The Mental Health Parity And Addiction Equity Act (MHPAEA) Final Rules Are Here: Key Changes And Takeaways For Plan Sponsors And Health Insurance Issuers

On September 9, 2024, the Departments of the Treasury, Labor and Health and Human Services (collectively, the "Departments") released final rules implementing the nonquantitative treatment limitation ("NQTL") comparative analyses requirements under the Mental Health Parity and Addiction Equity Act of 2008 ("MHPAEA"), in accordance with the amendments made to the law in 2021. These requirements prohibit group health plans and health insurance issuers from using NQTLs that place greater restrictions on access to mental health and substance use disorder benefits as compared to medical and surgical benefits. The regulations, which were finalized a little over a year after the Departments initially proposed them (see our prior alert here), seek to reinforce the obligations of group health plans and health insurance issuers under MHPAEA, by among other things, placing a heightened focus on the elimination of more restrictive barriers to access to mental health and substance use disorder benefits as compared to medical/surgical benefits, standardizing the definitions associated with the parity analysis for NQTLs applicable to mental health and substance use disorder benefits and medical/surgical benefits, and clarifying the content and data evaluation requirements of the NQTL comparative analyses.

While the final rules generally track what the Departments had proposed, they also reflect some notable changes in response to the many comments the proposal generated (close to 10,000 public comments had been submitted). Other changes appear to have been made in anticipation of potential challenges that the Departments have exceeded their administrative authority with this initiative and/or that they have engaged in arbitrary and capricious rulemaking in violation of the Administrative Procedure Act. Given the U.S. Supreme Court's reversal of the Chevron doctrine earlier this summer, the prospect of such a challenge seems likely. Notwithstanding this uncertainty, plan sponsors and health insurance issuers should start becoming familiar with these requirements now and devising their compliance protocols since the regulations are scheduled to take effect beginning January 1, 2025 for some provisions, and January 1, 2026 for others (including, the meaningful benefits standard, the prohibition on discriminatory factors and evidentiary standards, the relevant data evaluation requirements, and the related requirements in the provisions for comparative analyses).

What follows is a high-level summary of the changes between the proposed and final rules along with some key takeaways for plan sponsors and issuers.

Requirements for Compliant NQTLs

Under the final rules, a plan or issuer may not impose any NQTL with respect to mental health/substance use disorder benefits in any classification¹ that is more restrictive, as written or in operation, than the predominant NQTL that applies to substantially all medical/surgical benefits in the same classification. Furthermore, a plan or issuer may not impose any financial requirement or treatment limitation that is applicable only with respect to mental health or substance use disorder benefits and is not applicable to any medical/surgical benefits in the same classification.

In a notable change from the proposed rules, the Departments declined to adopt the four-prong test² for determining whether an NQTL was "no more restrictive," as written or in operation, when applied to mental health and substance use disorder benefits than the predominant NQTL that applies to substantially all medical/surgical benefits in the same classification. This test would have required plans and issuers to use mathematical testing to determine if something qualifies as "substantially all" or "predominant." Instead, the Departments have provided that consistent with the fundamental purpose of MHPAEA, an NQTL will be considered more restrictive than the predominant NQTL that applies to substantially all medical/surgical benefits in the same classification if the plan or issuer fails to satisfy (1) the design and application requirements or (2) the relevant data evaluation requirements.

R&G Takeaway: In choosing not to adopt the "no more restrictive" test that they proposed, the Departments have conceded that the required mathematical calculations would have presented various operational and feasibility challenges. Moreover, the decision to remove these potentially problematic provisions and to replace them with a restatement of the express statutory requirements at Code Sec. 9812(a)(3)(A), ERISA Sec. 712(a)(3)(A) and PHS Act Sec. 2726(a)(3)(A), seems to signify a defensive posture by the Departments, given the reversal of agency deference this summer in Loper Bright Enterprises v. Raimondo.

1. Design and Application Requirements

This set of requirements focuses on the following items:

• Are the processes, strategies, evidentiary standards or other factors used in designing and applying an NQTL to mental health/substance use disorder benefits in a classification comparable to, and applied no more stringently than, those used in designing and applying the limitation with respect to medical/surgical benefits in that same classification?
• Does the information, evidence, sources, or standards on which the factor or evidentiary standard is based discriminate against mental health/substance use disorder benefits as compared to medical/surgical benefits?
• • To determine if something is discriminatory, one must assess based on all the relevant facts and circumstances, whether the information systematically disfavors access or is specifically designed to disfavor access to mental health/substance use disorder benefits as compared to medical/surgical benefits.
  • • For example, historical plan data or information that predates when the plan or coverage became subject to MHPAEA will generally be categorized as biased or not objective, if it systematically disfavors access or it is specifically designed to disfavor access to mental health or substance use disorder benefits as compared to medical/surgical benefits, and the plan has not taken the steps necessary to correct, cure or supplement the data or information.
  • The final rules clarify that (i) generally recognized independent professional medical or clinical standards and (ii) carefully circumscribed measures reasonably and appropriately designed to detect or prevent and prove fraud and abuse that minimize the negative impact on access to appropriate mental health and substance use disorder benefits are not considered biased and are objective.
  • • Examples of independent professional medical or clinical sources could include (but are not limited to): peer-reviewed scientific studies and medical literature, formal published recommendations of federal government agencies, drug labeling approved by the U.S. Food and Drug Administration and recommendations of relevant nonprofit health care provider professional associations and societies.

R&G Takeaway: The final rules largely preserve what the Departments had initially proposed for the design and application requirements applicable to NQTLs. In order to ensure that plans and issuers are not using standards that have built-in biases (at the time of design) against mental health and substance use disorder benefits, the Departments have now provided some clarifications of what it means for the sources used to design and apply the NQTL to be discriminatory. The additional language should help plan sponsors, issuers and third-party administrators better understand what standards will and will not be considered discriminatory. That said, this may not necessarily be a drastic expansion of the universe of sources and information that will now be ineligible as discriminatory going forward. For example, the preamble explains how a factor or evidentiary standard (such as information about the clinical efficacy of a treatment or service) may solely relate to medical/surgical benefits and is silent with respect to mental health or substance use disorder benefits. The fact that such factor or standard is silent with respect to mental health conditions or substance use disorders does not preclude a plan sponsor from relying on it. The preamble explains that while such reliance would not be considered a violation of the prohibition on discriminatory factors and evidentiary standards, the use of such factor or standard must still comply with the regulation's design and application requirements.

2. Data Collection and Evaluation Requirements (Outcomes Data)

• For this set of requirements, the plan or issuer must collect and evaluate "relevant data" in a manner reasonably designed to assess the impact of the NQTL on relevant outcomes related to access to mental health/substance use disorder benefits as compared to medical/surgical benefits and to carefully consider the impact as part of the plan's or issuer's evaluation.
• • The Departments explain that "relevant data" is intended to be broadly construed, but at a minimum, it could include (i) the number and percentage of relevant claims denials; data relevant to NQTLs as required by state law or accreditation standards, and (ii) the network composition data (i.e., in-network and out-of-network utilization rates, network adequacy metrics and provider reimbursement rates (for comparable services and as benchmarked to a reference standard).
  • In a change from the proposal, the final rules expand the evaluation language by saying that the plan or issuer may not disregard relevant outcomes data that it knows or reasonably should know suggest that an NQTL is associated with material differences in access to mental health/substance use disorder benefits as compared to medical/surgical benefits.
  • In another change from the proposal, the final rules now provide guidance on how a plan or issuer can comply with the data evaluation requirements if the relevant data is temporarily unavailable (i.e., if there is a lag between imposing the NQTL and when the relevant data becomes available for gauging the impact on access). The Departments are under the impression that data will generally be available and that their guidance regarding the lack of data would apply in very limited circumstances.
  • The Departments state in the preamble that the unavailability of data for purposes of this evaluation requirement does not affect the plan or issuer's obligations to comply with the design and applications requirements addressed above.
  • The Departments have also declined to provide a list of all relevant outcomes data required to be collected and evaluated by plans and issuers; however, they indicate that they intend to issue future guidance as to the type, form and manner of collection and evaluation for the data required. The Departments also state that they will update the MHPAEA Self-Compliance Tool to provide a framework and roadmap for plans and issuers to determine which data to collect and evaluate.
• The final rules retain a special rule for NQTLs related to network composition standards, which says that a plan or issuer must collect and evaluate relevant data in a manner reasonably designed to assess the NQTLs' aggregate impact on relevant outcomes related to access to mental health and substance use disorder benefits and medical/surgical benefits.
• • The Departments acknowledge that network composition and access to mental health and substance use disorder benefits are the product of myriad NQTLs, processes, strategies, evidentiary standards and other factors used to design and apply such NQTLs. Furthermore, the Departments concede that a variety of metrics could be consulted as a plan or issuer evaluates its parity compliance regarding NQTLs related to network composition, and that parity in this sense does not necessarily mean an equal number of mental health or substance use disorder and medical/surgical providers.
• To the extent the relevant data that was evaluated suggests that the NQTL contributes to material differences in access to mental health and substance use disorder benefits as compared to medical/surgical benefits in a classification, such differences will be considered a strong indicator that the plan or issuer violates the MHPAEA requirements.
• • Differences in access to mental health benefits will be deemed material if the data suggests that NQTLs are likely to have a negative impact on mental health/substance abuse benefits compared to medical/surgical benefits. However, if the differences in the data can be attributed to generally recognized independent professional medical or clinical standards, the differences will not be considered material. The final rules contain a set of examples illustrating permissible versus impermissible data discrepancies.
• Where the relevant data suggests that the NQTL contributes to material differences in access to mental health and substance use disorder benefits as compared to medical/surgical benefits in a classification, the plan or issuer must take reasonable action as necessary to address the material differences to ensure compliance in operation with the final rules and must document the actions that have been or are being taken by the plan or issuer to address the material differences.

R&G Takeaway: The data evaluation requirements and the related provisions regarding the content of the comparative analysis (discussed below) are, in particular, the areas where the final rules dramatically expand the obligations and compliance burdens on plans, issuers and the service providers that will be relied on to prepare these materials. Accordingly, the Departments have adopted a delayed applicability date for these provisions, which begins on the first day of the plan year beginning on or after January 1, 2026. It will take time and money to properly conduct these analyses and fully implement any benefit design changes or NQTL modifications to be in compliance with MHPAEA. Besides the delayed applicability date, plan sponsors and issuers should take note of the Departments' preamble guidance that when it comes to gauging material differences in access, the Departments are not focusing on foot-faults or inconsequential differences.

Comparative Analysis Content Requirements

The Departments have largely adopted as proposed, the requirements addressing what plans and issuers must include in their comparative analyses of the design and application of each applicable NQTL. As depicted in the table below, the comparative analysis is required to contain, at a minimum, the following six items:

R&G Takeaway: As evidenced by the new disclosure requirements in the findings and conclusions section of the comparative analysis, the Labor Department is committed to holding fiduciaries of ERISA-covered group health plans liable in effectuating MHPAEA compliance. The preamble explicitly notes how the agency will continue to abide by its current enforcement approach, which prioritizes potential violations that affect not just one plan or coverage, but hundreds or thousands of plans that provide coverage for thousands or millions of individuals.

Where NQTL violations are identified in a plan or coverage, the Labor Department will generally examine the role that each of the plan's or issuer's service providers have in the design and administration of each NQTL to ascertain whether any of the service providers play a similar role serving other plans or issuers that might have the same violations and will seek to bring them into compliance. To the extent a third-party administrator exercises discretionary authority or discretionary responsibility in the administration of an ERISA-covered health plan, the Labor Department will generally consider them to be fiduciaries and will expect them to be in compliance with the MHPAEA standards. Moreover, to the extent these service providers are fiduciaries for those plans, they are subject to the provisions governing fiduciary conduct and liability, including the provisions for co-fiduciary liability under ERISA Sec. 405.

These requirements should be considered in light of the uptick in enforcement and litigation impacting ERISA-covered health plans and their service providers, including, the Labor Department's settlement last year with EmblemHealth stemming from its practice of cross-plan offsetting,³ and the recent lawsuits against plan fiduciaries at Johnson & Johnson and Wells Fargo alleging mismanagement of the companies' prescription drug benefits.

Plan sponsors will also want to be mindful of the terms of any agreements they enter into with group health plan service providers to ensure that these service providers will provide the data and analysis required to enable the plans to fulfill their obligations under these regulations and their related fiduciary obligations under ERISA.

HHS Finalized Regulations

HHS has also finalized the regulatory amendments related to (1) the applicability of MHPAEA to individual health insurance coverage and (2) the implementation of the sunset provision for self-funded, non-federal governmental plan elections to opt out of compliance with MHPAEA. Notably, HHS finalized both amendments as proposed and did not receive any comments objecting to the proposed changes:

1. Applicability to Individual Health Insurance Coverage

For policy years beginning on or after January 1, 2026, the final rules extend MHPAEA requirements to health insurance issuers offering individual health insurance coverage. Until the January 1, 2026 applicability date, issuers are required to continue to comply with the most recent MHPAEA regulations codified in the Code of Federal Regulations and must comply with the statutory provisions of MHPAEA, as amended by the Consolidated Appropriations Act, 2021.

2. Sunset of Opt-Out Provisions

HHS also finalized its proposal implementing the sunset provision for self-funded, non-federal governmental plan elections to opt out of compliance with MHPAEA, as enacted in the Consolidated Appropriations Act, 2023. Specifically, the sponsor of a self-funded, non-federal governmental plan may not elect to exempt its plans from any of the MHPAEA requirements on or after December 29, 2022. In the case of a self-funded non-federal governmental plan that is subject to multiple collective bargaining agreements of varying lengths and that has an election with respect to any of the MHPAEA requirements in effect as of December 29, 2022 that expires on or after June 27, 2023, the plan may extend such election until the date on which the term of the last such agreement expires.

R&G Takeaway: This rule is intended to ensure that all plans and issuers comply with the MHPAEA mandate. Further and in line with the Consolidated Appropriations Act, 2023, HHS is removing the remaining coverage loopholes for opt-out of MHPAEA compliance, extending MHPAEA protections to thousands of additional individuals. In doing so, HHS has emphasized its commitment to ensuring that plans that previously opted out of compliance with MHPAEA come into compliance with MHPAEA requirements. To ensure timely implementation, HHS will conduct compliance and NQTL comparative analysis review, weighing all relevant considerations, such as the number of complaints of MHPAEA noncompliance with respect to such plans. As a result, it is crucial for plans and issuers to promptly develop a plan to prepare an NQTL comparative analysis as soon as is practicable.

Footnotes

1 The 2013 MHPAEA regulations establishes six classifications of benefits:

(1) inpatient, in-network

(2) inpatient, out-of-network

(3) outpatient, in-network

(4) outpatient, out-of-network

(5) emergency care

(6) prescription drugs The 2013 regulations also state that if a plan or health insurance coverage provides mental health or substance use disorder benefits in any classification of benefits, the mental health or substance use disorder benefits must be provided in every classification in which medical or surgical benefits are provided.

2 Under this test, plans and issuers would have been required to determine:

3 See, "Department of Labor Reaches Settlement with New York Insurer, 3^rd Party Health Plan Administrator to End 'Cross-Plan Offsetting' Practice" available at https://www.dol.gov/newsroom/releases/ebsa/ebsa20231005.

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