On July 25, the Department of Labor, Department of the Treasury, and Department of Health and Human Services (the Departments) released new Proposed Rules (Proposed Rules) that clarify certain requirements imposed by the Mental Health Parity and Addiction Equity Act (MHPAEA). In addition to the new Proposed Rules, the Departments issued their annual MHPAEA report to Congress (Report) to detail recent enforcement efforts.
The Report provides useful insight into the enforcement priorities of the Departments and specific examples of non-quantitative treatment limitations (NQTLs) that are scrutinized during audits. The Report also provides a cautionary tale: none of the NQTL comparative analyses the Departments reviewed were determined to be sufficient on initial review.
A failure to comply with MHPAEA can be costly: a violation that requires removal or revision of a plan design element may require reprocessing of claims, the Departments may assess penalties, and/or plan sponsors may be subject to excise taxes. In addition, new requirements for plan fiduciaries imposed under the Proposed Rules could lead to increased liability in the future. As a result, we encourage plan sponsors to take proactive action now to shore up any potential deficiencies in their plan design and the required NQTL comparative analyses.
MHPAEA generally requires group health plans that provide mental health and substance use disorder benefits to provide those benefits “in parity with” medical and surgical benefits.
The Consolidated Appropriations Act, 2021 (CAA) added a requirement for plan sponsors and insurers to prepare a “comparative analysis” between the NQTLs a plan imposes on the following:
- Mental health and substance use disorder (MH/SUD) benefits.
- Medical and surgical (M/S) benefits.
These analyses must be performed regularly and provided to the Departments and participants upon request. Plans have 10 business days from the date of a Department audit request to deliver the written analysis, making it imperative to have the analysis ready prior to a request.
Before the release of the Proposed Rules, and as reported in our previous HR Law Talk blog post, the specifics of how the Departments expected plan sponsors and administrators to perform these comparative analyses remained unclear. The Proposed Rules provide needed guidance on the process for performing the comparative analyses, along with other clarifications, such as changes to statutory definitions and new requirements for the application of NQTLs to MH/SUD benefits.
New Requirements for Comparative Analyses of NQTLs and Common Deficiencies
Although many plan sponsors do not actually perform the comparative analyses on the NQTLs used by their plans, the Proposed Rules add a new requirement for plans subject to ERISA that one or more plan fiduciaries certify they have reviewed the comparative analysis performed on the plan’s NQTLs and have found it to be in compliance with the content requirements of the Proposed Rules.
Under the Proposed Rules, comparative analyses of NQTLs imposed on MH/SUD benefits must include, at a minimum, the following five elements:
- A description of the NQTL.
- The identification and definition of the factors used to design or apply the NQTL.
- A demonstration of comparability and stringency, as written.
- A demonstration of comparability and stringency in operation.
- Findings and conclusions.
Insight: Although the certification is not yet required, sponsors of ERISA plans are encouraged to review their current comparative analysis to identify elements that may be missing from the content requirements above.
In addition to the above list, the Report provides a helpful list of common deficiencies in the NQTL comparative analyses, which also instruct plan sponsors in the type of detail and content the Departments are looking for in the written analysis. Here are a few of the top deficiencies identified by the Report:
- Failure to explain how factors were applied when determining which benefits would be subject to the NQTL, inadequate definitions of factors, and inadequate explanations of how sources were used in selecting, defining or applying factors.
- Failure to demonstrate how or if the factors were comparably applied to MH/SUD benefits and M/S benefits.
- Failure to adequately explain how an NQTL was applied in operation, describing processes generally and evaluating differences in application to MH/SUD and M/S benefits without sufficient detail.
Insight: Plan sponsors may want to review their current comparative analyses for “gaps” in explanations, such as conclusory statements like “we considered clinical efficacy in setting treatment limitations” without showing how the consideration of clinical efficacy affected the specific limitation or impacted the differing limitations between MH/SUD benefits and M/S benefits.
Which NQTLs Are Being Targeted?
Based on the information presented in the Report, the following NQTLs, as applied to MH/SUD benefits, are being specifically targeted during audit activity:
- Prior authorization, precertification, or prior notification.
- Exclusion of applied behavior analysis, intensive behavioral, rehabilitative/habilitative, or cognitive therapy to treat MH/SUD conditions.
- Network admission standards, including reimbursement rates and network adequacy.
- Concurrent care review.
- Out-of-network reimbursement rates and out-of-network provider requirements.
Insight: Plan sponsors should consider reviewing current (or proposed) plan design for these types of items when applied to MH/SUD benefits. When reviewing, particularly consider whether the plan’s MH/SUD benefits are subject to more restrictive annual or lifetime dollar limits, financial requirements or treatment limitations than the predominant limits and limitations applied to the majority of the M/S benefits covered by the plan, and whether the plan imposes a greater burden on access to MH/SUD benefits than to generally comparable M/S benefits.
Effective Date of the New Requirements
The amendments to MHPAEA made by the CAA took effect on February 10, 2021, and remain in force. Therefore, while the newly clarified requirements for performing NQTL comparative analyses and applying NQTLs to MH/SUD benefits will not take effect until at least January 1, 2025, plans still must have written NQTL comparative analyses in compliance with current statutory requirements ready and available for review by the Departments.
Next Steps for Plan Sponsors and Employers
As noted above, plan sponsors and employers should perform a self-audit of current plan design elements in consultation with legal counsel, as needed. We also encourage plan sponsors and employers to contact third-party plan administrators and/or insurers to discuss steps being taken to ensure compliance with MHPAEA and the Proposed Rules.
The Proposed Rules are voluminous and complex in operation, but members of our Employee Benefits Practice Group are ready to ensure your plan is prepared to handle these changes in federal law. For questions or to discuss plan compliance issues, please contact a member of our Employee Benefits Practice Group today.