Before the interim final rules for the Mental Health Parity and Addiction Equity Act (MHPAEA) were released in February 2010, most employers were ready to do whatever was necessary to ensure compliance with the 2008 law. Then, two things happened.
First, the regulations themselves were more complex than expected, and the changes some employers had made to their mental health benefits to ensure parity proved to be insufficient to pass the required testing. “Most employers were open to parity as an objective,” said Mike Thompson, a principal with PricewaterhouseCoopers in New York. “However, the requirements are more onerous than expected.” For example, the regulations require testing for parity among six classifications of benefits. As a result, benefits that achieve parity from an actuarial standpoint still might not pass these tests.
Second, certain provisions of the Patient Protection and Affordable Care Act, the health care reform law enacted in March 2010, are likely to have a major impact on mental health parity compliance. However, because the law was so broadly written, most employers do not know exactly how health care reform will affect mental health parity compliance.
“Complying with mental health parity alone would not have been that big a deal,” said Tom Wildsmith, senior consultant with The Hay Group consultancy in Arlington, Va. “But now it’s one more piece to stay on top of while many other things are changing because of health care reform.”
The danger is that employers will get so caught up in the changes and implications of health care reform that mental health parity compliance does not get the attention it requires. “It is important for employers over the next few years to think strategically about the sum total of these changes” affecting health care, said Wildsmith.
The intent of the Mental Health Parity and Addiction Equity Act, enacted in 2008, is to ensure that coverage for mental health and substance use treatment, including depression and addiction, is treated fundamentally the same as physical ailments, such as heart attacks and diabetes. The parity requirements apply to U.S. employers with 50 or more workers whose group health plans choose to offer mental health or substance use disorder benefits. The regulations issued in February 2010 apply to plan years starting after June 30, 2010. To learn more, see the SHRM Online article “Agencies Issue Final Rules for Mental Health Parity Act.”
Interim Final Rules: Testing Surprises
“The original thinking behind (mental health) parity focused on eliminating some of the maximums, limits on visits and limits on days in the hospital,” said Thompson. “However, the overall impact has been much greater than that.” In some cases, employers who don’t satisfy required testing face the prospect of making major changes to their benefits programs.
For example, one way to pass the required tests might be to provide 100 percent coverage of all mental health services, which could have a significant impact on costs. Employers in these situations have the option of “making changes to make their medical plans and, by extension, compliance simpler, but I don’t see them doing it,” said Rich Stover, a principal with Buck Consultants in Secaucus, N.J.
Of course, not all employers are facing these types of decisions. Small and fully insured employers are less likely to run into trouble when complying with mental health parity because they can rely on an insurance company to make sure that the plan design will meet the requirements.
In general, Stover noted, employer plans in which all medical and mental health services are subject to the same deductibles and co-insurance tend to have an easier time complying with the mental health parity regulations. By contrast, employer plans with several different deductibles and co-insurance levels for different services—for example, covering preventive care at 100 percent or having lower co-payments for office visits than for other services—makes compliance more complicated. “Compliance for these plans is very involved, and you may come up with a very illogical result,” said Stover.
For employers that self-insure some or all of their benefits, the regulations could require plan design changes beyond coverage amounts. For example, the regulations make it more difficult to use gatekeepers, such as employee assistance programs (EAPs), or to carve out mental health benefits for specialized management. These vendors often have protocols and procedures for care that differ from those used for medical benefits, which can cause employers to run into trouble under the new regulations.
Although such specialized vendors can control mental health care costs for employers and employees, “everything has to be done under the same system as medical benefits, which makes it harder to use specialized vendors,” said Stover.
Overall, “employers with a self-funded plan need to get more involved in the decision-making process to make sure you are taking the actions necessary to put your plan into compliance,” said Stover. “You can’t just assume your vendors will do it for you.”
Regarding compliance, 'don't assume
your vendors will do it for you.'
Impact of Health Care Reform
Even as some employers struggle to comply with mental health parity requirements, the passage of health care reform threw another wrench into these efforts. Although the reform law’s effect on mental health parity compliance will not be clear until the federal government issues the applicable regulations, health care reform has the potential to expand mental health parity requirements for employers.
For example, before the reform law was passed, employers were able to impose lifetime limits on mental health benefits. However, when the reform law eliminated lifetime limits for health benefits, the parity requirements extended the prohibition to mental health benefits.
In addition, health care reform “grandfathers” many new coverage requirements (excluding the ban on annual and lifetime limits, among others) for plans that were in place when the law was passed. However, employers are concerned that any changes they make to their plans to comply with mental health parity requirements could put their plans’ grandfathered status at risk.
Perhaps the most significant impact of health care reform’s passage is the attention it has required from benefits professionals. While employers work out the potential strategic and tactical impact of health care reform on employee benefits, there is little bandwidth left over to deal with issues like mental health parity compliance.
Taking a Broad View
“Mental health can be managed effectively within the parity law, but doing so requires a more holistic view of both mental health and medical benefits together and understanding what you can and cannot do,” said Thompson. He foresees employers applying existing disease management models to mental health coverage as a way to ensure that patients have access to, and remain compliant with, high-quality, cost-effective care rather than serving as a more restrictive gatekeeper.
Joanne Sammer is a New Jersey-based freelance writer. Her articles have appeared in numerous publications, including HR Magazine.
SHRM: Consider ‘Real World’ Impact of Mental Health Parity Rules, HR News, May 2010
Agencies Issue Final Rules for Mental Health Parity Act, SHRM Online Benefits Discipline, February 2010
Mental Health Parity: Is Your Health Plan Ready?, SHRM Online Benefits Discipline, October 2009
Employee Assistance Programs Target Mental Health Parity Costs, SHRM Online Benefits Discipline, August 2009
Mental Health Parity: Benefit Design Challenges, SHRM Online Benefits Discipline, May 2009
New Mental Health Parity Law Raises Cost Concerns, SHRM Online Legal Issues, October 2008
SHRM Online Benefits Discipline