To Carve-In or Carve-Out…that is the Question

As health plans and self-insured employers around the country prepare for and implement the new federal Parity law, they are confronted by the choice between beginning/continuing a “carve out” with a managed behavioral health organization (MBHO) or applying the rival approach: a behavioral health “carve-in”.¬† Both options offer advantages as well as issues and challenges. It’s important for plan administrators to measure the pros and cons of each carefully against their organization’s strategic plan.

“Carve Out” 101 – The Basics

A behavioral health carve out involves the health plan selecting a vendor MBHO to literally assume responsibility for the administration and fulfillment of its mental health (MH) and substance use disorder (SUD) benefits. The MBHO – for the neophyte reader – is basically another insurer or plan administrator though it specializes – like a dental plan in the case of dental care – in MH and SUD benefits. MBHOs grew up around the time of HMOs from origins in the employee assistance program (EAP) field where they had mastered the building blocks of:

  • a behavioral health call center capable of handling highly sensitive calls and suicidal callers on a 24x7x365 basis
  • a specialty behavioral health network of contracted and credentialed providers who had agreed to discounts
  • the “assess and refer” approach
  • a case management approach for serious cases
  • specialized pricing, claims processing and financing
  • specialized marketing and member communications materials
  • unique data collection, analysis and reporting capabilities

It wasn’t hard, frankly, for EAPs to make the switch to MH/SUD insurer or plan administrator. Some contracts involve assuming financial risk (in exactly the same way EAPs are financed) and some involve administrative services only (ASO) wherein the health plan maintains the risk.

Benefits of a Carve Out

The advantages are simple:

  • one-stop shop
  • vendors could be URAC and/or NCQA accredited
  • usually a vast network of specialty providers
  • utilization management (UM) teams staffed by mental health professionals
  • case managers also mental health professionals
  • networks include entire continuum of care so cases can be managed through entire episode
  • plans can bundle EAP to feature prevention
  • single point of entry for consumers/subscribers

Carve In 101 – the Basics

A “carve in” involves assumption of the core processes involved in a fulfillment of behavioral healthcare by way of in-sourcing a professional or team of professionals who have the tools and methodologies to manage the special care of consumers and members suffering from MH and/or SUD. There may still be some services “carved out”, for instance, it may be easier to keep a hotline vendor contract in full force or to maintain agreements with specialty provider networks. Essentially, a carve-in involves specialized customer service (intake, assessment and referral), utilization management (benefit mgmt. and approvals), case management, disease management, and in some cases population management. All of which are dispensed within the walls of the health plan who also processes the claims and manages all of the data. Behavioral health professionals may be employed by the carve-in vendor¬† but they are located on site and collaborate daily with general health and medical peers.

Benefits of a Carve in

  • simplicity – fewer hand-offs and transfers reduce errors
  • simplified financing
  • simplified data management, privacy and security
  • simplified claims processing (though complete assumption of risk)
  • ability to integrate teams and coordinate care in important areas like case management and disease management
  • lower overall costs


The decision for health plans boils down to this: vision and mission.

What a plan chooses to do will reflect its culture, values, mission and goals. I have had occasion recently to speak with plan administrators who feel very strongly that the very best steward of their members’ benefits and care is their MBHO carve out vendor. They have nothing but praise to share and member satisfaction ratings are high. Importantly, their MBHO is ready for Parity today.

Some plans have shared a deep desire to pull MH and SUD management under their roof and manage it closely themselves. Some are going as far as adding MH and SUD professionals to their payroll and replicating the carve in approach. They relate a mission to “treat the whole person” and provide a comprehensive, integrated approach to population, disease and case management. All of which is a very progressive if not revolutionary stand for a health plan to take. It is 2009 after all.

It seems to boil down to a choice between the expedient carve out where a trusted vendor does it all or the fully integrated carve in where “real time” collaboration and coordination are the name of the game. What would work for your organization? Let us know what’s on your mind.


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