Last week the DOL, HHS and Treasury Department issued interim final regulations for the Mental Health Parity and Addiction Equity Act of 2008.  The Act expands the requirements of the Mental Health Parity Act of 1996 ("MHPA"), which required parity in aggregate lifetime and annual dollar limits for mental health benefits and medical/surgical benefits.  Previously, MHPA's parity requirements applied to mental health benefits and medical/surgical benefits. The Act expands MHPA's parity requirements to also include substance use disorder treatments as well.  Additionally, the Act amends MHPA by adding strengthened parity requirements to curb financial and treatment limitations on mental health imposed by plans.

The Act applies to group health plans offered by employers with more than 50 employees, and became effective for plan years beginning on or after January 1, 2010. The regulations are effective for plan years beginning on or after July 1, 2010.  Several highlights from the new rules are discussed below.

First, the regulations flesh out the additional parity requirements aimed at curbing quantitative financial and treatment limitations imposed by plans.  If a plan does not include an aggregate lifetime or annual dollar limit on any medical/surgical benefits or includes an aggregate lifetime or annual dollar limit that applies to less than one third of all medical/surgical benefits, the plan may not impose an aggregate lifetime or annual dollar limit on mental health or substance use disorder benefits.  For example, if a group health plan currently has no annual limit on medical/surgical benefits, and a $10,000 annual limit on mental health and substance use disorder benefits, the plan currently violates the Act.  The plan could come into compliance in one of several ways.  First, the plan could eliminate its annual dollar limit on mental health and substance use disorder benefits.  Second, the plan could replace its annual dollar limit on mental health and substance use disorder benefits with a $500,000 annual limit on all benefits.  Finally, the plan could replace its annual dollar limit on mental health and substance use disorder benefits with a $250,000 annual limit on medical/surgical benefits and a $250,000 annual limit on mental health and substance use disorder benefits.  Each of these three options would be acceptable under the new regulations.

Along the same lines, a plan may not impose more restrictive treatment limitations, including the number of covered office visits or days of in-patient treatment for mental health or substance use disorder benefits.  For example, if a plan allows unlimited medical/surgical office visits but only allows ten mental health or substance use disorder visits per year, the restriction on the mental health and substance use disorder visits would not comply with the new rules.

Additionally, a group health plan may not impose a non-quantitative treatment limitation with respect to mental health or substance use disorder benefits unless, under the terms of the plan, any processes, strategies, evidentiary standards or other factors used in applying the non-quantitative treatment limitation are comparable to, and are applied no more stringently than, the processes, strategies, evidentiary standards or other factors used in applying the limitation with respect to medical/surgical benefits in the same classification.  Non-quantitative treatment limitations include: standards limiting or excluding benefits based upon medical necessity or appropriateness; formulary design for prescription drugs; standards for provider admission to participate in a network, including reimbursement rates; plan methods for determining usual, customary and reasonable charges and exclusions based upon failure to complete a course of treatment.  For example, if a group health plan limits benefits to treatments that are medically necessary, and the plan requires concurrent review for in-patient, in-network mental health and substance use disorder benefits, but does not require it for any in-patient, in-network medical/surgical benefits, the arrangement violates the new rules.  The regulations state that this difference may be permissible in certain individual cases based on recognized clinically appropriate standards of care, but it is not permissible for distinguishing between all medical/surgical benefits and all mental health or substance use disorder benefits.

Finally, the rules clarify that the terms of the Act not apply to group health plans offered by employers with less than 50 employees during the last calendar year.

In order to comply with the Act and its regulations, plan sponsors should review the terms of their plans and ensure there is parity between their medical/surgical benefits and mental health or substance use disorder benefits offered under the plan. If the plan does not comply, plan sponsors should contact their third party administrators and coverage providers to ensure they are taking the necessary steps to abide by the Act and its rules.