Mental Health Parity and Addiction Equity Act (MHPAEA) Final Rule Adds "Access" to Benefits as New Compliance Standard

On September 9, 2024, the U.S. Departments of Labor, Health and Human Services, and the Treasury (collectively, the Departments) issued a 536-page Final Rule entitled, "Requirement Related to the Mental Health Parity and Addiction Equity Act." The Rule amends and, as anticipated, significantly adds to existing MHPAEA regulatory requirements and standards promulgated in 2013. We are still digesting the regulatory text and lengthy preamble to the Rule, but below are some highlights. As anticipated, the Final Rule, like the Proposed Rule, places heightened importance on covered plans and issuers providing access to mental health and substance use disorder (MH/SUD) benefits in order to demonstrate compliance, above and beyond whether plans are designed and administered in accordance with plan terms and processes that are in parity.

Purpose: The Final Rule states that ERISA § 712 and its implementing regulations "should be interpreted in a manner consistent with [their] purpose" and that "plans and issuers must not design or apply financial requirements or treatment limitations that impose a greater burden on access (that is, are more restrictive) to [MH/SUD] benefits... than they impose on access to medical/surgical [M/S] benefits in the same classification of benefits."

Definitions: The Final Rule adds or amends a host of definitions, including the terms "evidentiary standards," "factors," "medical/surgical benefits," "mental health benefits," "substance use disorder benefits," "processes," "strategies," and "treatment limitations." The Rule does not define "nonquantitative treatment limitation" (NQTL) other than distinguishing it from "quantitative treatment limitations" expressed numerically, but does give a non-exhaustive list of NQTLs. 

"No More Restrictive" Requirement for NQTLs: The Final Rule states that a plan or coverage will fail to meet the "no more restrictive" requirement if it fails to meet either the "design and application" standards or the "relevant outcomes data" standards. The "design and application" standards adopt a prohibition on the use of "discriminatory" factors and evidentiary standards. Discrimination is measured in terms of "disfavoring access" to MH/SUD benefits. To the extent "relevant outcomes data" "suggest" that an NQTL contributes to a "material difference" in access to MH/SUD benefits, such difference shall be a "strong indicator" of a violation of the "no more restrictive" requirement. A "material difference" is one "likely to have a negative impact on access to [MH/SUD] benefits as compared to [M/S] benefits."

Meaningful Benefits: The Final Rule requires that if a plan or coverage provides any benefits for a mental health condition or substance use disorder in any classification of benefits, it must provide "meaningful" benefits for that condition or disorder in every classification in which "meaningful" M/S benefits are provided. The Rule states that a plan or coverage does not provide "meaningful" benefits unless it provides benefits for a "core treatment" for that condition or disorder in each classification in which the plan or coverage provides benefits for a "core treatment" for one or more medical conditions or surgical procedures. A "core treatment" means a "standard treatment or course of treatment, therapy, service, or intervention indicated by generally recognized independent standards of current medical practice." 

Addressing Material Differences in Access Due to NQTLs Related to Network Composition: The Final Rule lists actions that may be taken by a plan or issuer to address and ensure compliance with the "no more restrictive" requirement in the context of network composition NQTLs. These actions include strengthening efforts to recruit MH/SUD providers to join networks, such as by increasing provider compensation, streamlining provider credentialing processes, contacting out-of-network providers to join networks, expanding telehealth, providing assistance to enrollees in finding in-network providers, and ensuring accuracy of provider directories. 

NQTL Comparative Analysis Requirements: The Final Rule details the requirements that must be satisfied when performing and documenting comparative analyses for each NQTL. These provisions describe how the comparable analyses should be performed and documented to demonstrate comparability and stringency of plan terms as written and as those terms are applied in practice. Among other things, the Rule requires that a comparative analysis identify relevant outcomes data and a detailed explanation of any material differences in access to MH/SUD benefits shown in the data or a "reasoned justification and analysis" for why such a difference does not exist. 

Fiduciary Certification: The Final Rule requires named fiduciaries to certify "they have engaged in a prudent process to select one or more qualified service providers to perform and document a comparative analysis" with respect to any NQTLs and "have satisfied their duty to monitor those service providers" as required by ERISA.

The new provisions take effect on the first day of the first plan year beginning on or after January 1, 2025, except for those provisions setting forth standards for "meaningful" benefits, "discriminatory" factors and evidentiary standards, relevant data evaluation requirements, and related requirements in the provisions for comparative analyses that will take effect on the first day of the first plan year beginning on or after January 1, 2026. 

DOL Issues Updated Cybersecurity Guidance To Cover Health and Welfare Plans

On September 6, 2024, the U.S. Department of Labor (DOL)'s Employee Benefits Security Administration (EBSA) issued Compliance Assistance Release No. 2024-01 related to cybersecurity. The guidance includes Tips for Hiring a Service Provider with Strong Cybersecurity Practices, Cybersecurity Program Best Practices, and Online Security Tips. Responding to increased cybersecurity incidents and data breaches, EBSA's guidance emphasizes that ERISA plan sponsors, fiduciaries, and service providers should develop a formal cybersecurity program that includes regular trainings, periodic risk assessments and audits, data control procedures, and oversight over third party vendors. 

EBSA first issued cybersecurity guidance in April 2021. This updated guidance does not include substantive changes from the original 2021 guidance, but "provides an important clarification for plan sponsors and fiduciaries, confirming that [the] guidance on cybersecurity applies to all plans covered by the [ERISA]," including health and other welfare plans.

The updated guidance is consistent with EBSA's recent focus on cybersecurity. Over the last several years, EBSA has routinely examined cybersecurity issues in its enforcement audits. 

Virginia Court Dismisses Forfeiture Claims Along with Excessive Fee Claims

On September 5, 2024, the U.S. District Court for the Eastern District of Virginia issued a decision dismissing a putative class action against BAE Systems, Inc., alleging ERISA fiduciary breach, failure to monitor, and prohibited transaction claims against the company as plan administrator of the BAE Systems Employees' Savings and Investment Plan (the Plan). Naylor v. BAE Systems, Inc., No. 24-00536 (E.D. Va. Sept. 5, 2024). The complaint alleged that, among other things, the company breached its ERISA duties by using forfeitures to offset employer contributions to the plan rather than cover administrative expenses or "otherwise increase[e] Plan assets" and by paying alleged excessive recordkeeping, account management, and legal fees. 

On the forfeiture claims, the court highlighted plan terms that stated that forfeited amounts "shall be" allocated to the company's matching and nonelective contributions for the applicable payroll period and that those contributions "shall be reduced" by any forfeitures. It also noted that the plan terms stated that plan administrative expenses "may be drawn" from forfeitures or from participant accounts or investment fund earnings. Further, the court noted that the application of forfeitures under the plan was to be done "in the discretion of the Plan Administrator to the extent it is legally permissible for these expenses to be paid." According to the court, "[t]he core issue to how to reconcile those mandatory Plan provisions with respect to the use of forfeitures with the discretion conferred."

In dismissing these claims, the court held that, given the company's obligation to follow the terms of a Plan, the Plan's discretionary provisions "can only be reasonably read to confer discretion in those situations where [] forfeitures are not needed to satisfy their required, mandatory use [to offset employer contributions], as any other reading essentially nullifies these mandatory-use provisions." In addition, it stated that the discretionary terms do not become a nullity under this holding "since there are circumstances where such discretion might be exercised, such as where the Employer suspends its contributions for financial reasons." On the anti-inurement claim, the court held that "because Plaintiff has not established that following such Plan terms is itself a fiduciary violation, Plaintiff similarly cannot establish that Plan assets inure[d] to the benefit of any employer, or were ever held for any other reason than to provid[e] benefits to participants in the plan and their beneficiaries and defraying reasonable expenses of administering the plan" (internal citations omitted). The court, likewise, dismissed the plaintiff's prohibited transaction claims, holding that "[t]o the extent that Defendant established the Plan terms, it did so in its capacity as a 'settlor,' which does not give rise to fiduciary duties under ERISA."

Reviewing the plaintiff's allegations on the recordkeeping and account management fee claims, the court ruled that "[a]t bottom, Plaintiff's claims are simply that [fees] are too high—but that is not enough to state a plausible claim for imprudence.... Instead, the complaint 'must provide a sound basis for comparison—a meaningful benchmark,'" which the court found lacking. According to the court, the same pleading deficits were present with respect to the plaintiff's claims related to the legal fees paid by the Plan. Because the breach of the duty to monitor claim was derivative of the fiduciary breach claims, the court dismissed that claim as well.

This succinct decision focused on plan terms contrasts with other recent decisions allowing similar forfeiture claims to proceed or be replead and finding the application of forfeitures to offset employer contributions was a discretionary fiduciary act despite plan terms addressing the use of forfeitures. 

Upcoming Speaking Engagements and Events

The firm is sponsoring today's ERISA 50th Anniversary Symposium and Gala.

Joanne is co-presenting the ABA Webinar, "50 Years of ERISA Preemption: Where Do We Stand?" on September 17.

Joanne is also speaking at the ERISA Industry Committee 2024 Virtual Fall Policy Conference on September 24.

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