What employers must know about mental health parity

The COVID-19 pandemic exacerbated what was already a severe mental health crisis in America, leading to a serious shortage of therapists and rising substance abuse rates. To get the care they urgently need, many patients and families are forced to take on unprecedented amounts of debt — often without knowing that their insurers or their group health plans are supposed to foot the bill.

Under the Mental Health Parity Act of 1996 and the Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA”), insurers and group health plans are required to provide coverage for mental health and substance abuse treatment on par with medical and surgical benefits. However, as a recent report to Congress showed, many group health plans are not in compliance, denying coverage for things such as applied behavioral therapy and addiction services, leaving patients to bear the brunt of the costs.

But this may be changing. The Department of Labor has stepped up its enforcement activity and a flurry of pending court cases are challenging coverage denials and reviewing policies for parity.

So, what has changed—and what does this mean for plan sponsors?

A heightened enforcement landscape

The Consolidated Appropriations Act of 2021 added an extra layer of enforcement to longstanding parity requirements for mental health and substance abuse treatment. While the Tri-Agency regulations issued in 2013 required group health plans to extend MHPAEA parity to non-quantitative treatment limitations (NQTLs), or factors limiting the scope or duration of benefits for treatment, the new legislation required group health plans to demonstrate their compliance.

In light of this new enforcement mechanism, the DOL has made enforcing MHPAEA compliance for group health plans a top priority. There is now “a level of attention, a level of resources being put to these issues that is kind of unprecedented,” said Ali Khawar, acting assistant secretary at the DOL Employee Benefits Security Administration.

Recent responses to an EBSA inquiry show how serious the problem has become. Out of 156 letters to group health plans and insurers requesting comparative parity analysis, not a single reply contained sufficient information, leading to further investigations and enforcement actions.

The DOL and patients also have been successfully taking health plans to court as a way of enforcing parity. These court challenges relate to treatment coverage, level of care guidelines, reimbursement rates and non-restorative therapy. For example, several courts have held that exclusion of Applied Behavior Analysis therapy, a treatment for autism spectrum disorders, violates MHPAEA.

Thanks to these new enforcement activities, many group health plans are no longer requiring blanket pre-certifications for mental health or substance use disorders, nor are they excluding coverage for treatments such as ABA therapy, medication-assisted treatment for opioid use disorder, nutritional counseling related to psychological conditions or drug testing for substance use disorders.

Four action steps for plan sponsors

With heightened regulatory scrutiny and litigation likely to continue, it’s important for plan sponsors to take steps to ensure their policies meet MHPAEA requirements to avoid costly fines and costs associated with enforcement and settlements. With a small number of exceptions, nearly every group health plan must offer parity. However, most sponsors will not be able to evaluate whether their plans are in compliance based simply on third-party administrator contracts or certificates of coverage because they don’t contain the granular analysis needed to demonstrate compliance.

Instead, plan sponsors who want to proactively ensure their group health plans comply with MHPAEA can take these steps.

1. Request a demonstration

One of the simplest steps plan sponsors may take to demonstrate compliance with parity requirements is to request a compliance demonstration from their TPA. While plan sponsors are legally responsible for ensuring compliance, the demonstration can help a plan sponsor determine whether its group health plan meets the compliance requirement. The demonstration must show that the group health plan, in writing and in operation, is in compliance with the parity requirements for NQTLs with respect to each of the components of care:  in-patient care, both in-network and out-of-network; out-patient care, both in-network and out-of-network, prescription drugs and emergency care. The DOL provides a self-compliance tool to walk users through their review approach, which can be broken down into four steps. Each of these steps is required for each NQTL. Following is a high-level example of how this review would be conducted with respect to a pre-authorization NQTL.

The first step of the analysis is to identify all services requiring preauthorization, including mental health and substance abuse treatments, as well as the components to which the NQTL applies (e.g., in-patient- in network, out-patient, etc.). How the pre-authorization requirement is implemented must also be documented, such as who makes pre-authorization decisions and their qualifications.

The second step identifies the factors considered in the design of the NQTL and how they are weighted. Example factors include excessive utilization, recent cost escalation, a lack of efficiency or high levels of variation in treatment. Step three goes further, identifying the sources used to define those factors, such as internal claims analysis or medical expert reviews.

The final step evaluates whether the processes, strategies and evidentiary standards used in applying the NQTL are comparable and no more stringently applied both as written and in operation to mental health and substance abuse benefits compared to medical or surgical benefits. The DOL uses information such as approval rates, reasons for denial, duration of approval, appeal rates and turnaround review times, among others, to make this determination.

2. Check for audits

Plan sponsors can also ask their TPA if they have been subject to an NQTL audit, either with respect to the self-insured plans it services or its fully insured products. Getting information about past or current audits can help sponsors understand where administrators are in the compliance process, as well as potential risks. Although TPAs may be reluctant to disclose this information, it’s a good idea to ask the question.

3. Protect against fees and penalties in service agreements

Because plan sponsors aren’t able to ensure MHPAEA compliance themselves, plan sponsors of self-insured plans should ask their TPAs to represent that the plan will be operated in compliance with MHPAEA and for indemnity for breach of this representation. While the group health plan would be responsible for paying out improperly denied claims, litigation and audits can also prove costly for sponsors thanks to attorney’s fees (both their own and plaintiffs), penalties and settlements that may result.

Although it may be difficult to obtain these protections in the service agreement, it is worth raising these options with the TPA when discussing group health plan operations or reviewing for compliance.

4. Conduct a separate review

If the TPA will not agree to perform and document their NQTL comparative analyses, then plan sponsors are legally required to do their own in-depth compliance review. This type of review is costly and difficult and will require cooperation from the TPA. Even if the TPA provides an NQTL comparative analyses, the responsibility for compliance remains with the plan sponsor.

In any case, proactive steps by plan sponsors to understand parity requirements and review their health plans before any audits or litigation can help promote full regulatory compliance with MHPAEA, deliver better care to their employees and limit the potential for costly litigation and enforcement actions.

Patricia Cain is chair of Neal Geber Eisenberg’s employee benefits and executive compensation legal practice group. She may be contacted at [email protected].

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