The groundbreaking final mental health parity rule: What plan sponsors and insurers need to know

Review

The U.S. Departments of the Treasury, Labor, and Health and Human Services (the “Departments”) recently issued long-awaited final regulations under the Mental Health Parity and Addiction Equity Act (MHPAEA). The newly issued final regulations update the 2013 final regulations primarily to reflect changes to the MHPAEA introduced by the Consolidated Appropriations Act of 2021 (CAA 2021), which requires plans and issuers to formally analyze and compare nonquantitative treatment limitations (NQTLs) as they apply to both mental health and substance use disorder (MH/SUD) benefits and medical/surgical (M/S) benefits.

The changes in the Final Rule will largely become applicable in 2025, with the effective date of some provisions delayed to 2026. Although the Final Rule may face challenges in litigation given the recent decision in Loper Bright Enterprises v. RaimondoHealth plan sponsors, in the meantime, should plan to adapt to the rapidly approaching deadlines. A related McDermott+ analysis of the final regulations is available here.

2024 Final Provisions:

Establish the meanings of certain important terms (including “medical/surgical benefits,” “mental health benefits,” and “substance use disorder benefits”) with minor changes from the proposed regulations;
Clarify how plans must demonstrate compliance with the 2021 CAA regulations governing NQTLs by eliminating the “substantially all” test from the proposed regulations and adopting, with some modifications, the standards for plan design and data collection and evaluation;
Adopt with modifications the “significant benefit” requirement in the proposed regulations;
Adopt new requirements for the content of NQTL comparative analyses and specify how plans and issuers must make such comparative analyses available to the Departments and any appropriate governmental authorities, participants, and grantees upon request; and
The fiduciary certification requirement in the proposed regulations was adopted, with some modifications.

In the depths

BACKGROUND

The principles governing mental health parity have evolved over the past several decades. In 1996, Congress passed the Mental Health Parity Act of 1996, which required parity in the combined lifetime and annual dollar limits for mental health and M/S benefits. Paul Wellstone and Pete Domenici’s Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) expanded the Mental Health Parity Act of 1996 to add new requirements, including provisions for the application of mental health parity to substance use disorder benefits. In general, the MHPAEA requires group health plans and issuers of group health insurance to ensure that (1) the financial requirements and treatment limitations applicable to MH/SUD benefits are not more restrictive (e.g.(i.e., not allowing for more restrictive lifetime or annual limits, financial requirements, or treatment limitations) in writing or operational form than those that apply to M/S benefits, and that (2) there are no separate financial requirements or treatment limitations that apply solely to MH/SUD benefits.

The 2021 CAA expanded the MHPAEA to expressly require health plans that provide M/S and MH/SUD benefits and impose NQTLs on MH/SUD benefits to conduct and document their comparative analyses regarding the design and application of NQTLs beginning February 10, 2021. Many of the Department’s recent audits of health plans have focused primarily on compliance with the MHPAEA. Since 2021, the Departments have also conducted audits of health plans for compliance with the MHPAEA, which to date have not demonstrated satisfactory compliance.

MHPAEA FINAL PROVISIONS

The final regulations generally follow and adopt most of the provisions of the 2023 proposed regulation, which attracted nearly 10,000 comment letters. While the final regulations modify the proposed regulations in several welcome respects, the basic structure of the proposed regulations remains intact.

The final regulations carry over the definitions set forth in the proposed regulations with minor changes. Terms such as “medical/surgical services,” “mental health services,” and “substance use disorder services” are defined with reference to generally accepted standards of current medical practice. Importantly, the proposed regulations referred to state law and guidelines as the basis for establishing these standards for purposes of compliance with the MHPAEA, but now refer exclusively to the International Classification of Diseases (ICD) and the Diagnostic and Statistical Manual of Mental Disorders (DSM) of the American Psychiatric Association. The new definitions are also adopted in principle consistent with the proposal describing the basic components of NQTL design and application. These include “processes,” “strategies,” “standards of evidence,” and “factors.” Finally, the final rule adopts the proposed provisions to acknowledge that the list of example limitations on treatment is not exhaustive and that a blanket exclusion of services for a particular condition is not a limitation on treatment.

Demonstration of NQTL compliance

The proposed regulations would establish a three-part test that includes a “substantially all” requirement. Contrary to appearances, the “substantially all” test in the proposed regulations would apply to NQTLs a quantitative test similar to the test currently applied to financial and quantitative limitations. This requirement was severely criticized in the comments, and the Departments have dropped it in the final regulation—a change that plan sponsors and issuers are likely to welcome. The remaining two requirements regarding plan design and data evaluation are adopted with minor modifications.

Another significant change from the proposed regulations is the separate exceptions for the design of NQTLs with reference to generally recognized independent professional medical or clinical standards and with reference to reasonable and appropriate measures to detect, prevent and prove fraud and abuse. NO carried forward to the final regulation. These exceptions have instead been relegated to the status of factors influencing the design of the NQTL. Going forward, plans and issuers that rely on independent professional medical or clinical standards or measures to prevent fraud and abuse must comply with the general principle of the design and use requirement. If such a standard or measure is used as an NQTL, the plan or issuer must also comply with the appropriate data evaluation requirements.

“Significant Benefits” Requirements

Under the proposed regulations, a plan or issuer would not be considered to provide MH/SUD benefits in every classification in which M/S benefits were provided unless, among other things, the plan or issuer provided “significant benefits” for the treatment of that condition or disorder in every such classification. This is an anti-abuse rule. Its purpose is to prevent plans or issuers from covering a broad range of M/S conditions while providing only limited MH/SUD benefits in a classification. The final regulations retain the significant benefits requirement, but with some modifications. To qualify as “significant,” a plan or policy must cover “essential treatment” for each MH/SUD condition or disorder in every classification in which the plan covers essential treatment for one or more M/S benefits. This significant benefits requirement has been widely criticized as creating a benefit mandate and is likely inconsistent with the intent of the MHPAEA and may be susceptible to court challenges.

The final regulations adopt, with minor modifications, the proposed content requirements for NQTL comparative analyses, consisting of six core content elements. They also specify how plans and issuers must make such comparative analyses available to the Departments—within 10 business days of receipt of a request—and to any applicable governmental authority, participant, or grantee upon request.

The proposed regulations would require a named fiduciary under the Employee Retirement Income Security Act to certify whether it has determined that the plan’s NQTL benchmarking analysis complies with the 2021 CAA NQTL content requirements. While the final regulations retain the requirement for fiduciary certification, they significantly limit the scope of the certification. Going forward, fiduciaries are required only to certify that they have engaged in a prudent process to select one or more qualified service providers to perform and document the benchmarking analysis in connection with the imposition of any NQTLs. According to the preamble to the final regulations, this would require the fiduciary to, among other things, “review the benchmarking analysis prepared by or on behalf of the plan with respect to the NQTLs; (and) ask questions about the analysis and discuss it with the service providers, as necessary, to understand the findings and conclusions documented in the analysis.” In practice, given the lack of service providers that can perform and document benchmarking, and the reluctance of large third-party administrators to provide assistance, plan sponsors will need to determine how to proceed to meet this requirement.

In the introduction to the final regulations, the Departments explain that the regulations added to the MHPAEA by the 2021 CAA are automatically implemented and are effective February 10, 2021. The new features of the final regulations generally become effective for group health plan years beginning on or after January 1, 2025. However, certain requirements of the regulations, including the material benefit standard, the prohibition of discriminatory factors and evidentiary standards, relevant data review requirements, and guidance on the design and scope of comparative analyses, apply to plan years beginning on or after January 1, 2026.

We anticipate numerous challenges for health plan sponsors in implementing the final rule. These include the small number of people in the typical corporate benefits department, which makes meeting the ever-increasing regulatory requirements an uphill battle, the lack of willing outside vendors to help plans and plan sponsors comply with mental health parity, and the continued lack of clarity about how the rule applies. Given the recent U.S. Supreme Court decision in Loper Bright Enterprises v. Raimondo effectively limiting deference to agency interpretations of ambiguous statutes, we anticipate that legal challenges may arise in applying these final MHPAEA regulations. In the meantime, health plan sponsors and fiduciaries should work closely with their legal counsel and any outside vendors to develop a compliance plan in light of the upcoming deadlines for MH/SUD benefits, which may have already been finalized for the 2025 plan year.

(See source.)