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Mental Health Parity Act Kentucky Employment Law Letter

New regulations clarify Mental Health Parity Act

The U.S. Departments of Labor, Health and Human Services, and the Treasury recently published in the Federal Register interim final regulations that implement the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA).

  These regulations apply to plan years beginning on or after July 1, 2010 (although there is a special effective date for certain collectively bargained plans).

 

The MHPAEA applies to most employers with more than 50 employees and requires those that offer mental health or substance use disorder benefits to make sure they’re in parity with the medical/surgical benefits they offer.  The departments issued the regulations to further clarify the MHPAEA, and the regulations are supposed to update certain defined terms and examples and demonstrate how the expanded rules apply.

Defining basic terms

According to the regulations, group health plans define the terms “mental health benefits” and “substance use disorder benefits,” but the definitions must be in accordance with applicable federal and state laws.  The regulations also provide that the terms must be “consistent with generally recognized independent standards of current medical practice.”

Those standards don’t have to be national standards; they just have to be “generally accepted in the relevant medical community.”  The regulations give a few examples of resources that would meet this requirement, including:

  • the most current version of the Diagnostic and Statistical Manual of Mental Disorders (DSM);
  • the most current version of the International Classification of Diseases (ICD); or
  • state guidelines.

The general parity requirement

The main goal of the MHPAEA is to achieve parity regarding a plan’s financial requirements and treatment limitations.  Financial requirements include copayments, deductibles, coinsurance, and out-of-pocket expenses.  Treatment limitations include limits on treatment frequency (e.g., one therapy session per week), number of visits (e.g., 35 visits per year to a mental health professional), days of coverage (e.g., 30-day hospital stays), and other similar limits on the scope or duration of treatment.

The regulations divide benefits into the following six classifications:

  1. inpatient, in-network;
  2. inpatient, out-of-network;
  3. outpatient, in-network;
  4. outpatient, out-of-network;
  5. emergency care; and
  6. prescription drugs.

According to the regulations, the parity requirements for financial requirements and treatment limitations must generally be applied on a classification-by-classification basis.  More specifically, a plan can’t apply “any financial requirement or treatment limitation to mental health or substance use disorder benefits in any classification that is more restrictive than the predominant financial requirement or treatment limitation of that type applied to substantially all medical/surgical benefits in the same classification.”  That means, for example, that the inpatient, in-network copayments for mental health or substance use disorder benefits must be compared to inpatient, in-network copayments for medical/surgical benefits.

Quantitative vs. nonquantitative treatment limitations

The regulations make a distinction between quantitative and nonquantitative treatment limitations.  Quantitative treatment limitations are expressed numerically and include day limits, visit limits, and frequency-of-treatment limits.  According to the regulations, nonquantitative limitations include:

  • medical management standards;
  • prescription drug formulary designs;
  • standards for provider admission to participate in a network;
  • determinations of usual, customary, and reasonable charges;
  • requirements for using lower-cost therapies before the plan will cover higher-cost therapies (i.e., fail-first policies or step therapy protocols); and
  • exclusions based on failure to complete a course of treatment.

The regulations make clear that plans can’t use factors to apply nonquantitative treatment limitations to mental health or substance use disorder benefits in a classification unless they’re comparable to and applied no more stringently than the factors used in applying limitations to medical/surgical benefits in the classification.  However, recognized clinically appropriate standards of care may permit some differences.

Prescription drug benefits

The regulations provide a special rule for applying the general parity requirement to prescription drug benefits since many plans impose different financial requirements based on a drug tier system.  Under such a system, a drug is usually placed in a certain tier based on factors that are unrelated to whether the drug is used to treat medical/surgical conditions or mental health conditions/substance use disorders.

Therefore, under the regulations, a plan can impose different levels of financial requirements on different tiers of prescription drug benefits if the requirements are:

  • based on reasonable factors (e.g., efficacy, cost, generic vs. brand name, and mail order vs. pharmacy pickup);
  • determined in accordance with the requirements for nonquantitative treatment limitations; and
  • imposed regardless of whether a drug is generally prescribed for medical/surgical benefits or mental health/substance use disorder benefits.

This rule allows plans to separately apply the MHPAEA’s general parity requirement to each tier of prescription drug benefits.

Cumulative requirements and limitations

The regulations also address cumulative financial requirements (e.g., deductibles and out-of-pocket maximums) and cumulative quantitative treatment limitations (e.g., annual or lifetime day or visit limits).  A plan can’t apply a cumulative financial requirement or a cumulative quantitative treatment limitation for mental health or substance use disorder benefits in a classification that accumulates separately from any such requirement or limitation for medical/surgical benefits in the same classification.  For example, a plan can’t have an annual $700 deductible for all medical/surgical benefits and a separate annual $700 deductible for all mental health or substance use disorder benefits.  The plan must establish a combined deductible for both medical/surgical benefits and mental health/substance use disorder benefits.

 

Comment period

The departments are still soliciting comments on the interim final rules, and comments are due on or before May 3, 2010.

This article is reprinted with permission from
Kentucky Employment Law Letter, which is
published by M. Lee Smith Publishers LLC.

If you have questions regarding the MHPAEA, please contact any of the attorneys listed on Greenebaum’s Labor and Employment Practice Group or Employee Benefits Team.

To learn more about Mary G. Eaves and her practice, please visit her profile.


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  • Partner

    Mary is a partner with a focus on employee benefits. Her practice includes design and compliance of qualified retirement plans and employee welfare benefit plans, including COBRA, and nonqualified deferred compensation ...

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