New Federal Parity Rules: A Step Forward for Equitable Mental Health and Substance Use Disorder Coverage

In September 2024, the U.S. Departments of Labor, Health and Human Services, and the Treasury (collectively, “the Departments”) released final rules to strengthen the enforcement of the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA”), which mandates that mental health and substance use disorder (“MH/SUD”) benefits be treated on par with medical and surgical benefits. The new rules represent a positive step in closing loopholes that have allowed insurance companies to engage in discriminatory practices, leaving millions of Americans without adequate access to the MH/SUD care to which they are entitled.

The updated parity rules specifically address persistent disparities in healthcare coverage, noting that “in 2022, nearly 54.6 million people . . . were classified as needing treatment for substance use, but only about 24 percent of those people received any treatment.” Final Rules, p. 3. Studies show that individuals with MH/SUDs are denied coverage at a significantly higher rate than those seeking medical or surgical treatment, compounding the hardships faced by those with these conditions. The Departments emphasize that these disparities are often caused by the improper application of nonquantitative treatment limitations (“NQTLs”) by plans and insurers, such as restrictive prior authorization requirements, limited provider networks, and low provider reimbursement rates. The final rules directly tackle these issues, which is critical to addressing barriers to access to MH/SUD benefits. Id., p. 7.

Key Provisions of the New Parity Rules

Greater Transparency

A critical aspect of the new rules is the emphasis on transparency. Health plans are now required to disclose how they develop their NQTLs, which include prior authorization requirements, treatment management techniques, standards for network composition, and methodologies for determining out-of-network reimbursement rates. Insurers must demonstrate that their NQTLs for MH/SUD benefits are applied no more restrictively than those for medical benefits. The final rules stress the importance of this transparency, highlighting the Departments’ understanding that without clear disclosure of how NQTLs are applied, plan members and providers are often left in the dark about why their claims for MH/SUD care are denied or under reimbursed.

To further promote transparency, health plans must provide detailed reports to regulators showing their compliance with parity requirements. Insurers are now obligated to explain how they develop and apply NQTLs, ensuring that MH/SUD treatment is not subject to undue restrictions compared to medical care.

Heightened Scrutiny of NQTLs

The new rules place particular emphasis on NQTLs, which have been a significant concern in MH/SUD treatment. NQTLs are often the primary way in which MH/SUD care is limited, with insurers imposing more stringent review standards, excessive authorization requirements, narrower provider networks for mental health services, and lower reimbursement rates for MH/SUD services. Health plans must now prove that these limitations are applied no more stringently to MH/SUD services than to comparable medical services. This heightened scrutiny is essential, as under the new rules, health plans will be required to swiftly correct any parity violations if they cannot demonstrate compliance.

Network Adequacy Requirements

In response to the widespread issue of inadequate MH/SUD networks, the final rules require health plans to maintain sufficient in-network access to MH/SUD providers. The final rules cite data showing the growing disparity in the utilization of out-of-network behavioral healthcare providers relative to out-of-network medical care providers. Out-of-network use was 3.5 times higher for behavioral healthcare than for all out-of-network medical care, which signal’s noncompliance with the NQTL requirements of MHPAEA. Final Rules, p. 5.

The Departments anticipate that these final rules will improve network composition by making mental health and substance use disorder provider networks more robust, and making it easier for individuals seeking mental health and substance use disorder care to actually receive it by cutting red tape, with fewer and less restrictive prior authorization requirements and other treatment management techniques to navigate. www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/final-rules-under-the-mental-health-parity-and-addiction-equity-act-mhpaea.

Data Collection and Compliance Audits

To enforce these final rules, the Departments have introduced enhanced data collection measures. The new rules “[c]odify the requirement in MHPAEA, as amended by the Consolidated Appropriations Act, 2021, that health plans and insurers conduct comparative analyses to measure the impact of NQTLs. This includes evaluating standards related to network composition, out-of-network reimbursement rates, and medical management and prior authorization NTQLs.” Id.

Health plans and insurers must now perform and document a comparative analysis of the design and application of each applicable NQTL. The final rules require that the comparative analysis contain at least six key elements: (1) a description of the NQTL and the benefits subject to it; (2) identification of the factors and evidentiary standards used to design or apply the NQTL; (3) a description of how these factors are used in the design or application of the NQTL; (4) a demonstration of comparability and stringency, as written; (5) a demonstration of comparability and stringency, in operation; and (6) findings and conclusions. Id.

The final rules set forth steps the Departments will follow to request and review a plan or insurer’s comparative analysis of an NQTl. These reports will be subject to compliance audits by the Departments, and a health plan found in violation will have to specify the actions it will take to comply and provide additional comparative analyses. As important, plans and insurers “must make a copy of the comparative analysis available when requested by . . . a participant, beneficiary, or enrollee who has received an adverse benefit determination related to mental health and substance use disorder treatment, and participants and beneficiaries in ERISA plans at any time.” Id.

Timeline for Compliance

For group health plans, “the new rules will generally begin to apply on January 1, 2025, though plans and companies will be given until January 1, 2026, to comply with certain new standards.” www.dol.gov/agencies/ebsa/laws-and-regulations/laws/mental-health-parity/new-mhpaea-rules-what-they-mean-for-providers. For “individual health insurance coverage (i.e., Marketplace), the new protections will generally begin to apply on January 1, 2026.” Id.

Conclusion

The new final parity rules are a critical step toward addressing long-standing inequities in the treatment of MH/SUD benefits. By requiring greater transparency, imposing stricter scrutiny on NQTLs, mandating adequate provider networks, requiring proper out-of-network reimbursements, and enhancing compliance audits, the new rules aim to create a fairer and more equitable healthcare system. Patients and providers should take full advantage of these strengthened protections, while health plans and insurers must adapt quickly to ensure parity compliance.

For more information about this article, MHPAEA, ERISA benefits and fiduciary claims, payor disputes, or healthcare litigation in general, please contact AGG Healthcare Litigation partners Rich Collins or Damon Eisenbrey. Their practice focuses on representing healthcare providers and plan members in disputes with health insurers.