Seyfarth Synopsis: The Mental Health Parity and Addiction Equity Act (MHPAEA) requires group health plans and insurers to cover treatments for mental health and substance use disorders in a manner that is equitable to the plans' coverage of medical and surgical treatments. Exactly how that is accomplished and how compliance is proven have been the subject of prescriptive yet ambiguous guidance for several years. The agencies seemingly have been as frustrated as plan sponsors when trying to unearth what plans are, in fact, covering. And, the uncertainty in the area has resulted in numerous lawsuits from legal providers and participants against plans and insurers.
Recently, the Departments of the Treasury ("Treasury Department"), Labor ("DOL"), and Health and Human Services ("HHS") (the "Departments") released their second report to Congress on plans compliance with MHPAEA, as well as new proposed regulations and a technical release seeking input from stakeholders.
The voluminous nature of the Department actions make it unwieldy for us to cover them all in a single alert. So, instead we will break down the guidance for you in a series of three alerts focused on:
This Alert focuses on the new proposed regulations.
On July 25, 2023, the Departments released proposed regulations that would amend existing regulations under MHPAEA and would add additional requirements for group health plans and insurers that apply nonquantitative treatment limitations (NQTLs) to mental health and substance use disorder (MH/SUD) benefits.
NQTL Analysis Content Requirements
There are six key content requirements that must be included in the non-quantitative treatment limitations (NQTL) analysis:
- the specific plan or coverage terms or other relevant terms regarding the NQTLs and a description of all mental health/substance use disorder (MH/SUD) benefits and medical/surgical (M/S) benefits to which each such term applies in each benefit classification;
- the factors used to determine how the NQTLs will apply to MH/SUD benefits and M/S benefits;
- the evidentiary standards used to develop the identified factors, when applicable, provided that each factor shall be defined, and any other source or evidence relied upon to design and apply the NQTLs to MH/SUD benefits and M/S benefits;
- the comparative analyses demonstrating that the processes, strategies, evidentiary standards, and other factors used to apply the NQTLs to MH/SUD benefits, as written, are comparable to, and are applied no more stringently than those used to apply the NQTLs to M/S benefits in the benefits classification;
- the comparative analyses demonstrating that the processes, strategies, evidentiary standards, and other factors used to apply the NQTLs to MH/SUD benefits, in operation, are comparable to, and are applied no more stringently than those used to apply the NQTLs to M/S benefits in the benefits classification;
- the specific findings and conclusions reached by the plan or issuer, including any results of the analyses that indicate that the plan or coverage is or is not in compliance with MHPAEA requirements.
The new Proposed Regulations expand on how to comply with each of the six content requirements. For example, the Proposed Regulations highlight the types of required data, records, certifications, and documentation that must be presented to substantiate the content included in an NQTL analysis. Additionally, the Proposed Regulations specifically refer back to the NQTLs that would be enforcement priorities in the near term, which are listed in the FAQs Part 45.
Data Evaluation Requirement
Under the proposed regulations, a plan must collect and evaluate relevant outcomes data when determining if an NQTL for MH/SUD benefits is operationally more restrictive than the predominate NQTL that is applied to substantially all M/S benefits. Further, a plan must demonstrate that the processes, strategies, evidentiary standards, and other factors used to apply an NQTL to MH/SUD benefits are applied no more stringently than those used to apply the NQTL to M/S benefits. According to the Departments, a determination of how the processes, strategies, evidentiary standards, and other factors are applied in operations, also requires an evaluation of quantitative outcomes data.
Thus, under the proposed regulations, when designing and applying an NQTL, a plan must “collect and evaluate relevant data in a manner reasonably designed to assess the impact of the NQTL on access to [MH/SUD] benefits and [M/S] benefits, and consider the impact as part of the plan’s […] analysis of whether such NQTL, in operation, complies with the proposed [regulations].” The data a plan would be required to collect and evaluate include the number and percentage of relevant claims denials and any other data relevant to the NQTLs as required by State law or private accreditation standards.
NQTLs Related to Network Composition
While noting that NQTLs standards related to network composition are critical to ensuring parity in access to MH/SUD benefits for participants and beneficiaries, the Departments also expressed concerns involving such standards. Specifically, the Departments stated that there is “a growing disparity between in-network reimbursement rates for [MH/SUD] providers and [M/S] providers, which may more negatively impact access under a plan or coverage to [MH/SUD] benefits as compared with [M/S] benefits” and that there is a significant disparity between the availability of network MH/SUD providers as compared to M/S providers, which often leaves participants and beneficiaries with no choice but to use out-of-network MH/SUD providers.
Therefore, the proposed regulations require plans to collect and evaluate additional relevant data for NQTLs related to network composition, which would include “in-network and out-of-network utilization rates (including data related to provider claim submissions), network adequacy metrics (including time and distance data, and data on providers accepting new patients), and provider reimbursement rates (including as compared to billed charges).”
Although the Departments recognized that a plan may “rely on minimum time and distance standards set by a private accreditation organization or by other Federal or State programs as the basis for a factor or evidentiary standard for an NQTL related to network composition,” the proposed regulations would not permit the plan to “solely rely on this information as an evidentiary standard or to inform a factor used to design and apply an NQTL” because such information are usually not designed with the intent to comply with MHPAEA. However, the Departments note that a plan may rely on such information if it performs the required data evaluation for network composition to determine if the relevant data shows material differences in access to in-network MH/SUD benefits as compared to in-network M/S benefits.
Addressing Material Differences Based on Data Evaluation
Consequence of Material Differences
If the evaluated data show material differences in access to MH/SUD benefits as compared to M/S benefits, “the differences would be considered a strong indicator that the plan […] violates proposed [regulations].” However, the Departments note that the material differences by itself would not automatically result in a finding of noncompliance.
In contrast, when designing and applying NQTLs related to network composition standards, “if the relevant data shows material differences in access to in-network [MH/SUD] benefits as compared to in-network [M/S] benefits in a classification,” the plan will automatically fail to meet the requirements of the proposed regulations. According to the Departments, a higher level of scrutiny is required for NQTLs related to network composition standards than for other NQTLs because they are concerned that plans “may defined their NQTLs related to network composition in a way that silos interrelated processes, strategies, and evidentiary standards that should be evaluated together under a plan’s […] standards related to network composition.” All NQTLs related to network composition must, therefore, be designed and applied in compliance with MHPAEA’s parity requirements.
Reasonable Action
When the evaluated data shows material differences, a plan must take reasonable action to address any material differences in access as necessary to ensure that the plan operationally complies with the proposed regulations. Whether an action would be reasonable will depend on the relevant facts and circumstances, “including the NQTL itself, the relevant data, the extent of the material differences in access to MH/SUD benefits as compared to M/S benefits, and the impact of the material differences in access on participants and beneficiaries.”
Documenting Reasonable Action
Under the proposed regulations, a plan must document in its comparative analyses any reasonable action that was, or will be, taken to mitigate those material differences. This documentation requirement allows the plan to explain why material differences shown by the data should not result in a violation of the NQTLs rules. The Departments are seeking comments on how “material difference” could be defined such that the information can be reflected in a quantitative form.
Additionally, if the plan takes reasonable actions and the relevant data continues to show material differences in access, such as, because of provider shortages, which the plan does not have the capability to address, the Departments would not cite such a plan for failure to comply with the proposed regulations as it relates to the plan’s NQTLs related to network composition if the plan otherwise complied with the other applicable MHPAEA requirements. However, plans should be prepared “to document the actions [it has] taken and to demonstrate why any disparities are attributable to provider shortages in the geographic area, rather than their NQTLs related to network composition.”
Exception to Data Evaluation Requirement
Under the proposed regulations, NQTLs that impartially apply generally recognized independent professional medical or clinical standards to MH/SUD benefits and M/S benefits are excepted from the data evaluation requirement under the proposed regulations. The exception is not available if a plan “fails to impartially apply such standards or deviates from those standards in any way, such as by imposing additional or different requirements.”
Third Party Administrator (TPA) Assistance
One of the biggest hurdles for self-funded plans trying to conduct an NQTL analysis is the lack of access to information required to be included in the analysis. Self-funded plans will struggle to meet the content requirements listed above given their heavy reliance on TPAs for network structure and adequacy, pricing, etc. The Departments note in the Proposed Regulations that they understand self-funded plans rely heavily on TPAs, but they have limited authority over TPAs, emphasizing the importance of using contractual terms to include co-fiduciary liability with respect to MHPAEA and compliance with the NQTL analysis requirements. However, in many cases self-funded plans are unsuccessful in attaching this type of liability to TPAs through contract drafting. The Departments request comments on ways that TPAs could be further incentivized to facilitate compliance with MHPAEA on behalf of the plans that they design and administer.
Due to the difficulty self-funded plans have faced in preparing the NQTL analyses, many plans have sought help from third-parties such as consultants or legal counsel to assist in drafting and reviewing the NQTL analysis on behalf of the plan. The Proposed Regulations state that under the sixth content requirement (findings and conclusions), plans must include the title and credentials of all relevant persons who participated in the performance and documentation of the analysis. To the extent a plan relies on an outside consultant or expert, the plan must include an assessment of each expert’s qualifications and whether the plan ultimately relied upon the expert’s evaluation. Additionally, one or more named fiduciaries who review the analysis must certify in writing whether the analysis is in compliance with the NQTL analysis content requirements. These added requirements may shrink the already small pool of outside vendors that are willing to assist with the NQTL analyses.
