Departments Release Final Mental Health Parity Regulations

This highly anticipated final regulation makes significant revisions but still requires group health plans to ensure parity between mental health/substance use disorder benefits and medical/surgical benefits.

September 17, 2024

Key Actions

  • Review final regulations and effective dates with counsel or consultants to determine needed changes and appropriate implementation timeline.
  • Continue to comply with existing MHPAEA and CAA ’21 requirements prior to effective dates of the new rules. Work with existing service providers to ensure readiness for upcoming changes and disclosure requirements. Update related contractual, administrative, and plan documents.
  • Especially for employer plans with benefits provided through multiple service providers, ensure adequate data, reporting, and cooperation with each other and/or an independent assessor who will perform the required analysis holistically across the plan.
  • Review the revised fiduciary certification requirement with counsel; determine and implement appropriate fiduciary engagement, documentation, and oversight process. Consider whether this requires an RFP for services and additional actions.

On September 9, the Departments of Labor/Employee Benefits Security Administration (DOL/EBSA), Health and Human Services (HHS), Centers for Medicare and Medicaid Services (HHS/CMS) and Treasury (collectively the Departments) released the final rule on Requirements Related to the Mental Health Parity and Addiction Equity Act (MHPAEA).

This highly-anticipated final regulation makes significant revisions to the proposed version released in late 2023, including some changes related to the Business Group’s comments and concerns (See: Business Group on Health Comments on Mental Health Parity Proposed Rule). However, the fundamental requirements of group health plans and health insurance issuers to ensure parity between mental health/substance use disorder (MH/SUD) benefits and medical/surgical (M/S) benefits remain intact. Plans must still demonstrate that quantitative treatment limitations (QTLs) and nonquantitative treatment limitations (NQTLs) are applied in a manner comparable to and no more restrictive than those applied to medical/surgical benefits.

Effective Dates

Before getting into the details of these final rules, it is important to understand that the Departments have provided two effective dates that cover different provisions: (1) plan years starting on or after January 1, 2025; and (2) plan years starting on or after January 1, 2026. Additionally, the Departments generally view many underlying MHPAEA requirements to already apply and expect plans to be complying with prior guidance until the specified effective dates. Plans should review the effective dates and requirements in detail with their counsel to ensure they understand and have adequate time to engage with service providers and make necessary changes. Effective date highlights include:

Prior to the plan year starting on or after January 1, 2025, plans must continue to:

  • provide plan benefits for MH/SUD are “in parity” or “no more restrictive” than those M/S; and,
  • Continue performing and making the NQTL comparative analysis available to the Departments or appliable state authorities upon request, consistent with prior guidance (see: ACA FAQs Part 45)

First day of the first plan year beginning on or after January 1, 2025:

  • Certain changes to the comparative analysis requirements, including the new fiduciary certification
  • Formalize timelines for responding to requests for comparative analyses and other documents by the Departments, appropriate state authorities, or plan participants and beneficiaries.

First day of the plan year beginning on or after January 1, 2026, new requirements related to:

  • Meaningful Benefits Standards
  • Prohibition on Discriminatory Factors and Evidentiary Standards
  • Relevant Data Evaluation Requirements
  • Related Requirements in the Comparative Analyses Provisions

Background

For context, the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) created standards for the financial requirements and treatment limitations that a group health plan or group health plan issuer may impose on mental health and substance use disorder (MH/SUD) benefits. MHPAEA and its initial implementing final rules from 2013 established that those financial requirements (such as copayments, coinsurance, etc.) and treatment limitations – including quantitative treatment limitations (QTLs) and nonquantitative treatment limitations (NQTLs) – cannot be “more restrictive” than those that apply to medical and surgical (M/S) benefits. Regarding financial requirements or QTLs (such as the number of inpatient days covered), the 2013 rules provided an assessment and calculation for plans to show that these types of controls were no more restrictive and thus “in parity” with M/S benefits. However, the 2013 rules expressly excluded NQTLs from that calculation and acknowledged the challenges and differences that justified the difference.

The final rule continues to rely on a long-standing regulatory concept, grouping various plan benefits into one of six classifications and attempting to establish M/S and MH/SUD comparisons within and among such classifications. The six benefits classifications remain any plan benefits provided:

  • inpatient, in-network;
  • inpatient, out-of-network;
  • outpatient, in-network;
  • outpatient, out-of-network;
  • as emergency care; and
  • for prescription drugs

Enacted in late 2020, the Consolidated Appropriations Act of 2021 (CAA ‘21) instituted a new requirement that group health plans perform and document comparative analyses of the design and application of NQTLs, with group health plans required to make these comparative analyses available in certain circumstances beginning February 2021. The Departments released some guidance about the CAA ’21 requirements but we have been waiting for these regulations to provide reliable, compliance-focused standards.

While these final rules are intended to be comprehensive for plans, and in some ways are an improvement over the proposed rules, our preliminary impression is that more clarity may be needed on certain provisions and the DOL’s enforcement standards and expectations will be important to the practical implementation of the rules.

Highlights of the Final Rule

Plans Must Still Assess NQTLs - but the Substantially All and Predominant Test is NOT Finalized as Proposed.

The 2023 proposed rule included a four-prong test for determining whether MH/SUD benefits were in parity with M/S benefits, known as the “substantially all and predominant test.” This test involved a step-by-step quantitative analysis to ensure that: determining whether the NQTL applied to "substantially all" M/S benefits, identifying the "predominant" version of the NQTL, and ensuring MH/SUD NQTLs were no more restrictive than the predominant M/S NQTL in the same classification. This proposed test would have posed additional and significant administrative complexity, requiring extensive data collection and mathematical analysis to ensure compliance. It may have also resulted in undesirable plan design and utilization management terms undertake solely to satisfy the calculation, and not because they actually made sense for the benefits in question.

The final regulation modifies this process significantly, removing the mathematical test entirely. This is in line with the Business Group’s recommendations in its comments and discussions following the proposed rule.

In lieu of the substantially all and predominant test, the final rule adopts a more flexible, general standard for evaluating NQTLs with greater focus on qualitative aspects. In general group health plans and issuers will need to:

  • Ensure that the processes, strategies, evidentiary standards, and other factors used in the design and application of NQTLs to MH/SUD benefits are comparable to and applied no more stringently than those used for M/S benefits in the same classification.
  • Document their processes and demonstrate compliance with this requirement through comparative analysis of how NQTLs are applied.
  • Evaluate and collect relevant data, including (but not limited to) factors such as claims denials, network adequacy, provider reimbursement and utilization rates to assess whether NQTLs lead to “material differences” in access to benefits.
  • If data suggest “material differences,” take reasonable corrective actions to address the disparity and document such actions in their comparative analysis.

The Departments declined to provide a specific definition of “material differences,” instead opting again for a generalized interpretation of the term. The material differences standard, as defined in the latest set of regulations, does not rely on strict thresholds or numerical criteria, but instead consideration of all qualitative and quantitative factors. Examples of relevant facts and circumstances that contribute to this standard include (but are not limited to): the terms of the NQTL at issue, the quality or limitations of the data, causal explanations and analyses, evidence as to the recurring or non-recurring nature of the results and the magnitude of any disparities.

The Departments indicate that to the extent the relevant data show material differences in access to MH/SUD benefits compared to M/S benefits, the Departments would consider these material differences to be a “strong indicator” of noncompliance (the Departments are also clear that these material differences would not be considered an automatic violation of parity).

Comparative Analysis Requirements

The regulations still require comparative analysis to be made and outline the necessary elements that must be included in the comparative analysis of each NQTL imposed under the plan.

More specifically, the comparative analysis of each NQTL imposed under the plan must include six components:

  • Description of the NQTL
  • Identification and definition of the factors & evidentiary standards considered in designing and applying the NQTL
  • Description of how the factors are utilized in the design and application of the NQTL
  • Demonstration of comparability and stringency of the NQTL, as written
  • Demonstration of comparability and stringency of the NQTL, in operation
  • Findings and conclusions, including the fiduciary certification (along with any actions the plan intends to address potential areas of noncompliance).

If certain data is not available for the comparative analysis, the final rule provides that a plan should include detailed explanation of lack of relevant data and when/how the data will become available to be collected and analyzed.

New Fiduciary Certification in the Comparative Analysis (Different than in the Proposed Rule)

The final rule makes significant modification to the previously proposed special fiduciary certification requirement. In the proposed edition of the regulations, plans subject to ERISA would have been required to have one or more named plan fiduciaries provide a special certification that they have reviewed the comparative analysis and whether they found it to be in compliance with the content requirements of the rules. We strongly opposed the proposed certification based on significant administrative burden, material change to the underlying qualifications to serve as a fiduciary, and unwarranted enforcement and litigation risk. The Business Group urged the Departments to reconsider this proposed requirement and in these final rules they have made important revisions.

The final rule maintains a fiduciary certification requirement but instead of certifying compliance per se, fiduciaries will need to confirm that they engaged in a “prudent process” to select qualified service providers for conducting the comparative analysis and took steps to appropriately supervise, review, and monitor the service provider’s performance and work product – a standard more in line with ERISA fiduciary duties more broadly. While this certification will still require a specific process and mindful documentation to be able to show appropriate fiduciary engagement, review, and selection, it is a better standard than would have otherwise applied under the proposed rule. Note that in some cases, certain fiduciaries may feel an RFP for services should be undertaken at a reasonable point in the future to consider service provider options and show appropriate selection processes.

Meaningful Benefits

The proposed rule raised the specter of a new potential standard for a plan intending to provide any MH/SUD coverage by asserting that such coverage would have to provide “meaningful benefits” in every applicable classification. The final rule adopts the “meaningful benefit” provision with some changes – attempting to provide additional clarity with new terms and examples. However, the standard, in our view, remains vague, and may require additional clarifications. Further, questions over the meaningful benefit provisions seem to have high potential as subjects of enforcement disputes and litigation challenges to the rule.

In general terms, the final rule provides that the determination of whether a plan’s MH/SUD coverage is meaningful will be done by comparison to the benefits provided for medical conditions and surgical procedures in each classification. At minimum, a plan would need to provide MH/SUD coverage for a condition in each classification in which the plan provides M/S benefits. Additionally, the final rules add that to be considered “meaningful” the plan must cover a “core treatment” for MH/SUD. In turn, a core treatment is described as a standard treatment or course of treatment, therapy, service, or intervention indicated by generally recognized independent standards of current medical practice.

Note on Possible Legal Challenges to the Final Rule

Looking forward, it is highly likely that these final rules will face legal challenges – potentially from different stakeholder groups seeking conflicting changes via the courts. Employer plans may have interest in seeking judicial relief from standards believed to be vague, unworkable, or overreaching, while providers and patients may assert that the final rules do not go far enough or reflect their interpretation of legislative intent. Following the Supreme Court of the United States’ (SCOTUS) recent ruling in Loper Bright Enterprises v. Raimondo these types of cases may have more of a chance to pushback on or cause revisions to agency rulemaking. As a reminder, the Loper Bright decision overturned the Chevron doctrine – a longstanding legal precedent granting deference to the interpretation of the federal agency responsible for administering a statute so long as the interpretation was “reasonable.” (See: Supreme Court’s Decision(s) Closing the 2023 Term Open Big Questions for Health Care Regulations and Judicial Review.)

Without Chevron, and presumably using the new standard set by Loper Bright, a federal court considering a legal challenge to these final rules would generally be expected to independently assess the Departments’ rulemaking using its own statutory interpretation and assessment of legislative intent for MHPAEA and CAA ’21 to determine whether the Departments acted appropriately. A court may consider the Departments’ interpretation of the statute and how they chose to craft the rules as factors, but the court would not be required to defer to the interpretation or expertise of the Departments in its decision.

We expect various industry stakeholders may be considering litigation in earnest and determining whether, when, and in which federal circuit to raise potential challenges to these final rules. Often a first step in such litigation would be to request an injunction to temporarily delay the rules from coming into effect while the lawsuit is proceeding. If this happens it may delay the otherwise applicable effective dates of the final rules, but plans should be mindful that general and self-implementing MHPAEA and CAA ’21 statutory requirements would likely still be effective and enforceable during any delay (potentially in accordance with previously issued regulations, if not challenged and encumbered by the lawsuit as well).

We will continue to monitor for additional guidance as well as any litigation related to these final rules and will provide updates as appropriate.

We provide this material for informational purposes only; it is not a substitute for legal advice.

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