pocket spending among all users (column 1). This may partly be the result of statistical imprecision, as there are only 16 high-need maternity care users in the data. It is also possible that consumers with greater needs enroll in more generous plans that have lower cost-sharing requirements, and hence have lower out-of-pocket costs despite higher overall spending.

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Publication Details

Publication Date:
May 18, 2017
Authors:
Christine Eibner, Christopher Whaley
Contact:
Christine Eibner, Senior Economist, RAND Corporation
E-mail: eibner@rand.org
Citation:
C. Eibner and C. Whaley, "Loss of Maternity Care and Mental Health Coverage Would Burden Those in Greatest Need," To the Point, The Commonwealth Fund, May 18, 2017.

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