Three federal agencies have recently issued regulations interpreting the requirements of the new federal law known as the Wellstone Act. The regulations help employers understand their legally permissible options in offering mental health and substance abuse benefits on a going forward basis.
The Mental Health Parity Act (MHPA) has been in place since 1996. The MHPA prohibits any annual and lifetime limits under employer group health plans which are more restrictive for mental health benefits than for other medical/surgical benefits. That law was expanded under the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (Wellstone Act). The Wellstone Act further restricts the ability of an employer group health plan to differentiate between mental health and medical/surgical benefits. For example, under the Wellstone Act, health plans can no longer impose any type of financial restriction including deductibles, copays, coinsurance and treatment limits on a less favorable basis for mental health benefits than for medical/surgical benefits. Further, the Wellstone Act expands its restrictions to apply to substance abuse benefits, as well as mental health benefits.
The Wellstone Act began to apply as of the first day of the first plan year beginning after October 3, 2009 (i.e., January 1, 2010 for calendar year plans). HHS was required to issue regulations last fall interpreting the Wellstone Act. However, HHS indicated that it needed more time to consider the high volume of comments received. As a result, the regulations were published on February 2, 2010. The regulations will not apply until plan years beginning on or after July 1, 2010 (i.e., January 1, 2011 for calendar year plans). Plans maintained pursuant to a collective bargaining agreement ratified before the Wellstone Act was enacted have a delayed effective date – until the first day of the first plan year beginning on or after the later of the date on which the collective bargaining agreement terminates (without regard to extensions) or July 1, 2010. For the current year, employers are required to make a good faith effort to comply with the Wellstone Act absent the regulatory guidance.
Here are some highlights of the new regulations:
- No Separate But Equal Deductible. Some employee benefit practitioners believed that under the Wellstone Act, employer group health plans could potentially require separate but equal deductibles for mental health/substance abuse treatment vs. medical/surgical treatment. The new regulations prohibit such a practice.
- Financial Requirements and Quantitative Treatment Limits. Parity is required with respect to financial requirements and quantitative treatment limitations. In applying this rule, the new regulations identify six separate classifications: inpatient in-network benefits, inpatient out-of-network benefits, outpatient in-network benefits, outpatient out-of-network benefits, emergency care and prescription drugs. A plan may not apply a financial requirement or a treatment limit to mental health/substance abuse benefits in any of the six classes which is more restrictive than the “predominant” financial requirement or treatment limit applied to “substantially all” medical/surgical benefits in the same class. For this purpose, “predominant” means more than one-half and “substantially all” means at least two-thirds.
- Nonquantitative Treatment Limits. The regs also require parity with respect to nonquantitative treatment limits such as medical management, standards to admit a provider to a network, formulary design, and step therapy. For example, an employee assistance program (EAP) cannot serve as a gatekeeper, restricting or directing mental health care, unless a similar form of medical management is applied to medical/surgical benefits. Further, employers cannot require employees to exhaust EAP benefits before they can access mental health care if a similar requirement does not exist for accessing medical care.
As with the MPHA, small group health plans provided by employers with an average of no more than 50 employees on business days during the prior calendar year are exempt from the law. Further, while the MPHA also included a cost-based exemption where the employer can prove that compliance with the law will significantly increase its health plan costs, that exemption is much more restrictive under the Wellstone Act. The Wellstone Act increases the cost threshold, requires actuarial certification and revises the notice requirement. Further, the cost-based exemption may only be claimed for alternating plan years. Additional guidance will be issued in the near future regarding the cost-based exemption.
Employers should review their current mental health / substance abuse benefit provisions to determine whether they comply with the new regulations and plan to make any necessary adjustments.