Significant Changes to the Mental Health Parity Regulations

In September 2024, the Department of Health and Human Services, the Department of Labor, and the Department of the Treasury (collectively “the Departments”) issued new final regulations under the Mental Health Parity and Addiction Equity Act. These regulations change the requirements for designing and applying non-quantitative treatment limitations (NQTLs) to the provision of mental health and/or substance use disorder (MH/SUD) benefits as compared to medical/surgical (M/S) benefits. This alert describes the important provisions of the new regulations as they apply to group health plans. The new regulations are at 2024-20612.pdf (govinfo.gov).

Applicability Date: The new regulations are generally applicable for plan years beginning on or after January 1, 2025. However, certain key provisions are not effective until plan years beginning on or after January 1, 2026.

Background

In 2008, Congress enacted the Mental Health Parity and Addiction Equity Act (MHPAEA) to provide requirements for group health plans (and health insurance issuers) related to the financial requirements and treatment limitations, and expanded the parity provisions to substance use disorder benefits.

In 2013, the Departments published final regulations under MHPAEA (the “2013 regulations”). The 2013 regulations set forth requirements with respect to quantitative and non-quantitative treatment limitations. NQTLs consist of requirements such as prior authorizations, concurrent review, experimental determinations, and usual, customary, and reasonable determinations. The 2013 regulations established six classifications of benefits to be considered with respect to the parity requirements. The six classifications are inpatient, in-network; inpatient, out-of-network; outpatient, in-network; outpatient, out-of-network; emergency care; and prescription drugs.

The Consolidated Appropriations Act, 2021 (CAA 2021) amended the MHPAEA, in part, by expressly requiring group health plans and health insurance issuers that provide both M/S benefits and MH/SUD benefits to perform and document comparative analyses of the design and application of NQTLs that apply to MH/SUD benefits.1 While no specific format was provided in the law for this testing and documentation, the Department of Labor (DOL) had released a compliance tool in 2020, before the CAA 2021 was passed.

On August 3, 2023, the Departments published proposed rules to amend the 2013 regulations to change the requirements for NQTLs and establish minimum standards for the comparative analysis that is required.2 The new final regulations have been issued after consideration of the comments received on the proposed rules.

Changes in the Final Regulations

The new regulations include a new purpose section at the beginning, add new parity requirements for NQTLs, set out requirements for the content of the comparative analysis, and provide numerous new and revised examples to illustrate the application of the new rules.3 The changes to the parity requirements were made by amending the existing regulations. The requirements for the content of the comparative analysis were set out in an entirely new section of the regulations.

For plan years beginning in 2025, the regulations require a certification by one or more named fiduciaries, e.g., Trustees for self-insured plans and insurance officers for fully insured plans. The certification states that the fiduciaries i) engaged in a prudent process to select one or more qualified service providers to perform and document a comparative analysis in connection with the imposition of any NQTLs that apply to MH/SUD benefits under the plan in accordance with applicable law and regulations, and ii) monitored those service providers. The certification would need to be provided upon audit and updated with any changes to the documentation report.

Additional NQTL Requirements

For plan years beginning in 2026, additional requirements must be met with the following changes taking effect:

  • Concept of Meaningful Benefits - If a plan provides benefits for a mental health condition or substance use disorder in any classification, then the plan must provide “meaningful benefits” for the mental health condition or substance use disorder in every classification (i.e., inpatient, in-network; inpatient, out-of-network; outpatient, in-network; outpatient, out-of-network; emergency care; and prescription drugs.) in which M/S benefits are provided. A meaningful benefit is provided when a “core treatment” for the condition or disorder is covered. A “core treatment” is a standard treatment or course of treatments, therapies, services, or interventions indicated by generally recognized independent standards of current medical practice for the specific condition. For example, if M/S services are covered for autism, (such as speech therapy), then Applied Behavioral Analysis (ABA) therapy, which is a MH/SUD “core treatment” for autism, must be provided.
  • Focus on Discriminatory Practices - A new prohibition on the use of discriminatory factors and evidentiary standards in designing a NQTL. For example, assume a plan’s written terms include a step therapy protocol (that requires participants to fail a generic or preferred drug before the plan will cover the drug originally prescribed). For a M/S condition, the plan provides an exception to this protocol if the patient could experience either severe or irreversible consequences. However, for a MH/SUD condition, the plan provides an exception to this protocol only if the patient could experience both severe and irreversible consequences. This would be considered discriminatory. Therefore the plan would need to make either make M/S step therapy drug exceptions require both severe and irreversible consequences or the MH/SUD step therapy drug exceptions require either severe or irreversible consequences.
  • Data Gathering to Show Outcomes - Requires plans to collect and evaluate relevant outcome data and take reasonable action, as necessary, to address material differences in access to MH/SUD benefits as compared to M/S benefits. For example, assume a plan’s written process for prior authorization states that the plan approves inpatient, in-network benefits for periods of 1, 3, and 7 days, after which a treatment plan must be submitted by the patient’s attending provider and approved by the plan. The relevant data show that approvals for 7 days are most common for M/S. The relevant data show that approvals for MH/SUD benefits are most commonly given only for 1 day, after which a treatment plan must be submitted by the patient’s attending provider and approved by the plan. In this case, the plan would be required to have the same most common number of days after which a treatment plan would be required for both M/S and MH/SUD.

Required Elements of a Satisfactory Comparative Analysis

The new regulations include a new section that

  • sets forth the content requirements for a comparative analysis of NQTLs;
  • requires that each plan must prepare a written list of all NQTLs imposed under the plan or coverage, provide the list to the named fiduciaries of the plan, and make available to the Secretary, upon request; and
  • requires the comparative analysis report be provided to participants upon their request.

In the Appendix we show the six elements of a satisfactory comparative analysis, as presented in the new regulations, compared to the DOL self-compliance tool.

Cheiron Observations:

 The NQTL comparative analysis requires plan sponsors to carefully evaluate the MH/SUD non-quantitative benefits, network, prescription drug formularies, and care management practices to ensure parity with M/S.

 Possible next steps include:

  • Notify plan fiduciaries of their new role and responsibilities to prepare them for signing off on the updates;
  • Review prior NQTL report and identifying updates required;
  • Identify a professional partner to update and/or prepare the more comprehensive NQTL analysis that the new regulations support;
  • Update prior reports for new requirements (see Appendix);
  • Review coverage and modify benefits as necessary to ensure the coverage of “meaningful benefits” for MH/SUD;
  • Confirm with their insurers and other business partner vendors what information they can provide for the comparative analysis that complies with the 2025 and 2026 requirements; and
  • Set up a process with primary business partners for regular updates of any NQTL modification and relevant reporting updates.

If you have any questions about your NQTL comparative analysis, please contact your Cheiron consultant.

APPENDIX: ELEMENTS OF A SATISFACTORY COMPARATIVE ANALYSIS

The 2020 compliance tool spelled out the four steps shown below:
Step 1
Identify the NQTL, Identify in the plan documents all the services (both MH/SUD and medical/surgical) to which the NQTL applies in each classification.
Step 2
Identify the factors considered in the design of the NQTL.
Step 3
Identify the sources (including any processes, strategies, or evidentiary standards) used to define the factors identified above to design the NQTL.
Step 4
Are the processes, strategies, and evidentiary standards used in applying the NQTL comparable and no more stringently applied to MH/SUD and medical/surgical benefits, both as written and in operation?

 

The final regulation has revised this and specifically requires the six elements listed below be included for each NQTL in the comparative analysis. Note: The documentation can be by either classification and then applicable NQTLs, or by NQTL then applicable classifications. In black font, we summarize the requirements that are effective for plan years beginning on or after 1/1/2025. In blue font, we summarize the new elements required effective with plan years beginning on or after 1/1/2026.

Element 1
A description of the NQTL which must include
  1. identification of the NQTL, including the specific terms of the plan or coverage or other relevant terms regarding the nonquantitative treatment limitation, the policies or guidelines (internal or external) in which the nonquantitative treatment limitation appears or is described, and the applicable sections of any other relevant documents, such as provider contracts, that describe the NQTL;
  2. identification of all MH/SUD benefits and M/S benefits to which the NQTL applies, including a list of which benefits are considered MH/SUD benefits and which benefits are considered M/S benefits; and
  3. a description of which benefits are included in each classification.
Element 2
Identification of factors and evidentiary standards used to design or apply the NQTL which must include
  1. identification of every factor considered or relied upon, as well as the evidentiary standards considered or relied upon to design or apply each factor and the sources from which each evidentiary standard was derived, in determining which MH/SUD benefits and which M/S benefits are subject to the NQTL, and
  2. a definition of each factor, including:
    1. a detailed description of the factor;
    2. a description of each evidentiary standard used to design or apply each factor (and the source of each evidentiary standard) identified under the regulations; and
    3. a description of any steps the plan has taken to correct, cure, or supplement any information, evidence, sources, or standards that would otherwise have been considered biased or not objective in the absence of such steps.      
Element 3
A description of how factors are used in the design and application of an NQTL which must include
  1. A detailed explanation of how each factor identified and defined in the regulation is used to determine which MH/SUD benefits and which M/S benefits are subject to the NQTL;
  2. An explanation of the evidentiary standards or other information or sources (if any) considered or relied upon in designing or applying the factors or relied upon in designing and applying the NQTL, including in the determination of whether and how MH/SUD benefits or M/S benefits are subject to the NQTL;
  3. If the application of the factor depends on specific decisions made in the administration of benefits, the nature of the decisions, the timing of the decisions, and the professional designations and qualifications of each decision maker;
  4. If more than one factor is identified and defined under the regulations, an explanation of:
    1. How all of the factors relate to each other;
    2. The order in which all the factors are applied, including when  they are applied;
    3. Whether and how any factors are given more weight than others; and
    4. The reasons for the ordering or weighting of the factors; and
  5. Any deviations or variations from a factor, its applicability, or its definition (including the evidentiary standards used to define the factor and the information or sources from which each evidentiary standard was derived), such as how the factor is used differently to apply the nonquantitative treatment limitation to MH/SUD benefits as compared to M/S benefits, and a description of how the plan or issuer establishes such deviations or variations.
Element 4
Demonstration of comparability and stringency as written, which must include
  1. Documentation of each factor identified and defined under the regulations that was applied to determine whether the NQTL applies to MH/SUD benefits and M/S benefits in a classification, including, as relevant:
    1. Quantitative data, calculations, or other analyses showing whether, in each classification in which the NQTL applies, MH/SUD benefits and M/S benefits met or did not meet any applicable threshold identified in the relevant evidentiary standard to determine that the NQTL would or would not apply; and
    2. Records maintained by the plan documenting the consideration and application of all factors and evidentiary standards, as well as the results of their application;
  2. In each classification in which the NQTL applies to MH/SUD benefits, a comparison of how the NQTL, as written, is designed and applied to MH/SUD benefits and to M/S benefits, including the specific provisions of any forms, checklists, procedure manuals, or other documentation used in designing and applying the NQTL or that address the application of the NQTL;
  3. Documentation demonstrating how the factors are comparably applied, as written, to MH/SUD benefits and M/S benefits in each classification, to determine which benefits are subject to the NQTL; and
  4. An explanation of the reasons for any deviations or variations in the application of a factor used to apply the nonquantitative treatment limitation, or the application of the NQTL, to MH/SUD benefits as compared to M/S benefits, and how the plan or issuer establishes such deviations or variations, including:
    1. In the definition of the factors, the evidentiary standards used to define the factors, and the sources from which the evidentiary standards were derived;
    2. In the design of the factors or evidentiary standards; or
    3. In the application or design of the NQTL.      
Element 5
Demonstration of comparability and stringency in operation which must include
  1. A comprehensive explanation of how the plan or issuer evaluates whether, in operation, the processes, strategies, evidentiary standards, or other factors used in designing and applying the NQTL to MH/SUD benefits in a classification are comparable to, and are applied no more stringently than, the processes, strategies, evidentiary standards, or other factors used in designing and applying the NQTL with respect to M/S benefits, including:
    1. An explanation of any methodology and underlying data used to demonstrate the application of the NQTL, in operation\
    2. The sample period, inputs used in any calculations, definitions of terms used, and any criteria used to select the MH/SUD benefits and M/S benefits to which the NQTL is applicable;
    3. With respect to a NQTL for which relevant data is temporarily unavailable as described in the regulations, a detailed explanation of the lack of relevant data, the basis for the plan’s conclusion that there is a lack of relevant data, and when and how the data will become available and be collected and analyzed;
    4. With respect to a NQTL for which no data exist that can reasonably assess any relevant impact of the NQTL on relevant outcomes related to access to mental health and substance use disorder benefits and M/S benefits as described in the regulations, a reasoned justification as to the basis for the conclusion that there are no data that can reasonably assess the NQTL’s impact, an explanation of why the nature of the NQTL prevents the plan or issuer from reasonably measuring its impact, an explanation of what data was considered and rejected, and documentation of any additional safeguards or protocols used to ensure that the NQTL complies with the regulations;
  2. Identification of the relevant data collected and evaluated, as required by the regulations;
  3. Documentation of the outcomes that resulted from the application of the NQTL to MH/SUD benefits and M/S benefits, including:
    1. The evaluation of relevant data as required under the regulations; and
    2. A reasoned justification and analysis that explains why the plan concluded that any differences in the relevant data do or do not suggest the NQTL contributes to material differences in access to MH/SUD benefits as compared to M/S benefits, in accordance with the regulation;
  4. A detailed explanation of any material differences in access demonstrated by the outcomes evaluated under the regulations, including:
    1. A reasoned explanation of any material differences in access that are not attributable to differences in the comparability or relative stringency of the NQTL as applied to MH/SUD benefits and M/S benefits (including any considerations beyond a plan’s control that contribute to the existence of material differences) and a detailed explanation of the bases for concluding that material differences are not attributable to differences in the comparability or relative stringency of the NQTL and
    2. To the extent differences in access to MH/SUD benefits are attributable to generally recognized independent professional medical or clinical standards or carefully circumscribed measures reasonably and appropriately designed to detect or prevent and prove fraud and abuse that minimize the negative impact on access to appropriate mental health and substance use disorder benefits, and such standards or measures are used as the basis for a factor or evidentiary standard used to design or apply a nonquantitative treatment limitation, documentation explaining how any such differences are attributable to those standards or measures, as required by the regulations; and
  5. A discussion of the actions that have been or are being taken by the plan or issuer to address any material differences in access to MH/SUD benefits as compared to M/S benefits, including the actions the plan has taken or is taking under the regulations to address material differences to comply, in operation, with the regulations including, as applicable:
    1. A reasoned explanation of any material differences in access to MH/SUD benefits as compared to M/S benefits that persist despite reasonable actions that have been or are being taken; and
    2. For a plan or issuer designing and applying one or more NQTLs related to network composition, a discussion of the actions that have been or are being taken to address material differences in access to in-network mental health and substance use disorder benefits as compared to in-network M/S benefits, including those listed in the regulations.  
Element 6
Findings and conclusions – a narrative giving the findings and conclusions as to the comparability of the processes, strategies, evidentiary standards, and other factors used in designing and applying the NQTL to MH/SUD benefits and M/S benefits within each classification, and the relative stringency of their application, both as written and in operation, which must include:
  1. Any findings or conclusions indicating that the plan or coverage is or is not (or might or might not be) in compliance with the requirements of the regulations, including any additional actions the plan or issuer has taken or intends to take to address any potential areas of concern or noncompliance;
  2. A reasoned and detailed discussion of the findings and conclusions described in the prior paragraph;
  3. Citations to any additional specific information not otherwise included in the comparative analysis that supports the findings and conclusions described that are not otherwise discussed in the comparative analysis;
  4. The date the analysis is completed and the title and credentials of all relevant persons who participated in the performance and documentation of the comparative analysis;
  5. If the comparative analysis relies upon an evaluation by a reviewer or consultant considered by the plan to be an expert, an assessment of each expert’s qualifications and the extent to which the plan ultimately relied upon each expert’s evaluation in performing and documenting the comparative analysis of the design and application of the NQTL applicable to both MH/SUD benefits and M/S benefits; and
  6. A certification by one or more named fiduciaries that they have engaged in a prudent process to select one or more qualified service providers to perform and document a comparative analysis in connection with the imposition of any nonquantitative treatment limitations that apply to mental health and substance use disorder benefits under the plan in accordance with applicable law and regulations, and have satisfied their duty to monitor those service providers as required under part 4 of ERISA with respect to the performance and documentation of such comparative analysis.

 

Cheiron is an actuarial consulting firm that provides actuarial and consulting advice. However, we are neither attorneys, accountants, or clinicians. Accordingly, we do not provide legal services, tax advice, or medical advice.

1 See the Cheiron Health Regulatory Alert of March 3, 2021 for more information on the comparative analysis required by the CAA 2021.

2 See the Cheiron Health Regulatory Alert of September 13, 2023 for more information on proposed rules.

3 See DOL Fact Sheet found at: https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/final-rules-under-the-mental-health-parity-and-addiction-equity-act-mhpaea#:~:text=Codify%20the%20requirement%20in%20MHPAEA,medical%20management%20techniques%20to%20navigate