Sean McBride

Associate Editor

Loyola University Chicago School of Law, JD 2025

On July 25, 2023, the Departments of Labor, Health and Human Services, and the Treasury (the agencies) proposed new rules placing heightened compliance standards on health insurers and plans regarding the use of Non-Quantitative Treatment Limitations (NQTLs) for mental health and substance abuse disorder (MHSUD) services. These new rules amend the current reporting requirements with the intent to establish ongoing reporting that more clearly demonstrates whether MHSUD services are provided in compliance with the law.

History of Mental Health Parity Regulation

In 2008, Congress passed the Pall Wellstone and Peter Domenici Mental Health Parity and Addiction Equity Act (MHPAEA). The MHPAEA requires health insurers to cover mental health and substance abuse treatment no differently than medical and surgical treatment. The scope of the MHPAEA was expanded to apply to individual health plans when the Affordable Care Act (ACA) was passed in 2010.

In 2021, Congress passed the Consolidated Appropriations Act (CAA), which required health insurers and plans to perform comparative analysis to prove that NQTLs – if applied – were being applied equally between MHSUD services and medical / surgical services.

NQTLs are non-numerical limits on the scope or duration of health benefits. One of the most common NQTLs is a pre-authorization requirement for prescription drug coverage. For instance, there may be specific prescriptions that a health insurer will not cover until it’s reasonably certain that it’s safe for the insured person to take the medication. The health insurer may require results from a blood test before approving coverage.

In the 15 years that the MHPAEA has been in place, insurers and employers have struggled to establish effective compliance. These issues are one of the primary reasons the new rules are being proposed. Ultimately, the goal is to provide a clearer path for insurers to remain in compliance.

The Proposed New Rules

 The proposed new rules have three significant updates to MHPAEA compliance reporting.

1. Under the new rules, health insurers and plans must include eating disorders and autism spectrum disorders within their overall definition of MHSUD.
2. Health insurers and plans must perform a comparative analysis on all NQTLs imposed on MHSUD services. If insurers fail to provide this reporting, they will be barred from imposing the NQTL until they can demonstrate compliance with the MHPAEA or a remedy to the violation.
3. If a health insurer plans to impose an NQTL on MHSUD benefits, the following three requirements must be met:

• • The rules establish a mathematical test that can be applied to NQTLs to ensure they are not applied more restrictively to MHSUD services compared to medical / surgical services.
  • Insurers will be required to document exactly how their NQTLs, as applied to MHSUD benefits, are comparable to their medical / surgical benefits. Importantly, insurers will not be permitted to use historical data to manipulate their analysis. For instance, if there were low rates paid to MHSUD providers in the past, these cannot be used to lower the average of what is paid today.
  • Finally, insurers will be required to show that they not only have written standards to facilitate compliance but provide evidence of outcomes. Insurers will be required to identify any material differences in outcomes and remedy them before proceeding.

It’s important to note that neither the MHPAEA nor the proposed new rules forbid NQTLs on MHSUD benefits. NQTLs are part-and-parcel with the concept of networks and can be extraordinarily important to ensure proper care. Rather, the proposed new rules reinforce the standard imposed by the MHPAEA that NQTLs must be applied equally to MHSUD benefits and medical / surgical benefits.

What steps should Health Insurers and Employers take?

While these proposed rules will certainly affect health insurers, the rules will also be enforced by the Employer Benefits Security Administration (EBSA) and will apply to all employers providing health insurance. This can present unique challenges to employers, since they don’t select network providers, negotiate reimbursement rates, determine preauthorization requirements, or control several other factors the agencies use to determine if benefits comply.

It’s important to note that these proposed rules are not yet law and the agencies are seeking feedback from stakeholders that may lead to changes in the proposed rules. If finalized, the rules would go into effect on January 1, 2025, for group health plans and January 1, 2026, for individual health plans. 

Despite this seemingly lengthy runway to prepare for these rules, health insurers and employers should start taking active steps to evaluate their networks, reimbursement rates, preauthorization requirements, and other NQTLs. More specifically, health insurers and employers should:

• Conduct an audit of all NQTLs imposed on MHSUD services, as well as policies and procedures that were created to ensure compliance with the MHPAEA
• Following such an audit, health insurers and employers should identify material gaps in compliance and determine the steps required to ameliorate the gaps.
• In doing so, health insurers and employers should note where they foresee substantial risks of non-compliance and determine if these risks can be mitigated or resolved.
• Internal auditing units should be prepared to conduct periodic reviews in anticipation of external audits from the agencies.
• Finally, health insurers and employers should communicate with each other and ultimately the agencies to ensure the rules – if implemented – are realistic for both health insurers and employers.

Ensuring compliance with these proposed new rules will help health insurers comply with the law and provide adequate mental health and substance abuse benefits to their members.