Final Mental Health Parity Rules Clarify Plan Disclosure Requirements

Practical Law Legal Update 9-548-5766 (Approx. 8 pages)

Final Mental Health Parity Rules Clarify Plan Disclosure Requirements

by Practical Law Employee Benefits & Executive Compensation

Quantitative and Nonquantitative Rules

The IFR established six benefits classifications and provided that parity requirements be applied on a classification-by-classification basis. For a given classification, the IFR prohibited plans and insurers from imposing a financial requirement or quantitative treatment limitation on mental health and substance use disorder benefits that is more restrictive than the predominant financial requirement or quantitative treatment limitation for substantially all medical/surgical benefits in the same classification. These rules were the basis of mathematical standards referred to as a quantitative parity analysis.

The IFR also included parity restrictions on the scope or duration of treatment that is not expressed numerically (for example, a medical management technique such as pre-authorization). These rules are known as nonquantitative treatment limitations (NQTLs).

Since publishing the IFR, the Departments have provided additional FAQs on MHPAEA issues (see Legal Updates, DOL Issues FAQs on the ACA and the Mental Health Parity Requirements, DOL Issues FAQs on Mental Health Parity and Addiction Equity Act and DOL FAQs Address MHPAEA Compliance). The MHPAEA final regulations include:

Clarifications previously issued by the Departments in FAQ form (for example, they reflect a prior FAQ enforcement safe harbor that permits subclassifications for office visits, separate from other outpatient services).
Additional clarifications on topics including NQTLs and the increased cost exemption.

Benefit Classifications

The final regulations include a clarification involving plan designs with two or more network tiers of providers. In applying the MHPAEA financial requirement and treatment limitation rules, a plan that provides in-network benefits through multiple tiers of in-network providers can divide benefits furnished on an in-network basis into subclassifications reflecting the network tiers. To do so however, the tiering must be:

Based on reasonable factors.
Without regard to whether a provider is a mental health or substance use disorder provider or a medical/surgical provider.

In general, the final regulations' benefit classifications and sub-classifications are intended to be comprehensive and cover the full range of medical/surgical benefits and mental health or substance use disorder benefits offered by plans and insurers. As a result, benefits cannot be:

Categorized as being offered outside the classifications.
Treated as not being subject to parity analysis.

Lifetime and Annual Limits Under the ACA; Preventive Health Services

The ACA restricts lifetime and annual limits on the dollar amount of essential health benefits, which includes mental health and substance use disorder services (including behavioral health treatment) (see Practice Note, Lifetime Limits, Annual Limits, and Essential Health Benefits Under the ACA). The MHPAEA, however, permits aggregate lifetime and annual dollar limits on mental health or substance use disorder benefits if the limits are consistent with the parity requirements for such limits. As a result, the parity requirements under the MHPAEA final regulations only apply to the provision of mental health and substance use disorder benefits that are not essential health benefits.

Also, the MHPAEA final regulations address whether plans that provide mental health or substance use disorder benefits under the ACA's preventive services requirements are subject to the MHPAEA's requirements. Under the MHPAEA final regulations, a group health plan or insurer that provides mental health or substance use disorder benefits only to the extent required under the ACA's preventive services rules is not required to provide additional mental health or substance use disorder benefits in any classification (see Practice Note, Coverage of Preventive Health Services Under the ACA).

Nonquantitative Treatment Limitations

Under the IFR and MHPAEA final regulations, group health plans or insurers generally cannot impose NQTLs regarding mental health or substance use disorder benefits in any classification unless, under the plan terms, any factors (for example, processes, strategies or evidentiary standards) used in applying the NQTL to mental health or substance use disorder benefits in the classification are comparable to, and are applied no more stringently than, how those factors are used in applying the limit for medical/surgical benefits in the same classification.

The final regulations remove an exception to the NQTL requirements that permitted variation to the extent that recognized "clinically appropriate standards of care" permitted a difference. According to the Departments, the underlying NQTLs are flexible enough, even without the exception, for plans and insurers to consider clinical and related standards in applying NQTLs to medical/surgical benefits and mental health or substance use disorder benefits.

Disclosure of Processes and Standards

The MHPAEA requires that the following information be made available:

The criteria for a plan's medical necessity determinations regarding mental health or substance use disorder benefits (by the plan administrator or insurer), to current or potential participants, beneficiaries, or contracting providers on request.
The reason for a plan's denial of reimbursement or payment for services regarding mental health or substance use disorder benefits (by the plan administrator or insurer), to participants and beneficiaries.

As indicated in prior FAQs, the MHPAEA final regulations instruct plans, insurers and individuals that compliance with the MHPAEA's disclosure rules is not determinative of compliance with other federal or state laws, including:

ERISA's requirement that a plan administrator furnish plan participants, within 30 days of request, with copies of instruments under which the plan is established or operated.
Disclosures under the DOL claims procedure regulations, as expanded under the ACA (see Practice Note, Internal Claims and Appeals Under the ACA).

Scope of Services

Commenters on the IFR requested clarification regarding how:

The MHPAEA affects the scope of coverage for intermediate services (for example, residential treatment or intensive outpatient treatment).
Intermediate services fit within the six classifications under the IFR.

As a general rule, plans and insurers must assign covered intermediate mental health and substance use disorder benefits to the existing six benefit classifications in the same way they assign comparable intermediate medical/surgical benefits to these classifications. For example, if the plan or insurer classifies care in skilled nursing facilities or rehabilitation hospitals as inpatient benefits, then it must similarly treat any covered care in residential treatment facilities for mental health or substance user disorders as an inpatient benefit.

Increased Cost Exemption and Notice Requirements

The MHPAEA contains an increased cost exemption available for plans and insurers that make changes to comply with the law and incur an increased cost of either (at least):

Two percent in the first year that MHPAEA applies to the plan.
One percent in any subsequent plan year.

Under the MHPAEA, plans or coverage that comply with the parity requirements for one full plan year and that satisfy the conditions for the increased cost exemption are exempt from the parity requirements for the following plan or policy year. The increased cost exemption:

Lasts for one plan or policy year.
Can, as a result, only be claimed for alternating plan years.

Under the MHPAEA final regulations, the test for an exemption must be based on the estimated increase in actual costs incurred by the plan or insurer that is:

Directly attributable to expansion of coverage due to requirements under the MHPAEA.
Not otherwise due to:
- occurring trends in utilization and prices;
- a random change in claims experience that is unlikely to persist; or
- seasonal variation that is commonly experienced in claims submission and payment patterns.

To calculate the increased cost, the final regulations include a multi-variable formula that plans and insurers may use, and which incorporates certain changes in measurement periods. Administrative costs attributable to MHPAEA implementation must be reasonable and supported with detailed documentation from accounting records.

Notice Requirements

In order to claim the increased cost exemption, a plan or insurer must furnish a notice of the plan's exemption from the parity requirements to:

Participants and beneficiaries covered under the plan.
The Departments and certain state agencies.

Regarding participants and beneficiaries, a group health plan subject to ERISA may satisfy the notice requirement by providing a summary of material reductions in covered services or benefits (under 29 C.F.R. § 2520.104b), if it includes all the information required by the MHPAEA final regulations. Regarding notice to the Departments, a plan or insurer must also furnish a notice that satisfies the final regulations' requirements.

In all cases, the exemption is not effective until 30 days after notice has been sent to both participants and beneficiaries, and to the appropriate federal agency. The FAQs provide addresses for the relevant federal government agencies.

Also, plans and insurers must make available to participants and beneficiaries, on request and at no charge, a summary of information on which the exemption was based.

Retiree-only Plans and Employee Assistance Programs

Group health plans that do not cover at least two employees who are current employees (for example, plans in which only retirees participate) are exempt from the MHPAEA and its final implementing regulations.

Also, the MHPAEA final regulations retain an approach from the IFR under which a plan or insurer that limits eligibility for mental health and substance use disorder benefits until after benefits under an employee assistance program (EAP) are exhausted:

Has established an NQTL.
Is subject to the parity rules.

If a comparable requirement did not apply for medical/surgical benefits, such a requirement could not be applied to mental health or substance use disorder benefits.

In addition, the Departments plan to provide guidance stating that until planned regulations regarding EAPs are finalized, and at least through 2014, the Departments will consider an EAP to be excepted benefits only if the EAP does not provide significant benefits in the nature of medical care or treatment.

Small Employer Exemption

Implementing the MHPAEA's small employer exemption, the final regulations (consistent with earlier FAQs) exempt group health plans and insurance coverage of employers with 50 or fewer employees from the MHPAEA. For non-federal governmental plans, the exemption generally applies for plans and coverage sponsored by employers having 100 or fewer employees . However, under HHS final regulations addressing essential health benefits (EHBs) (see Legal Update, Final HHS Rules Address Essential Health Benefits and Required Cost-Sharing), all insured, non-grandfathered small group plans must cover EHBs in compliance with the MHPAEA regulations, regardless of the MHPAEA's small employer exemption (for more information on EHBs, see Article, Health Insurance Exchange and Related Requirements Under the ACA: Minimum Insurance Standards for Health Coverage).

Multi-State Plan Program

Under the ACA, the Office of Personnel Management (OPM) must contract with private health insurers to offer at least two multi-state plans for each state's (and the District of Columbia's) exchange beginning in 2014. Multi-state plans are subject to the ACA's external review rules, under which group health plans and health insurers must comply with either a state external review process or the federal external review process.

The Departments have adopted provisions in proposed regulations published on March 21, 2013 (March 2013 Rule) specifying that:

Multi-state plans will be subject to the federal external review process (rather than a state's external review procedures).
The scope of the federal external review process (under the ACA's rules implementing the internal claims and appeals and external review requirements) is the minimum required scope of claims eligible for external review for plans using a federal external review process (see generally Practice Notes, Internal Claims and Appeals Under the ACA and External Review Under the ACA).

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