Mental Health Parity and Addiction Equity Act

1. This Employer Webinar Series program is presented by Spencer Fane Britt & Browne LLPin conjunction with United Benefit Advisors Mental Health Parity and Addiction Equity Act

2. Mental Health Parity and Addiction Equity Act Presented by Kenneth A. Mason Julia M. Vander Weele

3. Presenters Ken Mason kmason@spencerfane.com 913-327-5138 Julia Vander Weele jvanderweele@spencerfane.com 816-292-8182

4. History of Mental Health Parity • Mental Health Parity Act (1996) • Prohibited lower annual or aggregate lifetime max • Did not apply to substance abuse • Mental Health Parity and Addiction Equity Act (2008) • Expanded to substance use disorder benefits • Imposes additional parity requirements in connection with financial requirements and treatment limits • Interim Final Regulations issued 2010

5. Which Plans are Covered? • Applies to “group health plans” • Fully insured and self-funded • Parallel provisions in ERISA, Tax Code, and PHSA • Includes governmental and church plans unless self-funded governmental plan has opted out • Does not include HIPAA “excepted benefits”

6. Aggregation of Plans • All medical care benefits provided by employer constitute a single group health plan for purposes of MHPAEA requirements • Cannot meet MHPAEA requirements by offering mental health and substance use disorder benefits under separate plans • Parity must be satisfied with respect to each separate medical/surgical benefit package

7. Small Employer Exception • Exemption for employer who employed an average of 50 or fewer employees during the preceding calendar year • Measured on a “controlled group” basis

8. Small Plan Exception • Exemption for plans that, on first day of plan year, have fewer than 2 participants who are current employees • May mean that retiree only plans are exempt

9. Health Insurance Issuers • Insurers prohibited from selling coverage that fails to comply with MHPAEA requirements • Exception: okay to sell to plan for a year for which plan qualifies for an exemption

10. Preemption of State Law • ERISA generally preempts state law • MHPAEA requirements not to be construed to supersede any provision of state law which establishes or continues in effect any standard or requirement solely relating to health insurance issuers in connection with group health insurance coverage, except to the extent that such standard or requirement prevents the application of a MHPAEA requirement • More onerous state insurance laws will still apply to fully insured plans

11. Overview of MHPAEA Requirements • Requires full parity between mental health benefits and medical/surgical benefits • Applies to “mental health” and “substance use disorder” benefits • Old MHPA restrictions on annual and lifetime limits extended to substance use disorder benefits • New MHPAEA restrictions on financial requirements and treatment limitations

12. “Mental Health” Benefits • Defined by plan • Must be consistent with generally recognized independent standards of current medical practice • Intended to ensure that plan does not misclassify a benefit in order to avoid complying with MHPAEA

13. “Substance Use Disorder” Benefits • Benefits with respect to substance use disorders (substance abuse or chemical dependency), as defined by plan • Subject to same consistency requirement as mental health benefits

14. MHPAEA General Rule • If a group health plan provides medical/surgical benefits and mental health benefits (or substance use disorder benefits), the “financial requirements” and “treatment limitations” that apply to mental health benefits (or substance use disorder benefits) must be no more restrictive than the “predominant” financial requirements or treatment limitations that apply to “substantially all” medical/surgical benefits

15. Financial Requirements • Deductibles • Can’t be different or separate • Copayments • Coinsurance • Out-of-pocket maximums • Not annual dollar or aggregate lifetime limits

16. Treatment Limits • Includes limits on benefits based on frequency of treatment, number of visits, days of coverage, days in a waiting period, or other similar limits on the scope or duration of treatment • Also includes non-quantitative treatment limitations (e.g., case management)

17. “Substantially All” • A type of financial requirement or treatment limitation applies to substantially all medical/surgical benefits in a coverage classification if it applies to at least 2/3 of the medical/surgical benefits in that classification • If does not apply to at least 2/3, then the financial requirement or treatment limitation cannot be applied to mental health or substance use disorder benefits in that classification

18. “Predominant” • Most common or frequent level of particular financial requirement or treatment limit • Predominant level is the level that applies to more than ½ of the medical/surgical benefits in that coverage classification • Levels may be combined to get to ½ (least restrictive level will apply)

19. Measurement • “Predominant” and “substantially all” standards are measured based upon dollar amount of benefits expected to be paid for plan year • Any reasonable method may be used to determine dollar amount expected to be paid

20. Coverage Classifications • Whether a financial requirement or treatment limit is “predominant” and whether it applies to “substantially all” medical/surgical benefits is determined separately for each type of financial requirement or treatment limitation • Six types of coverage classifications

21. Coverage Classifications (continued) • Inpatient in-network • Inpatient out-of-network • Outpatient in-network • Outpatient out-of-network • Emergency care • Prescription drugs • No other coverage classifications allowed

22. Coverage Classifications (continued) • If plan provides mental health or substance use disorder benefits in any coverage classification, must provide such benefits in every coverage classification in which medical/surgical benefits are provided • Regulations do not define inpatient, outpatient, or emergency care • Subject to plan design • Must be applied uniformly

23. Prescription Drug Tiers • Plan will satisfy parity requirements as long as different tiers are based on reasonable factors (e.g., cost, efficacy, generic vs. brand) and without regard to condition for which drug is prescribed

24. Specialists vs. General Practitioners • Regulations appear to prohibit charging higher “specialist” co-pays for mental health providers • Due to “predominant” and “substantially all” requirements

25. Example One • A health plan imposes five different coinsurance rates for inpatient, out-of-network medical/surgical benefits: • 0% • 10% • 15% • 20% • 30% • Using reasonable methods, the plan projects its payments in each of these categories for the upcoming year, as shown in the following table:

26. Example One (continued)

27. Example One (continued) • Must first determine if “substantially all” medical/surgical benefits are subject to coinsurance. • To do so, plan must identify percentage of total expected costs subject to each level of coinsurance, as shown in 3rd row of table:

28. Example One (continued)

29. Example One (continued) • Total expected medical/surgical benefits subject to coinsurance are 80% of total medical/surgical benefits. • Because 80% is > 2/3, coinsurance applies to “substantially all” medical/surgical benefits in this classification.

30. Example One (continued) • Next question is which coinsurance rate is the “predominant” one. • Must determine percentage of those medical/surgical benefits that are subject to coinsurance ($800,000) falling within each coinsurance rate group. • E.g., 10% rate = $100,000  $800,000 = 12.5%. • The following chart shows similar percentages for all coinsurance rates:

31. Example One (continued)

32. Example One (wrap up) • The 15% coinsurance rate represents 56.25% of all projected medical/surgical benefits in this classification that are subject to coinsurance. • Because 56.25% > 50%, the “predominant” coinsurance rate is 15%. • Accordingly, mental health or substance use disorder benefits in this classification may be subject to a coinsurance rate of up to 15%.

33. Example Two • Plan imposes five different copayment amounts for outpatient, in-network medical/surgical benefits: • $0 • $10 • $15 • $20 • $50 • Using reasonable methods, the plan projects that, for the following year, these copayment amounts will apply to the benefit payment amounts shown in the following table:

34. Example Two (continued)

35. Example Two (continued) • Must first determine if “substantially all” medical/surgical benefits are subject to copayment requirement. • To do so, plan must identify percentage of total expected costs subject to each level of copayment, as shown in 3rd row of table:

36. Example Two (continued)

37. Example Two (continued) • 80% of projected medical/surgical benefits in this classification are subject to a copayment. • Because 80% > 2/3, the copayment requirement applies to “substantially all” medical/surgical benefits in this classification.

38. Example Two (continued) • Accordingly, the “predominant” copayment rate may be applied to mental health or substance abuse disorder benefits. • To determine the “predominant” copayment rate, must determine percentage of those medical/surgical benefits that are subject to copayment requirement ($800,000) falling within each copayment category:

39. Example Two (continued)

40. Example Two (continued) • Because no single copayment rate represents more than 50% of all benefits subject to a copayment, must aggregate multiple copayment rates to arrive at “predominant” rate. • $50 and $20 copayment rates apply to 50% of projected benefits (37.5% + 12.5%). • However, 50% is not morethan50% of projected benefits subject to copayment. • Therefore, must include $15 copayment rate, as well.

41. Example Two (continued) • 75% of projected medical/surgical benefits are subject to a copayment rate of at least $15 (12.5% + 35.5% + 25%). • The lowest of these three copayment amounts is treated as the “predominant” copayment rate for medical/surgical benefits. • Accordingly, mental health or substance use disorder benefits in this classification may be subject to a copayment rate of no more than $15.

42. Cumulative Requirements or Limitations • General Rule -- Plan may not apply any financial requirement or quantitative treatment limitation for mental health or substance use disorder benefits within a classification that accumulates separately from any such requirement or limitation applicable to medical/surgical benefits within that classification. • Applies to financial requirements, such as deductibles or out-of-pocket maximums. • Also applies to quantitative treatment limitations, such as maximum annual outpatient visits or days of inpatient coverage per year.

43. Cumulative Requirements or Limitations • Note: Annual or lifetime maximum coverage amounts are not cumulative financial requirements. • Thus, just as under Mental Health Parity Act, plan may have separate annual or lifetime limits for medical/surgical benefits and either mental health or substance use disorder benefits.

44. Example Three • Plan imposes $250 annual deductible on medical/surgical benefits and separate $250 annual deductible on mental health and substance use disorder benefits. • This is impermissible, because the two deductibles accumulate separately from each other.

45. Example Four • Plan imposes $300 annual deductible on medical/surgical benefits and separate $100 annual deductible on mental health or substance use disorder benefits. • As in Example Three, this is impermissible, even though deductible for mental health and substance use disorder benefits is lower than deductible for medical/surgical benefits.

46. Example Five • Plan imposes combined $500 annual deductible on medical/surgical, mental health, and substance use disorder benefits. • This is permissible, because the deductible accumulates in the aggregate for all benefits.

47. Example Six • Plan imposes combined $500 annual deductible on all benefits (including medical/surgical, mental health, and substance use disorder benefits), except for prescription drugs. • Using reasonable methods, plan projects its payments for medical/surgical benefits in each of the other five classifications for the upcoming year, as follows:

48. Example Six (continued)

49. Example Six (continued) • With the exception of emergency care, more than 2/3 of medical/surgical benefits in each classification are subject to the deductible. Accordingly, the “substantially all” requirement is satisfied. • Moreover, because the $500 deductible is the only level in each classification, it is also the “predominant” level.

50. Example Six (continued) • Accordingly, mental health or substance use disorder benefits in each of those four classifications may be subject to a $500 deductible. • However, because less than 2/3 of projected emergency care claims are subject to the deductible, mental health or substance use disorder benefits for emergency care may not be subject to a deductible.