Does insurance cover addiction treatment?

Quick Answer
Insurance is payment for health care services by a third party payer. Health insurance includes private insurance provided by an employer and Medicare, Medicaid, military health insurance, and individual health insurance. Some health insurance also covers inpatient, outpatient, physician, and counselor care for persons with addictions.
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History

Although experts have known for some time that rehabilitation treatment is important for sustained addiction recovery, not until 2008 did health insurers, on a wider scale, begin to cover addiction treatment. Typically, health insurers contract with health care facilities and providers to obtain a discounted reimbursement rate.

Mental health and addiction treatment facilities and providers have been reluctant to contract with health care insurers because they did not want to accept the reduced reimbursement and because many of their patients did not have health insurance covering mental health and addiction treatment. Less than 70 percent of addiction treatment facilities were contracted with public and private insurers. Health insurers, when they did cover addiction services, only covered detoxification. They provided little or nothing for rehabilitation services for the abuser.

A few US states had mandated that health insurers cover addiction treatment. Other states required that health insurers include options for addiction treatment but did not mandate this form of coverage; still other states did not require coverage at all for addiction services. There were exceptions, however. Self-insured employers opted not to cover addiction services, and employers covered by the Employment Retirement Income Security Act of 1974 (ERISA) were exempt from these state requirements.

ERISA is a federal law that sets minimum standards for pensions and health care insurance in private industry, but it does not require pension plans or health care insurance. Many substance abusers were not employed and had no health insurance. This left addiction treatment facilities and providers without any assurance of payment. As a result, addiction treatment facilities and providers frequently required that persons pay in advance for their treatment.

Mental Health and Addiction Coverage

In 2008, after years of lobbying by mental health advocates, the Mental Health Parity and Addiction Equity Act (MHPAE) was signed into law in the United States. This federal legislation requires that health insurance policies with coverage for mental health and substance abuse treatment include coverage at the same level as that for physical treatment. This means that co-payments, co-insurance, out-of-pocket expenses, office visit and days-of-service limitations, and in-network and out-of-network benefits, must be comparable to those for care for physical ailments.

In addition, this law requires equal mental health and substance abuse treatment coverage for self-funded health plans and for ERISA employers’ health plans; exclusions were no longer permitted. However, MHPAE has a large loophole: Health insurers and employers are not required to offer any mental health and addiction coverage.

Upon enactment of MHPAE, the greatest concern among businesses was that the act would increase the cost of health insurance. Few studies have been performed to determine whether this concern is valid. One study utilizing data from federal employees’ health plans has been performed to evaluate this change. Federal employees were granted mental health parity in 2001. The study used claims data from 1999 through 2002. The mental health costs before parity were compared with those after parity. The study found little increase in the utilization and costs of mental health and addiction treatment. However, out-of-pocket costs for members were lowered significantly.

Another flaw in the mental health parity law is the way that health insurers validate and pay for coverage. Often, they have special criteria for claims’ reimbursement that interfere with payments. For example, a health insurer might require that the mental health or substance abuse patient receive outpatient care before inpatient care. Only if the outpatient treatment fails can the person be admitted for care. Also, visits to a psychiatrist or a counselor are often limited in number by calendar year.

Issues

Even with parity for mental health and addiction treatment, additional reimbursement issues arise. First, a majority of addicted persons have no health insurance. Often they have no job or they have a job that does not provide any health insurance. Second, addicted persons often have relapses. Costs for addiction treatment are controlled through limited admissions for treatment, resulting in limited treatment for relapses.

Third, addiction treatment programs, both outpatient and inpatient, have patient rules. For example, patients cannot take any drugs while they are in the program. They are tested weekly for the presence of drugs in their urine. If they violate this rule, they can be discharged from the addiction treatment program, even if they have health insurance.

Fourth, insurers may require that substance abusers use in-network (contracted) providers. Often, only a few such facilities and providers exist in a given network, and there may be a waiting period for treatment. Programs using cognitive-behavioral therapy are more likely to accept health insurance for payment. If a patient does not respond well to this type of therapy, their health insurance is of little use to them. Fifth, denial is a common symptom of substance abuse. It can be difficult to get the patient to accept their problem and to go for treatment, even if he or she has health insurance.

Bibliography

“Acceptance of Private Health Insurance in Substance Abuse Treatment Facilities.” 6 Jan. 2011. Web. 21 Feb. 2012. http://www.oas.samhsa.gov/2k11/305/305privateins2k11.htm. Examines data on the extent to which treatment facilities are ready to accept private health insurance for substance abuse treatment services.

“Health Insurance and Substance Use Treatment Need.” Substance Abuse and Mental Health Services Administration. 2007. Web. 21 Feb. 2012. http://www.oas.samhsa.gov/2k7/insurance/insurance.htm. Describes health insurance coverage for mental health and addiction services prior to the passing of the mental health parity legislation.

Johnson, Teddi Dineley. “Mental Health Advocates Laud New Federal Parity Law: Equal Coverage for Mental Health Care.” Nation’s Health 38.10 (2008). Print. This article discusses the features of the Federal Mental Health and Substance Abuse parity legislation.

“Understanding the Federal Parity Law.” Substance Abuse and Mental Health Services Administration. Web. 21 Feb. 2012. http://www.samhsa.gov/healthreform/docs/ConsumerTipSheetParity508.pdf. A brief overview of the Mental Health Parity and Addiction Equity Act of 2008.