The substance abuse parity provisions we considered would affect commercial health plans in several ways. They could eliminate benefit limitations specific to substance abuse disorders, and require that beneficiary cost sharing requirements for such services be equal to those for other medical services. These plan changes could also increase premium rates.

We developed premium estimates for three different substance abuse parity provisions defined as follows:

1. Full Parity - This would provide parity with other medical conditions for beneficiary cost sharing provisions (deductibles, copayments and coinsurance), calendar year inpatient day and outpatient visits, and calendar year dollar and lifetime limits.
2. Partial Parity (Parity Except for Beneficiary Cost Sharing Provisions) - This would provide parity with other medical conditions for calendar year inpatient day and outpatient visits as well as calendar year dollar and lifetime limits.
3. Dollar Limits Parity - This would provide parity for calendar year dollar and lifetime limits only.

The following table presents our premium estimates for the full substance abuse parity provision:

Table I	Premium Estimates of "Typical" Benefit Plans -- Per Member Per Month for 1997 Full Parity applied to Substance Abuse Benefits
Benefit Plan	Service Category	"Typical" Baseline Plan	Full Parity Provision	Premium Increase
Fee-for-Service	Substance Abuse Total Plan Percent*	$0.67 $165.34 0.4%	$2.02 $166.69 1.2%	$1.35 0.8%
PPO/POS	Substance Abuse Total Plan Percent*	$0.70 $122.45 0.6%	$1.26 $123.01 1.0%	$0.56 0.5%
HMO/EPO	Substance Abuse Total Plan Percent*	$0.41 $93.86 0.4%	$0.55 $94.00 0.6%	$0.14 0.1%
Composite**	Substance Abuse Total Plan Percent*	$0.63 $126.88 0.5%	$1.29 $127.54 1.0%	$0.66 0.5%
* Ratio of substance abuse costs to total plan costs. ** Based on distribution of 25% fee-for-service plans, 53% PPO/POS plans and 22% HMO/EPO plans

We estimate that the Full Substance Abuse Parity Provision would increase premium rates for "typical" benefit plans from $0.14 per member per month for HMO/EPO plans to $1.35 per member per month for fee-for-service plans. We estimate the composite increase in premium rates at $0.66 per member per month, or less than $8 per year, an increase of 0.5% in the total composite plan premium.

The following table presents our premium estimates for implementing partial substance abuse parity except for cost sharing:

Table II	Premium Estimates of "Typical" Benefit Plans -- Per Member Per Month for 1997 Partial Parity (Parity Except for Beneficiary Cost Sharing Provisions) applied to Substance Abuse Benefits
Benefit Plan	Service Category	"Typical" Baseline Plan	Partial Parity Provision	Premium Increase
Fee-for-Service	Substance Abuse Total Plan Percent*	$0.67 $165.34 0.4%	$0.98 $165.65 0.6%	$0.31 0.2%
PPO/POS	Substance Abuse Total Plan Percent*	$0.70 $122.45 0.6%	$0.98 $122.73 0.8%	$0.28 0.2%
HMO/EPO	Substance Abuse Total Plan Percent*	$0.41 $93.86 0.4%	$0.51 $93.96 0.5%	$0.10 0.1%
Composite**	Substance Abuse Total Plan Percent*	$0.63 $126.88 0.5%	$0.88 $127.13 0.7%	$0.25 0.2%
* Ratio of substance abuse are costs to total plan costs ** Based on distribution of 25% fee-for-service plans, 53% PPO/POS plans and 22% HMO/EPO plans

We estimate that partial substance abuse parity (parity except for beneficiary cost sharing) would increase premium rates for "typical" benefit plans from $0.10 per member per month for HMO/EPO plans to just over $0.30 per member per month for fee-for-service plans. We estimate the composite increase at $0.25 per member per month, or $3 per year, an increase of 0.2% in the total composite plan premium.

The following table presents the results of our premium estimates for Dollar Limits Substance Abuse Parity (includes parity for annual dollar and lifetime dollar limits only):

Table III	Premium Estimates of "Typical" Benefit Plans -- Per Member Per Month for 1997 Dollar Limits (Parity for Annual and Lifetime Dollar Limits) applied to Substance Abuse Benefits
Benefit Plan	Service Category	"Typical" Baseline Plan	Dollar Limits Parity	Premium Increase
Fee-for-Service	Substance Abuse Total Plan Percent*	$0.67 $165.34 0.4%	$0.81 $165.48 0.5%	$0.14 0.1%
PPO/POS	Substance Abuse Total Plan Percent*	$0.70 $122.45 0.6%	$0.84 $122.59 0.7%	$0.14 0.1%
HMO/EPO	Substance Abuse Total Plan Percent*	$0.41 $93.86 0.4%	$0.45 $93.90 0.5%	$0.04 <0.1%
Composite**	Substance Abuse Total Plan Percent*	$0.63 $126.88 0.5%	$0.75 $127.00 0.6%	$0.12 0.1%
* Ratio of substance abuse are costs to total plan costs ** Based on distribution of 25% fee-for-service plans, 53% PPO/POS plans and 22% HMO/EPO plans

We estimate that the dollar limits substance abuse parity provision would increase premium rates for "typical" benefit plans from $0.04 per member per month for HMO/EPO plans to about $0.14 per member per month for fee-for-service plans. We estimate the composite increase in premium rates at $0.12 per member per month, or less than $1.50 per year, an increase of 0.1% in the total composite plan premium.

Appendix II contains summaries of the three benefit plans.

The above composite premium rate estimates are national averages of per capita costs for the commercially insured population. The estimates upon which those composites are based are each subject to a fair amount of uncertainty. Furthermore, they apply to distinct benefit plan designs. These composite rates might not apply to any individual underlying population.

A parity provision could move employers away from fee-for-service plans, and also from PPO/POS plans to HMO/EPO plans. This could result in a lower composite premium rate increases than shown above.

Appendix III contains information on possible cost offset benefits which may result in savings to employers and insurers.