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January 22, 2014

Final Rule on the Mental Health Parity and Addiction Equity Act

A final rule implementing the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) has been published by the Departments of Health and Human Services, Labor and Treasury.1 To a great extent, the final rule parallels the interim final rule published in February 2010.2 The similarities between the final rule and the 2010 rule mean that plan sponsors that have already implemented MHPAEA will be able to continue to comply with the rules with limited adjustments. The most significant adjustment will be with respect to coverage of intermediate mental health (MH) and substance use disorder (SUD) services, such as residential treatment, partial hospitalization and intensive outpatient treatment.

Although the MHPAEA does not apply to a group health plan of a small employer, because of a new requirement in the Affordable Care Act that insured, non-grandfathered small group plans3 cover the essential health benefits package, which includes MH and SUD services, and comply with the MHPAEA, such plans must comply with the parity rules despite the exemption in the MHPAEA itself.

The final rule takes effect with the plan year beginning on or after July 1, 2014. Until then, the 2010 interim final rule remains in effect. To the extent that a plan has a delayed effective date because of one or more collective bargaining agreements, that plan’s effective date is not modified by the final rule.

Overview of the Parity Standards and the Final Rule

In general, the MHPAEA requires that financial requirements (such as coinsurance) and treatment limitations (such as visit limits) imposed on MH and SUD benefits cannot be more restrictive than the predominant financial requirements and treatment limitations that apply to substantially all medical/surgical benefits. The final rule retains the general approach to parity laid out in the 2010 interim final rule (the 2010 rule). This approach requires plan sponsors to measure parity within six separate benefit classifications: (1) inpatient, in-network, (2) inpatient, out-of-network, (3) outpatient, in-network, (4) outpatient, out-of-network, (5) emergency care, and (6) prescription drugs. Parity applies to all requirements or limits expressed numerically (e.g., deductibles, coinsurance or day limits), as well as to all non-quantitative treatment limits (e.g., medical management tools, such as prior authorization).

Plan sponsors must perform an initial MHPAEA parity analysis to assure that the plan is in compliance with the law. Plan sponsors should also analyze benefits for MHPAEA when there is a change in plan benefit design, cost-sharing structure, or utilization that would affect a financial requirement or treatment limitation within one of these classifications. A parity analysis is not necessary every year, but is required when these changes occur. Plans should assure that an MHPAEA analysis has been prepared or updated in 2014 to take the final rule into consideration.

Important Clarifications in the Final Rule

The final rule includes several important clarifications, including the following:

  • Multiple Networks Health plans that use two or more provider networks may use different reimbursement tiers between the networks. For example, a plan might have a preferred network where patient cost sharing is the lowest and a second network of participating providers where patient cost sharing is greater. As long as the plan establishes these tiers based on objective factors (such as quality, performance, and market standards) and without regard to whether the provider provides medical/surgical or MH or SUD services, each network is treated separately for testing for MHPAEA parity.
  • Intermediate MH/SUD Treatment Settings  The final rules clarify how MHPAEA affects the scope of plan coverage for intermediate services, such as residential treatment, partial hospitalization, and intensive outpatient treatment, and how these services are tested under the six classifications. Plans must include these intermediate services within one of the six classifications when conducting an MHPAEA assessment. For example, if a plan sponsor classifies care in a skilled nursing facility or rehabilitation hospital as an inpatient benefit, then the sponsor must likewise treat MH or SUD residential treatment as an inpatient benefit. The result of this clarification is that in most situations, a plan with day limits on skilled nursing facilities, but not on inpatient hospital care generally, would not be able to apply day limits to MH or SUD care in residential treatment facilities. Moreover, the exclusion of MH or SUD treatment in any setting outside of a hospital (such as in a residential treatment center) while providing non-hospital inpatient treatment for medical/surgical care would violate the final parity rule. Similarly, if a plan treats home health care as an outpatient benefit, then intensive outpatient treatment or partial hospitalization would have to be considered an outpatient benefit as well.
  • Preventive Services under the Affordable Care Act The final rule states that plans that provide coverage for MH or SUD services only to the extent required by the preventive services requirement of the Affordable Care Act (applicable only to non-grandfathered plans) are not required to provide MH or SUD services in any additional classifications. The preamble mentions alcohol misuse screening and counseling, depression counseling and tobacco-use screening as required preventive services.

New Cost-Based Exemption

The final rule includes a section on how to qualify and apply for the exemption based on increased costs. It is available to plan sponsors that incur a 2 percent increase in costs in the first year or 1 percent in any subsequent year. However, as plans must first comply with the law and then claim the exemption in the following year, it is available only in alternating plan years. The preamble notes that since the effective date of the 2010 rule, no employer has applied for a cost-based exemption.

Implications for Plan Sponsors

Plan sponsors that have already fully implemented plan changes necessary to comply with the MHPAEA will only need to review a few aspects of the plan design to determine whether the plan complies with the final MHPAEA rules. Key areas for these plans to address are how intermediate treatment facilities are reimbursed, and how network tiers are affected by MHPAEA.

Plan sponsors that are not yet required to comply with the law because of a delayed effective date should undertake an MHPAEA analysis that includes all the terms of the final rules. The analysis, which is used to assure that the plan is in compliance, would be useful if an audit is conducted because it demonstrates the plan’s actions and can be used to defend them, if challenged. Because these analyses are generally time-consuming due to the detail in the MHPAEA regulations, plenty of time should be allocated to conduct them.

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As with all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their attorneys for authoritative advice on MHPAEA and related guidance, including the final rule summarized in this Capital Checkup. Sibson Consulting can be retained to work with employers and their attorneys on compliance issues.

1 The final rule was published in the November 13, 2013 Federal Register. The Departments also released a new set of answers to frequently asked Questions (FAQs) on the final rule, which are on the Department of Labor (DOL) website. (Return to the Capital Checkup.)

2 For information on the interim final rule, see Sibson’s March 2010 Bulletin, “MHPAEA Regulations Released.” (Return to the Capital Checkup.)

3 For group health plans subject to the Employee Retirement Income Security Act (ERISA) or to the Internal Revenue Code, this means an employer that employed on average 50 or fewer employees on business days during the preceding year. (Return to the Capital Checkup.)