On Sept. 9, 2024, the Departments of Labor (DOL), Treasury, and Health and Human Services (HHS) (collectively “the Departments”) released the much-anticipated final Mental Health Parity and Addiction Equity Act (MHPAEA) rule (opens a new window). This marks another significant push by the Departments to further implement and enforce the mental health parity laws by imposing additional requirements while also shedding light on what plan sponsors can expect from enforcement efforts going forward.
Executive summary
The final rule formalizes, clarifies, and expands on requirements regarding a plan’s Comparative Analysis of non-quantitative treatment limitations or requirements (NQTLs) applicable to mental health and/or substance use disorder benefits.
Group health plans and health insurance carriers (issuers) are required to conduct a two-part analysis to determine parity compliance with regard to NQTLs. This effectively raises the bar as to what employers must do to show that any NQTL meets parity requirements. Plans must proactively review relevant plan data to demonstrate operational compliance and ensure the design and application of any NQTL passes MHPAEA muster.
The final rule requires that plans and issuers provide “meaningful benefits" to treat covered mental health and substance use disorders in each benefit classification in which medical/surgical benefits are provided. “Meaningful benefits” in this context means covering at least one “core treatment” (if one exists) and are further described later in this Alert.
Moreover, plans are directed to rely on independent medical standards in treatment decisions. The standards must be based on unbiased, current medical literature.
When are these rules applicable? The final rule is generally effective for plan years beginning on or after Jan. 1, 2025. However, and importantly, the final rule delays the effective date for some of the more complex changes, including the application of the design and application analysis and relevant data analysis, to plan years beginning on or after Jan. 1, 2026.
What must employer plan sponsors do? Current MHPAEA rules are still in effect, and plans should already be taking steps to ensure compliance with those rules. Plans must have a current Comparative Analysis on hand and confirm that they have reviewed the conclusions reached on NQTL compliance therein. If a Comparative Analysis has not been conducted since the enactment of the Consolidated Appropriations Act of 2021 (CAA), it’s well past time to take that action.
Significantly, the final rule requires an ERISA plan fiduciary to certify they have engaged in a prudent process to select at least one qualified service provider to complete the plan’s Comparative Analysis.
This new rule is comprehensive (and complex) and takes steps to enhance compliance with the longstanding MHPAEA rules by incorporating more extensive requirements related to review of plan benefit design and plan operations, including review of relevant plan data.
Lockton Comment. There is a possibility, especially in light of a recent Supreme Court decision (opens a new window) (which overruled the longstanding Chevron deference), that these rules may face legal challenges. The Departments appear to anticipate such challenges based on the constant references to the authority provided to them through MHPAEA, as expanded under the CAA. Should these new rules face legal challenges, the current MHPAEA rules would remain, so plans and issuers will want to ensure they comply with current MHAPEA requirements.
Current State: What employers should already be doing
MHPAEA is not new. It was passed in 2008, and regulations were first finalized by the Departments in 2013.
In general, MHPAEA requires plans that cover mental health and substance use disorders (MH/SUD) to treat these benefits the same (or better) than medical/surgical benefits, specifically with regard to quantitative treatment limitations (QTLs) (e.g., plan copays, deductibles, or visit limitations) and NQTLs (e.g., prior authorization requirements, network adequacy, provider reimbursement rates or medical necessity determinations). Plans must ensure any QTL or NQTL applicable to MH/SUD benefits in a classification is comparable to or at least no more restrictive than those limitations or restrictions applicable to medical/surgical benefits with limited exceptions.
The CAA added another requirement mandating that, as of Feb. 10, 2021, employer plan sponsors must: (1) prepare a Comparative Analysis of any NQTL imposed on MH/SUD benefits to reflect parity as related to medical/surgical benefits within a similar classification and (2) provide the Comparative Analysis to regulators and plan participants upon request.
Employer plan sponsors should already be taking steps to review their health plans with their advisors, carriers and/or third-party administrator (TPA) partners to identify any potential red flags or problematic provisions. Additionally, employers should have a Comparative Analysis reflecting NQTL compliance available upon request. The Comparative Analysis should evaluate and sufficiently support all plan NQTLs and include the rationale, findings, and conclusions to show compliance.
Lockton Comment: The DOL self-compliance to (opens a new window)ol, which the Departments have indicated will be updated to assist in compliance with the new rule, is a good resource for employer plan sponsors to assist in reviewing their health plans.
Additionally, as employer plan sponsors enter into contracts with carriers and TPAs for services related to group health plans, they should include MHPAEA considerations.
Lockton Comment: For example, employer plan sponsors should consider including contract provisions requiring the carrier/TPA to administer the plan in accordance with MHPAEA requirements and provide a complete Comparative Analysis to include any NQTLs it imposes. They also should consider asking the service provider to assist in reviewing plan data and network information to show the plan operates in accordance with MHPAEA.
The Departments acknowledge that employers rely on their carriers and/or TPAs to administer their plans to comply with MHPAEA requirements but also emphasize the plan sponsors’ fiduciary obligation to ensure their plans comply with MHPAEA. If a carrier or TPA exercises discretionary control over a plan, including exercising discretion in the interpretation of plan provisions and adjudication of claims, they could be deemed a co-fiduciary under ERISA and subject to ERISA fiduciary provisions. Therefore, employer plan sponsors may also want to review contracts to determine if their carriers/TPAs acknowledge fiduciary status.
With respect to QTLs, the longstanding “predominant” and “substantially all” tests used to determine if a QTL applied to MH/SUD benefits complies with MHPAEA remains the same. That being said, the final rule clarifies that benefit limits expressed as subject to a zero level of a type of financial requirement are treated as benefits not subject to that financial requirement. Therefore, any benefits with no financial requirement (or other quantitative treatment limit) are considered as no limitation, rather than limitation: $0 copay, or limitation: 0% coinsurance.
Lockton comment: The significant rise in plans offering telehealth benefits with no participant cost-sharing, in addition to the Affordable Care Act-mandated preventive care with no cost-sharing, creates potential challenges for plans in passing the “substantially all” portion of the test (e.g., that the same type of cost-sharing must apply to at least 2/3 of claims in a classification in order to be applied to MH/SUD claims in that classification).
The path forward: The final rule
MHPAEA requires plans to show that any NQTL applicable to MH/SUD benefits, both as written and in plan operations, is designed and applied based on processes, strategies, evidentiary standards, or factors that are comparable to and not more stringently applied than those processes, strategies, evidentiary standards, or factors used in designing and applying the NQTL to medical/surgical benefits in that classification. The new rule offers a guiding principle in the form of a purpose statement plans advising them to evaluate their plan in a manner that ensures that individuals who seek treatment for covered MH/SUD conditions do not face greater burdens in obtaining care or receiving benefits for those conditions or disorders than they would face when seeking coverage for the treatment of a medical condition or a surgical procedure. The rule also provides additional concrete examples of common situations that plan sponsors should be aware of that raise noncompliance concerns.
Updated and clarifying terms and definitions
The final rule provides guardrails for the sources that plans can cite in the establishment of evidentiary standards, factors, processes, and strategies when designing non-quantitative treatment limitations through changes and modifications to specific definitions. Regulators re-defined both DSM (the American Psychiatric Association’s Diagnostic and Statistical Manual of Mental Disorders) and ICD (the World Health Organization’s International Classification of Diseases) to mean the current versions of those independent medical practice publications (DSM-V, published March 2022, and ICD-10, published October 2015).
Terms such as “medical/surgical benefits,” “mental health benefits” and “substance use disorder benefits” were also tweaked, and within the updated definitions, the Departments clarified that plans and issuers have flexibility to define these terms in the plan, so long as the plans’ definitions are in accordance with federal and state law,and consistent with generally recognized independent standards of medical practice, such as the most recent version of ICD or DSM.
If these publications are updated or revised, plans will have one year to update their plan definitions and align with the current editions. The DOL explained that this requirement was added because it routinely finds that plan documents and Comparative Analyses reference outdated medical publications and apply outdated views of certain conditions.
Lockton comment: For practical illustration, suppose an updated version of the ICD is published on April 30, 2025. A plan that relies on this publication for its plan definitions must make the updated version of the governing publication effective for plan years beginning on or after May 1, 2026.
"Meaningful benefits” must be provided for MH/SUD benefits
The final regulations stop short of mandating that plans cover any specific MH/SUD benefit. Instead, the rule offers additional guidance that expands upon past definitions and further clarifies some ambiguous terms.
Specifically, the rule formalizes the longstanding requirement to provide “meaningful benefits” for any covered MH/SUD condition in every classification in which medical/surgical benefits are provided. Now, the rule clarifies that providing “meaningful benefits” means the plan must provide at least one “core treatment” for each covered condition.
Core treatments are described as essential health care services and interventions that are both standard and foundational in the treatment of a medical condition, as indicated by generally recognized independent standards of current medical practice. The ICD and DSM both qualify as standards of current medical practice, among others.
Lockton comment: By applying these concepts of “meaningful benefits” and “core treatments” together, we assume that some MH/SUD benefits must be provided in every classification in which medical/surgical benefits are provided, and the plan must cover a standard course of treatment (as established by the DSM or other independent medical standards) for each covered MH/SUD condition to achieve parity.
The regulations also provide a level of practicality, noting that if there is no core treatment recognized by medical literature for a covered MH/SUD condition with respect to a given classification, the plan is not required to provide a core treatment in that classification, but still must provide some benefits for that condition in every classification where medical/surgical benefits are offered. Note though, the plan should document such conclusion in its Comparative Analysis.
Lockton Comment: The examples provided in the new regulations highlight some of the key investigation targets we have seen both the DOL and HHS focus on in the past few years, including coverage of ABA (Applied Behavior Analysis) therapy as a core treatment for autism, coverage of nutritional counseling as a core treatment for eating disorders, and coverage of medications to treat opioid use disorder as a core treatment for substance use disorder.
The devil is in the details (and the data!) for NQTLs
The final rule includes a two-part analysis for NQTLs, effectively raising the bar as to what employers must do to show that any NQTL meets parity requirements as written and in operation. For an NQTL to comply with MHPAEA, the plan must pass both tests, and if one or both tests is failed, the plan must take steps to remove or modify the NQTL to ensure compliance. If the DOL or HHS determines an NQTL is noncompliant, the final rule allows the DOL or HHS to prohibit a plan or issuer from imposing the NQTL.
Design and application analysis
The final rule requires plans to show that any NQTL applicable to MH/SUD benefits, both as written and in plan operations, is designed and applied based on processes, strategies, evidentiary standards, or factors that are comparable to and not more stringently applied than those processes, strategies, evidentiary standards, or factors used in designing and applying the NQTL to medical/surgical benefits in that classification.
To build on that, the final rule requires that plans conduct an analysis showing the design and application of any NQTL applied to MH/SUD benefits is not based on factors or evidentiary standards that discriminate against MH/SUD disorders. To clarify further, the rules state the NQTL in design or application is discriminatory if the information, evidence, sources, or standards used in creating and applying the NQTL are biased or not objective.
Lockton Comment: The new rules do not include clear exceptions for NQTLs based on generally recognized independent professional medical or clinical standards or measures reasonably and appropriately designed to detect, prevent, or prove fraud and abuse. However, the plan would need to document the analysis of any standard or measures in the Comparative Analysis appropriately to the same extent as any NQTL applied to MH/SUD benefits.
In the event the plan analysis shows the design and/or application of a particular NQTL discriminates against MH/SUD benefits, the rules require the plan to take steps to correct, cure or supplement the biased information, evidence, sources or standards relied upon, and outline those corrective steps in the plan’s Comparative Analysis. If done appropriately; this will remedy the MHPAEA issue.
Lockton Comment: The Departments emphasize that plans must use current and independently recognized professional and clinical guidelines when adjudicating claims and are prohibited from using discriminatory or outdated information to justify the protocols.
Relevant data analysis
The final rule requires that plans collect and review plan data, including data related to the network composition, to assess if an NQTL (in operations) impacts the outcomes related to MH/SUD conditions as compared to medical/surgical conditions. More plainly, is the NQTL, in operations, applied in a more stringent or restrictive manner on MH/SUD benefits compared to medical/surgical benefits. As to what data plans and issuers must review, the rules state that relevant data can include, but is not limited to, a review of claims denials, network utilization rates, and provider reimbursement rates.
Lockton Comment: The Departments emphasize that plans should interpret relevant data broadly, and the final rule refrains from limiting plans to an exhaustive list of data elements or dictating how data must be reviewed. This provides employers with flexibility in how they complete the data analysis. Note, to determine the impact of an NQTL, the plan may have to look at several data sets to make a reasonable determination. The Departments indicate they plan to provide more guidance in this area in the future and will update the DOL’s self-compliance tool accordingly.
Material differences identified based on the review of the data (for instance, a higher number of MH/SUD benefits being denied during the prior authorization process) would be a strong indicator of a MHPAEA violation. If a material difference is identified in a review of the data, the plan sponsor must take reasonable actions to bring the plan into compliance with MHPAEA and document the steps taken (or the steps to be taken) to ensure appropriate access to MH/SUD benefits as compared to medical/surgical benefits. These findings and any corrective steps taken by the plan should be reflected in the Comparative Analysis.
Lockton Comment: The Departments did not clearly define what constitutes a material difference, instead stating that it would be a “facts and circumstances” determination. Additionally, the final rule does not include a broad exception for generally recognized independent professional medical or clinical standards or reasonable fraud and abuse prevention or detection measures; the Departments note though that variances based on such standards or measures would not be deemed a material difference.
The new rule also addresses NQTLs related to network access. Plans must now review relevant data to assess the adequacy of provider networks and to ensure quality and adequate access to care. This could include reviewing in-network and out-of-network utilization rates, provider reimbursement rates, and metrics such as the number of providers within a certain geography or providers accepting new patients. If a review of the data shows there are an insufficient number of providers within the network, reasonable steps should be taken to correct or improve the network.
It is not enough for a plan to simply state that there are not enough providers willing to join a network or enough providers in general within a certain area. The plan should work to look for ways to expand networks to improve access such as requesting carrier efforts to attract more willing providers, increasing reimbursement rates, offering telehealth services, or easing licensure and credentialing standards to allow for more providers within the area.
Lockton Comment: Many in the industry submitted comments on the proposed rules highlighting how difficult it is for plan sponsors to obtain necessary data to review plans’ operational compliance from service providers. The Departments emphasize that MHPAEA compliance is the obligation of the plan, and although service providers are key in obtaining necessary data and information to complete an analysis, the burden is on the plan to comply. In the event employers are having problems obtaining the necessary information from service providers to complete any part of the MHPAEA analysis, the Departments recommend the employer contact the Departments regarding the service provider.
What if this is a new NQTL, and no data exists? If the plan does not have access to the relevant data because it is too small or no data exists that will reasonably assess the impact of NQTLs, plans must include a reasoned justification as to why the data is not included in the Comparative Analysis. The final rule indicates that plans must incorporate a review of relevant data as soon as it is made available.
Comparative Analysis requirements
The final rule formalizes and provides more clarity around the requirements for a plan’s Comparative Analysis, incorporating guidance provided in prior FAQs (Frequently Asked Questions).
As stated earlier, the Comparative Analysis requirement has been in effect since 2021, meaning plans must have a Comparative Analysis on hand that (1) describes and demonstrates that all NQTLs are compliant as written and in operation and (2) provides documentation and support to justify imposing each NQTL. The rules also maintain the requirement that the Comparative Analysis be provided to the DOL within 10 days of a request and provides 10 days for the employer to respond if the DOL determines the Comparative Analysis is insufficient.
The Comparative Analysis should include, at a minimum, the six specific content requirements outlined in the rule, including identifying the NQTL, the classification it applies to, the evidentiary standards, factors, or clinical support the plan used in creating and applying the NQTL, and comparing that to the NQTL application on the medical/surgical side.
Lockton comment: The Departments expect the Comparative Analysis to include robust and detailed information related to the plan NQTL and the design and application of the NQTL and be provided quickly if requested. Most of this information is best obtained from a carrier and/or TPA, especially with regard to network adequacy, reimbursement, and internal claims processing. Employers will want to work closely with their carrier and/or TPA to ensure they have a complete Comparative Analysis.
The final rule expands on current Comparative Analysis requirements to now include information related to the relevant claims data analysis applicable to NQTLs. It also requires details as to the design and application analysis to demonstrate any NQTL used by the plan are not having a direct, indirect, or unintended effect on MH/SUD claims that cause improper denials or limit access to coverage.
Lockton comment: The Departments, both in the proposed regulation and in prior MHPAEA Reports to Congress, indicate the Departments have not seen a sufficient Comparative Analysis on first pass. The new rule does provide clarification and insight into the requirement but did not include any sample or template of a Comparative Analysis that would satisfy the MHPAEA requirements, leaving employer plan sponsors, carriers, and TPAs struggling to comply.
Additionally, the rules require an ERISA plan fiduciary to certify they have engaged in a prudent process to select at least one qualified service provider to complete the plan’s Comparative Analysis. This is a welcome change from the proposed rules released last year which required a fiduciary to certify the accuracy of the Comparative Analysis. That said, employer plan sponsors will still want to review the Comparative Analysis provided to ensure it is complete and ask any questions they might have related to the findings to ensure they are acting as prudent plan fiduciaries.
Lockton Comment: What if a plan does not yet have a Comparative Analysis? The time to comply is now. The CAA requirement has been in effect since 2021, and the DOL is actively conducting plan investigations and expects to find plans in a state of good faith compliance.
Seek help from your TPAs and service providers
The NQTL analysis is complex, and the final rule adds a layer of specificity to this already difficult analysis. If you are a fully insured plan, the carrier is largely responsible for MHPAEA compliance, including the NQTL analysis. However, the plan sponsor still has a duty to monitor its service providers and should request a copy of the carrier’s NQTL comparative analysis to have on hand if DOL comes calling.
If you are self-insured plan though, how can the plan ensure compliance with MHPAEA? Practically speaking, many employer plan sponsors rely heavily on their TPA/carrier partners. TPAs are tasked with interpreting and administering the plan documents, processing claims and, in many cases, applying their own internal policies and procedures to the claims processing, including medical necessity determinations. Additionally, self-funded plans in many cases use a larger carrier network. In these instances, the TPA/carrier partners are in the best position to help work through the parity analysis regarding network-related NQTLs and various other types of NQTLs related to claims processing, preauthorization requirements, medical necessity, etc.
Lockton Comment: It would seem logical that a self-funded plan would satisfy this requirement if it mirrors a carrier’s fully insured plan design without change (including adopting the carrier’s network) and obtains, reviews and documents agreement with the analysis for the fully insured plan design. Note, though, if a plan made deviations from the prototype plan, established a separate network, or implemented other design changes that could impact MH/SUD benefits, those changes will need to be analyzed. Additionally, employers using unique plan designs, such as carved out pharmacy benefits programs or referenced-based pricing, may find it necessary to hire a third party to complete the plan’s NQTL analysis.
Effective date for the new rules
In general, the new rules come into effect for plan years beginning on or after Jan. 1, 2025, but (thankfully) the provisions that will require a bigger lift from employer plan sponsors, including those provisions related to meaningful benefits, prohibition on discriminatory factors and evidentiary standards, evaluation of outcomes data, and heightened Comparative Analysis requirements, will come into play for plan years beginning on or after Jan. 1, 2026.
Upcoming Lockton webcast
We invite you to join us for a webcast highlighting these issues and providing more examples of how the final rule will affect your plan, on Tuesday, Oct. 1 at 2-3 p.m. CT. Please register here (opens a new window)!
Not legal advice: Nothing in this alert should be construed as legal advice. Lockton may not be considered your legal counsel, and communications with Lockton's Compliance Consulting group are not privileged under the attorney-client privilege.
For more alerts, insights and additional information, click here (opens a new window) to visit Lockton's ERISA Compliance Consulting page.
Download alert (opens a new window)
