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The Department of Labor (DOL) is increasingly scrutinizing employers and group health plans for compliance with the provisions and rules of the Mental Health Parity and Addiction Equity Act (MHPAEA).
The comprehensive regulations that federal agencies are issuing on the MHPAEA have gone largely unnoticed by employers, said Dan Taylor, an attorney in Alston & Bird's Atlanta office.
"We've recently started seeing a significant increase in DOL investigations and enforcement of the MHPAEA. Employers and insurers would be wise to redouble their compliance efforts in this area," he said.
MHPAEA violations can result in a breach of fiduciary duty under the Employee Retirement Income Security Act (ERISA) and an IRS excise tax of $100 per covered individual per day.
What Is the MHPAEA?
The MPHAEA "generally prevents group health plans and health insurance issuers that provide mental health or substance use disorder benefits from imposing less favorable benefit limitations on [mental health and substance abuse] benefits than on medical/surgical benefits," according to the Centers for Medicare & Medicaid Services website. Final regulations implementing the act became effective on Jan. 13, 2014.
Under the law, employers that are plan sponsors must ensure that more exacting financial or treatment limitations on benefits are not applied to mental health and addiction benefits in the group health plan than are used for medical and surgical benefits in the same classification. Financial requirements include co-payment amounts, deductibles, co-insurance and out-of-pocket limits. Treatment limitations include quantitative limitations (e.g., hospital inpatient days, number of treatments, office visits per period) and nonquantitative limitations (e.g., pre-authorization requirements, quality of providers, written treatment plan requirements).
The final regulations specify that parity analysis should be performed within each of six classifications of benefits:
[SHRM members-only toolkit: Employing Persons with Psychiatric Disabilities]
Many plan sponsors have managed to identify and correct financial requirements and quantitative treatment limit imbalances for mental health and substance abuse benefits. Parity for the nonquantitative treatment limitations may not be as easy to identify.
"When the analysis is done, the numbers are clear—either the plan is compliant or not," Taylor said.
Nonquantitative limitations are not so easy, Taylor said, because the limitations are more administrative in nature. He warned that when the DOL conducts an investigation it requests both quantitative and nonquantitative information. Citing a DOL report to Congress, Taylor noted that 58 percent of noncompliance is found in the nonquantitative area.
Joni Andrioff, a partner at Steptoe & Johnson in Chicago, agreed that reviewing a plan's nonquantitative information is much harder to do. When employers initially looked at their plans' quantitative data, employers were able to see the information, she said. "They could see any nonparity and fix [it and] make co-pays and co-insurance equal."
The nonquantitative limitations, however, caught plan sponsors "flat-footed," Andrioff said. "Do the medical and surgical benefits make more prescription medications available? Provide a better quality of providers? Does the determination for medical and surgical benefits use a professional review panel or diagnostic codes?" Andrioff asked. "Then mental health services must use the same determination method."
In April 20, 2016, guidance, the DOL, IRS and Department of Health and Human Services provided "red flags" for employers to look for in the nonquantitative limitations of their medical plans. It is important to note, said Lisa Klinger, a health care reform and ERISA attorney with the Leavitt Group in San Diego, a major insurance provider, that the guidance "specifically says that the plan/policy terms listed do not automatically violate the MHPAEA. But in the event of an enforcement action the plan sponsor or insurer 'will need to provide evidence to substantiate compliance.' "
Unless a similar restriction is applied to medical and surgical benefits, these categories of provisions can serve as red flags that a plan may be imposing an impermissible nonquantitative limitation. The warning signs are:
What Employers Should Do
Now that the DOL has provided guidance, employers should have their plan documents and summary plan descriptions carefully reviewed by legal counsel, insurers and third-party administrators for nonquantitative limitations, Taylor said.
Andrioff noted that a lot of employers that sponsor plans do not realize that fiduciary rules under ERISA actually cover medical plans. "A lot of employers think that they can outsource to a provider. They think if they do what the service provider says, they will be all right," he said. "DOL has gone out of its way to advise them that this isn't the case. The plan sponsor is responsible and liable."
ERISA requires that a medical plan designate or establish a procedure for designating a fiduciary authorized to control or manage the operation and administration of the plan, Andrioff explains. If no named fiduciary or administrator is designated, the responsibility for those roles resides with the plan sponsor.
The allocation of fiduciary authority is important, Andrioff said. "Employers should review their actual agreements and not just accept what their provider's book says." They also should check the indemnification clause, in case the employer is fined or has other costs related to MHPAEA violations.
What changes might the Trump administration make to MHPAEA enforcement? Both Taylor and Andrioff pointed out that the act is a free-standing law; it is not a component of the Affordable Care Act (ACA). In addition, Congress has passed and President Barack Obama will sign the 21st Century Cures Act, which will mandate that the IRS, DOL and HHS produce guidance on MHPAEA compliance, Taylor said, so the repeal of the ACA wouldn't have great effect on the MHPAEA.
Robert Teachout, SHRM-SCP, is a writer in Washington, D.C., who covers employment law and HR issues.
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