Final Regulations on the Mental Health Parity and Addiction Equity Act of 2008 and New Affordable Care Act FAQs

by McDermott Will & Emery
Contact

Final regulations have been issued implementing the Mental Health Parity and Addiction Equity Act of 2008 (Act).  The Act generally requires group health plans (or health insurance coverage offered in connection with such a plan) to provide parity between medical and surgical benefits and mental health and/or substance use disorder benefits.  Insurers and employers will be required to evaluate the design of their mental health and substance use disorder benefits to ensure that they comply with the final regulations.

The U.S. Departments of Labor, Treasury and Health and Human Services (Departments) have jointly issued final regulations (Regulations) implementing the Mental Health Parity and Addiction Equity Act of 2008 (Act).  In addition, the U.S. Department of Labor issued Affordable Care Act (ACA) Frequently Asked Questions (FAQs) Part XVII addressing the integration of the Regulations with the ACA.  The Act generally requires group health plans (or health insurance coverage offered in connection with such a plan) to provide parity between medical and surgical benefits and mental health and/or substance use disorder benefits.  The Regulations do not vary greatly from the proposed regulations issued in 2010.

In general, the Regulations continue to require group health plans to ensure that the financial requirements (such as coinsurance, copayments and deductibles) and treatment limitations (such as a limit on covered office visits) applicable to mental health and/or substance use disorder benefits are no more restrictive than the predominant financial requirements and limitations applied to substantially all medical and surgical benefits.  While the Regulations do not require group health plans and issuers to cover mental health and substance use disorder benefits, coverage of such benefits will be required for those plans required to cover essential health benefits under the ACA. 

Application Dates

The Regulations apply to plan and policy years (for grandfathered and non-grandfathered plans) beginning on and after July 1, 2014 (January 1, 2015, for a calendar year plan).  Until the Regulations become applicable, group health plans and issuers must continue to comply with the mental health parity provisions of the interim final regulations, which were published on February 2, 2010.  A summary of the interim final regulations can be viewed here.  

The ACA amended the Public Health Services Act (PHSA) to apply the Act to health insurance issuers offering individual health insurance coverage (both through the Health Insurance Marketplaces, also known as Exchanges, and outside the Marketplaces).  These changes are effective for policy years beginning on or after January 1, 2014.  The Regulations apply to individual health insurance coverage for policy years beginning on or after July 1, 2014, and apply to both grandfathered and non-grandfathered plans.  This article focuses on the Regulations as they relate to group health plans.

Parity Requirements

The Regulations retain the six classifications enumerated in the interim final regulations, specify permissible sub-classifications and provide that the parity analysis should be performed within each classification and sub-classification.  The six classifications of benefits are: (1) inpatient, in-network; (2) inpatient, out-of-network; (3) outpatient, in-network; (4) outpatient, out-of-network; (5) emergency care; and (6) prescription drugs.

The Departments have incorporated previously issued FAQs in these Regulations, thus permitting sub-classifications for office visits, separate from other outpatient services.  However,  sub-classifications not specifically permitted in these Regulations include separate sub-classifications for generalists and specialists.  Once the sub-classifications are established, a plan or issuer may not impose any financial requirement or quantitative treatment limitation on mental health or substance use disorder benefits in any sub-classification that is more restrictive than the predominant financial requirement or quantitative treatment limitation that applies to substantially all medical/surgical benefits in the sub-classification using the methodology set forth in the Regulations.

Tiered Networks

If a plan (or health insurance coverage) provides in-network benefits through multiple tiers of in-network providers (such as an in-network tier of preferred providers with more generous cost sharing for participants than a separate in-network tier of participating providers), the Regulations provide that the plan may divide benefits furnished on an in-network basis into sub-classifications that reflect those network tiers, if the tiering is based on reasonable factors and without regard to whether a provider is a mental health or substance use disorder provider or a medical/surgical provider.  However, once the sub-classifications are established, the plan or issuer may not impose any financial requirement or quantitative treatment limitation on mental health or substance use disorder benefits in any sub-classification that is more restrictive than the predominant financial requirement or quantitative treatment limitation that applies to substantially all medical/surgical benefits in the sub-classification using the methodology set forth the Regulations.  The Departments provided that further guidance may be released with respect to plans that have uneven tiers, but until that happens, the Departments will consider a plan or issuer in compliance with the Act if the plan or issuer treats the least restrictive level of the financial requirement or quantitative treatment limitation that applies to at least two-thirds of medical/surgical benefits across all provider tiers in a classification as the predominant level that it may apply to mental health or substance use disorder benefits in the same classification.

Scope of Services and Preemption

A state law may mandate that an issuer offer coverage for a particular condition or require an issuer to offer a minimum dollar amount of mental health or substance use disorder benefits.  The Departments have deferred to the states to define the package of insurance benefits that must be provided in a state under the category of essential health benefits.  Thus, if a state mandates that certain mental health and substance abuse disorder benefits are mandatory, the Act will apply to those mandated benefits.

Measuring Plan Benefits

The Regulations maintain both the two-thirds “substantially all” numerical standard from the interim final regulations, and the “predominant” standard, i.e., more than one-half of medical/surgical benefits in the classification are subject to the financial requirement or quantitative treatment limitation.  The Departments did however clarify that a plan or issuer is not required to perform the parity analysis each plan year unless there is a change in plan benefit design, cost-sharing structure or utilization that would affect a financial requirement or treatment limitation within a classification (or sub-classification).

The Regulations also adopt the requirement under the interim final regulations that the determination of the portion of medical/surgical benefits in a classification of benefits subject to a financial requirement or quantitative treatment limitation (or subject to any level of a financial requirement or quantitative treatment limitation) is based on the dollar amount of all plan payments for medical/surgical benefits in the classification expected to be paid under the plan for the plan year.

Cumulative Financial Requirements and Cumulative Quantitative Treatment Limitations

The Regulations retain the requirement that a plan or issuer may not apply cumulative financial requirements (such as deductibles and out-of-pocket maximums) or cumulative quantitative treatment limitations (such as annual or lifetime day or visit limits) for mental health or substance use disorder benefits in a classification that accumulate separately from any cumulative requirement or limitation established for medical/surgical benefits in the same classification.  Thus, plans and issuers are still prohibited from applying separate cumulative financial requirements and cumulative quantitative treatment limitations to medical/surgical and mental health and substance use disorder benefits in a classification, and continue to provide that such cumulative requirements or limitations are only permitted to be applied for mental health and substance use disorder benefits in a classification to the extent that such unified cumulative requirements or limitations also apply to substantially all medical/surgical benefits in the classification.

Non-quantitative Treatment Limitations

Under the Regulations, a plan or issuer may not impose any non-quantitative treatment limitation (NQTL) with respect to mental health or substance use disorder benefits in any classification unless, under the terms of the plan as written and in operation, any processes, strategies, evidentiary standards or other factors used are comparable to, and are applied no more stringently than those applicable to medical/surgical benefits in the same classification.  The Regulations eliminated the exception to the NQTL requirements allowing for variation “to the extent that recognized clinically appropriate standards of care may permit a difference.”  

The Departments added two additional examples of NQTLs to the original list, network tier design and restrictions based on geographic location, facility type, provider specialty and other criteria that limit the scope or duration of benefits for services provided under the plan or coverage.  The original list included medical management standards limiting or excluding benefits based on medical necessity or medical appropriateness, or based on whether the treatment is experimental or investigative, formulary design for prescription drugs, standards for provider admission to participate in a network, including reimbursement rates, plan methods for determining usual, customary and reasonable charges, refusal to pay for higher cost therapies until it can be shown that a lower cost therapy is not effective (also known as fail-first policies or step therapy protocols) and exclusions based on failure to complete a course of treatment.  The Regulations did clarify that although an illustrative list is included, all NQTLs imposed on mental health and substance use disorder benefits by plans and issuers subject to the Act are required to be applied in accordance with these requirements.

Plans and issuers will continue to have flexibility to take into account clinically appropriate standards of care when determining whether and to what extent medical management techniques and other NQTLs apply to medical/surgical benefits and mental health and substance use disorder benefits, as long as the processes, strategies, evidentiary standards and other factors used in applying an NQTL to mental health and substance use disorder benefits are comparable to and applied no more stringently than those with respect to medical/surgical benefits.  The Act continues to specifically prohibit separate treatment limitations that are applicable only with respect to mental health or substance use disorder benefits.  The Regulations continue to provide different parity standards with respect to quantitative treatment limitations and NQTLs.

Combined Rule

The Regulations did not change the combined rule under the Act, which provides that

  1. The parity requirements apply to a group health plan offering both medical/surgical benefits and mental health or substance use disorder benefits
  2. The parity requirements apply separately with respect to each combination of medical/surgical coverage and mental health or substance use disorder coverage that any participant (or beneficiary) can simultaneously receive from an employer’s or employee organization’s arrangement or arrangements to provide medical care benefits
  3. All such combinations constitute a single group health plan for purposes of the parity requirements  

Essentially this rule prevents a group health plan from contracting with a mental health carve-out plan to avoid compliance with the parity requirements, with the exception of employee assistance programs.

Elimination of Lifetime or Annual Limits on Essential Health Benefits

The ACA phased out annual and eliminated lifetime limits on essential health benefits for both grandfathered and non-grandfathered plans.  The definition of an essential health benefit includes mental health and substance use disorder services, including behavioral health treatment.  Thus, notwithstanding the provisions of the Act that permit aggregate lifetime and annual dollar limits with respect to mental health or substance use disorder benefits as long as those limits are in accordance with the parity requirements for such limits, such dollar limits are prohibited with respect to mental health or substance use disorder benefits that are covered as essential health benefits.   

Preventive Care under the ACA

The ACA requires non-grandfathered group health plans and health insurance issuers offering non-grandfathered group and individual coverage to provide coverage for certain preventive services without cost sharing.  These preventive services presently include, among other things, alcohol misuse screening and counseling, depression counseling and tobacco use screening as provided for in guidelines issued by the U.S. Preventive Services Task Force.  The  Regulations do not require a group health plan (or health insurance issuer offering coverage in connection with a group health plan) that provides mental health or substance use disorder benefits to provide additional benefits or the full range of benefits for a mental health condition or substance use disorder.

Disclosure Consistent with ERISA Claims Procedures

The Regulations did not change the Employee Retirement Income Security Act (ERISA) disclosure rules applicable to claims and appeals; plans must disclose the reason for any denial of reimbursement or payment for services with regard to mental health and/or substance use disorder benefits consistent with the ERISA rules.  In other words, plans subject to ERISA must make disclosures in a form and manner consistent with the ERISA claims procedures for group health plans (including that these disclosures be provided automatically and free of charge).  The FAQs also explain that the Act provides that the criteria for medical necessity determinations with respect to mental health and/or substance use disorder benefits must be made available to plan participants, beneficiaries or contracting providers upon request, and required disclosures must also comply with the internal appeals and external review requirements added by the ACA for non-grandfathered group health plans and health insurance issuers. 

Act Exemptions 

The Act continues to contain an exemption for small employer group health plans (a small employer is generally defined as one that has 50 or fewer employees under ERISA and the Internal Revenue Code (Code), and one with 100 or fewer employees under the PHSA). However, because the ACA requires all insured, non-grandfathered, small group plans to cover essential health benefits, which include mental health and substance use disorder services, the small employer exemption may in reality not apply.  The Act does not apply to retiree-only plans of any size.

The Regulations maintain the increased cost exemption available to plans that meet the requirements for the exemption; however the increased cost exemption may only be claimed for alternating plan or policy years.  The Regulations establish standards and procedures for claiming the increased cost exemption under the Act.  Additionally, plans for state and local government employees who are self-insured may opt out of the Act’s requirements if certain administrative steps are taken.

Employee Assistance Programs (EAPs)

Under ACA guidance, the Departments recently published an announcement that they intend to amend the excepted benefit regulations to provide that benefits under an EAP are considered to be excepted benefits, but only if the program does not provide significant benefits in the nature of medical care or treatment.  Consistent with that approach, EAPs that qualify as excepted benefits will not be subject to the Act.

Enforcement

States have primary enforcement authority over health insurance issuers regarding the provisions of the Act.  The Departments of Labor and Treasury generally have primary enforcement authority over private sector employment-based group health plans, while Health and Human Services has primary enforcement authority over non-federal governmental plans, such as those sponsored by state and local government employers.

What This Means for Your Health Plan

Insurers and group health plans that offer mental health/substance use benefits should evaluate the design of their group health plans to ensure that they comply with the requirements of the Regulations.  Specifically, plans will need to evaluate financial requirements, treatment limitations, deductibles and non-quantitative treatment limitations measured across all classifications of benefit options to ensure compliance.  Plans subject to ERISA should also evaluate plan claim and appeal notices to ensure that they comply with the ERISA disclosure requirements.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© McDermott Will & Emery | Attorney Advertising

Written by:

McDermott Will & Emery
Contact
more
less

McDermott Will & Emery on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!