On November 8, 2013, the Departments of Labor, Health and Human Services (HHS) and the Treasury (the “Departments”) issued Final Rules implementing the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA”) and a set of Frequently Asked Questions as part of the series of FAQs implementing the Affordable Care Act (see FAQs Part XVII). This article highlights the primary changes under the Final Rules as they apply to group health plans.
MHPAEA amended the Public Health Service Act, the Employee Retirement Income Security Act (“ERISA”) and the Internal Revenue Code to increase parity between mental health/substance use disorder benefits and medical/surgical benefits. On February 2, 2010, the Departments issued interim final rules under the MHPAEA (see our February 2010 edition and the Department of Labor’s May 2012 FAQs for an in-depth summary of the interim final rules and the parity requirements).
The Final Rules incorporate clarifications issued by the Departments through FAQs since the issuance of the interim final regulations, provide new clarifications on certain aspects of the rules, and implement the provisions of the MHPAEA for the individual health insurance market. The Final Rules generally apply to group health plans and health insurance issuers offering group health insurance coverage for plan years beginning on or after July 1, 2014 (until then, plans and issuers must continue to comply with the interim final rules). So, for plans with calendar year plan years, the compliance deadline is January 1, 2015.
What’s New in the Final Rules?
Sub-Classifications Allowed for Outpatient Benefits and Multiple Provider Network Tiers
The interim final rules established six classifications of benefits (inpatient, in-network; inpatient, out-of-network; outpatient, in-network; outpatient, out-of-network; emergency care; and prescription drugs). If a plan provides both medical/surgical benefits and mental health or substance use disorder benefits, then the plan must provide mental health or substance use disorder benefits in all of the classifications in which it provides medical/surgical benefits. Additionally, a plan may not apply any financial requirement (such as a deductible, copayment, coinsurance, or annual or lifetime dollar limit) or quantitative treatment limitation (such an annual or lifetime day or visit limit) to mental health and substance use disorder benefits that is more restrictive than the predominant financial requirement or quantitative treatment limitation applied to substantially all of the medical/surgical benefits in a classification. To satisfy the parity requirements, the interim final rules require plans to undertake a complex analysis on a classification-by-classification basis. In a set of FAQs issued in May 2012, the Departments permit plans to divide outpatient benefits further into two sub-classifications [i.e., office visits, and all other outpatient items and services] when conducting the analysis as plans and issuers typically require a copayment for office visits (such as physician or psychologist visits) but impose coinsurance for all other outpatient services.
The Final Rules incorporate the May 2012 FAQ and permit plans and issuers to create sub-classifications based on multiple provider network tiers (for example, an in-network tier of preferred providers with more generous cost sharing versus a separate in-network tier of participating providers). Such tiering may be used as long as it is based on reasonable factors and without regard to whether a provider is a mental health/substance use disorder provider or a medical/surgical provider.
Exception to Nonquantitative Treatment Limitations Requirements Removed
Under both the interim final rules and the Final Rules, nonquantitative treatment limitations (“NQTLs”) must also meet the parity requirements. Examples of NQTLs are preauthorization standards, utilization reviews, and determinations of usual, customary, and reasonable amounts. Accordingly, processes, strategies, and evidentiary standards used in applying NQTLs on mental health/substance use disorder benefits must be comparable to and applied no more stringently to such benefits than the processes, strategies, and evidentiary standards applied to medical/surgical benefits in the applicable classification. For example, a plan cannot require prior authorization for coverage of all outpatient, out-of-network mental health or substance abuse disorder benefits unless the plan also requires prior authorization for coverage of all outpatient, out-of-network medical/surgical benefits.
Under the interim final rules, plans could maintain different NQTLs between medical/surgical benefits and mental health/substance use disorder benefits if the limits could be justified based on “clinically appropriate standards of care.” Because the Departments found that this exception was confusing, unnecessary and subject to potential abuse, the Final Rules eliminate the exception. The Departments noted that even without the exception, the rules are sufficiently flexible to allow plans and issuers to take into account clinical and other appropriate standards when applying NQTLs.
Parity Requirements Apply to Intermediate Levels of Care
The Final Rules clarify that the parity requirements also apply to intermediate levels of care (such as residential treatment, partial hospitalization, and intensive outpatient treatment). These intermediate levels of care must be treated comparably within the structure of plan benefits. For example, if a plan classifies care in skilled nursing facilities or rehabilitation hospitals as inpatient benefits, then any covered care in residential treatment facilities for mental health or substance use disorders must also be treated as an inpatient benefit.
Disclosure Requirements Clarified
The Final Rules incorporate several FAQs that clarified the breadth of disclosure requirements applicable to group health plans and health insurance issuers under both MHPAEA and other laws, including ERISA and the Affordable Care Act. These FAQs clarified that the disclosure requirements under MHPAEA (such as disclosure of the criteria for medically necessary determinations and reasons for any denial of reimbursement or payment with respect to mental health or substance use disorder benefits) are in addition to other disclosure requirements under applicable law (such as under ERISA section 104 and the internal appeals and external review requirements added by the Affordable Care Act). For example, under ERISA, documents with information on medical necessity criteria for both medical/surgical and mental health/substance use disorder benefits, as well as the processes, strategies, evidentiary standards, and other factors used to apply a nonquantitative treatment limitation, are instruments under which the plan is established or operated, and copies must be furnished to a participant within 30 days of request.
Cost Exemption Procedures Clarified
Under the MHPAEA, plans and health insurance issuers may seek an exemption from compliance if the plan or issuer incurred an increased cost of at least two percent in the first year to comply with the law or at least one percent in any subsequent plan or policy year. The Final Rules provide for a test to meet this exemption that is based on the estimated increase in actual costs incurred by the plan or issuer that is directly attributable to expansion of coverage due to the requirements of MHPAEA. FAQs Part XVII details the procedures for a plan or issuer to claim the increased cost exemption.
Please contact us if you would like assistance in reviewing the mental health/substance use disorder provisions of your group health plans for compliance with these Final Rules.