Mental Health Parity Regulations Finalized by the Departments of Health and Human Services, Labor and Treasury

October 3, 2024
Publications

To put it simply, a patient seeking treatment for his depression should not have to face obstacles such as steeper cost-sharing or stricter benefit limits than a patient seeking treatment for his diabetes.

The U.S. Departments of Health and Human Services (HHS), Labor, and Treasury (often referred to as the “Tri-Agencies”) published a group of final rules on Sept. 9, 2024, to amend and add to existing regulations implementing the Mental Health Parity and Addiction Equity Act (MHPAEA). First signed into law in 2008, MHPAEA aims to prevent health insurance plans from treating mental health and substance use disorder (MH/SUD) benefits less favorably than medical/surgical benefits. It built on the foundation laid by the Mental Health Parity Act of 1996, which prohibited large group health plans from imposing more restrictive annual or lifetime dollar limits on mental health benefits as opposed to those levied against medical/surgical benefits.

The focus of MHPAEA is to ensure that treatment for mental health conditions and substance use disorder is given the same legitimacy that are given to treatment for physical conditions or disorders. To put it simply, a patient seeking treatment for his depression should not have to face obstacles such as steeper cost-sharing or stricter benefit limits than a patient seeking treatment for his diabetes. Since its passage, several sets of regulations have been issued to implement its provisions, and the act itself has been amended to continue to clarify and extend the protection of the initial act.

As stated on page 13 of the pre-publication version of the preamble to the requirements related to the MHPAEA, the goal of each of these actions, as are the goal of the current amendments, is to ensure that “individuals will not face greater restrictions on access to mental health and substance use disorder benefits as compared to medical/surgical benefits.” While some version of mental health parity has been in place since the original act in 1996, in the preamble to the final rules, the drafters note that disparities in coverage between mental health and substance use disorder benefits and medical/surgical benefits have continued to grow; while at the same time, the need for these benefits has grown at an even faster pace. In the wake of the COVID-19 pandemic, on page 3 of the pre-publication version of the final rules, the Preamble notes that in the United States in 2022 alone, “nearly 54.6 million people aged 12 or older were classified as needing treatment for substance use,” and “nearly one in four adults (59.3 million) were living with any mental illness.”

The health insurance industry has been making diligent efforts to comply with the requirements of MHPAEA and its implementing regulations. However, one point of continued difficulty has been compliance with, and frankly full comprehension of, the requirements surrounding non-quantitative treatment limits (NQTLs). As discussed at 45 C.F.R. Section 146.136, NQTLs limit the scope or duration of benefits for treatment under a plan or coverage but are not based on a numerical value. Examples include prior authorization standards, reimbursement rates for providers, step therapy protocols, or formulary design for prescription drugs. NQTLs can serve as critical tools for health plans to both ensure proper care management for their enrollees as well as contain costs. However, they can also create disparities in treatment for those enrollees, whether intended or unintended.

For example, prior authorizations are a widely used tool by health plans to ensure enrollees are receiving care that is medically necessary. Prior authorizations help to both protect enrollees from treatments that may not be of use for their condition and save the health plan from paying for unnecessary treatments. However, applying stricter prior authorization requirements to mental health benefits than are imposed on comparable medical/surgical benefits—such as requiring prior authorization before an enrollee can seek any outpatient mental health therapy, but allowing an enrollee to attend one outpatient physical therapy session prior to requiring a prior authorization for additional treatment—would violate MHPAEA.

As described in the Preamble (see page 42 of the pre-publication version of the final rules), the newly published final rules aim to assist health plans in the process of designing NQTLs that do not impose greater restrictions on access to mental health and substance abuse use disorder benefits as compared to medical/surgical benefits. While a four-prong test for a health plan to determine NQTL compliance was proposed, due to a number of compelling industry comments indicating that this test could lead to additional confusion and troubled interpretation, the final rules provide a more streamlined framework which requires health plans to satisfy a “design and application requirement” (codified at 26 C.F.R. Section 54.9812-1(c0(4)(i), 29 C.F.R. Section 2590.712(c)(4)(i), and 45 C.F.R. Section 146.136(c)(4)(i)) and “relevant data evaluation requirements” (codified at 26 C.F.R. Section 54.9812-1(c)(4)(iii), 29 C.F.R. 2590.712(c)(4)(iii), and 45 C.F.R. Section 146.136(c)(4)(iii)).

With the design and application requirement, the Tri-Agencies emphasize that the design of a NQTL is just as important as how it is applied. The regulations state, as summarized on page 61 of the pre-publication preamble, that a health plan must consider if the processes, strategies, evidentiary standards, or other factors used in designing and applying the NQTL to mental health or substance use disorder benefits are comparable to, and are applied no more stringently than, those used in designing and applying the limitation with respect to medical/surgical benefits. The regulations also state that health plans must safeguard against the use of discriminatory or biased factors and evidentiary standards when designing NQTLs. Regarding the relevant data evaluation requirements, the regulations require that a health plan collect and evaluate relevant data in a manner reasonably designed to assess the impact of the NQTL on relevant outcomes related to access to mental health and substance use disorder benefits compared to access to medical/surgical benefits.

Should the plan find that there is a material difference in the impact on mental health and substance use disorder benefits as opposed to medical/surgical benefits, this finding must be considered when determining the overall compliance of the NQTL.

The final rules also codify requirements for health plans to conduct comparative analyses measuring the impact of NQTLs, and sunset a provision for self-funded nonfederal governmental plan elections to opt out of compliance with MHPAEA. The new regulations generally impact group health plans and group health insurance coverage on the first day of the first plan year beginning on or after Jan. 1, 2025. However, the provisions regarding NQTLs discussed in this article will apply on the first day of the first plan year beginning on or after Jan. 1, 2026.

Christina Duty is a McNees Wallace & Nurick health care regulatory and compliance attorney serving clients from Pittsburgh, She advises healthcare providers, including hospitals, health systems, physician practices and employee assistance programs as well as health insurance companies on matters related to statutory and regulatory compliance, health care reimbursement and payment regulations, privacy and security standards, and fraud and abuse laws. She can be reached at cduty@mcneeslaw.com or 412-227-2574.

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