On November 8, 2013, the Departments of Labor, Health and Human Services, and the Treasury issued a final regulation implementing the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). For calendar year plans, the effective date of the regulation is January 1, 2015. For non-calendar year plans, the effective date is the first day of the plan year beginning on or after July 1, 2014. Until the final regulation becomes effective, group health plans must continue to comply with the interim final regulation, which became effective for plan years beginning on or after July 1, 2010.

Background

MHPAEA applies to insured and self-insured group health plans sponsored by private and public sector employers. It applies to both fully insured and self-funded group plans, as well as individual plans sold on and off the health insurance exchanges. Plans for state and local government employees that are self-insured may opt-out of MHPAEA if certain administrative steps are taken. Retiree-only plans are not subject to MHPAEA. Finally, MHPAEA contains an increased cost exemption for group health plans that meet certain requirements.

Self-funded group health plans and fully insured group health plans maintained by large employers are not required to offer mental health and substance use disorder benefits under federal law, but plans that do must comply with MHPAEA. Thus, for example, if a self-insured group health plan does not provide any mental health and substance use disorder benefits, the plan is not required to comply with MHPAEA.1MHPAEA does not preempt state health insurance coverage mandates that are more stringent than federal parity requirements.

Group health plans that provide mental health and substance use disorder benefits must ensure that the financial requirements (e.g., co-pays, deductibles, coinsurance requirements, and out-of-pocket limits) and treatment limitations (e.g., number of treatments, visits, or days of coverage limits) that apply to those benefits are no less generous than the predominant financial requirements or treatment limitations that apply to substantially all medical/surgical benefits. To determine if a financial requirement or treatment limitation is permissible, the parity analysis must be applied for that type of financial requirement or treatment limitation within a coverage unit for each of six classifications of benefits separately. The six classifications of benefits are inpatient in-network, inpatient out-of-network, outpatient in-network, outpatient out-of-network, emergency care, and prescription drugs.

If a group health plan that provides medical and surgical benefits is on an out-of-network basis, it must also provide mental health and substance use disorder benefits on an out-of-network basis.

If a plan imposes non-quantitative treatment limits on mental health or substance use disorder benefits, these processes must not be more stringent or restrictive than the processes that apply to medical benefits. Non-quantitative treatment limits include: medical management standards limiting or excluding benefits based on medical necessity or medical appropriateness; whether a 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 for out-of-network providers; refusal to pay for higher-cost therapies until it can be shown that 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.

In addition to the benefit mandates, MHPAEA contains specific disclosure rules. First, the criteria for medical necessity determinations with respect to mental health and substance use disorder benefits must be made available to any current or potential participant, beneficiary, or contracting provider upon request. In addition, the reason for any denial of reimbursement or payment for services with respect to mental health benefits must be made available, upon request or as otherwise required, to the participant or beneficiary.

Detailed information regarding MHPAEA can be found here.

New Guidance

The final regulation offers a number of clarifications about the parity law. Here are some of the more important clarifications:

New Sub-Classification for Office Visits. As noted above, parity analysis must be conducted on a classification-by-classification basis in six specific classifications of benefits, including outpatient benefits. Under the final regulation, group health plans may further subdivide the outpatient classification into two sub-classifications: (1) office visits and (2) all other outpatient items and services. This means that with respect to outpatient benefits, plans and issuers may require a copayment for office visits (such as physician or psychologist visits) and coinsurance for all other outpatient services (such as outpatient surgery).

New Sub-Classification for Tiered Provider Networks. Using tiered provider networks can help group health plans manage the costs and quality of care. The final regulations permit plans and issuers that maintain tiered provider networks to treat an in-network provider tier as a separate sub-classification for purposes of applying the financial requirement and treatment limitation rules under MHPAEA. After 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. This means, for example, that within any one of the six categories (e.g., outpatient care), a plan will not violate MHPAEA simply because it provides more favorable cost-sharing treatment (e.g., more favorable co-pays) for services rendered by preferred providers than it provides for services rendered by non-preferred providers. The in-network provider tiers must be 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.

Scope of Services — Continuum of Care. Scope of services generally refers to the types of treatment and treatment settings that are covered by a group health plan or health insurance coverage. The interim final regulation did not address this issue. To address this open question, the final regulation requires plans and issuers to assign covered intermediate mental health and substance use disorder benefits to the existing six benefit classifications in the same way that they assign comparable intermediate medical/surgical benefits to these classifications. So, for example, if a plan or issuer classifies care in skilled nursing facilities or rehabilitation hospitals as inpatient benefits, then the plan or issuer must likewise treat any covered care in residential treatment facilities for mental health or substance use disorders as an inpatient benefit. In addition, if a plan or issuer treats home health care as an outpatient benefit, then any covered intensive outpatient mental health or substance use disorder services and partial hospitalization must be considered outpatient benefits as well.

As noted, the final regulation applies to calendar year plans effective January 1, 2015. Employers, and in particular those that maintain self-insured plans, should begin a compliance review of their plans in the next several months to ensure that there will be sufficient time in advance of the 2015 open enrollment period to analyze plan design choices.