[Federal Register Volume 75, Number 21 (Tuesday, February 2, 2010)]
[Rules and Regulations]
[Pages 5410-5451]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-2167]
Tuesday,
February 2, 2010
Part IV
Department of the Treasury
_________________________________
Internal Revenue Service
26 CFR Part 54
_________________________________
Department of Labor
_________________________________
Employee Benefits Security Administration
29 CFR Part 2590
_________________________________
Department of Health and Human Services
_________________________________
Centers for Medicare & Medicaid Services
_________________________________
45 CFR Part 146
Interim Final Rules Under the Paul Wellstone and Pete Domenici
Mental Health Parity and Addiction Equity Act of 2008; Final Rule
Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 /
Rules and Regulations
[[Page 5410]]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 54
[TD 9479]
RIN 1545-BJ05
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Part 2590
RIN 1210-AB30
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
[CMS-4140-IFC]
45 CFR Part 146
RIN 0938-AP65
Interim Final Rules Under the Paul Wellstone and Pete Domenici
Mental Health Parity and Addiction Equity Act of 2008
AGENCIES: Internal Revenue Service, Department of the Treasury;
Employee Benefits Security Administration, Department of Labor; Centers
for Medicare & Medicaid Services, Department of Health and Human
Services.
ACTION: Interim final rules with request for comments.
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SUMMARY: This document contains interim final rules implementing the
Paul Wellstone and Pete Domenici Mental Health Parity and Addiction
Equity Act of 2008, which requires parity between mental health or
substance use disorder benefits and medical/surgical benefits with
respect to financial requirements and treatment limitations under group
health plans and health insurance coverage offered in connection with a
group health plan.
DATES: Effective date. These interim final regulations are effective on
April 5, 2010.
Comment date. Comments are due on or before May 3, 2010.
Applicability date. These interim final regulations generally apply
to group health plans and group health insurance issuers for plan years
beginning on or after July 1, 2010.
ADDRESSES: Written comments may be submitted to any of the addresses
specified below. Any comment that is submitted to any Department will
be shared with the other Departments. Please do not submit duplicates.
All comments will be made available to the public. WARNING: Do not
include any personally identifiable information (such as name, address,
or other contact information) or confidential business information that
you do not want publicly disclosed. All comments are posted on the
Internet exactly as received, and can be retrieved by most Internet
search engines. No deletions, modifications, or redactions will be made
to the comments received, as they are public records. Comments may be
submitted anonymously.
Department of Labor. Comments to the Department of Labor,
identified by RIN 1210-AB30, by one of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: [email protected].
Mail or Hand Delivery: Office of Health Plan Standards and
Compliance Assistance, Employee Benefits Security Administration, Room
N-5653, U.S. Department of Labor, 200 Constitution Avenue, NW.,
Washington, DC 20210, Attention: RIN 1210-AB30.
Comments received by the Department of Labor will be posted without
change to http://www.regulations.gov and http://www.dol.gov/ebsa, and
available for public inspection at the Public Disclosure Room, N-1513,
Employee Benefits Security Administration, 200 Constitution Avenue,
NW., Washington, DC 20210.
Department of Health and Human Services. In commenting, please
refer to file code CMS-4140-IFC. Because of staff and resource
limitations, we cannot accept comments by facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one
of the ways listed):
1. Electronically. You may submit electronic comments on this
regulation to http://www.regulations.gov. Follow the instructions under
the ``More Search Options'' tab.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-4140-IFC, P.O. Box 8016,
Baltimore, MD 21244-1850.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-4140-IFC, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments before the close of the comment period
to either of the following addresses:
a. For delivery in Washington, DC--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, Room 445-G, Hubert
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC
20201.
(Because access to the interior of the Hubert H. Humphrey
Building is not readily available to persons without Federal
government identification, commenters are encouraged to leave their
comments in the CMS drop slots located in the main lobby of the
building. A stamp-in clock is available for persons wishing to
retain a proof of filing by stamping in and retaining an extra copy
of the comments being filed.)
b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, 7500 Security
Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call (410) 786-7195 in advance to schedule your arrival with one
of our staff members.
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
Submission of comments on paperwork requirements. You may submit
comments on this document's paperwork requirements by following the
instructions at the end of the ``Collection of Information
Requirements'' section in this document.
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to
view public comments.
Comments received timely will also be available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday
[[Page 5411]]
through Friday of each week from 8:30 a.m. to 4 p.m. EST. To schedule
an appointment to view public comments, phone 1-800-743-3951.
Internal Revenue Service. Comments to the IRS, identified by REG-
120692-09, by one of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Mail: CC:PA:LPD:PR (REG-120692-09), room 5205, Internal
Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC
20044.
Hand or courier delivery: Monday through Friday between
the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-120692-09),
Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue,
NW., Washington, DC 20224.
All submissions to the IRS will be open to public inspection and
copying in room 1621, 1111 Constitution Avenue, NW., Washington, DC
from 9 a.m. to 4 p.m.
FOR FURTHER INFORMATION CONTACT: Amy Turner or Beth Baum, Employee
Benefits Security Administration, Department of Labor, at (202) 693-
8335; Russ Weinheimer, Internal Revenue Service, Department of the
Treasury, at (202) 622-6080; Adam Shaw, Centers for Medicare & Medicaid
Services, Department of Health and Human Services, at (877) 267-2323,
extension 61091.
Customer Service Information: Individuals interested in obtaining
information from the Department of Labor concerning employment-based
health coverage laws, including the mental health parity provisions,
may call the EBSA Toll-Free Hotline at 1-866-444-EBSA (3272) or visit
the Department of Labor's Web site (http://www.dol.gov/ebsa). In
addition, information from HHS on private health insurance for
consumers (such as mental health and substance use disorder parity) can
be found on the Centers for Medicare & Medicaid Services (CMS) Web site
(http://www.cms.hhs.gov/HealthInsReformforConsume/01_Overview.asp).
SUPPLEMENTARY INFORMATION:
I. Background
The Paul Wellstone and Pete Domenici Mental Health Parity and
Addiction Equity Act of 2008 (MHPAEA) was enacted on October 3, 2008 as
sections 511 and 512 of the Tax Extenders and Alternative Minimum Tax
Relief Act of 2008 (Division C of Pub. L. 110-343).\1\ MHPAEA amends
the Employee Retirement Income Security Act of 1974 (ERISA), the Public
Health Service Act (PHS Act), and the Internal Revenue Code of 1986
(Code). In 1996, Congress enacted the Mental Health Parity Act of 1996
(MHPA 1996), which required parity in aggregate lifetime and annual
dollar limits for mental health benefits and medical and surgical
benefits. Those mental health parity provisions were codified in
section 712 of ERISA, section 2705 of the PHS Act, and section 9812 of
the Code, which apply to employment-related group health plans and
health insurance coverage offered in connection with a group health
plan. The changes made by MHPAEA are codified in these same sections
and consist of new requirements as well as amendments to the existing
mental health parity provisions. The changes made by MHPAEA are
generally effective for plan years beginning after October 3, 2009.
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\1\ A technical correction to the effective date for
collectively bargained plans was made by Public Law 110-460, enacted
on December 23, 2008.
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On April 28, 2009, the Departments of the Treasury, Labor, and HHS
(collectively, the Departments) published in the Federal Register (74
FR 19155) a request for information (RFI) soliciting comments on the
requirements of MHPAEA. After consideration of the comments received in
response to the RFI, the Departments are publishing these interim final
regulations. These regulations generally become applicable to plans and
issuers for plan years beginning on or after July 1, 2010.
II. Overview of the Regulations
These interim final regulations replace regulations published on
December 22, 1997 at 62 FR 66932 implementing MHPA 1996. These
regulations also make conforming changes to reflect modifications
MHPAEA made to the original MHPA 1996 definitions and provisions
regarding parity in aggregate lifetime and annual dollar limits, and
incorporate new parity standards.
A. Meaning of Terms (26 CFR 54.9812-1T(a), 29 CFR 2590.712(a), and 45
CFR 146.136(a))
The paragraph with the heading ``definitions'' in the MHPA 1996
regulations has been renamed ``meaning of terms'' under these
regulations because some of the terms added by MHPAEA are not
comprehensively defined. The change in heading reflects the fact that
if a term is described as including a list of examples, the term may
have a broader meaning than the illustrative list of examples.
1. Aggregate Lifetime and Annual Dollar Limits
The word ``dollar'' has been added to the terms ``aggregate
lifetime limit'' and ``annual limit'' under the MHPA 1996 regulations
to distinguish them from lifetime and annual limits expressed in terms
of days or visits which are subject to new requirements under MHPAEA.
2. Coverage Unit
Paragraph (a) in these regulations cross-references the definition
of coverage unit in paragraph (c)(1). Paragraph (c)(1) clarifies the
term for purposes of the new MHPAEA rules and is discussed later in
this preamble.
3. Cumulative Financial Requirements
These regulations add a definition for the term ``cumulative
financial requirements''. Under this definition, a cumulative financial
requirement is a financial requirement that typically operates as a
threshold amount that, once satisfied, will determine whether, or to
what extent, benefits are provided. A common example of a cumulative
financial requirement is a deductible that must be satisfied before a
plan will start paying for benefits. However, aggregate lifetime and
annual dollar limits are excluded from being cumulative financial
requirements (because the statutory term financial requirements
excludes aggregate lifetime and annual dollar limits).
4. Cumulative Quantitative Treatment Limitations
These regulations add a definition for the term ``cumulative
quantitative treatment limitations''. Similar to the definition for
cumulative financial requirements, a cumulative quantitative treatment
limitation is defined as a treatment limitation that will determine
whether, or to what extent, benefits are provided based on an
accumulated amount. A common example of a cumulative quantitative
treatment limitation is a visit limit (whether imposed annually or on a
lifetime basis).
5. Financial Requirements
These regulations repeat the statutory language that provides the
term ``financial requirements'' includes deductibles, copayments,
coinsurance, and out-of-pocket maximums. The statute and these
regulations exclude aggregate lifetime and annual dollar limits from
the meaning of financial requirements; these limits are subject to
[[Page 5412]]
separate provisions originally enacted as part of MHPA 1996 that remain
in paragraph (b).
6. Medical/Surgical Benefits, Mental Health Benefits, and Substance Use
Disorder Benefits
Among the changes enacted by MHPAEA is an expansion of the parity
requirements for aggregate lifetime and annual dollar limits to include
protections for substance use disorder benefits. Prior law specifically
excluded substance abuse or chemical dependency benefits \2\ from those
requirements. Consequently, these regulations amend the meanings of
medical/surgical benefits and mental health benefits (and add a
definition for substance use disorder benefits). Under these
regulations, medical/surgical benefits are benefits for medical or
surgical services, as defined under the terms of the plan or health
insurance coverage, but do not include mental health or substance use
disorder benefits. Mental health benefits and substance use disorder
benefits are benefits with respect to services for mental health
conditions and substance use disorders, as defined under the terms of
the plan and in accordance with applicable Federal and State law. These
regulations further provide that the plan terms defining whether the
benefits are mental health or substance use disorder benefits must be
consistent with generally recognized independent standards of current
medical practice. This requirement is included to ensure that a plan
does not misclassify a benefit in order to avoid complying with the
parity requirements.
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\2\ The terms ``substance abuse,'' ``chemical dependency, '' and
``substance use disorder'' are variously used to refer to substance
use disorders. Although they mean essentially the same thing, the
term used in MHPAEA is ``substance use disorder''.
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The word ``generally'' in the requirement ``to be consistent with
generally recognized independent standards of current medical
practice'' is not meant to imply that the standard must be a national
standard; it simply means that a standard must be generally accepted in
the relevant medical community. There are many different sources that
would meet this requirement. For example, a plan may follow the most
current version of the Diagnostic and Statistical Manual of Mental
Disorders (DSM), the most current version of the International
Classification of Diseases (ICD), or a State guideline. All of these
would be considered acceptable resources to determine whether benefits
for a particular condition are classified as medical/surgical, mental
health, or substance use disorder benefits.
7. Treatment Limitations
These regulations repeat the statutory language with respect to the
term ``treatment limitation'' and also distinguish between a
quantitative and a nonquantitative treatment limitation. These
regulations provide that the parity requirements in the statute apply
to both quantitative and nonquantitative treatment limitations. A
quantitative treatment limitation is a limitation that is expressed
numerically, such as an annual limit of 50 outpatient visits. A
nonquantitative treatment limitation is a limitation that is not
expressed numerically, but otherwise limits the scope or duration of
benefits for treatment. A non-exhaustive list of nonquantitative
treatment limitations is included in these regulations in paragraph
(c)(4). This list, as well as the application of these regulations to
nonquantitative treatment limitations, is further discussed later in
this preamble. However, these regulations provide that a permanent
exclusion of all benefits for a specific condition or disorder is not a
treatment limitation.
B. Conforming Amendments to Parity Requirements With Respect to
Aggregate Lifetime and Annual Dollar Limits (26 CFR 54.9812-1T(b), 29
CFR 2590.712(b), and 45 CFR 146.136(b))
Paragraph (b) of these regulations addresses the parity
requirements with respect to aggregate lifetime and annual dollar
limits. The mechanics of these requirements generally remain the same
as under the MHPA 1996 regulations, except that MHPAEA expanded the
scope of the parity provisions to apply also to substance use disorder
benefits. Accordingly, these regulations make conforming changes to
reflect this expansion. Certain examples illustrating the application
of MHPA 1996 to benefits for substance abuse and chemical dependency
were deleted (as they are no longer accurate); other provisions were
modified to include references to substance use disorder benefits as
within the scope of the parity requirements for aggregate lifetime and
annual dollar limits.
C. Parity Requirements With Respect to Financial Requirements and
Treatment Limitations (26 CFR 54.9812-1T(c), 29 CFR 2590.712(c), and 45
CFR 146.136(c))
Paragraph (c) of these regulations implements the core of MHPAEA's
new rules, which require parity with respect to financial requirements
and treatment limitations.
1. Clarification of Terms
In addition to the meaning of terms in paragraph (a), paragraph
(c)(1) of these regulations clarifies certain terms that have been
given specific meanings for purposes of MHPAEA.
a. Classification of benefits. Paragraph (c)(1) cross-references
the term ``classification of benefits'' in paragraph (c)(2)(ii).
Paragraph (c)(2)(ii) describes the six benefit classifications and
their application, which are discussed later in this preamble. These
regulations provide that the parity requirements for financial
requirements and treatment limitations are applied on a classification-
by-classification basis.
b. Type. These regulations use the term ``type'' to refer to
financial requirements and treatment limitations of the same nature.
Different types include copayments, coinsurance, annual visit limits,
and episode visit limits. Plans often apply more than one financial
requirement or treatment limitation to benefits. These regulations
specify that a financial requirement or treatment limitation must be
compared only to financial requirements or treatment limitations of the
same type within a classification. For example, copayments are compared
only to other copayments, and annual visit limits are compared only to
other annual visit limits; copayments are not compared to coinsurance,
and annual visit limits are not compared to episode visit limits.
c. Level. A type of financial requirement or treatment limitation
may vary in magnitude. For example, a plan may impose a $20 copayment
or a $30 copayment depending on the medical/surgical benefit. In these
regulations, a ``level'' of a type of financial requirement or
treatment limitation refers to the magnitude (such as the dollar,
percentage, day, or visit amount) of the financial requirement or
treatment limitation.
d. Coverage unit. Plans typically distinguish between coverage for
a single participant, for a participant plus a spouse, for a family,
and so forth. Coverage unit is the term used in these regulations to
refer to how a plan groups individuals for purposes of determining
benefits, or premiums or contributions. These regulations provide that
the general parity requirement of MHPAEA for financial requirements and
treatment limitations is applied separately for each coverage unit.
2. General Parity Requirement for Financial Requirements and Treatment
Limitations
The general parity requirement of paragraph (c)(2) of these
regulations
[[Page 5413]]
prohibits a plan (or health insurance coverage) from applying any
financial requirement or treatment limitation to mental health or
substance use disorder benefits in any classification that is more
restrictive than the predominant financial requirement or treatment
limitation applied to substantially all medical/surgical benefits in
the same classification. For this purpose, the general parity
requirement of MHPAEA applies separately for each type of financial
requirement or treatment limitation (that is, for example, copayments
are compared to copayments, and deductibles to deductibles). The test
is applied somewhat differently to nonquantitative treatment
limitations, as discussed later in this preamble.
a. Classifications of benefits. Plans often vary the financial
requirements and treatment limitations imposed on benefits based on
whether a treatment is provided on an inpatient, outpatient, or
emergency basis; whether a provider is a member of the plan's network;
or whether the benefit is specifically for a prescription drug.
Therefore, determining the predominant financial requirements and
treatment limitations for the entire plan without taking these
distinctions into account could potentially lead to absurd results. For
example, if a plan generally requires a $100 copayment on inpatient
medical/surgical benefits and a $10 copayment on outpatient medical/
surgical benefits, and most services (as measured by plan costs) are
provided on an inpatient basis, the plan theoretically could charge a
$100 copayment for outpatient mental health and substance use disorder
benefits. Similarly, if most benefits are provided on an outpatient
basis, the plan would only be able to charge a $10 copayment for
inpatient mental health and substance use disorder benefits. Commenters
generally agreed that the statute should be applied within several
broad classifications of benefits.
These regulations specify, in paragraph (c)(2)(ii), six
classifications of benefits: Inpatient, in-network; inpatient, out-of-
network; outpatient, in-network; outpatient, out-of-network; emergency
care; and prescription drugs. If a plan does not have a network of
providers for inpatient or outpatient benefits, all benefits in the
classification are characterized as out-of-network. These regulations
provide that the parity requirements for financial requirements and
treatment limitations are generally applied on a classification-by-
classification basis and these are the only classifications used for
purposes of satisfying the parity requirements of MHPAEA. Moreover,
these classifications must be used for all financial requirements and
treatment limitations to the extent that a plan (or health insurance
coverage) provides benefits in a classification and imposes any
separate financial requirement or treatment limitation (or separate
level of a financial requirement or treatment limitation) for benefits
in the classification. Examples illustrate the application of this
rule.
Commenters noted that a common plan design imposes lower copayments
for treatment from a primary care provider (for example, an internist
or a pediatrician) as compared to higher copayments for treatment from
a specialist (such as a cardiologist or an orthopedist). Some of these
commenters requested that this distinction be permitted in applying the
parity requirements by recognizing a separate classification for
specialists; others of these commenters opposed allowing this
distinction. Some plans (or health insurance coverage) identify a large
range of mental health and substance use disorder providers as
specialists. Allowing plans to provide less favorable benefits with
respect to services by these providers than for services by providers
of medical/surgical care that are classified by the plan as primary
care providers would undercut the protections that the statute was
intended to provide. These regulations, therefore, do not allow the
separate classification of generalists and specialists in determining
the predominant financial requirement that applies to substantially all
medical/surgical benefits.
Under these regulations, if a plan provides any benefits for a
mental health condition or substance use disorder, benefits must be
provided for that condition or disorder in each classification for
which any medical/surgical benefits are provided. This follows from the
statutory requirement that any treatment limitations applied to mental
health or substance use disorder benefits may be no more restrictive
than the predominant treatment limitations applied to substantially all
medical/surgical benefits. Treatment limitation is not comprehensively
defined under the statute. The statute describes the term as including
limits on the frequency of treatment, number of visits, days of
coverage, or other similar limits on the scope or duration of
treatment, but it is not limited to such types of limits. Indeed, these
regulations make a distinction between quantitative treatment
limitations (such as day limits, visit limits, frequency of treatment
limits) and non-quantitative treatment limitations (such as medical
management, formulary design, step therapy). If a plan provides
benefits for a mental health condition or substance use disorder in one
or more classifications but excludes benefits for that condition or
disorder in a classification (such as outpatient, in-network) in which
it provides medical/surgical benefits, the exclusion of benefits in
that classification for a mental health condition or substance use
disorder otherwise covered under the plan is a treatment limitation. It
is a limit, at a minimum, on the type of setting or context in which
treatment is offered.
This rule does not require an expansion of the range of mental
health conditions or substance use disorders covered under the plan; it
merely requires, for those conditions or disorders covered under the
plan, that coverage also be provided for them in each classification in
which medical/surgical coverage is provided. If a plan does not offer,
for instance, any benefits for medical/surgical services on an
outpatient basis by an out-of-network provider, then there is no
requirement to provide benefits for mental health conditions or
substance use disorders on an outpatient, out-of-network basis.
Although this rule follows from the general parity requirement added by
MHPAEA, the statute includes a specific provision in the case of out-
of-network benefits.\3\ The rule for out-of-network benefits is stated
separately in these regulations to reflect the separate statutory
provision, but the application of the general rule requires the same
result with respect to all classifications.
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\3\ See sections 9812(a)(5) of the Code, 712(a)(5) of ERISA,
2705(a)(5) of the PHS Act.
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These regulations do not define inpatient, outpatient, or emergency
care. These terms are subject to plan design and their meanings may
differ from plan to plan. Additionally, State health insurance laws may
define these terms. A plan must apply these terms uniformly for both
medical/surgical benefits and mental health or substance use disorder
benefits. However, the manner in which they apply may differ from plan
to plan. For example, a plan may treat a hospital stay of more than 12
hours as inpatient care for medical/surgical benefits; in such case, it
must also treat a hospital stay of more than 12 hours as inpatient care
for mental health and substance use disorder benefits. However, another
plan may treat a hospital stay that includes midnight as inpatient care
for medical/surgical benefits; in such a case the plan must also treat
a hospital stay that includes
[[Page 5414]]
midnight as inpatient care for mental health or substance use disorder
benefits.
b. Applying the general parity requirement to financial
requirements and quantitative treatment limitations. Paragraph (c)(3)
of these regulations addresses the application of the general parity
requirement of MHPAEA to plan financial requirements and quantitative
treatment limitations.
(1) Measuring plan benefits. In order to apply the substantive
rules, these regulations first establish standards for measuring plan
benefits. These regulations, similar to the MHPA 1996 regulations,
provide that the portion of plan payments subject to a financial
requirement or quantitative treatment limitation is based on the dollar
amount of all plan payments for medical/surgical benefits in the
classification expected to be paid under the plan for the plan year.
Also similar to the MHPA 1996 regulations, any reasonable method may be
used to determine the dollar amount expected to be paid under the plan
for medical/surgical benefits subject to a financial requirement or
quantitative treatment limitation.
Some cumulative financial requirements, such as deductibles and
out-of-pocket maximums, involve a threshold amount that causes the
amount of a plan payment to change. These regulations clarify that, for
purposes of deductibles, the dollar amount of plan payments includes
all payments with respect to claims that would be subject to the
deductible if it had not been satisfied. For purposes of out-of-pocket
maximums, the dollar amount of plan payments includes all plan payments
associated with out-of-pocket payments that were taken into account
towards the out-of-pocket maximum as well as all plan payments
associated with out-of-pocket payments that would have been made
towards the out-of-pocket maximum if it had not been satisfied. Other
threshold requirements are treated similarly.
(2) ``Substantially all''. The first step of these regulations in
applying the general parity requirement of MHPAEA is to determine
whether a financial requirement or quantitative treatment limitation
applies to substantially all medical/surgical benefits in a
classification. Regulations issued under MHPA 1996 interpreted the term
``substantially all'' to mean at least two-thirds. Under these
regulations, a financial requirement or quantitative treatment
limitation applies to substantially all medical/surgical benefits in a
classification if it applies to at least two-thirds of the benefits in
that classification. In determining whether a financial requirement or
quantitative treatment limitation applies to substantially all medical/
surgical benefits in a classification, benefits expressed as subject to
a zero level of a type of financial requirement are treated the same as
benefits that are not subject to that type of requirement, and benefits
expressed as subject to an unlimited quantitative treatment limitation
are treated the same as benefits that are not subject to that type of
limitation. For example, in the classification of outpatient, in-
network medical/surgical benefits, a plan could reduce the normal
copayment amount of $15 to $0 for well baby care or routine physical
examinations, while a copayment is not imposed on office visits for
allergy shots. For purposes of this analysis, both of these benefits
are treated as not subject to a copayment.
If a type of financial requirement or quantitative treatment
limitation does not apply to at least two-thirds of the medical
surgical benefits in a classification, that type of requirement or
limitation cannot be applied to mental health or substance use disorder
benefits in that classification. If a single level of a type of
financial requirement or quantitative treatment limitation applies to
at least two-thirds of medical/surgical benefits in a classification,
then it is also the predominant level and that is the end of the
analysis. However, if the financial requirement or quantitative
treatment limitation applies to at least two-thirds of all medical/
surgical benefits in a classification but has multiple levels and no
single level applies to at least two-thirds of all medical/surgical
benefits in the classification, then additional analysis is required.
In such a case, the next step is to determine which level of the
financial requirement or quantitative treatment limitation is
considered predominant.
(3) ``Predominant''. MHPAEA provides that a financial requirement
or treatment limitation is predominant if it is the most common or
frequent of a type of limit or requirement. Under these regulations,
the predominant level of a type of financial requirement or
quantitative treatment limitation is the level that applies to more
than one-half of medical/surgical benefits subject to the financial
requirement or quantitative treatment limitation in that
classification. If a single level of a type of financial requirement or
quantitative treatment limitation applies to more than one-half of
medical/surgical benefits subject to the financial requirement or
quantitative treatment limitation in a classification (based on plan
costs, as discussed earlier in this preamble), the plan may not apply
that particular financial requirement or quantitative treatment
limitation to mental health or substance use disorder benefits at a
level that is more restrictive than the level that has been determined
to be predominant.
If no single level applies to more than one-half of medical/
surgical benefits subject to a financial requirement or quantitative
treatment limitation in a classification, plan payments for multiple
levels of the same type of financial requirement or quantitative
treatment limitation can be combined by the plan (or health insurance
issuer) until the portion of plan payments subject to the financial
requirement or quantitative treatment limitation exceeds one-half. For
any combination of levels that exceeds one-half of medical/surgical
benefits subject to the financial requirement or quantitative treatment
limitation in a classification, the plan may not apply that particular
financial requirement or quantitative treatment limitation to mental
health and substance use disorder benefits at a level that is more
restrictive than the least restrictive level within the combination.
The plan may combine plan payments for the most restrictive levels
first, with each less restrictive level added to the combination until
the combination applies to more than one-half of the benefits subject
to the financial requirement or treatment limitation. Examples in these
regulations illustrate the application of this rule.
These regulations provide an alternative, simpler method for
compliance when a type of financial requirement or quantitative
treatment limitation applies to at least two-thirds of medical surgical
benefits in a classification but no single level applies to more than
one-half of the medical/surgical benefits subject to the financial
requirement or quantitative treatment limitation in that
classification. In such a situation, a plan is permitted to treat the
least restrictive level of the financial requirement or quantitative
treatment limitation applied to medical/surgical benefits in that
classification as the predominant level.
If a plan provides benefits for more than one coverage unit and
applies different levels of financial requirements or quantitative
treatment limitations to these coverage units within a classification
of benefits, determining the predominant level of a particular
financial requirement or quantitative treatment limitation must be done
separately for each coverage unit. Thus, for example, a plan with
[[Page 5415]]
different deductibles for self-only and family coverage units would not
determine the predominant level of a deductible applied for benefits
across both the self-only and family coverage units. Instead, the plan
would determine the predominant level of the deductible for self-only
coverage independently from the predominant level for family coverage.
c. Special rule for prescription drug benefits with multiple levels
of financial requirements. These regulations include, in paragraph
(c)(3)(iii), a special rule for applying the general parity requirement
of MHPAEA to prescription drug benefits. Although applying the general
parity requirement to a prescription drug program with a single level
of a type of financial requirement would be relatively uncomplicated,
the analysis becomes more difficult if different financial requirements
are imposed for different tiers of drugs. The placement of a drug in a
tier is generally based on factors (such as cost and efficacy)
unrelated to whether the drug is usually prescribed for the treatment
of a medical/surgical condition or a mental health condition or
substance use disorder. To the extent such a program does not
distinguish between drugs as medical/surgical benefits or mental health
or substance use disorder benefits, requiring the program to make that
distinction solely for the purpose of determining the predominant
financial requirement or quantitative treatment limitation that applies
to substantially all medical/surgical benefits in a classification
might impose significant burdens without ensuring any greater parity
for mental health and substance use disorder benefits.
Consequently, these regulations provide that if a plan imposes
different levels of financial requirements on different tiers of
prescription drugs based on reasonable factors (such as cost, efficacy,
generic versus brand name, and mail order versus pharmacy pick-up),
determined in accordance with the requirements for nonquantitative
treatment limitations, and without regard to whether a drug is
generally prescribed with respect to medical/surgical benefits or
mental health or substance use disorder benefits, the plan satisfies
the parity requirements with respect to the prescription drug
classification of benefits. The special rule for prescription drugs, in
effect, allows a plan or issuer to subdivide the prescription drug
classification into tiers and apply the general parity requirement
separately to each tier of prescription drug benefits. For any tier,
the financial requirements and treatment limitations imposed with
respect to the drugs prescribed for medical/surgical conditions are the
same as (and thus not more restrictive than) the financial requirements
and treatment limitations imposed with respect to the drugs prescribed
for mental health conditions and substance use disorders in the tier.
Moreover, because the financial requirements and treatment limitations
apply to 100 percent of the medical/surgical drug benefits in the tier,
they are the predominant financial requirements and treatment
limitations that apply to substantially all of the medical/surgical
drug benefits in the tier.
d. Cumulative financial requirements and quantitative treatment
limitations, including deductibles. While financial requirements such
as copayments and coinsurance generally apply separately to each
covered expense, other financial requirements (in particular,
deductibles) accumulate across covered expenses. In the case of
deductibles, generally an amount of otherwise covered expenses must be
accumulated before the plan pays benefits. Financial requirements and
quantitative treatment limitations that determine whether and to what
extent benefits are provided based on accumulated amounts are defined
in these regulations as cumulative financial requirements and
cumulative quantitative treatment limitations.
In response to the RFI, the Departments received a number of
comments regarding how to apply the parity requirements to cumulative
financial requirements, in particular to deductibles (although some
also referred to out-of-pocket maximums). The comments reflect two
opposing views. One view is that a plan can have deductibles that
accumulate separately for medical/surgical benefits on the one hand,
and mental health or substance use disorder benefits on the other, as
long as the level of the two deductibles is the same (separately
accumulating deductibles). The opposing view is that expenses for both
mental health or substance use disorder benefits and medical/surgical
benefits must accumulate to satisfy a single combined deductible before
the plan provides either medical/surgical benefits or mental health or
substance use disorder benefits (combined deductible).
The provisions of the statute imposing parity on financial
requirements and treatment limitations do not specifically address this
issue; the language of the statute can be interpreted to support either
position. The comments that supported allowing separately accumulating
deductibles maintained that it is commonplace for plans to have such
deductibles, and that the projected cost of converting systems to
permit unified deductibles would be extremely high for the many plans
that use a separate managed behavioral health organization (MBHO).\4\
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\4\ Several commenters stated that the estimated cost to develop
interfaces between MBHOs and the entity administering medical/
surgical claims would be $420,000-$750,000 per interface, and that
in some cases multiple interfaces per MBHO (as many as 40-50) would
be necessary. In response to these cost concerns, the Departments
performed an independent analysis, which indicated that the initial
cost per interface could be as low as $35,000. The Departments'
lower estimated cost reflects, in part, the use of less expensive
interface systems (for example, batch processing rather than real-
time), and the ability to model new interfaces on existing systems
used to interface with pharmacy benefit managers and dental
insurers. In addition, many MBHOs already have developed interfaces,
because their clients requested combined deductibles. This should
result in reduced costs, because interface development costs are
incremental and should decrease after the first interface is
created. For a further discussion of this issue, see section IV.
Economic Impact and Paperwork Burden later in this preamble.
---------------------------------------------------------------------------
By contrast, comments that supported requiring combined deductibles
argued that allowing separately accumulating deductibles undermines a
central goal of parity legislation, to affirm that mental health and
substance use disorder benefits are integral components of
comprehensive health care and generally should not be distinguished
from medical/surgical benefits. Distinguishing between the two requires
individuals who need both kinds of care to satisfy a deductible that is
greater than that required for individuals needing only medical/
surgical care. Other comments that supported requiring combined
deductibles noted that mental health and substance use disorder
benefits typically comprise only 2 to 5 percent of a plan's costs, so
that even using identical levels for separately accumulating
deductibles imposes a greater barrier to mental health and substance
use disorder benefits.
The Departments carefully considered the positions advanced by both
groups of comments regarding separately accumulating and combined
deductibles. Given that the statutory language does not preclude either
interpretation, the Departments' view is that prohibiting separately
accumulating financial restrictions and quantitative treatment
limitations is more consistent with the policy goals that led to the
enactment of MHPAEA. Consequently, these regulations provide, in
paragraph (c)(3)(v), that a plan may not apply cumulative financial
requirements or cumulative quantitative treatment limitations to mental
health or
[[Page 5416]]
substance use disorder benefits in a classification that accumulate
separately from any such cumulative financial requirements or
cumulative quantitative treatment limitations established for medical/
surgical benefits in the same classification.\5\ Examples in these
regulations illustrate the application of this rule.
---------------------------------------------------------------------------
\5\ This rule in the interim final regulations prohibiting
separately accumulating financial requirements and quantitative
treatment limitations does not apply with respect to aggregate
lifetime and annual dollar limits. The statutory language of MHPA
1996 specifically permitted plans to impose aggregate lifetime or
annual dollar limits that distinguish between mental health benefits
and medical/surgical benefits. MHPAEA left the language of this
statutory provision intact, modifying it only to expand its
applicability to include substance use disorder benefits.
---------------------------------------------------------------------------
e. Application to nonquantitative treatment limitations. Plans
impose a variety of limits affecting the scope or duration of benefits
under the plan that are not expressed numerically. Nonetheless, such
nonquantitative provisions are also treatment limitations affecting the
scope or duration of benefits under the plan. These regulations provide
an illustrative list of nonquantitative treatment limitations,
including medical management standards; prescription drug formulary
design; standards for provider admission to participate in a network;
determination of usual, customary, and reasonable amounts; requirements
for using lower-cost therapies before the plan will cover more
expensive therapies (also known as fail-first policies or step therapy
protocols); and conditioning benefits on completion of a course of
treatment.
Paragraph (c)(4) of these regulations generally prohibits the
imposition of any nonquantitative treatment limitation to mental health
or substance use disorder benefits unless certain requirements are met.
Any processes, strategies, evidentiary standards, or other factors used
in applying the nonquantitative treatment limitation to mental health
or substance use disorder benefits in a classification must be
comparable to, and applied no more stringently than, the processes,
strategies, evidentiary standards, or other factors used in applying
the limitation with respect to medical surgical/benefits in the
classification. However, these requirements allow variations to the
extent that recognized clinically appropriate standards of care may
permit a difference. These requirements apply to the terms of the plan
(or health insurance coverage) both as written and in operation.
The phrase, ``applied no more stringently'' was included to ensure
that any processes, strategies, evidentiary standards, or other factors
that are comparable on their face are applied in the same manner to
medical/surgical benefits and to mental health or substance use
disorder benefits. Thus, for example, assume a claims administrator has
discretion to approve benefits for treatment based on medical
necessity. If that discretion is routinely used to approve medical/
surgical benefits while denying mental health or substance use disorder
benefits and recognized clinically appropriate standards of care do not
permit such a difference, the processes used in applying the medical
necessity standard are considered to be applied more stringently to
mental health or substance use disorder benefits. The use of discretion
in this manner violates the parity requirements for nonquantitative
treatment limitations.
Different types of illnesses or injuries may require different
review, as well as different care. The acute versus chronic nature of a
condition, the complexity of it or the treatment involved, and other
factors may affect the review. Although the processes, strategies,
evidentiary standards, and other factors used in applying these
limitations must generally be applied in a comparable manner to all
benefits, the mere fact of disparate results does not mean that the
treatment limitations do not comply with parity.
Examples in these regulations illustrate the operation of the
requirements for nonquantitative treatment limitations. Medical
management standards are implemented by processes such as
preauthorization, concurrent review, retrospective review, case
management, and utilization review; the examples feature the
application of these requirements to some of these processes. The facts
in the examples reflect simple situations for purposes of better
illustrating the application of the rules rather than reflecting the
realistic, complex facts that would typically be found in a plan. The
Departments invite comments on whether additional examples would be
helpful to illustrate the application of the nonquantitative treatment
limitation rule to other features of medical management or general plan
design.
Commenters asked if the MHPAEA requirements apply when eligibility
for mental health and substance use disorder benefits under a major
medical program is conditioned on exhausting some limited number of
mental health and substance use disorder counseling sessions offered
through an employee assistance program (EAP). Generally, the provision
of mental health or substance use disorder benefits by an EAP in
addition to the benefits offered by a major medical program that
otherwise complies with the parity rules would not violate MHPAEA.
However, requiring participants to exhaust the EAP benefits--making the
EAP a gatekeeper--before an individual is eligible for the major
medical program's mental health or substance use disorder benefits is a
nonquantitative treatment limitation subject to the parity
requirements. Consequently, if similar gatekeeping processes with a
similar exhaustion requirement (whether or not through the EAP) are not
applied to medical/surgical benefits, the requirement to exhaust mental
health or substance use disorder benefits available under the EAP would
violate the rule that nonquantitative treatment limitations be applied
comparably and not more stringently to mental health and substance use
disorder benefits.
The Departments received many comments addressing an issue
characterized as ``scope of services'' or ``continuum of care''. Some
commenters requested, with respect to a mental health condition or
substance use disorder that is otherwise covered, that the regulations
clarify that a plan is not required to provide benefits for any
particular treatment or treatment setting (such as counseling or non-
hospital residential treatment) if benefits for the treatment or
treatment setting are not provided for medical/surgical conditions.
Other commenters requested that the regulations clarify that a
participant or beneficiary with a mental health condition or substance
use disorder have coverage for the full scope of medically appropriate
services to treat the condition or disorder if the plan covers the full
scope of medically appropriate services to treat medical/surgical
conditions, even if some treatments or treatment settings are not
otherwise covered by the plan. Other commenters requested that MHPAEA
be interpreted to require that group health plans provide benefits for
any evidence-based treatment.
The Departments recognize that not all treatments or treatment
settings for mental health conditions or substance use disorders
correspond to those for medical/surgical conditions. The Departments
also recognize that MHPAEA prohibits plans and issuers from imposing
treatment limitations on mental health and substance use disorder
benefits that are more restrictive than those applied to medical/
surgical benefits. These regulations do not address the scope of
services issue. The Departments invite comments on whether and to what
[[Page 5417]]
extent MHPAEA addresses the scope of services or continuum of care
provided by a group health plan or health insurance coverage.
D. Availability of Plan Information (26 CFR 54.9812-1T(d), 29 CFR
2590.712(d), and 45 CFR 146.136(d))
MHPAEA includes two new disclosure provisions for group health
plans (and health insurance coverage offered in connection with a group
health plan). First, the criteria for medical necessity determinations
made under a plan (or health insurance coverage) with respect to mental
health or substance use disorder benefits must be made available by the
plan administrator (or the health insurance issuer offering such
coverage) in accordance with regulations to any current or potential
participant, beneficiary, or contracting provider upon request. These
regulations repeat the statutory language without substantive change.
The Departments invite comments on what additional clarifications might
be helpful to facilitate compliance with this disclosure requirement
for medical necessity criteria.
MHPAEA also provides that the reason for any denial under a group
health plan (or health insurance coverage) of reimbursement or payment
for services with respect to mental health or substance use disorder
benefits in the case of any participant or beneficiary must be made
available, upon request or as otherwise required, by the plan
administrator (or the health insurance issuer) to the participant or
beneficiary in accordance with regulations. These regulations clarify
that, in order for plans subject to ERISA (and health insurance
coverage offered in connection with such plans) to satisfy this
requirement, disclosures must be made in a form and manner consistent
with the rules for group health plans in the ERISA claims procedure
regulations,\6\ which provide (among other things) that such
disclosures must be provided automatically and free of charge. In the
case of non-Federal governmental and church plans (which are not
subject to ERISA), and health insurance coverage offered in connection
with such plans, these regulations provide that compliance with the
form and manner of the ERISA claims procedure regulations for group
health plans satisfies this disclosure requirement. The Departments
invite comments regarding any additional clarifications that would be
helpful to facilitate compliance with MHPAEA's disclosure requirements
regarding denials of mental health or substance use disorder benefits.
---------------------------------------------------------------------------
\6\ 29 CFR 2560.503-1.
---------------------------------------------------------------------------
E. General Applicability Provisions (26 CFR 54.9812-1T(e), 29 CFR
2590.712(e), and 45 CFR 146.136(e))
Paragraph (e) of these regulations addresses the applicability of
these regulations to group health plans and health insurance issuers
and clarifies the scope of these regulations.
1. Overview
These regulations make a number of changes to the general
applicability provisions in the MHPA 1996 regulations (paragraphs (c)
and (d) in those regulations). Amendments made by MHPAEA require some
of these changes. For example, the MHPA 1996 rules of construction
specifically excluded any plan provisions relating to cost sharing,
limits on the number of visits or days of coverage, and requirements
relating to medical necessity from the application of the parity
requirements for aggregate lifetime and annual dollar limits. MHPAEA
replaces these exclusions with a rule providing that the provisions
should not be construed as affecting the terms and conditions of the
plan or coverage relating to mental health and substance use disorder
benefits except as provided in the rules relating to financial
requirements and treatment limitations. These regulations make
corresponding changes to the MHPA 1996 regulations.
These regulations also (1) establish a new rule with respect to the
mental health and substance use disorder parity requirements for the
determination of the number of plans that an employer or employee
organization maintains, (2) combine what were in the MHPA 1996
regulations separate rules for group health plans and benefit packages,
and (3) make additional clarifications.
a. Group health plans. In 2004, the Departments issued proposed
regulations for a number of issues under Chapter 100 of the Code, Part
7 of ERISA, and Title XXVII of the PHS Act, including rules for
determining the number of group health plans that an employer or
employee organization is considered to maintain for purposes of those
provisions.\7\ Those proposed regulations generally would have
respected the number of plans designated in the instruments governing
the employer's or employee organization's arrangements to provide
medical care benefits as long as the arrangements were operated
pursuant to those instruments as separate plans. The 2004 proposed
regulations included an anti-abuse clause, providing that, if a
principal purpose of establishing separate plans was to evade any
requirement of law, then the separate plans would be considered a
single plan to the extent necessary to prevent the evasion.
---------------------------------------------------------------------------
\7\ See 69 FR 78800 (December 30, 2004).
---------------------------------------------------------------------------
The Departments recognized that under the 2004 proposed
regulations, absent the anti-abuse clause, plan sponsors might attempt
to provide mental health (and now substance use disorder) benefits
under a plan that is separate from a plan that provides only medical/
surgical benefits. Because the mental health (and now substance use
disorder) parity requirements apply only to plans that provide both
mental health or substance use disorder benefits and medical/surgical
benefits, the absence of medical/surgical benefits in a plan providing
mental health or substance use disorder benefits would have resulted
in, absent the anti-abuse clause, the inapplicability of the parity
requirements. The 2004 proposed regulations included the anti-abuse
clause to avoid this kind of evasion of the parity requirements.
Commenters raised problems of proof with the subjective intent element
of the proposed anti-abuse clause. While the 2004 rule remains
proposed, these interim final regulations include a rule for
determining the number of plans that an employer or employee
organization maintains for the mental health and substance use disorder
parity requirements that operates irrespective of the intent of a plan
sponsor. The rule is that all medical care benefits provided by an
employer or employee organization constitute a single group health
plan.
MHPAEA left unchanged the rule from MHPA 1996 requiring that the
parity requirements be applied separately to each benefit package
option under a group health plan. The MHPA 1996 regulations used the
term ``benefit package'' rather than ``benefit package option'' and
clarified that the parity requirements would apply separately to
separate benefit packages also in situations in which the participants
(or beneficiaries) had no choice between multiple benefit packages,
such as where retirees are provided one benefit package and active
employees a separate benefit package. Under these regulations, the
statutory rule providing that the parity requirements apply separately
to separate benefit package options (reflected in paragraph (c) of the
MHPA 1996 regulations), the statutory rule providing that the parity
requirements
[[Page 5418]]
apply to a group health plan providing both mental health or substance
use disorder benefits and medical/surgical benefits (reflected in
paragraph (d) of the MHPA 1996 regulations), and the determination of
how many plans an employer or employee organization maintains have been
combined as a single rule in paragraph (e)(1).
The new combined rule in these regulations does not use the term
benefit package. Instead, it provides that (1) the parity requirements
apply to a group health plan offering both medical/surgical benefits
and mental health or substance use disorder benefits, (2) the parity
requirements apply separately with respect to each combination of
medical/surgical coverage and mental health or substance use disorder
coverage that any participant (or beneficiary) can simultaneously
receive from an employer's or employee organization's arrangement or
arrangements to provide medical care benefits, and (3) all such
combinations constitute a single group health plan for purposes of the
parity requirements. This new combined rule clearly prohibits what
might have been formerly viewed as a potential evasion of the parity
requirements by allocating mental health or substance use disorder
benefits to a plan or benefit package without medical/surgical benefits
(when medical/surgical benefits are also otherwise available). For
example, if an employer with a single benefit package for medical/
surgical benefits also has a separately administered benefit package
for mental health and substance use disorder benefits, the parity
requirements apply to the combined benefit package and the combined
benefit package is considered a single plan for purposes of the parity
requirements.
Similarly, if an employer offered three medical/surgical benefit
packages, A, B, and C, and a mental health and substance use disorder
benefit package, D, that could be combined with each of A, B, and C,
then the parity requirements must be satisfied with respect to each of
AD, BD, and CD. If the A benefit package had a standard option and a
high option, A1 and A2, then the parity
requirements would have to be satisfied with respect to each of
A1D and A2D.
b. Health insurance issuers. These regulations make a change
regarding applicability with respect to health insurance issuers. Both
the MHPA 1996 regulations and these regulations apply to an issuer
offering health insurance coverage. The MHPA 1996 regulations provide
that the health insurance coverage must be for both medical/surgical
and mental health benefits in connection with a group health plan; the
rule in these regulations provides that the health insurance coverage
must be for mental health or substance use disorder benefits in
connection with a group health plan subject to MHPAEA under paragraph
(e)(1). Thus, under these regulations, an issuer offering health
insurance coverage without any medical/surgical benefits is nonetheless
subject to the parity requirements if it offers health insurance
coverage with mental health or substance use disorder benefits in
connection with a group health plan subject to the parity requirements.
In addition, under these regulations, the parity requirements do not
apply to an issuer offering health insurance coverage to a group health
plan not subject to the parity requirements.
c. Scope. Paragraph (e)(3) of these regulations provides that
nothing in these regulations requires a plan or issuer to provide any
mental health or substance use disorder benefits. Moreover, the
provision of benefits for one or more mental health conditions or
substance use disorders does not require the provision of benefits for
any other condition or disorder.
2. Interaction With State Insurance Laws
Numerous comments requested guidance on how MHPAEA interacts with
State insurance laws requiring parity for, or mandating coverage of,
mental health or substance use disorder benefits. Some commenters
sought clarification that MHPAEA does not preempt any State insurance
law mandating a minimum level of coverage (such as a minimum dollar,
day, or visit level) for mental health conditions or substance use
disorders. Other commenters suggested that, while MHPAEA does not
preempt State insurance parity and mandate laws to the extent that they
do not prevent the application of MHPAEA, provisions in the State laws
that are more restrictive than the requirements of MHPAEA are
preempted.
The preemption provisions of section 731 of ERISA and section 2723
of the PHS Act (added by the Health Insurance Portability and
Accountability Act of 1996 (HIPAA) and implemented in 29 CFR
2590.731(a) and 45 CFR 146.143(a)) apply so that the MHPAEA
requirements are not to be ``construed to supersede any provision of
State law which establishes, implements, or continues in effect any
standard or requirement solely relating to health insurance issuers in
connection with group health insurance coverage except to the extent
that such standard or requirement prevents the application of a
requirement'' of MHPAEA. The HIPAA conference report indicates that
this is intended to be the ``narrowest'' preemption of State laws. (See
House Conf. Rep. No. 104-736, at 205, reprinted in 1996 U.S. Code Cong.
& Admin. News 2018.)
A State law, for example, that mandates that an issuer offer a
minimum dollar amount of mental health or substance use disorder
benefits does not prevent the application of MHPAEA. Nevertheless, an
issuer subject to MHPAEA may be required to provide mental health or
substance use disorder benefits beyond the State law minimum in order
to comply with MHPAEA.
F. Small Employer Exemption (26 CFR 54.9812-1T(f), 29 CFR 2590.712(f),
and 45 CFR 146.136(f))
Paragraph (f) of these regulations amends the MHPA 1996 regulations
to implement the exemption for a group health plan (or health insurance
issuer offering coverage in connection with a group health plan) for a
plan year of a small employer. For this purpose, a small employer is
generally defined, in connection with a group health plan with respect
to a calendar year and a plan year, as an employer who employed an
average of not more than 50 employees on business days during the
preceding calendar year.
G. Increased Cost Exemption (26 CFR 54.9812-1T(g), 29 CFR 2590.712(g),
and 45 CFR 146.136(g))
Both MHPA 1996 and MHPAEA include an increased cost exemption under
which, if certain requirements are met, plans that incur increased
costs above a certain threshold as a result of the application of the
parity requirements of both these laws can be exempt from the statutory
parity requirements. MHPAEA changed the MHPA 1996 increased cost
exemption in several ways, including (1) raising the threshold for
qualification from one percent to two percent for the first year for
which the plan is subject to MHPAEA; (2) requiring certification by
qualified and licensed actuaries who are members in good standing of
the American Academy of Actuaries; and (3) revising the notice
requirements. Under MHPAEA, plans that comply with the parity
requirements for one full plan year and that satisfy the conditions for
the increased cost exemption are exempt from the parity requirements
for the following plan year, and the exemption lasts for one year.
Thus, the increased cost exemption may only be claimed for alternating
plan years.
[[Page 5419]]
These regulations withdraw the MHPA 1996 regulatory guidance on the
increased cost exemption and reserve paragraph (g). The Departments
intend to issue, in the near future, guidance implementing the new
requirements for the increased cost exemption under MHPAEA. The
Departments invite comments on implementing the new statutory
requirements for the increased cost exemption under MHPAEA, as well as
information on how many plans expect to use the exemption.
H. Sale of Nonparity Health Insurance Coverage (26 CFR 54.9812-1T(h),
29 CFR 2590.712(h), and 45 CFR 146.136(h))
These regulations make a few changes to what was paragraph (g) in
the MHPA 1996 regulations. That paragraph included a paragraph (g)(2)
relating to how long the increased cost exemption applies once its
requirements have been satisfied. It has been deleted because MHPAEA
provides a new rule for how long the increased cost exemption applies.
In addition, minor changes have been made to the presentation in what
was paragraph (g)(1) in the MHPA 1996 regulations. Both that paragraph
and paragraph (h) in these regulations address the circumstances of
health insurance coverage that does not comply with the parity
requirements being sold to a group health plan. The MHPA 1996
regulations refer to an issuer selling a policy; these regulations
refer to an issuer selling a policy, certificate, or contract of
insurance. The longer phrase in these regulations includes health
insurance coverage sold in a form that might not always be described by
the term ``policy'' and is the more typical formulation used throughout
the regulations under Chapter 100 of the Code, Part 7 of ERISA, and
Title XXVII of the PHS Act. An additional change shifts the emphasis by
stating the rule in terms of an issuer not being able to sell except in
the described circumstances, rather than in terms of an issuer being
able to sell only in the described circumstances. Finally, the cross-
reference contained in this paragraph to the parity requirements has
been conformed to include the new requirements of MHPAEA.
I. Applicability Dates (26 CFR 54.9812-1T(i), 29 CFR 2590.712(i), and
45 CFR 146.136(i))
In general, the requirements of these regulations apply for plan
years beginning on or after July 1, 2010. There is a special effective
date for certain collectively-bargained plans, which provides that, for
group health plans maintained pursuant to one or more collective
bargaining agreements ratified before October 3, 2008, the requirements
of these regulations do not apply to the plan (or health insurance
coverage offered in connection with the plan) for plan years beginning
before the later of either the date on which the last of the collective
bargaining agreements relating to the plan terminates (determined
without regard to any extension agreed to after October 3, 2008) or
July 1, 2010. MHPAEA provides that any plan amendment made pursuant to
a collective bargaining agreement solely to conform to the requirements
of MHPAEA not be treated as a termination of the agreement.
Many commenters requested guidance on what percentage of employees
covered by a plan must be union employees for the plan to be considered
a plan maintained pursuant to one or more collective bargaining
agreements--some suggesting as low a percentage as 25 percent while
others suggested 90 percent. This issue arises in a number of statutes
that provide special rules for plans maintained pursuant to collective
bargaining agreements. As such, the issue is beyond the scope of these
regulations implementing the MHPAEA amendments and is not addressed in
them.
Because the statutory MHPAEA provisions are self-implementing and
are generally effective for plan years beginning after October 3, 2009,
many commenters asked for a good faith compliance period from
Departmental enforcement until plans (and health insurance issuers)
have time to implement changes consistent with these regulations. For
purposes of enforcement, the Departments will take into account good-
faith efforts to comply with a reasonable interpretation of the
statutory MHPAEA requirements with respect to a violation that occurs
before the applicability date of paragraph (i) of these regulations.
However, this does not prevent participants or beneficiaries from
bringing a private action.
III. Interim Final Regulations and Request for Comments
Section 9833 of the Code, section 734 of ERISA, and section 2792 of
the PHS Act authorize the Secretaries of the Treasury, Labor, and HHS
(collectively, the Secretaries) to promulgate any interim final rules
that they determine are appropriate to carry out the provisions of
Chapter 100 of Subtitle K of the Code, Part 7 of Subtitle B of Title I
of ERISA, and Part A of Title XXVII of the PHS Act, which include the
provisions of MHPAEA.
Under Section 553(b) of the Administrative Procedure Act (5 U.S.C.
551 et seq.) a general notice of proposed rulemaking is not required
when an agency, for good cause, finds that notice and public comment
thereon are impracticable, unnecessary, or contrary to the public
interest.
These rules are being adopted on an interim final basis because the
Secretaries have determined that without prompt guidance some members
of the regulated community may not know what steps to take to comply
with the requirements of MHPAEA, which may result in an adverse impact
on participants and beneficiaries with regard to their health benefits
under group health plans and the protections provided under MHPAEA.
Moreover, MHPAEA's requirements will affect the regulated community in
the immediate future.
The requirements of MHPAEA are generally effective for all group
health plans and for health insurance issuers offering coverage in
connection with such plans for plan years beginning after October 3,
2009. Plan administrators and sponsors, issuers, and participants and
beneficiaries need guidance on how to comply with the new statutory
provisions. As noted earlier, these regulations take into account
comments received by the Departments in response to the request for
information on MHPAEA published in the Federal Register on April 28,
2009 (74 FR 19155). For the foregoing reasons, the Departments find
that the publication of a proposed regulation, for the purpose of
notice and public comment thereon, would be impracticable, unnecessary,
and contrary to the public interest.
IV. Economic Impact and Paperwork Burden
A. Summary--Department of Labor and Department of Health and Human
Services
As discussed earlier in this preamble, MHPAEA requires group health
plans and group health insurance issuers to ensure that financial
requirements (e.g., copayments, deductibles) and treatment limitations
(e.g., visit limits) applicable to mental health or substance use
disorder benefits are no more restrictive than the predominant
financial requirements or treatment limitations applied to
substantially all medical/surgical benefits. Under MHPAEA, a financial
requirement or treatment limitation is considered to be predominant if
it is the most common or frequent of such type of requirement or
limitation. Additionally, there can be no separate cost-sharing
requirements or
[[Page 5420]]
treatment limitations applicable only with respect to mental health or
substance use disorder benefits. The statute does not mandate coverage
for either mental health or substance use disorder benefits. Thus,
self-insured plans are free to choose whether to provide mental health
or substance use disorder benefits; insured plans may have to provide
these benefits under state laws. Either type of plan that provides
mental health or substance use disorder benefits must do so in
accordance with MHPAEA's parity provisions.
The Departments have crafted these regulations to secure the
protections intended by Congress in as economically efficient a manner
as possible. Although the Departments are unable to quantify the
regulations' economic benefits, they have quantified some of the costs
and have provided a qualitative discussion of some of the benefits and
costs that may stem from these regulations.
B. Statement of Need for Regulatory Action
Congress directed the Departments to issue regulations implementing
the MHPAEA provisions. In response to this Congressional directive,
these interim final regulations clarify and interpret the MHPAEA
provisions under section 712 of ERISA, section 2705 of the PHS Act, and
section 9812 of the Code. These regulations are needed to secure and
implement MHPAEA's provisions and ensure that the rights provided to
participants, beneficiaries, and other individuals under MHPAEA are
fully realized. The Departments' assessment of the expected economic
effects of these regulations is discussed in detail below.
C. Executive Order 12866--Department of Labor and Department of Health
and Human Services
Under Executive Order 12866 (58 FR 51735), the Department must
determine whether a regulatory action is ``significant'' and therefore
subject to review by the Office of Management and Budget (OMB). Section
3(f) of the Executive Order defines a ``significant regulatory action''
as an action that is likely to result in a rule (1) having an annual
effect on the economy of $100 million or more, or adversely and
materially affecting a sector of the economy, productivity,
competition, jobs, the environment, public health or safety, or State,
local or tribal governments or communities (also referred to as
``economically significant''); (2) creating a serious inconsistency or
otherwise interfering with an action taken or planned by another
agency; (3) materially altering the budgetary impacts of entitlement
grants, user fees, or loan programs or the rights and obligations of
recipients thereof; or (4) raising novel legal or policy issues arising
out of legal mandates, the President's priorities, or the principles
set forth in the Executive Order. The Departments have determined that
this regulatory action is economically significant within the meaning
of section 3(f)(1) of the Executive Order, because it is likely to have
an effect on the economy of $100 million or more in any one year.
Accordingly, the Departments provide the following assessment of its
potential costs and benefits. As elaborated below, the Department
believes that the benefits of the rule justify its costs.
Table 1, below, summarizes the costs associated with the rule. The
estimates are explained in the following sections. Over the ten-year
period of 2010 to 2019, the total undiscounted cost of the rule is
estimated to be $115 million in 2010 Dollars. Columns E and F display
the costs discounted at 3 percent and 7 percent, respectively. Column G
shows a transfer of $25.6 billion over the ten-year period. All other
numbers included in the text are not discounted, except where noted.
Table 1--Total Costs of Rule
[In millions of 2010 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Medical Total Total 3% Total 7%
Year General review necessity Single undiscounted discounted discounted Transfer
disclosure deductible costs costs costs (undiscounted)
(A) (B) (C) A+B+C (E) (F) (G)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2010................................... $27.8 $1.2 $39.2 $68.2 $68.2 $68.2 $2,360.0
2011................................... 0 1.2 3.9 5.2 5.0 4.8 2,400.0
2012................................... 0 1.2 3.9 5.2 4.9 4.5 2,430.0
2013................................... 0 1.2 3.9 5.2 4.7 4.2 2,460.0
2014................................... 0 1.2 3.9 5.2 4.6 3.9 2,510.0
2015................................... 0 1.2 3.9 5.2 4.4 3.7 2,570.0
2016................................... 0 1.2 3.9 5.2 4.3 3.4 2,620.0
2017................................... 0 1.2 3.9 5.2 4.2 3.2 2,680.0
2018................................... 0 1.2 3.9 5.2 4.1 3.0 2,740.0
2019................................... 0 1.2 3.9 5.2 4.0 2.8 2,810.0
----------------------------------------------------------------------------------------------------------------
Total.............................. ............... .............. .............. 114.6 108.4 101.8 25,600.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The displayed numbers are rounded to the nearest thousand and therefore may not add up to the totals.
The Departments performed a comprehensive, unified analysis to
estimate the costs and, to the extent feasible, provide a qualitative
assessment of benefits attributable to the regulations for purposes of
compliance with Executive Order 12866, the Regulatory Flexibility Act,
and the Paperwork Reduction Act. The Departments' assessment and
underlying analysis is set forth below.
1. Regulatory Alternatives
Section 6(a)(3)(C)(iii) of Executive Order 12866 requires an
economically significant regulation to include an assessment of the
costs and benefits of potentially effective and reasonable alternatives
to the planned regulation, and an explanation of why the planned
regulatory action is preferable to the potential alternatives. As
discussed earlier in this preamble, the Departments considered the
alternative of whether to require the same separately accumulating
deductible for medical/surgical benefits and mental health or substance
use disorder benefits or a combined deductible for such benefits.
[[Page 5421]]
The language of the statute can be interpreted to support either
alternative. The comments that supported allowing separately
accumulating deductibles maintained that it is commonplace for plans to
have such deductibles, and that the projected cost of converting
systems to permit unified deductibles would be extremely high for the
many plans that use a separate managed behavioral health organization
(MBHO).\8\ By contrast, comments that supported requiring combined
deductibles argued that allowing separately accumulating deductibles
undermines a central goal of parity legislation: To affirm that mental
health and substance use disorder benefits are integral components of
comprehensive health care and generally should not be distinguished
from medical/surgical benefits. Distinguishing between the two requires
individuals who need both kinds of care to satisfy a deductible that is
greater than that required for individuals needing only medical/
surgical care. Other comments that supported requiring combined
deductibles noted that mental health and substance use disorder
benefits typically comprise only 2 to 5 percent of a plan's costs, so
that even using identical levels for separately accumulating
deductibles imposes a greater barrier to mental health and substance
use disorder benefits.
---------------------------------------------------------------------------
\8\ For a full discussion of the cost considerations involved
with these alternatives, see section 4.b., below, Costs associated
with cumulative financial requirements and quantitative treatment
limitations, including deductibles.
---------------------------------------------------------------------------
The Departments carefully considered the alternative of requiring
separately accumulating or combined deductibles. Given that the
statutory language does not preclude either interpretation, the
Departments choose to require combined deductibles, because this
position is more consistent with the policy goals that led to the
enactment of MHPAEA.
2. Affected Entities and Other Assumptions
The Departments expect MHPAEA to benefit the approximately 111
million participants in 446,400 ERISA-covered employer group health
plans, and an estimated 29 million participants in the approximately
20,300 public, non-Federal employer group health plans sponsored by
state and local governments.\9\ In addition, approximately 460 health
insurance issuers providing mental health or substance use disorder
benefits in the group health insurance market and at least 120 MBHOs
providing mental health or substance use disorder benefits to group
health plans are expected to be affected.\10\
---------------------------------------------------------------------------
\9\ The Departments' estimates of the numbers of affected
participants are based on DOL estimates using the 2008 CPS. ERISA
plan counts are based on DOL estimates using the 2008 MEP-IC and
Census Bureau statistics. The number of state and local government
employer-sponsored plans was estimated using 2007 Census data and
DOL estimates. Please note that the estimates are based on survey
data that is not broken down by the employer size covered by MHPAEA
making it difficult to exclude from estimates those participants
employed by employers who employed an average of at least 2 but no
more than 50 employees on the first day of the plan year.
\10\ The Departments' estimate of the number of insurers is
based on industry trade association membership. Please note that
these estimates could undercount small state regulated insurers.
---------------------------------------------------------------------------
3. Benefits
Congress first passed mental health parity legislation in 1996 with
the enactment of MHPA 1996.\11\ As discussed earlier in this preamble,
this law requires health insurance issuers and group health plans that
offer mental health benefits to have aggregate annual and lifetime
dollar limits on mental health benefits that are no more restrictive
than those for all medical/surgical benefits.
---------------------------------------------------------------------------
\11\ Pub. L. 104-204, title VII, 110 Stat. 2874, 2944-50.
---------------------------------------------------------------------------
The impact of MHPA 1996 was limited, however, because it did not
require parity with respect to day limits for inpatient or outpatient
care, deductibles, co-payments or coinsurance, substance use disorder
benefits, and prescription drug coverage.\12\ While a large majority of
plans complied with the MHPA 1996 parity requirement regarding annual
and lifetime dollar limits, many employer-sponsored group health plans
contained plan design features that were more restrictive for mental
health benefits than for medical/surgical benefits. For example, data
on private insurance arrangements from the pre-MHPAEA era show that
after MHPA 1996, the most significant disparities in coverage for
mental health substance use treatment involve limits on the number of
covered days of inpatient care and the number of outpatient visits.
Survey data from the Kaiser/HRET national employer survey shows that 64
percent of covered workers had more restrictive limits on the number of
covered hospital days for mental health care and 74 percent had more
restrictive limits on outpatient mental health visits. In addition, 22
percent of covered workers had higher cost-sharing imposed on mental
health care benefits. Among those workers with more restrictive limits
on inpatient days, 77 percent had limits of 30 days or less.\13\ For
these reasons, as discussed more fully below, the Departments expect
that MHPAEA and these regulations will have their greatest impact on
people needing the most intensive treatment and financial protection.
The Departments do not have an estimate of the number of individuals
who have exceeded the treatment limits. However, according to the FEHBP
data used to analyze the FEHBP parity directive in the year before its
implementation, the 90th percentile of the mental health spending
distribution was corresponded to $2,134 in 1999 dollars. Among the
people spending at the 90th percentile or higher, 12% had inpatient
psychiatric stays and 20% of those above the 90th percentile had a
diagnosis of schizophrenia or bipolar disorder, chronic conditions
requiring prescription drugs and regular contact with mental health
service providers. It is this group that experienced especially large
declines in out of pocket payments after FEHBP implemented parity.
---------------------------------------------------------------------------
\12\ GAO/HEHS-00-95, Implementation of the Mental Health Parity
Act. In the report, GAO found that 87 percent of compliant plans
contained at least one more restrictive provision for mental health
benefits with the most prevalent being limits on the number of
outpatient office visits and hospital day limits. Id. at 5.
\13\ Barry, Colleen, et al. ``Design of Mental Health Benefits:
Still Unequal After All These Years,'' Health Affairs Vol. 22,
Number 5, 2003. Please note that the baseline data from the Kaiser
HRET survey cited in this article are weighted by region, firm size
and industry to reflect the national composition of employers. So
the data cited establishing the baseline reflects the impact of
state parity laws. It is important to realize that state parity laws
frequently focus on a subset of diagnoses, e.g., biologically based
disorders, and do not apply to self-funded insurance programs. Thus,
in most states only a minority of insurance contracts is affected by
state parity laws.
---------------------------------------------------------------------------
Treatment for alcohol abuse disorders showed a similar trend:
Surveys indicate that 74 percent of private industry employees were
covered by plans that imposed more restrictive limits for inpatient
detoxification benefits than medical and surgical benefits, 88 imposed
more restrictive limits for inpatient rehabilitation, and 89 percent
imposed more restrictive limits for outpatient rehabilitation.\14\
---------------------------------------------------------------------------
\14\ Morton, John D. and Patricia Aleman. ``Trends in Employer-
provided Mental Health and Substance Abuse Benefits.'' Monthly Labor
Review, April 2005.
---------------------------------------------------------------------------
After MHPA 1996, many states also passed mental health parity laws.
Research focused on the impacts of parity laws found that similar to
MHPA 1996, even the most comprehensive state laws resulted in little or
no increase in access to and utilization of
[[Page 5422]]
mental health services for covered individuals.\15\
---------------------------------------------------------------------------
\15\ Id., at 9. The state mental health parity laws varied
significantly with most of differences related the following areas:
the type of mental health mandate, definition of mental illness, the
inclusion of substance abuse coverage, small employers' coverage,
and cost increase exceptions. Few state laws provide as extensive
coverage as MHPAEA, particularly with regard to its prohibition of
visit limitations.
---------------------------------------------------------------------------
To address these issues, Congress amended MHPA 1996 by enacting
MHPAEA. One of Congress' primary objectives in enacting MHPAEA was to
improve access to mental health and substance use disorder benefits by
eliminating discrimination that existed with respect to these benefits
after MHPA 1996. Congress' intent in enacting MHPAEA was articulated in
a floor statement from Representative Patrick Kennedy (D-RI), one of
the chief sponsors of the legislation, who said ``[a]ccess to mental
health services is one of the most important and most neglected civil
rights issues facing the Nation. For too long, persons living with
mental disorders have suffered discriminatory treatment at all levels
of society.'' \16\ In a similar statement, Representative James Ramstad
(R-MN) said, ``[i]t's time to end the discrimination against people who
need treatment for mental illness and addition. It's time to prohibit
health insurers from placing discriminatory barriers on treatment.''
\17\
---------------------------------------------------------------------------
\16\ 153 Cong. Rec. S1864-5 (daily ed., February 12, 2007).
\17\ 154 Cong. Rec. H8619 (daily ed., September 23, 2008).
---------------------------------------------------------------------------
The Departments expect that the largest benefit associated with
MHPAEA and these regulations will be derived from applying parity to
cumulative quantitative treatment limitations such as annual or
lifetime day or visit limits (visit limitations). As discussed above, a
large percentage of plans imposed visit limitations pre-MHPAEA, and the
GAO found that a major shortcoming of MHPA 1996 was its failure to
apply parity to visit limitations. Applying parity to visit limitations
will help ensure that vulnerable populations--those accessing
substantial amounts of mental health and substance use disorder
services--have better access to appropriate care. The Departments
cannot estimate how large this benefit will be, because sufficient data
is not available to estimate the number of covered individuals that had
their benefits terminated because they reached their coverage limit.
Though difficult to estimate, the number of beneficiaries who have a
medical necessity for substantial amount of care are likely to be
relatively small. Severe mental health disorders account for 2-3
percent of people in private health insurance plans and a substantially
larger share of mental health spending. Evidenced-based treatments for
severe and persistent mental illnesses like schizophrenia, bipolar
disorder and chronic major depression requires prolonged (possibly
lifetime) maintenance treatment that consists of pharmacotherapy,
supportive counseling and often rehabilitation services.\18\ The most
common visit limits under current insurance arrangements are those for
20 visits per year. That means assuming a minimal approach to treatment
of one visit per week, people with severe and persistent mental
disorders will exhaust their coverage in about five months. This often
results in people foregoing outpatient treatment and a higher
likelihood of non-adherence to treatment regimes that produce poor
outcomes and the potential for increased hospitalization costs.
---------------------------------------------------------------------------
\18\ See, Lehman AF ``Quality of care in mental health: the case
of schizophrenia'' Health Affairs 18(5): 52-65.
---------------------------------------------------------------------------
Increased coverage also should provide enhanced financial
protection for this group by reducing out-of-pocket expenses for
services that previously were needed but uncovered. This should help
prevent bankruptcy and financial distress for these individuals and
families and reduce cost-shifting of care to the public sector, both of
which occur when covered benefits are exhausted. In addition, increased
coverage for those seeking substantial amounts of care potentially
could reduce emergency room use by ensuring that benefits for
individuals with serious conditions are not terminated. Finally,
reduced entry into disability programs may result from having more
complete insurance coverage for mental health and substance use
disorder treatment.
Since the early 1990s, many health insurers and employers have made
use of specialized vendors, known as behavioral health carve-outs to
manage their mental health and substance abuse benefits. These vendors
have specialized expertise in the treatment of mental and addictive
disorders and organized specialty networks of providers. These vendors
are known as behavioral health carve-outs. They use information
technology, clinical algorithms and selective contracts to control
spending on mental health and substance abuse treatment. There is an
extensive literature that has examined the cost savings and impacts on
quality of these organizations. Researchers \19\ have reviewed this
literature and estimated reductions in private insurance spending of 20
percent to 48 percent compared to fee-for-service indemnity
arrangements. Also, it appears that the rate of utilization of mental
health care rises under behavioral health carve out arrangements. The
number of people receiving inpatient psychiatric care typically
declines as does the average number of outpatient visits per episode.
---------------------------------------------------------------------------
\19\ Sturm R, ``Tracking changes in behavioral health services:
How carve-outs changed care?'' Journal of Behavioral Health Services
and Research 26(4): 360-371, 1999. Frank RG and Garfield RL;
``Managed Behavioral Health Carve-Outs: Past Performance and Future
Prospects'' Annual Reviews of Public Health 2007, 28:11; 1-18. Frank
RG and Garfield RL; ``Managed Behavioral Health Carve-Outs: Past
Performance and Future Prospects'' Annual Reviews of Public Health
2007, 28:11; 1-18.
---------------------------------------------------------------------------
The OPM encouraged its insurers to consider carve-out arrangements
when implementing the parity directive in 2000 for the FEHBP. This is
because of the ability of behavioral health carve-outs to use
utilization management tools to control utilization and spending in the
face of reductions in cost-sharing and elimination of limits. Thus,
parity in a world dominated by behavioral carve-outs has meant
increased utilization rates, reduced provider fees, reduced rates of
hospitalization and fewer very long episodes of outpatient care.
Intensive treatment was more closely aligned with higher levels of
severity.
Another potential benefit associated with MHPAEA and these
regulations is that use of mental health and substance use disorder
benefits could improve.\20\ Untreated or under treated mental health
conditions and substance use disorders are detrimental to individuals
and the entire economy. Day and visit limits can interfere with
appropriate treatment thereby reducing the impact of care for workers
seeking treatment. Many people with mental health conditions and
substance use disorders are employed and these debilitating conditions
have a devastating impact on employee attendance and productivity,
which results in lost productivity for employers and lost earnings for
employees. For example, studies have
[[Page 5423]]
shown that the high prevalence of depression and the low productivity
it causes have cost employers $31 billion to $51 billion annually in
lost productivity in the United States.\21\ More days of work loss and
work impairment are caused by mental illness than by various other
chronic conditions, including diabetes and lower back pain.\22\
---------------------------------------------------------------------------
\20\ While studies have shown that state parity laws have
increased access only marginally, most state laws still allowed
disparate treatment limits for mental health conditions and
substance use disorders, which limited access for those needing
significant amounts of treatment. As discussed above, MHPAEA and
these regulations prohibit the imposition of such disparate limits,
which could increase access for those individuals. Nine states have
treatment limit requirements similar to MHPAEA for mental health
benefits, while 10 states have similar requirements for substance
abuse disorder benefits.
\21\ Stewart, W.F., Ricci, J.A., Chee, E., Hahn, S.R. &
Morgenstein, D. (2003, June 18). ``Cost of lost productive work time
among US workers with depression.'' JAMA: Journal of the American
Medical Association. 289, 23, 3135-3144.
Kessler, R.C., Akiskal, H.S., Ames, M., Birnbaum, H., Greenberg,
P., Hirschfeld, H.M.A. et al. (2006). ``Prevalence and effects of
mood disorders on work performance in a nationally representative
sample of U.S. workers.'' American Journal of Psychiatry, 163, 1561-
1568.
\22\ Stewart, W.F., Ricci, J.A., Chee, E., Hahn, S.R. &
Morgenstein, D. (2003, June 18). ``Cost of lost productive work time
among US workers with depression.'' JAMA: Journal of the American
Medical Association. 289, 23, 3135-3144.
---------------------------------------------------------------------------
Moreover, studies have consistently found that workers who report
symptoms of mental disorders have lower earnings than other similarly-
situated coworkers. For example, a recent study funded by the National
Institutes of Health's National Institute of Mental Health \23\ found
that mental disorders cost employees at least $193 billion annually in
lost earnings alone, a staggering number that probably is a
conservative estimate because it did not include the costs associated
with people in hospitals and prisons, and included very few
participants with autism, schizophrenia and other chronic illnesses
that are known to greatly affect a person's ability to work. The study
also noted that individuals suffering from depression earn 40 percent
less than non-depressed individuals.
---------------------------------------------------------------------------
\23\ Kessler, Ronald C., Steven Heeringa, Matthew D. Lakoma,
Maria Petukhova, Agnes E. Rupp, Michael Schoenbaum, Philip S. Wang,
and Alan M. Zaslavsky. ``Individual and Societal Effects of Mental
Disorders on Earnings in the United States: Results From the
National Comorbidity Survey Replication.''
The American Journal of Psychiatry; June 2008; 165, 6; Research
Library pg. 703.
---------------------------------------------------------------------------
Although accurately determining cause and effect can be difficult,
studies have attempted to estimate the beneficial impact of treating
mental disorders. One study found that treating individuals suffering
from mental disorders helped close the gap in productivity between
those with mental disorders and those who did not have a mental
disorder.\24\ The finding that treatment can help increase the
productivity of those suffering from mental illness suggests that
increasing access to treatment of mental disorders could have a
beneficial impact on lost productivity cost and lost earnings that stem
from untreated and under treated mental health conditions and substance
use disorders. The Departments, however, do not have sufficient data to
determine whether this result will occur, and, if it does, the extent
to which lost productivity cost and lost earnings could improve.
---------------------------------------------------------------------------
\24\ Hilton, Michael F., Paul A. Schuffham, Judith Sheridan,
Catherine M. Clearly, Neria Vecchio, and Harvey A. Whiteford. ``The
Association Between Mental Disorders and Productivity in Treated and
Untreated Employees.'' Journal of Occupational and Environmental
Medicine. Volume 51, Number 9, September 2009.
---------------------------------------------------------------------------
As noted above the combination of reduced cost sharing and the
elimination of day and visit limits have the effect of making coverage
more complete. The dominant role of managed behavioral health care in
the market and the evidence about it success in controlling costs means
that the moral hazard problem can be controlled (the evidence on this
is discussed in more detail below). The implication is that more
complete financial protection can be offered to people without a
significant increase in social costs. This implies improved efficiency
in the insurance market since more efficient risk spreading would occur
without much welfare loss due to moral hazard.
In order to comply with MHPAEA and these regulations, cost-sharing
requirements for mental health and substance use disorder benefits
cannot be any more restrictive than the predominant cost-sharing
requirement applied to substantially all medical/surgical benefits.
Because expenditures on mental health and substance use disorder
benefits only comprise 3-6 percent of the total benefits covered by a
group health plan and 8 percent of overall healthcare costs,\25\ the
Departments expect that group health plans will lower cost-sharing on
mental health and substance use disorder benefits instead of raising
cost-sharing on medical/surgical benefits.
---------------------------------------------------------------------------
\25\ Finch R.A., Phillips K. Center for Prevention and Health
Services. ``An Employer's Guide to Behavioral Health Services: A
Roadmap and Recommendations for Evaluating Designing, and
Implementing Behavioral Health Services.'' National Business Group
on Health 2005.
---------------------------------------------------------------------------
MHPAEA and these interim final regulations could have a positive
impact on the delivery system of mental health services. Currently,
approximately half of mental health care is delivered solely by primary
care physicians.\26\ This trend is likely due in part to the large
discrepancies between insurance cost-sharing for services delivered by
mental health professionals and primary care physicians. Historically,
the cost-sharing associated with primary care physician visits is lower
than cost-sharing for mental health professional visits. This
difference in the relative price encouraged patients suffering from
mental illness to visit primary care physicians for mental health-
related conditions. If MHPAEA and these regulations result in lowering
the relative price of mental health care, more individuals suffering
from mental illness could visit and receive care from mental health
professionals. One study \27\ found that only 12.7 percent of
individuals treated in the general medical sector received at least
minimally adequate mental health care compared to 48.3 percent of
patients treated in the specialty mental health sector.\28\ A shift in
source of treatment from primary care physicians to mental health
professionals could lead to more appropriate care, and thus, better
health outcomes.\29\ The Departments, however, do not have sufficient
data to estimate how large this shift in treatment could be or
determine whether it will occur.
---------------------------------------------------------------------------
\26\ Wang, P.S., Lane, M., Olfson, M., Pincus, H.A., Wells,
K.B., and Kessler, R.C. (2005, June). ``Twelve month use of mental
health services in the United States.'' Archives of General
Psychiatry, 62, 629-640. The study found that 40 percent of people
reporting mental health and substance use disorders receive some
treatment in a year.
\27\ Wang, P.S., Lane, M., Olfson, M., Pincus, H.A., Wells,
K.B., and Kessler, R.C. (2005, June). ``Twelve month use of mental
health services in the United states.'' Archives of General
Psychiatry, 62, 629-640.
\28\ Another analysis demonstrating poor adherence to evidence-
based treatment for mental disorders is:
Wang PS, Berglund P, Kessler RC, Journal of General Internal
Medicine. 2000; 15:284-292. Recent care of common mental disorders
in the United States: Prevalence and conformance with evidence-based
recommendations. This study finds that only 57.3 percent of people
with major depression receive treatment during a year and less than
one-third of those who receive treatment receive effective
treatment.
Based on expert opinion, Normand et al. rated the likely
effectiveness of combinations of general medical visits, specialty
visits (with psychotherapy) and drug treatment to demonstrate the
correlation between adequate treatment for depression and the
probability of remission. For patients with no anti-depressant
medication, the probability of remission increased as the number of
specialty visits increased from one or less during a year to ten or
more. The probability of remission was greater for patients with
antidepressant medication and improved with more specialty visits
during the year. Normand SLT, Frank RG, McGuire, TG. ``Using
elicitation techniques to estimate the value of ambulatory
treatments for depression.'' Medical Decision Making, 2001; 22: 245-
261.
\29\ The Healthcare Effectiveness Data and Information Set
report card for 2007 produced by National Center for Quality
Assurance shows that for treatment of depression, only 20 percent of
patients get appropriate levels of provider contacts; about 45
percent receive appropriate maintenance level medications and 62
percent obtain adequate medication doses and duration during the
acute phase of illness.
---------------------------------------------------------------------------
Mental health and physical health are interrelated, and individuals
with poor mental health are more likely to have
[[Page 5424]]
physical health problems as well. Increased access and utilization of
mental health and substance use disorder benefits could result in a
reduction of medical/surgical costs for individuals afflicted with
mental health conditions and substance use disorders. The decrease in
medical/surgical costs could be significant; however, the Departments
do not have sufficient data to estimate how large these health care
spending offsets could be or determine whether they will occur.
There is disagreement among experts as to whether depression is an
important antecedent risk factor for physical illness or whether the
causal relationship acts in the opposite direction. Regardless, there
is evidence that comorbid depression worsens the prognosis, prolongs
recovery and may increase the risk of mortality associated with
physical illness. In addition, comorbid depression has been shown to
increase the costs of medical care, over and above the costs of
treating the depression itself.\30\
---------------------------------------------------------------------------
\30\ Conti R, Berndt ER, Frank RG. ``Early retirement and DI/SSI
applications: Exploring the impact of depression'', in Culter DM,
Wise DA. Health in Older Ages: The causes and consequences of
declining disability among the elderly, (Chicago: National Bureau of
Economic Research, 2008).
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The returns on investment from treatment of substance use disorders
can be large.\31\ Studies in Washington state clinics demonstrated that
each dollar invested in inpatient and outpatient substance abuse
treatment yielded returns of about 10 and 23 times their initial
investments, respectively.\32\ California and Oregon state treatment
systems demonstrated a sevenfold return in their investments.\33\ Other
studies show effects ranging from a return of one and a half times the
cost in a large study of a treatment clinic in Chicago to a return of 5
times the initial investment for a treatment for mentally ill chemical
abusers,\34\ resulting in a net benefit of about $85,000 per client for
an investment of nearly $20,000.\35\
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\31\ The Office of National Drug Control Policy has information
on effective treatment and cost savings at http://www.whitehousedrugpolicy.gov.
\32\ French, M.T., H.J. Salome, A. Krupski, J.R. McKay, D.M.
Donovan, A.T. McLellan, and J. Durrell. (2000). ``Benefit-cost
analysis of residential and outpatient addiction treatment in the
State of Washington.'' Evaluation Review, 24(6), 609-634.
\33\ Ettner, S.L., D. Huang, E. Evans, D.R. Ash, M. Hardy, M.
Jourabchi, and Y. Hser. (2006). ``Benefit-Cost in the California
Treatment Outcome Project: Does Substance Abuse Treatment `Pay for
Itself?''' Health Services Research, 41(1), 192-213.
\34\ French, M.T., K.E. McCollister, S. Sacks, K. McKendrick, &
G. De Leon. (2002). ``Benefit cost analysis of a modified
therapeutic community for mentally ill chemical abusers.''
Evaluation and Program Planning, 25, 137-148.
\35\ The returns are the ratio of benefits to costs. Benefits
include personal as well as societal benefits including increased
employment and reduced crime.
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4. Costs
a. Cost associated with increased utilization of mental health and
substance use disorder benefits. As discussed in the Benefits section
earlier in this preamble, one of Congress' primary objectives in
enacting MPHAEA was to eliminate barriers that impede access to and
utilization of mental health and substance use disorder benefits. This
has raised concerns among some that increased access and utilization of
mental health and substance use disorder benefits will result in
increases in associated payments and plan expenditures, which could
lead to large premium increases that will make mental health and
substance use disorder benefits unaffordable. The Departments are
uncertain regarding the level of increased costs and premium increases
that will result from MHPAEA and these regulations, but there is
evidence that any increases will not be large.
One theory for increased costs resulting from parity is based on
the fact that cost-sharing for mental health and substance use disorder
benefits will decrease. A frequent justification for higher cost-
sharing of mental health and substance use disorder benefits is the
greater extent of moral hazard for these benefits; individuals will
utilize more mental health and substance use disorder benefits at a
higher rate when they are not personally required to pay the cost. To
support this assumption, many have cited the RAND Health Insurance
Experiment, conducted in 1977-1982, which demonstrated that individuals
are more likely to increase their mental health care usage when their
personal cost-sharing for mental health care services fall than they
are to increase their physical health care usage when their personal
cost-sharing for physical health care services decreases. Because this
experiment was conducted nearly thirty years ago, researchers recently
tested to determine whether this result held true.\36\ Their results
indicate that individuals' sensitivity to changes in cost-sharing may
have changed significantly over time. These changes are explained at
least in part due to the expansion of managed behavioral health care
(described earlier). The authors found that individuals' price
responsiveness of ambulatory mental health treatment is now slightly
lower than physical health treatment. These results indicate that if
plans lower the cost-sharing associated with mental health services,
costs will not rise as much as would be expected using the results from
the RAND Experiment.\37\
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\36\ Meyerhoefer, Chad D. and Samuel Zuvekas, 2006. ``New
Estimates of the Demand for Physical and Mental Health Treatment.''
Agency for Healthcare Research and Quality Working Paper No. 06008.
\37\ Another paper showing a similar result to the Myerhoefer
paper cited above is: Lu CL, Frank, RG and McGuire TG. ``Demand
Response Under Managed Care.'' Contemporary Economic Policy,
27(1):1-15, 2009.
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When the RAND Experiment was conducted, managed care was not nearly
as prevalent as it is today. Health care economists have studied the
impact of using cost control techniques associated with managed care to
reduce the quantity of mental health and substance use disorder
benefits utilized so that lowered cost sharing may result in only a
small increase in spending.\38\ This research concluded that
``comprehensive parity implemented in the context of managed care would
have little impact on total spending.'' \39\
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\38\ Barry, Frank, and McGuire. ``The Costs of Mental Health
Parity: Still an Impediment?'' Health Affairs, no. 3:623 (2006).
\39\ Id.
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These findings were similar to those of a recent study published in
the New England Journal of Medicine examining the Federal Employees
Health Benefits Program (FEHBP), which implemented parity for mental
health and substance use disorder benefits in 2001.\40\ The primary
concern has been that the existence of parity in the FEHBP would result
in large increases in the use of mental health and substance-abuse
services and spending on these services. However, the study concluded
that these fears were unfounded and ``that parity of coverage of mental
health and substance-abuse services, when coupled with management of
care, is feasible and can accomplish its objectives of greater fairness
and improved insurance protection without adverse consequences for
health care costs.'' \41\ The study found average per user declines in
out patient cost sharing of between zero and $87 depending on the
[[Page 5425]]
plan. The reductions were largest for high users of mental health care.
The study also found that insurers were not likely to drop out of the
FEHBP pool due to the implementation of parity.
---------------------------------------------------------------------------
\40\ Goldman, et al., ``Behavioral Health Insurance Parity for
Federal Employees,'' New England Journal of Medicine (March 30,
2006) Vol. 354, No. 13. In 1999, President Clinton directed the
Office of Personnel Management (OPM) to equalize benefits coverage
in the FEHBP, and parity was implemented in 2001. Parity under the
FEHBP is very similar to MHPAEA. It requires benefits coverage for
plan mental health, substance abuse, medical, surgical, and hospital
providers to have the same limitations and cost-sharing such as
deductibles, coinsurance, and co-pays. When patients use plan
providers and follow a treatment regime approved by their plan, all
diagnostic categories of mental health and substance abuse
conditions listed in the Diagnostic and Statistical Manual of Mental
Disorders, Fourth Edition (DSM IV) are covered.
\41\ Id.
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The experience of states that have enacted mental health parity
laws with appropriate managed care also suggests that minimal increased
cost results from implementing parity. One study found that ``with the
implementation of mental health parity at the same time as managed
behavioral health care, many states have discovered that overall health
care costs increased minimally and in some cases even were reduced.''
\42\ For example, at least nine states--California, Maine, Maryland,
Minnesota, North Carolina, Pennsylvania, Rhode Island, South Carolina,
and Vermont--have actually documented experience that implementing
mental health parity including cost controls through managed care
resulted in lower costs and lowered premiums (or at most, very modest
cost increases of less than one percent) within the first year of
implementation.\43\
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\42\ Melek, Steve, ``The Costs of Mental Health Parity,'' Health
Section News (March 2005).
\43\ Bachman, Ronald, Mental Health Parity--Just the Facts
(2000).
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Similarly, the Departments expect medical management and managed
care techniques will help control any major cost impact resulting from
MHPAEA and these regulations. As discussed earlier in this preamble,
these regulations provide that medical management can be applied to
mental health and substance use disorder benefits by plans as long as
any processes, strategies, evidentiary standards, or other factors used
in applying medical management are comparable to, and are applied no
more stringently than, the processes, strategies, evidentiary
standards, or other factors used in applying medical management to
medical/surgical benefits.
Although the increase in per plan costs associated with parity is
not likely to be substantial, there may be plans that decide to drop
coverage for mental health and substance use disorder benefits in
response to higher costs, or individuals may decide to drop coverage
even if it is offered. The Departments do not have an estimate of the
number of plans that will drop coverage or the number of individuals
that will lose benefits. Currently 98 percent of covered workers have
some form of mental health benefits.\44\ The lack of coverage for
mental health and substance use disorder benefits for these people may
lead to many of the typical costs associated with uninsured
individuals: Lack of access, decreased health, and increased financial
burden. The Departments are not able to quantify these costs. Research
on the introduction of state parity laws suggests few plans or
individuals will drop insurance coverage due to parity.\45\
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\44\ Kaiser Family Foundation and Health Research & Educational
Trust. Employer Health Benefits 2008 Annual Survey.
\45\ Cseh, Attila. ``Labor Market Consequences of State Mental
Health Parity Mandates,'' Forum for Health Economics & Policy, Vol.
11, issue 2, 2008.
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b. Costs associated with cumulative financial requirements and
quantitative treatment limitations, including deductibles. As discussed
earlier in this preamble, paragraph (c)(3)(v) of these regulations
provide that a group health plan may not apply cumulative financial
requirements, such as deductibles, for mental health and substance use
disorder benefits in a classification that accumulate separately from
any such requirements or limitations established for medical/surgical
benefits in the same classification. Some group health plans and health
insurance issuers ``carve-out'' the administration and management of
mental health and substance use disorder benefits to MBHOs. These
entities obtain cost savings for plan sponsors by providing focused
case management and directing care to a broad network of mental and
behavioral health specialists (with whom they negotiate lower fees) who
ensure that appropriate care for mental health conditions and substance
use disorders is provided.\46\
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\46\ Research papers have indicated that carve-out arrangements
have reduced the cost of proving mental health and substance use
disorder benefits by an estimated 25-40 percent. Frank, Richard G.
and Thomas G. McGuire, ``Savings from a Carve-Out Program for Mental
Health and Substance Abuse in Massachusetts Medicaid'' Psychiatric
Services 48(9); 1147-1152, 1997; Ma, Ching-to Albert and Thomas G.
McGuire, ``Costs and Incentives in a Behavioral Health Carve-out.
Health Affairs March/April 1998.
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When a group health plan or health insurance issuer uses a carve-
out arrangement, at least two entities are involved in separately
managing and administering medical/surgical and mental health and
substance use disorder benefits.\47\ The imposition of a single
deductible requires entities providing medical/surgical and mental
health and substance use disorder benefits to develop and program a
communication network often referred to as an ``interface'' or an
``accumulator'' that will allow them to exchange the data necessary to
make timely and accurate determinations of when participants have
incurred sufficient combined medical/surgical and mental health and
substance use disorder expenses to satisfy the single deductible.
---------------------------------------------------------------------------
\47\ This can create a coordination issue that has cost
implications that otherwise do not exist when a single vendor is
used.
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Two comments received in response to the RFI indicate that MBHOs
would confront significant costs to develop real-time interfaces that
could range from $420,000-$750,000 with an additional $40,000-$70,000
required for annual maintenance.\48\ The Departments held discussions
with the regulated community which indicated that interface development
costs may not be as high as stated in the RFI comments. For example,
the Departments have learned that MBHOs could develop less costly
``batch process'' interfaces that exchange data on a daily or weekly
basis rather than real-time for as low as approximately $35,000 per
interface.\49\
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\48\ RFI comments. MHPAEA RFI comments can be viewed at http://www.dol.gov/ebsa/regs/cmt-MHPAEA.html.
\49\ An additional undetermined expense would be required to
reconcile and make adjustments in instances when two claims are
received on the same day satisfying the unified deductible. While
this alternative would produce a much lower cost than real-time
interfaces, the costs remain significant. A low-end estimate of the
first year cost for MBHOs and insurers to create, on average, at
least 20 new interfaces would be $700,000 per insurer. There is
uncertainty regarding the total cost, because the number of entities
that would need to create interfaces is unclear. The Departments are
aware of 460 health insurance issuers and at least 120 MBHOs that
could be affected.
---------------------------------------------------------------------------
It also appears that some plan sponsors using carve-out
arrangements already are implementing a unified, single deductible, and
MBHOs have created interfaces to service these clients. For example,
the Departments' discussions found that one MBHO already has
established 10-15 accumulators, because its plan sponsor clients
requested a single deductible. The MBHO reported that another 10-15
accumulators were being implemented for the current benefit year,
because plan sponsors wanted to ensure that they were compliant with
MHPAEA. This finding suggests that while costly, putting these
accumulators in place is not cost prohibitive for the MBHOs and plan
sponsors. Moreover, plans and issuers have created and used interfaces
with separate pharmacy benefit managers and dental insurers for years.
Interface development costs should decrease after the first interface
is created. The experience and lessons learned from creating these
interfaces should reduce the cost associated with designing and
implementing interfaces with MBHOs.
While the RFI comment letters suggested that MBHOs would have to
create 40-50 interfaces each, this
[[Page 5426]]
number most likely only relates to the largest MBHOs. The smallest
MBHOs would need to create fewer interfaces. The Departments assume
that a significant number of smaller MBHOs exist; therefore, the
Departments estimate that, on average, seven interfaces would have to
be created per insurer. The Departments acknowledge that there is
uncertainty in this estimate due to incomplete information about the
MBHO industry.
For purposes of this analysis, the Departments have used an
estimated interface development cost of $35,000 per interface, because
the Departments were not able to substantiate the higher estimated
costs provided in the RFI comment letters, and the propensity of the
evidence leads to the conclusion that the cost could be significantly
less. Based on the foregoing, the Departments estimate total interface
development costs of approximately $39.2 million.\50\
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\50\ Please note that using the $420,000 per interface estimate
cited in the RFI comment letters would result in total interface
development costs of $470 million, with annual maintenance costs of
$47 million. Based on this estimate, the per-participant first year
interface development costs would be $7, and the annual maintenance
costs in subsequent years would be $.06 cents per participant per
month.
---------------------------------------------------------------------------
Once the interfaces are created, ongoing annual maintenance costs
will be incurred. One industry source suggested that ongoing
maintenance costs could be one-tenth of the development costs, and
based on this information, the Departments estimate that maintenance
cost of $3.9 million will be incurred annually after the interfaces are
created.
While the total interface development and maintenance costs are
large, a useful measure to examine is the per-participant cost impact.
While reliable estimates of the number of participants enrolled in
plans utilizing MBHOs are not available, based on the best available
information, the Departments estimate that at least 70 million
participants are covered by MBHOs. Based on this count, the per-
participant first year interface development costs would be $0.60, and
the maintenance costs in subsequent years would be less than one cent.
Comments from health insurance issuers have suggested that the
costs of creating these interfaces would be passed on to participants
in the form of higher premiums; however, no independent information has
been found to corroborate this assertion.
c. Compliance review costs. The Departments expect that group
health plans and health insurance issuers will conduct a compliance
review to ensure that their plan documents, summary plan descriptions,
and any associated policies and procedures comply with the requirements
of MHPAEA and these regulations. While the Departments do not know the
total number of issuers that will be affected by the regulations, the
Departments estimate that there are approximately 460 issuers operating
in the group market. In addition, the Departments are aware of at least
120 MBHOs.\51\ The Departments believe smaller MBHOs exist but were
unable to obtain a count.
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\51\ There are about 460 issuers in the group market; this is an
average of 1,000 plans per issuers. In addition, there are at least
120 MBHOs.
---------------------------------------------------------------------------
The Departments assume that insured plans will rely on the issuers
providing coverage to ensure compliance, and that self-insured plans
will rely on third-party administrators to ensure compliance. The per-
plan compliance costs are expected to be low, because vendors and
issuers will be able to spread these costs across multiple client
plans. These regulations provide examples illustrating the application
of the rules to specific situations, which are intended to reduce the
compliance burden.
The Departments assume that the average burden per plan will be
one-half hour of a legal professional's time at an hourly labor rate of
$120 to conduct the compliance review and make the needed changes to
the plan and related documents. This results in a total cost of $27.8
million in the first year. The Departments welcome public comments on
this estimate.
d. Costs associated with MHPAEA disclosures. MHPAEA and these
regulations contain two new disclosure provisions for group health
plans and health insurance coverage offered in connection with a group
health plan that are addressed in paragraph (d) of the rules.
(1) Medical necessity disclosure. The first disclosure requires
plan administrators to make the plan's medical necessity determination
criteria available upon request to potential participants,
beneficiaries, or contracting providers. The Departments are unable to
estimate with certainty the number of requests that will be received by
plan administrators based on this requirement. However, the Departments
have assumed that, on average, each plan affected by the rule will
receive one request. For purposes of this estimate, the Departments
assume that it will take a medically trained clerical staff member five
minutes to respond to each request at a labor rate of $26.85 per hour
resulting in an annual cost of approximately $1,044,000.\52\
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\52\ EBSA estimates of labor rates include wages, other
benefits, and overhead based on the National Occupational Employment
Survey (May 2008, Bureau of Labor Statistics) and the Employment
Cost Index (June 2009, Bureau of Labor Statistics).
---------------------------------------------------------------------------
The Departments also estimated the cost to deliver the requested
criteria for medical necessity determinations. Many insurers already
have the information prepared in electronic form, and the Departments
assume that 38 percent \53\ of requests will be delivered
electronically resulting in a de minimis cost. The Departments estimate
that the cost associated with distributing the approximately 290,000
requests sent by paper will be approximately $192,000.\54\
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\53\ For purposes of this burden estimate, the Departments
assume that 38 percent of the disclosures will be provided through
electronic means in accordance with the Department's standards for
electronic communication of required information provided under 29
CFR 2520.104b-1(c).
\54\ This estimate is based on an average document size of four
pages, $.05 cents per page material and printing costs, $.44 cent
postage costs.
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(2) Claims denial disclosure. MHPAEA and these regulations also
provide that the reason for any denial under a group health plan (or
health insurance coverage) of reimbursement or payment for services
with respect to mental health or substance use disorder benefits in the
case of any participant or beneficiary must be made available upon
request or as otherwise required by the plan administrator (or the
health insurance issuer offering such coverage) to the participant or
beneficiary. The Department of Labor's ERISA claims procedure
regulation (29 CFR 2560.503-1) requires, among other things, such
disclosures to be provided automatically to participants and
beneficiaries free of charge. Although non-ERISA covered plans, such as
plans sponsored by state and local governments that are subject to the
PHS Act, are not required to comply with the ERISA claims procedure
regulation, these regulations provide that such plans (and health
insurance coverage offered in connection with such plans) will be
deemed to satisfy the MHPAEA claims denial disclosure requirement if
they comply with the ERISA claims procedure regulation.
For purposes of this cost analysis, the Departments assume that
non-Federal governmental plans will satisfy the safe harbor, because
the same third-party administrators and insurers are hired by ERISA-
and non-ERISA-covered plans, and these entities provide the same claims
denial notifications to participants covered by ERISA- and non-ERISA-
covered plans. Therefore,
[[Page 5427]]
based on the foregoing, the Departments have not included a cost for
plans to provide the claims denial disclosures.
5. Transfer Resulting for Premium Increase Due to MHPAEA
The evaluation of mental health and substance use disorder parity
in the Federal Employees Health Benefit Program (FEHBP) estimated the
overall impact of parity on total spending for mental health and
substance use disorder services relative to a set of control plans that
did not experience any increase in mental health coverage.\55\ That
evaluation also assessed changes in out-of-pocket spending. The overall
results on total mental health and substance use disorder (MH/SUD)
spending (health plan spending plus out of pocket spending) showed
essentially no significant increase in total MH/SUD spending. The
evaluation also showed that in general parity resulted in a
statistically significant decrease in out-of-pocket spending. This
means that while there was no increase in the total spending on MH/SUD
services there was a significant shift in the final responsibility for
paying for these services. In other words, health plan spending
expanded due to parity. The magnitude of the change implies an
estimated increase in total health care premiums of 0.4 percent.\56\
Thus the 0.4 percent increase derived from the FEHBP evaluation is due
entirely to a shift in final responsibility for payment.
---------------------------------------------------------------------------
\55\ Goldman, et al., ``Behavioral Health Insurance Parity for
Federal Employees,'' New England Journal of Medicine (March 30,
2006) Vol. 354, No. 13.
\56\ The estimated .04 percent increase was derived from an
authors' final calculation based on data from the report cited in
the previous footnote.
---------------------------------------------------------------------------
The Congressional Budget Office \57\ estimated the direct and
indirect costs to the private and public sector of implementing MHPAEA
and similarly found that health insurance premiums would go up by
approximately 0.4 percent. The FEHBP estimate contrasts with the CBO
estimate, because the CBO estimate appears to include some shift in
final payment along with an increase in service utilization.
---------------------------------------------------------------------------
\57\ Congressional Budget Office Cost Estimate on H.R. 1424--
Paul Wellstone Mental Health and Addiction Equity Act of 2007, 21
November 2007.
---------------------------------------------------------------------------
The Departments estimate that total health care premiums will rise
0.4 percent due to MHPAEA based on data and analysis from the FEHBP
evaluation. The premium increase is a transfer from those not using MH/
SUD benefits to those who do, because given the size of the estimated
impacts and the known changes in coverage from baseline discussed
earlier in this Regulatory Impact Analysis, any change in utilization
must be very small again suggesting that premium changes were primarily
due to a shift in responsibility for final payments for MH/SUD care.
Using data on private health insurance premiums from the National
Health Expenditure Projections \58\ and data on premiums for individual
insurance \59\ from the National Association of Insurance
Commissioners, the Departments estimate that the dollar amount of the
0.4 percent premium increases attributable to MHPAEA would be
approximately $25.6 billion over the ten-year period 2010-2019. The
ten-year value using a discount rate of seven percent is $19.0 billion,
and it is $22.4 billion using a three percent discount rate. Yearly
estimates are reported in Table 1, column G. Due to the magnitude of
this transfer, this regulatory action is economically significant
pursuant to section 3(f)(1) of Executive Order 12866.
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\58\ National Health Expenditures Projections 2008-2018, Centers
for Medicare & Medicaid Services, Office of the Actuary, http://www.cms.hhs.gov/NationalHealthExpendData/.
\59\ The National Health Expenditure estimate of total spending
on private health insurance includes premiums for purchases made in
the individual market, which is not affected by MHPAEA. Therefore it
needs to be subtracted from the total. The NAIC data does not
contain information from California; therefore, an adjustment based
on the number of lives covered in California and average premiums
was used to impute a value for California.
---------------------------------------------------------------------------
D. Regulatory Flexibility Act--Department of Labor and Department of
Health and Human Services
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to federal rules that are subject to
the notice and comment requirements of section 553(b) of the
Administrative Procedure Act (APA) (5 U.S.C. 551 et seq.) and that are
likely to have a significant economic impact on a substantial number of
small entities. Under Section 553(b) of the Administrative Procedures
Act (APA), a general notice of proposed rulemaking is not required when
an agency, for good cause, finds that notice and public comment thereon
are impracticable, unnecessary, or contrary to the public interest.
These interim final regulations are exempt from APA, because the
Departments made a good cause finding that a general notice of proposed
rulemaking is not necessary earlier in this preamble. Therefore, the
RFA does not apply and the Departments are not required to either
certify that the rule would not have a significant economic impact on a
substantial number of small entities or conduct a regulatory
flexibility analysis.
Nevertheless, the Departments carefully considered the likely
impact of the rule on small entities in connection with their
assessment under Executive Order 12866. The Departments expect the
rules to reduce the compliance burden imposed on plans and insurers by
clarifying definitions and terms contained in the statute and providing
examples of acceptable methods to comply with specific provisions. The
Departments believe that the rule's impact on small entities will be
minimized by the fact that MHPAEA does not apply to small employers who
have between two and 50 employees.
E. Special Analyses--Department of the Treasury
Notwithstanding the determinations of the Department of Labor and
Department of Health and Human Services, for purposes of the Department
of the Treasury, it has been determined that this Treasury decision is
not a significant regulatory action for purposes of Executive Order
12866. Therefore, a regulatory assessment is not required. It has also
been determined that section 553(b) of the Administrative Procedure Act
(5 U.S.C. chapter 5) does not apply to these regulations. For the
applicability of the RFA, refer to the Special Analyses section in the
preamble to the cross-referencing notice of proposed rulemaking
published elsewhere in this issue of the Federal Register. Pursuant to
section 7805(f) of the Code, these temporary regulations have been
submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on their impact on small businesses.
F. Paperwork Reduction Act
1. Departments of Labor and the Treasury
As part of their continuing efforts to reduce paperwork and
respondent burden, the Departments conduct a preclearance consultation
program to provide the general public and federal agencies with an
opportunity to comment on proposed and continuing collections of
information in accordance with the Paperwork Reduction Act of 1995
(PRA) (44 U.S.C. 3506(c)(2)(A)). This helps to ensure that requested
data can be provided in the desired format, reporting burden (time and
financial resources) is minimized, collection instruments are clearly
understood, and the impact of collection requirements on respondents
can be properly assessed.
[[Page 5428]]
As discussed earlier in this preamble, MHPAEA includes two new
disclosure provisions for group health plans and health insurance
coverage offered in connection with a group health plan. First, the
criteria for medical necessity determinations made under a group health
plan with respect to mental health or substance use disorder benefits
(or health insurance coverage offered in connection with the plan with
respect to such benefits) must be made available in accordance with
regulations by the plan administrator (or the health insurance issuer
offering such coverage) to any current or potential participant,
beneficiary, or contracting provider upon request (``medical necessity
disclosure'').
MHPAEA also requires the reason for any denial under a group health
plan (or health insurance coverage) of reimbursement or payment for
services with respect to mental health or substance use disorder
benefits in the case of any participant or beneficiary must be made
available upon request or as otherwise required by the plan
administrator (or the health insurance issuer offering such coverage)
to the participant or beneficiary in accordance with regulations
(``claims denial notice'').
The MHPAEA disclosures are information collection requests (ICRs)
subject to the PRA. The Departments are not soliciting comments
concerning an ICR pertaining to the claims denial notice, because the
Department of Labor's ERISA claims procedure regulation (29 CFR
2560.503-1) requires (among other things) ERISA-covered group health
plans to provide such disclosures automatically to participants and
beneficiaries free of charge. Although non-ERISA covered plans, such as
certain church plan under Treasury/IRS jurisdiction and plans sponsored
by state and local governments that are subject to the PHS Act and
under HHS jurisdiction (these plans are discussed under the HHS ICR
discussion below) are not required to comply with the ERISA claims
procedure regulation, these regulations provide that such plans (and
health insurance coverage offered in connection with such plans) will
be deemed to satisfy the MHPAEA claims denial disclosure requirement if
they comply with the ERISA claims procedure regulation. For purposes of
this PRA analysis, the Departments assume that non-ERISA plans will
satisfy the safe harbor, because the same third-party administrators
and insurers are hired by ERISA- and non-ERISA-covered plans, and these
entities provide the same claims denial notifications to participants
covered by ERISA- and non-ERISA-covered plans. Therefore, the
Departments hereby determine that the hour and cost burden associated
with the claims denial notice already is accounted for in the ICR for
the ERISA claims procedure regulation that is approved under OMB
Control Number 1210-0053.
Currently, the Departments are soliciting comments concerning the
medical necessity disclosure. The Departments have submitted a copy of
these interim final regulations to OMB in accordance with 44 U.S.C.
3507(d) for review of the information collections. The Departments and
OMB are particularly interested in comments that:
Evaluate whether the collection of information is
necessary for the proper performance of the functions of the agency,
including whether the information will have practical utility;
Evaluate the accuracy of the agency's estimate of the
burden of the collection of information, including the validity of the
methodology and assumptions used;
Enhance the quality, utility, and clarity of the
information to be collected; and
Minimize the burden of the collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technological collection
techniques or other forms of information technology, for example, by
permitting electronic submission of responses.
Comments should be sent to the Office of Information and Regulatory
Affairs, Attention: Desk Officer for the Employee Benefits Security
Administration either by fax to (202) 395-7285 or by e-mail to [email protected]. Although comments may be submitted through
April 5, 2010, OMB requests that comments be received within 30 days of
publication of these interim final regulations to ensure their
consideration. A copy of the ICR may be obtained by contacting the PRA
addressee: G. Christopher Cosby, Office of Policy and Research, U.S.
Department of Labor, Employee Benefits Security Administration, 200
Constitution Avenue, NW., Room N-5718, Washington, DC 20210. Telephone:
(202) 693-8410; Fax: (202) 219-4745. These are not toll-free numbers.
E-mail: [email protected]. ICRs submitted to OMB also are available at
reginfo.gov (http://www.reginfo.gov/public/do/PRAMain).
The Departments are unable to estimate with certainty the number of
requests for medical necessity criteria disclosures that will be
received by plan administrators; however, the Departments have assumed
that, on average, each plan affected by the rule will receive one
request. The Departments estimate that approximately 93 percent of
large plans and all small plans administer claims using service
providers; therefore, 5.1 percent of the medical necessity criteria
disclosures will be done in-house. For PRA purposes, plans using
service providers will report the costs as a cost burden, while plans
administering claims in-house will report the burden as an hour burden.
The Departments assume that it will take a medically trained
clerical staff member five minutes to respond to each request at a wage
rate of $27 per hour. This results in an annual hour burden of nearly
1,900 hours and an associated equivalent cost of nearly $51,000 for the
approximately 23,000 requests done in-house by plans. The remaining
424,000 medical necessity criteria disclosures will be provided through
service providers resulting in a cost burden of approximately $950,000.
The Departments also calculated the cost to deliver the requested
medical necessity criteria disclosures. Many insurers and plans already
may have the information prepared in electronic form, and the
Departments assume that 38 percent of requests will be delivered
electronically resulting in a de minimis cost. The Departments estimate
that the cost burden associated with distributing the approximately
277,000 medical necessity criteria disclosures sent by paper will be
approximately $177,000.\60\ The Departments note that persons are not
required to respond to, and generally are not subject to any penalty
for failing to comply with, an ICR unless the ICR has a valid OMB
control number.\61\
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\60\ This estimate is based on an average document size of four
pages, $.05 cents per page material and printing costs, $.44 cent
postage costs.
\61\ 5 CFR 1320.1 through 1320.18.
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These paperwork burden estimates are summarized as follows:
Type of Review: New collection.
Agencies: Employee Benefits Security Administration, Department of
Labor; Internal Revenue Service, U.S. Department of the Treasury.
Title: Notice of Medical Necessity Criteria under the Mental Health
Parity and Addition Equity Act of 2008.
OMB Number: 1210-NEW; 1545-NEW.
Affected Public: Business or other for-profit; not-for-profit
institutions.
Total Respondents: 446,400.
[[Page 5429]]
Total Responses: 446,400.
Frequency of Response: Occasionally.
Estimated Total Annual Burden Hours: 950 hours (Employee Benefits
Security Administration); 950 hours (Internal Revenue Service).
Estimated Total Annual Burden Cost: $562,500 (Employee Benefits
Security Administration); $562,500 (Internal Revenue Service).
2. Department of Health and Human Services
Under the PRA, we are required to provide 30-days notice in the
Federal Register and solicit public comment before a collection of
information requirement is submitted to the Office of Management and
Budget (OMB) for review and approval. In order to fairly evaluate
whether an information collection should be approved by OMB, section
3506(c)(2)(A) of the PRA requires that we solicit comment on the
following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
We are soliciting public comment on each of these issues for the
following sections of this document that contain information collection
requirements (ICRs):
ICRs Regarding Parity in Mental Health and Substance Use Disorder
Benefits. (45 CFR 146.136(d))
As discussed above, MHPAEA includes two new disclosure provisions
for group health plans and health insurance coverage offered in
connection with a group health plan. First, the criteria for medical
necessity determinations made under a group health plan with respect to
mental health or substance use disorder benefits (or health insurance
coverage offered in connection with the plan with respect to such
benefits) must be made available in accordance with regulations by the
plan administrator (or the health insurance issuer offering such
coverage) to any current or potential participant, beneficiary, or
contracting provider upon request (``medical necessity disclosure'').
MHPAEA also requires the reason for any denial under a group health
plan (or health insurance coverage) of reimbursement or payment for
services with respect to mental health or substance use disorder
benefits in the case of any participant or beneficiary must be made
available upon request or as otherwise required by the plan
administrator (or the health insurance issuer offering such coverage)
to the participant or beneficiary in accordance with regulations
(``claims denial disclosure'').
Medical Necessity Disclosure
The Department estimates that there are 29.1 million participants
covered by 20,300 state and local public plans that are subject to the
MHPAEA disclosure requirements that are employed by employers with more
than 50 employees.\62\
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\62\ Non-Federal governmental plans may opt-out of MHPAEA and
certain other requirements under Section 2721 of the PHS Act. Since
past experience has shown that the number of non-Federal
governmental plans that opt-out is small, the impact of the opt-out
election should be immaterial on the Department's estimates.
---------------------------------------------------------------------------
The Department is unable to estimate with certainty the number of
requests for medical necessity criteria disclosures that will be
received by plan administrators; however, the Department has assumed
that, on average, each plan affected by the rule will receive one
request. CMS estimates that approximately 93 percent of large plans
administer claims using third party providers. Furthermore the vast
majority of all smaller employers usually are fully insured such that
issuers will be administering their claims. Therefore 5.1 percent of
claims are administered in-house. For plans that use issuers or third
party providers the costs are reported as cost burden while for plans
that administer claims in-house the burden is reported as an hour
burden. For purposes of this estimate, the Department assumes that it
will take a medically trained clerical staff member five minutes to
respond to each request at a wage rate of $26.85 per hour. This results
in an annual hour burden of 86 hours and an associated equivalent cost
of about $2,300 for the approximately 1,000 requests handled by plans.
The remaining 19,300 claims (94.9 percent) are provided through a
third-party provider or an issuer and results in a cost burden of
approximately $43,000.
Claims Denial Disclosure
MHPAEA requires plans to disclose to participants and beneficiaries
upon request the reason for any denial under the plan (or coverage) of
reimbursement or payment for services with respect to mental health or
substance use disorder benefits. The Department of Labor's ERISA claims
procedure regulation (29 CFR 2560.503-1) requires, among other things,
such disclosures to be provided automatically to participants and
beneficiaries free of charge. Although non-ERISA covered plans, such as
plans sponsored by state and local governments that are subject to the
PHS Act, are not required to comply with the ERISA claims procedure
regulation, the interim final regulations provide that these plans (and
health insurance coverage offered in connection with such plans) will
be deemed to satisfy the MHPAEA claims denial disclosure requirement if
they comply with the ERISA claims procedure regulation.
Using assumptions similar to those used for the ERISA claims
procedure regulation, the Department estimates that there will be
approximately 29.7 million claims for mental health or substance use
disorder benefits with approximately 4.45 million denials that could
result in a request for an explanation of reason for denial. The
Department has no data on the percent of denials that will result in a
request for an explanation, but assumed that ten percent of denials
will result in a request for an explanation (445,000 requests).
The Department estimates that a medically trained clerical staff
member may require five minutes to respond to each request at a labor
rate of $27 per hour. This results in an annual hour burden of nearly
1,900 hours and an associated equivalent cost of nearly $51,000 for the
approximately 22,700 requests completed by plans. The remaining 422,300
are provided through an issuer or a third-party provider, which results
in a cost burden of approximately $945,000.
In association with the explanation of denial, participants may
request a copy of the medical necessity criteria. While the Department
does not know how many notices of denial will result in a request for
the criteria of medical necessity, the Department assumes that ten
percent of those requesting an explanation of the reason for denial
will also request the criteria of medical necessity, resulting in
44,500 requests, 2,300 of which will be completed in-house with an hour
burden of 190 hours and equivalent cost of $5,000 and 42,000 requests
handled by issuers or third-party providers with a cost burden of
$95,000.
The Department also calculated the cost to deliver the requested
information. Many insurers or plans may already have the information
prepared in electronic format, and the Department assumes that requests
will be delivered electronically resulting in a
[[Page 5430]]
de minimis cost.\63\ The Department estimates that the cost burden
associated with distributing the approximately 135,000 disclosures sent
by paper will be approximately $86,000.\64\ The Department notes that
persons are not required to respond to, and generally are not subject
to any penalty for failing to comply with, an ICR unless the ICR has a
valid OMB control number.\65\
---------------------------------------------------------------------------
\63\ Following the assumption in the ERISA claims regulation, it
was assumed 75 percent of the explanation of denials disclosures
would be delivered electronically, while it was assumed that 38
percent of non-denial related requests for the medical necessity
criteria would be delivered electronically.
\64\ This estimate is based on an average document size of four
pages, $.05 cents per page material and printing costs, $.44 cent
postage costs.
\65\ 5 CFR 1320.1 through 1320.18.
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These paperwork burden estimates are summarized as follows:
Type of Review: New collection.
Agency: Department of Health and Human Services.
Title: Required Disclosures Under the Mental Health Parity and
Addition Equity Act of 2008.
OMB Number: 0938-NEW.
Affected Public: State, Local, or Tribal Governments.
Respondents: 20,300.
Responses: 510,000.
Frequency of Response: Occasionally.
Estimated Total Annual Burden Hours: 2,200 hours.
Estimated Total Annual Burden Cost: $1,169,000.
If you comment on these information collection and recordkeeping
requirements, please do either of the following:
1. Submit your comments electronically as specified in the
ADDRESSES section of this proposed rule; or
2. Submit your comments to the Office of Information and Regulatory
Affairs, Office of Management and Budget,
Attention: CMS Desk Officer, 4140-IFC
Fax: (202) 395-6974; or
E-mail: [email protected].
G. Congressional Review Act
These regulations are subject to the Congressional Review Act
provisions of the Small Business Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801 et seq.) and have been transmitted to Congress and
the Comptroller General for review.
H. Unfunded Mandates Reform Act
The Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires
agencies to prepare several analytic statements before proposing any
rules that may result in annual expenditures of $100 million (as
adjusted for inflation) by state, local and tribal governments or the
private sector. These rules are not subject to the Unfunded Mandates
Reform Act because they are being issued as interim final rules.
However, consistent with the policy embodied in the Unfunded Mandates
Reform Act, the regulation has been designed to be the least burdensome
alternative for state, local and tribal governments, and the private
sector, while achieving the objectives of MHPAEA.
I. Federalism Statement--Department of Labor and Department of Health
and Human Services
Executive Order 13132 outlines fundamental principles of
federalism, and requires the adherence to specific criteria by federal
agencies in the process of their formulation and implementation of
policies that have ``substantial direct effects'' on the States, the
relationship between the national government and States, or on the
distribution of power and responsibilities among the various levels of
government. Federal agencies promulgating regulations that have these
federalism implications must consult with State and local officials,
and describe the extent of their consultation and the nature of the
concerns of State and local officials in the preamble to the
regulation.
In the Departments' view, these regulations have federalism
implications, because they have direct effects on the States, the
relationship between the national government and States, or on the
distribution of power and responsibilities among various levels of
government. However, in the Departments' view, the federalism
implications of these regulations are substantially mitigated because,
with respect to health insurance issuers, the Departments expect that
the majority of States have enacted or will enact laws or take other
appropriate action resulting in their meeting or exceeding the federal
MHPAEA standards.
In general, through section 514, ERISA supersedes State laws to the
extent that they relate to any covered employee benefit plan, and
preserves State laws that regulate insurance, banking, or securities.
While ERISA prohibits States from regulating a plan as an insurance or
investment company or bank, the preemption provisions of section 731 of
ERISA and section 2723 of the PHS Act (implemented in 29 CFR
2590.731(a) and 45 CFR 146.143(a)) apply so that the MHPAEA
requirements are not to be ``construed to supersede any provision of
State law which establishes, implements, or continues in effect any
standard or requirement solely relating to health insurance issuers in
connection with group health insurance coverage except to the extent
that such standard or requirement prevents the application of a
requirement'' of MHPAEA. The conference report accompanying HIPAA
indicates that this is intended to be the ``narrowest'' preemption of
State laws. (See House Conf. Rep. No. 104-736, at 205, reprinted in
1996 U.S. Code Cong. & Admin. News 2018.)
States may continue to apply State law requirements except to the
extent that such requirements prevent the application of the MHPAEA
requirements that are the subject of this rulemaking. State insurance
laws that are more stringent than the federal requirements are unlikely
to ``prevent the application of'' MHPAEA, and be preempted.
Accordingly, States have significant latitude to impose requirements on
health insurance issuers that are more restrictive than the federal
law.
In compliance with the requirement of Executive Order 13132 that
agencies examine closely any policies that may have federalism
implications or limit the policy making discretion of the States, the
Departments have engaged in numerous efforts to consult with and work
cooperatively with affected State and local officials. It is expected
that the Departments will act in a similar fashion in enforcing the
MHPAEA requirements.
Throughout the process of developing these regulations, to the
extent feasible within the specific preemption provisions of HIPAA as
it applies to MHPAEA, the Departments have attempted to balance the
States' interests in regulating health insurance issuers, and Congress'
intent to provide uniform minimum protections to consumers in every
State. By doing so, it is the Departments' view that they have complied
with the requirements of Executive Order 13132.
Pursuant to the requirements set forth in section 8(a) of Executive
Order 13132, and by the signatures affixed to these regulations, the
Departments certify that the Employee Benefits Security Administration
and the Centers for Medicare & Medicaid Services have complied with the
requirements of Executive Order 13132 for the attached regulations in a
meaningful and timely manner.
[[Page 5431]]
V. Statutory Authority
The Department of the Treasury temporary and final regulations are
adopted pursuant to the authority contained in sections 7805 and 9833
of the Code.
The Department of Labor interim final regulations are adopted
pursuant to the authority contained in 29 U.S.C. 1027, 1059, 1135,
1161-1168, 1169, 1181-1183, 1181 note, 1185, 1185a, 1185b, 1191, 1191a,
1191b, and 1191c; sec. 101(g), Public Law 104-191, 110 Stat. 1936; sec.
401(b), Public Law 105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec.
512(d), Public Law 110-343, 122 Stat. 3765; Public Law 110-460, 122
Stat. 5123; Secretary of Labor's Order 6-2009, 74 FR 21524 (May 7,
2009).
The Department of Health and Human Services interim final
regulations are adopted pursuant to the authority contained in sections
2701 through 2763, 2791, and 2792 of the PHS Act (42 U.S.C. 300gg
through 300gg-63, 300gg-91, and 300gg-92), as amended.
List of Subjects
26 CFR Part 54
Excise taxes, Health care, Health insurance, Pensions, Reporting
and recordkeeping requirements.
29 CFR Part 2590
Continuation coverage, Disclosure, Employee benefit plans, Group
health plans, Health care, Health insurance, Medical child support,
Reporting and recordkeeping requirements.
45 CFR Part 146
Health care, Health insurance, Reporting and recordkeeping
requirements, and State regulation of health insurance.
Internal Revenue Service
26 CFR Chapter 1
0
Accordingly, 26 CFR parts 54 and 602 are amended as follows:
PART 54--PENSION EXCISE TAXES
0
Paragraph 1. The authority citation for part 54 continues to read in
part as follows:
Authority: 26 U.S.C. 7805. * * *
0
Par. 2. Section 54.9812-1T is revised to read as follows:
Sec. 54.9812 Parity in mental health and substance use disorder
benefits (temporary).
(a) Meaning of terms. For purposes of this section, except where
the context clearly indicates otherwise, the following terms have the
meanings indicated:
Aggregate lifetime dollar limit means a dollar limitation on the
total amount of specified benefits that may be paid under a group
health plan for any coverage unit.
Annual dollar limit means a dollar limitation on the total amount
of specified benefits that may be paid in a 12-month period under a
group health plan for any coverage unit.
Coverage unit means coverage unit as described in paragraph
(c)(1)(iv) of this section.
Cumulative financial requirements are financial requirements that
determine whether or to what extent benefits are provided based on
accumulated amounts and include deductibles and out-of-pocket maximums.
(However, cumulative financial requirements do not include aggregate
lifetime or annual dollar limits because these two terms are excluded
from the meaning of financial requirements.)
Cumulative quantitative treatment limitations are treatment
limitations that determine whether or to what extent benefits are
provided based on accumulated amounts, such as annual or lifetime day
or visit limits.
Financial requirements include deductibles, copayments,
coinsurance, or out-of-pocket maximums. Financial requirements do not
include aggregate lifetime or annual dollar limits.
Medical/surgical benefits means benefits for medical or surgical
services, as defined under the terms of the plan, but does not include
mental health or substance use disorder benefits. Any condition defined
by the plan as being or as not being a medical/surgical condition must
be defined to be consistent with generally recognized independent
standards of current medical practice (for example, the most current
version of the International Classification of Diseases (ICD) or State
guidelines).
Mental health benefits means benefits with respect to services for
mental health conditions, as defined under the terms of the plan and in
accordance with applicable Federal and State law. Any condition defined
by the plan as being or as not being a mental health condition must be
defined to be consistent with generally recognized independent
standards of current medical practice (for example, the most current
version of the Diagnostic and Statistical Manual of Mental Disorders
(DSM), the most current version of the ICD, or State guidelines).
Substance use disorder benefits means benefits with respect to
services for substance use disorders, as defined under the terms of the
plan and in accordance with applicable Federal and State law. Any
disorder defined by the plan as being or as not being a substance use
disorder must be defined to be consistent with generally recognized
independent standards of current medical practice (for example, the
most current version of the DSM, the most current version of the ICD,
or State guidelines).
Treatment limitations include limits on benefits based on the
frequency of treatment, number of visits, days of coverage, days in a
waiting period, or other similar limits on the scope or duration of
treatment. Treatment limitations include both quantitative treatment
limitations, which are expressed numerically (such as 50 outpatient
visits per year), and nonquantitative treatment limitations, which
otherwise limit the scope or duration of benefits for treatment under a
plan. (See paragraph (c)(4)(ii) of this section for an illustrative
list of nonquantitative treatment limitations.) A permanent exclusion
of all benefits for a particular condition or disorder, however, is not
a treatment limitation.
(b) Parity requirements with respect to aggregate lifetime and
annual dollar limits--(1)--General--(i) General parity requirement. A
group health plan that provides both medical/surgical benefits and
mental health or substance use disorder benefits must comply with
paragraph (b)(2), (b)(3), or (b)(6) of this section.
(ii) Exception. The rule in paragraph (b)(1)(i) of this section
does not apply if a plan satisfies the requirements of paragraph (f) or
(g) of this section (relating to exemptions for small employers and for
increased cost).
(2) Plan with no limit or limits on less than one-third of all
medical/surgical benefits. If a plan does not include an aggregate
lifetime or annual dollar limit on any medical/surgical benefits or
includes an aggregate lifetime or annual dollar limit that applies to
less than one-third of all medical/surgical benefits, it may not impose
an aggregate lifetime or annual dollar limit, respectively, on mental
health or substance use disorder benefits.
(3) Plan with a limit on at least two-thirds of all medical/
surgical benefits. If a plan includes an aggregate lifetime or annual
dollar limit on at least two-thirds of all medical/surgical benefits,
it must either--
(i) Apply the aggregate lifetime or annual dollar limit both to the
medical/surgical benefits to which the limit would otherwise apply and
to mental health or substance use disorder benefits in a manner that
does not distinguish between the medical/
[[Page 5432]]
surgical benefits and mental health or substance use disorder benefits;
or
(ii) Not include an aggregate lifetime or annual dollar limit on
mental health or substance use disorder benefits that is less than the
aggregate lifetime or annual dollar limit, respectively, on medical/
surgical benefits. (For cumulative limits other than aggregate lifetime
or annual dollar limits, see paragraph (c)(3)(v) of this section
prohibiting separately accumulating cumulative financial requirements
or cumulative quantitative treatment limitations.)
(4) Examples. The rules of paragraphs (b)(2) and (b)(3) of this
section are illustrated by the following examples:
Example 1. (i) Facts. A group health plan has no annual limit on
medical/surgical benefits and a $10,000 annual limit on mental
health and substance use disorder benefits. To comply with the
requirements of this paragraph (b), the plan sponsor is considering
each of the following options:
(A) Eliminating the plan's annual dollar limit on mental health
and substance use disorder benefits;
(B) Replacing the plan's annual dollar limit on mental health
and substance use disorder benefits with a $500,000 annual limit on
all benefits (including medical/surgical and mental health and
substance use disorder benefits); and
(C) Replacing the plan's annual dollar limit on mental health
and substance use disorder benefits with a $250,000 annual limit on
medical/surgical benefits and a $250,000 annual limit on mental
health and substance use disorder benefits.
(ii) Conclusion. In this Example 1, each of the three options
being considered by the plan sponsor would comply with the
requirements of this paragraph (b).
Example 2. (i) Facts. A plan has a $100,000 annual limit on
medical/surgical inpatient benefits and a $50,000 annual limit on
medical/surgical outpatient benefits. To comply with the parity
requirements of this paragraph (b), the plan sponsor is considering
each of the following options:
(A) Imposing a $150,000 annual limit on mental health and
substance use disorder benefits; and
(B) Imposing a $100,000 annual limit on mental health and
substance use disorder inpatient benefits and a $50,000 annual limit
on mental health and substance use disorder outpatient benefits.
(ii) Conclusion. In this Example 2, each option under
consideration by the plan sponsor would comply with the requirements
of this section.
(5) Determining one-third and two-thirds of all medical/surgical
benefits. For purposes of this paragraph (b), the determination of
whether the portion of medical/surgical benefits subject to an
aggregate lifetime or annual dollar limit represents one-third or two-
thirds of all medical/surgical benefits is based on the dollar amount
of all plan payments for medical/surgical benefits expected to be paid
under the plan for the plan year (or for the portion of the plan year
after a change in plan benefits that affects the applicability of the
aggregate lifetime or annual dollar limits). Any reasonable method may
be used to determine whether the dollar amount expected to be paid
under the plan will constitute one-third or two-thirds of the dollar
amount of all plan payments for medical/surgical benefits.
(6) Plan not described in paragraph (b)(2) or (b)(3) of this
section--(i) In general. A group health plan that is not described in
paragraph (b)(2) or (b)(3) of this section with respect to aggregate
lifetime or annual dollar limits on medical/surgical benefits, must
either--
(A) Impose no aggregate lifetime or annual dollar limit, as
appropriate, on mental health or substance use disorder benefits; or
(B) Impose an aggregate lifetime or annual dollar limit on mental
health or substance use disorder benefits that is no less than an
average limit calculated for medical/surgical benefits in the following
manner. The average limit is calculated by taking into account the
weighted average of the aggregate lifetime or annual dollar limits, as
appropriate, that are applicable to the categories of medical/surgical
benefits. Limits based on delivery systems, such as inpatient/
outpatient treatment or normal treatment of common, low-cost conditions
(such as treatment of normal births), do not constitute categories for
purposes of this paragraph (b)(6)(i)(B). In addition, for purposes of
determining weighted averages, any benefits that are not within a
category that is subject to a separately-designated dollar limit under
the plan are taken into account as a single separate category by using
an estimate of the upper limit on the dollar amount that a plan may
reasonably be expected to incur with respect to such benefits, taking
into account any other applicable restrictions under the plan.
(ii) Weighting. For purposes of this paragraph (b)(6), the
weighting applicable to any category of medical/surgical benefits is
determined in the manner set forth in paragraph (b)(5) of this section
for determining one-third or two-thirds of all medical/surgical
benefits.
(iii) Example. The rules of this paragraph (b)(6) are illustrated
by the following example:
Example. (i) Facts. A group health plan that is subject to the
requirements of this section includes a $100,000 annual limit on
medical/surgical benefits related to cardio-pulmonary diseases. The
plan does not include an annual dollar limit on any other category
of medical/surgical benefits. The plan determines that 40 percent of
the dollar amount of plan payments for medical/surgical benefits are
related to cardio-pulmonary diseases. The plan determines that
$1,000,000 is a reasonable estimate of the upper limit on the dollar
amount that the plan may incur with respect to the other 60 percent
of payments for medical/surgical benefits.
(ii) Conclusion. In this Example, the plan is not described in
paragraph (b)(3) of this section because there is not one annual
dollar limit that applies to at least two-thirds of all medical/
surgical benefits. Further, the plan is not described in paragraph
(b)(2) of this section because more than one-third of all medical/
surgical benefits are subject to an annual dollar limit. Under this
paragraph (b)(6), the plan sponsor can choose either to include no
annual dollar limit on mental health or substance use disorder
benefits, or to include an annual dollar limit on mental health or
substance use disorder benefits that is not less than the weighted
average of the annual dollar limits applicable to each category of
medical/surgical benefits. In this example, the minimum weighted
average annual dollar limit that can be applied to mental health or
substance use disorder benefits is $640,000 (40% x $100,000 + 60% x
$1,000,000 = $640,000).
(c) Parity requirements with respect to financial requirements and
treatment limitations--(1) Clarification of terms--(i) Classification
of benefits. When reference is made in this paragraph (c) to a
classification of benefits, the term ``classification'' means a
classification as described in paragraph (c)(2)(ii) of this section.
(ii) Type of financial requirement or treatment limitation. When
reference is made in this paragraph (c) to a type of financial
requirement or treatment limitation, the reference to type means its
nature. Different types of financial requirements include deductibles,
copayments, coinsurance, and out-of-pocket maximums. Different types of
quantitative treatment limitations include annual, episode, and
lifetime day and visit limits. See paragraph (c)(4)(ii) of this section
for an illustrative list of nonquantitative treatment limitations.
(iii) Level of a type of financial requirement or treatment
limitation. When reference is made in this paragraph (c) to a level of
a type of financial requirement or treatment limitation, level refers
to the magnitude of the type of financial requirement or treatment
limitation. For example, different levels of coinsurance include 20
percent and 30 percent; different levels of a copayment include $15 and
$20; different levels of a deductible include $250 and $500; and
different levels of an episode limit include 21 inpatient days per
episode and 30 inpatient days per episode.
[[Page 5433]]
(iv) Coverage unit. When reference is made in this paragraph (c) to
a coverage unit, coverage unit refers to the way in which a plan groups
individuals for purposes of determining benefits, or premiums or
contributions. For example, different coverage units include self-only,
family, and employee-plus-spouse.
(2) General parity requirement--(i) General rule. A group health
plan that provides both medical/surgical benefits and mental health or
substance use disorder benefits may not apply any financial requirement
or treatment limitation to mental health or substance use disorder
benefits in any classification that is more restrictive than the
predominant financial requirement or treatment limitation of that type
applied to substantially all medical/surgical benefits in the same
classification. Whether a financial requirement or treatment limitation
is a predominant financial requirement or treatment limitation that
applies to substantially all medical/surgical benefits in a
classification is determined separately for each type of financial
requirement or treatment limitation. The application of the rules of
this paragraph (c)(2) to financial requirements and quantitative
treatment limitations is addressed in paragraph (c)(3) of this section;
the application of the rules of this paragraph (c)(2) to
nonquantitative treatment limitations is addressed in paragraph (c)(4)
of this section.
(ii) Classifications of benefits used for applying rules--(A) In
general. If a plan provides mental health or substance use disorder
benefits in any classification of benefits described in this paragraph
(c)(2)(ii), mental health or substance use disorder benefits must be
provided in every classification in which medical/surgical benefits are
provided. In determining the classification in which a particular
benefit belongs, a plan must apply the same standards to medical/
surgical benefits and to mental health or substance use disorder
benefits. To the extent that a plan provides benefits in a
classification and imposes any separate financial requirement or
treatment limitation (or separate level of a financial requirement or
treatment limitation) for benefits in the classification, the rules of
this paragraph (c) apply separately with respect to that classification
for all financial requirements or treatment limitations. The following
classifications of benefits are the only classifications used in
applying the rules of this paragraph (c):
(1) Inpatient, in-network. Benefits furnished on an inpatient basis
and within a network of providers established or recognized under a
plan.
(2) Inpatient, out-of-network. Benefits furnished on an inpatient
basis and outside any network of providers established or recognized
under a plan. This classification includes inpatient benefits under a
plan that has no network of providers.
(3) Outpatient, in-network. Benefits furnished on an outpatient
basis and within a network of providers established or recognized under
a plan.
(4) Outpatient, out-of-network. Benefits furnished on an outpatient
basis and outside any network of providers established or recognized
under a plan. This classification includes outpatient benefits under a
plan that has no network of providers.
(5) Emergency care. Benefits for emergency care.
(6) Prescription drugs. Benefits for prescription drugs. See
special rules for multi-tiered prescription drug benefits in paragraph
(c)(3)(iii) of this section.
(B) Application to out-of-network providers. See paragraph
(c)(2)(ii)(A) of this section, under which a plan that provides mental
health or substance use disorder benefits in any classification of
benefits must provide mental health or substance use disorder benefits
in every classification in which medical/surgical benefits are
provided, including out-of-network classifications.
(C) Examples. The rules of this paragraph (c)(2)(ii) are
illustrated by the following examples. In each example, the group
health plan is subject to the requirements of this section and provides
both medical/surgical benefits and mental health and substance use
disorder benefits.
Example 1. (i) Facts. A group health plan offers inpatient and
outpatient benefits and does not contract with a network of
providers. The plan imposes a $500 deductible on all benefits. For
inpatient medical/surgical benefits, the plan imposes a coinsurance
requirement. For outpatient medical/surgical benefits, the plan
imposes copayments. The plan imposes no other financial requirements
or treatment limitations.
(ii) Conclusion. In this Example 1, because the plan has no
network of providers, all benefits provided are out-of-network.
Because inpatient, out-of-network medical/surgical benefits are
subject to separate financial requirements from outpatient, out-of-
network medical/surgical benefits, the rules of this paragraph (c)
apply separately with respect to any financial requirements and
treatment limitations, including the deductible, in each
classification.
Example 2. (i) Facts. A plan imposes a $500 deductible on all
benefits. The plan has no network of providers. The plan generally
imposes a 20 percent coinsurance requirement with respect to all
benefits, without distinguishing among inpatient, outpatient,
emergency, or prescription drug benefits. The plan imposes no other
financial requirements or treatment limitations.
(ii) Conclusion. In this Example 2, because the plan does not
impose separate financial requirements (or treatment limitations)
based on classification, the rules of this paragraph (c) apply with
respect to the deductible and the coinsurance across all benefits.
Example 3. (i) Facts. Same facts as Example 2, except the plan
exempts emergency care benefits from the 20 percent coinsurance
requirement. The plan imposes no other financial requirements or
treatment limitations.
(ii) Conclusion. In this Example 3, because the plan imposes
separate financial requirements based on classifications, the rules
of this paragraph (c) apply with respect to the deductible and the
coinsurance separately for--
(A) Benefits in the emergency classification; and
(B) All other benefits.
Example 4. (i) Facts. Same facts as Example 2, except the plan
also imposes a preauthorization requirement for all inpatient
treatment in order for benefits to be paid. No such requirement
applies to outpatient treatment.
(ii) Conclusion. In this Example 4, because the plan has no
network of providers, all benefits provided are out-of-network.
Because the plan imposes a separate treatment limitation based on
classifications, the rules of this paragraph (c) apply with respect
to the deductible and coinsurance separately for--
(A) Inpatient, out-of-network benefits; and
(B) All other benefits.
(3) Financial requirements and quantitative treatment limitations--
(i) Determining ``substantially all'' and ``predominant''--(A)
Substantially all. For purposes of this paragraph (c), a type of
financial requirement or quantitative treatment limitation is
considered to apply to substantially all medical/surgical benefits in a
classification of benefits if it applies to at least two-thirds of all
medical/surgical benefits in that classification. (For this purpose,
benefits expressed as subject to a zero level of a type of financial
requirement are treated as benefits not subject to that type of
financial requirement, and benefits expressed as subject to a
quantitative treatment limitation that is unlimited are treated as
benefits not subject to that type of quantitative treatment
limitation.) If a type of financial requirement or quantitative
treatment limitation does not apply to at least two-thirds of all
medical/surgical benefits in a classification, then that type cannot be
applied to mental health or substance use disorder benefits in that
classification.
(B) Predominant--(1) If a type of financial requirement or
quantitative
[[Page 5434]]
treatment limitation applies to at least two-thirds of all medical/
surgical benefits in a classification as determined under paragraph
(c)(3)(i)(A) of this section, the level of the financial requirement or
quantitative treatment limitation that is considered the predominant
level of that type in a classification of benefits is the level that
applies to more than one-half of medical/surgical benefits in that
classification subject to the financial requirement or quantitative
treatment limitation.
(2) If, with respect to a type of financial requirement or
quantitative treatment limitation that applies to at least two-thirds
of all medical/surgical benefits in a classification, there is no
single level that applies to more than one-half of medical/surgical
benefits in the classification subject to the financial requirement or
quantitative treatment limitation, the plan may combine levels until
the combination of levels applies to more than one-half of medical/
surgical benefits subject to the financial requirement or quantitative
treatment limitation in the classification. The least restrictive level
within the combination is considered the predominant level of that type
in the classification. (For this purpose, a plan may combine the most
restrictive levels first, with each less restrictive level added to the
combination until the combination applies to more than one-half of the
benefits subject to the financial requirement or treatment limitation.)
(C) Portion based on plan payments. For purposes of this paragraph
(c), the determination of the portion of medical/surgical benefits in a
classification of benefits subject to a financial requirement or
quantitative treatment limitation (or subject to any level of a
financial requirement or quantitative treatment limitation) is based on
the dollar amount of all plan payments for medical/surgical benefits in
the classification expected to be paid under the plan for the plan year
(or for the portion of the plan year after a change in plan benefits
that affects the applicability of the financial requirement or
quantitative treatment limitation).
(D) Clarifications for certain threshold requirements. For any
deductible, the dollar amount of plan payments includes all plan
payments with respect to claims that would be subject to the deductible
if it had not been satisfied. For any out-of-pocket maximum, the dollar
amount of plan payments includes all plan payments associated with out-
of-pocket payments that are taken into account towards the out-of-
pocket maximum as well as all plan payments associated with out-of-
pocket payments that would have been made towards the out-of-pocket
maximum if it had not been satisfied. Similar rules apply for any other
thresholds at which the rate of plan payment changes.
(E) Determining the dollar amount of plan payments. Subject to
paragraph (c)(3)(i)(D) of this section, any reasonable method may be
used to determine the dollar amount expected to be paid under a plan
for medical/surgical benefits subject to a financial requirement or
quantitative treatment limitation (or subject to any level of a
financial requirement or quantitative treatment limitation).
(ii) Application to different coverage units. If a plan applies
different levels of a financial requirement or quantitative treatment
limitation to different coverage units in a classification of medical/
surgical benefits, the predominant level that applies to substantially
all medical/surgical benefits in the classification is determined
separately for each coverage unit.
(iii) Special rule for multi-tiered prescription drug benefits. If
a plan applies different levels of financial requirements to different
tiers of prescription drug benefits based on reasonable factors
determined in accordance with the rules in paragraph (c)(4)(i) of this
section (relating to requirements for nonquantitative treatment
limitations) and without regard to whether a drug is generally
prescribed with respect to medical/surgical benefits or with respect to
mental health or substance use disorder benefits, the plan satisfies
the parity requirements of this paragraph (c) with respect to
prescription drug benefits. Reasonable factors include cost, efficacy,
generic versus brand name, and mail order versus pharmacy pick-up.
(iv) Examples. The rules of paragraphs (c)(3)(i), (c)(3)(ii), and
(c)(3)(iii) of this section are illustrated by the following examples.
In each example, the group health plan is subject to the requirements
of this section and provides both medical/surgical benefits and mental
health and substance use disorder benefits.
Example 1. (i) Facts. For inpatient, out-of-network medical/
surgical benefits, a group health plan imposes five levels of
coinsurance. Using a reasonable method, the plan projects its
payments for the upcoming year as follows:
--------------------------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------------------------------
Coinsurance rate............... 0% 10% 15% 20% 30% Total
Projected payments............. $200x $100x $450x $100x $150x $1,000x
Percent of total plan costs.... 20% 10% 45% 10% 15% ..................
Percent subject to coinsurance N/A 12.5% 56.25% 12.5% 18.75% ..................
level. (100x/800x) (450x/800x) (100x/800x) (150x/800x)
--------------------------------------------------------------------------------------------------------------------------------------------------------
The plan projects plan costs of $800x to be subject to
coinsurance ($100x + $450x + $100x + $150x = $800x). Thus, 80
percent ($800x/$1,000x) of the benefits are projected to be subject
to coinsurance, and 56.25 percent of the benefits subject to
coinsurance are projected to be subject to the 15 percent
coinsurance level.
(ii) Conclusion. In this Example 1, the two-thirds threshold of
the substantially all standard is met for coinsurance because 80
percent of all inpatient, out-of-network medical/surgical benefits
are subject to coinsurance. Moreover, the 15 percent coinsurance is
the predominant level because it is applicable to more than one-half
of inpatient, out-of-network medical/surgical benefits subject to
the coinsurance requirement. The plan may not impose any level of
coinsurance with respect to inpatient, out-of-network mental health
or substance use disorder benefits that is more restrictive than the
15 percent level of coinsurance.
Example 2. (i) Facts. For outpatient, in-network medical/
surgical benefits, a plan imposes five different copayment levels.
Using a reasonable method, the plan projects payments for the
upcoming year as follows:
--------------------------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------------------------------
Copayment amount............... $0 $10 $15 $20 $50 Total
Projected payments............. $200x $200x $200x $300x $100x $1,000x
Percent of total plan costs.... 20% 20% 20% 30% 10% ..................
Percent subject to copayments.. N/A 25% 25% 37.5% 12.5% ..................
(200x/800x) (200x/800x) (300x/800x) (100x/800x)
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 5435]]
The plan projects plan costs of $800x to be subject to
copayments ($200x + $200x + $300x + $100x = $800x). Thus, 80 percent
($800x/$1,000x) of the benefits are projected to be subject to a
copayment.
(ii) Conclusion. In this Example 2, the two-thirds threshold of
the substantially all standard is met for copayments because 80
percent of all outpatient, in-network medical/surgical benefits are
subject to a copayment. Moreover, there is no single level that
applies to more than one-half of medical/surgical benefits in the
classification subject to a copayment (for the $10 copayment, 25
percent; for the $15 copayment, 25 percent; for the $20 copayment,
37.5 percent; and for the $50 copayment, 12.5 percent). The plan can
combine any levels of copayment, including the highest levels, to
determine the predominant level that can be applied to mental health
or substance use disorder benefits. If the plan combines the highest
levels of copayment, the combined projected payments for the two
highest copayment levels, the $50 copayment and the $20 copayment,
are not more than one-half of the outpatient, in-network medical/
surgical benefits subject to a copayment because they are exactly
one-half ($300x + $100x = $400x; $400x/$800x = 50%). The combined
projected payments for the three highest copayment levels--the $50
copayment, the $20 copayment, and the $15 copayment--are more than
one-half of the outpatient, in-network medical/surgical benefits
subject to the copayments ($100x + $300x + $200x = $600x; $600x/
$800x = 75%). Thus, the plan may not impose any copayment on
outpatient, in-network mental health or substance use disorder
benefits that is more restrictive than the least restrictive
copayment in the combination, the $15 copayment.
Example 3. (i) Facts. A plan imposes a $250 deductible on all
medical/surgical benefits for self-only coverage and a $500
deductible on all medical/surgical benefits for family coverage. The
plan has no network of providers. For all medical/surgical benefits,
the plan imposes a coinsurance requirement. The plan imposes no
other financial requirements or treatment limitations.
(ii) Conclusion. In this Example 3, because the plan has no
network of providers, all benefits are provided out-of-network.
Because self-only and family coverage are subject to different
deductibles, whether the deductible applies to substantially all
medical/surgical benefits is determined separately for self-only
medical/surgical benefits and family medical/surgical benefits.
Because the coinsurance is applied without regard to coverage units,
the predominant coinsurance that applies to substantially all
medical/surgical benefits is determined without regard to coverage
units.
Example 4. (i) Facts. A plan applies the following financial
requirements for prescription drug benefits. The requirements are
applied without regard to whether a drug is generally prescribed
with respect to medical/surgical benefits or with respect to mental
health or substance use disorder benefits. Moreover, the process for
certifying a particular drug as ``generic'', ``preferred brand
name'', ``non-preferred brand name'', or ``specialty'' complies with
the rules of paragraph (c)(4)(i) of this section (relating to
requirements for nonquantitative treatment limitations).
----------------------------------------------------------------------------------------------------------------
Tier 1 Tier 2 Tier 3 Tier 4
---------------------------------------------------------------------------
Non-preferred
Tier description brand name drugs
Generic drugs Preferred brand (which may have Specialty drugs
name drugs Tier 1 or Tier 2
alternatives)
----------------------------------------------------------------------------------------------------------------
Percent paid by plan................ 90% 80% 60% 50%
----------------------------------------------------------------------------------------------------------------
(ii) Conclusion. In this Example 4, the financial requirements
that apply to prescription drug benefits are applied without regard
to whether a drug is generally prescribed with respect to medical/
surgical benefits or with respect to mental health or substance use
disorder benefits; the process for certifying drugs in different
tiers complies with paragraph (c)(4) of this section; and the bases
for establishing different levels or types of financial requirements
are reasonable. The financial requirements applied to prescription
drug benefits do not violate the parity requirements of this
paragraph (c)(3).
(v) No separate cumulative financial requirements or cumulative
quantitative treatment limitations. (A) A group health plan may not
apply any cumulative financial requirement or cumulative quantitative
treatment limitation for mental health or substance use disorder
benefits in a classification that accumulates separately from any
established for medical/surgical benefits in the same classification.
(B) The rules of this paragraph (c)(3)(v) are illustrated by the
following examples:
Example 1. (i) Facts. A group health plan imposes a combined
annual $500 deductible on all medical/surgical, mental health, and
substance use disorder benefits.
(ii) Conclusion. In this Example 1, the combined annual
deductible complies with the requirements of this paragraph
(c)(3)(v).
Example 2. (i) Facts. A plan imposes an annual $250 deductible
on all medical/surgical benefits and a separate annual $250
deductible on all mental health and substance use disorder benefits.
(ii) Conclusion. In this Example 2, the separate annual
deductible on mental health and substance use disorder benefits
violates the requirements of this paragraph (c)(3)(v).
Example 3. (i) Facts. A plan imposes an annual $300 deductible
on all medical/surgical benefits and a separate annual $100
deductible on all mental health or substance use disorder benefits.
(ii) Conclusion. In this Example 3, the separate annual
deductible on mental health and substance use disorder benefits
violates the requirements of this paragraph (c)(3)(v).
Example 4. (i) Facts. A plan generally imposes a combined annual
$500 deductible on all benefits (both medical/surgical benefits and
mental health and substance use disorder benefits) except
prescription drugs. Certain benefits, such as preventive care, are
provided without regard to the deductible. The imposition of other
types of financial requirements or treatment limitations varies with
each classification. Using reasonable methods, the plan projects its
payments for medical/surgical benefits in each classification for
the upcoming year as follows:
----------------------------------------------------------------------------------------------------------------
Benefits subject Percent subject
Classification to deductible Total benefits to deductible
----------------------------------------------------------------------------------------------------------------
Inpatient, in-network..................................... $1,800x $2,000x 90
Inpatient, out-of-network................................. 1,000x 1,000x 100
Outpatient, in-network.................................... 1,400x 2,000x 70
Outpatient, out-of-network................................ 1,880x 2,000x 94
Emergency care............................................ 300x 500x 60
----------------------------------------------------------------------------------------------------------------
[[Page 5436]]
(ii) Conclusion. In this Example 4, the two-thirds threshold of
the substantially all standard is met with respect to each
classification except emergency care because in each of those other
classifications at least two-thirds of medical/surgical benefits are
subject to the $500 deductible. Moreover, the $500 deductible is the
predominant level in each of those other classifications because it
is the only level. However, emergency care mental health and
substance use disorder benefits cannot be subject to the $500
deductible because it does not apply to substantially all emergency
care medical/surgical benefits.
(4) Nonquantitative treatment limitations--(i) General rule. A
group health plan may not impose a nonquantitative treatment limitation
with respect to mental health or substance use disorder benefits in any
classification unless, under the terms of the plan as written and in
operation, any processes, strategies, evidentiary standards, or other
factors used in applying the nonquantitative treatment limitation to
mental health or substance use disorder benefits in the classification
are comparable to, and are applied no more stringently than, the
processes, strategies, evidentiary standards, or other factors used in
applying the limitation with respect to medical surgical/benefits in
the classification, except to the extent that recognized clinically
appropriate standards of care may permit a difference.
(ii) Illustrative list of nonquantitative treatment limitations.
Nonquantitative treatment limitations include--
(A) Medical management standards limiting or excluding benefits
based on medical necessity or medical appropriateness, or based on
whether the treatment is experimental or investigative;
(B) Formulary design for prescription drugs;
(C) Standards for provider admission to participate in a network,
including reimbursement rates;
(D) Plan methods for determining usual, customary, and reasonable
charges;
(E) Refusal to pay for higher-cost therapies until it can be shown
that a lower-cost therapy is not effective (also known as fail-first
policies or step therapy protocols); and
(F) Exclusions based on failure to complete a course of treatment.
(iii) Examples. The rules of this paragraph (c)(4) are illustrated
by the following examples. In each example, the group health plan is
subject to the requirements of this section and provides both medical/
surgical benefits and mental health and substance use disorder
benefits.
Example 1. (i) Facts. A group health plan limits benefits to
treatment that is medically necessary. The plan requires concurrent
review for inpatient, in-network mental health and substance use
disorder benefits but does not require it for any inpatient, in-
network medical/surgical benefits. The plan conducts retrospective
review for inpatient, in-network medical/surgical benefits.
(ii) Conclusion. In this Example 1, the plan violates the rules
of this paragraph (c)(4). Although the same nonquantitative
treatment limitation--medical necessity--applies to both mental
health and substance use disorder benefits and to medical/surgical
benefits for inpatient, in-network services, the concurrent review
process does not apply to medical/surgical benefits. The concurrent
review process is not comparable to the retrospective review
process. While such a difference might be permissible in certain
individual cases based on recognized clinically appropriate
standards of care, it is not permissible for distinguishing between
all medical/surgical benefits and all mental health or substance use
disorder benefits.
Example 2. (i) Facts. A plan requires prior approval that a
course of treatment is medically necessary for outpatient, in-
network medical/surgical, mental health, and substance use disorder
benefits. For mental health and substance use disorder treatments
that do not have prior approval, no benefits will be paid; for
medical/surgical treatments that do not have prior approval, there
will only be a 25 percent reduction in the benefits the plan would
otherwise pay.
(ii) Conclusion. In this Example 2, the plan violates the rules
of this paragraph (c)(4). Although the same nonquantitative
treatment limitation--medical necessity--is applied both to mental
health and substance use disorder benefits and to medical/surgical
benefits for outpatient, in-network services, the penalty for
failure to obtain prior approval for mental health and substance use
disorder benefits is not comparable to the penalty for failure to
obtain prior approval for medical/surgical benefits.
Example 3. (i) Facts. A plan generally covers medically
appropriate treatments. For both medical/surgical benefits and
mental health and substance use disorder benefits, evidentiary
standards used in determining whether a treatment is medically
appropriate (such as the number of visits or days of coverage) are
based on recommendations made by panels of experts with appropriate
training and experience in the fields of medicine involved. The
evidentiary standards are applied in a manner that may differ based
on clinically appropriate standards of care for a condition.
(ii) Conclusion. In this Example 3, the plan complies with the
rules of this paragraph (c)(4) because the nonquantitative treatment
limitation--medical appropriateness--is the same for both medical/
surgical benefits and mental health and substance use disorder
benefits, and the processes for developing the evidentiary standards
and the application of them to mental health and substance use
disorder benefits are comparable to and are applied no more
stringently than for medical/surgical benefits. This is the result
even if, based on clinically appropriate standards of care, the
application of the evidentiary standards does not result in similar
numbers of visits, days of coverage, or other benefits utilized for
mental health conditions or substance use disorders as it does for
any particular medical/surgical condition.
Example 4. (i) Facts. A plan generally covers medically
appropriate treatments. In determining whether prescription drugs
are medically appropriate, the plan automatically excludes coverage
for antidepressant drugs that are given a black box warning label by
the Food and Drug Administration (indicating the drug carries a
significant risk of serious adverse effects). For other drugs with a
black box warning (including those prescribed for other mental
health conditions and substance use disorders, as well as for
medical/surgical conditions), the plan will provide coverage if the
prescribing physician obtains authorization from the plan that the
drug is medically appropriate for the individual, based on
clinically appropriate standards of care.
(ii) Conclusion. In this Example 4, the plan violates the rules
of this paragraph (c)(4). Although the same nonquantitative
treatment limitation--medical appropriateness--is applied to both
mental health and substance use disorder benefits and medical/
surgical benefits, the plan's unconditional exclusion of
antidepressant drugs given a black box warning is not comparable to
the conditional exclusion for other drugs with a black box warning.
Example 5. (i) Facts. An employer maintains both a major medical
program and an employee assistance program (EAP). The EAP provides,
among other benefits, a limited number of mental health or substance
use disorder counseling sessions. Participants are eligible for
mental health or substance use disorder benefits under the major
medical program only after exhausting the counseling sessions
provided by the EAP. No similar exhaustion requirement applies with
respect to medical/surgical benefits provided under the major
medical program.
(ii) Conclusion. In this Example 5, limiting eligibility for
mental health and substance use disorder benefits only after EAP
benefits are exhausted is a nonquantitative treatment limitation
subject to the parity requirements of this paragraph (c). Because no
comparable requirement applies to medical/surgical benefits, the
requirement may not be applied to mental health or substance use
disorder benefits.
(5) Exemptions. The rules of this paragraph (c) do not apply if a
group health plan satisfies the requirements of paragraph (f) or (g) of
this section (relating to exemptions for small employers and for
increased cost).
(d) Availability of plan information--(1) Criteria for medical
necessity determinations. The criteria for medical necessity
determinations made under a group health plan with respect to mental
health or substance use disorder benefits must be made available by the
plan administrator to any current or potential participant,
beneficiary, or contracting provider upon request.
[[Page 5437]]
(2) Reason for denial. The reason for any denial under a group
health plan of reimbursement or payment for services with respect to
mental health or substance use disorder benefits in the case of any
participant or beneficiary must be made available by the plan
administrator to the participant or beneficiary in accordance with this
paragraph (d)(2).
(i) Plans subject to ERISA. If a plan is subject to ERISA, it must
provide the reason for the claim denial in a form and manner consistent
with the requirements of 29 CFR 2560.503-1 for group health plans.
(ii) Plans not subject to ERISA. If a plan is not subject to ERISA,
upon the request of a participant or beneficiary the reason for the
claim denial must be provided within a reasonable time and in a
reasonable manner. For this purpose, a plan that follows the
requirements of 29 CFR 2560.503-1 for group health plans complies with
the requirements of this paragraph (d)(2)(ii).
(e) Applicability--(1) Group health plans. The requirements of this
section apply to a group health plan offering medical/surgical benefits
and mental health or substance use disorder benefits. If, under an
arrangement or arrangements to provide health care benefits by an
employer or employee organization (including for this purpose a joint
board of trustees of a multiemployer trust affiliated with one or more
multiemployer plans), any participant (or beneficiary) can
simultaneously receive coverage for medical/surgical benefits and
coverage for mental health or substance use disorder benefits, then the
requirements of this section (including the exemption provisions in
paragraph (g) of this section) apply separately with respect to each
combination of medical/surgical benefits and of mental health or
substance use disorder benefits that any participant (or beneficiary)
can simultaneously receive from that employer's or employee
organization's arrangement or arrangements to provide health care
benefits, and all such combinations are considered for purposes of this
section to be a single group health plan.
(2) Health insurance issuers. See 29 CFR 2590.712(e)(2) and 45 CFR
146.136(e)(2), under which a health insurance issuer offering health
insurance coverage for mental health or substance use disorder benefits
is subject to requirements similar to those applicable to group health
plans under this section if the health insurance coverage is offered in
connection with a group health plan subject to requirements under 29
CFR 2590.712 or 45 CFR 146.136 similar to those applicable to group
health plans under this section.
(3) Scope. This section does not--
(i) Require a group health plan to provide any mental health
benefits or substance use disorder benefits, and the provision of
benefits by a plan for one or more mental health conditions or
substance use disorders does not require the plan under this section to
provide benefits for any other mental health condition or substance use
disorder; or
(ii) Affect the terms and conditions relating to the amount,
duration, or scope of mental health or substance use disorder benefits
under the plan except as specifically provided in paragraphs (b) and
(c) of this section.
(f) Small employer exemption--(1) In general. The requirements of
this section do not apply to a group health plan for a plan year of a
small employer. For purposes of this paragraph (f), the term small
employer means, in connection with a group health plan with respect to
a calendar year and a plan year, an employer who employed an average of
at least two (or one in the case of an employer residing in a state
that permits small groups to include a single individual) but not more
than 50 employees on business days during the preceding calendar year.
See section 9831(a)(2) and Sec. 54.9831-1(b), which provide that this
section (and certain other sections) does not apply to any group health
plan for any plan year if, on the first day of the plan year, the plan
has fewer than two participants who are current employees.
(2) Rules in determining employer size. For purposes of paragraph
(f)(1) of this section--
(i) All persons treated as a single employer under subsections (b),
(c), (m), and (o) of section 414 are treated as one employer;
(ii) If an employer was not in existence throughout the preceding
calendar year, whether it is a small employer is determined based on
the average number of employees the employer reasonably expects to
employ on business days during the current calendar year; and
(iii) Any reference to an employer for purposes of the small
employer exemption includes a reference to a predecessor of the
employer.
(g) Increased cost exemption--[Reserved].
(h) Sale of nonparity health insurance coverage. See 29 CFR
2590.712(h) and 45 CFR 146.136(h), under which a health insurance
issuer may not sell a policy, certificate, or contract of insurance
that fails to comply with requirements similar to those under paragraph
(b) or (c) of this section, except to a plan for a year for which the
plan is exempt from requirements similar to those under paragraph (b)
or (c) of this section because the plan meets requirements under
paragraph (f) or (g) of 29 CFR 2590.712 or 45 CFR 146.136 similar to
those under paragraph (f) or (g) of this section.
(i) Effective/applicability dates--(1) In general. Except as
provided in paragraph (i)(2) of this section, the requirements of this
section are applicable for plan years beginning on or after July 1,
2010.
(2) Special effective date for certain collectively-bargained
plans. For a group health plan maintained pursuant to one or more
collective bargaining agreements ratified before October 3, 2008, the
requirements of this section do not apply to the plan for plan years
beginning before the later of either--
(i) The date on which the last of the collective bargaining
agreements relating to the plan terminates (determined without regard
to any extension agreed to after October 3, 2008); or
(ii) July 1, 2010.
(j) Expiration date. This section expires on or before January 29,
2013.
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
Par. 3. The authority citation for part 602 continues to read as
follows:
Authority: 26 U.S.C. 7805.
Par. 4. In Sec. 602.101, paragraph (b) is amended by adding the
following entry in numerical order to the table:
Sec. 602.101 OMB Control numbers.
* * * * *
(b) * * *
------------------------------------------------------------------------
Current OMB
CFR part or section where identified and described control No.
------------------------------------------------------------------------
* * * * *
54.9812-1T................................................. 1545-2165
* * * * *
------------------------------------------------------------------------
[[Page 5438]]
Approved: January 27, 2010.
Steven T. Miller,
Deputy Commissioner for Services and Enforcement, Internal Revenue
Service.
Michael F. Mundaca,
Acting Assistant Secretary of the Treasury (Tax Policy).
Employee Benefits Security Administration
29 CFR Chapter XXV
0
29 CFR Part 2590 is amended as follows:
PART 2590--RULES AND REGULATIONS FOR HEALTH INSURANCE PORTABILITY
AND RENEWABILITY FOR GROUP HEALTH PLANS
0
1. The authority citation for Part 2590 is revised to read as follows:
Authority: Secs. 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169,
1181-1183, 1181 note, 1185, 1185a, 1185b, 1191, 1191a, 1191b, and
1191c; sec. 101(g), Public Law 104-191, 110 Stat. 1936; sec. 401(b),
Public Law 105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 512(d),
Public Law 110-343, 122 Stat. 3765; Public Law 110-460, 122 Stat.
5123; Secretary of Labor's Order 6-2009, 74 FR 21524 (May 7, 2009).
Subpart C--Other Requirements
0
2. Section 2590.712 is revised to read as follows:
Sec. 2590.712 Parity in mental health and substance use disorder
benefits.
(a) Meaning of terms. For purposes of this section, except where
the context clearly indicates otherwise, the following terms have the
meanings indicated:
Aggregate lifetime dollar limit means a dollar limitation on the
total amount of specified benefits that may be paid under a group
health plan (or health insurance coverage offered in connection with
such a plan) for any coverage unit.
Annual dollar limit means a dollar limitation on the total amount
of specified benefits that may be paid in a 12-month period under a
group health plan (or health insurance coverage offered in connection
with such a plan) for any coverage unit.
Coverage unit means coverage unit as described in paragraph
(c)(1)(iv) of this section.
Cumulative financial requirements are financial requirements that
determine whether or to what extent benefits are provided based on
accumulated amounts and include deductibles and out-of-pocket maximums.
(However, cumulative financial requirements do not include aggregate
lifetime or annual dollar limits because these two terms are excluded
from the meaning of financial requirements.)
Cumulative quantitative treatment limitations are treatment
limitations that determine whether or to what extent benefits are
provided based on accumulated amounts, such as annual or lifetime day
or visit limits.
Financial requirements include deductibles, copayments,
coinsurance, or out-of-pocket maximums. Financial requirements do not
include aggregate lifetime or annual dollar limits.
Medical/surgical benefits means benefits for medical or surgical
services, as defined under the terms of the plan or health insurance
coverage, but does not include mental health or substance use disorder
benefits. Any condition defined by the plan as being or as not being a
medical/surgical condition must be defined to be consistent with
generally recognized independent standards of current medical practice
(for example, the most current version of the International
Classification of Diseases (ICD) or State guidelines).
Mental health benefits means benefits with respect to services for
mental health conditions, as defined under the terms of the plan and in
accordance with applicable Federal and State law. Any condition defined
by the plan as being or as not being a mental health condition must be
defined to be consistent with generally recognized independent
standards of current medical practice (for example, the most current
version of the Diagnostic and Statistical Manual of Mental Disorders
(DSM), the most current version of the ICD, or State guidelines).
Substance use disorder benefits means benefits with respect to
services for substance use disorders, as defined under the terms of the
plan and in accordance with applicable Federal and State law. Any
disorder defined by the plan as being or as not being a substance use
disorder must be defined to be consistent with generally recognized
independent standards of current medical practice (for example, the
most current version of the DSM, the most current version of the ICD,
or State guidelines).
Treatment limitations include limits on benefits based on the
frequency of treatment, number of visits, days of coverage, days in a
waiting period, or other similar limits on the scope or duration of
treatment. Treatment limitations include both quantitative treatment
limitations, which are expressed numerically (such as 50 outpatient
visits per year), and nonquantitative treatment limitations, which
otherwise limit the scope or duration of benefits for treatment under a
plan. (See paragraph (c)(4)(ii) of this section for an illustrative
list of nonquantitative treatment limitations.) A permanent exclusion
of all benefits for a particular condition or disorder, however, is not
a treatment limitation.
(b) Parity requirements with respect to aggregate lifetime and
annual dollar limits--(1)--General--(i) General parity requirement. A
group health plan (or health insurance coverage offered by an issuer in
connection with a group health plan) that provides both medical/
surgical benefits and mental health or substance use disorder benefits
must comply with paragraph (b)(2), (b)(3), or (b)(6) of this section.
(ii) Exception. The rule in paragraph (b)(1)(i) of this section
does not apply if a plan (or health insurance coverage) satisfies the
requirements of paragraph (f) or (g) of this section (relating to
exemptions for small employers and for increased cost).
(2) Plan with no limit or limits on less than one-third of all
medical/surgical benefits. If a plan (or health insurance coverage)
does not include an aggregate lifetime or annual dollar limit on any
medical/surgical benefits or includes an aggregate lifetime or annual
dollar limit that applies to less than one-third of all medical/
surgical benefits, it may not impose an aggregate lifetime or annual
dollar limit, respectively, on mental health or substance use disorder
benefits.
(3) Plan with a limit on at least two-thirds of all medical/
surgical benefits. If a plan (or health insurance coverage) includes an
aggregate lifetime or annual dollar limit on at least two-thirds of all
medical/surgical benefits, it must either--
(i) Apply the aggregate lifetime or annual dollar limit both to the
medical/surgical benefits to which the limit would otherwise apply and
to mental health or substance use disorder benefits in a manner that
does not distinguish between the medical/surgical benefits and mental
health or substance use disorder benefits; or
(ii) Not include an aggregate lifetime or annual dollar limit on
mental health or substance use disorder benefits that is less than the
aggregate lifetime or annual dollar limit, respectively, on medical/
surgical benefits. (For cumulative limits other than aggregate lifetime
or annual dollar limits, see paragraph (c)(3)(v) of this section
prohibiting separately accumulating cumulative financial requirements
or cumulative quantitative treatment limitations.)
[[Page 5439]]
(4) Examples. The rules of paragraphs (b)(2) and (b)(3) of this
section are illustrated by the following examples:
Example 1. (i) Facts. A group health plan has no annual limit on
medical/surgical benefits and a $10,000 annual limit on mental
health and substance use disorder benefits. To comply with the
requirements of this paragraph (b), the plan sponsor is considering
each of the following options--
(A) Eliminating the plan's annual dollar limit on mental health
and substance use disorder benefits;
(B) Replacing the plan's annual dollar limit on mental health
and substance use disorder benefits with a $500,000 annual limit on
all benefits (including medical/surgical and mental health and
substance use disorder benefits); and
(C) Replacing the plan's annual dollar limit on mental health
and substance use disorder benefits with a $250,000 annual limit on
medical/surgical benefits and a $250,000 annual limit on mental
health and substance use disorder benefits.
(ii) Conclusion. In this Example 1, each of the three options
being considered by the plan sponsor would comply with the
requirements of this paragraph (b).
Example 2. (i) Facts. A plan has a $100,000 annual limit on
medical/surgical inpatient benefits and a $50,000 annual limit on
medical/surgical outpatient benefits. To comply with the parity
requirements of this paragraph (b), the plan sponsor is considering
each of the following options--
(A) Imposing a $150,000 annual limit on mental health and
substance use disorder benefits; and
(B) Imposing a $100,000 annual limit on mental health and
substance use disorder inpatient benefits and a $50,000 annual limit
on mental health and substance use disorder outpatient benefits.
(ii) Conclusion. In this Example 2, each option under
consideration by the plan sponsor would comply with the requirements
of this section.
(5) Determining one-third and two-thirds of all medical/surgical
benefits. For purposes of this paragraph (b), the determination of
whether the portion of medical/surgical benefits subject to an
aggregate lifetime or annual dollar limit represents one-third or two-
thirds of all medical/surgical benefits is based on the dollar amount
of all plan payments for medical/surgical benefits expected to be paid
under the plan for the plan year (or for the portion of the plan year
after a change in plan benefits that affects the applicability of the
aggregate lifetime or annual dollar limits). Any reasonable method may
be used to determine whether the dollar amount expected to be paid
under the plan will constitute one-third or two-thirds of the dollar
amount of all plan payments for medical/surgical benefits.
(6) Plan not described in paragraph (b)(2) or (b)(3) of this
section--(i) In general. A group health plan (or health insurance
coverage) that is not described in paragraph (b)(2) or (b)(3) of this
section with respect to aggregate lifetime or annual dollar limits on
medical/surgical benefits, must either--
(A) Impose no aggregate lifetime or annual dollar limit, as
appropriate, on mental health or substance use disorder benefits; or
(B) Impose an aggregate lifetime or annual dollar limit on mental
health or substance use disorder benefits that is no less than an
average limit calculated for medical/surgical benefits in the following
manner. The average limit is calculated by taking into account the
weighted average of the aggregate lifetime or annual dollar limits, as
appropriate, that are applicable to the categories of medical/surgical
benefits. Limits based on delivery systems, such as inpatient/
outpatient treatment or normal treatment of common, low-cost conditions
(such as treatment of normal births), do not constitute categories for
purposes of this paragraph (b)(6)(i)(B). In addition, for purposes of
determining weighted averages, any benefits that are not within a
category that is subject to a separately-designated dollar limit under
the plan are taken into account as a single separate category by using
an estimate of the upper limit on the dollar amount that a plan may
reasonably be expected to incur with respect to such benefits, taking
into account any other applicable restrictions under the plan.
(ii) Weighting. For purposes of this paragraph (b)(6), the
weighting applicable to any category of medical/surgical benefits is
determined in the manner set forth in paragraph (b)(5) of this section
for determining one-third or two-thirds of all medical/surgical
benefits.
(iii) Example. The rules of this paragraph (b)(6) are illustrated
by the following example:
Example. (i) Facts. A group health plan that is subject to the
requirements of this section includes a $100,000 annual limit on
medical/surgical benefits related to cardio-pulmonary diseases. The
plan does not include an annual dollar limit on any other category
of medical/surgical benefits. The plan determines that 40% of the
dollar amount of plan payments for medical/surgical benefits are
related to cardio-pulmonary diseases. The plan determines that
$1,000,000 is a reasonable estimate of the upper limit on the dollar
amount that the plan may incur with respect to the other 60% of
payments for medical/surgical benefits.
(ii) Conclusion. In this Example, the plan is not described in
paragraph (b)(3) of this section because there is not one annual
dollar limit that applies to at least two-thirds of all medical/
surgical benefits. Further, the plan is not described in paragraph
(b)(2) of this section because more than one-third of all medical/
surgical benefits are subject to an annual dollar limit. Under this
paragraph (b)(6), the plan sponsor can choose either to include no
annual dollar limit on mental health or substance use disorder
benefits, or to include an annual dollar limit on mental health or
substance use disorder benefits that is not less than the weighted
average of the annual dollar limits applicable to each category of
medical/surgical benefits. In this example, the minimum weighted
average annual dollar limit that can be applied to mental health or
substance use disorder benefits is $640,000 (40% x $100,000 + 60% x
$1,000,000 = $640,000).
(c) Parity requirements with respect to financial requirements and
treatment limitations--(1) Clarification of terms--(i) Classification
of benefits. When reference is made in this paragraph (c) to a
classification of benefits, the term ``classification'' means a
classification as described in paragraph (c)(2)(ii) of this section.
(ii) Type of financial requirement or treatment limitation. When
reference is made in this paragraph (c) to a type of financial
requirement or treatment limitation, the reference to type means its
nature. Different types of financial requirements include deductibles,
copayments, coinsurance, and out-of-pocket maximums. Different types of
quantitative treatment limitations include annual, episode, and
lifetime day and visit limits. See paragraph (c)(4)(ii) of this section
for an illustrative list of nonquantitative treatment limitations.
(iii) Level of a type of financial requirement or treatment
limitation. When reference is made in this paragraph (c) to a level of
a type of financial requirement or treatment limitation, level refers
to the magnitude of the type of financial requirement or treatment
limitation. For example, different levels of coinsurance include 20
percent and 30 percent; different levels of a copayment include $15 and
$20; different levels of a deductible include $250 and $500; and
different levels of an episode limit include 21 inpatient days per
episode and 30 inpatient days per episode.
(iv) Coverage unit. When reference is made in this paragraph (c) to
a coverage unit, coverage unit refers to the way in which a plan (or
health insurance coverage) groups individuals for purposes of
determining benefits, or premiums or contributions. For example,
different coverage units include self-only, family, and employee-plus-
spouse.
(2) General parity requirement--(i) General rule. A group health
plan (or health insurance coverage offered by an issuer in connection
with a group health plan) that provides both medical/surgical benefits
and mental health or substance use disorder benefits may not
[[Page 5440]]
apply any financial requirement or treatment limitation to mental
health or substance use disorder benefits in any classification that is
more restrictive than the predominant financial requirement or
treatment limitation of that type applied to substantially all medical/
surgical benefits in the same classification. Whether a financial
requirement or treatment limitation is a predominant financial
requirement or treatment limitation that applies to substantially all
medical/surgical benefits in a classification is determined separately
for each type of financial requirement or treatment limitation. The
application of the rules of this paragraph (c)(2) to financial
requirements and quantitative treatment limitations is addressed in
paragraph (c)(3) of this section; the application of the rules of this
paragraph (c)(2) to nonquantitative treatment limitations is addressed
in paragraph (c)(4) of this section.
(ii) Classifications of benefits used for applying rules--(A) In
general. If a plan (or health insurance coverage) provides mental
health or substance use disorder benefits in any classification of
benefits described in this paragraph (c)(2)(ii), mental health or
substance use disorder benefits must be provided in every
classification in which medical/surgical benefits are provided. In
determining the classification in which a particular benefit belongs, a
plan (or health insurance issuer) must apply the same standards to
medical/surgical benefits and to mental health or substance use
disorder benefits. To the extent that a plan (or health insurance
coverage) provides benefits in a classification and imposes any
separate financial requirement or treatment limitation (or separate
level of a financial requirement or treatment limitation) for benefits
in the classification, the rules of this paragraph (c) apply separately
with respect to that classification for all financial requirements or
treatment limitations. The following classifications of benefits are
the only classifications used in applying the rules of this paragraph
(c):
(1) Inpatient, in-network. Benefits furnished on an inpatient basis
and within a network of providers established or recognized under a
plan or health insurance coverage.
(2) Inpatient, out-of-network. Benefits furnished on an inpatient
basis and outside any network of providers established or recognized
under a plan or health insurance coverage. This classification includes
inpatient benefits under a plan (or health insurance coverage) that has
no network of providers.
(3) Outpatient, in-network. Benefits furnished on an outpatient
basis and within a network of providers established or recognized under
a plan or health insurance coverage.
(4) Outpatient, out-of-network. Benefits furnished on an outpatient
basis and outside any network of providers established or recognized
under a plan or health insurance coverage. This classification includes
outpatient benefits under a plan (or health insurance coverage) that
has no network of providers.
(5) Emergency care. Benefits for emergency care.
(6) Prescription drugs. Benefits for prescription drugs. See
special rules for multi-tiered prescription drug benefits in paragraph
(c)(3)(iii) of this section.
(B) Application to out-of-network providers. See paragraph
(c)(2)(ii)(A) of this section, under which a plan (or health insurance
coverage) that provides mental health or substance use disorder
benefits in any classification of benefits must provide mental health
or substance use disorder benefits in every classification in which
medical/surgical benefits are provided, including out-of-network
classifications.
(C) Examples. The rules of this paragraph (c)(2)(ii) are
illustrated by the following examples. In each example, the group
health plan is subject to the requirements of this section and provides
both medical/surgical benefits and mental health and substance use
disorder benefits.
Example 1. (i) Facts. A group health plan offers inpatient and
outpatient benefits and does not contract with a network of
providers. The plan imposes a $500 deductible on all benefits. For
inpatient medical/surgical benefits, the plan imposes a coinsurance
requirement. For outpatient medical/surgical benefits, the plan
imposes copayments. The plan imposes no other financial requirements
or treatment limitations.
(ii) Conclusion. In this Example 1, because the plan has no
network of providers, all benefits provided are out-of-network.
Because inpatient, out-of-network medical/surgical benefits are
subject to separate financial requirements from outpatient, out-of-
network medical/surgical benefits, the rules of this paragraph (c)
apply separately with respect to any financial requirements and
treatment limitations, including the deductible, in each
classification.
Example 2. (i) Facts. A plan imposes a $500 deductible on all
benefits. The plan has no network of providers. The plan generally
imposes a 20 percent coinsurance requirement with respect to all
benefits, without distinguishing among inpatient, outpatient,
emergency, or prescription drug benefits. The plan imposes no other
financial requirements or treatment limitations.
(ii) Conclusion. In this Example 2, because the plan does not
impose separate financial requirements (or treatment limitations)
based on classification, the rules of this paragraph (c) apply with
respect to the deductible and the coinsurance across all benefits.
Example 3. (i) Facts. Same facts as Example 2, except the plan
exempts emergency care benefits from the 20 percent coinsurance
requirement. The plan imposes no other financial requirements or
treatment limitations.
(ii) Conclusion. In this Example 3, because the plan imposes
separate financial requirements based on classifications, the rules
of this paragraph (c) apply with respect to the deductible and the
coinsurance separately for--
(A) Benefits in the emergency classification; and
(B) All other benefits.
Example 4. (i) Facts. Same facts as Example 2, except the plan
also imposes a preauthorization requirement for all inpatient
treatment in order for benefits to be paid. No such requirement
applies to outpatient treatment.
(ii) Conclusion. In this Example 4, because the plan has no
network of providers, all benefits provided are out-of-network.
Because the plan imposes a separate treatment limitation based on
classifications, the rules of this paragraph (c) apply with respect
to the deductible and coinsurance separately for--
(A) Inpatient, out-of-network benefits; and
(B) All other benefits.
(3) Financial requirements and quantitative treatment limitations--
(i) Determining ``substantially all'' and ``predominant''--(A)
Substantially all. For purposes of this paragraph (c), a type of
financial requirement or quantitative treatment limitation is
considered to apply to substantially all medical/surgical benefits in a
classification of benefits if it applies to at least two-thirds of all
medical/surgical benefits in that classification. (For this purpose,
benefits expressed as subject to a zero level of a type of financial
requirement are treated as benefits not subject to that type of
financial requirement, and benefits expressed as subject to a
quantitative treatment limitation that is unlimited are treated as
benefits not subject to that type of quantitative treatment
limitation.) If a type of financial requirement or quantitative
treatment limitation does not apply to at least two-thirds of all
medical/surgical benefits in a classification, then that type cannot be
applied to mental health or substance use disorder benefits in that
classification.
(B) Predominant--(1) If a type of financial requirement or
quantitative treatment limitation applies to at least two-thirds of all
medical/surgical benefits in a classification as determined under
paragraph (c)(3)(i)(A) of this section, the level of the financial
requirement or quantitative treatment
[[Page 5441]]
limitation that is considered the predominant level of that type in a
classification of benefits is the level that applies to more than one-
half of medical/surgical benefits in that classification subject to the
financial requirement or quantitative treatment limitation.
(2) If, with respect to a type of financial requirement or
quantitative treatment limitation that applies to at least two-thirds
of all medical/surgical benefits in a classification, there is no
single level that applies to more than one-half of medical/surgical
benefits in the classification subject to the financial requirement or
quantitative treatment limitation, the plan (or health insurance
issuer) may combine levels until the combination of levels applies to
more than one-half of medical/surgical benefits subject to the
financial requirement or quantitative treatment limitation in the
classification. The least restrictive level within the combination is
considered the predominant level of that type in the classification.
(For this purpose, a plan may combine the most restrictive levels
first, with each less restrictive level added to the combination until
the combination applies to more than one-half of the benefits subject
to the financial requirement or treatment limitation.)
(C) Portion based on plan payments. For purposes of this paragraph
(c), the determination of the portion of medical/surgical benefits in a
classification of benefits subject to a financial requirement or
quantitative treatment limitation (or subject to any level of a
financial requirement or quantitative treatment limitation) is based on
the dollar amount of all plan payments for medical/surgical benefits in
the classification expected to be paid under the plan for the plan year
(or for the portion of the plan year after a change in plan benefits
that affects the applicability of the financial requirement or
quantitative treatment limitation).
(D) Clarifications for certain threshold requirements. For any
deductible, the dollar amount of plan payments includes all plan
payments with respect to claims that would be subject to the deductible
if it had not been satisfied. For any out-of-pocket maximum, the dollar
amount of plan payments includes all plan payments associated with out-
of-pocket payments that are taken into account towards the out-of-
pocket maximum as well as all plan payments associated with out-of-
pocket payments that would have been made towards the out-of-pocket
maximum if it had not been satisfied. Similar rules apply for any other
thresholds at which the rate of plan payment changes.
(E) Determining the dollar amount of plan payments. Subject to
paragraph (c)(3)(i)(D) of this section, any reasonable method may be
used to determine the dollar amount expected to be paid under a plan
for medical/surgical benefits subject to a financial requirement or
quantitative treatment limitation (or subject to any level of a
financial requirement or quantitative treatment limitation).
(ii) Application to different coverage units. If a plan (or health
insurance coverage) applies different levels of a financial requirement
or quantitative treatment limitation to different coverage units in a
classification of medical/surgical benefits, the predominant level that
applies to substantially all medical/surgical benefits in the
classification is determined separately for each coverage unit.
(iii) Special rule for multi-tiered prescription drug benefits. If
a plan (or health insurance coverage) applies different levels of
financial requirements to different tiers of prescription drug benefits
based on reasonable factors determined in accordance with the rules in
paragraph (c)(4)(i) of this section (relating to requirements for
nonquantitative treatment limitations) and without regard to whether a
drug is generally prescribed with respect to medical/surgical benefits
or with respect to mental health or substance use disorder benefits,
the plan (or health insurance coverage) satisfies the parity
requirements of this paragraph (c) with respect to prescription drug
benefits. Reasonable factors include cost, efficacy, generic versus
brand name, and mail order versus pharmacy pick-up.
(iv) Examples. The rules of paragraphs (c)(3)(i), (c)(3)(ii), and
(c)(3)(iii) of this section are illustrated by the following examples.
In each example, the group health plan is subject to the requirements
of this section and provides both medical/surgical benefits and mental
health and substance use disorder benefits.
Example 1. (i) Facts. For inpatient, out-of-network medical/
surgical benefits, a group health plan imposes five levels of
coinsurance. Using a reasonable method, the plan projects its
payments for the upcoming year as follows:
--------------------------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------------------------------
Coinsurance rate............... 0% 10% 15% 20% 30% Total
Projected payments............. $200x $100x $450x $100x $150x $1,000x
Percent of total plan costs.... 20% 10% 45% 10% 15% ..................
Percent subject to coinsurance N/A 12.5% 56.25% 12.5% 18.75% ..................
level. (100x/800x) (450x/800x) (100x/800x) (150x/800x)
--------------------------------------------------------------------------------------------------------------------------------------------------------
The plan projects plan costs of $800x to be subject to coinsurance
($100x + $450x + $100x + $150x = $800x). Thus, 80 percent ($800x/
$1,000x) of the benefits are projected to be subject to coinsurance,
and 56.25 percent of the benefits subject to coinsurance are
projected to be subject to the 15 percent coinsurance level.
(ii) Conclusion. In this Example 1, the two-thirds threshold of
the substantially all standard is met for coinsurance because 80
percent of all inpatient, out-of-network medical/surgical benefits
are subject to coinsurance. Moreover, the 15 percent coinsurance is
the predominant level because it is applicable to more than one-half
of inpatient, out-of-network medical/surgical benefits subject to
the coinsurance requirement. The plan may not impose any level of
coinsurance with respect to inpatient, out-of-network mental health
or substance use disorder benefits that is more restrictive than the
15 percent level of coinsurance.
Example 2. (i) Facts. For outpatient, in-network medical/
surgical benefits, a plan imposes five different copayment levels.
Using a reasonable method, the plan projects payments for the
upcoming year as follows:
--------------------------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------------------------------
Copayment amount............... $0 $10 $15 $20 $50 Total
Projected payments............. $200x $200x $200x $300x $100x $1,000x
Percent of total plan costs.... 20% 20% 20% 30% 10% ..................
Percent subject to copayments.. N/A 25% 25% 37.5% 12.5% ..................
(200x/800x) (200x/800x) (300x/800x) (100x/800x)
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 5442]]
The plan projects plan costs of $800x to be subject to copayments
($200x + $200x +$300x + $100x = $800x). Thus, 80 percent ($800x/
$1,000x) of the benefits are projected to be subject to a copayment.
(ii) Conclusion. In this Example 2, the two-thirds threshold of
the substantially all standard is met for copayments because 80
percent of all outpatient, in-network medical/surgical benefits are
subject to a copayment. Moreover, there is no single level that
applies to more than one-half of medical/surgical benefits in the
classification subject to a copayment (for the $10 copayment, 25%;
for the $15 copayment, 25%; for the $20 copayment, 37.5%; and for
the $50 copayment, 12.5%). The plan can combine any levels of
copayment, including the highest levels, to determine the
predominant level that can be applied to mental health or substance
use disorder benefits. If the plan combines the highest levels of
copayment, the combined projected payments for the two highest
copayment levels, the $50 copayment and the $20 copayment, are not
more than one-half of the outpatient, in-network medical/surgical
benefits subject to a copayment because they are exactly one-half
($300x + $100x = $400x; $400x/$800x = 50%). The combined projected
payments for the three highest copayment levels--the $50 copayment,
the $20 copayment, and the $15 copayment--are more than one-half of
the outpatient, in-network medical/surgical benefits subject to the
copayments ($100x + $300x + $200x = $600x; $600x/$800x = 75%). Thus,
the plan may not impose any copayment on outpatient, in-network
mental health or substance use disorder benefits that is more
restrictive than the least restrictive copayment in the combination,
the $15 copayment.
Example 3. (i) Facts. A plan imposes a $250 deductible on all
medical/surgical benefits for self-only coverage and a $500
deductible on all medical/surgical benefits for family coverage. The
plan has no network of providers. For all medical/surgical benefits,
the plan imposes a coinsurance requirement. The plan imposes no
other financial requirements or treatment limitations.
(ii) Conclusion. In this Example 3, because the plan has no
network of providers, all benefits are provided out-of-network.
Because self-only and family coverage are subject to different
deductibles, whether the deductible applies to substantially all
medical/surgical benefits is determined separately for self-only
medical/surgical benefits and family medical/surgical benefits.
Because the coinsurance is applied without regard to coverage units,
the predominant coinsurance that applies to substantially all
medical/surgical benefits is determined without regard to coverage
units.
Example 4. (i) Facts. A plan applies the following financial
requirements for prescription drug benefits. The requirements are
applied without regard to whether a drug is generally prescribed
with respect to medical/surgical benefits or with respect to mental
health or substance use disorder benefits. Moreover, the process for
certifying a particular drug as ``generic'', ``preferred brand
name'', ``non-preferred brand name'', or ``specialty'' complies with
the rules of paragraph (c)(4)(i) of this section (relating to
requirements for nonquantitative treatment limitations).
----------------------------------------------------------------------------------------------------------------
Tier 1 Tier 2 Tier 3 Tier 4
---------------------------------------------------------------------------
Non-preferred
Tier description brand name drugs
Generic drugs Preferred brand (which may have Specialty drugs
name drugs Tier 1 or Tier 2
alternatives)
----------------------------------------------------------------------------------------------------------------
Percent paid by plan................ 90% 80% 60% 50%
----------------------------------------------------------------------------------------------------------------
(ii) Conclusion. In this Example 4, the financial requirements
that apply to prescription drug benefits are applied without regard
to whether a drug is generally prescribed with respect to medical/
surgical benefits or with respect to mental health or substance use
disorder benefits; the process for certifying drugs in different
tiers complies with paragraph (c)(4) of this section; and the bases
for establishing different levels or types of financial requirements
are reasonable. The financial requirements applied to prescription
drug benefits do not violate the parity requirements of this
paragraph (c)(3).
(v) No separate cumulative financial requirements or cumulative
quantitative treatment limitations--(A) A group health plan (or health
insurance coverage offered in connection with a group health plan) may
not apply any cumulative financial requirement or cumulative
quantitative treatment limitation for mental health or substance use
disorder benefits in a classification that accumulates separately from
any established for medical/surgical benefits in the same
classification.
(B) The rules of this paragraph (c)(3)(v) are illustrated by the
following examples:
Example 1. (i) Facts. A group health plan imposes a combined
annual $500 deductible on all medical/surgical, mental health, and
substance use disorder benefits.
(ii) Conclusion. In this Example 1, the combined annual
deductible complies with the requirements of this paragraph
(c)(3)(v).
Example 2. (i) Facts. A plan imposes an annual $250 deductible
on all medical/surgical benefits and a separate annual $250
deductible on all mental health and substance use disorder benefits.
(ii) Conclusion. In this Example 2, the separate annual
deductible on mental health and substance use disorder benefits
violates the requirements of this paragraph (c)(3)(v).
Example 3. (i) Facts. A plan imposes an annual $300 deductible
on all medical/surgical benefits and a separate annual $100
deductible on all mental health or substance use disorder benefits.
(ii) Conclusion. In this Example 3, the separate annual
deductible on mental health and substance use disorder benefits
violates the requirements of this paragraph (c)(3)(v).
Example 4. (i) Facts. A plan generally imposes a combined annual
$500 deductible on all benefits (both medical/surgical benefits and
mental health and substance use disorder benefits) except
prescription drugs. Certain benefits, such as preventive care, are
provided without regard to the deductible. The imposition of other
types of financial requirements or treatment limitations varies with
each classification. Using reasonable methods, the plan projects its
payments for medical/surgical benefits in each classification for
the upcoming year as follows:
----------------------------------------------------------------------------------------------------------------
Benefits subject Percent subject
Classification to deductible Total benefits to deductible
----------------------------------------------------------------------------------------------------------------
Inpatient, in-network..................................... $1,800x $2,000x 90
Inpatient, out-of-network................................. 1,000x 1,000x 100
Outpatient, in-network.................................... 1,400x 2,000x 70
Outpatient, out-of-network................................ 1,880x 2,000x 94
Emergency care............................................ 300x 500x 60
----------------------------------------------------------------------------------------------------------------
[[Page 5443]]
(ii) Conclusion. In this Example 4, the two-thirds threshold of
the substantially all standard is met with respect to each
classification except emergency care because in each of those other
classifications at least two-thirds of medical/surgical benefits are
subject to the $500 deductible. Moreover, the $500 deductible is the
predominant level in each of those other classifications because it
is the only level. However, emergency care mental health and
substance use disorder benefits cannot be subject to the $500
deductible because it does not apply to substantially all emergency
care medical/surgical benefits.
(4) Nonquantitative treatment limitations--(i) General rule. A
group health plan (or health insurance coverage) may not impose a
nonquantitative treatment limitation with respect to mental health or
substance use disorder benefits in any classification unless, under the
terms of the plan (or health insurance coverage) as written and in
operation, any processes, strategies, evidentiary standards, or other
factors used in applying the nonquantitative treatment limitation to
mental health or substance use disorder benefits in the classification
are comparable to, and are applied no more stringently than, the
processes, strategies, evidentiary standards, or other factors used in
applying the limitation with respect to medical surgical/benefits in
the classification, except to the extent that recognized clinically
appropriate standards of care may permit a difference.
(ii) Illustrative list of nonquantitative treatment limitations.
Nonquantitative treatment limitations include--
(A) Medical management standards limiting or excluding benefits
based on medical necessity or medical appropriateness, or based on
whether the treatment is experimental or investigative;
(B) Formulary design for prescription drugs;
(C) Standards for provider admission to participate in a network,
including reimbursement rates;
(D) Plan methods for determining usual, customary, and reasonable
charges;
(E) Refusal to pay for higher-cost therapies until it can be shown
that a lower-cost therapy is not effective (also known as fail-first
policies or step therapy protocols); and
(F) Exclusions based on failure to complete a course of treatment.
(iii) Examples. The rules of this paragraph (c)(4) are illustrated
by the following examples. In each example, the group health plan is
subject to the requirements of this section and provides both medical/
surgical benefits and mental health and substance use disorder
benefits.
Example 1. (i) Facts. A group health plan limits benefits to
treatment that is medically necessary. The plan requires concurrent
review for inpatient, in-network mental health and substance use
disorder benefits but does not require it for any inpatient, in-
network medical/surgical benefits. The plan conducts retrospective
review for inpatient, in-network medical/surgical benefits.
(ii) Conclusion. In this Example 1, the plan violates the rules
of this paragraph (c)(4). Although the same nonquantitative
treatment limitation--medical necessity--applies to both mental
health and substance use disorder benefits and to medical/surgical
benefits for inpatient, in-network services, the concurrent review
process does not apply to medical/surgical benefits. The concurrent
review process is not comparable to the retrospective review
process. While such a difference might be permissible in certain
individual cases based on recognized clinically appropriate
standards of care, it is not permissible for distinguishing between
all medical/surgical benefits and all mental health or substance use
disorder benefits.
Example 2. (i) Facts. A plan requires prior approval that a
course of treatment is medically necessary for outpatient, in-
network medical/surgical, mental health, and substance use disorder
benefits. For mental health and substance use disorder treatments
that do not have prior approval, no benefits will be paid; for
medical/surgical treatments that do not have prior approval, there
will only be a 25 percent reduction in the benefits the plan would
otherwise pay.
(ii) Conclusion. In this Example 2, the plan violates the rules
of this paragraph (c)(4). Although the same nonquantitative
treatment limitation--medical necessity--is applied both to mental
health and substance use disorder benefits and to medical/surgical
benefits for outpatient, in-network services, the penalty for
failure to obtain prior approval for mental health and substance use
disorder benefits is not comparable to the penalty for failure to
obtain prior approval for medical/surgical benefits.
Example 3. (i) Facts. A plan generally covers medically
appropriate treatments. For both medical/surgical benefits and
mental health and substance use disorder benefits, evidentiary
standards used in determining whether a treatment is medically
appropriate (such as the number of visits or days of coverage) are
based on recommendations made by panels of experts with appropriate
training and experience in the fields of medicine involved. The
evidentiary standards are applied in a manner that may differ based
on clinically appropriate standards of care for a condition.
(ii) Conclusion. In this Example 3, the plan complies with the
rules of this paragraph (c)(4) because the nonquantitative treatment
limitation--medical appropriateness--is the same for both medical/
surgical benefits and mental health and substance use disorder
benefits, and the processes for developing the evidentiary standards
and the application of them to mental health and substance use
disorder benefits are comparable to and are applied no more
stringently than for medical/surgical benefits. This is the result
even if, based on clinically appropriate standards of care, the
application of the evidentiary standards does not result in similar
numbers of visits, days of coverage, or other benefits utilized for
mental health conditions or substance use disorders as it does for
any particular medical/surgical condition.
Example 4. (i) Facts. A plan generally covers medically
appropriate treatments. In determining whether prescription drugs
are medically appropriate, the plan automatically excludes coverage
for antidepressant drugs that are given a black box warning label by
the Food and Drug Administration (indicating the drug carries a
significant risk of serious adverse effects). For other drugs with a
black box warning (including those prescribed for other mental
health conditions and substance use disorders, as well as for
medical/surgical conditions), the plan will provide coverage if the
prescribing physician obtains authorization from the plan that the
drug is medically appropriate for the individual, based on
clinically appropriate standards of care.
(ii) Conclusion. In this Example 4, the plan violates the rules
of this paragraph (c)(4). Although the same nonquantitative
treatment limitation--medical appropriateness--is applied to both
mental health and substance use disorder benefits and medical/
surgical benefits, the plan's unconditional exclusion of
antidepressant drugs given a black box warning is not comparable to
the conditional exclusion for other drugs with a black box warning.
Example 5. (i) Facts. An employer maintains both a major
medical program and an employee assistance program (EAP). The EAP
provides, among other benefits, a limited number of mental health or
substance use disorder counseling sessions. Participants are
eligible for mental health or substance use disorder benefits under
the major medical program only after exhausting the counseling
sessions provided by the EAP. No similar exhaustion requirement
applies with respect to medical/surgical benefits provided under the
major medical program.
(ii) Conclusion. In this Example 5, limiting eligibility for
mental health and substance use disorder benefits only after EAP
benefits are exhausted is a nonquantitative treatment limitation
subject to the parity requirements of this paragraph (c). Because no
comparable requirement applies to medical/surgical benefits, the
requirement may not be applied to mental health or substance use
disorder benefits.
(5) Exemptions. The rules of this paragraph (c) do not apply if a
group health plan (or health insurance coverage) satisfies the
requirements of paragraph (f) or (g) of this section (relating to
exemptions for small employers and for increased cost).
(d) Availability of plan information--(1) Criteria for medical
necessity determinations. The criteria for medical
[[Page 5444]]
necessity determinations made under a group health plan with respect to
mental health or substance use disorder benefits (or health insurance
coverage offered in connection with the plan with respect to such
benefits) must be made available by the plan administrator (or the
health insurance issuer offering such coverage) to any current or
potential participant, beneficiary, or contracting provider upon
request.
(2) Reason for any denial. The reason for any denial under a group
health plan (or health insurance coverage) of reimbursement or payment
for services with respect to mental health or substance use disorder
benefits in the case of any participant or beneficiary must be made
available by the plan administrator (or the health insurance issuer
offering such coverage) to the participant or beneficiary in a form and
manner consistent with the rules in Sec. 2560.503-1 of this Part for
group health plans.
(e) Applicability--(1) Group health plans. The requirements of this
section apply to a group health plan offering medical/surgical benefits
and mental health or substance use disorder benefits. If, under an
arrangement or arrangements to provide medical care benefits by an
employer or employee organization (including for this purpose a joint
board of trustees of a multiemployer trust affiliated with one or more
multiemployer plans), any participant (or beneficiary) can
simultaneously receive coverage for medical/surgical benefits and
coverage for mental health or substance use disorder benefits, then the
requirements of this section (including the exemption provisions in
paragraph (g) of this section) apply separately with respect to each
combination of medical/surgical benefits and of mental health or
substance use disorder benefits that any participant (or beneficiary)
can simultaneously receive from that employer's or employee
organization's arrangement or arrangements to provide medical care
benefits, and all such combinations are considered for purposes of this
section to be a single group health plan.
(2) Health insurance issuers. The requirements of this section
apply to a health insurance issuer offering health insurance coverage
for mental health or substance use disorder benefits in connection with
a group health plan subject to paragraph (e)(1) of this section.
(3) Scope. This section does not--
(i) Require a group health plan (or health insurance issuer
offering coverage in connection with a group health plan) to provide
any mental health benefits or substance use disorder benefits, and the
provision of benefits by a plan (or health insurance coverage) for one
or more mental health conditions or substance use disorders does not
require the plan or health insurance coverage under this section to
provide benefits for any other mental health condition or substance use
disorder; or
(ii) Affect the terms and conditions relating to the amount,
duration, or scope of mental health or substance use disorder benefits
under the plan (or health insurance coverage) except as specifically
provided in paragraphs (b) and (c) of this section.
(f) Small employer exemption--(1) In general. The requirements of
this section do not apply to a group health plan (or health insurance
issuer offering coverage in connection with a group health plan) for a
plan year of a small employer. For purposes of this paragraph (f), the
term small employer means, in connection with a group health plan with
respect to a calendar year and a plan year, an employer who employed an
average of at least two (or one in the case of an employer residing in
a state that permits small groups to include a single individual) but
not more than 50 employees on business days during the preceding
calendar year. See section 732(a) of ERISA and Sec. 2590.732(b) of
this Part, which provide that this section (and certain other sections)
does not apply to any group health plan (and health insurance issuer
offering coverage in connection with a group health plan) for any plan
year if, on the first day of the plan year, the plan has fewer than two
participants who are current employees.
(2) Rules in determining employer size. For purposes of paragraph
(f)(1) of this section--
(i) All persons treated as a single employer under subsections (b),
(c), (m), and (o) of section 414 of the Code are treated as one
employer;
(ii) If an employer was not in existence throughout the preceding
calendar year, whether it is a small employer is determined based on
the average number of employees the employer reasonably expects to
employ on business days during the current calendar year; and
(iii) Any reference to an employer for purposes of the small
employer exemption includes a reference to a predecessor of the
employer.
(g) Increased cost exemption--[Reserved]
(h) Sale of nonparity health insurance coverage. A health insurance
issuer may not sell a policy, certificate, or contract of insurance
that fails to comply with paragraph (b) or (c) of this section, except
to a plan for a year for which the plan is exempt from the requirements
of this section because the plan meets the requirements of paragraph
(f) or (g) of this section.
(i) Applicability dates--(1) In general. Except as provided in
paragraph (i)(2) of this section, the requirements of this section are
applicable for plan years beginning on or after July 1, 2010.
(2) Special effective date for certain collectively-bargained
plans. For a group health plan maintained pursuant to one or more
collective bargaining agreements ratified before October 3, 2008, the
requirements of this section do not apply to the plan (or health
insurance coverage offered in connection with the plan) for plan years
beginning before the later of either--
(i) The date on which the last of the collective bargaining
agreements relating to the plan terminates (determined without regard
to any extension agreed to after October 3, 2008); or
(ii) July 1, 2010.
Signed at Washington, DC, this 26th day of January 2010.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration, U.S.
Department of Labor.
Department of Health and Human Services
45 CFR Subtitle A
0
For the reasons set forth in the preamble, the Department of Health and
Human Services is amending 45 CFR Subtitle A, Subchapter B, Part 146,
Subpart C as follows:
PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET
0
1. The authority citation for Part 146 continues to read as follows:
Authority: Secs. 2702 through 2705, 2711 through 2723, 2791, and
2792 of the PHS Act (42 U.S.C. 300gg-1 through 300gg-5, 300gg-11
through 300gg-23, 300gg-91, and 300gg-92).
0
2. Section 146.136 is revised to read as follows:
Sec. 146.136 Parity in mental health and substance use disorder
benefits.
(a) Meaning of terms. For purposes of this section, except where
the context clearly indicates otherwise, the following terms have the
meanings indicated:
Aggregate lifetime dollar limit means a dollar limitation on the
total amount of specified benefits that may be paid under a group
health plan (or health
[[Page 5445]]
insurance coverage offered in connection with such a plan) for any
coverage unit.
Annual dollar limit means a dollar limitation on the total amount
of specified benefits that may be paid in a 12-month period under a
group health plan (or health insurance coverage offered in connection
with such a plan) for any coverage unit.
Coverage unit means coverage unit as described in paragraph
(c)(1)(iv) of this section.
Cumulative financial requirements are financial requirements that
determine whether or to what extent benefits are provided based on
accumulated amounts and include deductibles and out-of-pocket maximums.
(However, cumulative financial requirements do not include aggregate
lifetime or annual dollar limits because these two terms are excluded
from the meaning of financial requirements.)
Cumulative quantitative treatment limitations are treatment
limitations that determine whether or to what extent benefits are
provided based on accumulated amounts, such as annual or lifetime day
or visit limits.
Financial requirements include deductibles, copayments,
coinsurance, or out-of-pocket maximums. Financial requirements do not
include aggregate lifetime or annual dollar limits.
Medical/surgical benefits means benefits for medical or surgical
services, as defined under the terms of the plan or health insurance
coverage, but does not include mental health or substance use disorder
benefits. Any condition defined by the plan as being or as not being a
medical/surgical condition must be defined to be consistent with
generally recognized independent standards of current medical practice
(for example, the most current version of the International
Classification of Diseases (ICD) or State guidelines).
Mental health benefits means benefits with respect to services for
mental health conditions, as defined under the terms of the plan and in
accordance with applicable Federal and State law. Any condition defined
by the plan as being or as not being a mental health condition must be
defined to be consistent with generally recognized independent
standards of current medical practice (for example, the most current
version of the Diagnostic and Statistical Manual of Mental Disorders
(DSM), the most current version of the ICD, or State guidelines).
Substance use disorder benefits means benefits with respect to
services for substance use disorders, as defined under the terms of the
plan and in accordance with applicable Federal and State law. Any
disorder defined by the plan as being or as not being a substance use
disorder must be defined to be consistent with generally recognized
independent standards of current medical practice (for example, the
most current version of the DSM, the most current version of the ICD,
or State guidelines).
Treatment limitations include limits on benefits based on the
frequency of treatment, number of visits, days of coverage, days in a
waiting period, or other similar limits on the scope or duration of
treatment. Treatment limitations include both quantitative treatment
limitations, which are expressed numerically (such as 50 outpatient
visits per year), and nonquantitative treatment limitations, which
otherwise limit the scope or duration of benefits for treatment under a
plan. (See paragraph (c)(4)(ii) of this section for an illustrative
list of nonquantitative treatment limitations.) A permanent exclusion
of all benefits for a particular condition or disorder, however, is not
a treatment limitation.
(b) Parity requirements with respect to aggregate lifetime and
annual dollar limits--(1)--General--(i) General parity requirement. A
group health plan (or health insurance coverage offered by an issuer in
connection with a group health plan) that provides both medical/
surgical benefits and mental health or substance use disorder benefits
must comply with paragraph (b)(2), (b)(3), or (b)(6) of this section.
(ii) Exception. The rule in paragraph (b)(1)(i) of this section
does not apply if a plan (or health insurance coverage) satisfies the
requirements of paragraph (f) or (g) of this section (relating to
exemptions for small employers and for increased cost).
(2) Plan with no limit or limits on less than one-third of all
medical/surgical benefits. If a plan (or health insurance coverage)
does not include an aggregate lifetime or annual dollar limit on any
medical/surgical benefits or includes an aggregate lifetime or annual
dollar limit that applies to less than one-third of all medical/
surgical benefits, it may not impose an aggregate lifetime or annual
dollar limit, respectively, on mental health or substance use disorder
benefits.
(3) Plan with a limit on at least two-thirds of all medical/
surgical benefits. If a plan (or health insurance coverage) includes an
aggregate lifetime or annual dollar limit on at least two-thirds of all
medical/surgical benefits, it must either--
(i) Apply the aggregate lifetime or annual dollar limit both to the
medical/surgical benefits to which the limit would otherwise apply and
to mental health or substance use disorder benefits in a manner that
does not distinguish between the medical/surgical benefits and mental
health or substance use disorder benefits; or
(ii) Not include an aggregate lifetime or annual dollar limit on
mental health or substance use disorder benefits that is less than the
aggregate lifetime or annual dollar limit, respectively, on medical/
surgical benefits. (For cumulative limits other than aggregate lifetime
or annual dollar limits, see paragraph (c)(3)(v) of this section
prohibiting separately accumulating cumulative financial requirements
or cumulative quantitative treatment limitations.)
(4) Examples. The rules of paragraphs (b)(2) and (b)(3) of this
section are illustrated by the following examples:
Example 1. (i) Facts. A group health plan has no annual limit on
medical/surgical benefits and a $10,000 annual limit on mental
health and substance use disorder benefits. To comply with the
requirements of this paragraph (b), the plan sponsor is considering
each of the following options--
(A) Eliminating the plan's annual dollar limit on mental health
and substance use disorder benefits;
(B) Replacing the plan's annual dollar limit on mental health
and substance use disorder benefits with a $500,000 annual limit on
all benefits (including medical/surgical and mental health and
substance use disorder benefits); and
(C) Replacing the plan's annual dollar limit on mental health
and substance use disorder benefits with a $250,000 annual limit on
medical/surgical benefits and a $250,000 annual limit on mental
health and substance use disorder benefits.
(ii) Conclusion. In this Example 1, each of the three options
being considered by the plan sponsor would comply with the
requirements of this paragraph (b).
Example 2. (i) Facts. A plan has a $100,000 annual limit on
medical/surgical inpatient benefits and a $50,000 annual limit on
medical/surgical outpatient benefits. To comply with the parity
requirements of this paragraph (b), the plan sponsor is considering
each of the following options--
(A) Imposing a $150,000 annual limit on mental health and
substance use disorder benefits; and
(B) Imposing a $100,000 annual limit on mental health and
substance use disorder inpatient benefits and a $50,000 annual limit
on mental health and substance use disorder outpatient benefits.
(ii) Conclusion. In this Example 2, each option under
consideration by the plan sponsor would comply with the requirements
of this section.
(5) Determining one-third and two-thirds of all medical/surgical
benefits. For purposes of this paragraph (b), the determination of
whether the portion of
[[Page 5446]]
medical/surgical benefits subject to an aggregate lifetime or annual
dollar limit represents one-third or two-thirds of all medical/surgical
benefits is based on the dollar amount of all plan payments for
medical/surgical benefits expected to be paid under the plan for the
plan year (or for the portion of the plan year after a change in plan
benefits that affects the applicability of the aggregate lifetime or
annual dollar limits). Any reasonable method may be used to determine
whether the dollar amount expected to be paid under the plan will
constitute one-third or two-thirds of the dollar amount of all plan
payments for medical/surgical benefits.
(6) Plan not described in paragraph (b)(2) or (b)(3) of this
section--(i) In general. A group health plan (or health insurance
coverage) that is not described in paragraph (b)(2) or (b)(3) of this
section with respect to aggregate lifetime or annual dollar limits on
medical/surgical benefits, must either--
(A) Impose no aggregate lifetime or annual dollar limit, as
appropriate, on mental health or substance use disorder benefits; or
(B) Impose an aggregate lifetime or annual dollar limit on mental
health or substance use disorder benefits that is no less than an
average limit calculated for medical/surgical benefits in the following
manner. The average limit is calculated by taking into account the
weighted average of the aggregate lifetime or annual dollar limits, as
appropriate, that are applicable to the categories of medical/surgical
benefits. Limits based on delivery systems, such as inpatient/
outpatient treatment or normal treatment of common, low-cost conditions
(such as treatment of normal births), do not constitute categories for
purposes of this paragraph (b)(6)(i)(B). In addition, for purposes of
determining weighted averages, any benefits that are not within a
category that is subject to a separately-designated dollar limit under
the plan are taken into account as a single separate category by using
an estimate of the upper limit on the dollar amount that a plan may
reasonably be expected to incur with respect to such benefits, taking
into account any other applicable restrictions under the plan.
(ii) Weighting. For purposes of this paragraph (b)(6), the
weighting applicable to any category of medical/surgical benefits is
determined in the manner set forth in paragraph (b)(5) of this section
for determining one-third or two-thirds of all medical/surgical
benefits.
(iii) Example. The rules of this paragraph (b)(6) are illustrated
by the following example:
Example. (i) Facts. A group health plan that is subject to the
requirements of this section includes a $100,000 annual limit on
medical/surgical benefits related to cardio-pulmonary diseases. The
plan does not include an annual dollar limit on any other category
of medical/surgical benefits. The plan determines that 40% of the
dollar amount of plan payments for medical/surgical benefits are
related to cardio-pulmonary diseases. The plan determines that
$1,000,000 is a reasonable estimate of the upper limit on the dollar
amount that the plan may incur with respect to the other 60% of
payments for medical/surgical benefits.
(ii) Conclusion. In this Example, the plan is not described in
paragraph (b)(3) of this section because there is not one annual
dollar limit that applies to at least two-thirds of all medical/
surgical benefits. Further, the plan is not described in paragraph
(b)(2) of this section because more than one-third of all medical/
surgical benefits are subject to an annual dollar limit. Under this
paragraph (b)(6), the plan sponsor can choose either to include no
annual dollar limit on mental health or substance use disorder
benefits, or to include an annual dollar limit on mental health or
substance use disorder benefits that is not less than the weighted
average of the annual dollar limits applicable to each category of
medical/surgical benefits. In this example, the minimum weighted
average annual dollar limit that can be applied to mental health or
substance use disorder benefits is $640,000 (40% x $100,000 + 60% x
$1,000,000 = $640,000).
(c) Parity requirements with respect to financial requirements and
treatment limitations--(1) Clarification of terms--(i) Classification
of benefits. When reference is made in this paragraph (c) to a
classification of benefits, the term ``classification'' means a
classification as described in paragraph (c)(2)(ii) of this section.
(ii) Type of financial requirement or treatment limitation. When
reference is made in this paragraph (c) to a type of financial
requirement or treatment limitation, the reference to type means its
nature. Different types of financial requirements include deductibles,
copayments, coinsurance, and out-of-pocket maximums. Different types of
quantitative treatment limitations include annual, episode, and
lifetime day and visit limits. See paragraph (c)(4)(ii) of this section
for an illustrative list of nonquantitative treatment limitations.
(iii) Level of a type of financial requirement or treatment
limitation. When reference is made in this paragraph (c) to a level of
a type of financial requirement or treatment limitation, level refers
to the magnitude of the type of financial requirement or treatment
limitation. For example, different levels of coinsurance include 20
percent and 30 percent; different levels of a copayment include $15 and
$20; different levels of a deductible include $250 and $500; and
different levels of an episode limit include 21 inpatient days per
episode and 30 inpatient days per episode.
(iv) Coverage unit. When reference is made in this paragraph (c) to
a coverage unit, coverage unit refers to the way in which a plan (or
health insurance coverage) groups individuals for purposes of
determining benefits, or premiums or contributions. For example,
different coverage units include self-only, family, and employee-plus-
spouse.
(2) General parity requirement--(i) General rule. A group health
plan (or health insurance coverage offered by an issuer in connection
with a group health plan) that provides both medical/surgical benefits
and mental health or substance use disorder benefits may not apply any
financial requirement or treatment limitation to mental health or
substance use disorder benefits in any classification that is more
restrictive than the predominant financial requirement or treatment
limitation of that type applied to substantially all medical/surgical
benefits in the same classification. Whether a financial requirement or
treatment limitation is a predominant financial requirement or
treatment limitation that applies to substantially all medical/surgical
benefits in a classification is determined separately for each type of
financial requirement or treatment limitation. The application of the
rules of this paragraph (c)(2) to financial requirements and
quantitative treatment limitations is addressed in paragraph (c)(3) of
this section; the application of the rules of this paragraph (c)(2) to
nonquantitative treatment limitations is addressed in paragraph (c)(4)
of this section.
(ii) Classifications of benefits used for applying rules--(A) In
general. If a plan (or health insurance coverage) provides mental
health or substance use disorder benefits in any classification of
benefits described in this paragraph (c)(2)(ii), mental health or
substance use disorder benefits must be provided in every
classification in which medical/surgical benefits are provided. In
determining the classification in which a particular benefit belongs, a
plan (or health insurance issuer) must apply the same standards to
medical/surgical benefits and to mental health or substance use
disorder benefits. To the extent that a plan (or health insurance
coverage) provides benefits in a classification and imposes any
separate financial requirement or treatment limitation (or separate
level of a financial requirement or treatment limitation) for benefits
in
[[Page 5447]]
the classification, the rules of this paragraph (c) apply separately
with respect to that classification for all financial requirements or
treatment limitations. The following classifications of benefits are
the only classifications used in applying the rules of this paragraph
(c):
(1) Inpatient, in-network. Benefits furnished on an inpatient basis
and within a network of providers established or recognized under a
plan or health insurance coverage.
(2) Inpatient, out-of-network. Benefits furnished on an inpatient
basis and outside any network of providers established or recognized
under a plan or health insurance coverage. This classification includes
inpatient benefits under a plan (or health insurance coverage) that has
no network of providers.
(3) Outpatient, in-network. Benefits furnished on an outpatient
basis and within a network of providers established or recognized under
a plan or health insurance coverage.
(4) Outpatient, out-of-network. Benefits furnished on an outpatient
basis and outside any network of providers established or recognized
under a plan or health insurance coverage. This classification includes
outpatient benefits under a plan (or health insurance coverage) that
has no network of providers.
(5) Emergency care. Benefits for emergency care.
(6) Prescription drugs. Benefits for prescription drugs. See
special rules for multi-tiered prescription drug benefits in paragraph
(c)(3)(iii) of this section.
(B) Application to out-of-network providers. See paragraph
(c)(2)(ii)(A) of this section, under which a plan (or health insurance
coverage) that provides mental health or substance use disorder
benefits in any classification of benefits must provide mental health
or substance use disorder benefits in every classification in which
medical/surgical benefits are provided, including out-of-network
classifications.
(C) Examples. The rules of this paragraph (c)(2)(ii) are
illustrated by the following examples. In each example, the group
health plan is subject to the requirements of this section and provides
both medical/surgical benefits and mental health and substance use
disorder benefits.
Example 1. (i) Facts. A group health plan offers inpatient and
outpatient benefits and does not contract with a network of
providers. The plan imposes a $500 deductible on all benefits. For
inpatient medical/surgical benefits, the plan imposes a coinsurance
requirement. For outpatient medical/surgical benefits, the plan
imposes copayments. The plan imposes no other financial requirements
or treatment limitations.
(ii) Conclusion. In this Example 1, because the plan has no
network of providers, all benefits provided are out-of-network.
Because inpatient, out-of-network medical/surgical benefits are
subject to separate financial requirements from outpatient, out-of-
network medical/surgical benefits, the rules of this paragraph (c)
apply separately with respect to any financial requirements and
treatment limitations, including the deductible, in each
classification.
Example 2. (i) Facts. A plan imposes a $500 deductible on all
benefits. The plan has no network of providers. The plan generally
imposes a 20 percent coinsurance requirement with respect to all
benefits, without distinguishing among inpatient, outpatient,
emergency, or prescription drug benefits. The plan imposes no other
financial requirements or treatment limitations.
(ii) Conclusion. In this Example 2, because the plan does not
impose separate financial requirements (or treatment limitations)
based on classification, the rules of this paragraph (c) apply with
respect to the deductible and the coinsurance across all benefits.
Example 3. (i) Facts. Same facts as Example 2, except the plan
exempts emergency care benefits from the 20 percent coinsurance
requirement. The plan imposes no other financial requirements or
treatment limitations.
(ii) Conclusion. In this Example 3, because the plan imposes
separate financial requirements based on classifications, the rules
of this paragraph (c) apply with respect to the deductible and the
coinsurance separately for--
(A) Benefits in the emergency classification; and
(B) All other benefits.
Example 4. (i) Facts. Same facts as Example 2, except the plan
also imposes a preauthorization requirement for all inpatient
treatment in order for benefits to be paid. No such requirement
applies to outpatient treatment.
(ii) Conclusion. In this Example 4, because the plan has no
network of providers, all benefits provided are out-of-network.
Because the plan imposes a separate treatment limitation based on
classifications, the rules of this paragraph (c) apply with respect
to the deductible and coinsurance separately for--
(A) Inpatient, out-of-network benefits; and
(B) All other benefits.
(3) Financial requirements and quantitative treatment limitations--
(i) Determining ``substantially all'' and ``predominant''--(A)
Substantially all. For purposes of this paragraph (c), a type of
financial requirement or quantitative treatment limitation is
considered to apply to substantially all medical/surgical benefits in a
classification of benefits if it applies to at least two-thirds of all
medical/surgical benefits in that classification. (For this purpose,
benefits expressed as subject to a zero level of a type of financial
requirement are treated as benefits not subject to that type of
financial requirement, and benefits expressed as subject to a
quantitative treatment limitation that is unlimited are treated as
benefits not subject to that type of quantitative treatment
limitation.) If a type of financial requirement or quantitative
treatment limitation does not apply to at least two-thirds of all
medical/surgical benefits in a classification, then that type cannot be
applied to mental health or substance use disorder benefits in that
classification.
(B) Predominant--(1) If a type of financial requirement or
quantitative treatment limitation applies to at least two-thirds of all
medical/surgical benefits in a classification as determined under
paragraph (c)(3)(i)(A) of this section, the level of the financial
requirement or quantitative treatment limitation that is considered the
predominant level of that type in a classification of benefits is the
level that applies to more than one-half of medical/surgical benefits
in that classification subject to the financial requirement or
quantitative treatment limitation.
(2) If, with respect to a type of financial requirement or
quantitative treatment limitation that applies to at least two-thirds
of all medical/surgical benefits in a classification, there is no
single level that applies to more than one-half of medical/surgical
benefits in the classification subject to the financial requirement or
quantitative treatment limitation, the plan (or health insurance
issuer) may combine levels until the combination of levels applies to
more than one-half of medical/surgical benefits subject to the
financial requirement or quantitative treatment limitation in the
classification. The least restrictive level within the combination is
considered the predominant level of that type in the classification.
(For this purpose, a plan may combine the most restrictive levels
first, with each less restrictive level added to the combination until
the combination applies to more than one-half of the benefits subject
to the financial requirement or treatment limitation.)
(C) Portion based on plan payments. For purposes of this paragraph
(c), the determination of the portion of medical/surgical benefits in a
classification of benefits subject to a financial requirement or
quantitative treatment limitation (or subject to any level of a
financial requirement or quantitative treatment limitation) is based on
the dollar amount of all plan payments for medical/surgical benefits in
the classification expected to be paid under
[[Page 5448]]
the plan for the plan year (or for the portion of the plan year after a
change in plan benefits that affects the applicability of the financial
requirement or quantitative treatment limitation).
(D) Clarifications for certain threshold requirements. For any
deductible, the dollar amount of plan payments includes all plan
payments with respect to claims that would be subject to the deductible
if it had not been satisfied. For any out-of-pocket maximum, the dollar
amount of plan payments includes all plan payments associated with out-
of-pocket payments that are taken into account towards the out-of-
pocket maximum as well as all plan payments associated with out-of-
pocket payments that would have been made towards the out-of-pocket
maximum if it had not been satisfied. Similar rules apply for any other
thresholds at which the rate of plan payment changes.
(E) Determining the dollar amount of plan payments. Subject to
paragraph (c)(3)(i)(D) of this section, any reasonable method may be
used to determine the dollar amount expected to be paid under a plan
for medical/surgical benefits subject to a financial requirement or
quantitative treatment limitation (or subject to any level of a
financial requirement or quantitative treatment limitation).
(ii) Application to different coverage units. If a plan (or health
insurance coverage) applies different levels of a financial requirement
or quantitative treatment limitation to different coverage units in a
classification of medical/surgical benefits, the predominant level that
applies to substantially all medical/surgical benefits in the
classification is determined separately for each coverage unit.
(iii) Special rule for multi-tiered prescription drug benefits. If
a plan (or health insurance coverage) applies different levels of
financial requirements to different tiers of prescription drug benefits
based on reasonable factors determined in accordance with the rules in
paragraph (c)(4)(i) of this section (relating to requirements for
nonquantitative treatment limitations) and without regard to whether a
drug is generally prescribed with respect to medical/surgical benefits
or with respect to mental health or substance use disorder benefits,
the plan (or health insurance coverage) satisfies the parity
requirements of this paragraph (c) with respect to prescription drug
benefits. Reasonable factors include cost, efficacy, generic versus
brand name, and mail order versus pharmacy pick-up.
(iv) Examples. The rules of paragraphs (c)(3)(i), (c)(3)(ii), and
(c)(3)(iii) of this section are illustrated by the following examples.
In each example, the group health plan is subject to the requirements
of this section and provides both medical/surgical benefits and mental
health and substance use disorder benefits.
Example 1. (i) Facts. For inpatient, out-of-network medical/
surgical benefits, a group health plan imposes five levels of
coinsurance. Using a reasonable method, the plan projects its
payments for the upcoming year as follows:
--------------------------------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------------
Coinsurance rate............ 0% 10% 15% 20% 30% Total
Projected payments.......... $200x $100x $450x $100x $150x $1,000x
Percent of total plan costs. 20% 10% 45% 10% 15% ................
Percent subject to N/A 12.5% 56.25% 12.5% 18.75% ................
coinsurance level. (100x/800x) (450x/800x) (100x/800x) (150x/800x)
--------------------------------------------------------------------------------------------------------------------------------------------------------
The plan projects plan costs of $800x to be subject to coinsurance
($100x + $450x + $100x + $150x = $800x). Thus, 80 percent ($800x/
$1,000x) of the benefits are projected to be subject to coinsurance,
and 56.25 percent of the benefits subject to coinsurance are
projected to be subject to the 15 percent coinsurance level.
(ii) Conclusion. In this Example 1, the two-thirds threshold of
the substantially all standard is met for coinsurance because 80
percent of all inpatient, out-of-network medical/surgical benefits
are subject to coinsurance. Moreover, the 15 percent coinsurance is
the predominant level because it is applicable to more than one-half
of inpatient, out-of-network medical/surgical benefits subject to
the coinsurance requirement. The plan may not impose any level of
coinsurance with respect to inpatient, out-of-network mental health
or substance use disorder benefits that is more restrictive than the
15 percent level of coinsurance.
Example 2. (i) Facts. For outpatient, in-network medical/
surgical benefits, a plan imposes five different copayment levels.
Using a reasonable method, the plan projects payments for the
upcoming year as follows:
--------------------------------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------------
Copayment amount............ $0 $10 $15 $20 $50 Total
Projected payments.......... $200x $200x $200x $300x $100x $1,000x
Percent of total plan costs. 20% 20% 20% 30% 10% ................
Percent subject to N/A 25% 25% 37.5% 12.5% ................
copayments. (200x/800x) (200x/800x) (300x/800x) (100x/800x)
--------------------------------------------------------------------------------------------------------------------------------------------------------
The plan projects plan costs of $800x to be subject to copayments
($200x + $200x + $300x + $100x = $800x). Thus, 80 percent ($800x/
$1,000x) of the benefits are projected to be subject to a copayment.
(ii) Conclusion. In this Example 2, the two-thirds threshold of
the substantially all standard is met for copayments because 80
percent of all outpatient, in-network medical/surgical benefits are
subject to a copayment. Moreover, there is no single level that
applies to more than one-half of medical/surgical benefits in the
classification subject to a copayment (for the $10 copayment, 25%;
for the $15 copayment, 25%; for the $20 copayment, 37.5%; and for
the $50 copayment, 12.5%). The plan can combine any levels of
copayment, including the highest levels, to determine the
predominant level that can be applied to mental health or substance
use disorder benefits. If the plan combines the highest levels of
copayment, the combined projected payments for the two highest
copayment levels, the $50 copayment and the $20 copayment, are not
more than one-half of the outpatient, in-network medical/surgical
benefits subject to a copayment because they are exactly one-half
($300x + $100x = $400x; $400x/$800x = 50%). The combined projected
payments for the three highest copayment levels--the $50 copayment,
the $20 copayment, and the $15 copayment--are more than one-half of
the outpatient, in-network medical/surgical benefits subject to the
copayments ($100x + $300x + $200x = $600x; $600x/$800x = 75%). Thus,
the plan may not impose any copayment on outpatient, in-network
mental health or substance use disorder benefits that is more
restrictive than the least restrictive copayment in the combination,
the $15 copayment.
Example 3. (i) Facts. A plan imposes a $250 deductible on all
medical/surgical benefits for self-only coverage and a $500
deductible on all medical/surgical benefits for family coverage. The
plan has no network of providers. For all medical/surgical benefits,
the plan imposes a coinsurance requirement. The plan imposes no
other
[[Page 5449]]
financial requirements or treatment limitations.
(ii) Conclusion. In this Example 3, because the plan has no
network of providers, all benefits are provided out-of-network.
Because self-only and family coverage are subject to different
deductibles, whether the deductible applies to substantially all
medical/surgical benefits is determined separately for self-only
medical/surgical benefits and family medical/surgical benefits.
Because the coinsurance is applied without regard to coverage units,
the predominant coinsurance that applies to substantially all
medical/surgical benefits is determined without regard to coverage
units.
Example 4. (i) Facts. A plan applies the following financial
requirements for prescription drug benefits. The requirements are
applied without regard to whether a drug is generally prescribed
with respect to medical/surgical benefits or with respect to mental
health or substance use disorder benefits. Moreover, the process for
certifying a particular drug as ``generic'', ``preferred brand
name'', ``non-preferred brand name'', or ``specialty'' complies with
the rules of paragraph (c)(4)(i) of this section (relating to
requirements for nonquantitative treatment limitations).
----------------------------------------------------------------------------------------------------------------
Tier 1 Tier 2 Tier 3 Tier 4
---------------------------------------------------------------------------
Non-preferred
Tier description brand name drugs
Generic drugs Preferred brand (which may have Specialty drugs
name drugs Tier 1 or Tier 2
alternatives)
----------------------------------------------------------------------------------------------------------------
Percent paid by plan................ 90% 80% 60% 50%
----------------------------------------------------------------------------------------------------------------
(ii) Conclusion. In this Example 4, the financial requirements
that apply to prescription drug benefits are applied without regard
to whether a drug is generally prescribed with respect to medical/
surgical benefits or with respect to mental health or substance use
disorder benefits; the process for certifying drugs in different
tiers complies with paragraph (c)(4) of this section; and the bases
for establishing different levels or types of financial requirements
are reasonable. The financial requirements applied to prescription
drug benefits do not violate the parity requirements of this
paragraph (c)(3).
(v) No separate cumulative financial requirements or cumulative
quantitative treatment limitations--(A) A group health plan (or health
insurance coverage offered in connection with a group health plan) may
not apply any cumulative financial requirement or cumulative
quantitative treatment limitation for mental health or substance use
disorder benefits in a classification that accumulates separately from
any established for medical/surgical benefits in the same
classification.
(B) The rules of this paragraph (c)(3)(v) are illustrated by the
following examples:
Example 1. (i) Facts. A group health plan imposes a combined
annual $500 deductible on all medical/surgical, mental health, and
substance use disorder benefits.
(ii) Conclusion. In this Example 1, the combined annual
deductible complies with the requirements of this paragraph
(c)(3)(v).
Example 2. (i) Facts. A plan imposes an annual $250 deductible
on all medical/surgical benefits and a separate annual $250
deductible on all mental health and substance use disorder benefits.
(ii) Conclusion. In this Example 2, the separate annual
deductible on mental health and substance use disorder benefits
violates the requirements of this paragraph (c)(3)(v).
Example 3. (i) Facts. A plan imposes an annual $300 deductible
on all medical/surgical benefits and a separate annual $100
deductible on all mental health or substance use disorder benefits.
(ii) Conclusion. In this Example 3, the separate annual
deductible on mental health and substance use disorder benefits
violates the requirements of this paragraph (c)(3)(v).
Example 4. (i) Facts. A plan generally imposes a combined annual
$500 deductible on all benefits (both medical/surgical benefits and
mental health and substance use disorder benefits) except
prescription drugs. Certain benefits, such as preventive care, are
provided without regard to the deductible. The imposition of other
types of financial requirements or treatment limitations varies with
each classification. Using reasonable methods, the plan projects its
payments for medical/surgical benefits in each classification for
the upcoming year as follows:
----------------------------------------------------------------------------------------------------------------
Benefits subject Percent subject
Classification to deductible Total benefits to deductible
----------------------------------------------------------------------------------------------------------------
Inpatient, in-network..................................... $1,800x $2,000x 90
Inpatient, out-of-network................................. 1,000x 1,000x 100
Outpatient, in-network.................................... 1,400x 2,000x 70
Outpatient, out-of-network................................ 1,880x 2,000x 94
Emergency care............................................ 300x 500x 60
----------------------------------------------------------------------------------------------------------------
(ii) Conclusion. In this Example 4, the two-thirds threshold of
the substantially all standard is met with respect to each
classification except emergency care because in each of those other
classifications at least two-thirds of medical/surgical benefits are
subject to the $500 deductible. Moreover, the $500 deductible is the
predominant level in each of those other classifications because it
is the only level. However, emergency care mental health and
substance use disorder benefits cannot be subject to the $500
deductible because it does not apply to substantially all emergency
care medical/surgical benefits.
(4) Nonquantitative treatment limitations--(i) General rule. A
group health plan (or health insurance coverage) may not impose a
nonquantitative treatment limitation with respect to mental health or
substance use disorder benefits in any classification unless, under the
terms of the plan (or health insurance coverage) as written and in
operation, any processes, strategies, evidentiary standards, or other
factors used in applying the nonquantitative treatment limitation to
mental health or substance use disorder benefits in the classification
are comparable to, and are applied no more stringently than, the
processes, strategies, evidentiary standards, or other factors used in
applying the limitation with respect to medical surgical/benefits in
the classification, except to the extent that recognized clinically
appropriate standards of care may permit a difference.
(ii) Illustrative list of nonquantitative treatment limitations.
Nonquantitative treatment limitations include--
(A) Medical management standards limiting or excluding benefits
based on
[[Page 5450]]
medical necessity or medical appropriateness, or based on whether the
treatment is experimental or investigative;
(B) Formulary design for prescription drugs;
(C) Standards for provider admission to participate in a network,
including reimbursement rates;
(D) Plan methods for determining usual, customary, and reasonable
charges;
(E) Refusal to pay for higher-cost therapies until it can be shown
that a lower-cost therapy is not effective (also known as fail-first
policies or step therapy protocols); and
(F) Exclusions based on failure to complete a course of treatment.
(iii) Examples. The rules of this paragraph (c)(4) are illustrated
by the following examples. In each example, the group health plan is
subject to the requirements of this section and provides both medical/
surgical benefits and mental health and substance use disorder
benefits.
Example 1. (i) Facts. A group health plan limits benefits to
treatment that is medically necessary. The plan requires concurrent
review for inpatient, in-network mental health and substance use
disorder benefits but does not require it for any inpatient, in-
network medical/surgical benefits. The plan conducts retrospective
review for inpatient, in-network medical/surgical benefits.
(ii) Conclusion. In this Example 1, the plan violates the rules
of this paragraph (c)(4). Although the same nonquantitative
treatment limitation--medical necessity--applies to both mental
health and substance use disorder benefits and to medical/surgical
benefits for inpatient, in-network services, the concurrent review
process does not apply to medical/surgical benefits. The concurrent
review process is not comparable to the retrospective review
process. While such a difference might be permissible in certain
individual cases based on recognized clinically appropriate
standards of care, it is not permissible for distinguishing between
all medical/surgical benefits and all mental health or substance use
disorder benefits.
Example 2. (i) Facts. A plan requires prior approval that a
course of treatment is medically necessary for outpatient, in-
network medical/surgical, mental health, and substance use disorder
benefits. For mental health and substance use disorder treatments
that do not have prior approval, no benefits will be paid; for
medical/surgical treatments that do not have prior approval, there
will only be a 25 percent reduction in the benefits the plan would
otherwise pay.
(ii) Conclusion. In this Example 2, the plan violates the rules
of this paragraph (c)(4). Although the same nonquantitative
treatment limitation--medical necessity--is applied both to mental
health and substance use disorder benefits and to medical/surgical
benefits for outpatient, in-network services, the penalty for
failure to obtain prior approval for mental health and substance use
disorder benefits is not comparable to the penalty for failure to
obtain prior approval for medical/surgical benefits.
Example 3. (i) Facts. A plan generally covers medically
appropriate treatments. For both medical/surgical benefits and
mental health and substance use disorder benefits, evidentiary
standards used in determining whether a treatment is medically
appropriate (such as the number of visits or days of coverage) are
based on recommendations made by panels of experts with appropriate
training and experience in the fields of medicine involved. The
evidentiary standards are applied in a manner that may differ based
on clinically appropriate standards of care for a condition.
(ii) Conclusion. In this Example 3, the plan complies with the
rules of this paragraph (c)(4) because the nonquantitative treatment
limitation--medical appropriateness--is the same for both medical/
surgical benefits and mental health and substance use disorder
benefits, and the processes for developing the evidentiary standards
and the application of them to mental health and substance use
disorder benefits are comparable to and are applied no more
stringently than for medical/surgical benefits. This is the result
even if, based on clinically appropriate standards of care, the
application of the evidentiary standards does not result in similar
numbers of visits, days of coverage, or other benefits utilized for
mental health conditions or substance use disorders as it does for
any particular medical/surgical condition.
Example 4. (i) Facts. A plan generally covers medically
appropriate treatments. In determining whether prescription drugs
are medically appropriate, the plan automatically excludes coverage
for antidepressant drugs that are given a black box warning label by
the Food and Drug Administration (indicating the drug carries a
significant risk of serious adverse effects). For other drugs with a
black box warning (including those prescribed for other mental
health conditions and substance use disorders, as well as for
medical/surgical conditions), the plan will provide coverage if the
prescribing physician obtains authorization from the plan that the
drug is medically appropriate for the individual, based on
clinically appropriate standards of care.
(ii) Conclusion. In this Example 4, the plan violates the rules
of this paragraph (c)(4). Although the same nonquantitative
treatment limitation--medical appropriateness--is applied to both
mental health and substance use disorder benefits and medical/
surgical benefits, the plan's unconditional exclusion of
antidepressant drugs given a black box warning is not comparable to
the conditional exclusion for other drugs with a black box warning.
Example 5. (i) Facts. An employer maintains both a major medical
program and an employee assistance program (EAP). The EAP provides,
among other benefits, a limited number of mental health or substance
use disorder counseling sessions. Participants are eligible for
mental health or substance use disorder benefits under the major
medical program only after exhausting the counseling sessions
provided by the EAP. No similar exhaustion requirement applies with
respect to medical/surgical benefits provided under the major
medical program.
(ii) Conclusion. In this Example 5, limiting eligibility for
mental health and substance use disorder benefits only after EAP
benefits are exhausted is a nonquantitative treatment limitation
subject to the parity requirements of this paragraph (c). Because no
comparable requirement applies to medical/surgical benefits, the
requirement may not be applied to mental health or substance use
disorder benefits.
(5) Exemptions. The rules of this paragraph (c) do not apply if a
group health plan (or health insurance coverage) satisfies the
requirements of paragraph (f) or (g) of this section (relating to
exemptions for small employers and for increased cost).
(d) Availability of plan information--(1) Criteria for medical
necessity determinations. The criteria for medical necessity
determinations made under a group health plan with respect to mental
health or substance use disorder benefits (or health insurance coverage
offered in connection with the plan with respect to such benefits) must
be made available by the plan administrator (or the health insurance
issuer offering such coverage) to any current or potential participant,
beneficiary, or contracting provider upon request.
(2) Reason for denial. The reason for any denial under a non-
Federal governmental plan (or health insurance coverage offered in
connection with such plan) of reimbursement or payment for services
with respect to mental health or substance use disorder benefits in the
case of any participant or beneficiary must be made available within a
reasonable time and in a reasonable manner by the plan administrator
(or the health insurance issuer offering such coverage) to the
participant or beneficiary upon request. For this purpose, a non-
Federal governmental plan (or health insurance coverage offered in
connection with such plan) that provides the reason for the claim
denial in a form and manner consistent with the requirements of 29 CFR
2560.503-1 for group health plans complies with the requirements of
this paragraph (d)(2).
(e) Applicability--(1) Group health plans. The requirements of this
section apply to a group health plan offering medical/surgical benefits
and mental health or substance use disorder benefits. If, under an
arrangement or arrangements to provide medical care benefits by an
employer or employee organization (including for this purpose a joint
board of trustees of a multiemployer trust affiliated with one or more
multiemployer plans), any participant (or beneficiary) can
[[Page 5451]]
simultaneously receive coverage for medical/surgical benefits and
coverage for mental health or substance use disorder benefits, then the
requirements of this section (including the exemption provisions in
paragraph (g) of this section) apply separately with respect to each
combination of medical/surgical benefits and of mental health or
substance use disorder benefits that any participant (or beneficiary)
can simultaneously receive from that employer's or employee
organization's arrangement or arrangements to provide medical care
benefits, and all such combinations are considered for purposes of this
section to be a single group health plan.
(2) Health insurance issuers. The requirements of this section
apply to a health insurance issuer offering health insurance coverage
for mental health or substance use disorder benefits in connection with
a group health plan subject to paragraph (e)(1) of this section.
(3) Scope. This section does not--
(i) Require a group health plan (or health insurance issuer
offering coverage in connection with a group health plan) to provide
any mental health benefits or substance use disorder benefits, and the
provision of benefits by a plan (or health insurance coverage) for one
or more mental health conditions or substance use disorders does not
require the plan (or health insurance coverage) under this section to
provide benefits for any other mental health condition or substance use
disorder; or
(ii) Affect the terms and conditions relating to the amount,
duration, or scope of mental health or substance use disorder benefits
under the plan (or health insurance coverage) except as specifically
provided in paragraphs (b) and (c) of this section.
(f) Small employer exemption--(1) In general. The requirements of
this section do not apply to a group health plan (or health insurance
issuer offering coverage in connection with a group health plan) for a
plan year of a small employer. For purposes of this paragraph (f), the
term small employer means, in connection with a group health plan with
respect to a calendar year and a plan year, an employer who employed an
average of at least two but not more than 50 employees on business days
during the preceding calendar year and who employs at least two
employees on the first day of the plan year (except that for purposes
of this paragraph, a small employer shall include an employer with one
employee in the case of an employer residing in a State that permits
small groups to include a single individual). See also section 2721(a)
of the PHS Act and Sec. 146.145(b) of this Part, which provide that
this section (and certain other sections) does not apply to any group
health plan (and health insurance issuer offering coverage in
connection with a group health plan) for any plan year if, on the first
day of the plan year, the plan has fewer than two participants who are
current employees.
(2) Rules in determining employer size. For purposes of paragraph
(f)(1) of this section--
(i) All persons treated as a single employer under subsections (b),
(c), (m), and (o) of section 414 of the Internal Revenue Code of 1986
(26 U.S.C. 414) are treated as one employer;
(ii) If an employer was not in existence throughout the preceding
calendar year, whether it is a small employer is determined based on
the average number of employees the employer reasonably expects to
employ on business days during the current calendar year; and
(iii) Any reference to an employer for purposes of the small
employer exemption includes a reference to a predecessor of the
employer.
(g) Increased cost exemption--[Reserved]
(h) Sale of nonparity health insurance coverage. A health insurance
issuer may not sell a policy, certificate, or contract of insurance
that fails to comply with paragraph (b) or (c) of this section, except
to a plan for a year for which the plan is exempt from the requirements
of this section because the plan meets the requirements of paragraph
(f) or (g) of this section.
(i) Applicability dates--(1) In general. Except as provided in
paragraph (i)(2) of this section, the requirements of this section are
applicable for plan years beginning on or after July 1, 2010.
(2) Special effective date for certain collectively-bargained
plans. For a group health plan maintained pursuant to one or more
collective bargaining agreements ratified before October 3, 2008, the
requirements of this section do not apply to the plan (or health
insurance coverage offered in connection with the plan) for plan years
beginning before the later of either--
(i) The date on which the last of the collective bargaining
agreements relating to the plan terminates (determined without regard
to any extension agreed to after October 3, 2008); or
(ii) July 1, 2010.
Approved: November 12, 2009.
Charlene Frizzera,
Acting Administrator, Centers for Medicare & Medicaid Services.
Approved: December 2, 2009.
Kathleen Sebelius,
Secretary.
[FR Doc. 2010-2167 Filed 1-29-10; 8:45 am]
BILLING CODE 4830-01-P; 4510-29-P; 4120-01-P