The Mental Health Parity and Addiction Equity Act: What Employers Need to Know
By Bobbie Jo Aue, Director of Product Development Marketing and Member Services
The Mental Health Parity and Addiction Equity Act (MHPAEA) is a federal law that requires group health plans to provide equal coverage for mental health/substance abuse services and medical services. Over half of the Department of Labor (DOL) benefit investigations involve mental health parity, and with new proposed regulations predicted in 2024, it is important for employers to understand the MHPAEA to reduce risk for their organizations.
John Barlament, Shareholder at Reinhart Boerner Van Deuren, spoke at part one of The Alliance’s MHPAEA webinar series to explain the Mental Health Parity and Addiction Equity Act and what it means for employers. Below is a recap of the most important parts of the session. You can also watch the webinar on-demand here.
[H3] Why was the MHPAEA created?
The government believed employers were not offering equal benefits for mental and physical health services. The MHPAEA was put into effect to stop health insurers from imposing stricter treatment limitations (like visit counts) or financial demands (such as copay amounts) on services linked to mental health and substance abuse than they did for medical and surgical services.
[H3] What does it mean for employers?
Employers need to make sure their health plans are compliant with requirements established under the Mental Health and Addiction Equity Act.
Annual/lifetime limits
If the plan has annual or lifetime dollar limits for medical and surgical (M/S) benefits, the plan must apply those same (or higher) dollar limits for mental health and substance use disorder (MH/SUD) benefits. For example, it would be non-compliant to include a $1,000,000 lifetime limit on M/S benefits, but a $500,000 lifetime limit on MH/SUD benefits. However, this requirement is no longer relevant as the Affordable Care Act (ACA) eliminated dollar-based annual and lifetime limits for essential health benefits.
Financial requirements
Financial requirements, such as coinsurance, copayments and deductibles and quantitative treatment limitations, like visit limits, cannot be more restrictive against MH/SUD benefits compared to M/S benefits. There also cannot be separate cost-sharing requirements only for MH/SUD benefits. For example, a plan cannot have a $1,000 deductible for M/S benefits and a $500 deductible for MH/SUD benefits. Even though the deductible is lower for MH/SUD benefits in this example, it still violates the MHPAEA because it is separate.
Quantitative treatment limit (QTL) test
Employers must perform QTL tests to identify classifications of treatment like inpatient, in-network, and emergency care. It allows employers to check whether the financial requirement, like a copay or coinsurance, applies to at least two thirds of M/S benefits in the classification. If it does not apply to two thirds of M/S benefits it cannot apply to any MH/SUD benefits in the classification.
Nonquantitative treatment limit (NQTL)
NQTL is a non-numeric limit on the scope or duration of benefits for treatment. This is very common; most health plans have some form of NQTLs. For example, medical management standards that limit or exclude benefits based on medical necessity or appropriateness or whether the treatment is experimental or investigative. Note it is more difficult to determine what services are necessary for mental health than physical health.
Employers must make sure the processes they use in applying any NQTL to mental health and substance abuse disorder benefits are identified and compared to the processes used for medical and surgery benefits. Again, employers cannot have separate NQTLs that are applicable only for MH/SUD benefits. If the NQTLs are comparable, employers must dig deeper to make sure the processes are not applied more stringently for mental health and substance abuse disorder benefits compared to medical and surgery benefits. If requested, plans must be able to provide a comparative analysis of NQTLs including a detailed explanation on the basis for the plan’s conclusion that NQTLs comply with the parity law.
[H3] How can you reduce risk for your organization?
The biggest risk for non-compliance is not the risk of deficient Summary Plan Descriptions (SPDs). This risk is small and relatively simple to fix. More significant is the risk of deficient vendor practices. This risk is larger and more difficult to identify and resolve. To reduce the risk of deficient vendor practices, employers need to be proactive. They should ask their vendors to show proof that their practices are compliant. A legal review may be necessary to ensure the health plan is compliant. Employers do not need to perform an annual review, but if there is a change in vendors, they should conduct a review.
If the DOL finds that parity has been violated, the health plan has 45 days to take corrective action. After that time, if the DOL finds that the plan is still in violation, the plan needs to notify enrolled participants of the non-compliance within 7 days. The DOL must provide an annual report naming non-compliant plans. In addition, the DOL may refer violating health plans to the IRS, which can result in civil penalties of up to $100 per day.
[H3] What’s next?
Proposed regulations to the MHPAEA for 2024 could affect employers in 2025.
Register for part two of The Alliance’s MHPAEA webinar series to learn how proposed regulations could affect employers.
We’ll provide an in-depth analysis of the proposed regulations and offer practical insights and strategies pertaining to the legal requirements. This session is applicable for those responsible for overseeing mental health and addiction benefits within their organization or advising clients on how to navigate this new landscape.
Bobbie Jo Aue joined The Alliance in 2021 and serves as Director of Product Development where she uses her wealth of experience in network design, implementation, and analysis to better service employer-members and their brokers. Bobbie Jo comes from UMR where she held the role of Director of Customer Solutions – Networks for over 11 years. Other previous positions include Network Administrator/ Contract Manager roles at UMR, Security Health Plan, and Fiserv Health.
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