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New law addresses mental health coverage parity
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Among the add-ons to the $700 billion financial rescue package that Congress recently passed was a measure that will affect many employers whose health plans offer mental health benefits. The Paul Wellstone-Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 builds on and closes employer-friendly loopholes in the limited mental health parity measure the two senators (Wellstone is deceased) worked to pass in 1996. Besides widening mental health and substance abuse coverage for all but the smallest employers, the new law makes other noteworthy changes. Here's a brief summary.
Audio Conference: How 2009 Will Change Your Health and Welfare Benefits Plans
1996-style parity
First, some background on the previous mental health parity law. It required a covered employer whose group health plan or coverage provided both medical-surgical and mental health benefits to set the same aggregate lifetime and annual limits on each type of benefit. Employers weren't required to provide mental health benefits, and the law expressly allowed different mental health limits for cost sharing, number of visits, and days of coverage. Employers also could set different requirements for the medical necessity of mental health coverage.
All of that changes with the 2008 Act, which now expressly covers treatment for substance abuse and addictions. In addition to requiring parity between mental health-substance abuse and medical benefits in the areas of lifetime and annual limits, it requires parity in financial requirements, treatment limitations, and coverage of out-of-network providers.
Parity today, new disclosures
Mental health financial requirements — defined to include deductibles, copayments, coinsurance, and out-of-pocket expenses — can be no more restrictive than the most common or frequent limitations applied to "substantially all" covered medical financial benefits. "Substantially all" isn't defined. There can be no separate cost-sharing requirements that apply only to mental health benefits, which may effectively extend the definition of financial requirements beyond the four expressly mentioned.
Treatment limitations include limits on the frequency of visits, days of coverage, or other similar limits on scope or duration of treatment. Mental health treatment limits can be no more restrictive than the most common or frequent limitations applied to substantially all covered medical benefits. No separate treatment limits can be applied exclusively to mental health coverage.
In addition, a plan or coverage that provides benefits for out-of-network medical providers must provide comparable out-of-network benefits for mental health providers.
The Act requires plan administrators and health insurance issuers to disclose, upon request, the plan's criteria for medical necessity as applied to mental health benefits. Current and potential plan participants, beneficiaries, and contracting providers may request that information. Plan administrators and issuers also must provide, upon request from plan participants or beneficiaries, the reason for denial of mental health benefits. The statute doesn't require requests to be in writing or in any particular form.
Who is covered, exemptions
The Act applies to employers with more than 50 employees. Those with fewer are generally exempt.
There also are provisions for one-year exemptions if the increased cost of complying with the Act exceeds certain percentages. If actual costs in the first plan go up by more than two percent as a result of the Act's requirements, an exemption is available. (The exemption is tied to a one percent increase in costs in later years.) The Act sets forth specific requirements for applying for a cost- based exemption. A licensed actuary must make and certify the determination that actual costs have increased, and the plan must have complied with the Act for at least six months before seeking the exemption. The Act also provides for audits of the books and records of group health plans relating to an exemption, and the audits can take place for six years after the plan has been certified and has notified the U.S. Department of Labor (DOL) that it has elected the exemption.
Additional provisions
Unlike the 1996 parity measure, the 2008 measure contains no sunset requirement, meaning it doesn't need to be reauthorized to continue in force. The Act amends the Employee Retirement Income Security Act, the Public Health Service Act, and the Internal Revenue Code to incorporate the parity requirements. It also allows state laws to remain in force if they provide more generous mental health parity requirements.
The DOL, in cooperation with the Treasury and the Department of Health and Human Services, is charged with publishing guidance and assistance on the Act's requirements. The three departments also must issue regulations implementing the Act within one year of its enactment. With one exception for collective bargaining agreements, the Act applies to group health plans for plan years that begin after the one-year anniversary of enactment, regardless of whether the regulations have been issued. For plans under collective bargaining agreements, the Act becomes effective by the later of January 1, 2009, or the date on which the last agreement relating to the plan ends.
Employers, take note
Consider reviewing the following areas as you prepare to meet the Act's requirements:
- Set up a means by which to comply with the Act's information-sharing requirements on criteria for the medical necessity of mental health coverage and reasons for denial of coverage.
- Review your mental health coverage and how it compares to your medical-surgical coverage. Do you now cover treatment for addictions? This will be covered under the new Act.
- Examine the most common or frequent limitations applied to covered medical benefits. How would they apply to your mental health benefits?
- Examine how you're going to monitor the costs of complying with the new measure, which you will have to do to request an exemption.
Each employer's plan will have its own particular quirks. Consult with experienced counsel to make the best decisions for your organization.
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Copyright 2008 M. Lee Smith Publishers LLC. UTAH EMPLOYMENT LAW LETTER. The contents of the UTAH EMPLOYMENT LAW LETTER are intended for general information purposes only and should not be construed or relied upon as legal advice or a legal opinion on any specific facts or circumstances. Anyone needing specific legal advice should consult an attorney. For further information about the content of any article in this newsletter, please contact any of the editors.
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