On August 3, 2023, the Departments of Treasury (IRS), Labor (DOL) and Health and Human Services (HHS) (collectively, the “Departments”) published proposed rules that serve to ensure that health plans provide access to mental health or substance use disorder (MH/SUD) benefits as easily as medical or surgical (M/S) benefits and aims to strengthen and reinforce compliance with the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). With MHPAEA enforcement top of mind for the Departments, the below discusses how the proposed rules, if finalized, could amend MHPAEA to provide clarifications, as well as new compliance obligations for group health plans subject to MHPAEA.

Background

MHPAEA applies to group health plans and insurers that provide coverage for MH/SUD and prohibits certain group health plans from imposing higher financial requirements (e.g., insurance and copays) or stricter treatment limitations (e.g., frequency of treatment, number of visits, days of coverage) on MH/SUD benefits as compared to M/S benefits. Among its requirements, plans and issuers are prohibited from imposing more restrictive non-quantitative treatment limitations (NQTLs) on MH/SUD benefits than M/S claims. Examples of NQTLs include (but are not limited to) prior authorization requirements, step therapy/fail-first policies, and limitations based on medical necessity.

In response to the Departments observing consistent noncompliance with NQTL plan design and application, the Consolidated Appropriations Act 2021 (CAA) amended the MHPAEA, requiring group health plans that offer MH/SUD benefits (and impose NQTLs) to perform and document a comparative analysis on the design and application of NQTLs on MH/SUD benefits (effective since February 10, 2021). The analysis considers NQTLs in six benefit classifications, including in-network inpatient, out-of-network inpatient, in-network outpatient, out-of-network outpatient, emergency care, and prescription drugs. For more information on the comparative analysis requirement, see our blog post Guidance Released on the New Mental Health Parity Comparative Analysis Requirements.

Proposed Rules

MHPAEA enforcement has been a priority for the Departments in recent years, and they continue to observe noncompliance (especially regarding NQTL design and application), as well as barriers and restrictions to accessing MH/SUD benefits as compared to M/S benefits. Aiming to strengthen and reinforce MHPAEA compliance, the proposed rules seek to offer clear guidance to plans and insurers on how to comply with MHPAEA’s requirements. If finalized, the proposed rules would become effective for plan years beginning on or after January 1, 2025. Highlights of the proposed rules include:

  • Additional Requirements for Plans and Issuers that Impose NQTLs to MH/SUD Benefits.
    • Three tests must be met for group health plans to apply NQTLs, which in practice could require group health plans to remove certain NQTLs on MH/SUD benefits. The proposed rules provide that plans and issuers would not be permitted to impose an NQTL unless:
      1. The NQTL is no more restrictive as applied to MH/SUD benefits than to M/S benefits, requiring plans to follow similar steps that apply when determining parity with financial requirements or quantitative treatment limitations [the no more restrictive requirement];
      2. The plan or issuer satisfies requirements related to the design and application of the NQTL [the design and application requirement]; and
      3. The plan or issuer collects, evaluates, and considers the impact of relevant data on access to mental health and substance use disorder benefits relative to access to M/S benefits, and subsequently takes reasonable action, as necessary, to address any material differences in access shown in the data to ensure compliance with MHPAEA [the relevant data evaluation requirement].
    • There are two narrow exceptions to the above:
      1. “NQTLs that impartially apply generally recognized independent professional medical or clinical standards (consistent with generally accepted standards of care) to medical/surgical benefits and mental health or substance use disorder benefits”; and
      2. “NQTLs reasonably designed to detect or prevent, and prove fraud, waste, and abuse, based on indicia of fraud, waste, and abuse that have been reliably established through objective and unbiased data.”
  • Specific Written Comparative Analysis Content Requirements. The Departments propose content requirements in response to (1) inquiries for more details on how plans and issuers should perform and document a comparative analysis, and (2) findings from the Department’s NQTL comparative analysis reviews. The proposed rules would require that a comparative analysis include (at minimum):
    • A description of the NQTL;
    • The identification and definition of the factors used to design or apply the NQTL;
    • A description of how factors are used in the design or application of the NQTL;
    • A demonstration of comparability and stringency;
    • A demonstration of comparability and stringency in operation; and
    • Findings and conclusions.
  • Comparative Analysis Fiduciary Certification. Importantly, the proposed rules seek to include named fiduciaries of the plan (for group health plans subject to ERISA) and require them to certify that the comparative analysis complies with the content requirements.
  • Terms Clarified and New Terms Defined. Several existing definitions and new definitions of key terms are also proposed in the new rules, including new terms such as “evidentiary standards”, “factors”, “process”, and “strategies”, and there are updates to current terms such as “M/S benefits” and “MH/SUD benefits” (not exhaustive), as explained further in the proposed rules.
  • Meaningful Benefits Requirement. The proposed rules require “meaningful benefits” for the treatment of a MH/SUD condition in each classification (i.e., in-network inpatient, out-of-network inpatient, in-network outpatient, out-of-network outpatient, emergency care, and prescription drugs). While the proposed rules do not provide a definition for ‘meaningful benefits’, the Departments provide examples, including the following:
    • A plan that generally covers treatment for autism spectrum disorder (ASD), a mental health condition, and covers outpatient, out-of-network developmental evaluations for ASD but excludes all other benefits for outpatient treatment for ASD, including applied behavioral analysis (ABA) therapy, when provided on an out-of-network basis. In addition, the plan generally covers the full range of outpatient treatments and treatment settings for medical conditions and surgical procedures when provided on an out-of-network basis. Because the plan only covers one type of benefit for ASD in the outpatient, out-of-network classification and excludes all other benefits for ASD in the classification, but generally covers the full range of medical/surgical benefits in the classification, it fails to provide meaningful benefits for treatment of ASD in the classification.
  • NQTL Design and Application Examples. The proposed rules revise existing examples and add several new examples to help demonstrate both compliant and noncompliant NQTL design and application. Topics include (but are not limited to): more restrictive prior authorization requirements, peer-to-peer concurrent review requirements, and more restrictive peer-to-peer review medical necessity standards in operation.

While the Departments recognize that compliance with the proposed rules will cause group health plans to incur costs (which may ultimately be passed on, resulting in higher premiums and cost-sharing), they believe the benefits of improved mental health access and outcomes outweigh and validate such potential impact.

Employer/Plan Sponsor Impact

  • As the proposed rules are not yet finalized, there is no immediate action for employers at this time; however, employers should be informed of these MHPAEA developments and how they may affect future plan design and benefit administration.
  • Employers should continue to work with their carriers and/or TPAs to ensure compliance with MHPAEA (which may include adding an MHPAEA obligation to carrier or TPA contracts);
  • Employers with NQTLs should be sure to request and/or retain their plans’ written comparative analysis per current guidance (see our blog post Guidance Released on the New Mental Health Parity Comparative Analysis Requirements for additional information).

The Departments also emphasize their MHPAEA Self-Compliance Tool, which includes a non-exhaustive list of NQTLs, a process for conducting an NQTL comparative analyses, a list of the types of documents and information that a plan or issuer should have available to support its analyses, and illustrations of specific fact patterns to aid in compliance.

Finally, note that the Departments are seeking comments on the proposed rules through October 2, 2023, and comments can be submitted one of two ways: via Regulations.gov (follow the ‘‘Submit a comment’’ instructions); or by mail to:

Office of Health Plan Standards and Compliance Assistance
Employee Benefits Security Administration, Room N–5653
U.S. Department of Labor
200 Constitution Avenue NW
Washington, DC 20210, Attention: 1210–AC11

Sequoia will continue to monitor and communicate important employer updates surrounding MHPAEA as they occur. 

Additional Resources

The information and materials on this blog are provided for informational purposes only and are not intended to constitute legal or tax advice. Information provided in this blog may not reflect the most current legal developments and may vary by jurisdiction. The content on this blog is for general informational purposes only and does not apply to any particular facts or circumstances. The use of this blog does not in any way establish an attorney-client relationship, nor should any such relationship be implied, and the contents do not constitute legal or tax advice. If you require legal or tax advice, please consult with a licensed attorney or tax professional in your jurisdiction. The contributing authors expressly disclaim all liability to any persons or entities with respect to any action or inaction based on the contents of this blog. © 2023 Sequoia. All Rights Reserved. 

Diane Cross — Diane is a Client Compliance Consultant for Sequoia, where she works with our clients to optimize and streamline benefits compliance. In her free time, Diane enjoys spending time with her family, live music, and cycling.