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Sidebar: Redesigning plans to ensure compliance
Update: On Nov. 9, 2013, federal agencies issued the subsequent final rules on implementing the Mental Health Parity and Addition Equity Act, which modified the interim final rules discussed in the news story below. Please see the SHRM Online article "Final Mental Health Parity Rules Issued."
The story below is about the interim final rules issued in February 2010.
Federal agencies have issued long-awaited regulations on providing parity for employees enrolled in group health plans who need treatment for mental health or substance use disorders. The interim final rules were issued by the Treasury Department, the U.S. Department of Labor and the U.S. Department of Health and Human Services (HHS), and published in the Feb. 2, 2010, issue of the Federal Register. The rules apply to plan years starting after June 30, 2010.
The new rules implement the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA), enacted in October 2008 and effective as of Jan. 1, 2010, for calendar-year plans. MHPAEA prohibits group health insurance plans—typically offered by employers—from restricting access to care by limiting benefits and requiring higher patient costs than those that apply to general medical or surgical benefits.
MHPAEA applies to employers with 50 or more workers whose group health plans choose to offer mental health or substance use disorder benefits.
The regulations were originally expected to be issued by October 2009, as set out under the statute, but were delayed. In an October 2009 letter to Congress, HHS Secretary Kathleen Sebelius told lawmakers that the regulations would be issued by January 2010.
"Three months ago, we wondered where the regulations for the Mental Health Parity Act were headed. Now we know. The interim final rules explicitly provide for parity across the board," says Joelle C. Sharman, a partner with law firm Ford & Harrison LLP in Atlanta. "The rules break down benefits into six categories and specify that if a group health plan provides coverage for substance abuse and/or mental health services in any one or more of these six categories, it must be on par with the medical and surgical benefits offered in that category."
-------------------------------------------------------'The interim final rules explicitlyprovide for parity across the board.'------------------------------------------------------
Sharman advises plan sponsors to review plan documents to ensure that they comply with the new interim final rules. To the extent that plan managers decide to drop their mental health or substance use disorder coverage, "Summaries of Material Reduction must be provided, and revisions will need to be made to the Summary Plan Descriptions, benefit booklets, and other benefit communications," she notes.
Long Time Coming
MHPAEA expands greatly on an earlier law, the Mental Health Parity Act of 1996, which required parity only in aggregate lifetime and annual dollar limits among the categories of benefits and did not extend to substance use disorder benefits. The new law requires that:
• Any group health plan that includes mental health and substance use disorder benefits along with standard medical and surgical coverage must treat them equally in terms of out-of-pocket costs, benefit limits and practices such as prior authorization and utilization review.• These practices must be based on the same level of scientific evidence used by the insurer for medical and surgical benefits.
• Any group health plan that includes mental health and substance use disorder benefits along with standard medical and surgical coverage must treat them equally in terms of out-of-pocket costs, benefit limits and practices such as prior authorization and utilization review.
• These practices must be based on the same level of scientific evidence used by the insurer for medical and surgical benefits.
For example, a plan may not apply separate deductibles for treatment related to mental health or substance use disorders and medical or surgical benefits. They must be calculated as one limit.
The interim final rules prohibit health insurance coverage from applying any financial requirement or treatment limit to mental health or substance use disorder benefits in any classification that is more restrictive than the predominant financial requirement or treatment limit applied to substantially all medical or surgical benefits in the same classification.
The rules repeat the statutory language in which the term “financial requirements” include deductibles, co-payments, co-insurance, and out-of-pocket maximums. The rules hold that MHPAEA's general parity requirement applies separately for each type of financial requirement or treatment limit (for example, co-pays are compared to co-pays, and deductibles are compared to deductibles).
The statute and the rules exclude aggregate lifetime and annual dollar limits that distinguish between mental health benefits and medical/surgical benefits from the meaning of “financial requirements”; these limits are subject to separate provisions originally enacted as part of the 1996 Mental Health Parity Act that remain in paragraph (b) of MHPAEA.
The rules provide that the parity requirements in the statute apply to quantitative and nonquantitative treatment limits. A quantitative treatment limit is expressed numerically, such as an annual limit of 50 outpatient visits. A nonquantitative treatment limit is not expressed numerically but otherwise limits the scope or duration of benefits for treatment. Nonquantitative treatment limits include:
• Medical management standards.• Drug formulary design.• Standards for provider admission to participate in a network.• Determination of usual, customary and reasonable amounts.• Requirements for using lower-cost therapies before the plan will cover more expensive therapies (also known as fail-first policies or step therapy protocols).• Conditioning benefits on completion of a course of treatment.
• Medical management standards.
• Drug formulary design.
• Standards for provider admission to participate in a network.
• Determination of usual, customary and reasonable amounts.
• Requirements for using lower-cost therapies before the plan will cover more expensive therapies (also known as fail-first policies or step therapy protocols).
• Conditioning benefits on completion of a course of treatment.
The rules specify six classifications of benefits:
• Inpatient in network.• Inpatient out of network.• Outpatient in network.• Outpatient out of network.• Emergency care.• Prescription drugs.
• Inpatient in network.
• Inpatient out of network.
• Outpatient in network.
• Outpatient out of network.
• Emergency care.
• Prescription drugs.
If a plan does not have a network of providers for inpatient or outpatient benefits, all benefits in the classification are characterized as out of network.
The rules mandate that parity for financial requirements and treatment limits generally be applied on a classification-by-classification basis and that these are the only classifications used to satisfy MHPAEA's parity requirements. These classifications must be used for all financial requirements and treatment limits to the extent that a plan provides benefits in a classification and imposes a separate financial requirement or treatment limit for benefits in the classification.
Measuring plan benefits
In order to apply the substantive rules, the regulations establish standards for measuring plan benefits. These are similar to those under the Mental Health Parity Act of 1996, and provide that the portion of plan payments subject to a financial requirement or quantitative treatment limit is based on the dollar amount of all plan payments for medical/surgical benefits in the classification expected to be paid under the plan for the plan year.
Also similar to the 1996 act's regulations, any reasonable method may be used to determine the dollar amount expected to be paid under the plan for medical/surgical benefits subject to a financial requirement or quantitative treatment limit.
Redesigning Plans to Ensure Compliance
When MHPAEA was enacted in 2008, many employers assumed they would be compliant with the parity mandate if they removed day and limit visits that applied only to their mental health benefits, but that they could maintain separate deductibles and out-of-pocket maximums for these benefits, according to Kathleen Mahieu, a senior behavioral health consultant with consultancy Hewitt Associates. However, the new rules clarify that employers are not allowed to apply "separate but unequal deductibles and maximums," she notes. "Around 70 percent of employers who have a carve-out arrangement with a mental health vendor implemented separate deductibles and maximums for mental health services. Those employers will have to modify their plan design to comply with new regs," she says.
Mahieu adds that cross applying deductibles and out-of-pocket maximums to both mental health and medical/surgical plans "can be an onerous task" when multiple vendors are involved. The time delay in cross applying data transfer on payments brings the potential for miscommunication over whether deductibles have been satisfied, she points out. It can also mean higher administrative fees to vendors "to make cross application work."
Mahieu, however, says she isn't seeing large employers moving to drop their mental health and substance use benefits in order to avoid the parity mandate. "They understand the impact of mental health on employees' overall health," she observes.
A gray area that still needs clarification, according to Mahieu, involves precertification. The provisions in the rules on medical management/ nonquantitative treatment limitations suggest that requiring precertification for mental health services but not for medical/surgical benefits would not be permitted, "but additional clarification around that is certainly needed," she says.
The interim final rules were based on the departments’ review of more than 400 public comments on how the parity rule should be written. However, officials note that they were still weighing how to explain some parts of MHPAEA. Sections where further comments were being sought include nonquantitative treatment limits, such as those that pertain to the scope and duration of covered benefits, how covered drugs are determined (formularies), and the coverage of "step therapies."
Comments on the interim final rules will be accepted through May 3, 2010, and may be e-mailed to the federal rulemaking portal at http://www.regulations.gov.
Stephen Miller is an online editor/manager for SHRM.
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