First Look at Proposed New Federal Mental Health Parity Rules

Last week, the departments of the Treasury, Labor and Health and Human Services (collectively, the Departments) published long-awaited proposed regulations intended to clarify and improve compliance with the federal mental health parity law known as the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA).  The Departments also released their latest MHPAEA Comparative Analysis Report to Congress (the Report), which focuses on the Departments’ efforts to enforce the comparative analysis requirements established by Section 203 of the Consolidated Appropriations Act, 2021 (Section 203) as well as a Technical Release that provides further guidance on the types of data that are particularly relevant to network composition/adequacy the Departments also solicit comments regarding the data to be collected and a potential future enforcement safe harbor that would apply to network access related violations. The proposed rules will be published in the Federal Register with a 60-day comment period. 

Given the complexity, magnitude and abstract nature of the existing laws, regulations and related guidance, health plans and issuers (collectively, plans) have hoped that the proposed rules would offer more concrete and specific guidance regarding what plans must do to comply with MHPAEA. While the Departments have included two new (but apparently narrow) exceptions and indicate that a safe harbor regarding network composition/adequacy requirements may be forthcoming, the newly proposed regulations add a host of new requirements. While it would be impossible to thoroughly analyze in this newsletter the hundreds of pages of proposed rule changes, explanations and regulatory guidance, below we summarize some of the key aspects of the proposed rule and offer our high level observations.  For additional background regarding MHPAEA, please see our prior newsletters and look for further analyses of these developments in future newsletters. 

Changes to the Core Rules Regarding Nonquantitative Treatment Limitations

MHPAEA regulates both quantitative treatment limitations (QTLs), (such as numerical or financial limits on visits to a mental health provider) and non-quantitative treatment limitations or (NQTLs), (such as prior authorization and other utilization management processes) which are not expressed in numerical terms.  Most of the issues and difficulties surrounding mental health parity compliance relate to NQTLs, which are more difficult to evaluate for parity given that they are not expressed numerically.

Under the newly proposed rules, an NQTL cannot be applied to mental health/substance use disorder (MH/SUD) benefits unless a plan establishes that the NQTL satisfies several significant new requirements. 

1. A plan may not apply any NQTL in any classification¹ that is more restrictive, as written or in operation, than “the predominant nonquantitative treatment limitation applied to substantially all medical/surgical benefits in the same classification.”
2. A plan must comply with the new requirements regarding the design and application of the NQTL.
3. A plan must collect and evaluate relevant data in a manner reasonably designed to assess the impact of the NQTL on access to MH/SUD and  (M/S) benefits and consider that data in connection with the plan’s assessment of whether the NQTL meets the first two requirements.

The proposed rules include detailed explanations of how plans must establish compliance with each of these requirements.

Imposition of the Predominantly/Substantially All Tests on NQTLs

Under the proposed rules, to establish that an NQTL is not impermissibly restrictive as to MH/SUD benefits, the Departments have proposed to apply the “predominantly” and “substantially all”  tests, which previously have been applied solely to  QTLs.  Under existing regulations, a plan or issuer may not impose a QTL such as a financial requirement on MH/SUD benefits in any classification that is more restrictive than the predominant QTL of that type that is applied to substantially all M/S benefits in the same classification. Under the proposed regulations, NQTLs would also be required to satisfy this test.  Specifically, a plan would be required to determine:

1. The portion of plan payments for M/S benefits subject to an NQTL in a classification;
2. Whether the NQTL applies to substantially all M/S benefits in the classification;
3. The predominant variation of the NQTL that applies to M/S benefits in the classification; and
4. Whether the NQTL, as applied to MH/SUD benefits in the classification is more restrictive than the predominant variation of the NQTL as applied to substantially all M/S benefits.
   An NQTL that does not pass this complex test may not be imposed on MH/SUD benefits.

New Design and Application Requirements

To satisfy the new design and application requirements, plans would be required to establish that under the terms of a plan as written and in operation any processes, strategies, evidentiary standards, or other factors used in designing and applying the NQTL to MH/SUD benefits in the classification are comparable and applied no more stringently than those applied to M/S benefits in the same classification.  While that requirement echoes prior guidance, the proposed rules go further, prohibiting as a threshold matter the use of “discriminatory factors and evidentiary standards.”  Specifically, “a plan or issuer may not rely upon any factor or evidentiary standard if the information, evidence, sources, or standards on which the factor or evidentiary standard is based discriminates against mental health or substance use disorder benefits as compared to medical/surgical benefits”.  While plans are not likely to apply “discriminatory” factors and evidentiary standards, the Departments interpret this prohibition broadly to include the use of “any information that results in the less favorable treatment of mental health and substance use disorder benefits without legitimate justification or that is otherwise not objective.”  For example, the Departments state that plans would be prohibited from using historical data from a time when the plan was not subject to MHPAEA or was in violation of MHPAEA’s requirements.  As interpreted, ambiguity regarding terms such as “legitimate” and the limitations on the use of plan data will make it more difficult to comply with these rules.

Required Use of Outcomes Data 

Guidance from the Departments has previously indicated that various outcomes data could establish red flags indicating a parity violation or, conversely, the likely absence of a violation.  However, the collection and analysis of data are not currently required as a compliance obligation.  The proposed regulations would change that by making the collection and analysis of data an affirmative compliance obligation and a prerequisite to the imposition of an NQTL.  Specifically, the proposed regulations currently indicate that plans would be required to collect and evaluate for all NQTLs the following data and take note of any “material” differences between the MH/SUD data and the M/S data:

1. Number and percentage of relevant claims denials;
2. Any other data relevant to the NQTL required by state law or private accreditation standards;
3. In-network and out-of-network utilization rates (including data related to provider claim submissions);
4. Network adequacy metrics (including time and distance data and data on providers accepting new patients);
5. Provider reimbursement rates (including as compared to billed charges).

Although the proposed rules do not define what would constitute a “material” difference, such differences as to the data identified in the first two bullets, above would be considered a “strong indicator” of noncompliance and would require a plan to take reasonable action to address the differences and document the action being taken to mitigate the differences in access to MH/SUD benefits as compared to M/S benefits. Material differences as to the network composition/access standards identified in the third, fourth and fifth bullets, would be dispositive of a MHPAEA violation.

While the collection and evaluation of data are a new proposed requirement, we note that some of the data specifically listed in the proposed regulations is already referenced in the 2020 MHPAEA Self-Compliance Guide (claims denials, provider reimbursement rates) as well as referenced in the MHPAEA comparison reports to Congress as information that is regularly requested in investigations.  Therefore, plans should strongly consider collecting and evaluating these types of data, and not wait for the proposed regulations to be finalized.

In Technical Release 2023-01P, which was published concurrently with the proposed rules, the Departments state that comments are sought with respect to adopting a “data-driven” approach, particularly with respect to network composition/access requirements.  Specifically, the Departments seek comments to inform future guidance on the “type, form and manner” of data that plans would be required to collect and evaluate along with other relevant data as part of their comparative analyses.  In addition, the Departments seek comments regarding the data elements that would be specified by the Departments for a potential enforcement safe harbor applicable to plans that demonstrate they meet or exceed all of the data standards regarding network composition.  The Departments state that the safe harbor would set a “high bar” to ensure that enforcement relief is provided only to plans that clearly satisfy network composition standards.  The Technical Release specifically seeks comments on the following metrics: out-of-network utilization, percentage of in-network providers actively submitting claims, time and distance standards and reimbursement rates.  The Departments will set a prospective date by which comparative analyses would be required to include the specific data elements.

Exceptions for Independent Professional Medical or Clinical Standards and Standards to Detect or Prevent and Prove Fraud, Waste, and Abuse.

The proposed regulations provide two narrow exceptions from some of the new rules for NQTLs.  Specifically, there may be an exception when a plan includes an NQTL that impartially (i) applies independent professional medical or clinical standards or (ii) applies standards to detect or prevent and prove fraud, waste and abuse based on indicia of fraud, waste and abuse that have been reliably established through objective and unbiased data and also are narrowly designed to minimize the negative impact on access to appropriate MH/SUD benefits.  However, a plan would not qualify for the proposed exception if it deviated “in any way” from those standards such as by imposing additional or different requirements.  The Departments note that these are important exceptions that serve goals that are independent of parity and therefore, there may be circumstances where the application of independent professional medical or clinical standards might result in plans applying NQTLs to MH/SUD benefits that would otherwise be more restrictive than the predominant NQTLs applied to substantially all M/S benefits in the same classification.  These exceptions are important given the widespread use of independent professional standards, which may also be mandated by state law.  However, in light of the narrowness of these exceptions, their usefulness may be limited.

Codification and Expansion of Section 203 Requirements

The proposed rules also formalize the Departments’ informal guidance contained in FAQs issued in April 2021 regarding compliance with Section 203, which imposed a new requirement that plans perform and document comparative analyses of the design and application of their NQTLs to demonstrate mental health parity and provide those analyses to the Departments or state regulators, upon request.  In the FAQs, the Departments set out very extensive analysis and documentation requirements that plans have struggled to comply with.  Indeed, the Departments’ first report stated that no plans from which the Departments sought comparative analyses had complied with the requirements of Section 203, and the recently published report indicates only marginal improvement.  However, rather than simplifying the comparative analysis requirements, in the process of codifying the rules, the Departments have added detailed additional requirements.

ERISA Plans and Service Providers

In commentary accompanying the proposed rules, the Departments acknowledge that plans often contract with managed behavioral health organizations (MHBOs) and third-party administrators (TPAs) to provide or administer MH/SUD benefits.  However, the Departments note that such arrangements do not relieve plans of their obligations under MHPAEA.  In that regard, the Departments state that plans should have clear protocols and processes in place to ensure that MBHOs and TPAs provide sufficient information to ensure that MH/SUD benefits are coordinated with M/S benefits for purposes of compliance with MHPAEA.  While noting that the Departments have limited direct enforcement authority over MHBOs, TPAs and other service providers (except to the extent that they act as fiduciaries with respect to ERISA plans), the Departments state that they are committed to using all available authority to ensure compliance by with MHPAEA including all entities that play a role in administering benefits.  The Departments seek comments on how best to ensure that all entities involved in the design and administration of ERISA plan benefits provide the necessary information to plans to support their efforts to comply with MHPAEA.

In the Technical Release (discussed above) the Departments state that they are considering requiring the data to be collected and evaluated by TPAs or other service providers in the aggregate for all plans and policies that use the same network of providers or reimbursement rates because plan-level or product-level data may not reflect sufficient claims experience to consider the impact of an NQTL on network composition/access.

Finally, under the proposed rules, the comparative analysis would be required to include a certification by one or more named fiduciaries of an ERISA plan who have reviewed the analysis stating whether they found the comparative analysis to be in compliance with the content requirements in the proposed rules.

The Report

The latest Report by the Departments generally reflects the continuing struggles with MHPAEA compliance.  Reporting specifically on the Departments’ enforcement efforts regarding NQTLs during the second year of implementation of Section 203, the Departments note that none of the comparative analyses initially submitted were sufficient to demonstrate compliance.  However, the Report indicates that further responses provided by plans improved in quality.

The Report also provides useful guidance to plans, including descriptions of common deficiencies.  The following are some key takeaways from the Report:

• The Departments added two new NQTL enforcement priorities to the prior list of four:

1. Prior authorization requirements for in-network and out-of-network inpatient services;
2. Concurrent care review for in-network and out-of-network inpatient and outpatient services;
3. Standards for provider admission to participate in a network, including reimbursement rates;
4. Out-of-network reimbursement rates (methods for determining usual, customary, and reasonable charges);
5. Impermissible exclusions of key treatments for mental health conditions and substance use disorders (NEW since the January 2022 Report);
6. Adequacy standards for MH/SUD provider networks (NEW since the January 2022 Report).

• The importance of data is stressed repeatedly, noting that it can sometimes operate as a “green flag” signaling that the  NQTL in question did not apply more stringently to MH/SUD benefits relative to M/S benefits.  The Report also includes a list of the types of data that it has typically sought (e.g., samples of covered and denied MH/SUD and M/S benefit claims).
• The Report notes that the DOL’s Employee Benefits Security Administration (EBSA) has placed increased priority on NQTLs related to network adequacy, particularly provider network composition and participation standards, which includes reviewing how plans set their provider reimbursement rates and their efforts to monitor the adequacy of provider networks.
• The Departments state that they are targeting service providers for investigation (particularly as to exclusions) as a way to have the greatest impact.
• Notably, the Report indicates that despite the clear requirement for a comparative analysis under Section 203, several plans apparently did not have such an analysis already prepared.
• Because NQTL requirements are no longer new, in coming years the EBSA will expect deficiencies to be cured more quickly.

Action Items

As noted at the outset, this newsletter reflects our first review of the new guidance.  However, based on both the proposed regulations and the Report, there are certain actions that plans should consider taking now:

1. Have a comparative analysis that is responsive to Section 203 (and the FAQs, Part 45) prepared;
2. Incorporate the two newly identified enforcement priorities into the comparative analysis;
3. Prepare and evaluate the data described in the proposed regulations, Technical Release and the Report.

_{¹ Under MHPAEA, the six classifications of benefits are: 1) Inpatient in-network; 2) Inpatient out-of-network; 3) Outpatient in-network; 4) Outpatient out-of-network; 5) Emergency care; 6) Prescription drugs.}