The U.S. Departments of Labor, Health and Human Services and the Treasury have published interim final rules 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 mandated parity of certain lifetime and annual dollar limits for mental health benefits and medical/surgical benefits. The MHPAEA expands the scope of parity under the MHPA to include: (1) financial requirements (e.g., deductibles, copayments, coinsurance and out-of-pocket maximums) and treatment limitations (e.g., length of stay and number of sessions); and (2) protections for substance use disorder benefits. The new regulations, published February 2, 2010, clarify a number of significant issues for employers and are generally effective for plan years beginning on or after July 1, 2010.
The parity rules apply to the predominant requirement or limit on a “classifi cation-by-classifi cation” basis.
While a group health plan is not required to offer mental health and/or substance use disorder benefits, if it does, the plan is subject to the requirements of the MHPAEA. Under the MHPAEA, a group health plan that provides both medical/surgical benefits and mental health or substance use disorder benefits may not apply a more restrictive financial requirement or treatment limitation to mental health or substance use disorder benefits of any type in a particular classification than the “predominant” financial requirement or treatment limitation of the same type applied to “substantially all” medical/surgical benefits in the same classification. Under the regulations, a financial requirement or treatment limitation generally applies to “substantially all” medical/surgical benefits in a classification if it applies to at least two-thirds of the benefits in the classification. A financial requirement or treatment limitation generally is considered “predominant” if it applies to more than one-half of medical/surgical benefits subject to the financial requirement or treatment limitation in that classification. The regulations clarify that the predominance test should be applied separately for each type of financial requirement or treatment limitation. The new regulations provide additional guidance about applying these standards to specific situations and their application to particular plans may be complex.
The regulations list six classifications of benefits to use in determining whether a plan satisfies the parity requirements. Within any given classification, the requirements and limits imposed on mental health/substance abuse benefits may be no more restrictive than the predominant requirements and limits applicable to medical/surgical benefits. For example, a group health plan may apply a copayment to all in-network benefits and apply a separate, higher copayment to all out-of-network benefits, provided the mental health/substance use disorder and medical/surgical benefits are treated the same within each classification. Note that the regulations do not permit plans to make distinctions on the basis of classifications other than those listed. For example, it would be problematic to impose a higher copayment for services from a mental health specialist than for a primary care provider (e.g., an internist).
Generally, if a plan provides mental health or substance use disorder benefits in any of the six classifications of benefits, mental health or substance use disorder benefits must be provided in every classification in which medical/surgical benefits are provided. For example, if a plan does not provide any out-of-network medical/surgical coverage, the plan would not have to provide out-of-network mental health/substance use disorder coverage.
Plan sponsors should begin the complex process of identifying the “predominant” financial requirements and treatment limitations for each applicable classification and consider any appropriate plan design changes.
The regulations also do not define inpatient, outpatient or emergency care, and the meaning of these terms may differ from plan to plan. Employers should review their plans to confirm that these terms are defined carefully and are applied uniformly to medical/surgical and mental health/substance use disorder benefits.
Plans may not require a separate deductible for mental health/ substance use disorder benefi ts and medical/surgical benefits.
Under the new rules, plans may no longer require participants to meet separate deductibles for mental health or substance use disorders and medical/surgical treatment. A combined deductible for mental health, substance use disorder benefits and medical/ surgical benefits is required. Although the MHPAEA could be interpreted to permit separate deductibles, the preamble to the final interim regulations clarifies that requiring combined deductibles is consistent with the policy goals of the MHPAEA.
Employers should review their current plan design to confirm that a separate deductible is not required for mental health benefits and modify their group health plans as appropriate. Note that a more detailed analysis may be required to determine the predominant requirement/limit if certain types of expenses (e.g., preventive care) are not subject to the deductible.
An employer may not circumvent the parity rules by creating a separate plan for medical/surgical benefits only.
Because the MHPAEA applies only to plans that provide both medical/surgical benefits and mental health or substance use disorder benefits, a plan that provided only medical/ surgical benefits would not be subject to the parity requirements. The regulations clarified, however, that all medical care benefits provided by an employer or employee organization will be considered part of a single group health plan. Even if an employer sponsors a plan with only medical/surgical benefits, if the employer sponsors a separate plan for mental health or substance use disorder benefits, the plans will be considered a single plan for purposes of applying the parity rules.
Action Item: Employers who currently are sponsoring separate medical and mental health plans for the sole purpose of circumventing the parity requirements may want to combine them into a single group health plan to simplify administration.
The regulations apply to both quantitative and non-quantitative treatment limitations.
The regulations clarify that the parity rules apply to a plan’s quantitative limits (e.g., deductibles, out-of-pocket and annual dollar limits), as well as a plan’s non-quantitative treatment limitations (e.g., medical management standards, preauthorization requirements, etc.). For example, a medical plan may not require participants to precertify all mental health benefit claims (both in-patient and out-patient), where the plan only requires pre-certification of in-patient medical/surgical claims. If a plan does not require preauthorization of out-patient medical claims, it may not require preauthorization of out-patient mental health benefit claims. A plan may not apply a more stringent preauthorization requirement or penalty (e.g., for failure to follow the plan’s preauthorization requirements) on mental health benefits than it does for medical/ surgical benefits.
Employers should review the non-quantitative limitations under their current plan design, including preauthorization requirements, to confirm that they comply with the final interim regulations.
The preamble to the regulations also clarifies that requiring participants to exhaust benefits under an employee assistance program (EAP) before an individual is eligible for mental health or substance use disorder benefits is a nonquantitative treatment limitation subject to the parity requirements. If a similar exhaustion requirement is not applied to medical/surgical benefits, the requirement to exhaust EAP benefits would violate the rule that nonquantitative treatment limitations be applied comparably and not more stringently to mental health and substance use disorder benefits.
Action Item: Many plans require participants to exhaust employee assistance program benefits before utilizing mental health or substance use disorder benefits. Unless the plans impose a similar exhaustion requirement on medical benefits, these plans will need to be modified to comply with the final interim regulations.
Small employers and certain plans that incur increased costs are exempt from the parity requirements.
The regulations confirm that small employers are exempt from MHPAEA’s requirements and define a small employer as an employer who employed an average of not more than 50 employees on business days during the preceding calendar year. In addition, MHPAEA includes an increased cost exemption. MHPAEA changed the MHPA increased cost exemption in several ways, including (1) raising the threshold for qualification from 1 percent to 2 percent for the first year for which the Plan is subject to MHPAEA; (2) requiring certification by qualified and licensed actuaries; and (3) revising the notice requirements. The regulations clarify that the increased cost exemption may only be claimed for alternating plan years. Prior guidance on the increased cost exemption has been withdrawn and new guidance on the new statutory requirement is expected to be issued in the future.