On July 25, 2023, the Departments of Labor, Treasury, and Health and Human Services (the “Departments”) released much anticipated guidance under the Mental Health Parity and Addiction Equity Act (MHPAEA). The guidance includes a tri-agency Proposed Rule and Department of Labor (DOL) Technical Release 2023-01P, both of which are intended to clarify existing MHPAEA requirements and to assist group health plans and issuers in compliance. 

The combined guidance, which exceeds 400 pages, is very technical in nature and includes extensive discussion of a plan's administrative and operational processes as they impact a determination of the plan's compliance. In this client alert, we highlight what we believe are the key takeaways for employers and plan sponsors that rely predominantly on a third-party administrator and other service providers for MHPAEA compliance.

What Guidance Did We Receive?

The Departments issued a Proposed Rule that would amend existing 2013 regulations and also add some new regulations. 

• The amendments to existing regulations are intended to provide more consistency and clarity through the use of both revised and additional defined terms and examples. The amendments also provide considerable new detail regarding the evaluation of nonquantitative treatment limitations (NQTLs), by providing a framework to evaluate NQTLs that is similar to the way quantitative treatment limitations are evaluated.
• The new regulations address the requirement under the Consolidated Appropriations Act, 2021 (CAA 2021) for plans to perform and document an analysis on NQTLs imposed by the plan on mental health and substance use disorder benefits, as compared to medical and surgical benefits. The Departments are charged with auditing plans' NQTL comparative analyses under CAA 2021, and to date, have found them wanting. The Proposed Rule provides plan administrators with a roadmap for completing a sufficient NQTL analysis and further clarifies the Departments' expectations.

In addition to the Proposed Rule, the DOL issued Technical Release 2023-01P, which considers requirements on NQTLs related to network composition. The Technical Release seeks public comment to inform future guidance, including the standards for a potential enforcement safe harbor in this area.

Key Takeaways for Employers and Plan Sponsors

Most employers do not directly administer their group health plans, or have direct control over their plan's network composition. However, as reiterated by the Departments in the preamble, the fact that employers may contract with a third-party administrator and/or other service providers to administer their plans does not relieve them of their obligations under MHPAEA. In considering the new guidance, we have identified the following action items that all employers sponsoring a group health plan should consider with respect to MHPAEA compliance.

Review plan design for red flags.

Much of the new guidance focuses on a plan's evidentiary standards, factors, and processes, all of which require a "behind the curtain" analysis of a plan's administrative and operational processes. Most employers are not in a position to directly evaluate these aspects of their plans. However, the guidance also provides new examples to highlight some common plan designs that the Departments have found to be problematic, particularly with respect to autism spectrum disorder (ASD) benefits and benefits for individuals with eating disorders. Employers should consider taking a fresh look at any parameters around existing mental health and substance use disorder benefits in their plan documents to confirm that they do not raise a red flag under the new guidance. If the employer identifies any impermissible limitations or restrictions on mental health or substance use disorder benefits, the plan should be amended to remove them, and the administrator should be notified of any required changes to plan operation.

Review plan service contracts for self-funded plans.

In the preamble to the Proposed Rule, the Departments recognize that, in practice, employers rely on the issuer of a fully insured plan, or on the third-party administrator (TPA) of a self-insured plan, to administer their plans in compliance with MHPAEA regulations, including the requirement to perform a NQTL comparative analysis. While the states and the Department of Health and Human Services (HHS) have enforcement authority over health insurance issuers, the Departments have limited direct enforcement authority over TPAs or other service providers with respect to self-insured plans. 

Notwithstanding, the Departments noted that, under ERISA, TPAs and other service providers may be fiduciaries with respect to the plan, and to the extent such service providers are fiduciaries, they are subject to the provisions governing fiduciary conduct and liability, including the provisions for co-fiduciary liability under ERISA Section 405. 

Employers with self-insured plans should review their TPA and other service provider contracts to determine whether the employer has delegated contractual responsibility to the TPA/provider for compliance with MHPAEA requirements, with appropriate indemnification for failures. ERISA employers should further consider specifying in the contract that the TPA/provider is a named fiduciary with respect MHPAEA compliance. The Departments have made clear that they are committed to using all available authority to ensure MHPAEA compliance by all entities that play a role in administering and designing benefits. Following this guidance, and in light of the significant rise in enforcement activity, we expect that TPAs and other service providers will be under increasing pressure from employers to contractually accept this responsibility and fiduciary liability. 

Confirm NQTL comparative analysis has been performed and request a copy.

The requirement under CAA 2021 to perform and document a NQTL comparative analysis has been in effect since February 10, 2021. Plans are required to submit their NQTL comparative analysis to the relevant Department upon request by the Secretary. To date, the DOL has issued approximately 182 audit letters requesting NQTL analyses from ERISA-covered employers, and HHS has issued approximately 26 audit letters to non-federal governmental group health plans. 

In the preamble to the Proposed Rule, the Departments reiterate that the requirement to perform and document a NQTL comparative analysis is not dependent upon an audit request. Therefore, all employers that are subject to this requirement should confirm that a NQTL comparative analysis has been performed and documented, and should further request a copy for review and for their records. For ERISA plans, the NQTL comparative analysis must include a certification by one or more named fiduciaries who have reviewed the analysis, stating whether they found the comparative analysis to be in compliance with the content requirements of the Proposed Rule.

Importantly –

• If selected for audit by a Department, the plan must provide a copy of its NQTL comparative analysis to the Secretary within ten business days of the request.
• All participants in a non-grandfathered group health plan are entitled to a copy of their plan’s NQTL comparative analysis upon request, in connection with an appeal of an adverse benefit determination, which must be provided in the applicable timeframes for the appeal review.
• All participants in an ERISA-covered group health plan are entitled to a copy of their plan’s NQTL comparative analysis upon request, which must be provided within 30 days of the request.

The above timeframes do not permit an employer to be reactive by waiting until a request is received to perform and document the NQTL comparative analysis. Employers that fail to timely provide a NQTL analysis may be in violation of the disclosure requirement under applicable law (e.g., the claims and appeals provisions of the Affordable Care Act or ERISA’s disclosure requirements), independently from any substantive violation of the plan’s obligations with respect to NQTLs. 

Moreover, performing the NQTL comparative analysis allows employers to identify and remedy any identified violations in their plans before a government audit. Under audit, employers have only 45 calendar days to address any issues of noncompliance identified by the Secretary. If the relevant Department makes a final determination of noncompliance following the 45-day corrective period, the plan must issue a notice to all plan participants within seven calendar days regarding its noncompliance. Preparation and review of the NQTL comparative analysis well in advance of a plan audit can avoid this significant negative consequence for the employer plan sponsor.

Ask questions about your plan’s network composition.

Finally, much of the new guidance draws attention to the issue of network composition and its impact to participants in accessing mental health and substance use disorder benefits. Issues around network composition include looking at the methods for determining reimbursement rates and credentialing standards, as well as procedures for ensuring the network includes an adequate number of each category of provider and facility to provide services under the plan. The Departments recognize that some of these issues may stem from a lack of adequate mental health or substance use disorder providers in a given geographic location. Notwithstanding, plans have a responsibility to address certain metrics within their control that bear on network adequacy. For example, if reimbursement rates are not sufficient, a plan may be unable to attract a comparable network of mental health/substance use disorder providers relative to medical and surgical providers. Therefore, the Proposed Rule requires plans to collect and evaluate data relative to reimbursement rates as part of the NQTL comparative analysis. 

Employers typically do not have direct control over the network composition offered under their plans. That being said, they can (and should) ask their TPAs and other service providers how they are working to evaluate and address concerns about network composition, and document the responses they receive. Specific data on network composition should also be included in the plan’s NQTL comparative analysis. Like other aspects of the Proposed Rule, we think attention to this issue will increase pressure on TPAs and other service providers to improve parity in the number and type of mental health/substance use disorder providers who are accessible in-network, when compared with medical and surgical providers.

Elimination of the MHPAEA Opt-Out for Governmental Plans

Self-funded non-federal governmental plans have historically been able to opt-out of compliance with the MHPAEA by filing an annual opt-out notice with the Centers for Medicare & Medicaid Services. Indeed, many such governmental plans did so when the NQTL comparative analysis became effective even though such plans still otherwise attempted to maintain compliance with the MHPAEA’s substantive parity requirements. However, the Consolidated Appropriations Act, 2023 eliminated the ability of self-funded non-federal governmental plans to opt-out of MHPAEA compliance.

The end of the opt-out comes in two waves. First, no new opt-out elections are allowed after December 29, 2022. Second, any opt-out that expires on or after June 27, 2023, cannot be renewed (presumably, an opt-out that expired before June 27, 2023, may be renewed one more time, although more guidance is needed on this point). Special rules exist for collectively bargained plans. As a result, governmental plans with an opt-out that expires on or after June 27 should be prepared to comply with all MHPAEA requirements (including the NQTL analysis) when their current opt-out expires. Self-funded non-federal governmental plans may still opt-out of compliance with the Newborns' and Mothers' Health Protection Act, the Women's Health and Cancer Rights Act, and Michelle's Law if the correct opt-out procedures are observed.

Effective Date of Proposed Rule

The Proposed Rule, if finalized, would apply to group health plans beginning on the first day of the first plan year beginning on or after January 1, 2025. Note that this effective date does not relieve employers of their current obligations under MHPAEA, and specifically does not relieve them of the requirement to perform and document a NQTL comparative analysis, which has been in effect since February 10, 2021. To provide ample time for implementation, we recommend that employers not delay in beginning discussions with their TPAs and other service providers regarding MHPAEA compliance, as set forth in the Proposed Rule and Technical Release 2023-01P.

For more information about MHPAEA compliance for your group health plans, please contact Audra Ferguson, Rob Gauss, Melissa Proffitt, Shalina Schaefer, Tara Sciscoe, Chris Sears, or the Ice Miller Workplace Solutions attorney with whom you regularly work.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.