Final Rules Related to the Mental Health Parity and Addiction Equity Act May Drive You Wild

Seyfarth Synopsis:  On September 9, 2024, the Departments of the Treasury, Labor, and Health and Human Services (the “Departments”) released highly anticipated Final Rules under the Mental Health Parity and Addiction Equity Act (MHPAEA).  Instead of providing the guidance hoped for by stakeholders, the new rules may leave employers wondering if they should continue to offer mental health (MH) and substance use disorder (SUD) benefits.

In a prior alert, we described how proposed regulations would amend existing regulations under MHPAEA and what would be required for group health plans that apply non-quantitative treatment limitations (NQTLs) to MH and SUD benefits. The Final Rules both add requirements and modify the requirements set forth in the proposed regulations.

Definitions

The Final Rules amend the definitions of “medical/surgical benefits” and “mental health benefits” by removing reference to state guidelines. As in the proposed rules, these benefits must be defined consistent with generally recognized independent standards of current medical practice. For this purpose, a plan's definition of whether a condition or disorder is a MH condition or SUD must follow the most current version of the International Classification of Diseases (ICD) or the Diagnostic and Statistical Manual of Mental Disorders (DSM). The Final Rules clarify the definitions of “ICD” and “DSM” and specify that the current version is the version in effect 60 days after the date the Final Rules are published in the Federal Register, and any subsequent version will be considered the “most current” beginning on the first day of the plan year that is one year after the date that version is adopted or published (as applicable).

The Final Rules also add new definitions for the following terms:

"Evidentiary standards" are any evidence, sources, or standards that a plan or issuer considered or relied upon in designing or applying a factor with respect to an NQTL

"Factors" are all information, including processes and strategies (but not evidentiary standards), that a plan or issuer considered or relied upon to design an NQTL or to determine whether or how the NQTL applies to benefits under the plan or coverage.

"Processes" are actions, steps, or procedures that a plan or issuer uses to apply an NQTL.

"Strategies" are practices, methods, or internal metrics that a plan or issuer considers, reviews, or uses to design an NQTL.

Classifications

There are six classifications of benefits across which MH and SUD coverage will be compared to medical/surgical (M/S) coverage for purposes of the requirements discussed below. These are inpatient, in-network; inpatient, out-of-network; outpatient, in-network; outpatient, out-of-network; emergency care, and prescription drugs. These classifications remained the same as in the proposed rules.

Meaningful Benefit Requirement

The meaningful benefit requirement found in the proposed rules has been finalized, but modified. The Final Rules require a plan to provide meaningful benefits for a covered MH condition or SUD in every classification in which M/S benefits are provided. In order to provide meaningful benefits, a plan must cover a core treatment for a covered MH condition or SUD in each classification in which the plan provides benefits for a core treatment for a M/S procedure. A core treatment is a standard treatment or course of treatment, therapy, service or intervention indicated by generally recognized independent standards of current medical practice.

A new example illustrates how a plan can provide meaningful benefits for the treatment of opioid use disorder (OUD). In the example, a plan provides benefits for the core treatments of many M/S procedures in the outpatient/in-network and prescription drug classifications. If the plan provides coverage for the diagnosis and treatment of OUD in the outpatient/in-network classification by covering counseling and behavioral therapies, and in the prescription drug classification by covering medications to treat OUDs, this results in the plan providing a core treatment and meaningful benefits for OUD in those classes. 

Nonquantitative Treatment Limitation Requirements

The Final Rules revise the requirements applicable to NQTLs. A plan may not impose a NQTL on MH or SUD benefits that is more restrictive, as written or in operation, than the predominant NQTL that applies to substantially all M/S benefits in the same classification.  A NQTL is more restrictive if it fails to comply with the following requirements:

Design and Application

The processes, strategies, evidentiary standards, and other factors used in designing and applying a NQTL to MH or SUD benefits in a class are comparable to and applied no more stringently than those used in designing and applying the NQTL to M/S benefits in the same class. This requires an examination of the processes, strategies, evidentiary standards, and other factors used in designing and applying an NQTL to ensure they are comparable.

These requirements also prohibit a plan from relying on discriminatory factors or evidentiary standards to design a NQTL to be imposed on MH/SUD benefits. A factor or evidentiary standard is discriminatory if the information, evidence, sources, or standards on which it is based are biased or not objective in a manner that discriminates against MH/SUD benefits as compared to M/S benefits.

Data Evaluation

A plan is required to collect and evaluate “relevant data” to ensure that, in operation, a NQTL applicable to MH or SUD benefits in a classification is no more restrictive than the predominant NQTL applied to substantially all M/S benefits. The data must be collected and evaluated to determine whether the data suggests that an NQTL contributes to material differences in relevant outcomes related to access to MH/SUD benefits as compared to M/S benefits in a classification. 

Relevant data may include the number and percentage of claim denials relevant to the NQTL or, for network composition, the in-network and out-of-network utilization rates, network adequacy metrics, and provider reimbursement rates. Although the Final Rules do not provide a list of all relevant outcomes data required to be collected and evaluated, the preamble states that the Departments intend to issue future guidance and update the MHPAEA Self-Compliance Tool to provide information on the type, form and manner of collection and evaluation of data, as well as provide additional information for NQTLs related to network composition. 

If material differences in relevant outcomes exist, a plan must take reasonable action, as necessary, to address the material differences to ensure compliance, in operation. The Final Rules provide the following examples of possible actions that a plan could take to improve network composition:  (i) strengthening efforts to recruit  providers and facilities to join a network; (ii) expand availability of telehealth; (iii) provide assistance to participants to find providers; and (iv) ensure that provider directories are accurate.

NQTL Written Comparative Analysis

Collect Information and Document Analysis

The Final Rules also solidified various requirements relating to compliance with the CAA’s NQTL written comparative analysis requirement. After collecting the necessary data, policies, and other information about standards, processes, and plan design, plan administrators must: (1) prepare a comprehensive list of all NQTLs under the plan; and (2) document a comparative analysis of each NQTL that satisfies the following content requirements:

1. a description of the NQTL, including identification of benefits subject to the NQTL;
2. identification and definition of the factors and evidentiary standards 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, including the required data, evaluation of that data, explanation of any material differences in access, and description of reasonable actions taken to address such differences; and
6. findings and conclusions.

Written Certification of Fiduciary Prudence

While the finalization of these content requirements are not surprising, one additional content requirement may come as a shock to plan fiduciaries. Under the Final Rule, plans subject to ERISA must include a certification in their comparative analyses by one or more named plan fiduciaries. The fiduciary certification must state that the named fiduciaries: (1) prudently selected qualified service providers to perform and document the comparative analysis, and (2) have satisfied their duty to monitor the service providers.  Although this fiduciary certification is less worrisome than the originally proposed requirement to certify that the comparative analysis actually complies with regulatory content requirements, it still imposes a high burden on plan fiduciaries with respect to documenting the comparative analysis. 

DOL, State Authorities and Plan Participants and Beneficiaries May Request Copies

Plans must be prepared to provide copies of the comparative analysis to both the DOL and plan participants. Under the Final Rules, the DOL may request a copy of the comparative analysis and plans must furnish it within ten (10) business days. Following a finding that the analysis is insufficient, plans will have an additional ten (10) business days to provide additional information requested by the DOL.  If the DOL issues an initial determination of noncompliance, an additional forty-five (45) calendar days are afforded for making corrections and providing a revised comparative analysis for further consideration by the DOL. If the DOL remains unsatisfied, the agency will issue a final determination of noncompliance.

There are two scenarios under which the plan must provide documentation to participants and beneficiaries:

1. If the DOL makes a final determination of noncompliance, the plan must distribute a notice of noncompliance (meeting certain content requirements) to all plan participants and beneficiaries within seven (7) business days.
2. Plan participants and beneficiaries may request a copy of the plan’s comparative analysis after receiving an adverse benefit determination relating to MH or SUD benefits, or at any time under ERISA Section 104. Generally, the analysis would need to be produced within thirty (30) days.

Lastly, the Final Rules clarify that any applicable State authority may request a copy of the comparative analysis. 

Effective Dates

All provisions of the Final Rules are effective for plan years starting on or after January 1, 2025, except for the following provisions, which are effective for plan years starting on or after January 1, 2026:

1. The meaningful benefits standard;
2. The prohibition on discriminatory factors and evidentiary standards;
3. The relevant data evaluation requirements; and
4. The NQTL comparative analysis requirements related to items 1 -3 above (i.e. the meaningful benefits standard, the prohibition on discriminatory standards and the relevant data evaluation requirements).

Given these rapidly approaching effective dates, plan sponsors and administrators should begin preparing for the implementation of these Final Rules as soon as possible.

Change is Possible

The Final Rules may leave many plan sponsors feeling overwhelmed (among other emotions….). While we offer some practical pointers on next steps at the end of this article, it’s important to understand that the Final Rules are far from settled at this point. We are watching three key developments to determine where the dust settles:

1. Election Outcome. Any change in Administrations can bring a change to regulatory guidance. While our understanding is that the Biden DOL attempted to finalize these regulations early enough to avoid the application of the Congressional Review Act (which, generally speaking, makes it easier for Congress or a subsequent Administration to overturn recently passed regulations), a turnover in the Administration could still result in modifications to the regulations at the margins, a non-enforcement safe harbor, or even a complete regulatory overhaul (which would take longer). 
2. Loper Challenges. The MHPAEA Final Rules are commonly mentioned as ripe for a Loper  challenge. For the last 40 years, courts were generally required to defer to regulatory agency guidance, but that all changed during the last Supreme Court term which overturned the doctrine of Chevron deference in Loper v.  Bright. Even in the wake of Loper, courts may still be required to defer to agency guidance where (a) Congress expressly delegated rulemaking to the agencies, or (b) the agency’s statutory interpretation is persuasive based on the agency’s particular expertise. Notwithstanding, it could be reasonably expected that a plaintiff could find a court to agree that the agencies overstepped their authority with respect to the meaningful benefit mandate, or the relevant data evaluation provisions. 
3. Additional DOL Guidance. Finally, the DOL promised to issue additional guidance to assist plan sponsors with compliance. Notably, the DOL intends to update its self-compliance tool and to provide additional information regarding the relevant data evaluation. We should also expect regular reports to Congress that shed additional light on DOL areas of focus on audit. 

Action Items

Despite the uncertainty regarding where the Final Rules will settle, plan sponsors can no longer afford to take a “wait and see” approach. The Final Rules reiterate that many of the NQTL requirements are in effect today, with more coming online in 2025 and then again in 2026. Of particular interest to plan administrators might be the fiduciary certification requirement, which takes effect on January 1, 2025 and (as further described above) requires a named fiduciary to certify that they prudently selected and monitored the service provider(s) that performed the comparative analysis. Moreover, the DOL is actively auditing plans for MHPAEA compliance, and under the Final Rules participants can request a copy of a plan’s comparative analysis at any point, thereby triggering a 30-day disclosure deadline. 

We have consistently heard from plan sponsors that there is no easy path to compliance. Third-party administrators have been unwilling to assume these compliance obligations, and consultants can be expensive (with a long waiting list). While there is no silver bullet that will quickly and easily yield a compliant analysis, we would offer the following practical pointers to plan sponsors seeking to mitigate their risk:

• Contract Leverage. While there can be an imbalance for many plan sponsors when contracting with large, national third-party administrators, employers have the most leverage prior to engaging a service provider, and, to a lesser extent, at the time of contracting. Especially in light of recent fiduciary litigation, plan sponsors may consider running an RFP for claims administration services. Any such RFP should seek to contract commitments from bidders to perform (or, at a minimum, assist with) the NQTL comparative analysis.

For sponsors who have already engaged their third party administrator (TPA) and do not intend to put the services out to bid, they should still leverage contracting (and renewals) to seek such assistance. Even if a plan sponsor previously sought such assistance (and was denied), this is a developing area of law and it is reasonable to expect that with each passing year, more claims administrators will develop platforms to complete the comparative analysis for their clients. 

The DOL notes in the Final Rules that claims administrators are, in most instances, fiduciaries. The DOL suggests reminding claims administrators that they can face co-fiduciary liability for plan fiduciary failures. 

• LeverageTPA’s Analysis. Even if a self-funded plan has no contractual commitment from its TPA to assist with its comparative analysis, most claims administrators have performed their own comparative analysis for purposes of their fully-insured book of business (where they face direct liability for non-compliance). While a sponsor of a self-funded plan may have different design features than those offered by the claims administrator, many will be the same (including, but not limited to, network composition, provider reimbursement rates, medical necessity guidelines, and others). As such, prior to engaging a consultant, an employer might consider addressing as many NQTL comparative analyses as possible based on the claims administrator’s analysis. 
• Respond to TPA Warnings. The DOL made clear in the Final Rules that their goal is not to drive compliance employer-by-employer, but rather to look for opportunities to impart more broad-based changes. One common strategy is to initiate an audit against an employer plan, engage the TPA during the audit based on a feature of the TPA’s protocols, advise the TPA’s standard protocols, and then direct the TPA to notify all clients who have adopted that feature/protocol that the provision is problematic. If clients of the TPA fail to modify the feature/protocol, the DOL forces the TPA to disclose a list of non-compliant clients, which effectively creates an ongoing audit pool for the DOL.  As such, we strongly recommend that if an employer receives such a notice from the TPA, the employer closely consider (and probably adopt) the recommended change. 
• Contract with Consultants as Needed.  Relying on the TPA may not work for all employers. Many employers have custom designs or supplemental vendors that create gaps in the TPA’s analysis. Moreover, an employer may be unable to independently assess the quality of the TPA’s comparative analysis, which may give such an employer pause as to whether it can reasonably complete the fiduciary certification. In such instances, plan sponsors may determine that the most prudent course of action would be to engage a consultant to collect the necessary data and to perform the analysis. We expect that over time, the analysis will become more routine and less expensive, so plan sponsors may be tempted to wait as long as possible to benefit from process advancements. Even so, as noted above, plan sponsors may need to produce their comparative analyses in as little as 30 days.