In November 2013, the IRS, DOL, and HHS (the “agencies”) jointly issued final regulations implementing the Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA”), and a related set of FAQs. Generally, MHPAEA prohibits group health plans from imposing financial requirements (such as deductibles, copays, or coinsurance) or treatment limitations on mental health and substance use disorder (“MH/SUD”) benefits that are more restrictive than those that apply to the plan’s medical/surgical (“medical”) benefits. The final regulations clarify a number of issues and incorporate the agencies’ previously-issued FAQ guidance on MHPAEA. The final regulations are effective for plan years beginning on or after July 1, 2014. Until then, plans must continue to comply with the February 2010 interim final regulations and related FAQ guidance.1 The following highlights a number of the main changes from the interim final regulations.
Background on Parity Analysis: Separate rules apply to determine parity for: (1) financial requirements and quantitative treatment limits; and (2) nonquantitative treatment limits (“NQTLs”).
Parity for Financial Requirements and Quantitative Treatment Limits: Plans may not apply any “type” of financial requirement or quantitative treatment limit (such as a copay or visit limit) to MH/SUD benefits in any classification (see below) unless that type of financial requirement or treatment limit applies to at least two-thirds of the medical benefits in that classification. Then, the maximum “level” of that requirement or limit (such as the dollar copay amount, coinsurance percentage, or number of visits allowed) that the plan can apply to MH/SUD benefits in that classification is the level that applies to at least 50% of the medical benefits in that classification.2
Parity for NQTLs: The processes, strategies, evidentiary standards, and other factors used in applying a nonquantitative treatment limitation (“NQTL”) to MH/SUD benefits in any classification must be comparable to and applied no more stringently than those used in applying the NQTL to medical benefits. Examples of NQTLs include medical necessity requirements, prescription drug formularies, and medical management techniques.
Benefit Sub-Classifications: The interim final rules recognized six specific classifications3 for purposes of determining parity, and prohibited plans from further dividing benefits into “sub-classifications.” The final rules allow sub-classifications in two limited instances. First, plans providing network benefits through multiple tiers of network providers4 may divide their network benefits into sub-classifications reflecting those provider tiers, as long as certain requirements are met. Second, a plan’s outpatient benefits may be divided into sub-classifications for “office visits” and “all other outpatient items and services.” Each sub-classification must separately satisfy the parity requirements.
Nonquantitative Treatment Limitations: The final rules modify and clarify the NQTL rules in two main ways:
- Updated illustrative list of NQTLs: The interim final rules included an illustrative list of NQTLs. The final rules add two NQTLs to the list, and clarify that all NQTLs, whether or not listed, must be applied in a manner that complies with the final rules.
- Elimination of exception for “clinically appropriate standards of care”: The interim final rules included an exception permitting differences between the processes, strategies, evidentiary standards, and other factors used in applying an NQTL to MH/SUD versus medical benefits “to the extent that recognized clinically appropriate standards of care may permit a difference.” The final rules eliminate this exception, but clarify that the underlying NQTL rules themselves “are sufficiently flexible to allow plans and issuers to take into account clinical and other appropriate standards when applying [NQTLs].”In other words, plans may take clinically appropriate standards of care into account with respect to the NQTLs, and are not required to use the same NQTLs for both MH/SUD and medical benefits, so long as the processes, strategies, evidentiary standards, and other factors used to determine whether and to what extent a benefit is subject to an NQTL are comparable to and applied no more stringently for MH/SUD benefits than for medical benefits.5
Intermediate Treatment Settings Services: MHPAEA does not require a plan to offer MH/SUD benefits at all (or for any particular condition or disorder), but a plan that provides MH/SUD benefits for a particular condition or disorder in any classification generally must provide MH/SUD benefits for that condition or disorder in all classifications in which medical benefits are provided. Moreover, plans must assign MH/SUD and medical benefits to the classifications in a consistent manner. The preamble to the final rules clarifies that these rules apply to covered intermediate MH/SUD treatment settings and services (such as partial hospitalization, residential treatment facilities, and intensive outpatient treatments), which must be assigned to the benefit classifications in the same way a plan assigns comparable intermediate medical benefits to those classifications. For example, if a plan classifies care in skilled nursing facilities or rehabilitation hospitals as inpatient benefits, the plan must likewise treat any covered care in residential treatment facilities for MH/SUDs as an inpatient benefit.
Interaction of MHPAEA and PPACA/Other Laws: The final rules clarify MHPAEA’s interaction with other federal laws that may impact a plan’s coverage of MH/SUD benefits in certain instances.
- PPPACA Preventive Health Services: The final rules confirm that if a plan covers MH/SUD benefits only to the extent required to comply with PPACA’s preventive services mandate, that alone will not require the plan to provide additional MH/SUD benefits in any classification under MHPAEA.6 However, a plan that voluntarily provides MH/SUD benefits beyond those required by PPACA for any particular condition or disorder must provide benefits for that condition or disorder in all classifications in which medical benefits are provided.
- Annual and lifetime dollar limits: The final rules clarify that MHPAEA’s parity requirements regarding annual and lifetime limits7 apply only to MH/SUD benefits that are not Essential Health Benefits” (“EHBs”) under PPACA.
- Employee Assistance Programs (EAPs) and retiree-only plans: The final rule confirms that the MHPAEA requirements do not apply to excepted benefits, such as EAPs that do not provide “significant benefits in the nature of medical care,”8 and retiree-only plans.
MHPAEA Disclosures: The final rules clarify that in addition to the MHPAEA’s disclosure requirements, other federal laws may require disclosure of information relevant to MH/SUD benefits, such as ERISA § 104 (which requires disclosures of certain governing plan documents upon request) or the DOL’s claims procedure regulations (which requires disclosure of certain documents that are relevant to a benefit claim after a claim denial). For example, after a benefit denial, the DOL’s claims procedure regulations would require a plan to disclose the processes, strategies, evidentiary standards, and other factors used to apply an NQTL with respect to medical or MH/SUD benefits as a document “relevant” to the benefit denial.
Small Employer and Increased Cost Exemptions: The final rules clarify that all insured, non-grandfathered, small group plans must cover EHBs (including MH/SUD benefits) in compliance with PPACA and the MHPAEA regulations, regardless of MHPAEA’s exemption for group health plans of employers with fewer than 50 employees.9 However, self-funded plans sponsored by employers with fewer than 50 employees remain exempt from MHPAEA’s requirements. Additionally, the final rules provide guidance on the “increased cost” exemption from MHPAEA’s requirements. Generally, the increased cost exemption is available to plans that make changes to comply with MHPAEA and incur an increased cost of at least 2% in the first year of MHPAEA applicability (1% in subsequent years). The final rules include detailed procedures for determining the amount of a cost increase attributable to MHPAEA compliance, as well as notice requirements that must be satisfied in order to claim the exemption.
Not Intended As Legal Advice.
- More information about the interim final regulations is available in our February 2010 Bulletin.
- For example, if a plan’s outpatient medical benefits are subject only to a 20% coinsurance requirement, then coinsurance is the only financial requirement that plan can apply to outpatient MH/SUD benefits, at a maximum level of 20%. The plan cannot impose any other financial requirement to outpatient MH/SUD benefits, even if the other financial requirement is less restrictive (i.e., the plan cannot instead apply a $20 copay, because a copay is not applied to at least two-thirds of all outpatient medical benefits).
- The six “classifications” are: inpatient, in-network; inpatient, out-of-network; outpatient, in-network; outpatient, out-of-network; prescription drugs; and emergency.
- For example, an in-network tier of preferred providers with more generous cost-sharing than a separate in-network tier of non-preferred participating providers.
- The agencies offer the following as an example of a scenario that violates the NQTL rules: a plan covers “medically appropriate” treatments. In determining whether prescription drugs are medically appropriate, the plan automatically excludes coverage for antidepressant drugs that are given a black box warning label by the Food and Drug Administration (indicating that the drug carries a significant risk of serious adverse effects). For other drugs without a black box warning (including those prescribed for other MH/SUDs, as well as for medical conditions), the plan will provide coverage if the prescribing physician obtains authorization from the plan that the drug is medically appropriate for the individual, based on clinically appropriate standards of care. This plan violates the NQTL rules, because although the standard for applying a NQTL is the same for both MH/SUD benefits and medical benefits – whether a drug has a black box warning – it is not applied in a comparable manner. The plan’s unconditional exclusion of antidepressant drugs given a black box warning is not comparable to the conditional exclusion for other drugs with a black box warning.
- Although MHPAEA does not mandate coverage for any particular condition or disorder, PPACA’s preventive services mandate requires plans to provide some degree of benefits for certain MH/SUDs, such as nicotine or alcohol addiction. This led to concerns that providing MH/SUD benefits solely to comply with PPACA’s preventive care mandates would require plans to provide comprehensive coverage for those MH/SUDs across all six classifications in order to comply with MHPAEA.
- Under MHPAEA, plans may either: (a) apply any aggregate lifetime or annual dollar limits on a combined basis to both medical/surgical benefits and MH/SUD benefits (i.e., in a manner that does not distinguish between the available benefits); or (b) apply separate limits to MH/SUD benefits, provided they are no more stringent than the limits applied to medical benefits.
- The agencies intend in upcoming guidance to amend the definition of excepted benefits to include EAPs that do not provide significant benefits in the nature of medical care. Until this guidance is issued, plans may make a reasonable, good faith determination of whether an EAP provides “significant benefits in the nature of medical care.”
- HHS’s final EHB regulations require issuers providing EHBs to provide MH/SUD benefits in compliance with the MHPAEA regulations, even if those requirements would not otherwise apply directly.