Mental Health Parity Final Regulations FAQ
What is the Federal Mental Health Parity and Addiction Equity Act of 2008?
- The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA” or the “Act”), which amended the original Mental Health Parity Act of 1996, was signed into law on October 3, 2008.
- The Act was effective January 1, 2010 for calendar year plans (prior to the issuance of regulations).
- The Act requires plans that choose to offer both medical benefits and mental health or substance use disorder benefits to offer such benefits in parity.
- Interim regulations implementing MHPAEA were published in the Federal Register by the Departments of Health and Human Services, Labor and the Treasury (the “Departments”) as “Interim Final Rules” or the “IFR” on February 10, 2010. A copy of the regulations can be obtained online. The IFR was applicable for the first plan year beginning on or after July 1, 2010. Therefore, for calendar year plans, the IFR applied starting January 1, 2011.
- The Final Regulations implementing MHPAEA were published in the Federal Register by the Departments on November 13, 2013 (the “Final Regulations” or the “Final Rule”).
The Final Rule generally applies to group health plans and health insurance issuers offering group health insurance coverage for plan years beginning on or after July 1, 2014 (or January 1, 2015 for calendar year plans). Until the applicability date of the Final Rule, plans and issuers subject to MHPAEA must continue to comply with the IFR.
See Frequently Asked Questions on November 8, 2013 regarding implementation of MHPAEA and the Final Rule: FAQs about ACA Implementation Part XVII and Mental Health Parity Implementation.
Also on January 9, 2014, Department of Labor's Employee Benefits Security Administration updated its website with FAQs about ACA Implementation Part XVIII and Mental Health Parity Implementation. Question #12 of this FAQ clarifies the intersection of MHPAEA and the ACA as it relates to grandfathered and non-grandfathered individual and small group plans and as is outlined in the following section of this FAQ. Most significantly, the FAQ provides guidance regarding the impact of the HHS transitional policy on non-grandfathered individual and small group plans. The HHS Transitional Policy is outlined in the Letter to Insurance Commissioners, Center for Consumer Information and Insurance Oversight, November 14, 2013. See http://www.cms.gov/CCIIO/Resources/Letters/Downloads/commissioner-letter-11-14-2013.PDF
What plans are required to comply with MHPAEA?
MHPAEA applies to self- funded and fully insured plans, with special opt out rules for self-funded state and local government plans, as well as specific exemptions for retiree-only plans and plans facing increased costs.
Under the Final Rule, the applicability of mental health parity requirements has been significantly expanded as a result of the Affordable Care Act ("ACA") rules concerning essential health benefits, as well as the Final Rule.
FAQs issued on January 9, 2014 indicate that for:
- Policy years beginning on or after January 1, 2014, all non-grandfathered individual market coverage that is not otherwise subject to the HHS transitional policy must include coverage for mental health and substance use disorder benefits, and that coverage must comply with the Federal parity requirements set forth in the interim final regulations issued in February 2010. The final regulations apply for policy years beginning on or after July 1, 2014 (which, for calendar year policies, is January 1, 2015).
- Grandfathered individual health insurance coverage is not subject to the EHB requirements and therefore is not required to cover mental health or substance use disorder benefits. However, to the extent mental health or substance use disorder benefits are covered under the policy, coverage must comply with the Federal parity requirements set forth in final regulations for policy years beginning on or after July 1, 2014 (which, for calendar year policies, is January 1, 2015).
The Final Rule retains the exemption for small group plans. However, to the extent non-grandfathered small group plans are required to provide essential health benefits, including mental health and substance abuse disorder benefits, such benefits must be provided in compliance with the IFR for policy years on or after January 1, 2014 and with the Final Rule for policy years on or after July 1, 2014.
Grandfathered small group plans are not subject to MHPAEA.
What Key Provisions from the Interim Final Regulations were Retained for Purposes of the Final Rule?
The Final Rule retained two key items from the Interim Final Rule: (1) financial requirements; and (2) the mathematical formula (“substantially all/predominant test”) related to quantitative treatment limits.
The Final Rule also formally adopted an enforcement “safe harbor” established under prior guidance issued by the Departments, permitting sub-classification of outpatient benefits into (1) office visits and (2) all other items and services.
How does the Final Rule differ from the Interim Final Rule?
The Final Rule is substantially similar to the Interim Final Rule with some key modifications. For example, the Final Rule:
- Permits sub-classifications for benefits furnished on an in-network basis through network tiers.
- Clarifies that plans and issuers must assign covered intermediate mental health and substance use disorder benefits (such as residential treatment, partial hospitalization, and intensive outpatient treatment) within the existing six benefit classifications in the same way that they assign comparable intermediate medical/surgical benefits to those classifications.
- Eliminates a provision that allowed differences in the application of non-quantitative treatment limitations (NQTLs) "to the extent that recognized clinically appropriate standards of care may permit a difference."
- Expands the list of “illustrative” NQTLs to include (1) multiple network tiers (i.e., preferred providers and participating providers), network tier design; and (2) restrictions based on geographic location, facility types, provider specialty and other criteria that limit the scope or duration of benefits for services.
- Includes additional language clarifying that in addition to disclosure of medical necessity and denial information required by MHPAEA, other applicable laws, such as ERISA, may impose disclosure requirements on plans concerning information relevant to medical/surgical and mental health/substance use disorder benefits.
- Expands applicability of requirements to both grandfathered and non-grandfathered individual plans, as well as non-grandfathered small group plans (to the extent such plans are required to comply with essential health benefits).
What are the key elements of the MHPAEA Regulations?
As outlined in the Act, plans must ensure that the financial requirements and treatment limitations applied to mental health and substance use disorders are not more restrictive than those applied to medical surgical benefits.
Some of the key elements of MHPAEA and the implementing regulations are as follows:
1) Classification of benefits- The Final Regulations confirm six classifications of benefits: (i) Inpatient, in-network, (ii) Inpatient out-of-network, (iii) Outpatient in-network, (iv) Outpatient out-of-network, (v) Emergency care; and (vi) Prescription drugs.
Parity must be determined on a classification by classification basis and these are the only classifications that may be used for purposes of satisfying parity.
The Final Rule formally adopted an enforcement "safe harbor" established under prior guidance issued by the Departments, permitting sub-classification of outpatient benefits into (1) office visits and (2) all other items and services.
The Final Rule also permits sub-classifications for benefits furnished on an in-network basis through network tiers, if the tiering is based on reasonable factors (such as quality, performance and market standards) and without regard to whether a provider is a mental health/substance use disorder provider or medical/surgical provider.
2) Quantitative Treatment Limitation Formula - The Final Regulations retain the specific mathematical formula for purposes of complying with the quantitative treatment limitation requirement.
The formula must be applied to the 6 different benefit classifications (or permissible sub-classifications noted above)
- The formula is applied to determine what the "predominant" medical surgical financial requirement (e.g. member cost share such as co-pays or co-insurance) is that applies to "substantially all" medical/surgical benefits within a classification (i.e. outpatient in-network.)
- In order to meet the "substantially all" requirement, a single type of member cost share (e.g.) co-pay must apply to at least 2/3 of the medical/surgical benefits within a classification (i.e. outpatient in-network.)
- If a single type of cost share does not occur at least 2/3 of the time within a medical/surgical classification (i.e. outpatient in-network) the result is that mental health and/or substance use disorder benefits within that classification must be covered at 100% without any member cost share.
- If a single type of cost share does occur at least 2/3 of the time within a medical/surgical classification (i.e. outpatient in-network), the next step is determining what the predominant cost share is within that same classification, for e.g.) whether the mental health and/or substance use disorder benefits should include a $10 co-pay versus a $20 co pay based on the medical surgical benefits.
- These determinations must be made on a plan design specific basis.
Prior to the Final Regulations, the Department of Labor (DOL) released guidance regarding compliance with the "substantially all" test required by the federal parity interim final regulations: http://www.dol.gov/ebsa/faqs/faq-mhpaea.html.
3) Non-quantitative Treatment Limitations (“NQTLs”)
NQTLs are limitations that are not expressed numerically but otherwise limit the scope or duration of benefits for treatment. Under the IFR and the Final Rule, any processes, strategies, evidentiary standards or other factors used in applying non quantitative treatment limitations to mental health or substance use disorder benefits in a classification must be comparable to, and applied no more stringently than, the processes, strategies, evidentiary standards, or other factors used in applying the limitation with respect to medical/surgical benefits in such classification.
The Final Regulations preserve the requirements associated with NQTLs as outlined in the IFR. The Final Regulations, however, eliminated a provision in the IFR that allowed distinctions between medical/surgical NQTLs and mental health/substance use NQTLs where “clinically appropriate standards of care justified a difference.”
The Final Regulations also added two new plan standards to the illustrative list of NQTLs: (a) For plans with multiple network tiers, the list now includes network tier design; (b) The illustrative list now includes restrictions based on geographic location, facility type, provider specialty and other criteria that limit the scope or duration of benefits for services under the plan or coverage.
Non-quantitative treatment limitations therefore include, but are not limited to, medical management (i.e. excluding benefits based on medical necessity or appropriateness), formulary design, provider network admission standards, provider reimbursements, geographic location, facility type, provider specialty, and network tier design.
4) Single Deductibles and Out of Pocket Limits Required.
The Final Rule does not change the requirement outlined in the Interim Final Rule that plans may not apply cumulative financial requirements (e.g., deductibles or out-of-pocket maximums) or cumulative treatment limitations (e.g., visit or day limits) to mental health or substance use disorder benefits that accumulate separately from similar requirements for medical surgical benefits. The Final Rule does not require Plans to cross accumulate the lifetime or annual maximums. This provision is also discussed in Question 2 of the February 20, 2013 FAQs About Affordable Care Act Implementation issued by HHS and the Treasury.
5) Disclosure Requirements
Under the IFR, the criteria for medical necessity determinations concerning mental health/substance use disorder benefits must be made available by the plan administrator or issuer, upon request, to any current or potential participant, beneficiary or provider. This requirement was retained by the Final Rule.
Under the IFR, the reason for any denial or reimbursement or payment with respect to mental health/substance use disorder benefits was required to be made available to participants/beneficiaries “upon request.” The Final Rule removes the phrase “upon request,” thereby requiring that the reason for any denial or reimbursement or payment be made available automatically.
Additionally, the preamble to the Final Regulations indicates that in addition to information on medical necessity criteria and reasons for denial per the Interim Final Rules, the processes, strategies, evidentiary standards and other factors used to apply a NQTL may be considered a plan document under which the plan is established or operated that generally must be furnished to plan participants within 30 days of request.
The Departments published FAQs simultaneously with the Final Rule requesting comments on whether and how to ensure greater transparency and compliance (see #8): FAQs about ACA Implementation Part XVII and Mental Health Parity Implementation
6) Frequency of Analysis
The Final Regulations clarify that a plan or issuer is not required to perform the parity analysis each plan year unless there is a change in plan benefit design, cost sharing structure or utilization that would affect a financial requirement or treatment limitation within a classification or sub-classification.
Does Federal Mental Health Parity require plan sponsors to cover mental health and/or substance abuse benefits?
No. MHPAEA does not require plan sponsors to cover mental health or substance abuse benefits. However, if a plan sponsor chooses to offer mental health or substance use disorder benefits, the law prohibits imposing more restrictive financial requirements (such as co-pays or deductibles) or treatment limitations (including quantitative treatment limitations, such as day or visit limits, and non-quantitative treatment limitations described below) on mental health or substance abuse benefits than those applied to medical or surgical benefits.
Additionally, if a plan provides mental health or substance use disorder benefits in any classification of benefits, mental health or substance use disorder benefits must be provided in every classification in which medical/surgical benefits are provided. For example, if a plan covers inpatient in-network mental health benefits, the plan must provide mental health benefits in every other classification in which medical/surgical benefits are provided.
The Final Rule clarifies that compliance with Section 2713 of the Public Health Service Act (PHSA), which requires non-grandfathered group health plans and issuers to provide coverage for certain preventive services without cost sharing (including alcohol misuse screening and counseling and tobacco use screening) does not require that mental health/substance use disorder benefits be provided in every classification in which medical/surgical benefits are provided.
As stated below, state law will continue to apply and may, for example, mandate that certain mental health/substance abuse coverage be covered under the plan.
Does Federal Mental Health Parity specify how parity must be achieved?
No. MHPAEA does not dictate how parity should be achieved. For example, the law does not say that parity should be achieved through reducing medical benefits or by increasing mental health benefits. The law only requires "parity" however the health plan chooses to structure the benefits.
- Small employer exemption - Small employer group health plans remain exempt from MHPAEA. However, the essential health benefits (EHB) rules require all non-grandfathered small group health insurance plans to provide all categories of EHB, including mental health and substance use disorder benefits and that such benefits be provided in compliance with MHPAEA.
- Any employer that has an average of between two and fifty employees during the preceding calendar year is classified as a small employer. For purposes of Federal Mental Health Parity, employers are required to count all employees (including part-time, temporary, seasonal and full-time) in order to determine if they meet the small employer exemption.
- If international employees are employees under payroll in a foreign corporation (not a branch) they will not be counted in the calculation outlined above. If the international employees are employees working and residing abroad but are US citizens and they are under the payroll of the US corporation or the payroll of a branch in a foreign country then they will be counted toward total employees who worked throughout the preceding calendar year.
- Cost-based exemption - If the parity provisions raise the total costs of any group health plan by 2% or more in the first year and 1% in the following years the plan can seek a one year exemption. The cost based exemption can only be claimed every other year. The Final Regulations clarify that the exemption will be based on the estimated increase in actual costs incurred by the plan or issuer that is directly attributable to expansion of coverage due to requirements of the law.
- Self-funded Non-Federal Government Employers - A non-federal government employer that provides self-funded group health plan coverage to its employees may elect to opt-out from requirements of Federal Mental Health parity by filing an exemption election with the Centers for Medicare & Medicaid Services ("CMS"). Guidance on this option is available.
- Retiree only plans - Plans that meet the definition of a "retiree only" plan are exempt from Federal Mental Health Parity.
- A "retiree only" plan is defined as any group health plan (and group health insurance coverage offered in connection with a group health plan) with less than two participants who are current employees. The plan must be offered solely to retirees and the retiree plan must have a separate, free standing plan for which the former employer issues a separate Summary Plan Description and files a separate Form 5500 with the Department of Labor.
- Medicaid and CHIP - The Final Regulations do not apply to Medicaid and CHIP managed care organizations, alternative benefit plans, or the Children’s Health Insurance Program ( CHIP). However, The Centers for Medicare & Medicaid Services (CMS) issued a letter on January 16, 2013, which provided guidance e on the applicability of the MHPAEA to Medicaid Managed Care Organizations (MCOs), CHIP and Alternative (Benchmark) Plans. A copy of the letter can be found online
Does Federal Mental Health Parity preempt or supersede existing state parity laws?
No. Federal Mental Health Parity establishes a floor for benefits but specifically allows states to continue to enforce any parity requirement deemed stronger than federal law (as long as state law does not compromise the federal law). For plans not subject to state laws (ERISA, self- funded plans), the federal law sets both the floor and the ceiling.
The preamble to the Final Regulations notes that if state law requires coverage of certain mental health/substance use disorder benefits that the benefits must be provided in parity with medical surgical benefits. This clarifies that if a state mandates mental health benefits but permits an annual dollar limit be imposed on such benefits, the annual dollar limit would be preempted by MHPAEA.
What mental health and substance use disorder benefits are subject to Federal Mental Health Parity?
As stated above, Federal Mental Health Parity does not require plan sponsors to offer mental health or substance abuse coverage. However, if an plan sponsor chooses to offer mental health or substance abuse benefits, the law prohibits imposing more restrictive financial requirements (such as copays or deductibles) or treatment limitations (including quantitative treatment limitations, such as day or visit limits, and non-quantitative treatment limitations described below) on mental health or substance abuse benefits than those applied to medical or surgical benefits.
Additionally, if a plan provides mental health or substance use disorder benefits in any classification of benefits, mental health or substance use disorder benefits must be provided in every classification in which medical/surgical benefits are provided. For example, if a plan covers inpatient in-network mental health benefits, the plan must provide mental health benefits in every classification in which medical/surgical benefits are provided.
Does Federal Mental Health Parity define mental health and substance use disorder benefits?
The law defines mental health and substance use disorder benefits as those "defined under the terms of the plan and in accordance with applicable Federal and State law." This means that the law defers to group health plans to define mental and substance use disorders and their coverage. Definitions must be consistent with "generally recognized independent standards of current medical practice" which include the Diagnostic and Statistical Manual of Mental Disorders, the International Classification of Diseases and State guidelines. As previously noted, where state law either defines or mandates coverage of specific mental illnesses or services, those definitions will continue to apply to plans subject to state regulation.
The Final Regulations include minor changes to certain definitions. They clarify that the definitions for "medical surgical benefits’ and “substance use disorder benefits" include benefits for items as well as services.
Is any additional federal guidance available regarding compliance with MHPAEA?
The Departments have issued several FAQs regarding implementation of MHPAEA.
- FAQ guidance was jointly prepared by the Departments and published on June 30 and December 22, 2010.
- FAQ guidance was also published on November 17, 2011 specific to the application of the non-quantitative treatment limitations (NQTLs) rule to prior authorization requirements; and specialty copayments (co-pays). These FAQs can also be found on the Department of Labor site.
- FAQs for employees specific to MHPAEA were published in May of 2012
- A set of Frequently Asked Questions were published on November 13, 2013 at the time that the final MHPAEA Regulations were published: FAQs about ACA Implementation Part XVII and Mental Health Parity Implementation
- Also on January 9, 2014, Department of Labor's Employee Benefits Security Administration updated its website with FAQs about ACA Implementation Part XVIII and Mental Health Parity Implementation
- As further guidance becomes available, we will provide timely informational updates.
Did Aetna support Plan Sponsors in determining compliance with the "substantially all" and "predominant" parity formulas?
Aetna completed financial testing for our fully insured plans, in accordance with the Federal Mental Health Parity and Addiction Equity Act and Interim Final Regulations, including the non-enforcement safe harbor issued by the Department of Labor (DOL) on July 1, 2010. We are in full compliance with the “substantially all” and all quantitative treatment limitation formulas. We have paid claims based on parity compliant plan designs that were effective for July 1, 2010 and beyond and will continue to do so. For fully insured plans, our account representatives informed customers and collaborated regarding any plan design changes that were required to comply with the Federal Mental Health Parity and Addiction Equity Act.
It is the legal responsibility of self-funded customers to determine compliance with the parity law and regulations, including any testing of their current plan design benefits. We recommend that customers work with their legal counsel and consultants to ensure compliance for their self-funded plans. We can provide case-specific data, for an additional charge, to a customer’s consultant for compliance testing. If a self-funded customer determines that their self-funded plan design may be problematic and would like official actuarial advice for compliance testing and determination of outpatient classifications, we can supply assistance through arrangements that we have made with an external actuarial firm. Upon request, we can provide a fee schedule and other details related to this service along with informational examples of plan design scenarios that may have difficulty meeting the testing requirements.
How is Aetna classifying residential behavioral health care?
As a result of the classifications set forth in the Interim Final Regulations and confirmed in the Final Regulations, the Residential Treatment Facility (RTF) Behavioral Health/Substance Use Disorder (BH/SUD) benefit is comparable to the Medical Surgical Inpatient benefit.
How is Aetna classifying partial and intensive outpatient behavioral health care?
Both partial and intensive outpatient behavioral health care benefits are classified as outpatient benefits.
How is Aetna sub-classifying outpatient benefits?
In accordance with the non-enforcement safe harbor issued by the Department of Labor on July 1, 2010 and codified in the Final Regulations, Aetna is sub-classifying outpatient (OP) benefits into 1.) office visits and 2.) all other outpatient items and services for purposes of applying the financial requirement and treatment limitation rules under MHPAEA. We are defining the outpatient office visits as those routine, specialty, preventative, and rehabilitative services that have a professional component but do not require an overnight stay at their place of service. We are defining all other outpatient items and services as including durable medical equipment and surgical and or diagnostic services.
What impact will parity have on the Aetna Employee Assistance Program (EAP)?
The Final Regulations clarify that Employee Assistance Programs that qualify as excepted benefits will not be subject to MHPAEA or the final rule. The Departments will consider an employee assistance program as constituting excepted benefits only if the employee assistance program does not provide significant benefits in the nature of medical care or treatment.
Regulatory agencies have proposed to formally amend excepted benefits to include limited vision and dental benefits; EAPs and comments are due by Feb. 24, 2014.
IRS, DOL, HHS Proposed Rules on Excepted Benefits
Can a plan sponsor opt out of offering mental health or substance use disorder coverage entirely (self-funded and/or fully insured)?
Federal Mental Health Parity applies to group health plans offering mental health or substance use disorder benefits. It does not require that applicable plans offer these benefits. We strongly recommend however, that plan sponsors do not eliminate offering mental health/substance abuse coverage. Additionally, state law will continue to apply and may, for example, mandate certain mental health/substance abuse coverage.
It has been well established that behavioral health issues are a primary driver of medical costs. There are, for example, high rates of depression with most chronic conditions. These lead to higher medical costs, poorer clinical outcomes and loss of productivity. By addressing the cost of treatment, the MHPAEA helps remove a barrier preventing people from using their benefit to get necessary services. Parity creates opportunities to treat members early before conditions worsen and become more costly.
Are Medicare supplemental insurers subject to parity?
Medicare Supplemental Insurers are not subject to the Mental Health Parity and Addiction Equity Act.
Are Medicare Advantage Plans subject to parity?
Medicare Advantage Plans offered through an ERISA group health plan are subject to the Mental Health Parity and Addiction Equity Act, unless the ERISA group health plan is a “retiree-only” plan.
Compliance with the federal parity law is the responsibility of self funded plan sponsors and Aetna cannot provide legal advice in this regard. Plan sponsors should seek their own separate counsel for legal guidance on application of the federal parity requirements. Coventry Plans, including those managed by MHNet are in process of migrating to Aetna as a result of Aetna’s 2013 acquisition of Coventry. Aetna’s interpretation and approach to federal parity compliance will apply to those Plans as they migrate to Aetna operational platforms. Any questions about Aetna's approach to Federal Mental Health Parity may be referred to your Aetna sales or account representative.