How the ACA, Cyber and Benefits Impact Substance Abuse Treatment Facilities

The Affordable Care Act (ACA) led to an expansion in healthcare coverage for drug and alcohol addiction treatment in 2014 but that hasn’t led to much growth in the insurance market for this sector — yet. That’s according to a few specialists insuring this segment of social services.

Tim DePriest, managing director of Chapman, a division of Arthur J. Gallagher, says that while an expansion in coverage seems like good news for individuals battling drug and alcohol addiction, the cost to get treatment remains too much to bear for many seeking help.

Premiums, copays and deductibles remain so high that it’s extremely difficult for individuals to pay for services even with healthcare coverage, he says. “And for those people that can’t afford their employer-sponsored health plan, they end up choosing a plan within the health insurance exchanges which typically carries very high coinsurance – some as high as a 40 percent copayment,” DePriest says.

That’s one reason why DePriest says the ACA so far is not driving a lot of new revenue or patients into treatment facilities, at least in the western United States.

What is driving growth in this sector is the increasing trend of integrated care, says Jeff Collins, vice president of commercial lines underwriting in the human services divisions of Philadelphia Insurance Cos.

“A large percentage of individuals with a substance abuse disorder are diagnosed to also have a mental illness disorder,” Collins says. Aside from substance abuse and mental health issues, this population of individuals also tends to suffer from more physical health problems than the general public, he says.

The Mental Health Parity and Addiction Equity Act (MHPAEA), which took effect in 2010, has pushed more blending of services such as substance abuse treatment, mental health treatment and primary healthcare to meet those needs.

As a result, there are funding dollars available to organizations that implement and provide primary care services with behavioral health and substance abuse services, Collins says. “Also, MHPAEA ensures that health plan features such as co-pays, deductible and visit limits are not more restrictive for mental health/substance abuse disorder benefits than they are for medical/surgical benefits.”

Brad Storey, assistant vice president of risk management for program administrator Irwin Siegel Agency Inc. based in Rockhill, N.Y., says this “blending” of services is happening all across the human services industry.

“In a lot of the social services segments we are seeing a much broader risk profile. … The Mental Health Parity and Addiction Equity Act has a lot to do with the blending of behavioral health, addiction treatment and primary care. It’s just a far better way to treat individuals.”

Tiffany Van Etten, Irwin Siegel’s behavioral health underwriting specialist, says insurers in this space have been quick to respond as well.

“On the insurance side we have no problem or issues adding that exposure; it’s typically very basic primary care,” she says.

She is seeing organizations in the mental health world starting to partner with primary care providers as well. They are not providing the services but referring to someone close to their proximity, she said.

Growth

Van Etten says that Irwin Siegel continues to see “very healthy growth across the country” in its drug and alcohol portfolio.

Some of that growth comes in the form of rate increases.

“The market is not soft for substance abuse facilities due to the difficult exposures,” Collins says, but adds that his insurer has seen healthy new business growth as well. “We finished last year at 23 percent above our new business goal. We see the largest growth in the Sunbelt, Western, Rocky Mountain, Northeast, Metro and Florida territories.”

One area ripe for growth in many industries is cyber liability. It is quickly becoming a must-have coverage, especially for drug and alcohol facilities, says Dawn Martin, assistant vice president of underwriting for Irwin Siegel.

“Cyber is in the news every day and these organizations are starting to realize that they can no longer go without coverage,” Martin says. “In less than a year we have increased the size of our cyber bookings by 30-some percent.”

The cost of cyber coverage is far less than what a cyber breach will cost these facilities, she says.

The average cost of a corporate data breach increased 15 percent in the last year to $3.5 million, according to a study by the Ponemon Institute. That same study also found that the cost incurred for each lost or stolen record containing sensitive and confidential information increased more than 9 percent to a consolidated average of $145.

The only states lacking notification laws are Alabama, New Mexico and North Dakota but that will soon change.

“Alabama and New Mexico introduced bills this year to enact notification requirements,” Martin says.

But having cyber coverage isn’t enough, Martin adds. “This year 29 states have introduced legislation to amend their notification laws that will require better cybersecurity protection,” she says. “Not only do you have to have insurance, follow HIPAA laws, but now states are going to require that you better protect yourself with cybersecurity measures.”

Martin says that data encryption is the very least drug and alcohol facilities should be doing when it comes to cybersecurity.

Benefits

One area where DePriest sees his clients in this segment having concerns is in the area of employee benefits.

“Most of these organizations have fewer than 100 employees, and those with less than 100 employees will be considered ‘small groups’ under the ACA next year,” DePriest says. Small group plans must provide “essentially the same” benefit plans as those in the health insurance exchanges. That’s a concern because of the type of employee often working in substance abuse treatment facilities, he notes.

“A lot of these facilities will hire former patients and those former patients, from a health standpoint, come with some issues related to their abuse of drugs. They come with higher rates of cancer, possible liver damage, possible organ transplants and they can be high utilizers of services.”

DePriest says that when these organizations get pushed into the small group market it’s going to be difficult for those employees to afford small group plans. “And as healthcare costs continue to increase, it’s getting more difficult for the employer to offer broad, affordable benefits.