15. Mandated Insurance

All laws that provide and regulate private and public health insurance should mandate adequate and reasonable coverage for treatment of alcohol and other drug problems, in freestanding and hospital-based, in-patient and out-patient, public and private programs, especially for youth.

There is no dispute that funding of treatment for alcohol and drug abuse and dependency should be provided by both the public and the private sector, including private health insurance carriers.348 However, despite great changes in public attitudes toward alcohol and drug abuse and dependency problems, many private health insurers have routinely excluded such coverage.349 One approach that has been taken in many states is to require private insurance carriers to include at least some minimum coverage for alcohol and/or drug abuse treatment in all health insurance policies.35u This procedure, often referred to as "mandated" coverage, has also been traditionally used to require other kinds of insurance coverage, such as mental health benefits, which were not being readily provided by insurers.35I Similarly, in the area of alcohol and/or drug abuse treatment, such mandated coverages are necessary to remove current exclusions and to increase access to treatment services, especially for youth.352

This recommendation urges the states to mandate coverage for alcohol and other drug dependency treatment.353

On June 3, 1985, a unanimous eight member Supreme Court affirmed the lower courts' decisions that federal law does preempt states from mandating particular insurance benefit, in that case, minimum coverage of mental health treatment by private insurers. The insurers had opposed the state's statutory requirement on the grounds that federal law, specifically the Employee Retirement Income Security Act (ERISA) and the labor laws, preempt the state from attempting to regulate employee health benefit plans in this manner.354 In Metropolitan, the Court held as follows:

We hold that Massachusetts' mandated-benefit law is a 'law which regulates insurance' and so is not preempted by ERISA as it applies to insurance contracts purchased for plans subject to ERISA. We further hold that the mandated-benefit law as applied to a plan negotiated pursuant to a collective-bargaining azreement subject to the NLR A is not preempted by federal labor law.333

There are several aspects of the decision worthy of special note. First, while Metropolitan involved mental health coverage, the Court was clearly aware of the broad impact that its decision will have on other specified mandated health insurance benefits laws in various states. In his opinion for the Court, Justice Harry Blackmun specifically noted at the outset that:

According to the Health Insurance Association of America, 26 States have promulgated 69 mandated-benefit laws.... Different States mandate a great variety of different kinds of insurance coverage. For example require alcoholism coverage, see Conn. Stat. Sec. 38-262b (Supp. 1985)....(emphasis added)5)b

In his exposition of the issue in the Metropolitan case, Justice Blackmun's description of the issue was broad enough to include all similar types of state-required coverage:

Mandated-benefits laws, that require an insurer to provide a certain kind of benefit to cover a specified illness or procedure whenever someone purchases a certain kind of insurance, are a subclass of such content regulation.... Many state statutes require that insurance offer on an option basis particular kinds of coverage to purchasers.357

Thus, it is clear that the Metropolitan holding is not limited to its facts, but rather applies generally to state mandated-benefits statutes including those requiring coverage of treatment for alcohol and other drug problems.

While the Court's decision in Metropolitan fully supports the Recommendation, the tasks of the states in developing and passing such laws is just beginning. The Court in Metropolitan specifically noted the background of state public policy developed in Massachusetts to support the mandated benefit for mental health coverage:

Massachusetts mandated-benefit law is an insurance regulation designed to implement the Commonwealth's policy on mental health care and as such is a valid and unexceptional exercise of the Commonwealth's police power. It was designed in part to ensure that the less wealthy residents of the Commonwealth would be provided adequate mental-health treatment should they require it.358

The Court noted the particularly clear background of the Massachusetts statute:

Section 47(8) was designed to address problems encountered in treating mental illness in Massachusetts. The Commonwealth determined that its working people needed to be protected against the high cost of treatment for such illness. It also believed that, without insurance, mentally ill workers were often institutionalized in large state mental hospitals, and that mandated insurance would lead to a higher incidence of more effective treatment in private community mental health centers.359

Thus, the Metropolitan case calls for at least some minimal exposition of state policy justifying the particular mandated benefit. The state legislatures must articulate their policy reasons for requiring alcoholism or drug treatment coverage. This Recommendation and Report, can be one resource for such policy statements under Metropolitan.

Putting aside the Metropolitan case for the moment, the case for requiring insurance coverage of alcohol and drug abuse and dependency treatment has been well documented on policy grounds.360 For example, there are 36 states with statutes mandating some form of insurance coverage for treatment of alcoholism and 1.5 states requiring coverage of drug abuse and dependency treatment.36I From these states' experiences and others, there is a substantial body of data to convince legislators in the remaining states of the soundness of such required coverage.362 As was demonstrated in the Metropolitan case, there is more than ample evidence that mandated coverage of these benefits is financially feasible.363 For example, on this issue in the Metropolitan case, there were repeated allegations by the insurers that such benefits were financially disastrous for the insurers. In fact, as noted in the oral argument before the Supreme Court, there was no hard evidence brought forth at any time in that case, from trial through appellate review, to document the insurer's claims of ruin. 364

The record thus far also documents that coverage of alcohol and drug dependency treatment is affordable for consumers,365 increases availability of treatment,366 and actually results in cost savings as compared to the enormous societal losses from continued alcoholism and drug abuse.367. For example, recently a major study funded by the National Institute on Alcohol Abuse and Alcoholism (NIAAA) was released which examined in depth the costs and utilization of an employees insurance plan with coverage of alcoholism treatment. That major study, referred to as the "Aetna Study," demonstrates that:

Overall health care costs and utilization for alcoholics show a gradual rise during the three years preceding treatment, with the most dramatic increase occuring in the six months prior to treatment. Following the initiation of treatment, the health care costs of alcoholics drop significantly.368

The advantage of the Aetna Study is that it covered a relatively large study group (a treatment group of 1,64.5 families, and 1,697 persons in alcoholism treatment), over a long pre- and post- treatment period, with a comprehensive set of utilization and cost measures, as compared to a demographically comparable non-alcoholic comparison group of 3,598 families. The total cost for alcoholism treatment was just over $9 million, and there were no allegations of financial pressure on the company as a result of this coverage. 369

In order to assure sufficient alternatives for treatment, any statute mandating such coverage should not be limited to hospital care but should also permit treatment to occur in a wide range of less expensive settings. Specifically, mandated coverage should provide insurance benefits for alcohol and drug abuse and dependency treatment in public and private, free-standing and hospital-based, inpatient and outpatient programs when duly licensed by the appropriate governmental bodies, properly accredited and staffed.370

Another related major issue is the coverage of substance abuse treatment by public health insurance such as Medicare and Medicaid. With the huge federal and state outlays for health care under these programs,37I the same cost savings arguments apply as in the private insurance sector. Recent studies involving Medicaid patients demonstrate the similarity in lower health costs between public and private health insurance coverage of alcoholism treatment.372 Mandated private insurance coverage should therefore be matched by increased public insurance of substance abuse treatment.

Given the huge social costs of untreated alcoholism and drug abuse (estimated at $176.4 billion in 1983), which are increasingly being documented,373 the mandating of insurance benefits for treatment by some level of government is a public policy imperative.374

348See eg testimony of Carolann Kane, Nancy Brach, Mia Andersen, ,    • •,
Princeton. See also Fein, supra note 186 at 44.

3495ee NIAAA Health Insurance Resource Kit, Private Sector - Alcohol Coverage (1981) at I. "(L)ess than 40% of full time private sector workers have any health insurance that would cover any form of treatment for alcoholism or drug abuse."

350Id.

35I5ee infra on the failure of the insurance "market" to provide for such coverage.

352See Fein, supra note 186, at 52. See also Private Health Insurance Coverage for Alcoholism and Drug Dependency Treatment Services. (National Association of State Alcohol and Drug Abuse Directors, 1983); Cooper, Private Health Insurance Benefits for Alcoholism, Drug Abuse and Mental Illness at 2-3,5 (Intergov. Health Policy Project 1979); Donabedian, Benefits in Medical Care Programs; Rosenberg, Survey of Health Insurance for Alcoholism: In-Patient Coverage.

3535ee infra note 354, Briefs Amicus Curiae of the American Psychiatric Association, et al.

354Metropolitan Life Insurance Company v. Commonwealth of Massachusetts, Travelers Insurance Company v. Commonwealth of Mass., Nos. 84-325 and 84-356 (53 U.S.L.W. 4616, 4625) U.S. S. Ct. June 3, 1985. In the Metropolitan case, the close similarities between mandated mental health coverage and mandated alcoholism coverage were specifically addressed in a brief amicus curiae filed by the National Association of Alcoholism Treatment Programs, Inc. (NAATP). The NAATP amicus brief also specifically addressed the need for such insurance to provide treatment for youth. NAATP Brief Amicus Curiae in Metropolitan, at 5.

355(A)jd. at 4625. 356(B)Id. at 4617, n. 10.

357Id.

358Id. at 4625.

3591d. at 4618. See Massachusetts General Court Joint Committee on Insurance, Advances in Health Insurance in Massachusetts (1974).

360See supra note 352.

36ISee Fein, supra note 241 plus verbal update in 1985, as well as appendix IIA to Brief Amicus Curiae of Health Insurance Association of America in Metropolitan. However, as the Brief Amicus Curiae of NAATP noted at 18, even these state mandates often provide only for minimal coverage. See also NIAAA Health Insurance Resource Kit, State Activity, 1983.

3625ee Cooper, supra note 352.

3635ee, etg.t, Brief Amicus Curiae Insurance Coverage in of the Coalition for Comprehensive Metropolitan.

364Argument of Commonwealth of Massachusetts in Metropolitan, February 26, 1985.

365See Fein supra note 241.

3661d.

367See1 eg•1 Testimony of Nancy Brach. See also Cost and Utilization of Alcoholism Treatment Under Health Insurance, A Review of Three Studies, 9 Alcohol Health and Research World 45 (Winter 1984-85).

368Abstract: Alcoholism Treatment and Impact on Total Health Care
Utilization and Cost: A Four Year Longitudinal Analysis of Federal Employee Health Benefit Program with Aetna Life Insurance Company (1985).

369Id. It is projected that within 2 to 3 years the cost of treatment is fully offset by decreases in other health care costs.

3705ee, stg., the current New Jersey Medicaid Model Program which includes coverage of non-hospital, free-standing alcohol treatment facilities pursuant to a HCFA Alcoholism Services Demonstration grant which includes six states. See also Becker, Mangerial Report: The Illinois Medicare/Medicaid Alcoholism Service Demonstration, Sept. 21, 1984. See generally Brief Amicus Curiae of NAATP in Metropolitan, at 20-22.

371During FY 1985, the Medicare program is expected to finance service for 28 million aged and 3 million disabled Americans at a projected cost of $69.7 billion, Budget of the United States Government, FY 1985.