Milliman & Robertson, Inc. (M&R) was retained by the Coalition for Nondiscriminatory Coverage of Addiction Treatment to estimate the effect on commercial health insurance premium rates of substance abuse parity provisions. These parity provisions would prohibit health insurers, HMOs and employee health benefit plans from imposing treatment limits and/or cost sharing on coverage for substance abuse treatment that are not imposed on services for other conditions. Nothing in these provisions prevents health plan insurers or employee health benefit plans from requiring concurrent review, prior authorization of services or other utilization management mechanisms.²

Milliman & Robertson, Inc., is an international firm of consultants and actuaries with offices in major cities throughout the United States. With over 1,100 employees, M&R uses actuarial risk management expertise to provide strategic and tactical advice to a full range of financial and health care organizations, providers, governments, and employers. The firm has helped many HMOs, insurance companies, and providers measure their financial status, appraise business opportunities, develop new products, and determine premium rates.

• Our estimates indicate that a full and complete substance abuse parity provision would increase "composite" per capita health insurance premiums (aggregate premium increases across fee-for-service, PPO/POS and HMO/EPO plans) by 0.5% or less than $1 per member per month.
• According to our estimates, more limited parity provisions would increase composite health insurance premiums by 0.1% ($0.12 per member per month) if calendar year dollar and lifetime limits require parity, and by 0.2% ($0.25 per member per month) if calendar year inpatient day and outpatient visit limits also require parity.
• In more aggressively managed delivery systems, premium cost increases attributable to non-discriminatory coverage for treatment of substance abuse will be lower than in less managed systems.
• We did not incorporate any possible medical or other cost offset savings resulting from increased substance abuse coverage in our estimates. However, evidence exists that supports the potential for such savings, which would reduce the cost estimates we present here. Appendix III of this report summarizes this evidence.

• Our approach used actuarial data that reflect the experience of individuals covered through commercially available benefit plans. In our analysis, we incorporated the cost-reducing effects of utilization management mechanisms, including medical necessity criteria and placement criteria for the least intensive available treatment setting appropriate to the needs of the patient, while maintaining patient safety.

Our estimates were based on conservative assumptions, in that we believe they tend to overstate potential cost increases.