Competition or catastrophe: Insurance for psychiatric care

Abstract

On January 5, 1981, Blue Cross/Blue Shield, Federal Employees Program (FEP) of the Federal Employees Health Benefits Program (FEHBP) reduced its psychiatric benefits by raising the co-payment for outpatient mental health treatment from 20 to 30 percent. This was only a first step in a major reduction which took place on January 1, 1982. On that date an annual limit of 50 outpatient visits and 60 inpatient days was introduced. FEP had been widely recognized as the broadest and best insurance coverage for mental disorders in the United States. This series of reductions may be part of an overall trend to reduce mental health benefit programs under insurance systems. This paper will review these changes in a context of ongoing problems for mental health coverage under insurance and various approaches to paying for psychiatric care through third party payments. These approaches include a market or “competitive” approach, a traditional insurance or “catastrophic” approach, and a public health approach.