On September 9, 2024, the Departments of Treasury (IRS), Labor (DOL) and Health and Human Services (HHS) (collectively, the “Departments”) published their long-awaited final rules under the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA), which reflect updates in response to the almost 10,000 public comments received after publishing the 2023 proposed rules. The final rules aim to strengthen and reinforce compliance with MHPAEA, which has been a top priority for the Departments in recent years. This article provides an overview of the final rules and the impact to group health plans.

Compliance Snapshot

  • The final rules amend existing MHPAEA provisions by incorporating new and revised definitions of key terms, specifying steps plans and insurers are required to take to comply with MHPAEA, and codifying minimum standards for the comparative analysis requirement (among other items).
  • While the final rules appear less burdensome that then 2023 proposed rules, they do create new plan requirements that could pose challenges to plans and issuers. See our prior blog, Proposed Rules Prioritize Mental Health Parity Compliance, for more details on the initial proposed rules.
  • There are new rules for the non-quantitative treatment limitation (NQTL) comparative analysis requirement which will likely require plans and issuers to update any existing analyses and the related documentation.

Background

MHPAEA applies to group health plans and insurers that provide coverage for mental health and substance use disorder (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 medical and surgical (M/S) benefits. Among its requirements, plans and issuers are prohibited from imposing more restrictive 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 that 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. As described in their most recent Report to Congress, the Departments continue to observe challenges with plan design and application of NQTLs (see our blog post Ongoing Mental Health Parity Compliance Concerns Identified in the 2023 Report to Congress for more information). To help provide clarity and address compliance with MHPAEA and the comparative analysis requirement, the Departments published proposed rules in August of 2023 (see our blog for more details, Proposed Rules Prioritize Mental Health Parity Compliance).

Final Rules

Per the DOL, the “Departments anticipate that these final rules will improve network composition by making mental health and substance use disorder provider networks more robust…” and will also help individuals receive care by removing some of the restrictive prior authorization requirements and medical management techniques. The DOL also purports that the final rules provide more clarity to plans and issuers so they can meet their compliance obligations (see the DOL Fact Sheet).

Highlights of the final rules include:

  • Requirements for NQTLs. MHPAEA requires that a plan or issuer cannot impose any NQTL regarding MH/SUD benefits in any classification that is more restrictive (as written or in operation) than the predominant NQTL that applies to substantially all M/S benefits in the same classification. The final rules explain that for this purpose, a plan or issuer must satisfy two sets of requirements:
    1. The design and application requirements, which require examination of the processes, strategies, evidentiary standards, and other factors used in the design and application of an NQTL to MH/SUD benefits to ensure such NQTL is not applied more stringently with respect to M/S benefits in the same classification. As part of these requirements, plans and issuers must determine if processes, standards, or information are biased or not objective, which is prohibited, based on all relevant facts and circumstances. The final rules explain that generally recognized independent professional medical or clinical standards are considered nonbiased and objective.
    2. The relevant data evaluation requirements, wherein plans and issuers must collect and evaluate relevant data to assess the impact of an NQTL on relevant outcomes related to access of MH/SUD benefits and M/S benefits. The goal is to ensure, in operation, that an NQTL applied to MH/SUD benefits in a classification is no more restrictive than the predominate NQTL applied to substantially all M/S benefits in the same classification. The final rules provide flexibility for plans and issuers to determine what should be collected and evaluated, as appropriate. See the final rules for examples illustrating this standard.
  • Written Comparative Analysis Content Requirements. The final rules reiterate that plans must perform and document an NQTL comparative analyses and respond to an agency’s request to produce the analysis within ten business days of the request. The comparative analysis is required to include (at minimum):
    • A description of the NQTL;
    • The identification and definition of the factors and evidentiary standards 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, as written;
    • A demonstration of comparability and stringency, in operation, including required data and related evaluation of such data, explanation of any material differences in access, and a description of reasonable actions taken to address such differences; and
    • Findings and conclusions.
      If the agency finds the analysis insufficient, the agency will specify supplementary information to be provided within ten business days (or a period of time specified by the agency). If the requesting agency deems the comparative analysis deficient, plans and issuers have 45 calendar days to make corrections. If there is a final determination that an NQTL is noncompliant (for example, because the comparative analysis does not sufficiently demonstrate compliance) the agency may direct the plan or issuer to not impose the NQTL with respect to MH/SUD benefits unless and until compliance is demonstrated, or the plan or issuer takes appropriate action to remedy the violation.
  • Comparative Analysis Fiduciary Certification. Importantly, the final rules implement a newly required fiduciary certification for plans subject to ERISA (although a bit different than what was initially mentioned in the proposed rules), which requires that the comparative analysis include a certification that the fiduciary engaged in a prudent process to select a qualified service provider to perform and document a comparative analysis and that they satisfied the duty to monitor the service providers. As the named ERISA fiduciary most often is the employer, this means that the employer generally must complete the fiduciary certification. Note this certification represents typical fiduciary requirements under ERISA for selecting and monitoring third-party vendors.

    The preamble to the final rules explains that the DOL expects plan fiduciaries making this certification will (at minimum):
    • Review the comparative analysis prepared;
    • Ask questions about the analysis and discuss it with service providers, as necessary, to understand the findings and conclusions documented in the analysis; and
    • Ensure that any service provider assisting with the comparative analysis provides assurance that, to the best of its ability, the NQTL and associated comparative analysis complies with the requirements of MHPAEA and its implementing regulations.
  • Meaningful Benefits Requirement. The final rules require “meaningful benefits” for the treatment of a MH/SUD condition in each classification in which meaningful M/S benefits are provided (i.e., in-network inpatient, out-of-network inpatient, in-network outpatient, out-of-network outpatient, emergency care, and prescription drugs). This will require coverage of a core treatment for the condition or disorder in each classification (where coverage is provided for a core treatment for one or more M/S benefits), with core treatment defined as a standard treatment generally recognized by independent standards of current medical practice. Practically speaking, this requirement could function as a benefit mandate.
  • Terms Clarified and New Terms Defined. Definitions of the terms “medical/surgical benefits”, “mental health benefits”, and “substance use disorder benefits” are amended by removing reference to state guidelines. Plans must follow the most current version of the International Classification of Diseases (ICD) or the Diagnostic and Statistical Manual of Mental Disorders (DSM) when defining whether considerations or disorders are MH/SUD. New definitions and examples are provided for terms such as “evidentiary standards”, “factors”, “processes”, and “strategies”, as explained further in the final rules.

Employer Takeaways

  • Employers should be mindful of their fiduciary duty under ERISA, and must prudently select and monitor the carriers and/or third-party administrators (TPAs) preparing the comparative analysis (and all other plan service providers). This should include engaging in an objective process that obtains necessary information to assess the provider, including (but not limited to) the provider’s qualifications, quality of services, and reasonableness of fees.
  • Employers should continue to work with their carriers and/or TPAs to ensure compliance with MHPAEA, as carriers and TPAs are best situated to complete the comparative analysis. The Departments anticipate carriers will complete the NQTL comparative analysis for fully insured plans, and similarly expect that TPAs for self-insured plans will perform most of the work to produce the comparative analysis, as they are best positioned to do so (even though TPAs are not directly subject to the comparative analysis requirement in the way that carriers are for fully insured plans).
    • Fully insured plans should confirm the carrier agreement includes the carrier’s obligation to comply with MHPAEA and should work with their carriers to complete the fiduciary certification of the comparative analysis. Keep in mind that fully insured employers still maintain the fiduciary duty to prudently select and monitor all plan service providers, which includes carriers.
    • Self-insured plans should confirm their administrative services agreements with their TPA addresses responsibility for MHPAEA compliance and how the TPA will support the plan’s NQTL comparative analysis. If the TPA will not provide the comparative analysis, then the employer will need to work with a qualified vendor or legal counsel to comply with the requirements. Self-insured plans should be sure to create processes that support selecting and monitoring a qualified service provider to perform and document the analysis, include a fiduciary certification as part of the comparative analysis (as described above), remove any problematic NQTL design and/or application, and ensure the comparative analysis is compliant with legal counsel, as necessary.
  • Effective dates
    • For certain provisions, including the design and application of the NQTLs for MH/SUD being no more restrictive than M/S, impact of noncompliance, and the comparative analysis content requirements (unrelated to outcomes data) – including the fiduciary certification, the final rules generally apply to plan years beginning on or after January 1, 2025.
    • For the provisions implementing the meaningful benefits standard, the prohibition on discriminatory factors and evidentiary standards, the required use of outcomes data, and the corresponding requirement to include these elements in the comparative analyses, the final rules apply to plan years beginning on or after January 1, 2026.

Additional Resources

Connect with a Sequoia consultant to learn how Sequoia’s compliance services are integrated in our benefits services and tailored solutions. And if you’re already a Sequoia client, stay on top of your employer obligations with your Compliance Checklist that highlights important compliance dates, action items, and 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. © 2024 Sequoia Consulting Group. 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.