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PAI Self-Funded Plan Updates

Mental Health Parity and Addiction Equity Act of 2008 Update

June 29, 2010

Mental Health Parity and Addiction Equity Act of 2008 Update

June 29, 2010 

On October 8, 2008, the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act (the Act) was signed into law. The Act requires group health plans that provide medical/surgical coverage and mental health/substance abuse (MHSA) coverage benefits to ensure that financial requirements and treatment limits are equal.

Since passage of the Act there have been updates, which include:

·         On February 2, 2010 the Internal Revenue Service (IRS), Department of Labor (DOL) and Centers for Medicare and Medicaid Services (CMS) (collectively, the Departments) published interim final regulations (the Regulations) implementing the Act.

·         Effective April 5, 2010, the Regulations replaced the prior mental health parity regulations and generally apply to group health plans and health insurance issuers for plan years beginning on or after July 1, 2010 (there is a special rule for collectively bargained plans).

·         The new Regulations would be applicable on January 1, 2011 for most calendar year plans, but earlier for plan years beginning after July 1, 2010.

·         The Regulations generally apply to employers who employed an average of more than 50 employees on business days during the preceding calendar year.

The Regulations are more expansive than anticipated. They include:

·         Plan sponsors, many of whom adopted changes to their plan designs to comply with the Act without the benefit of interpretive guidance, will now need to review their plan designs to determine whether their plans are in parity under the rules as set forth in the Regulations – particularly with regard to non-quantitative treatment limitations such as medical management tools.

·         The parity tests for financial requirements and quantitative treatment limitations are complex and will require in-depth analysis.

·         The Regulations provide a good-faith compliance period until the applicability date. There may be certain aggressive plan designs that plan sponsors may wish to change prior to the applicability date.

·         It is the plan sponsor’s responsibility to test their plan designs.

The Regulations provide specific formulas to compare MHSA benefits and medical/surgical benefits. Plan sponsors will need to collect plan information to apply the formulas. If a plan feature does not clearly meet or violate the parity rules, employers must conduct a multi-step parity analysis to determine whether their MHSA financial requirements or treatment limitations are more restrictive than the predominant ones that apply to “substantially all” medical/surgical benefits.

Multi-step Parity Analysis

1.       Identify whether the plan covers MHSA and medical/surgical benefits in the six benefit classifications: inpatient/in-network, inpatient/out-of-network, outpatient/in-network, outpatient/out-of-network, emergency care and prescription drugs.

2.       Create a reasonable estimate of plan payments for medical/surgical benefits in each of the six categories.

3.       Determine whether at least two-thirds (“substantially all”) of the plan payments in a category are subject to a particular financial requirement (such as copayments) or treat­ment limit.

4.       If Step 3 is met, determine whether the amount or level of the financial requirement or treatment limit (such as a $20 copayment) applies to more than half of the benefits within a category. If so, it is the pre­dominant level.

5.       If there is no predominant level, further analysis is needed.

For PAI Self-funded Accounts:

·         For employer plan sponsors that do not have a relationship with a third-party vendor, or are looking for a firm to assist them with the analysis, PAI recommends Milliman as an option.

·         PAI can assist putting the plan sponsor in touch with Milliman.  Mr. Steve Melek, FSA, Principal and Consulting Actuary with Milliman is an expert in the field of behavioral health care, serving on the American Academy of Actuaries Mental Health Parity Work Group.

·         The direct contracting relationship and cost to perform plan testing will be the responsibility of the plan sponsor.

·         PAI can assist by providing plan information and data to a plan sponsor or any third-party entity designated by the plan sponsor for the analysis, provided that a Business Associate Agreement is in place.

·         Requests should be directed through the plan sponsor’s PAI marketing representative.

For questions regarding Mental Health Parity, contact Suzanne Miller, PAI Compliance Officer, at 803-462-3139 or smiller@paisc.com.

This communication is provided for informational purposes only and does not constitute legal advice or legal opinions. The information contained herein contains summaries of various portions of legislation addressing health care reform and is subject to change without notice. This information is not a substitute for legal advice from your lawyers.