Proposed Rulemaking Expands Requirements for MHPAEA NQTL Parity Compliance

This week we focus on the recently proposed Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) regulatory requirements issued by the Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury (collectively, the Departments) aimed in large part at preventing plans and issuers from imposing non-quantitative treatment limitations (NQTL) on mental health and substance use disorder (MH/SUD) benefits that are not in parity with those imposed on medical and surgical (M/S) benefits. As discussed last week, access to MH/SUD benefits is the driving force behind the notice of proposed rulemaking. The proposed regulations introduce new requirements and augment existing standards by which parity will be assessed. 

New Parity Requirements

Under the proposal, plans and issuers would not be permitted to impose an NQTL unless all the following requirements are met. The second requirement tracks the current methodology for assessing NQTL parity compliance, but the first and third requirements are new.

1. No More Restrictive Requirement: The NQTL is no more restrictive as applied to MH/SUD benefits than to M/S benefits. 

This requirement tracks MHPAEA's statutory language on treatment limitations and states that a plan or issuer may not apply any NQTL with respect to MH/SUD benefits in any classification that is more restrictive, as written and in operation, than the predominant NQTL applied to substantially all M/S benefits in the same classification. Plans and issuers would be required to follow steps similar to those that currently apply under the 2013 final MHPAEA regulations when analyzing financial requirements and quantitative treatment limitations. The No More Restrictive Requirement is novel with respect to NQTLs, as the Departments have traditionally relied upon the 2013 regulatory standards addressing NQTLS, and not the statutory language or 2013 financial requirements and quantitative treatment limitations standards, to govern NQTL parity compliance.

For purposes of this proposed rule, "restrictive" means imposing conditions, terms, or requirements that limit access to benefits. "Substantially all" means the NQTL applies to at least two-thirds of all M/S benefits in the classification, based on expected annual plan payments. If an NQTL does not apply to at least two-thirds of all M/S benefits in the classification, it cannot be applied to MH/SUD benefits in the classification. "Predominant" means the most common or frequent variation of the NQTL within the classification based on the highest portion of expected plan payments, when multiple NQTLs are imposed within a classification. 

The proposal contains exceptions to allow for the application of NQTLs that are based on independent medical or clinical standards or standards narrowly designed to detect and prevent fraud, waste, and abuse and established through "objective and unbiased data." There are multiple examples in the proposed rule and preamble intended to illustrate application of this new requirement. The Departments seek comments on whether plans and issuers maintain systems capable of making the determinations called for under this requirement and the administrative burdens associated with such determinations. Comments are also sought on clarifications or further guidance needed to determine what is a predominant variation of an NQTL.

2. Design and Application Requirements: The plan or issuer satisfies requirements related to the design and application of the NQTL.

The proposal largely redesignates the 2013 NQTL regulatory framework as the "Design and Application Requirements." These requirements prohibit imposition of NQTLs on MH/SUD benefits, as written and in operation, unless the processes, strategies and evidentiary standards, or other factors used in applying the NQTL to MH/SUD benefits in the classification are comparable to, and applied no more stringently than, those used in applying the NQTL to M/S benefits in the same classification. The proposal does, however, amend the 2013 regulatory text to cover use of processes, strategies, evidentiary standards, and other factors in plan design of NQTLs as well as application of NQTLs, and states that this change aligns with the text of MHPAEA and the Departments' prior interpretation.

The proposal states that a key consideration in determining whether the Design and Application Requirements are satisfied is whether processes, strategies, evidentiary standards, and other factors used in designing and applying an NQTL restrict access more to MH/SUD disorder benefits than compared to M/S benefits. In addition, even if a plan or issuer is exempted from complying with the No More Restrictive Requirement under the medical and clinical or the fraud, waste, and abuse standards exceptions, it would still need to satisfy the Design and Application Requirements. 

Under the proposal, plans and issuers would be prohibited from relying upon factors or evidentiary standards that discriminate against MH/SUD benefits. Information is discriminatory if it is "biased or not objective" in a manner that results in less favorable treatment of MH/SUD benefits without legitimate justification. Impartial and independent medical or clinical standards and reasonably designed fraud, waste, and abuse standards are not discriminatory. Plans and issuers would be prohibited from relying on historical plan data and information from a time a plan or coverage was not compliant with MHPAEA when developing factors and evidentiary standards.

Comments are requested on all aspects of these provisions.

3. Relevant Data Evaluation Requirements: The plan or issuer collects, evaluates, and considers the impact of relevant data on access to MH/SUD benefits, and subsequently takes reasonable action as necessary to address any material differences in access shown in the data to ensure compliance with MHPAEA.

This requirement would mandate that plans and issuers collect and evaluate data, including outcomes data, about how an NQTL impacts the administration and provision of benefits. In addition, plans and issuers must consider those impacts when analyzing whether an NQTL in operation satisfies the No More Restrictive Requirement and the Design and Application Requirements. Relevant data that must be considered includes the number and percent of claims denials and any other data required by state law or private accreditation standards. For NQTLs related to network composition standards, relevant data includes in-network and out of network utilization rates, network adequacy metrics, and provider reimbursement rates. If an NQTL is based on independent professional or clinical standards, the Relevant Data Evaluation Requirements do not apply, but they do apply when standards based on fraud, waste, and abuse are used.

The proposed regulation states that "material differences" in access to MH/SUD benefits compared to M/S benefits revealed by the data "will be a considered a strong indicator that the plan or issuer violates" the No More Restrictive Requirement and the Design and Application Requirements for most NQTLs. Under such circumstances, the plan or issuer "[m]ust take reasonable action to address the material differences" and document the action taken or that will be taken to mitigate the differences. The Departments seek comment on how to define "material differences" and whether the definition should reference quantitative and statistical research methods and testing.

The proposal contains a heightened standard for NQTLs related to network composition. With these NQTLs, material differences in access to benefits revealed in the data will constitute a violation of the No More Restrictive Requirement and the Design and Application Requirements in operation, not merely a strong indicator of a violation.

Additional Provisions

The regulatory proposal states that plans and issuers are prohibited from applying an NQTL applicable only to MH/SUD benefits that does not apply to any M/S benefits in the same classification. To satisfy the current requirement that benefits for MH/SUD conditions and disorders covered by a plan must be provided in every classification in which M/S benefits are provided, the plan or issuer would be required to provide "meaningful benefits for treatment" of such MH/SUD conditions and disorders in each applicable classification, "as determined in comparison to the benefits provided for medical/surgical conditions in the classification." According to the preamble, the "meaningful benefit" criteria, which is undefined, is intended to ensure that, when a plan or issuer covers benefits for a range of M/S treatments and services in a classification, they cannot, for example, provide only one limited benefit for MH/SUD conditions or disorders in that classification.

In addition, a final determination of noncompliance with the comparative analysis requirements added to ERISA § 712 in 2020 would, under the proposal, constitute a MHPAEA parity violation allowing the DOL to direct the plan or issuer not to impose the NQTL unless and until the plan or issuer demonstrates compliance. The proposal further states that information on a plan's or issuer's medical necessity criteria, the processes, strategies and evidentiary standards and other factors used to apply an NQTL, and its comparative analyses are all plan documents that must be produced to participants under ERISA § 104 and upon request in claims appeals.

The proposed rulemaking contains an applicability date of the first day a plan year beginning on or after January 1, 2025. Comments to the proposed rule are due on October 2, 2023.

Coming Up

Stay tuned for Part III next week, in which we'll focus on the Departments' proposed rulemaking related to the content of MHPAEA comparative analyses. Later this month, Part IV will discuss the 2023 MHPAEA Comparative Analysis Report to Congress and Technical Release 2023-01P, issued contemporaneously with the proposed rulemaking.

DOL Sues UMR on Emergency Services and Urinary Drug Screening Claims

On July 31, 2023, the DOL filed an ERISA lawsuit against UMR, Inc., alleging the third-party administrator (TPA) "to at least 2,136 self-funded welfare benefit plans" and "the nation's largest TPA" failed to pay emergency services (ER) and urinary drug screening (UDS) claims in accordance with ERISA and plan terms. Su v. UMR, Inc., No. 3:23-cv-00513-wmc, July 31, 2023, W. D. Wisc.). DOL asserts that UMR is an ERISA fiduciary and improperly denied ER claims based solely on diagnosis codes and not in accordance with the Affordable Care Act's (ACA) prudent layperson standard. That standard requires health plans to treat as emergency medical conditions for purposes of adjudicating benefit claims all medical conditions that a person with average knowledge of health and medicine would consider an emergency requiring immediate medical attention, even if the condition is not, in fact, a true emergency. The complaint also alleges that UMR failed to adhere to the plan's medical necessity standards when denying UDS claims, and that the explanations of benefits (EOBs) issued in connection with ER and UDS denials were deficient, in part because the EOBs for the ER claims did not make reference to the prudent layperson standard. According to the complaint, these practices violated UMR's fiduciary duties under ERISA and the ERISA claims regulation and were inconsistent with plan terms and the Public Health Service Act requirements for health plans set forth in ERISA § 715. DOL seeks a court order requiring UMR to reform its claims adjudication practices and re-adjudicate the "thousands" of denied claims.

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