Details Upon Details: Compliance Under MHPAEA’s New Proposed Regulations

Details matter. For all of their complexity about the comparative analysis of nonquantitative treatment limitations (NQTLs) under the Mental Health Parity and Addiction Equity Act (MHPAEA), the proposed regulations and other guidance issued recently by the Departments of Labor, Health and Human Services, and the Treasury (Departments) deliver a simple message: pay attention to the details.

The new rules require health plans and insurers to demonstrate that the NQTLs applicable to mental health and substance use disorder (MHSUD) benefits are comparable to and no more stringent than the NQTLs for medical and surgical (MS) benefits. This demonstration must come through a meticulous examination of each NQTL along with its underpinnings, application to benefits, and outcomes.

The Requirements. The analysis needs to be thoroughly documented in writing to address:

• What NQTLs apply. The documentation must identify all NQTLs applicable to MHSUD benefits. The regulations list a number of NQTLs, and the preamble to the regulations identifies others, but those lists are not intended to be exhaustive.  The description of these NQTLs must extend beyond mere identification. The documentation must describe the plan terms and other relevant policies, guidelines, and other documents in which the NQTLs are mentioned or described.
• Which benefits are affected. The documentation needs to link each NQTL to the MHSUD and MS benefits to which it applies. For these purposes and throughout the comparative analysis, the connection between NQTLs and benefits should be conducted separately for each classification of benefits that applies in the MHPAEA rules. These classifications are in-network inpatient, out-of-network inpatient, in-network outpatient, out-of-network outpatient, emergency, and prescription drugs.
• How the plan or insurer decided to implement the NQTL. The documentation must describe the factors, evidentiary standards, processes, and strategies that were considered and relied upon in the design and application of NQTLs and provide details relevant to the decision to implement them, such as the sources for the evidentiary standards and the weight accorded to each factor. Documentation should include records relating to the process for determining to implement the NQTLs. It should demonstrate that, in establishing an NQTL for MHSUD benefits, the plan or insurer applied relevant factors in a manner comparable to their application for MS benefits. It should explain any deviations and variations.
• How NQTLs were implemented. The documentation needs to show an analysis of whether an NQTL is, in operation, comparable to and applied no more stringently for MHSUD benefits than for MS benefits, including a discussion of how that comparability is maintained. The documentation should include a comparison of written materials, such as policy manuals and procedural forms pertaining to MHSUD and MS benefits.
• What effect the NQTLs have. The documentation must review how outcomes differ for MHSUD and MS benefits, for example, how often prior authorization for services is denied and how often enrolled individuals need to seek out-of-network care. Differences in outcome can be seen as a red flag for potential violations of MHPAEA rules, and the documentation should address efforts undertaken or planned to mitigate material differences in access to MHSUD benefits and MS benefits.
• What the comparative analysis reveals. The documentation should include a detailed and reasoned discussion of findings and conclusions from the comparative analysis.
• How the analysis was conducted. The documentation should also include certain information about the analysis itself, including when it was performed, who participated in it, and who was consulted as an expert.

As substantial as this listing is, it does not include all of the details set forth in the proposed regulations. For example, the definitions and examples in and the preamble to the proposed regulations set a standard similar to, although not exactly the same as the standard for quantitative treatment limitations (such as copayments and limits on the number of visits). Under this standard, an NQTL applicable to MHSUD benefits will also need to apply to substantially all (meaning two-thirds) of all MS benefits, determined on the basis of cost data. In a slight deviation from the quantitative treatment limitations, NQTLs for MHSUD benefits should also apply at a level for MHSUD benefits that is no more restrictive than the predominant level (meaning the most common level) for MS benefits, again based on cost data.

For example, suppose a plan requires that benefits will be paid for any out-of-network inpatient care only if it is medically necessary in accordance with independent professional standards, but those standards do not require peer-to-peer review. In practice, the plan requires peer-to-peer review for all out-of-network inpatient non-hospital stays for substance use disorder treatment, but not for other services. The plan would be regarded as meeting the “substantially all” test because it applies the medical necessity standard to all MS benefits, but it would fail the “predominant” test because it applies more restrictively to certain MHSUD benefits than it most commonly applies to MS benefits.

Exceptions. The proposed regulations set forth two significant exceptions to the requirements. Where these exceptions apply, an NQTL may be more restrictive for MHSUD benefits than for MS benefits.

First, the requirements will not interfere with a plan or insurer’s impartial application of generally recognized independent professional medical or clinical standards. (The regulations do not explain how the Departments will determine which standards are “generally recognized, but they cite the Diagnostic and Statistical Manual of Mental Disorders and International Classification of Diseases for purposes of defining when a condition or disorder will be considered a mental health or substance use disorder.) The NQTL for MHSUD benefits must otherwise be based on factors that are comparable to and applied no more stringently than they are for MS benefits. The exception will not apply to any deviation from the generally recognized standards.

For example, a plan that follows generally recognized independent professional clinical standards for prior authorization will not violate the MHPAEA simply because those standards result in a higher rate of denials for MHSUD benefits. However, if in operation, the plan deviates from those standards by requiring prior authorization for each refill of medication used in the treatment of opioid addiction (where it does not for refills of MS drugs), the plan may violate the MHPAEA by imposing a more restrictive requirement on MHSUD benefits.

Second, plans and insurers will be permitted to implement narrowly designed and carefully circumscribed measures to prevent, detect, and prove fraud, waste, and abuse. Again, the NQTL for MHSUD benefits must otherwise be based on factors that are comparable to and applied no more stringently than they are for MS benefits. Unlike the external standards, this exception does not excuse NQTLs from a review of outcomes data.

The rules also recognize that certain factors beyond the NQTLs may cause a health plan or insurer to fail to achieve outcomes for MHSUD that are comparable to those for MS benefits. For example, plans and insurers will not be treated as violating the MHPAEA if, despite their appropriate actions, there are material differences in provider access that, data shows, correlates to a general shortage of mental health and substance use disorder providers.

Enforcement and Consequences. The Departments (and applicable state authorities and plan participants and beneficiaries) may request documentation of the NQTL comparative analysis. If a Department make such a request, a plan or insurer must produce the documentation within 10 business days. The plan or insurer will have an opportunity to supplement the documentation that it originally provides (subject to specified deadlines). But if it fails to do so adequately or if the documentation provided fails to demonstrate compliance, a Department may ultimately make a final determination that the plan or insurer has failed to comply with MHPAEA rules.

If a plan or insurer receives notice of a final determination of noncompliance, the plan or issuer will need to notify enrolled individuals that it is out of compliance with the MHPAEA.  The Departments may also require the plan or insurer to stop applying any NQTLs that lack a proper demonstration of compliance. Alternatively, the sponsor may choose to simply stop coverage for MHSUD benefits altogether or, as referenced in the Departments’ recent report to Congress, terminate the plan.

Measures to Take. Health plan sponsors will not be able to complete the comparative analysis on their own and will need to seek the assistance of their insurers, third-party administrators, and other relevant plan vendors. The detailed analysis required under the proposed regulations provides a renewed incentive to seek as much cooperation from these vendors as possible. 

Sponsors of insured health plans should seek a contractual commitment from their carriers to conduct and document the full comparative analysis. Insurers control both the design and operation of the plan and must meet the NQTL requirements on their own behalf. They should be in a position to make that commitment.

Sponsors of self-funded health plans will also need extensive cooperation from their vendors. This cooperation may include not only the provision of information, but the performance and documentation of many (if not all) required analyses. Although plan sponsors may ultimately bear responsibility for the design of their plans, the NQTLs in their plans most likely draw on the design of insured arrangements. Their vendors are best positioned to identify and describe the factors, evidentiary standards, processes, and strategies considered in the design and establishment of an NQTL and evaluate how they have been applied in formulating and implementing the NQTL. Plan vendors will be the ones that actually administer the NQTLs in the operation of the plans and be in a position to evaluate their operation in practice. They also have the data needed for a review of plan outcomes and the experience in conducting relevant evaluations – particularly if they offer a fully-insured health benefits product.

While plans should seek as much cooperation as possible from their vendors, they should also review the information and analyses their vendors provide to make sure that they are complete, well supported, and thoroughly documented and to fill in any gaps.

As much cooperation as plans obtain from their vendors, they should seek to obtain and review their analyses to make sure that they are complete, well supported, and thoroughly documented.

Plans and insurers will need to be careful to account for any deviations from a vendor’s standard design. They will need to address situations where multiple vendors provide services. Coordination is particularly important when the administration of MHSUD benefits have been carved out from the administration of other health benefits.

Plan sponsors that have already received information from plan vendors should consider circling back with those vendors in view of the proposed rules to see how those vendors are addressing any insufficiencies in the information they have provided and assess their readiness to furnish a greater level of compliance support.

Effective Date. The proposed regulations will need to be finalized before they become effective. They ask for comments on a wide range of subjects, so it is not clear when the rules will become final. The proposed rules put forth an effective date of the first day of the plan year beginning in 2025, and they should not be effective earlier than that date.

However, the proposed rules are not fashioned out of whole cloth. They build on prior guidance. Even as plan sponsors and insurers gather more information and perform deeper analyses, they should make sure that they currently have in place documentation that demonstrates the comparability of NQTLs through a rigorous evaluation process.

Future Briefings. This article addresses the proposed regulations, but other guidance has been recently issued on NQTLs under the MHPAEA. Be on the lookout for future briefings on this guidance, including on how NQTLs apply to network development (an area of particular concern to the Departments) and on the Departments’ recent report to Congress (reflecting what it has found in its review of compliance with the NQTL comparative analysis requirements).

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