- New Mental Health Parity and Addiction Equity Act of 2008
- December 2, 2009
- Law Firm: Baker & Hostetler LLP - Washington Office
The new Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (the “Act”) will become effective for calendar year group health plans beginning January 1, 2010. The Act applies to group health plans with 51 or more employees in the prior calendar year. The law prohibits group health plans from imposing different financial requirements or treatment limitations on mental health and substance abuse benefits than those applicable to medical and surgical benefits.
The Mental Health Parity Act of 1996 prohibited group health plans from placing annual or lifetime dollar limits on mental health benefits that were lower than annual or lifetime dollar limits for medical and surgical benefits provided under the plan. These requirements will continue.
The new law expands coverage for mental health benefits and substance abuse benefits. The Act prohibits group health plans from applying financial requirements or treatment limits for mental health and substance abuse benefits that are more restrictive than the predominate financial requirements and treatment limits that are applicable to substantially all medical and surgical benefits. Financial requirements include deductibles, copayments, coinsurance and out-of-pocket expenses. Treatment limitations include limits on the frequency of treatment, number of visits, days of coverage, or other limits on the scope or duration of treatment. The Act also requires plans to allow out-of-network mental health or substance abuse benefits if the plan offers out-of-network medical and surgical benefits. The Act does not require plans to offer mental health or substance abuse benefits (although state laws may require insured group health plans to do so).
There are two new disclosure requirements imposed on plans that offer mental health or substance abuse benefits. Plans must disclose, upon request, the criteria for medical necessity determinations. Moreover, the reason for the denial of benefits (or coverage) for reimbursement of such benefits must be given to the participant or beneficiary in accordance with regulations. These disclosure requirements are similar to those already found in the claims procedure regulations -- i.e., the reasons for the adverse determination must be provided to the claimant upon denial and if an internal rule, guideline, protocol or similar criteria was relied on in making the adverse determination, then a copy of such rule, guideline, protocol or other criteria must be provided to the claimant free of charge.
The Act contains a cost exemption if the parity requirements result in an increase of the total plan costs by 2% in the first plan year or 1% in the succeeding years. Exemption determinations of increases on actual costs have to be made and certified by a licensed actuary. The cost exemption will not apply for at least six months. The cost exemption is for one plan year increments and the calculations for the exemption are based on the prior year’s figures. The plan must notify the Secretary of Labor (for self-funded plans) or the Secretary of Health and Human Services (for insured plans), the appropriate state agencies and the participants and beneficiaries that the plan intends to utilize the cost exemption. The notice to participants and beneficiaries must be given prior to the effective date of the cost exemption. The notifications to the Secretary of Labor (or the Secretary of Health and Human Services), which are to be kept confidential, must include information on: (i) the number of covered lives as of the date of notification and at the time of prior election of the cost exemption (if any); (ii) the total cost of benefits provided under the plan (for both the plan year upon which the cost exemption is sought and the prior year); and (iii) the total cost of mental health and substance abuse benefits (for both the plan year upon which the cost exemption is sought and the prior year). These exemption requirements are onerous enough to discourage group health plans from seeking exemptions.
No proposed or interim regulations have been issued, although questions were asked by the agencies and comments from the public have been solicited. Despite the lack of guidance, compliance with the new law is required.
Plan sponsors of covered group health plans need to make sure their plans are amended to comply with the new requirements. It is also important to review the plan’s provisions to ensure compliance with State parity laws. State laws are not preempted by the federal law to the extent they are stricter than federal law, as applied to insured health plans. ERISA self-funded group plans are not subject to state parity laws.