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Expanded Parity Regs: No Separate Mental Health or Substance Abuse Deductible Permitted

Since passage of the Mental Health Parity Act of 1996, employer group health plans have been prohibited from imposing annual or lifetime dollar limits on mental health benefits that are more restrictive than the limits for other medical or surgical benefits. Legislation enacted in 2008 and effective for plan years beginning on or after October 3, 2009, expanded these parity requirements to include substance abuse benefits, and in other ways.  We are now providing an update to supply clarification on the published Regulations and what the law means for employer group health plans.

Key provisions in the regulations include the following: 

• All cumulative cost-sharing requirements that apply to employees, such as deductibles and out-of-pocket limits, must integrate both mental health and substance use disorder benefits. In other words, plans cannot impose a separate deductible or out-of-pocket limit on mental health or substance use disorder benefits.
• Parity requirements apply separately to six benefits classifications: inpatient in-network, outpatient in-network, inpatient out-of-network, outpatient out-of-network, emergency room and prescription drugs. This means that for mental health and substance use disorder benefits, each of these coverage provisions must be no more restrictive than the corresponding coverage provision that is most predominant for substantially all medical/surgical benefits. So, for example, if a plan provides for out-of-network medical/surgical benefits, it must also provide for out-of-network mental health and substance use disorder benefits.
• In addition to the prohibition on differences in quantitative treatment limits (such as visit limits and day limits), a plan cannot impose a nonquantitative treatment limit on mental health or substance use disorder benefits in any benefit classification, if that limit is not comparable to or is more stringent than how it is applied to other medical/surgical benefits. Nonquantitative limits include plan provisions such as those regarding medical management, step therapy, preauthorization and formulary design. So, for example, a plan cannot require employees to exhaust their employee assistance plan (EAP) benefits before accessing mental health/substance use disorder benefits, unless a similar requirement applies for medical/surgical benefits.

As with the original mental health parity law, group health plans with 50 or fewer employees are exempt from the requirements. Larger plans may apply for an exemption based on the cost of providing mental health and substance use disorder benefits. Qualifying for this exemption has become more difficult under the expanded law: A group health plan sponsor must demonstrate that compliance with the parity requirements will result in increased claims of at least 2% in the first year, or 1% in subsequent years, and this demonstration must be made through a certified actuarial report.

Neither the original parity law, or the law providing for the expansion, requires plans to provide mental health or substance use disorder  benefits. The regulations are effective for plan years beginning on or after July 1, 2010 (2011 plan years for calendar year plans).

Employer plans that provide mental health and substance abuse benefits should examine plan provisions to assure compliance with the new regulations. Some provisions in the regulations were unexpected—such as the prohibition on separate deductibles and out-of-pocket limits for mental health and substance use disorder benefits—so a review of current plan provisions is a prudent and important course of action now.