Kirk C. Allison, Ph.D., M.S. 

Program in Human Rights and Health / 

Division of Health Policy and Management 

University of Minnesota School of Public Health1

420 Delaware Street SE, MMC 164 

Minneapolis, MN 55455 

Email: alli0001@umn.edu 

Tel. 612-626-6559 

Fax 612-626-3908

Request for Information Regarding the Paul Wellstone and Pete Domenici Mental Health 

Parity and Addiction Equity Act of 2008 (MHPAEA). FR Doc. E9-9629. Federal Register 

79(80):19155-19158. April 28, 2009.

State Comparison: Minnesota

In 1996, Minnesota was the first state to implement comprehensive mental health (MH) and 

chemical dependency (CD) parity legislation (Minnesota Statute § 62Q.47) that is substantially 

similar to the current MHPAEA. In passing, the similarity is unsurprising given the MHPAEA 

honorific and early sponsorship by Senator Paul Wellstone (D-Minnesota). 

Minnesota Statute § 62Q.47 required MH and CD benefits to at least match general hospital and 

surgical benefits. It also fell under the generally applicable a small employer exemption. 

Cost-sharing requirements and benefit or service limitations for outpatient [inpatient] 

mental health and outpatient [inpatient] chemical dependency services [...] must not place 

a greater financial burden on the enrollee, or be more restrictive than those requirements 

and limitations for outpatient [inpatient] medical services.2

 

Such similarities provide an early laboratory and experience set in the context of MHPAEA. 

                                                           

1

For identification purposes only. All analysis and comments are my own rather than on behalf of 

the University of Minnesota. 

2 Mental Health and Chemical Dependency Services, Minn. Stat. § 62Q.47 (1996); 1995 Minn. 

Laws c 234 art 2 s 29. [Clause (b) covers outpatient services, clause (c) inpatient services]. 

https://www.revisor.leg.state.mn.us/statutes/?id=62Q.47 
In 2006 I undertook a study3

 examining i.a. health insurance switching comparing mental health 

service users and nonusers as a natural experiment before and after implementation of Minnesota 

Statute § 62Q.47. 

In this context two questions were of interest: 

1. Were MH service users ‘held’ by plans with higher MH benefits within a set of insurance 

plan options also when premium repricing and other plan benefit incentives induced nonMH service users to change plans? 

2. After the parity legislation was there evidence of MH service users ‘releasing’ from prior 

plans in response to parity given premium and other benefit changes? 

An affirmative answer would indicate disproportionate selection or retention for plans offering 

more generous MH benefits with less market responsiveness by MH service users to other price 

or quality signals. 

With the parity law passed in 1995 and effective in 1996, study data derived from the 1994-1996 

Minnesota State Employee Group Insurance Program (SEGIP). SEGIP covered circa 57,000 

employees statewide; with dependents a total of 144,000 covered lives. The sample drew from 

the seven-county Minneapolis-St. Paul metropolitan area, which guaranteed a uniform plan set in 

the sample for each chooser for the annual open enrollment.4

 

The choice set included 5 plans for 1994 and 1995 from 4 firms (including 1 “State Plan” in 

1994-95) and 6 plans in 1996 (including a second “State Plan” in 1996). The new low-premium 

plan provided a novel point of comparison for employee choices in 1996. In this sample 12.5% 

of all policy holders had a MH data marker (445 of 3556). This included 10.3% Individual and 

14.5% Family market enrollees. 

Pre-parity MH/CD benefit characteristics: For years 1994-95 inpatient MH covered days ranged 

from 24 to 58. CD covered days were more generous but ranged more narrowly from 58 to 71. 

After parity in 1996 all plans offered 365 covered days for both MH and CD coverage - 

matching general medical and surgical benefits for all plans. 

                                                           

3 Allison KC. A Discrete Choice Model Analysis of Health Insurance Transition, Branding 

Effect, and Status Quo. Health Services Research, Policy and Administration MS Project. 

University of Minnesota, 2006 (177 pp.)

4

The data comprised 1) historical health plan premium, cost and benefit information from open 

enrollment publications; 2) a random sample for a pre-post telephone survey collected in 1995-

96, and 3) back-linked administrative data covering plan choice from 1994-1996. The random 

sample included 1563 individual enrollees who were present across the three years.
Re Request II.B.1. 

1) Before parity, MH coverage was more restrictive than CD coverage. Coverage also 

varied for with different levels within the choice set for both MH and CD. 

2) That MH service benefits were lower and differences greater than for CD benefits 

indicates plans treated MH as a more risk critical domain: More restrictive MH coverage 

points to a higher per enrollee cost of aggregate MH services compared to CD services. 

(The upper bound of MH coverage equaled the lower bound of CD coverage.) 

3) Lower coverage levels within the choice set are a disincentive for MH enrolment, with 

lower benefit levels relative to CD benefits in every plan to limit MH cost exposure. 

If typical, MHPAEA will have a greater market and cost impact on MH services relative 

to CD services. Covered plans will no longer be able to use benefit differentials to 

disincentivize enrollment by MH service users in specific plans nor to limit MH cost 

exposure differentially relative to CD cost exposure. 

Plan choice analysis: Multivariable discrete choice analysis and switching mapping before and 

after parity were used to investigate baseline and change of choice patterns comparing MH vs. 

non-MH service users.5

 

For 1996, parity removed coverage incentives unique to either MH and CD service usage 

(though not necessarily provider relationship incentives): Plans had to compete for all users 

according to other benefit structures (e.g. differences in co-pays, self-referral, price, etc.). 

The results of the switching analysis were as follows: 

• Parity was followed by a modest increase in switching by MH service users. 

In the individual market MH switchers increased after parity marginally but 

nonsignificantly by 0.61% (p=.86) while non-MH user switchers decreased 

significantly by -3.38% (p=.02). 

In the family market both MH service users and nonusers increased in switching (MH 

+2.31%, p=.44, non-MH +3.36%, p=.02).6

 A more marked contrast in the individual 

market may be due to the fact that the preferences and needs of a single individual do 

not compete and are not offset by others within the family unit. 

                                                           

5

The data set did not include a chemical dependency service use marker, hence the analysis 

concerned MH service users. The benefit structure, however, indicates cost exposure to MH to 

of greater concern than cost exposure to CD service use. 6

In the individual post-parity market there were 2 zero premium plans, in contrast to a single lowcost plan in the family market with the former low cost plan now 3rd, whereas one of the zero 

premium individual plans was the previous low-cost plan.
• In general MH service users switch less than non-MH service users with or without 

MH benefit parity; that is, MH service users are less responsive to market forces, 

although the specific MH benefit incentives disappeared with parity aligning with 

overall plan benefits in situations of competitive choice (which may or may not be the 

context for small firms offering their employees health insurance). This differential 

effect however is attenuated through parity (given marginally increased MH service 

user mobility, in particular in the individual market). 

• Given lower levels of switching by MH service users, in multiple plan contexts new 

plans entering the market in the first year will have a lower case mix of MH service 

users than continuing plans, other factors being equal. Where MH service users have 

higher than average cost profiles, this will result in a less costly pool for the new plan. 

(In the family market with a single low cost plan (the new plan), every prior plan had 

a significant positive MH user coefficient vis. the new plan.) 

 

• Given lower levels of switching by MH service users, plans losing market share will 

increase their relative case mix of MH service users. Plans gaining market share will 

decrease their relative mix. In the case of the SEGIP data, on average the highest 

premium plan had the greatest concentration of MH service users (others switched 

away) even though that plan had the median benefit level. 

• In case of a cost differential between MH and CD benefits and higher pre-parity 

levels of CD coverage, relative cost mix of MH service exposure will predominate 

over CD cost exposure after parity. 

• Relative to total cost differences in MH/CD to medical/surgical aggregate costs and 

exemption rules under MHPAEA, language should clarify the 2% first year and 1% 

subsequent cost increase threshold per enrollee. 

• Parenthetically from a plan manager point of view, the best strategy for lowering 

MH/CD mix below average prevalence (aside from being a new plan) is to offer a 

benefit structure that appeals broadly across the pool in a competitive choice context. 

Re 2.A.(ii). In multi-plan contexts, less competitive plans that fall below 100 enrollees will be 

able to once again disincentivize MH/CD enrollees from remaining in those plans by 

ratcheting down from parity levels, inducing switching to parity plans. Also rather than 

offering 1 plan covering say 150 employees, there may be a perverse incentive to offer 

several plans, none of which reach the 100 member threshold. (To clarify: is the threshold 

vis. each employer or a specific plan offered to multiple employers pooling by one insurer?)