The Obama administration recently issued final regulations implementing the Paul Wellstone and Pete Domenici Mental Health Parity and Addition Equity Act of 2008 (the “MHPAEA”). The regulations implement the MHPAEA’s prohibition against imposing limits on mental health and substance use disorder benefits that are more restrictive than the limits on medical and surgical benefits. The final regulations largely preserve interim final regulations that have been in effect since July 1, 2010, with some clarifications that were announced previously in less formal guidance.
The final regulations, not surprisingly, require parity between medical/surgical benefits, on the one hand, and mental health/substance use disorder benefits, on the other, when both are provided under an employer’s major medical plan. However, in determining whether the parity is achieved, employers will need to consider separate arrangements, such as employee assistance plans and wellness programs. The failure to consider plans other than the major medical plan could result in noncompliance with the mental health parity rules.
The penalty for failing to comply with the new requirements is an excise tax of $100 per day per affected participant. In frequently asked questions that were issued with the final regulations, the Departments indicated that ensuring compliance through audits and other mechanisms is a high priority.
1. New Rules Generally Prohibit Requiring Exhaustion of EAPs
Many employers maintain employee assistance programs (“EAPs”) that provide limited counseling and other assistance for certain mental health and substance use disorder issues. EAPs typically do not provide significant medical benefits and generally are not considered to be a substitute for mental health or substance use disorder benefits under a major medical plan. However, some major medical plans require employees to exhaust counseling benefits under the EAP before receiving benefits for counseling for mental health or substance use disorder issues under the major medical plan.
The Preamble to the final regulations clarifies that an EAP that does not provide significant medical or surgical benefits is not subject to the MHPAEA or the final regulations. This means that an EAP may continue to impose limitations on mental health, substance use disorder, and other benefits. Indeed, limitations are generally required in order to ensure that the EAP does not provide significant medical benefits.
In contrast, however, mental health and substance use disorder benefits under a major medical plan are subject to the MHPAEA. The MHPAEA and the final regulations prohibit a nonquantitative treatment limitation on mental health or substance use disorder benefits that is more stringent than the nonquantitative treatment limitation (if any) imposed on medical or surgical benefits. For example, if a plan does not impose pre-authorization requirements on medical/surgical benefits, it may not impose pre-authorization requirements on mental health/substance use disorder benefits.
Applying this principle, the final regulations state that a major medical plan may not require participants to exhaust their EAP benefits before using mental health or substance use disorder benefits under the major medical plan, unless the plan imposes a comparable requirement for medical and surgical benefits.
2. The Aggregation Rule Interferes With Certain Wellness Programs
The final regulations include a plan aggregation rule that is intended to prohibit efforts to avoid the MHPAEA by establishing separate plans. Under the aggregation rule, if an individual can be enrolled in more than one group health plan at the same time, both plans must be treated as a single plan when determining parity between medical and mental health benefits. For example, suppose an employer offers three, alternative medical/surgical benefit packages (packages A, B, and C) and a separate mental health and substance use disorder benefit that may be selected with package A, B, or C (package D). The final regulations aggregate each medical package with the separate mental health package, requiring the mental health parity rules to be satisfied with respect to each resulting package, AD, BD, and CD.
A key concern arises when a wellness program is considered a group health plan that must be aggregated with the major medical benefits packages. Whether a wellness program is covered by the aggregation rule depends on whether it is a group health plan or whether it merely consists of “excepted benefits”: The plan aggregation rule does not apply to plans that consist solely of “excepted benefits.” A plan is a group health plan if it provides “medical care”, which includes counseling services. Therefore, wellness programs are group health plans if they provide − as they typically do − more than just referrals or general information, such as diagnostic, preventive, or counseling services for mental health or substance use disorder issues. In contrast, an EAP would provide solely “excepted benefits” if it does not provide significant medical care or treatment benefits. (Other plans that provide “excepted benefits” include stand-alone dental or vision plans, health flexible spending arrangements, accidental death and dismemberment insurance, disability income insurance, certain on-site medical clinics, and hospital or fixed indemnity insurance.)
If a wellness program is a group health plan, any limits on mental health or substance use disorder benefits under the wellness program must satisfy the parity requirements, taking into account the employer’s major medical plan. For example, if a wellness program provides ten smoking cessation treatments, the limit on the course of treatment would be permissible only if similar limits apply to medical and surgical benefits under the major medical plan.