Biden Administration Issues Final Reg on Mental Health Parity Requirements

Earlier this week, comments were due on the major Medicare calendar year payment regs, marking the unofficial end to the summer reg season that all in health policy “enjoy” each year. However, that doesn’t mean that the buffet of regs (and eggs) ends!

The same day these comments were due, the US Departments of Health and Human Services, Treasury and Labor released a final reg related to mental health parity requirements for health plans. The Departments finalized most of what they initially proposed in July 2023, with some differences to address the 9,000+ comments they received. To help me break down the final reg, I’m bringing in my colleague Katie Waldo. M+ is also working on a more comprehensive summary of the reg (so stay tuned), and you can check out resources from the Departments here:

As background, the Mental Health Parity and Addiction Equity Act (MHPAEA), which passed in 2008, prohibits health plans from implementing more restrictive coverage policies for mental health and substance use disorder services than for medical or surgical services. The MHPAEA includes both quantitative and non-quantitative requirements. Quantitative requirements relate to patient cost-sharing arrangements (deductibles, copayments, coinsurance, annual or lifetime dollar limits), and non-quantitative requirements include treatment limitations (called NQTLs) such as prior authorization. The law doesn’t require health plans to cover mental health services, but if plans do cover these services, they must treat them the same way they treat other services.

Since the MHPAEA passed, subsequent laws have expanded the types of health plans that are subject to the mental health parity requirements. With mental health and substance use disorders on the rise, the Departments wish to ensure that the MHPAEA is working as intended and codify the requirements of MHPAEA and subsequent laws, such as the Consolidated Appropriations Act, 2021.

To that end, the Departments finalized the following policies:

• Clarified definitions. The Departments finalized various definitions found within the MHPAEA to help ensure that stakeholders know with certainty what constitutes mental health benefits versus medical and surgical benefits. The Departments also created definitions to ensure that any treatment limitations that health plans implement do not “impose a greater burden on access (that is, are more restrictive) to mental health or substance use disorder benefits under the plan or coverage than they impose on access to medical/surgical benefits in the same classification of benefits.”
• Non-quantitative treatment limitation (NQTL) test. As previously mentioned, NQTLs are non-numerical limits on the scope or duration of benefits for treatment (such as prior authorization requirements). In the proposed reg, the Departments proposed to prohibit plans from imposing NQTLs on mental health or substance use disorder benefits unless they satisfied all three of the following requirements:
  1. The NQTL is no more restrictive as applied to mental health and substance use disorder benefits than to medical/surgical benefits (the no-more-restrictive requirement). The proposed reg included a four-prong test for determining compliance with this requirement.
  2. The plan satisfies requirements related to the design and application of the NQTL (the design and application requirements).
  3. The plan collects, evaluates, and considers the impact of relevant data on access to mental health and substance use disorder benefits relative to access to medical/surgical benefits and subsequently takes reasonable action, as necessary, to address any material differences in access shown in the data to ensure compliance with MHPAEA (the relevant data evaluation requirements).

However, many commenters expressed confusion as to how this NQTL test, as proposed, would be applied in practice, and highlighted the need for more detail. Based on these concerns, the Departments did not finalize the first of the requirements: the no-more-restrictive requirement. Instead, plans only must satisfy the other two elements: the design and application requirements, and the relevant data evaluation requirements. (The final reg includes additional modifications to these elements.)

• Additional information related to non-quantitative treatment limitations. Since non-quantitative policies can be trickier to define, the Departments included a non-exhaustive list of these policies, including the following:
  • Medical management standards (such as prior authorization) limiting or excluding benefits based on medical necessity or medical appropriateness, or based on whether the treatment is experimental or investigative.
  • Formulary design for prescription drugs.
  • Preferred providers or network tier design.
  • Provider Network Standards Plan methods for determining out-of-network rates, such as allowed amounts; usual, customary and reasonable charges; or application of other external benchmarks for out-of-network rates.
  • Refusal to pay for higher-cost therapies until it can be shown that a lower-cost therapy is not effective (also known as fail-first policies or step therapy protocols).
  • Exclusions based on failure to complete a course of treatment.
  • Restrictions based on geographic location, facility type, provider specialty, and other criteria that limit the scope or duration of benefits for services provided under the plan.

Under the final reg, if health plans wish to design and apply an NQTL, they must collect and evaluate relevant data to assess the policy’s impact on access to mental health and substance use disorder benefits and medical/surgical benefits, then analyze whether the limitation, in operation, complies with the MHPAEA. The reg refers to this as the NQTL “comparative analysis.” The Departments require plans to conduct a comparative analysis for each NQTL. Each comparative analysis must include six elements:

1. A description of the NQTL.
2. Identification and definition of the factors used to design or apply the NQTL.
3. A description of how factors are used in the design or application of the NQTL.
4. A demonstration of comparability and stringency, as written.
5. A demonstration of comparability and stringency, in operation.
6. Findings and conclusions.

The Departments declined to provide a list of all relevant outcomes data that plans must collect and evaluate. However, the Departments stated that they intend to issue future guidance specifying the type, form, and manner of collection and evaluation for the data required, and the lists of examples of data that are relevant across the majority of NQTLs.

• Strengthened enforcement of the MHPAEA. Under the final reg, the Departments can request from health plans their comparative analyses for each NQTL. If the Departments find a health plan to be out of compliance with the MHPAEA, they will give the health plan 45 days to develop a corrective action plan. If the Departments, upon receiving the corrective action plan and following up with the health plan, make a final determination that the health plan is not in compliance with the MHPAEA, the health plan will be required to notify all participants and enrolled beneficiaries within seven business days that it has been determined to not be in compliance. This notice must state the following: “Attention! Department of the Treasury has determined that [insert the name of group health plan] is not in compliance with the Mental Health Parity and Addiction Equity Act.”

While the health plan will still be expected to come into compliance after issuing this notice, the Departments did not institute any financial penalties or other long-term consequences for noncompliance.

• State Medicaid agency templates and reporting documents. To support implementation of parity in Medicaid and the Children’s Health Insurance Program (CHIP), CMS developed a new set of templates and instructional guides for state agencies to document how mental health and substance use disorder benefits provided through a state’s Medicaid managed care program, Medicaid alternative benefit plans, or Children’s Health Insurance Program (CHIP) comply with MHPAEA requirements. These new tools are intended to standardize, streamline, and strengthen the process for states to demonstrate, and CMS to evaluate, compliance with mental health and substance use disorder parity requirements in coverage and delivery of state Medicaid and CHIP benefits.

CMS is seeking preliminary comments on these templates and instructional guides through an informal request for comment and intends to take these comments into account before finalizing these tools. The templates and questions provided by CMS can be accessed here.

The final reg generally applies to group health plans and group health insurance coverage on the first day of the first plan year beginning on or after January 1, 2025. For health insurance issuers offering individual health insurance coverage, the requirements begin to apply on or after January 1, 2026. Other requirements, including those related to comparative analyses, apply on the first day of the first plan year beginning on or after January 1, 2026.

All in all, this final reg sends a strong signal that the Biden Administration is committed to enforcing mental health parity. However, since the reg was released, some stakeholders have already raised legal concerns, arguing that the Departments went beyond their statutory authority in creating the new requirements. Therefore, although the reg has been finalized, a strong likelihood of lawsuits raises questions about whether all or part of the reg will ultimately stand.

Until next week, this is Jeffrey (and Katie) saying, enjoy reading regs with your eggs.

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