Parity in Practice: From Passage to Implementation

1. Parity in Practice: From Passage to Implementation Monday, March 8, 2010 11:00 a.m.-12:30 p.m. Ronald Bachman, F.S.A., M.A.A.A., President and CEO, Healthcare Visions, Inc., Atlanta, GA Doug Walter, J.D., Counsel for Legislative and Regulatory Affairs, Government Relations, Practice Directorate

2. Interim Final Rule (“IFR”) for the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA”) • Published by the Departments of Health and Human Services, Labor, and Treasury • Publication Date: February 2, 2010 (75 Fed. Reg. 5,410 et seq.) • 90-Day comment period (comments due on May 3, 2010) • Replaces the current rule for the Mental Health Parity Act of 1996 (“MHPA”)

3. MHPAEA Links • Parity IFR— • http://edocket.access.gpo.gov/2010/pdf/2010-2167.pdf • APAPO Summary of IFR— • http://www.apapracticecentral.org/advocacy/reform/parity-rule.aspx • APAPO Summary of MHPAEA— • http://www.apapracticecentral.org/news/2008/parity-summary.aspx

4. MHPAEA Expands Parity • MHPA requires parity for lifetime and annual dollar limits. • MHPAEA expands the MHPA to require parity additionally for all other benefit’s financial requirements and treatment limitations.

5. MHPAEA Parity Requirement MHPAEA requires that a group health plan—that provides both medical and surgical benefits and mental health or substance use benefits—must ensure that the financial requirements and treatment limitations applicable to mental health/substance use disorder benefits are no more restrictive than those requirements and limitations placed on medical/surgical benefits.

6. MHPAEA Applicability Applies to all group health plans of 51 or more employees that provide both medical/surgical (“MED”) and mental health/substance use disorder (“MH/SUD”) benefits.

7. MHPAEA Effective Dates • The MHPAEA applies to all health plans effective October 3, 2009. • The IFR applies to health plans for plan years beginning after July 1, 2010. For most plans this means January 1, 2011. • Health plans must continue “good faith” compliance with MHPAEA before the effective date of the IFR.

8. MHPAEA Parity Standard Applied Three parity standards— • Parity for lifetime and annual dollar limits. • Parity for financial requirements and “quantitative” treatment limitations. • Parity for “nonquantitative” treatment limitations.

9. Parity for lifetime and annual dollar limits • If a health plan does not impose or imposes a lifetime or annual dollar limit on less than ⅓ of all MED benefits, then it may not impose a limit on MH/SUD benefits. • If a health plan imposes a lifetime or annual dollar limit on at least ⅔ of all MED benefits, then it may impose the same or a lesser limit on MH/SUD benefits. • If a health plan imposes a lifetime or annual dollar limit on more than ⅓ but less than ⅔ of all MED benefits, then it may not impose a limit on MH/SUD benefits, or it may impose a limit that is equal to the weighted average of the limits imposed.

10. Parity for lifetime and annual dollar limits The determination of whether the portion of MED benefits subject to a lifetime or annual dollar limit represents less than ⅓ or more than ⅔ of all MED benefits is based on the dollar amount of all plan payments for MED benefits expected to be paid by the health plan (using any reasonable method) for the plan year.

11. Parity for financial requirements and “quantitative” treatment limitations A health plan may not apply any financial requirement or quantitative treatment limitation to MH/SUD benefits in any classification that is more restrictive than the requirement or limitation of that type applied to substantially all MED benefits in the same classification.

12. Parity for financial requirements and “quantitative” treatment limitations Terms— • “Financial requirements” include deductibles, copayments, coinsurance, out-of-pocket maximums and each of these is a type of requirement. • “Quantitative treatment limitations” include number of visits, days of coverage, days in a waiting period, and other similar limits on scope of coverage and which provide a numerical limitation (i.e. an annual visit limit of 20 days); each of these is a type of limitation. • “Classification” means one of six classifications for which parity is applied—inpatient/in-network, inpatient/out-of-network, outpatient/in-network, outpatient/out-of-network, emergency care, or prescription drugs. • “Level” refers to magnitude of a requirement or limitation (i.e. a copayment of $20 versus $30).

13. Parity for financial requirements and “quantitative” treatment limitations A two step test— • Step 1—Does the type of financial requirement or quantitative treatment limitation apply to substantially all—meaning ⅔ of all—MED benefits in a classification? If NO—the requirement or limitation cannot be applied to MH/SUD benefits. If YES—proceed to Step 2. • Step 2—What is the predominant level of the financial requirement or quantitative treatment limitation that applies to MED benefits? The predominant level—meaning it applies to more than ½ of the MED benefits—may be applied to MH/SUD benefits. If no single level applies to more than ½ of MED benefits, a health plan may combine levels until the threshold is met and then apply the least restrictive level in the combination.

14. Parity for financial requirements and “quantitative” treatment limitations The determination of whether the portion of MED benefits in a classification subject to a financial requirement or quantitative treatment limitation represents ⅔ (substantially all) or more than ½ (predominant) of all MED benefits is based on the dollar amount of all plan payments for MED benefits expected to be paid by the health plan (using any reasonable method) for the plan year.

15. Parity for financial requirements and “quantitative” treatment limitations Related issues— • A health plan must provide out-of-network MH/SUD benefits, at parity, when it provides out-of-network MED benefits. • Separate (even if equal) deductibles and out-of-pocket maximums may not be imposed on MH/SUD benefits. • Psychologists and other mental health providers cannot be classified as “specialists” for the purposes of imposing higher copayments or other cost sharing.

16. Parity for “nonquantitative” treatment limitations Any processes, strategies, evidentiary standards, or other factors used by a health plan in applying a nonquantitative treatment limitation to MH/SUD benefits in a classification shall be comparable to and applied no more stringently than those used in applying the limitation to MED benefits in the classification, except to the extent that recognized clinically appropriate standards of care may permit a difference.

17. Parity for “nonquantitative” treatment limitations The IFR provides for an illustrative list of “nonquantitative” treatment limitations— • Medical management standards that limit or exclude benefits based on medical necessity/appropriateness or whether treatment is experimental/investigative. • Formulary prescription drug design. • Provider network participation standards (including reimbursement). • Plan methods for determining usual, customary and reasonable charges. • Plan refusal to pay for higher cost therapies until it can be shown that a lower-cost therapy is not effective. • Exclusions based on failure to complete a course of treatment.

18. MHPAEA definition of mental health and substance use disorders • Mental health and substance use disorder benefits means benefits with respect to services for mental health conditions and substance use disorders, as defined under the terms of the plan and in accordance with applicable federal and state law. • Conditions and disorders must be defined to be consistent with generally recognized independent standards of current medical practice (for example, the most current version of the Diagnostic and Statistical Manual of Mental Disorders).

19. MHPAEA health plan cost exemption • MHPAEA provides that if a group health plan experiences an increase in actual total costs with respect to MED and MH/SUD benefits of 1% (2% in the first plan year), the plan can be exempted from the law. • This IFR does not address the cost exemption, which the regulators indicate they will address in a later regulation.

20. Contact Information Doug Walter, J.D., Counsel for Legislative and Regulatory Affairs, Government Relations, Practice Directorate (202)336-5889 (Office) (202)336-5797 (Fax) dwalter@apa.org (E-mail)