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The ERISA Edit: Analysis of MHPAEA Proposed Rule

Employee Benefits Alert

Analysis of MHPAEA Proposed Rulemaking and Report to Congress: Part I

Over the next several weeks, we'll analyze key provisions of the proposed rulemaking to amend regulations under the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) and implement the 2020 amendments to ERISA § 712 (ERISA's parity provision) mandating written comparative parity analyses. We'll also cover the July 2023 MHPAEA Comparative Analysis Report to Congress. The MHPAEA regulatory proposal was published in the Federal Register on August 3, 2023, making comments due on October 1, 2023. 

This week we focus on the proposed regulatory provisions addressing MHPAEA's purpose and changes to the definitions of key terms.

MHPAEA's Purpose

The predominant theme throughout the MHPAEA regulatory proposal is access to mental health and substance use disorder (MH/SUD) benefits, the focus of a proposed regulatory provision addressing MHPAEA's purpose. According to the proposal, a fundamental purpose of ERISA § 712 and related regulations is "to ensure that participants and beneficiaries [in plans that offer mental health or substance use disorder benefits] are not subject to more restrictive lifetime or annual dollar limits, financial requirements, or treatment limitations with respect to those benefits than the predominant dollar limits, financial requirements or treatment limitations that are applied to substantially all medical/surgical benefits covered by the plan or coverage." Given this purpose, the proposed regulatory text states that plans and issuers:

must not design or apply financial requirements or treatment limitations that impose a greater burden on access (that is, are more restrictive) to mental health and substance use disorder benefits . . . than they impose on access to generally comparable medical/surgical benefits.

The proposal also states that ERISA § 712 and its implementing regulations should be interpreted in a manner consistent with this purpose.

With this succinct but significant wished-for addition to the MHPAEA rules, together with the substantive regulatory proposals that we will address in the future, plans and issuers will have new MH/SUD access standards to satisfy when designing and administering benefits and when developing their written comparative parity analyses. Many of the substantive changes and proposed additions to the regulations focus on increasing access to MH/SUD benefits, in part, through measuring, evaluating, and adjusting for outcomes that result when administering benefits and paying claims. The approach goes a step further than prior agency regulatory interpretations and guidance on the significance of outcomes when assessing MHPAEA compliance. In the past, the Departments of Labor, Health and Human Services, and Treasury (the Departments) stated that, at most, disparate outcomes are red flags that may warrant further review but are not determinative of a MHPAEA violation. See, e.g., Self-Compliance Tool for the Mental Health Parity and Addiction Equity Act at 28. A question raised by this new enforcement approach and that will be debated during the comment period and thereafter is whether ERISA § 712 can and should be read to so closely tie the legal requirements of the parity law to access. 

Meaning of Terms

The proposal also provides sought-after clarification of key terms in MHPAEA's statutory text and regulations. These regulatory changes are intended to address, among other things, situations where state laws conflict with generally accepted standards in the medical profession about what is a medical versus mental health condition. 

Under the proposal, "medical/surgical benefits," "mental health benefits," and "substance use disorder benefits" will continue to be defined with reference to generally accepted standards of current medical practice. However, the regulatory text eliminates reference to state law and guidelines as a basis for establishing those standards for purposes of MHPAEA compliance. Plans and issuers can use state laws to inform their definition of these benefit categories, but only to the extent those laws are consistent with independent standards of medical practice. According to the proposal, those standards for mental health and substance use benefits are established by the mental, behavioral, neurodevelopment, and substance abuse and addiction disorders chapters of the World Health Organization's (WHO) International Classification of Diseases (ICD) or the American Psychiatric Association's (APA) Diagnostic and Statistical Manual of Mental Disorders (DSM), and a plan's or issuer's definition of a mental health or substance use disorder condition must include all conditions covered under the plan or coverage listed in those publications. The proposal also clarifies that mental health and substance use disorder benefits are not medical benefits. If practice standards do not address which benefits category applies to a condition or procedure, plans and issuers may define the condition or procedure in accordance with applicable state or federal laws. The preamble to the proposed regulation states that eating disorders and autism spectrum disorder (ASD), two conditions that have been the subject of many agency comparative analysis requests, are mental health conditions under generally recognized independent standards of current medical practice.

Key terms in the current non-quantitative treatment limitation (NQTL) regulation, now codified in ERISA § 712, are also defined in the proposed regulations, with many examples included in the rule's preamble and proposed regulatory text to illustrate what the definitions are intended to denote. Collectively, the scope of these NQTL definitions is expansive. 

  • "Processes" are "actions, steps, or procedures" that a plan or issuer "uses to apply" an NQTL, "including actions, steps, or procedures established by a plan or issuer as requirements in order for a participant or beneficiary to access benefits."
  • "Strategies" are "practices, methods, or internal metrics" that a plan or issuer "considers, reviews or uses to design an NQTL."
  • "Evidentiary standards" are "any evidence, sources, or standards" that a plan or issuer "considered or relied upon in designing or applying a factor" with respect to an NQTL, "including specific benchmarks or thresholds." These are not factors but may be relied upon when developing a factor.
  • "Factors" are "all information, including processes and strategies (but not evidentiary standards)" that a plan or issuer "considered or relied upon to design [an NQTL], or to determine whether or how the [NQTL] applies to benefits under the plan or coverage." This definition should be read broadly, according to the proposal.

The proposal also amends the regulatory definition of "treatment limitations" to clarify that the current illustrative list is non-exhaustive and that a "complete" exclusion of benefits for a particular condition is not a treatment limitation. 

The Departments request comment on many aspects of the proposed definitions. The new definitions and examples will be helpful to plans and issuers when preparing comparative parity analyses, but they affirm that the amount and level of detail of information being requested by the Departments is considerable. 

Coming Up: Analysis of MHPAEA Proposed Rulemaking and Report to Congress: Part II 

Next week's edition of The ERISA Edit will focus on the new NQTL requirements aimed at preventing plans and issuers from imposing limits on access to mental health and substance use disorder benefits.

Washington State Prevails in Clash between Abortion-Coverage Mandate and Religious Beliefs 

Last week, the U.S. District Court for the Western District of Washington issued a decision upholding a Washington state statute mandating coverage for abortion services. Cedar Park Assembly of God v. Kreidler, No. 19-cv-5181 (W.D. Wash., July 25, 2023).

In 2018, Washington state enacted a SB 6219, a law that requires all health insurance plans that provide maternity coverage to provide substantially equivalent abortion coverage. Under the Affordable Care Act (ACA), employers with more than 50 employees must provide health insurance to their employees or pay penalties for failure to do so, and the coverage must include access to maternity care services unless the plan is self-insured, a large group market health plan, or a grandfathered health plan. SB 6219 therefore requires all non-exempt employers in Washington who are covered by the ACA to provide their employees health insurance coverage for abortion services.

In 2019, Cedar Park Assembly of God, a Christian church, sued the state, seeking to enjoin enforcement of SB 6219 before it went into effect. Cedar Park had previously purchased a fully insured health plan that excluded abortion services, but the carrier informed the church that coverage for abortion services would be included in the plan at renewal. According to Cedar Park, self-insurance, exempt from SB 6219's mandate, was not financially viable. 

The church alleged that SB 6219 violated the First Amendment's free exercise clause because providing abortion coverage was contrary to its religious beliefs. On cross-motions for summary judgment, the district court disagreed. In a decision issued on July 25, 2023, the court first held that the law does not burden religion; according to the court, the statute is facially neutral, not the result of "religious gerrymandering," and generally applicable. The law therefore needed only to survive rational basis review, which it did because, the court concluded, "[t]he Washington legislature identified multiple legitimate governmental purposes for enacting SB 6219, including promoting gender equity, promoting economic success of women, improving women's health, and protecting privacy. These are all legitimate governmental purposes [and] SB 6219 is rationally related to those legitimate purposes."

Religious organizations are likely to continue to object to abortion-coverage mandates such as the one enacted in Washington state. In this case, Cedar Park already appealed to the Ninth Circuit once. Time will tell if the church appeals its case, which has already been pending for four years, again.

Upcoming Speaking Engagements and Events

Joanne Roskey and Anthony Shelley will present, "Discussion with EBSA: Enforcement & Regulatory Priorities Impacting Health Plans," at the BCBS 2023 Law, Audit, Compliance & Ethics Conference on August 9, 2023.

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