The Departments of Labor, Treasury, and Health and Human Services have jointly issued interim final regulations clarifying compliance requirements in regard to the Federal Mental Health Parity Act for group health plans renewing on or after July 1, 2010.  While the provisions of the Act were originally effective for plan years beginning on or after October 3, 2009 (as discussed in the Compliance Alert dated October 14, 2008), employers’ good faith efforts to comply with a reasonable interpretation of the law will be taken into account until the interim rules become effective (January 2011 for calendar year plans).  This alert provides an overview of the interim final rules and the parity requirements.

Background
The Federal Mental Health Parity Act requires certain employers and group health plans offering mental health insurance to ensure such benefits are equal to coverage received for physical ailments.  While the Act does not require those plans to provide mental health or substance abuse benefits, it does mandate them to abide by the law’s parity requirements if they already offer such benefits in coordination with medical benefits.

Employers who employed less than 50 employees during the preceding calendar year are exempt from the Federal Mental Health Parity Act requirements.  Additionally, group health plans are exempt if, on the first day of the plan year, the plan has fewer than two participants who are current employees.

What is prohibited?
Plans are not allowed to apply any financial requirement or treatment limitation (e.g., deductible, co-pay, co-insurance, annual visit limits, etc.) on mental health or substance abuse disorders that are more restrictive than the financial requirement or treatment limitation imposed on substantially all (meaning two-thirds of the benefits a plan expects to provide for the year) medical/surgical benefits in the same “classification”.

There are six benefit classifications:

1. inpatient/in-network
2. inpatient/out-of-network
3. outpatient/in-network
4. outpatient/out-of-network
5. emergency care
6. prescription drugs

The requirements of the regulations are applied separately for each coverage unit (e.g., single, employee plus spouse, family, etc.).   

The rules state that the parity requirements apply to quantitative (expressed numerically – such as a limit of visits) and non-quantitative treatment limits.  Examples of non-quantitative treatment limits include:

• Medical management standards
• Drug formulary designs
• Standards of for provider admission to participate in a network
• Determination of usual, customary, and reasonable amounts
• Conditioning benefits on completion of a course of treatment

What is a “mental health condition” or “substance abuse disorder”?
While there exists no definition in the regulations for “mental health conditions” and/or “substance abuse disorders,” plans are allowed to define these terms as long as they are “consistent with generally recognized independent standards of current medical practice.” This standard does not necessarily have to be a national standard, but must be generally accepted in the relevant medical community (ex. Diagnostic and Statistical Manual of Mental Disorder).

Special Rule for Prescription Drug Benefits
Plans are allowed to divide prescription drug benefits into tiers and apply the parity requirements separately to each tier based on reasonable factors (cost, efficacy, generic vs. brand name, mail order vs. pharmacy, etc.).

What about EAPs?
An Employee Assistance Plan (EAP) offered in addition to a medical plan that complies with the parity requirements is not considered a violation of the regulations.  However, an EAP used as a gatekeeper to the plan’s mental health or substance abuse benefits will violate the regulations.

Disclosure Requirements
There are two disclosure requirements under the regulations:

1. The criteria for medical necessity determinations with respect to mental health conditions or substance abuse benefits must be made available by the plan administrator or insurer upon the request of a current or future participant.
   
2. The plan administrator or insurer must provide the reason for a denial of a claim for reimbursement or payment of services with respect to mental health or substance abuse benefits.  Plans subject to ERISA will provide this notification consistent with ERISA form.

If you have any questions about the Federal Mental Health Parity Act, please visit the Mental Health Parity page of the DHHS website or contact or our office at (919) 403-1986.