On February 2, 2010, the U.S. Departments of Labor, Health & Human Services, and the Treasury jointly published the long-awaited interim final rules (Interim Regulations) under the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). The MHPAEA expands the Mental Health Parity Act of 1996 (MHPA), which requires parity in aggregate lifetime and annual dollar limits for mental health benefits and medical/surgical benefits. The MHPAEA expands the scope of parity under the MHPA to require parity in other financial requirements (for example, deductibles and co-payments) and treatment limitations (for example, number of visits or days of coverage), and to establish similar parity requirements for substance use disorder benefits. Employers with more than 50 employees, unions, and insurers must become familiar with the Interim Regulations and update their group health plans in order to ensure compliance.
Benefits for “Mental Health Conditions” and “Substance Use Disorders”
The MHPAEA and the Interim Regulations do not mandate that a plan provide any particular mental health condition or substance use disorder benefits. In addition, neither the MHPAEA nor the Interim Regulations provide specific definitions for “mental health conditions” or “substance use disorders.” Rather, the Interim Regulations permit the employer or plan sponsor to define what is a mental health condition or a substance abuse disorder and determine whether it will offer benefits for such conditions (insured plans may be required to provide certain benefits under state laws). However, the plan's definitions must be consistent with generally recognized independent standards of current medical practice (for example, the most current version of the Diagnostic and Statistical Manual of Mental Disorders (DSM), the most current version of the International Classification of Diseases (ICD), or State guidelines). If a plan provides benefits for mental health conditions or substance use disorders (as defined in the plan), the plan must comply with MHPAEA's parity provisions.
Aggregate Lifetime and Annual Dollar Limits
The structure of the parity requirements for lifetime and annual limits generally remain the same as under the MHPA regulations, except the MHPAEA expands the scope of such requirements to include substance use disorder benefits. Thus, a plan may not impose an aggregate lifetime or annual dollar limit on mental health or substance abuse benefits if such limitation does not apply to medical/surgical benefits.
Parity With Respect to Other Financial Requirements and Treatment Limitations
Generally, group health plans that provide mental health and/or substance use disorder benefits may not impose financial requirements or treatment limitations that are more restrictive than the “predominant” requirements or limitations that apply to “substantially all” medical/surgical benefits. These requirements and limitations fall into three categories:
- Financial requirements such as deductibles, co-payments, coinsurance, and out-of-pocket maximums
- Quantitative (numerically expressed) treatment limitations such as frequency of treatment, number of visits, days of coverage, or other numerical duration/scope of treatment limits
- Nonquantitative treatment limitations, which are defined as limitations that are not expressed numerically, but limit the scope of duration of benefits such as medical management standards, including medical necessity and medical appropriateness, prescription drug formulary design, standards for provider network admission, methods for determining usual, customary and reasonable amounts, and step therapy
“Predominant” means the level that applies to more than one-half of medical/surgical benefits in a particular class of benefits subject to the financial requirement or quantitative treatment limitation.
“Substantially all” is defined as applying to at least two-thirds of all medical/surgical benefits in a particular classification of benefits (see below).
The Interim Regulations require that if plans offer mental health or substance use disorder benefits, the plans must analyze how financial requirements and quantitative treatment limitations apply in the classifications set forth below. Such plans must ensure parity in the requirements or limitations within each such classification:
- Inpatient, in-network
- Inpatient, out-of-network
- Outpatient, in-network
- Outpatient, out-of-network
- Emergency care
- Prescription drugs
For example, if a plan that offers mental health and substance use disorder benefits does not require a co-payment for substantially all inpatient, in-network medical/surgical services, the plan cannot impose such a co-payment for inpatient, in-network mental health or substance use disorder services. Again, the Interim Regulations do not require that a plan provide mental health or substance use disorder benefits in any one classification. If a plan that offers mental health and substance use disorder benefits does not offer medical/surgical benefits for outpatient or out-of-network services, there is no requirement to provide mental health or substance use disorder benefits for outpatient or out-of-network services.
Nonquantitative Treatment Limitations
The parity requirements also apply to “nonquantitative” treatment limitations, which are described above. Any nonquantitative treatment limitations applicable to mental health and substance use disorder benefits must be comparable to, and applied no more stringently than, the factors used in applying the limitation to medical/surgical benefits. However, the Interim Regulations do permit some variations to the extent that recognized “clinically appropriate standards of care may permit a difference.”
Employee Assistance Plans (EAPs)
The Interim Regulations also address benefits offered through an EAP. Generally, the provision of mental health or substance use disorder benefits through an EAP that are offered in addition to a major medical plan with compliant mental health/substance use disorder benefits is not a violation of the Interim Regulations. However, if an EAP is used as a gatekeeper (in other words, a plan participant cannot receive the medical plan's mental health benefits until he or she exhausts the EAP benefit), then the EAP violates the parity requirements unless there is a similar gatekeeper requirement for medical/surgical benefits.
Based on the language of the MHPAEA, many employers and plan sponsors assumed that plans could maintain separate deductibles and out-of-pocket maximums for mental health/substance abuse benefits. However, the Interim Regulations clarify that separate deductibles for mental health and substance abuse benefits are not allowed, even if the deductible is equivalent to the deductible that applies to medical/surgical benefits. Therefore, plans must have a combined deductible that applies to both medical/surgical and mental health and substance use benefits. For example, a plan that currently imposes a $500 deductible on medical/surgical benefits and a $500 deductible on mental health/substance use disorder benefits must establish a combined deductible for both mental health/substance use disorder benefits and medical/surgical benefits.
Mental Health Providers Not Considered “Specialists”
With regard to the designation of mental health providers, the Interim Regulations do not allow plans to consider mental health or substance use disorder providers as specialists in determining the plan's financial requirements or treatment limitations. A mental health or substance use disorder provider must be considered the equivalent of a primary care physician when determining parity. This appears to apply to all mental health and substance use disorder providers, including psychiatrists.
Prescription Drug Benefits
The Interim Regulations establish a special rule for applying the general parity requirement to prescription drug benefits. Specifically, if a plan creates different tiers of prescription drugs (thereby imposing different levels of financial requirements), the plan will satisfy the parity requirements for such financial requirements if the tiering is: (1) based on reasonable factors such as cost, efficacy, generic versus brand name, and mail order versus pharmacy pick-up; (2) determined in accordance with the requirements for nonquantitative treatment limitations; and (3) determined without regard to whether a drug is generally prescribed with respect to medical/surgical benefits or mental health or substance use disorder benefits.
Small Employer Exemption
The MHPAEA does not apply to group health plans offered by small employers (employers who employed an average of more than two but not more than 50 employees on business days during the preceding calendar year). For this purpose, companies that are considered part of a single “controlled group” must be treated as one employer.
Increased Cost Exemption
Similar to the MHPA, plan sponsors may apply for a “cost exemption” from MHPAEA. Under the MHPAEA, if a group health plan obtains a certified actuarial report demonstrating an increase in costs (based on actual claims experience) of at least two percent in the first year the plan complies with the MHPAEA (or one percent in subsequent years), then the plan may qualify to be exempt from the parity requirements for the following year. If an actual increase in costs during 2010 is used to justify an exemption from the parity requirements for 2011, there will be no 2011 data to justify an exemption from parity requirements in 2012. The plan would need to comply in 2012 in order to establish sufficiently increased costs to justify an exemption from the parity requirements in 2013. As a practical matter, it is unlikely that plan sponsors will pursue this exemption, as it would require the plan sponsor to revise plan documents and comply with the MHPAEA every other year.
Notice and Disclosure Requirements
Under the MHPA, plans were only required to provide notice to beneficiaries if the plan was granted an increased cost exemption and was therefore not subject to the parity requirements. The MHPAEA and the Interim Regulations describe two additional disclosure provisions for plans. Upon request (or as otherwise required) plans must: (1) disclose the criteria for medical necessity determinations made with respect to mental health or substance use disorder benefits to any current or potential participant, beneficiary, or contracting provider; and (2) provide the reason for any denial of reimbursement or payment for services with respect to mental health or substance use disorder benefits.
The Interim Regulations are effective April 5, 2010. Comments on the Interim Regulations are being accepted on or before May 3, 2010 and may be submitted online at the Federal eRulemaking Portal at http://www.regulations.gov/. The Interim Regulations generally apply to group health plans for plan years beginning on or after July 1, 2010 (January 1, 2011 for calendar year plans). Collectively bargained plans have a special effective date as set forth in the Interim Regulations.
Penalties for Non-Compliance
The new requirements will be jointly enforced by the U.S. Departments of Labor, Health & Human Services, and the Internal Revenue Service. Non-compliance carries significant penalties, including excise taxes and penalties of up to $100 per day.
Medicare and Medicaid Beneficiaries
The MHPAEA does not apply to Medicare beneficiaries. However, on November 25, 2009, the Centers for Medicare & Medicaid Services (CMS) issued regulations under the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), which establishes guidelines for achieving parity for outpatient mental health services under Medicare. Currently, Medicare beneficiaries pay an increased co-payment for outpatient psychotherapy and services furnished by non-physician mental health professionals, as compared to the co-payment for other outpatient health services. Under the new regulations, beginning on January 1, 2010, increased co-payments for mental health services will be slowly phased out so that by January 1, 2014, Medicare beneficiaries will pay only a 20 percent co-payment for outpatient mental health services. The MHPAEA does apply to Medicaid managed care plans.
Group health plans that offer mental health or substance use disorder benefits must be closely evaluated to ensure compliance with the Interim Regulations.