Mental Health Parity
On October 3, 2008, President Bush signed into law the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 as part of the Emergency Economic Stabilization Act. Effective for plan years beginning after October 3, 2009, group health plans that offer mental health and/or substance abuse coverage must provide coverage equal to that offered for medical conditions in terms of co-payments, deductibles, and co-insurance. Under the existing law, coverage was not mandated for substance abuse expenses.
Plans are prohibited from applying separate limitations to the number of visits or the number of inpatient days for mental health or substance abuse related expenses. Lastly, if out-of- network benefits are provided for medical conditions, then out-of-network benefits must also be provided for mental health and substance abuse expenses. Both of these provisions represent changes from the existing law, which permitted plans to limit mental health related expenses based on the number of visits and to exclude out-of-network mental health expenses.
Plans sponsored by employers with 50 or less employees would remain exempt from the mental health parity requirements. The law amends the Employee Retirement Income Security Act of 1974 (ERISA), so its requirements will apply to both fully-insured plans and self-insured plans. Sponsors of fully-insured plans should work with their advisor and carrier to revise benefit summaries and summary plan descriptions. Sponsors of self-insured plans should work with their advisor, third party administrator or attorney to properly revise plan documents. Again, the law is effective for plan years beginning on or after October 3, 2009. Thus, calendar year plans will need to comply by January 1, 2010.
On December 23, 2008, President Bush signed a technical correction that amends the Act. The amendment clarifies that collectively bargained plans must comply with the mental health parity provisions either by a) the plan year beginning on or after January 1, 2010 or b) the date that the current collective bargaining agreement related to the plan terminates, whichever is later.
Interim Final Regulations
On February 2, 2010, the IRS, EBSA and CMS jointly issued interim final rules implementing the provisions of the Paul Wellstone and Pete Dominici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). Although the law is effective for plan years beginning on or after Oct. 3, 2009, the interim final regulations will become applicable to plans and issuers for plan years beginning on or after July 1, 2010.
Benefits provided for mental health benefits and substance use disorder benefits may be no more restrictive than benefits provided for "medical/surgical benefits." The regulations clarify that "medical/surgical benefits" should be defined under the terms of the plan in accordance with applicable state and federal law, and must be generally accepted in the medical community. Under the regulations, the financial requirements applicable to mental health or substance use disorder benefits must be no more restrictive than the predominant financial requirements applied to substantially all medical and surgical benefits covered by the plan. The interim final regulations define the term "predominant" as the level of coverage that applies to more than one-half of "medical/surgical benefits" subject to the financial requirement or quantitative treatment limitation in that classification. Situational examples are provided in the amended sections of the IRS Code, EBSA regulations and CMS regulations, beginning on page 81 of the interim final rule.
The interim final regulations also clarify that the cost exemption is only permitte for alternating years. Additionally, the regulations state that there are six distinct and separate categories of coverage for parity, including:
- Inpatient/in-network
- Inpatient/out-of-network
- Outpatient/in-network
- Outpatient/out-of-network
- ER
- Prescription drugs
It is permissible to achieve parity through tiered prescription plans as long as tiers are based on efficacy, cost, generic/brand, and mail order. Also of importance, parity for financial requirements (including co-payments, co-insurance, deductibles and out of pocket maximums) and treatment limitations can be quantitative, such as the number of visits allowed, or non-quantitative, such as prescription drug formulary designs. The regulations reinforce that separate but equal annual limits and lifetime limits are permitted, but separate deductibles are not permitted.
Finally, the regulations confirm that parity requirements still applies to carve out plans when in connection with a health plan with medical and surgical.
FAQs
Does the Mental Health Parity Act require our group health plan to cover mental health disorders or substance abuse?
Federal law does not require a group health plan to provide coverage for mental health disorders or substance abuse. However, if a group health plan chooses to provide such coverage, that coverage must be equal to that provided for other medical conditions. Additionally, state law may require a fully insured plan to provide coverage for certain disorders including anorexia, schizophrenia, or major depressive disorder. If you would like information on your state’s requirements, please contact your advisor.
In the past, our group health plan limited the number of inpatient days and outpatient visits for mental health related services. Is this compliant under the new law?
Under the new law, group health plans may only limit the number of inpatient days and outpatient visits for mental health related services if the same limits apply to medical related services. If there is no limit on the number of inpatient days or outpatient visits for medical conditions, there cannot be a limit placed on the mental health services.
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