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.
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.
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.
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.
The Regulations did not change the combined rule under the Act, which provides that
The parity requirements apply to a group health plan offering both medical/surgical benefits and mental health or substance use disorder benefits
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
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.
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.
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.