The U.S. health care system faces unprecedented financial challenges, with costs continuing to climb year after year. Among the many drivers of these rising expenses, behavioral health issues stand out as a critical and growing factor. Behavioral health cost containment is becoming an essential focus for health insurers seeking to manage overall spending while improving patient outcomes.
A recent review by Moody’s Investor Service highlights the urgency of addressing behavioral health more effectively. The report reveals that health insurers who develop better strategies to manage behavioral health conditions among their enrollees can reduce total health care costs and gain a competitive advantage in the marketplace.
Behavioral Health Conditions Are Increasing Rapidly
Behavioral health encompasses a broad range of mental health disorders and substance use conditions. Over the past several years, the prevalence of these diagnoses has risen steadily. This trend accelerated during the COVID-19 pandemic, which profoundly impacted mental health nationwide. According to the Moody’s report, symptoms of anxiety and depression skyrocketed, with 41% of Americans reporting such symptoms in January 2021—up from just 11% in June 2019.
Additionally, conditions such as ADHD, anxiety disorders, delirium, dementia, and other cognitive disorders are among the fastest-growing areas of health care spending, as identified by the U.S. Bureau of Economic Analysis.
This surge in diagnoses not only increases direct costs for behavioral health care but also leads to higher spending on unrelated physical health conditions. This complex relationship makes behavioral health cost containment both a challenging and vital goal for insurers.
Behavioral Health Has a Ripple Effect on Overall Health Care Spending
One of the most striking insights from the Moody’s report is the disproportionate impact behavioral health issues have on total health care costs. Individuals with behavioral health conditions incur average annual health care costs of $12,272, which is 3.5 times higher than costs for those without these conditions. However, only 7.9% of their spending goes directly to treating behavioral health issues.
This means that behavioral health problems often contribute to other medical complications—such as chronic diseases, emergency room visits, and hospitalizations—that drive up overall spending. Effective behavioral health cost containment, therefore, requires addressing the whole patient, not just the diagnosed condition.
High-Cost Individuals Often Have Behavioral Health Needs
Health care spending in the U.S. is heavily concentrated: approximately 10% of the population accounts for about 70% of total health care costs. Importantly, about half of these “high-cost” individuals have a mental health or substance use disorder.
With total health care expenditures reaching roughly $4.1 trillion in 2020—nearly 20% of the nation’s GDP—and rising at a rate of 9.7% year-over-year (more than double the previous year’s growth), controlling costs among this high-need group is crucial.
Behavioral health cost containment efforts focused on these individuals can have outsized benefits for both insurers and patients.
Insurers Are Under Pressure to Improve Behavioral Health Integration
The steady rise in behavioral health diagnoses and the associated increase in medical costs underscore the need for health insurers to enhance their behavioral health services. Moody’s warns that failing to act may result in external political or regulatory interventions.
Insurers that successfully integrate behavioral health into their broader offerings can better manage medical costs and improve outcomes. This integration not only helps patients receive more coordinated care but also supports long-term financial sustainability for insurers.
Strategic Acquisitions Highlight Industry Efforts to Manage Behavioral Health
Several major health insurers have taken active steps to bolster their behavioral health capabilities through acquisitions of specialized firms:
- Anthem’s acquisition of Beacon Health Options
- Centene’s acquisition of Magellan Health
- UnitedHealth Group’s acquisition of AbleTo
These acquisitions provide insurers with expert resources to more effectively identify behavioral health issues, offer targeted interventions, and improve patient outcomes. Beyond generating third-party revenue, these strategic moves are designed to support behavioral health cost containment by reducing the medical costs that often arise when behavioral health conditions are left untreated or poorly managed.
Value-Based Care Models Encourage Holistic Treatment
Beyond acquisitions, many insurers are embracing value-based care models that link provider reimbursement to patient outcomes instead of service volume. This approach incentivizes providers to treat the whole person, integrating mental and physical health care to improve overall wellness.
Value-based care encourages a shift from reactive treatment to proactive management, aligning financial incentives with health outcomes. This shift is particularly important for behavioral health cost containment because it addresses the interconnected nature of behavioral and physical health conditions.
Telehealth Has Expanded Behavioral Health Access and Efficiency
The rise of telehealth has revolutionized how behavioral health services are delivered. Behavioral health is especially well-suited for remote care, and the COVID-19 pandemic accelerated telehealth adoption dramatically.
In 2020, more than one-third of behavioral health visits occurred via telehealth, compared to only 8% of primary care visits and 3% of visits to other specialties. Telehealth can reduce barriers such as transportation and stigma, reaching underserved populations and improving timely access to care.
By leveraging telehealth, insurers can improve behavioral health outcomes at scale while supporting behavioral health cost containment goals.
Medicaid Managed Care and Behavioral Health Spending
Health insurers involved in Medicaid managed care face significant behavioral health challenges. Medicaid enrollees account for the largest share of emergency room spending on several behavioral health conditions, including:
- Alcohol-related visits (34.7%)
- Depression (33.4%)
- Suicide and intentional self-harm (38%)
- Schizophrenia and other psychotic disorders (36.3%)
Overall, Medicaid beneficiaries represent 33.3% of emergency room spending on behavioral health issues. For insurers such as UnitedHealth, Anthem, and Centene, who have large Medicaid populations, effective behavioral health cost containment is critical to managing risk and improving care quality.
Conclusion: Integrated Behavioral Health Is Key to Sustainable Health Care
The evidence is clear: behavioral health conditions drive a significant portion of health care spending, much of which is avoidable with better care integration and management. Health insurers that prioritize behavioral health cost containment through strategic acquisitions, value-based care models, telehealth, and focused Medicaid strategies are better positioned to control costs and improve member outcomes.
The complexity of behavioral health cost containment demands innovation and commitment from insurers. Those who lead the way will not only shape a more affordable and effective health care system but also gain a sustainable competitive advantage in a rapidly evolving market.
