Question: What is the new Mental Health Parity and Addiction Equity Act (MHPAEA) employer certification requirement?

Short Answer: The CAA added a MHPAEA requirement for group health plans to make available upon request to the DOL, HHS, and IRS a comparative analysis of the design and application of non-quantitative treatment limitations (NQTLs) on the plan mental health and substance use disorder benefits. New MHPAEA regulations require that the employer as a fiduciary certify within the document that they have engaged in a prudent process and monitored their service provider.

General Rule: The Mental Health Parity and Addiction Equity Act (MHPAEA)

The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) was enacted in 2008 as a sweeping overhaul of prior mental health parity laws. MHPAEA generally provides that financial requirements (such as coinsurance and copays) and treatment limitations (such as visit limits) imposed on mental health or substance use disorder (MH/SUD) benefits cannot be more restrictive than the predominant financial requirements and treatment limitations that apply to substantially all medical/surgical (M/S) benefits within its set classification. In addition, MHPAEA prohibits separate treatment limitations that apply only to MH/SUD benefits.

The six classifications of benefits under MHPAEA for comparison of MH/SUD vs. M/S are: 1) inpatient, in-network; 2) inpatient, out-of-network; 3) outpatient, in-network; 4) outpatient, out-of-network; 5) emergency care; and 6) prescription drugs. The MHPAEA generally applies to employers with 50 or more employees.

MHPAEA NQTLs: Mental Health/Substance Use Disorder Parity with Medical/Surgical

The MHPAEA provides that group health plans and insurance carriers may not impose non-quantitative treatment limitations (NQTL) with respect to MH/SUD benefits in any classification unless, under the terms of the plan as written and in operation, any processes, strategies, evidentiary standards, or other factors used in applying the NQTL to MH/SUD benefits in the classification are comparable to, and are applied no more stringently than, the processes, strategies, evidentiary standards, or other factors used in applying the limitation to M/S benefits in the same classification.

This analysis does not focus on whether the final result is the same for MH/SUD benefit as for M/S benefits. Rather, the analysis focuses on ensuring the underlying processes, strategies, evidentiary standards, and other factors for MH/SUD benefits are in parity, comparable, and applied no more stringently than for M/S benefits.

Examples of NQTLs include:

• Medical management standards limiting or excluding benefits based on medical necessity or medical appropriateness, or based on whether the treatment is experimental or investigative;

• Formulary design for prescription drugs;

• Network tier design;

• Standards for provider admission to participate in a network, including reimbursement rates;

• Plan methods for determining usual, customary, and reasonable charges;

• Fail-first policies or step therapy protocols;

• Exclusions based on failure to complete a course of treatment; and

• Restrictions based on geographic location, facility type, provider specialty, and other criteria that limit the scope or duration of benefits for services provided under the plan or coverage.

The DOL provides a useful list of warning signs for where a plan’s NQTLs require additional analysis to determine MHPAEA compliance. The DOL also offers a MHPAEA Self-Compliance Tool that is intended to assist plans in this area, including a section on NQTLs that outlines a process for conducting the comparative analysis, and the Departments have stated their intent to update it to include the new regulatory framework.

Key Provisions in the New MHPAEA Regulations

The Department issued new final regulations on September 9, 2024 that amend the existing rules and add new rules implementing the MHPAEA. The new regulations generally apply for plan years beginning on or after January 1, 2025.

Under the new final regulations, health plans and insurance carriers must:

• Define whether a condition or disorder is an MH condition or SUD in a manner that is consistent with the most current version of the International Classification of Diseases or Diagnostic and Statistical Manual of Mental Disorders.

• Offer meaningful benefits (including a core treatment) for each covered MH condition or SUD in every classification in which M/S benefits (a core treatment) are offered.

• Not use factors and evidentiary standards to design NQTLs that discriminate against MH conditions and SUDs.

• Collect and evaluate relevant outcomes data and take reasonable action, as necessary, to address material differences in access to MH/SUD benefits as compared to M/S benefits.

• Include specific elements in documented comparative analyses and make them available to the Departments, an applicable State authority, or individuals upon request.

The New Comparative Analysis Documentation Requirements Include Fiduciary Certification

The Consolidated Appropriations Act, 2021 (CAA) expanded upon the MHPAEA by requiring group health plans and insurance carriers that offer both M/S benefits and MH/SUD benefits, and that impose NQTLs on MH/SUD benefits, to perform and document a comparative analysis of the design and application of the NQTLs. The CAA requires group health plans and insurance carriers that offer both M/S benefits and MH/SUD benefits, and that impose NQTLs on MH/SUD benefits, to make their comparative analysis of the design and application of NQTLs available to the Departments (DOL/HHS/IRS) or applicable state authorities upon request.

The new final regulations further clarify the content requirements of the comparative analysis document, including a key new certification requirement for employers.

1. Comparative analysis content requirements:

2. Description of the nonquantitative treatment limitations;

3. Identification and definition of the factors and evidentiary standards used to design or apply the nonquantitative treatment limitations;

4. Description of how factors are used in the design and application of the nonquantitative treatment limitations;

5. Demonstration of comparability and stringency as written;

6. Demonstration of comparability and stringency in operation;

7. Findings and conclusions; and

8. Fiduciary certification.

The fiduciary certification requirement provides as follows:
“A certification by one or more named fiduciaries that they have engaged in a prudent process to select one or more qualified service providers to perform and document a comparative analysis in connection with the imposition of any nonquantitative treatment limitations that apply to mental health and substance use disorder benefits under the plan in accordance with applicable law and regulations, and have satisfied their duty to monitor those service providers as required under part 4 of ERISA with respect to the performance and documentation of such comparative analysis.”

In the vast majority of situations, the employer is the named ERISA fiduciary. Employers sponsoring a single employer plan are the default ERISA “plan sponsor,” which in turn means they are the default ERISA §3(16) plan “administrator”. The DOL has confirmed that the ERISA plan administrator role is always a fiduciary position by the nature and responsibilities of its position. ERISA §402(a) in turn requires that the plan document include the named fiduciary, which makes explicit in the plan terms that the employer is named as the plan fiduciary.

Accordingly, in nearly all situations, the employer must complete the fiduciary certification.

The Employer’s Fiduciary Duty to Prudently Select and Monitor Plan Service Providers

At issue in the certification is the employer’s fiduciary duty of prudence. This duty requires employers to act with the care, skill, prudence, and diligence under the circumstances of a prudent person acting in a like capacity with respect to any fiduciary function.

DOL guidance suggests that the duty of prudence is better viewed as a prudent “expert” standard, at least in situations requiring specialized knowledge and expertise. For example, in the retirement plan investment context, the DOL has stated that the fiduciary should determine whether it possesses the requisite expertise, knowledge, and information to understand and analyze the nature of the risk and potential returns involved in a particular investment. If the employer does not have personnel whose judgement meets that prudent expert standard, it should consult with someone who does have the appropriate level of expertise.

More broadly, the duty of prudence commonly arises in the context of the fiduciary duty to prudently select and monitor plan service providers (e.g., third-party administrators) with an appropriate method based on the facts and circumstances. The DOL has summarized this obligation in the health plan context as follows:

“In selecting a health care provider in this context, as with the selection of any service provider under ERISA, the responsible plan fiduciary must engage in an objective process designed to elicit information necessary to assess the qualifications of the provider, the quality of services offered, and the reasonableness of the fees charged in light of the services provided. In addition, such process should be designed to avoid self-dealing, conflicts of interest or other improper influence.”

For more details:

• The Core Four ERISA Fiduciary Duties

• Newfront ERISA for Employers Guide

In the MHPAEA context, the same fiduciary duty applies for employers to prudently select and monitor plan service providers for compliance with MHPAEA and the comparative analysis documentation requirement. This forms the basis for the employer’s certification.

The DOL’s Expectation of Employers

The preamble to the new final regulations includes the following discussion of how the DOL expects the employers to fulfill their fiduciary duty to prudently select and monitor MHPAEA compliance, and thereby be able to complete the comparative analysis certification:

“For this purpose, DOL expects that a plan fiduciary making such a certification will, at a minimum, review the comparative analysis prepared by or on behalf of the plan with respect to an NQTL applicable to mental health and substance use disorder benefits and medical/surgical benefits; ask questions about the analysis and discuss it with service providers, as necessary, to understand the findings and conclusions documented in the analysis; and ensure that a service provider responsible (in whole or in part) for performing and documenting a comparative analysis provides assurance that, to the best of its ability, the NQTL and associated comparative analysis complies with the requirements of MHPAEA and its implementing regulations.”

Employer Certification: Practical Action Items

Employers Sponsoring a Fully Insured Medical Plan
Employers with fully insured medical plans will look to the insurance carrier as directly responsible for compliance with the MHPAEA requirements, including the new regulatory requirements, to prepare the comparative analysis documentation. Nonetheless, fully insured employers still maintain the fiduciary duty to prudently select and monitor all plan service providers, including insurance carriers. This means employers will still be required to complete the fiduciary certification component of the comparative analysis. Presumably, insurance carriers will eventually direct all employers agreeing to a policy’s terms to sign-off on the certification.

Employers Sponsoring a Self-Insured Medical Plan
Employers sponsoring self-insured medical plans (including level funded plans) will generally rely on the TPA to satisfy compliance with the MHPAEA requirements, including the new regulatory requirements, and to prepare the required comparative analysis documentation. Because the TPA is not directly responsible for compliance in a self-insured plan (even if the TPA acts in other capacities as an insurance carrier), MHPAEA compliance—and particularly addressing these new regulations and the comparative analysis documentation—should be a point of emphasis going forward in any TPA administrative services agreements.

As with most technical aspects of group health plan compliance, employers sponsoring a self-insured medical plan will appropriately expect these obligations to be delegated to TPAs because of their insight into the plan’s claims administration procedures and, in most cases, their delegated status as the plan’s named fiduciary for appeals under 29 CFR §2560.503-1(h)(1). Furthermore, the robust and specialized compliance departments at a TPA are in a far better position to accommodate these types of standardized health plan obligations than most employers.

Nonetheless, there will be some TPAs that decline to prepare the comparative analysis documentation as part of the scope of their administrative services. In those situations, the employer should prudently select a different third-party vendor to review the plan terms and independently perform the comparative analysis.

All Employers
Regardless of whether the plan’s insurance carrier, primary TPA, or a separate vendor prepares the comparative analysis documentation, the employer as plan fiduciary retains the fiduciary duty to prudently select and monitor that vendor’s (and all other plan service providers’) engagement with the plan. With respect to the comparative analysis assessment, the DOL has made clear its expectations that employers will:

• Review the document;

• Ask questions and discuss with the vendor as needed to understand the findings and conclusions within; and

• Ensure that the vendor provides assurances that, to the best of its ability, the document complies with MHPAEA and its implementing regulations

Enforcement

Plans and issuers must make a copy of the comparative analysis available when requested by any applicable State authority, a participant, beneficiary, or enrollee who has received an adverse benefit determination related to MH/SUD benefits, and participants and beneficiaries in ERISA plans at any time.

In the preamble to the new regulations, the Departments emphasized (apparently in frustration of reports that some plans had yet not prepared a comparative analysis when they received the request) that the analysis must be performed and documented “regardless of whether the Department or an applicable State authority have requested them.”

The new regulations set forth the steps the Departments will follow to request and review the comparative analysis:

1. After an initial request for a comparative analysis, the plan must submit it to the relevant Department (DOL/IRS/HHS) within 10 business days;

2. If the Department determines the comparative analysis is insufficient, the plan has 10 business to provide the required additional information;

3. If the Department makes an initial determination of noncompliance, the plan has 45 calendar days to specify the actions it will take to comply and provide additional comparative analyses.

4. If the Department makes a final determination of noncompliance, the plan must notify all participants, beneficiaries, and enrollees enrolled in the plan or coverage within 7 business days.

The noncompliance notice to participants must meet several content requirements, including the following statement prominently displayed on the first page, in no less than 14-point font: “Attention! The [Department of Labor/Department of Health and Human Services/Department of the Treasury] has determined that [insert the name of group health plan or health insurance issuer] is not in compliance with the Mental Health Parity and Addiction Equity Act.”

Potential Legal Challenges

A number of industry groups have voiced their opposition to the new rules. Some have suggested that they will consider potential litigation as an option to challenge the rules. Furthermore, given the Supreme Court’s recent Loper Bright decision to overturn the Chevron doctrine, many have speculated the new regulations may be an overreach beyond statutory CAA authority that is now more susceptible to being overturned.

Summary

Employers act as a fiduciary with respect to the health plan in many different areas. One of the key areas is the fiduciary duty to prudently select and monitor plan service providers. The new MHPAEA regulations do not change this core ERISA requirement, they simply illuminate it.

In all other situations where employers oversee vendors, the ERISA fiduciary overlay is implicit. The MHPAEA approach is simply to take that overarching obligation that underpins all vendor relationships and make it explicit by requiring the employer to certify that they have upheld their fiduciary duty in this context.

The new MHPAEA regulations have imposed an employer certification as a component of the NQTL comparative analysis added by the CAA. The idea appears to be that employers are likely to be more deliberate in performing their standard ERISA fiduciary obligation if they certify their procedural prudence. Whether that proves true, or whether the certification is just another example of excessive regulatory red tape, is yet to be determined.

Relevant Cites:

29 CFR §2590.712-1(c)(6):

(vi) A certification by one or more named fiduciaries that they have engaged in a prudent process to select one or more qualified service providers to perform and document a comparative analysis in connection with the imposition of any nonquantitative treatment limitations that apply to mental health and substance use disorder benefits under the plan in accordance with applicable law and regulations, and have satisfied their duty to monitor those service providers as required under part 4 of ERISA with respect to the performance and documentation of such comparative analysis.

Disclaimer: The intent of this analysis is to provide the recipient with general information regarding the status of, and/or potential concerns related to, the recipient’s current employee benefits issues. This analysis does not necessarily fully address the recipient’s specific issue, and it should not be construed as, nor is it intended to provide, legal advice. Furthermore, this message does not establish an attorney-client relationship. Questions regarding specific issues should be addressed to the person(s) who provide legal advice to the recipient regarding employee benefits issues (e.g., the recipient’s general counsel or an attorney hired by the recipient who specializes in employee benefits law).