Changes to The Affordable Care Act (ACA) will have a profound impact on more than 20 million people who found health insurance under this law. Yet of the entire affected healthcare industry, certain sectors, like mental health and substance use, are facing a different reality under the Trump Administration.
As clinical psychologist with professional expertise in mental health and chemical dependency treatment, I can say that the repeal of the ACA has many consequences, but the behavioral healthcare industry will not be devastated. The federal parity law was enacted before the ACA/Obamacare. It greatly increased coverage for millions of Americans for mental health and substance use disorders, and this will not change.
For buyout shops considering future investments in this space, these are circumstances to take into consideration:
The ACA of 2010 enumerated 10 essential health benefits, and behavioral healthcare (treatment for mental health and substance use disorders) was one of those essential benefits. The ACA requires behavioral healthcare benefits to be offered on par with benefits for medical conditions. This is referred to as parity, and it was based on the 2008 law, The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act. The federal parity law changed insurance coverage in dramatic ways, and there is no real movement to roll these changes back.
The federal parity law applied to group health plans and group health insurance plans (which means fully insured products and employer self-insured products which cover over 160 million Americans), while the ACA applied the parity requirements to individual insurance products. The point is that while the ACA did not impact the coverage of most employer-insured individuals, the repeal of ACA won’t impact them as well. Federal parity remains in place, and this is a powerful law that fundamentally changed coverage for mental health and SUD treatment.
The change in insurance funding for behavioral healthcare under federal parity was profound, and yet it is likely that few people understand this reality unless they were involved in either: 1) the decade-long legislative policy fight in Washington, D.C., or 2) the coverage transition in corporate America following enactment of the law. I was involved in both, and the boring transition discussions are the ones I best remember. There was passion in the legislative phase to stop discriminating against people with behavioral health conditions and to stop offering them vastly inferior insurance coverage. Yet there was confusion and amazement in corporate America when executive leaders had to confront the grossly unequal benefits for medical and behavioral conditions they had been providing, as well as the potential financial impact of parity.
What is the impact of this on the investment community?
Behavioral healthcare services will continue to be well funded under insurance, even if the ACA is repealed. One of the most dramatic changes in coverage resulting from federal parity was making out of network coverage for behavioral health conditions on par with medical conditions. Prior to federal parity, many plans had out of network coverage for behavioral healthcare that was either meager or non-existent. The parity changes have supported the development of treatment programs that now exclusively accept out of network benefits. This will ultimately be impacted by the reality that parity legislation still permits utilization review decisions about the necessity of out of network treatment, but the main point is that stakeholders are struggling over how dollars will be distributed in a vastly increased funding pool.
There are two crusades here, but only one message for investors:
First, we need to find a way to provide healthcare coverage for all Americans, and yet the reality is that this goal was not fully met under ACA, and with the repeal of ACA we will regress significantly.
Second, we should not discriminate in the level of insurance coverage we provide for people based on their diagnosis (e.g., cardiovascular disease vs. depression), and we appear to have achieved an enduring agreement about this with the federal parity law. Investors should continue to ride the coattails of parity, and they should participate in the dialogue on how we address the needs of the uninsured in our country.