Mental Health Parity and Addition Equity Act (MHPAEA)
On Oct. 3, 2008, President George W. Bush signed into law the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). As a result of this legislation, effective for plan years beginning after Oct. 3, 2009, group health plans that offer mental health and/or substance use disorder benefits must provide parity between such benefits offered under the plan in connection with financial requirements and treatment limitations, as well as aggregate lifetime and dollar limits under the plan.
Plans are also prohibited from applying separate limitations to the number of visits or the number of inpatient days for mental health or expenses related substance use disorder. 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 expenses related to mental health 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 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 Oct. 3, 2009. Thus, calendar year plans had to comply by Jan. 1, 2010.
On Dec. 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 Jan. 1, 2010, or b) the date that the current collective bargaining agreement related to the plan terminates, whichever is later.
Interim Final Regulations
On Feb. 2, 2010, the Internal Revenue Service (IRS), Employee Benefits Security Administration (EBSA) and Centers for Medicare and Medicaid (CMS) jointly issued interim final rules implementing the provisions of the MHPAEA. Although the law was effective for plan years beginning on or after Oct. 3, 2009, the interim final regulations was 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 permitted for alternating years. Additionally, the regulations state that there are six distinct and separate categories of coverage for parity, including:
- 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.
Employer Action Required
If the plan includes mental health or substance use disorder benefits, then the plan must provide parity in compliance with the MHPAEA for those benefits. As such, employers should have reviewed plans to comply with the Oct. 3, 2009, effective date, as well as the July 1, 2010, effective date for the interim final rules. Employers sponsoring self-insured plans are responsible for ensuring the plan is operating in compliance with MHPAEA. Employers sponsoring fully insured plans should discuss the plan's compliance with MHPAEA with the issuer.
Penalties for Noncompliance
ERISA contains no specific penalty or enforcement rule for violations of the MHPAEA. However, participants, beneficiaries, and the DOL may use ERISA's civil enforcement provisions to file lawsuits to enforce the MHPA's and the MHPAEA's requirements
Such a lawsuit could include claims for breach of fiduciary duty for failure to comply with the MHPA or the MHPAEA, as well as claims for payment of mental health benefits alleged to be due under the plan because of the MHPA or the MHPAEA. The affected party could seek damages for unpaid benefits, interest and attorney's fees under ERISA Section 502. Additionally, the IRS may impose excise taxes for a group health plan's failure to comply with the MHPA's and the MHPAEA's requirements of $100 per day for each individual to whom a failure relates, which increases to $200 per day for multiple violations. This is subject to certain limitations and exceptions that depend on the nature of the failure to comply.
Further, the provisions of MHPAEA are enforced in many cases by state insurance regulators; the U.S. Department of Health and Human Services may enforce these provisions where a state fails to substantially enforce them.
Frequently Asked Questions
Q1. Does the MHPAEA require our group health plan to cover mental health disorders or substance use disorders?
A. Federal law does not require a group health plan to provide coverage for mental health disorders or substance use disorders. 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.
Q2. In the past, our group health plan limited the number of inpatient days andoutpatient visits for mental health related services. Is this compliant under the new law?
A.Under the new law, group health plans may only limit the number of inpatient days and outpatient visits for services related to mental health 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.
- ERISA § 712
- Code § 9812
- Public Health Service Act § 2726
- Mental Health Parity and Addiction Equity Act of 2008, Pub. L. No. 110-343 (2008).
- Interim Final Rules under the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, 75 Fed. Reg. 5410 (Feb. 2, 2010)
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