How insurance and regulation team up to address workers’ mental health issues

By Gretchen Day

The mainstreaming of dialogue surrounding work-life balance and mental well-being is a sign that mental health is finally getting the attention it deserves. Generation Z is leading the charge and prioritizing its mental health needs as members of that demographic enter the workforce in greater numbers. These trends represent a movement among young employees to reassess their job dynamics and regain control over their mental well-being.

According to the Society for Human Resource Management, 1 in 3 U.S. employees believes their job has had a negative impact on their mental health over the past six months.

As societal awareness of mental health issues grows, employers are getting creative and providing an abundance of resources, including mental health awareness toolkits and employee well-being fairs, to strengthen their support of employee mental health.

Findings on health coverage to address mental health issues

Zurich Insurance Group reports that Gen Z will account for 27% of the workforce in two years. As greater numbers of Gen Zers enter, employers are putting a high priority on mental and behavioral health, providing more affordable and available benefits. Telemedicine, including teletherapy, is one of them. In fact, according to American Hospital Association, 44% of Gen Z and millennial respondents said they would consider changing providers if telehealth options were not available.

Alera Group’s 2023 Healthcare and Employee Benefits Benchmarking Report notes that offering telemedicine continues to be the most efficient option to contain cost and boost employee wellness. Even though many plans offer telemedicine, it is typically restricted to the employees who have enrolled in the employer’s medical plan, the report states.

Alera Group’s 2023 Employee Benefits Market Outlook points out that there’s a notable surge in mental health issue diagnoses, accompanied by a corresponding increase in treatment expenses. Over the span of 2018 to 2021, the cost of treating plan members facing psychosocial conditions rose by 6%, escalating from $9,991 to $10,600.

Unfortunately, due to a lack of in-network care, many employees must leverage out-of-network care for mental health conditions at a rate more than double that observed for physical health conditions. This issue is only escalating; over the past few years, the disparity in out-of-network care usage for mental health and substance use disorder benefits has surged by 85%, according to Milliman Research. That’s where government regulations come into play.

Regulations accelerate improvements in coverage

Regulations have historically played a significant role in shaping insurance coverage across the board, including in the realm of mental health. The federal Mental Health Parity and Addiction Equity Act of 2008 was a milestone in the journey toward equalizing mental health coverage. This law mandates that health plans offering benefits for mental health and substance use disorders must ensure an equal level of coverage for these treatments and services, mirroring the money provided for medical and surgical care. As a result, employers have been prompted to enhance and expand their mental health coverage to comply with these regulations.

In July, the Biden administration announced a proposal that aims to compel health insurers to provide mental health and addiction care with the same comprehensive coverage as treatments for physical health conditions. Under the new regulation, insurers would be mandated to assess their networks comprehensively. This evaluation would encompass not only the sufficiency of mental health and addiction coverage but also the actual accessibility of these services for patients.

The proposed regulation aims to address various negative tactics employed by health insurers, such as providing reduced rates to out-of-network mental health providers or instituting higher prior authorization prerequisites for mental health care compared to most physical health services or procedures. In addition, the proposal effectively eliminates a gap in the system that currently permits health insurance plans provided by state or local governments to bypass mental health parity obligations.

Under the proposal, insurance companies are looking at how they respond to requests from doctors to authorize treatments for mental illness. However, the problem for mental health coverage is rooted in the clinician shortage.

Provider shortage impedes mental health coverage

The U.S. Department of Health and Human Services estimates that more than 163 million Americans reside in regions where the availability of mental health professionals falls short of meeting the demand. Even worse, the field of psychiatry is projected to experience a shortage of up to 31,000 professionals next year.

Insufficient insurance coverage for mental and behavioral health represents only one of the factors contributing to provider shortages. For example, almost half of practicing mental health providers don’t accept insurance, since their reimbursement rates are much lower than those for primary medical care. This makes mental health providers tend to avoid insurer networks altogether and bill patients directly for more profit. Advocates emphasize that achieving equal treatment in coverage limits and financial requirements, such as copays, for both mental and physical health services, is an essential prerequisite for attracting more providers to the health care system.

As Andrea Davis, director of well-being at Alera Group, states in the 2023 Employee Benefits Market Outlook, “The shortages of mental health practitioners around the country are real, but there are increasingly expanded options for services. Communication is key to ensure employees are aware of available mental health resources and also feel comfortable accessing them.”

Optimistic outlook on addressing issues

The evolution of mental health coverage within insurance plans reflects a changing societal landscape. As the importance of mental health gains the recognition it deserves, insurance companies are stepping up to the plate by designing innovative and comprehensive coverage options. Regulatory forces have only accelerated this transformation, challenging insurance providers to adapt quickly.

While legislative updates are underway, there are many ways employers can still act. Developing a mental health framework to ensure employers are meeting the unique cultural and generational needs of their workers can be a great first step. Common areas that employers explore as part of their framework include mental health stigma, manager and employee training, policies and procedures, workplace norms, additional supportive benefit offerings, communications, and employee engagement opportunities.

With ongoing efforts to break down mental health stigma, adapt workplaces to support a multigenerational workforce and foster a culture of well-being, the journey toward accessible and effective mental health coverage is set to continue. This ultimately will benefit both employers and their workers.

Gretchen Day is vice president of health innovation and advanced strategies at Alera Group. Contact her at [email protected].