Federal Mental Health Parity Interim Final Regulations Explained

March 23, 2010

Mental Health Parity Act

The Federal Mental Health Parity Act requires our fully-insured employers with 50-2,999 employees, as well as self-funded customers, to offer the same level of coverage for mental health and substance use disorder services as that offered for medical and surgical services through their plan.

The 154-page Federal Mental Health Parity Interim Regulations and comments, were published in February in the Federal Register. Highlights of new/updated information from the interim  regulations are as follows:

Effective Date/Applicability

  • Regulations published as the Interim Final Rule are effective on the first day of the plan year beginning or renewing on or after July 1 and must be complied with even though it is not the Final Rule.
  • The U.S. Department of Labor (DOL), Department of The Treasury and Centers for Medicare and Medicaid Services (CMS) are seeking feedback on the interim final regulations via an open comment period which ends May 3.
  • Regulations are not applicable to Medicaid Managed Care Plans. Separate regulations will be provided from CMS for those plans, but they are still subject to the law.

Benefit Requirements
Establish six classifications of benefits: Parity for treatment limits and financial requirements defined by the regulations, is to be applied classification by classification:

  1. Inpatient In-Network
  2. Inpatient Out-of-Network
  3. Outpatient In-Network
  4. Outpatient Out-of-Network
  5. Emergency
  6. Prescription Drugs
  • The definitions of what constitutes Inpatient, Outpatient and Emergency are not defined by the regulations but instead defined by the plan or applicable state law. However, the terms cannot be defined differently for mental health/substance use disorder than for medical/surgical.
  • Benefits for mental health and substance use disorder are not mandated, but to the extent benefits are provided in one of the six classifications, they must be in parity with that classification’s medical benefits. Plans are not required to cover all mental health conditions or all substance use disorders but may define which they will or will not cover.  Fully-insured plans are still subject to state mandates which may require certain mental health or substance use disorder benefits.
  • Financial requirements and quantitative treatment limitations must be in parity with the requirements and limitations applied to substantially all benefits for the applicable classification on medical benefits. “Substantially all” means the requirement/limitations apply to at least two-thirds of the benefits in that classification.
  • Regulations do not allow recognition of distinction between primary and specialty financial requirements/treatment limitations for parity purposes.
  • Regulations prohibit separate cost sharing, e.g., no separate but equal deductibles or out-of-pocket maximums.
  • Parity applies to non-quantitative limits and specifically lists the following classifications and specifies these mustbe in parity:
    • Medical management standards, such as medical necessity
    • Formulary design for prescription drugs
    • Standards for provider admission to network, including reimbursement rates
    • Plan methods for determining usual and customary rates Fail-first or step therapy requirements (e.g., must try certain treatment before obtaining approval for another treatment
    • Exclusions for failure to complete a course of treatment   These limits must be comparable to and applied no more stringently for mental health/substance use disorder benefits than they are for medical benefits.

Product Requirements

  • Employee Assistance Program (EAP) gatekeeper models are prohibited.
  • A plan sponsor cannot avoid parity requirements by establishing a separate group health plan for mental health/substance use disorder benefits.
  • Plan sponsors with multiple medical benefit plans but a single mental health/substance use disorder plan must ensure compliance for parity purposes between the mental health/substance use disorder benefit plan and eachmedical plan.
  • No guidance is available yet on cost exemption. (This remains under development.)

Parity Relevance
Federal Mental Health Parity is relevant to all group health plans (fully insured and self-funded) with few exceptions, such as self-funded non-ERISA government (non-federal) plans that have expressly opted out under existing law and groups with 50 or fewer total employees.

Reference Materials
The Federal Mental Health Parity — A Summary of the Interim Final Rules: What You Need to Know brochure (available upon request) provides an overview of the new Federal Mental Health Parity regulations. The document highlights the key provisions, including implementing parity regulations for financial requirements and treatment limitations.

For more information please contact your Catalist Health Representative

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