Regulations Implementing the Federal Mental Health Parity and Addiction Equity Act of 2008 and the 21st Century Cures Act of 2016
Private health insurance must cover mental health equal to physical health conditions. This is "mental health parity.”This publication tells you about the final rules for the federal mental health parity law. The publication explains them. The publication tells you about covered plans and financial rules. The publication tells you about limits on health benefit. It tells you about the rules for medical necessity. This publication does not cover Medi-Cal.
Final federal regulations implementing the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) were issued on November 13, 2013.1
1. Highlights of the regulations
Plans subject to parity requirements. The regulations implement the extension of the MHPAEA requirements under the Affordable Care Act (ACA) to health care plans offered in the individual health insurance market, “qualified health plans” offered through health insurance marketplaces (exchanges) such as Covered California, and the same coverage offered outside of health insurance marketplaces, non-grandfathered employer-based plans required to provide essential health benefits in the small group market, and Medicaid (Medi-Cal in California) alternative benefit plans.
Preventive services. Preventive services mandated under the Affordable Care Act, namely alcohol misuse screening and counseling, depression counseling, and tobacco use screening do not trigger parity requirements under the MHPAEA.
Financial requirements and quantitative treatment limitations. The regulations clarify that the six classifications of benefits for purposes of financial requirements and quantitative treatment limitations under MHPAEA are comprehensive (with specific exceptions) and cover the complete range of benefits including so-called “intermediate” benefits such as residential treatment.
Nonquantitative treatment limitations. Parity requirements apply to nonquantitative treatment limitations (NQTLs) based on “clinically appropriate standards of care”.
Transparency. Disclosure of underlying processes and standards for determining NQTL parity may require disclosure of this information with respect to medical/surgical benefits as well as mental health and substance use disorder benefits.
This memo does not discuss cost exemption rules for plans or multistate plan appeals rules, which are also contained in the regulations.
2. Extension of the MHPAEA to additional types of plans and coverage under the ACA
Under federal law, health insurance coverage (including coverage offered through managed care organizations) is offered through the individual market, the small group market, and the large group market. Prior to the enactment of the ACA, employers with more than 50 employees offered large group market plans. The ACA changed this to more than 100 employees effective January 1, 2014, or, at state election, January 1, 2016, for plans not subject to ERISA.2
Prior to enactment of the ACA, the MHPAEA applied only to:
- All plans offered through the large group market, including plans subject to ERISA.3
- Medicaid (Medi-Cal in California) managed care plans (with exceptions).4
- All benefits offered through a State Children’s Health Insurance Program (CHIP).5 (CHIP was originally implemented in California as the Healthy Families Program (HFP)—it is now part of the Medi-Cal program.)
The ACA extended MHPAEA to the following:
- All plans offered through the individual market.6
- All “Qualified Health Plans,” i.e., plans offered through health insurance marketplaces (exchanges) under the ACA, and the same plans offered outside of the exchanges. (In California the health insurance marketplace is called Covered California.)7
- Non-grandfathered plans in the small group market, i.e., small-group plans which are required to offer “Essential Health Benefits” under the ACA.8
- Medicaid (Medi-Cal in California) non-managed care alternative benefit plans (with exceptions).9
The reason the MHPAEA applies to non-grandfathered plans in the small group market is that those plans are required to offer “Essential Health Benefits” under the ACA.12 Essential health benefits, as defined under the ACA, include mental health and substance use disorder benefits. Therefore, because mental health and substance use disorder benefits are offered under those plans, parity between those benefits and medical/surgical benefits is required. While the MHPAEA does not by its own terms require that mental health benefits and substance use benefits be offered, once the benefits are offered, whether on a voluntary or mandatory basis, parity is required.
3. Preventive services required under the ACA do not trigger MHPAEA parity requirements
The regulations treat preventive services mandated under the ACA differently than essential health benefits mandated under the ACA. Unlike mental health and substance use disorder benefits mandated as essential health benefits under the ACA, mental health and substance use disorder preventive services mandated under the ACA do not trigger MHPAEA parity requirements.13 Preventive services mandated under the ACA include alcohol misuse screening and counseling, depression counseling, and tobacco use screening.14 This specific exception in the regulations is designed to underscore the emphasis in the regulations that the offering of mental health and substance use benefits is not mandatory under the terms of the MHPAEA itself. Therefore, the specific requirement to offer certain preventive services does not trigger a requirement to offer broader mental health or substance use benefits than the plan chooses to offer.15
4. Financial requirements/Quantitative treatment limitations
The MHPAEA and implementing regulations draw a distinction between financial requirements/quantitative treatment limitations on the one hand, and nonquantitative treatment limitations on the other hand.
Financial requirements and quantitative treatment limitations are numbers. The regulations define these terms as follows:
- Financial requirements include deductibles, copayments, coinsurance, or out-of-pocket maximums.16
- Quantitative treatment limitations are expressed numerically (such as 50 outpatient visits per year).17
Because financial requirements and quantitative treatment limitations are numbers, application of the parity rules to them is simpler and more straightforward than application of parity rules to nonquantitative treatment limitations. This is because it is easier to compare numerical standards than non-numerical standards. However, there are some complications in comparing numerical standards. The regulations provide clarifications in how to compare these numerical standards. The following is a brief description of the clarifications provided by the l regulations.
Comprehensive classification of benefits
The federal approach to numerical parity is to compare mental health and substance use disorder benefits to medical/surgical benefits in six separate categories or classes listed in the MHPAEA. This means mental health/substance use disorder benefits and medical/surgical benefits must first be assigned to one of the six classifications. Then parity requirements are applied to all of the benefits within each classification. For example, inpatient mental health/substance use disorder benefits are compared only to inpatient medical/surgical benefits.
The regulations emphasize that the six classifications listed in the statute are the only classifications used in applying the financial requirement/quantitative treatment limitation rules.18 The following are the six classifications:
- Inpatient, in-network.
- Inpatient, out-of-network.
- Outpatient, in-network.
- Outpatient, out-of-network.
- Emergency care.
- Prescription drugs (if otherwise offered).19
According to the regulations, all mental health and substance use benefits, as well as all medical/surgical benefits, have to fit into these six categories.20 Nothing can fall through the cracks. Plans cannot claim a benefit is not covered or subject to parity requirements on the basis that the benefit does not quite fit into one of the six categories.
This means so called “intermediate” levels of care such as residential services, partial hospitalization and intensive outpatient treatment must be covered if mental health/substance use disorder benefits are covered under the plan and there are analogous medical/surgical benefits under the plan.21
Benefits in these “intermediate” levels cannot be denied just because they do not fit neatly into one of the six categories. The intermediate services must be classified to one of the six categories depending on how similar medical/surgical benefits are classified to the six categories by the plan. For example, if a plan provides for medical/surgical rehabilitation as an inpatient benefit, it must provide mental health/substance use disorder rehabilitation as an inpatient benefit as well.22 By contrast, if a plan provides for medical/surgical rehabilitation as an outpatient benefit, it must provide mental health/substance use disorder rehabilitation as an outpatient benefit as well.
In addition, sub-classifications are prohibited except with respect to outpatient benefits and multiple tiers of in-network providers, discussed below.23
Sub-classifications of outpatient benefits
The regulations do not allow sub-classifications of benefits except outpatient benefits may be sub-classified into office visits on the one hand and all other outpatient benefits on the other hand.24
Multiple tiers of in-network providers
The regulations do not allow sub-classifications of providers except for different cost sharing requirements among multiple tiers of in-network providers.25 Tiers have to be based on reasonable factors and without regard to whether a provider is a mental health/substance use disorder provider or a medical/surgical provider. Presumably, this means a plan can charge a copayment of, say, $20 for a visit to a primary care provider and a higher copayment of, say, $40 for a visit to a specialist so long as the plan applies the same formula uniformly to mental health/substance use disorder benefits and medical/surgical benefits.
Managed behavioral health organization (MBHOs) subcontractors
Many plans subcontract with MBHOs to provide mental health or substance use disorder benefits. The regulations provide that plans cannot evade parity requirements by subcontracting.26 In addition, the MBHOs are subject to parity requirements within the scope of their subcontracts.27
Annual and lifetime benefit limits for non-grandfathered small group plans
The original federal Mental Health Parity Act (MHPA) did not prohibit annual and lifetime limits. However, annual and lifetime limits for mental health benefits cannot be higher than medical/surgical benefits.28 The MHPAEA did not change this requirement but extended it to substance use disorder benefits. However, the ACA prohibits annual and lifetime limits for many types of coverage. Nevertheless, the regulations leave annual and lifetime limit rules in place for non-grandfathered plans not subject to the new ACA requirements.29 These non-grandfathered plans are small group plans not required to offer essential health benefits under the ACA.
5. Non-quantitative treatment limitations (NQTLs)
Non-quantitative treatment limitations are limitations that limit the scope or duration of benefits for treatment under a plan or coverage not expressed numerically.30 MHPAEA requires any processes, strategies, evidentiary standards, or other factors used in applying any NQTL to mental health or substance use disorder benefits in any classification are comparable to, and are applied no more stringently than, the processes, strategies, evidentiary standards, or other factors used in applying the limitation with respect to medical/surgical benefits in the same classification.31 This requirement applies to any NQTL under the terms of the plan as written and in operation.32
Comparisons of non-quantitative treatment limitations for parity purposes are more difficult than comparison of the numerical treatment limitations described above. This is because treatment interventions for any given condition vary at least somewhat from the treatment interventions for any other condition no matter what the condition is. For example, treatment interventions in response to a heart attack are not going to be the same as treatment interventions for clinical depression. However, to the extent that comparisons can be made, parity is required.
The regulations provide guidance on how to make comparisons with respect to NQTLs. Much of the guidance is in the form of examples that explain how to apply the general parity requirement to NQTLs.
Examples of NQTLs
The regulations contain eight examples of NQTLs.:3
- Medical management standards limiting or excluding benefits based on medical necessity or medical appropriateness, or based on whether the treatment is experimental or investigative (including standards for concurrent review).
- Network tier design for plans with tiered networks.
- Formulary design for prescription drugs.
- Standards for provider admission to participate in a network, including reimbursement rates.
- Plan methods for determining usual, customary, and reasonable charges.
- Refusal to pay for higher-cost therapies until lower-cost therapy is shown 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.
NQTL examples are illustrative
The regulations emphasize that NQTL examples are illustrative only, not exhaustive.34 The general rule provides that the processes, strategies, evidentiary standards and other factors used in applying NQTLs cannot be specifically designed to restrict access to mental health or substance use disorder benefits.
For example, the preamble to the regulations clarifies that, while the following plan standards are not listed in the examples in the regulations, they must be applied in accordance with the regulations.
- In and out of network geographic limitations
- Limitations on inpatient services in situations where a beneficiary is a threat to self or others
- Exclusions for court ordered and involuntary holds
- Experimental treatment limitations
- Service coding
- Exclusions for services provided by clinical social workers
- Network adequacy35
None of these standards are listed in the rules or in the examples contained in the rules, but they fall within the parity requirements based on the general prohibition of differences in NQTLs.36
6. Disclosure of underlying processes and standards
Under the MHPAEA, plans must provide beneficiaries with the plan’s criteria for medical necessity determinations and with the reasons for denial of payment for mental health and substance use disorder services.
There are concerns about what kind of information plans must disclose. For example, it is difficult to evaluate mental health and substance use disorder medical necessity standards without access to information about the processes, strategies, evidentiary standards, and other factors used to apply the medical necessity standard. Likewise, it is difficult to determine comparability with medical/surgical medical necessity standards unless information as well as the processes, strategies, evidentiary standards, and other factors used to apply those standards is disclosed.
The regulations handle this by incorporating a reminder to plans that the specific MHPAEA disclosure requirements are in addition to disclosure requirements contained in other statutes, such as ERISA.37 For example, for plans subject to ERISA, plan administrators must furnish instruments under which the plan is established or operated to plan participants.38 According to the preamble to the MHPAEA final regulations, instruments under which the plan is established or operated include documents with information on medical necessity criteria for both medical/surgical benefits and mental health and substance use disorder benefits, as well as the processes, strategies, evidentiary standards, and other factors used to apply an NQTL with respect to medical/ surgical benefits and mental health or substance use disorder benefits under the plan.39
Guidance issued by the Departments of Labor, Health and Human Services and Labor clarifies that plans must disclose this information regarding medical necessity criteria and factors used to apply NQTLs upon request, and cannot refuse to do so because this information is considered “proprietary” or of “commercial value.”40 This information is also required when a beneficiary files an appeal under federal regulations governing ERISA plans and other plans subject to the ACA.41 Therefore, under these and possibly other regulations, plans must disclose information to enable participants to determine whether or not medical necessity standards and other NQTLs comply with mental health and substance use disorder parity requirements.
7. The 21st Century Cures Act Parity Provisions
On December 13, 2016, the 21st Century Cures Act (Cures Act) was signed into law. Title XIII of the Cures Act creates guidance and standards for compliance with the MHPAEA. The Cures Act was a legislative response to an October 2016 federal report, which found that a key barrier to parity implementation was a lack of guidance regarding how parity regulations, particularly regulations relating to NQTLs, should be applied. The report noted that enforcement of parity requirements was made difficult by a lack of documentation and reporting required on the part of health care insurers and providers.42
To provide guidance on parity implementation, the Cures Act requires the Departments of Health and Human Services (HHS), Labor, and Treasury (collectively, the Departments) to solicit feedback and issue guidance regarding both the disclosure and NQTL requirements of the MHPAEA, and to issue reports with illustrative examples of MHPAEA compliant and non-compliant scenarios.43 The Departments are required to coordinate with state counterparts to enhance parity enforcement.4 In addition, one of the Departments is required to audit any health plan or insurer that violates the MHPAEA five times, so as to improve compliance.45
The Cures Act permits the HHS Secretary to promote public awareness of various types of eating disorders, and to identify models for educating and training health care providers to identify and treat eating disorders.46 To ensure parity in coverage for eating disorders, the Cures Act clarifies that eating disorders are mental health conditions under the MHPAEA. Therefore, health insurers and plans offering coverage for eating disorders, including residential treatment, must do so in compliance with MHPAEA regulations.47
Since the Cures Act became law in 2016, the Departments have issued a number of FAQs that provide guidance on parity for mental health and substance use disorder benefits.48 In consultation with stakeholders, the Departments are in the process of developing model forms that consumers and their doctors can use to request disclosures relevant to determining if insurers are providing parity with respect to NQTLs.49
This information is provided to you through the combined effort of the following organizations:
Disability Rights California
(916) 504-5800/(800) 776-5746
Legal Aid Society of San Diego, Inc.
Mental Health Advocacy Project
Mental Health Advocacy Services, Inc.
The California Mental Health Services Authority (CalMHSA) is an organization of county governments working to improve mental health outcomes for individuals, families and communities. Prevention and Early Intervention programs implemented by CalMHSA are funded by counties through the voter-approved Mental Health Services Act (Prop 63). Prop. 63 provides the funding and framework needed to expand mental health services to previously underserved populations and all of California’s diverse communities.
1 78 Fed.Reg. 68240 (Nov. 13, 2013). Parallel final mental health and substance use disorder parity regulations were issued by the Internal Revenue Service, 78 Fed.Reg. 68266, 26 C.F.R. § 54.9812–1, Department of Labor, Employee Benefits Security Administration, 78 Fed.Reg. 68276, 29 C.F.R. § 2590.712, and Department of Health and Human Services, 78 Fed.Reg. 68286, 45 C.F.R. § 146.136. The preamble (“preamble”) to the final regulations was issued jointly by the three agencies. Citations in this memo to the parity regulations will be to the Department of Health and Human Services regulations. – (Return to main document)
2 45 C.F.R. § 144.403. – (Return to main document)
3 68248. – (Return to main document)
4 78 Fed.Reg. 68248, 68252 (Nov. 13, 2013), See: http://www.medicaid.gov/Federal-Policy-Guidance/downloads/SHO-13-001.pdf. – (Return to main document)
5 Id. – (Return to main document)
6 78 Fed.Reg. 68251 (Nov. 13, 2013), 45 C.F.R. §§147.140, 147.160. – (Return to main document)
7 45 C.F.R. §§ 147.150, 156.115. – (Return to main document)
8 78 Fed.Reg. 68248 (Nov. 13, 2013), 45 C.F.R. § 156.115(a)(3), See https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-39-proposed.pdf See FAQs about Affordable Care Act Implementation (Part V) and Mental Health Parity Implementation, question 8, http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs5.html. – (Return to main document)
9 78 Fed.Reg. 68252 (Nov. 13, 2013), See: http://www.medicaid.gov/Federal-Policy-Guidance/downloads/SHO-13-001.pdf. – (Return to main document)
10 45 C.F.R. § 147.160. – (Return to main document)
11 45 C.F.R. §§ 147.150, 156.115, See: http://www.medicaid.gov/Federal-Policy-Guidance/downloads/SHO-13-001.pdf. – (Return to main document)
12 78 Fed.Reg. 68248 (Nov. 13, 2013), 45 C.F.R. § 156.115(a)(3), See FAQs about Affordable Care Act Implementation (Part V) and Mental Health Parity Implementation, question 8, available at http://www.dol.gov/ebsa/faqs/faq-aca5.html and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs5.html. – (Return to main document)
13 78 Fed.Reg. 68244 (Nov. 13, 2013), 45 C.F.R. § 146.136(e)(3)(ii) – (Return to main document)
14 Id. – (Return to main document)
15 Id. – (Return to main document)
16 45 C.F.R. § 146.136(a) – (Return to main document)
17 Id. – (Return to main document)
18 78 Fed.Reg. 68243 (Nov. 13, 2013). – (Return to main document)
19 45 C.F.R. § 146.136(c)(2)(ii). – (Return to main document)
20 78 Fed.Reg. 38243 (Nov. 13, 2013). – (Return to main document)
21 78 Fed.Reg. 68246-47 (Nov. 13, 2013). – (Return to main document)
22 78 Fed.Reg. 68247 (Nov. 13, 2013). – (Return to main document)
23 78 Fed.Reg. 68243 (Nov. 13, 2013), 45 C.F.R. § 146.136(c)(2)(ii). – (Return to main document)
24 78 Fed.Reg. 68242 (Nov. 13, 2013), 45 C.F.R. § 146.136(c)(3)(iii)(C). – (Return to main document)
25 78 Fed.Reg. 68242 (Nov. 13, 2013), 45 C.F.R. § 146.136(c)(3)(iii)(B). – (Return to main document)
26 78 Fed.Reg. 68250 (Nov. 13, 2013). – (Return to main document)
27 Id. – (Return to main document)
28 78 Fed.Reg. 38244 (Nov. 13, 2013). – (Return to main document)
29 78 Fed.Reg. 68244 (Nov. 13, 2013), 45 C.F.R. § 146.136(b) – (Return to main document)
30 78 Fed.Reg. 68241 (Nov. 13, 2013). – (Return to main document)
31 78 Fed.Reg. 68241, 6824444 (Nov. 13, 2013), 45 C.F.R. § 146.136(b)(4). – (Return to main document)
32 78 Fed.Reg. 68244-45 (Nov. 13, 2013), C.F.R. § 146.136(b)(4). – (Return to main document)
33 78 Fed.Reg. 68246 (Nov. 13, 2013), 45 C.F.R. § 146.136(c)(4)(ii). – (Return to main document)
34 78 Fed.Reg. 68246 (Nov. 13, 2013). – (Return to main document)
3578 Fed.Reg. 68246 (Nov. 13, 2013). – (Return to main document)
36 Id. – (Return to main document)
37 78 Fed.Reg. 68247 (Nov. 13, 2013), (d)(3). – (Return to main document)
38 78 Fed.Reg. 68247-48 (Nov. 13, 2013). – (Return to main document)
39 78 Fed.Reg. 68247 (Nov. 13, 2013). – (Return to main document)
40 FAQs about Affordable Care Act Implementation (Part XXIX) and Mental Health Parity Act Implementation, question 12, available at https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-xxix.pdf and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/FAQs-Part-XXIX.pdf. – (Return to main document)
41 78 Fed.Reg. 68247 (Nov. 13, 2013). – (Return to main document)
43 114 P.L. 255, § 13001 (Dec. 16, 2016). – (Return to main document)
44 114 P.L. 255, § 13002 (Dec. 16, 2016). – (Return to main document)
45 114 P.L. 255, § 13001(d) (Dec. 16, 2016). – (Return to main document)
46 114 P.L. 255, § 13005-13006 (Dec. 16, 2016) – (Return to main document)
47 114 P.L. 255, § 13007 (Dec. 16, 2016). – (Return to main document)
49 See [Proposed] FAQs about Affordable Care Act Implementation (Part XXXIX) and Mental Health Parity Act Implementation, available at https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-39-proposed.pdf and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/FAQs-Part-XXIX.pdf.https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-39-proposed.pdf – (Return to main document)
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