Proposed mental health parity rule signals significant updates to longstanding requirements

To strengthen the longstanding Mental Health Parity and Addiction Equity Act (MHPAEA), the Departments of Labor, Treasury, and Health and Human Services (the Departments) recently released a Proposed Regulation (opens a new window), a Technical Release (opens a new window)and the 2023 MHPAEA Report to Congress (opens a new window)outlining enforcement efforts and priorities.

Executive summary

  • The proposed rule provides a three-part analysis for plan sponsors to determine parity with regards to non-quantitative treatment limitations or requirements (NQTLs). The three-part analysis focuses on showing operational compliance through review of relevant plan data and provides objective criteria in determining parity of plans’ NQTLs in accordance with MHPAEA.

  • The proposed rule formalizes, provides more clarity, and expands on requirements with regard to a plan’s comparative analysis of NQTLs (Comparative Analysis) applicable to mental health and/or substance use disorder benefits.

  • The proposed rule includes updated key terms, clarification of current requirements and welcome examples of potential plan NQTLs and the related MHPAEA analysis.

  • The 2023 MHPAEA Report to Congress (Report) highlights the substantial MHPAEA enforcement efforts of the Departments and provides insight into specific MHPAEA priorities, including: enforcement focus on network adequacy, preauthorization and concurrent review requirements; provider standards and reimbursement rates; and impermissible exclusions of key treatments for mental health and substance use disorders.

  • The Departments are seeking comments on the proposed rule from the public through October 2, 2023. Employers who wish to provide comment can do so electronically here (opens a new window).

Current state: What employers should be doing

The Mental Health Parity and Addiction Equity Act (MHPAEA) is already law and applicable to most group health plans.

In general, MHPAEA requires health plan benefits for mental health and substance use disorders (MH/SUD) be treated the same (or better) than medical/surgical benefits, specifically with regard to quantitative treatment limitations or requirements and NQTLs.

Employer-plan sponsors should already be taking steps to review their plans for compliance with current MHPAEA requirements, including the requirement to have a Comparative Analysis reflecting NQTL compliance available upon request. The Departments acknowledge that employers rely on their carriers and/or third-party administrators (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.

Lockton comment: 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 are a fiduciary under ERISA and subject to ERISA fiduciary provisions and potential liability based on their actions. Employers may want to review contracts to determine if their carriers/TPAs acknowledge fiduciary status.

Employers should review their plans with their advisors, carriers and/or TPA partners and identify any potential red flags or problematic provisions. The DOL self-compliance tool (opens a new window) is a good resource to help with plan reviews.

Additionally, employers will want to have an appropriate Comparative Analysis available that evaluates and sufficiently supports all plan NQTLs and includes the rationale, findings, and conclusions to demonstrate compliance.

Going forward, as employer-plan sponsors enter contracts with carriers and TPAs, they should consider including contract provisions requiring the carrier/TPA to administer the plan in accordance with MHPAEA requirements, including providing a complete Comparative Analysis and assisting the employer in reviewing data and plan network information to show the plan operates in accordance with MHPAEA.

It is hard to determine when the proposed rule will be finalized or what changes we might see in the final rule based on the public comments. We suspect we will likely see many heightened requirements come into play in the final rule. Given the scope of the regulatory action, it will likely take some time for the industry to fully digest and understand the impact the final rule, but employer-plan sponsors and industry experts should be prepared to analyze and implement requirements once the file rule is released.

Lockton Compliance Consulting will be ready to assist employers in navigating the new requirements and any potential changes that might occur when the rule is finalized.

What is MHPAEA?

MHPAEA was passed in 2008, and regulations were first finalized by the Departments in 2013.

MHPAEA requires “parity” with regard to any quantitative treatment limitations or requirements (such as plan copays, deductibles, or visit limitations) or NQTLs (such as prior authorization requirements, network adequacy or medical necessity determinations) applied to MH/SUD benefits as compared to medical/surgical benefits. Plans must ensure any quantitative limitation 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.

Lockton comment: MHPAEA analysis focuses on six specific benefit classifications: In-patient/in-network, in-patient out-of-network, outpatient/in-network, outpatient/out-of-network, prescription drugs, and emergency services.

MHPAEA guidance has continued to evolve since that time, and more recent legislation has shown the continued priority of increasing and improving mental health access and care and ensuring parity in the provision of mental health and substance use disorder benefits in health benefits programs.

The Consolidated Appropriations Act in 2021 (CAA) added another requirement requiring employer plan sponsors to prepare a Comparative Analysis of any plan NQTL imposed on MH/SUD benefits to reflect parity as related to medical surgical benefits within a similar classification. As of Feb. 10, 2021, plans must be able to provide the Comparative Analysis to regulators and plan participants upon request.

Lockton comment: Since the inception of MHPAEA, the Departments have attempted to assist employers and carriers in understanding and complying with MHPAEA requirements by providing FAQs and a self-compliance tool. However, the guidance to date remains complex, and employers and carriers alike struggle to understand and comply with MHPAEA, especially as it relates to NQTLs. Specifically with regard to the Comparative Analysis requirement, we lack clear and definitive guidance as to which plan provisions constitute NQTLs and what the Departments would deem to be a sufficient analysis to justify a plan’s NQTL, leaving many employers and carriers struggling to understand where to focus their analytical efforts or know when an NQTL passes muster under the rules.

Fast forward to today, where we now have a substantial proposed rule released by the Departments to strengthen MHPAEA.

The proposed rule

The proposed rule has no immediate impact on employer-sponsored health plans. Still, we will highlight some key provisions within the proposed rule that could impact employer plan sponsors if the proposed rule is finalized as written.

The devil is in the data for NQTLs.

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 proposed rule elaborates on this current standard and establishes a three-part analysis for determining if a plan’s application of an NQTL on MH/SUD benefits meets parity requirements. The test calls for analysis of relevant plan data and outcomes to demonstrate parity.

1. Substantial/predominant test: If finalized, the proposed rule would first require a plan to show that any NQTL applied to MH/SUD benefits is no more restrictive than the predominant NQTL applied to substantially all of the medical/surgical benefits in the same classification.

Lockton comment: The substantial/predominant test is not new in this realm. MHPAEA already requires plan sponsors to utilize the test to determine parity compliance of a plan’s quantitative treatment limitations and requirements, such as cost-sharing or visit limitations. The proposed rule would take the same objective test, basically a mathematical formula, and apply it to plan NQTLS.

2. Design and application analysis: The analysis must show the design and application of any NQTL applied to MH/SUD benefits is not based on factors or evidentiary standards that innately discriminate against MH/SUD disorders.

3. Relevant data analysis: The proposed rule also requires a plan to collect and review plan data to show the plan does not operate in a manner resulting in clear disparity in the outcomes of MH/SUD benefits versus medical surgical benefits. Distinct differences found in the review of the data (for instance, a higher number of MH/SUD benefits being denied during the prior authorization process) would indicate the NQTL was applied more stringently to MH/SUD benefits, violating parity requirements.

Lockton comment: Current MHPAEA rules and guidance provide little insight as to how a plan demonstrates parity “in operation.” We have encouraged plan sponsors to review certain plan data, including plan claims and appeals information to identify any patterns or red flags that might indicate parity problems based on how the NQTL is applied in plan operations. The proposed requirements reflect a similar process but with more concrete requirements and guidance as to what data should be reviewed and how.

In tandem with the proposed rule, the Department of Labor (DOL) issued a technical release that provides more insight into the data analysis requirements and what specific information would need to be collected and analyzed as part of the NQTL analysis relating to the adequacy of a plan’s MH/SUD network. The DOL also discusses the potential of creating a future safe harbor for plan sponsors and carriers to demonstrate compliance and is seeking comments from the public relating to the data collection and analysis requirements.

Lockton comment: The proposed three-part analysis will require plans and issuers (with the help of their health plan actuaries) to do a deep dive into the relevant plan-level claims data to demonstrate parity. Plan sponsors will need to work closely with their carrier and/or TPA partners to obtain the various elements needed for the analysis. We have been and will continue to strongly encourage plan sponsors to get assurances from their carrier and TPA partners in writing that they will provide any and all plan data, including information related to plan networks, provider reimbursement standards and quality metrics in order to demonstrate compliance with MHPAEA.

Note, for each part of the three-part analysis, the proposed ruleprovides exceptions for plans that impartially follow “generally recognized independent professional medical or clinical standards” or related to fraud, waste, or abuse.

Other key provisions of note

Updating key terms: The proposed rule updates key terms and definitions such as “medical/surgical benefits,” “mental health benefits,” and “substance use disorder benefits.” Of note, the amended definitions would classify certain benefits, conditions, and disorders based on “generally recognized independent standards of current medical practice,” effectively eliminating the ability to define terms based on state guidelines if those guidelines don’t align with generally accepted standards of current medical practice.

Lockton comment: Currently, MHPAEA allows plans to define benefits based on state guidelines. For example, some states define autism as a medical condition, not a mental health condition. If a plan were to adopt certain state guidelines to define mental health benefits under the plan, autism benefits would be classified as medical/surgical benefits, avoiding the application of MHPAEA and the stringent parity requirements to those autism benefits.

“Meaningful Benefit” requirement: The proposed rule reiterates prior guidance that if a plan provides benefits for a mental health condition or substance use disorder in any classification, the plan must provide MH/SUD benefits in all classifications that medical/surgical benefits are provided in. Additionally, the plan must provide “meaningful benefits” in each classification. The proposed rule provides various examples of the application of this requirement.

Comparative Analysis requirements: The proposed rule formalizes and provides more clarity around the requirements for a plan’s Comparative Analysis, incorporating guidance provided in prior FAQs. However, it also expands on those requirements, including requiring an ERISA plan fiduciary certify the findings and conclusions of the Comparative Analysis.

Lockton comment: Employers, carriers, and industry partners have continuously pushed the Departments for more clarity as to what they would deem to be a sufficient Comparative Analysis. Although the proposed rule and guidance to date provide some insight, employer plan sponsors and carriers still struggle with compliance, as evidenced by the MHPAEA Report to Congress finding that no Comparative Analysis received as of the date of the report was sufficient when first provided to regulators. We have yet to see an example of a Comparative Analysis that the Departments have deemed to be sufficient.

MHPAEA opt-out elimination: The Consolidated Appropriations Act of 2023 eliminated the ability of self-funded non-federal governmental plans to opt out of MHPAEA compliance.

The proposed rule outlines the sunsetting of the opt-out provision. Specifically, no new opt-outs are allowed after Dec. 29, 2022, and any opt-outs expiring on or after June 27, 2023 cannot be renewed. The only exception is for plans subject to collectively bargained agreements, allowing current opt-out elections to continue through the expiration of the last collective bargaining agreement.

Lockton comment: Many self-funded, non-governmental plans with opt-outs have historically operated in the spirit of MHPAEA even under an opt-out, but plan sponsors will want to work with their vendor partners to ensure their plans comply with all MHPAEA requirements (including the Comparative Analysis) when their current opt-outs expire.

Effective date

If finalized, the proposed rule would apply to group health plans beginning on the first day of the first plan year beginning on or after Jan. 1, 2025.

Lockton comment: Keep in mind current MHPAEA requirements remain in effect, including the requirement that plan sponsors are prepared and have a Comparative Analysis of plan NQTLs ready and waiting should the Departments come knocking. We suspect the DOL will continue to prioritize MHPAEA enforcement efforts while awaiting finalization of the proposed rule.

Findings of the MHPAEA Comparative Analysis Report to Congress

In conjunction with the proposed rule, the Departments released their annual MHPAEA Report to Congress (Report) focusing on the enforcement efforts, particularly their findings related to the CAA requirement that plan sponsors provide a Comparative Analysis to reflect NQTL compliance with MHPAEA.

One key finding of the Report of specific interest to employer plan sponsors is that no Comparative Analysis reviewed was sufficient to show compliance with MHPAEA at first pass, resulting in numerous insufficiency notices from the Departments. The Departments are hopeful for improvement going forward based on enforcement efforts and the new proposed rule.

Lockton comment: The Departments expect the Comparative Analysis to include robust and very detailed information related to the plan NQTL and the design and application of the NQTL. Most of this information likely needs to be obtained from a carrier and/or TPA, especially regarding network adequacy, reimbursement, and internal claims processing. The DOL has been willing to work with employers to obtain the necessary information, at times issuing several notices of insufficiency specifying what additional information is needed. Those notices have proven to be helpful both in gaining insight into the Comparative Analysis requirements as well as pushing vendor partners to collect and analyze the data needed to show compliance.

The Departments remain committed to rigorous enforcement of MHPAEA, focusing on high-impact cases and continued review of the Comparative Analysis. Plainly speaking, MHPAEA will continue to be a top priority, and employer-plan sponsors will want to ensure they are ready in the event the DOL comes to see them.

The Report includes several examples of successful enforcement efforts including:

  • Reprocessing of improperly denied drug-testing claim.

  • Eliminating impermissible preauthorizations leading to improperly denied claims and enhancing plan coverage for mental health and substance use disorder benefits.

  • Coverage of nutritional counseling for participants and beneficiaries suffering from eating disorders.

  • Addition of telehealth benefits for MH/SUD services.

  • Improved coverage and access to ABA therapy.

  • Removal of employee assistance programs (EAPs) as a gatekeeper to obtaining MH/SUD benefits under the medical plan.

  • Removal of plan exclusion of opioid treatment with methadone.

  • Updated provider network standards, improving access to network providers for those seeking MH/SUD services.

Lockton comment: These highlighted successes provide good insight into the Departments’ position on various plan provisions. Employer-plan sponsors should review their plans to determine if they contain any similar provisions or restrictions.

If violations are identified, the DOL will require the plan to remove non-compliant provisions and pay improperly denied benefits, and employer-plan sponsors could be subject to an excise tax under Tax Code Section 4980D(b) of up to $100 per day per affected individual. Additionally, the CAA provides that in certain circumstances plans found to be in violation of MHPAEA will be included in the following year’s MHPAEA Report to Congress, which is publicly available. The plan name and the nature of the violation will be reported.

Want to learn more?

For a deeper dive into the proposed rule and MHPAEA enforcement efforts, please join our webcast on Aug. 24, 2023, at 3:00 pm CST, where three former DOL investigators, Suzanne Bach, Ethan McWilliams, and Rory Kane Akers, will discuss where we are with MHPAEA and what we might be able to expect. Download article (opens a new window)