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Mental Health Parity: Is Your Health Plan Ready?
The act is effective for plan years beginning after Oct. 3, 2009. Sidebar: Regulations delayed--in the meantime...

By Jackson Lewis LLP  10/7/2009
 

The Mental Health Parity and Addiction Equity Act of 2008 becomes effective for plan years beginning after Oct. 3, 2009 (a special rule applies to collectively bargained plans). Thus, the effective date is Jan. 1, 2010, for calendar-year plans.

The changes under the law will require a careful analysis of plan design and detailed drafting of plan terms to ensure compliance.

Key Provisions

The law amends the Employee Retirement Income Security Act (ERISA), the Internal Revenue Code and the Public Health Services Act to bring parity between medical and surgical benefits, on the one hand, and mental health and substance use disorder benefits on the other.

The law does not require plans to provide mental health and substance use disorder benefits if they do not already do so. What the law does require is certain changes to plans that provide both kinds of benefits (most plans likely fall in this category), including changes to their cost structures and benefits provisions. These changes will be particularly important for self-funded plans.

Key changes that will affect most group health plans include:

Annual and lifetime limitation provisions made permanent. The now-superseded Mental Health Parity Act of 1996 prohibited group health plans from having annual or lifetime dollar maximums for mental health benefits that were lower than medical or surgical benefits. The new act makes this permanent.

• Parity for substance abuse disorders added. The Mental Health Parity Act of 1996 applied only to mental health benefits. The new act expands those requirements to substance use disorder benefits.

Expansion of parity requirement to “financial requirements” and “treatment limitations.” While the Mental Health Parity Act of 1996 required parity with regard to annual and lifetime dollar maximums, it did not apply to a plan’s cost-sharing provisions, such as deductibles and co-pays, or to a plan’s terms regarding the amount, duration and scope of mental health benefits. This is why many group health plans have limits on mental health benefits that are less favorable than medical or surgical benefits, such as the number of office visits per year.  The new act forbids these disparities.

The new act requires that the “financial requirements” and “treatment limitations” for mental health benefits and substance use disorder benefits be no more restrictive than the most common or frequent “financial requirements” or “treatment limitations” applicable to substantially all medical and surgical benefits under the plan.

The new act defines “financial requirements” to include deductibles, co-payments, co-insurance and out-of-pocket expenses. It defines “treatment limitations” to include limits on the frequency of treatment, number of visits, days of coverage, and other limits on the scope or duration of treatment. Among its provisions:

Medical necessity criteria and benefit denial information to be made available. The new act requires plan administrators, upon request, to provide the criteria used for medical necessity determinations made with respect to mental health benefits and substance use disorder benefits, as well as the reasons for denials of benefits. Regulations are expected to direct how this information must be provided.

Out-of-network providers. Under the new act, plans that cover medical/surgical services provided by out-of-network providers generally must permit mental health and substance use disorder benefits to be provided by out-of-network providers.

Small Employer and Cost Exemption

Like the Mental Health Parity Act of 1996, the new act does not apply to group health plans that are sponsored by “small employers.” For the purpose of the new act, a small employer generally means an organization that employed 50 or fewer employees on average during the prior calendar year. However, in determining the number of employees, employers must include the employees of certain related employers under special aggregation rules, a consideration often missed by many small companies.

Plans can seek a one-year exemption from the parity act if their costs increase by at least a certain percentage because of the act’s requirements (2 percent in the first plan year the law applies to the plan, and 1 percent for all subsequent years).

However, it appears that obtaining the exemption will be complicated, costly and time-consuming. For example:

An actuary must make and certify in writing the determination of whether the cost increase is sufficient to meet the exemption, and the records on which the determination is made must be maintained for six years.

If the employer obtains the exemption, the plan must notify the Secretary of Labor, plan participants and beneficiaries, and certain state agencies, where applicable.

For six years after the notice, the books and records of the plan concerning the exemption are subject to audit by the Secretary of Labor and certain state agencies.

In a year filled with many changes affecting the workplace, including employee benefits, the Mental Health Parity and Addiction Equity Act of 2008 presents another compliance challenge for employers.

Jackson Lewis represents management exclusively in employment, labor, benefits and immigration law and related litigation. © 2007 Jackson Lewis LLP. All Rights Reserved.

Editor’s Note: This article should not be construed as legal advice.  

Regulations Delayed: In the Meantime...

Forthcoming regulations, originally expected to be issued by October 2009 but since delayed, will provide additional guidance concerning the law. Health and Human Services Secretary Kathleen Sebelius, in an Oct. 2, 2009, letter to lawmakers said the administration now aims to issue regulations for the 2008 act by January 2010.

According to an alert from law firm Ford & Harrison LLP:

"Until the regulations are issued, employers must carefully review their plan documents to assess whether the scope of services, medical management, financial and treatment limitations, and deductibles discriminate against any mental health or substance use disorder coverage. At the very least, plans should make reasonable efforts to adhere to the Mental Health Parity Act's intent so that good faith compliance is shown.

"To the extent that plans decide now to drop their mental health or substance use disorder coverage, Summaries of Material Reduction must be provided, and revisions will need to be made to the Summary Plan Descriptions, benefit booklets, and other benefit communications."
 

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Update: the interim final rules for the Mental Health Parity and Addiction Equity Act were released in February 2010. See the SHRM Online articles "Agencies Issue Final Rules for Mental Health Parity Act" and "Regulations and Reform Create Mental Health Parity Challenges."

Related Articles—External: 

Legal Alert: Where O Where are the Regulations for the Mental Health Parity Act?, Ford & Harrison LLP, October 2009

Related Articles—SHRM Online:

Agencies Issue Final Rules for Mental Health Parity Act, SHRM Online Benefits Discipline, February 2010

Regulations and Reform Create Mental Health Parity Challenges, SHRM Online Benefits Discipline, June 2010

Employee Assistance Programs Target Mental Health Parity Costs, SHRM Online Benefits Discipline, August 2009

Mental Health Parity: Benefit Design Challenges, SHRM Online Benefits Discipline, May 2009

New Mental Health Parity Law Raises Cost Concerns, SHRM Online Legal Issues, October 2008

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