Six Wishes for the Forthcoming Final Regulations Under MHPAEA

On July 1, 2024, the US Department of Labor (DOL) submitted final regulations to the Congressional Budget Office (CBO), implementing the Mental Health Parity and Addiction Equity Act (MHPAEA) as most recently amended by the Consolidated Appropriations Act, 2021 (CAA). The CAA added a requirement that plans and issuers perform and document comparative analyses of the design and application of nonquantitative treatment limitations (NQTLs) on mental health and substance use disorder benefits (MH/SUD) and medical and surgical (M/S) benefits. Submission to the CBO is the last step in the process of issuing a binding, final rule. The agency ordinarily acts on these submissions within 90 days, but it is widely anticipated that the final rule will be issued sooner.

The final regulations implement proposed regulations issued in July 2023, which were widely commented on.

To call the proposed rule contentious is an understatement, and the stakes for group health plan sponsors that provide mental health benefits are significant. Many comments on the proposed regulations asked the regulators to withdraw the proposed rule and to reconsider the issue anew. While the chance of that happening was always remote, it is now clear that this is not going to happen. There will shortly be final regulations. Recognizing this to be the case, here are six items in the proposed regulations that we would like to see changed or clarified.

Application of the Quantitative Testing Requirements to NQTLs

MHPAEA generally provides that financial requirements and treatment limitations imposed on MH/SUD benefits cannot be more restrictive than the predominant financial requirements and treatment limitations that apply to substantially all M/S benefits in a classification. The 2013 final regulations established the following classifications for this purpose: inpatient, in-network; inpatient, out-of-network; outpatient, in-network; outpatient, out-of- network; emergency care; and prescription drugs. “Treatment limitations” can be either quantitative treatment limitations (QTLs) (e.g., visit limits) or NQTLs (i.e., concurrent review). The rules for the testing of QTLs set out in the 2013 final regulations include detailed numerical standards, which have spawned a cottage industry for testing services.

The proposed regulations would impose quantitative testing requirements on NQTLs. This is at least modestly counterintuitive. It would also make an already complex testing rule materially more complicated. It is our hope that the DOL, US Department of Health and Human Services, and the US Department of the Treasury (the Departments) see fit to back away from this requirement.

Mental Health Carve-Out Vendors

The proposed regulations establish a three-prong test that plans and issuers must pass to impose an NQTL in a classification. To qualify, an NQTL:

• Must be no more restrictive when applied to MH/SUD benefits as compared to M/S benefits;
• The plan or issuer must meet specified design and application requirements; and
• The plan or issuer must collect, evaluate and consider the impact of relevant data on access to MH/SUD benefits (as opposed to M/S benefits) and take reasonable action to address any material differences.

These requirements, if adopted as proposed, could make it difficult for group health plans to use third-party payers that manage their MH/SUD benefits under so-called “MH/SUD carve-out” vendor arrangements. Also referred to generically as “managed behavioral health organizations,” MH/SUD carve-out vendors are payers that claim specialized expertise with, and focus exclusively on the treatment of, mental health and substance use disorders. Even under current law, demonstrating compliance for a single NQTL involves a number of steps, each of which must be repeated for each additional NQTL. NQTLs designed and adopted by mainstream M/S providers and administrative services and carve-out vendors will differ in their particulars. Layering on new, quantitative “no more restrictive” and “data collection” requirements will add a new level of complexity that may be prohibitively costly for plans that seek to use MH/SUD carve-out vendors.

We hope that the final rule will be more accommodating toward carve-outs than the proposed regulations.

Fiduciary Certifications

The proposed regulations include a requirement for health plan fiduciaries to annually certify that the plan complies with the rule. This will result in more compliance burdens, costs and risks for plan sponsors. One suspects that any fiduciary asked to sign the certification would insist on a legal opinion, for example. We are of the view that this certification requirement serves no purpose. The rule has the force of law; it must be complied with. Layering on a certification requirement adds nothing of any value.

Network Adequacy

Owing to the relative paucity of mental health providers when compared to M/S providers, a strict parity requirement would present an impossibly high bar. Severe shortages of behavioral health providers are currently the norm, and these shortages will persist without further action. Employers need time to adapt to the requirement. An extended, good-faith compliance period would be welcome.

Meaningful Benefits

According to the proposed regulations, a plan does not provide benefits for MH/SUD benefits in every classification in which M/S benefits are provided unless the plan provides meaningful benefits for treatment for the condition or disorder in each such classification “as determined in comparison to the benefits provided for medical/surgical conditions in the classification.” The term “meaningful benefits” is not defined. The preamble to the rule nevertheless observes that meaningful benefits are related to “scope of services.” “Scope of services” in turn generally refers to the types of treatments and treatment settings that are covered by a group health plan or health insurance issuers. Under the proposal, the meaningful benefits requirement is separate from, and in addition to, the newly prescribed NQTL testing standards.

It has been suggested that the final regulations add “scope of services” to the non-exhaustive list of NQTLs. This would mean that a plan’s scope of services would be subject to comprehensive NQTL testing. We would hope that the Departments do not adopt this suggestion. The better view is that a plan’s scope of services is a high-level plan design feature and not an NQTL.

Bonus Recommendation

A comment submitted by the National Association of Benefits and Insurance Professionals (NABIP) focused on a critical and commonplace compliance hurdle. Noting “the reliance virtually all employer group plan sponsors have on their service providers to give them the information necessary to complete their NQTL analyses,” and the lack of cooperation exhibited by many common health plan service providers, NABIP asked that any final regulation “include both enforcement relief and clear compliance standards for plan sponsors who are generally making a good faith effort to comply with their comparative analyses obligations.” NABIP also asked the regulators to explicitly specify “what group plan sponsors need to do to meet their compliance obligations when they are unable to obtain all or part of the information they need from service providers, including what documentation is required.” In the context of a final regulation, these strike us as big “asks.” Under the circumstances, however, they strike us as more than reasonable.

There are of course many other issues that have surfaced in the thousands of comments submitted in response to the proposed regulations. There are many other issues and questions that are of concern to employers and plans. Compliance with the mental health parity rules is complicated and expensive, and if the final regulations look anything like the proposed regulations, compliance will only get more complicated and more expensive. The rules need to be simplified, and we hope that the final regulations recognize and accommodate this view.