On October 3, 2008, President Bush signed the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA”). As suggested by the name of the law, MHPAEA requires parity or equal coverage between medical and surgical health benefits and benefits for mental health and substance use. While MHPAEA does not require group health plans to offer mental health or substance use benefits, group health plans that do offer mental health or substance use benefits must do so in parity with medical and surgical health benefits.
To Whom does MHPAEA apply?
MHPAEA applies to groups health plans (whether self-funded or conventionally insured) with more than 50 employees. Even if your Company's plan does not fall within the scope of MHPAEA, similar state laws may impose parity requirements on your plan.
When does MHPAEA take effect?
MHPAEA became effective for plan years beginning after October 3, 2009. For calendar year plans, this means an effective date of January 1, 2010. On February 2, 2010, the United States Centers for Medicare and Medicaid Services published interim final regulations implementing MHPAEA. The regulations become effective on April 5, 2010, and apply to plan years on or after July 1, 2010. The comment period on the regulations closes on May 3, 2010 (after the effective date of the regulations).
What does MHPAEA require?
MHPAEA requires several significant changes to group health plans that offer both medical and surgical benefits as well as mental health or substance use benefits. The following rules apply:
- Parity or equivalence in “financial requirements.” The financial requirements (e.g., deductibles, co-payments, coinsurance and out-of-pocket expenses) that apply to mental health or substance use benefits can be no more restrictive than the financial requirements applicable to substantially all medical and surgical benefits;
- Parity or equivalence in “treatment limitations.” The treatment limitations (i.e., number of visits, days of coverage, or other limits on the scope or duration of treatment) that apply to mental health or substance use benefits can be no more restrictive than the treatment limitations applicable to substantially all medical and surgical benefits;
- Parity in coverage. If the group health plan provides coverage for medical and surgical benefits provided by out-of-network providers, the group health plan must also provide coverage for mental health or substance use benefits provided by out-of-network providers;
- Parity in annual or lifetime dollar limits. The Mental Health Parity Act of 1996 (MHPA) prohibits annual or lifetime dollar limits on mental health benefits that are less favorable than limits imposed on medical and surgical benefits. MDPAEA leaves the prohibition intact with respect to mental health benefits and extends the prohibition to substance use benefits.
What do the regulations require?
MHPAEA is already law, but the regulations are not yet final. Nonetheless, the regulations are important guideposts for how employers should implement MHPAEA.
The regulations provide that the parity requirements must be applied separately to six classifications of benefits: inpatient in-network, outpatient in-network, inpatient out-of-network, outpatient out-of-network, emergency, and prescription drug. Thus, in order to meet MHPAEA’s parity requirements, the “substantially all” test must be applied separately to the restrictions and requirements in each benefit classification.
The regulations also draw a distinction between treatment limitations and classify treatment limitations as either quantitative or non-quantitative treatment limitations. Quantitative treatment limitations are numerical and include visit limits and day limits. Nonquantitative treatment limitations are categorized. Examples of nonquantatitive treatment limitations include, but are not limited to: (1) the use of medical management standards to limit or exclude benefits based on medical necessity or medical appropriateness; (2) exclusions based upon the failure to complete a course of treatment; and (3) pre-authorization. In general, a group health plan cannot impose a nonquantitative treatment limitation to any classification of mental health or substance use benefits unless the nonquantitative limitation is comparable to and is applied no more stringently than those governing medical and surgical benefits.
The regulations also provide a threshold for MHPAEA’s “predominant” and “substantially all” requirements. The “predominant” level of a type of either financial requirement or a treatment limitation is the level that applies to more than one-half of medical and surgical benefits subject to the financial requirement or quantitative treatment limitation in that classification. And, the “substantially all” criteria is met if a financial requirement or quantitative treatment limitation applies to at least two-thirds of the medical and surgical benefits in that classification.
Are there exemptions?
MHPAEA does not apply to employers with 50 or fewer employees. MHPAEA also contains a “cost exemption.” Under the cost exemption, if a group health plan sponsor demonstrates that compliance with MHPAEA increases claims by at least 2 (two) percent in the first year (one percent in subsequent years), the sponsor may request an exemption. The sponsor cannot claim this exemption unless the plan has complied with MHPAEA for at least the first six months of the plan year and an actuary certifies the increase in actual costs under the plan. In addition, the plan sponsor must satisfy certain notice requirements and can claim the exemption only for alternating plan years.
Failure to comply with MHPAEA results in the imposition of excise taxes. The amount is generally $100 per affected beneficiary for each day of non-compliance. A group health plan that fails to comply with MHPAEA must self-report the violation on IRS Form 8928.