Mental Health Parity Final Rule Released

The Departments of Health and Human Services (HHS), Labor and Treasury (jointly, the Departments) released the anticipated final rule for Mental Health Parity and Addiction Equity Act (MHPAEA). The final rules reflect and address the thousands of comments received from the public during the comment period on the proposed rules that were published on August 3, 2023. For full details on the 2023 Proposed Rules, see the prior Leavitt Group article Proposed Rule Issued to Strengthen Mental Health Parity Requirements. The final rule applies to all health plans for plan years beginning on or after January 1, 2025, with key requirements such as conducting the Non-Quantitative Treatment Limitations (NQTL) beginning plan years January 1, 2026 (with the NQTL self-audit audit requirement already in effect since the Consolidated Appropriations Act of 2021 and now codified in the final rule).

The MHPAEA rule applies to group health plans sponsored by employers with more than 50 employees. However, the Affordable Care Act (ACA) applies small group market reforms to insured plans mandating federal parity requirements for Mental Health/Substance Use Disorder (MH/SUD).

The MHPAEA rules mandate that any financial requirements (e.g., copays, deductible, and coinsurance) and treatment limitations (e.g., quantitative limits such as day limits and NQTLs such as step therapy, treatment limitations, and prior authorizations) imposed on MH/SUD benefits be no more restrictive than the ones applied to Medical and Surgical benefits (M/S). See the prior Leavitt Group article Mental Health Parity and Addiction Equity Act (MHPAEA). Opponents of the law say that imposing the new mandates will cause employers to stop offering mental health and substance use disorder benefits as the new requirements are unworkable and likely to be challenged. The MHPAEA rule itself does not mandate offering mental health and substance use disorder coverage, although some laws such as the Affordable Care Act may. The Final Rule includes specific additional consumer protections, such as:

Ensuring that parity applies to intermediate levels of care received in residential treatment or intensive outpatient settings;
Clarifying the scope of the transparency required by health plans, including the disclosure rights of plan participants, to ensure compliance with the law;
Clarifying that parity applies to all plan standards, including geographic limits, facility-type limits and network adequacy; and
Eliminating an exception to the existing parity rule that was determined to be confusing, unnecessary and open to abuse.

The prior Proposed Regulations required health plans to conduct a comparative analysis or self-audit of any mental health and substance use disorder benefits to determine parity with medical/surgical benefits. See the prior Leavitt Group article Mental Health Parity & Addiction Equity Act (MHPAEA) Self-Compliance Tool updated for 2020. Health plans are required to evaluate out-of-network providers and treatment limitations. See the article for full details.

The Consolidated Appropriations Act of 2021 amended MHPAEA to require health plans and health insurance issuers to conduct comparative analyses of the NQTLs used for M/S benefits compared to MH/SUD benefits. These analyses must contain a detailed, written and reasoned explanation of the specific plan terms and practices at issue and include the basis for the plan’s or issuer’s conclusion that the NQTLs comply with MHPAEA.

Final Rule

The final rules add a purpose section to the regulations, consistent with the statute, which emphasizes that plans must not design or apply financial requirements and treatment limitations that impose a greater burden on access (that is, are more restrictive) to MH/SUD benefits under the plan than they impose on access to medical/surgical benefits in the same classification of benefits and note that the MHPAEA regulations should be interpreted in a manner consistent with the purpose section.

Among other things, these final rules:

Make clear that MHPAEA protects plan participants, beneficiaries, and enrollees from facing greater restrictions on access to MH/SUD benefits as compared to M/S benefits.
Reinforce that health plans and issuers cannot use NQTLs that are more restrictive than the predominant NQTLs applied to substantially all M/S benefits in the same classification. Examples of NQTLs include prior authorization requirements and other medical management techniques, standards related to network composition, and methodologies to determine out-of-network reimbursement rates.
Require plans and issuers to collect and evaluate data and take reasonable action, as necessary, to address material differences in access to MH/SUD benefits as compared to M/S benefits that result from application of NQTLs, where the relevant data suggest that the NQTL contributes to material differences in access.
Codify the requirement in MHPAEA, as amended by the Consolidated Appropriations Act, 2021, that health plans and issuers conduct comparative analyses to measure the impact of NQTLs. This includes evaluating standards related to network composition, out-of-network reimbursement rates, and medical management and prior authorization NQTLs.
Prohibit plans and issuers from using discriminatory information, evidence, sources, or standards that systematically disfavor or are specifically designed to disfavor access to MH/SUD benefits as compared to medical/surgical benefits when designing NQTLs.
Implement the sunset provision for self-funded non-Federal governmental plan elections to opt out of compliance with MHPAEA.

Additionally, the final rules add new definitions for the following terms:

“Evidentiary standards” are any evidence, sources, or standards that a plan or issuer considered or relied upon in designing or applying a factor with respect to an NQTL
“Factors” are all information, including processes and strategies (but not evidentiary standards), that a plan or issuer considered or relied upon to design an NQTL or to determine whether or how the NQTL applies to benefits under the plan or coverage.
“Processes” are actions, steps, or procedures that a plan or issuer uses to apply an NQTL.
“Strategies” are practices, methods, or internal metrics that a plan or issuer considers, reviews, or uses to design an NQTL.

The definition of each of these terms includes several examples in the final rules.

Comparative Analysis Content Requirements

Plans and issuers that cover both M/S benefits and MH/SUD benefits and impose NQTLs on MH/SUD benefits must perform and document a comparative analysis of the design and application of each applicable NQTL. The final rules require the comparative analysis to contain, at a minimum, six content elements:

a description of the NQTL, including identification of benefits subject to the NQTL;
identification and definition of the factors and evidentiary standards used to design or apply the NQTL;
a description of how factors are used in the design or application of the NQTL;
a demonstration of comparability and stringency, as written;
a demonstration of comparability and stringency, in operation, including the required data, evaluation of that data, explanation of any material differences in access, and description of reasonable actions taken to address such differences; and
findings and conclusions.

Material Differences and Reasonable Action

If the evaluated relevant data suggest that the NQTL contributes to material differences in access to MH/SUD benefits as compared to M/S benefits, that will be considered a strong indicator of a MHPAEA violation. Differences in access are material if, based on all relevant facts and circumstances, the difference in the data suggests that the NQTL is likely to have a negative impact on access to MH/SUD benefits as compared to M/S benefits.

However, differences in access to MH/SUD benefits are not treated as material if they are attributable to generally recognized independent professional medical or clinical standards or carefully circumscribed measures reasonably and appropriately designed to detect, prevent, or prove fraud and abuse. If material differences in access exist, the plan or issuer must take reasonable action, as necessary, to address them to ensure compliance with MHPAEA in operation.

The final rules provide examples of possible reasonable actions that a plan or issuer could take to address any material differences in access for NQTLs related to network composition standards.

Sunset of MHPAEA Opt-Out

A little-known rule is that there was a limited opt-out of the MHPAEA rules. Effective January 1, 2025, opt-outs no longer exist for MHPAEA. In these final rules, HHS finalizes regulatory amendments to implement the sunset provision for self-funded non-Federal governmental plan elections to opt out of compliance with MHPAEA, as adopted in the Consolidated Appropriations Act, 2023.

Applicability Dates

The final rules generally apply to group health plans and group health insurance coverage on the first day of the first plan year beginning on or after January 1, 2025. However, the meaningful benefits standard, the prohibition on discriminatory factors and evidentiary standards, the relevant data evaluation requirements, and the related requirements in the provisions for comparative analyses apply on the first day of the first plan year beginning on or after January 1, 2026.

If a plan or issuer receives a final determination that an NQTL is not in compliance with the comparative analysis requirements, including because the plan or issuer has not submitted a sufficient comparative analysis to demonstrate compliance, the relevant Department may direct the plan or issuer to not impose the NQTL with respect to MH/SUD benefits unless and until the plan or issuer demonstrates compliance or takes appropriate action to remedy the violation.

The final rules apply to health insurance issuers offering individual health insurance coverage for policy years beginning on or after January 1, 2026.

Timing to Provide Results

ERISA plans generally must furnish the comparative analysis to plan participants and beneficiaries upon request within 30 days.

Plans must submit a comparative analysis to the Departments upon request within 10 business days of receipt and furnish additional information requested within 10 business days after such a request for additional information. This means plans will have little time to respond if they have not already completed the analysis. Making it more imperative to conduct a comparative analysis prior to an audit or request.

Upon notice of a final determination of noncompliance, a plan must notify all participants and beneficiaries enrolled in the plan or coverage, within seven business days, that the plan has been determined to not be in compliance with the requirements of MHPAEA.

Conclusion

Health plans should engage with the self-audit tool or a qualified MHPAEA audit service provider. Audits are mandatory and often overlooked. The final rules strengthen the proposed rules in its audit requirements and NQTL assessment and parity requirements. Work with your Leavitt Group Trusted Advisor in shaping your health plan mental health and substance use disorder coverage to ensure compliance with the MHPAEA rules.