Mental Illness and College Educational Outcomes: Evidence from State Parity Laws

Mental illness is prevalent in the U.S.: 18.3% of American adults experience some form of mental illness. Mental illness treatments are effective; however, majority of individuals with mental illness do not receive any treatment. In 2016, less than half of adults with mental illness received any treatment. Inability to pay for treatment and lack of insurance coverage for mental illness treatment are key barriers to receiving treatment. Mental illness treatment is costly for an uninsured patient: mental healthcare provider reimbursement rates can range from $67 to $144 per visit.

Historically, insurance coverage for mental healthcare has been less generous than general healthcare coverage. In an attempt to address discriminatory treatment of mental healthcare coverage, numerous U.S. states have implemented laws that compel private insurers to cover mental healthcare services at ‘parity’ with general healthcare services. Previous research has established that state mental illness parity laws improve access to mental healthcare and, in turn, reduce mental illness. Moreover, most mental illnesses develop during adolescence and early adulthood. I extend this literature in two important ways. First, I study the effect of the state mental illness parity law implementation on mental illness among college-age individuals. Second, I examine the effect of state mental illness parity laws on human capital accumulation. Considering spill-overs to these educational outcomes is important as previous research shows that mental illness impedes college performance. Hence, reduced mental illness through state parity laws could have positive spill-over effects to educational outcomes that have not yet been documented.

I use differences-in-differences models to uncover the causal effects of state mental illness parity laws on mental illness and educational outcomes. I leverage plausibly exogenous variation in insurance coverage for mental healthcare using changes in state laws over the period 1998 to 2008. First, to study parity law effects on mental illness I utilize administrative data on completed suicides from National Vital Statistics System and survey data on reported mental illness from Behavioral Risk Factor System. Second, I use longitudinal data from the National Longitudinal Survey of Youth 1997 Cohort to study the effects of the mental health parity law on two important educational outcomes: drop out decisions and grade point average (GPA).

Three main findings emerge from my analysis. First, I document that the passage of a mental health parity law leads to reductions in state-level suicide rate for the college-aged population, and reductions in the number of poor mental health days for the student population. Second, I find no evidence that the passage of a mental health parity law influences the propensity to drop out of college. Third, I show that state-level mental health parity laws have a significant positive effect on college GPA.

The findings from this study can provide insights into the impact of the Affordable Care Act, which expands access to valuable mental healthcare services to millions of Americans. More broadly, these findings document important spill-over effects from public health policy to educational outcomes, and suggest that considering policies in isolation may underestimate their value to society.