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The Promise and Problems of Mental Health Parity

HEALTH INSURANCE: Proposed New Rules Likely to Take Effect Jan. 2025

SAN DIEGO COUNTY – Since the onset of the COVID pandemic in 2020, access to mental health services and the importance of mental health coverage has become top of mind for insurance providers, employers, regulators, advocates and, most importantly, patients.

According to research conducted by the Kaiser Family Foundation, 90% of U.S. adults think the country is in the midst of a mental health crisis and 80% say the cost of addressing mental health is a “big problem.”

“Prior to the pandemic there was a big need for mental health support. Post-pandemic, it’s exacerbated. It’s gotten heightened,” said Giovanni Pacheco, principal in Marsh McLennan Agency’s Employee Health and Benefits Division, adding that sources have reported to him that anxiety-related phone calls to care providers “have quadrupled since the pandemic. It’s significant.”

Giovanni Pacheco
Principal
Marsh McLennan Agency

To address the significant mental health crisis, last summer the U.S. Department of Labor and U.S. Department of Health and Human Services proposed new rules to strengthen the Mental Health Parity and Addiction Equity Act (MHPAEA) that was passed in 2008.

“The whole idea of the parity requirements is to prohibit plans from imposing greater restrictions on access to mental health and substance abuse care than those that apply to medical or surgical benefits on plans,” Pacheco said. “Employer plans will have to abide by that.

“On fully-insured plans, the insurance carriers are making sure they are abiding by these rules; but then there’s these self-funded plans as well, and from the self-funded plan standpoint, we’re assisting those employers to make sure they’re meeting those obligations,” he added.

Proponents of the rules, which are expected to be finalized later this year and go into effect at the start of next year, say they will close loopholes in MHPAEA that insurance companies use to deny care for mental health and substance abuse.

Opponents to the rules say they will likely lead to higher costs and reduced quality of care in employer-sponsored mental health coverage.

New Mental Health Parity Proposals

The proposed rules for parity in mental health coverage are another update in what have become regular revisits to the Mental Health Parity Act of 1996, which at the time was viewed as inadequate by the bill’s sponsors, but is credited as the start of moving toward more equal coverage for mental health conditions.

The law was updated in 2008 as the Mental Health Parity and Addiction Equity Act, preventing group health plans and health insurance payors from imposing less favorable benefit limits for mental health benefits than on medical or surgical benefits. In 2010, the MHPAEA was again updated with the passage of the Affordable Care Act to require parity benefits in qualified health plans, individual plans and coverage provided to the ACA’s Medicaid expansion.

This latest proposed update to MHPAEA would amend the existing standard for nonquantitative treatment limitations. NQTLs are the processes, strategies, evidentiary standards or other criteria that limit scope or duration of benefits for services provided under health plans. The new rules will prevent plans and issuers from using NQTLs to limit access to mental health and substance use disorder benefits as compared to medical/surgical benefits.

Under the proposal, plans would be required to apply new mathematical tests to determine whether limits on mental health coverage are equally restrictive as limits on medical coverage. Plans will also have to document how any limitations to mental health coverage are equal to traditional medical coverage. Additionally, plans will need to collect, evaluate and analyze outcome data to show any impact of coverage restrictions, such as prior authorization rules or provider network limitations.

“Disparities in this data that show more restrictive limits on behavioral health than medical care would serve as an indicator of a possible violation of parity and trigger requirements on plans to take action to address the problem,” according to analysis of the new rules in a Kaiser Family Foundation report published in September.

Adding to Rising Costs a Concern

Pacheco described the NQTLs part of the parity rules update as “complicated” and the part that makes the topic “more involved, the part we need to be paying a little more attention to.”

“The agencies, they’re paying attention to a number of the prohibited NQTLs,” he said, adding that under current care review, common NQTLs include exclusions of coverage for cognitive issues, intensive behavioral conditions and rehab treatment for substance abuse disorders.

For patient advocates, the more NQTL loopholes taken out of the system, the more coverage for mental health conditions. For large employers concerned about costs of providing health plans for employees, the expanded coverage is a top concern.

According to the Business Group on Health’s 2024 Large Employer Health Care Strategy Survey, 44% of employers saw an increase in mental health concerns in 2022. Last year, that number jumped to 77%; and 16% of employers in the survey anticipate future increases. The survey also found that in 2024, employers are focused on increasing access to mental health services by providing more options for support and lowering cost barriers to care.

Lowering the cost mental health care has become a major concern of employer groups since the pandemic. According to a study by the RAND Corporation and Castlight Health, spending on mental health and substance abuse benefits rose 53% from the onset of the pandemic in March 2020 to the summer of 2022, due to a 39% increase in use of mental health services.

In October of last year, AHIP (America’s Health Insurance Plans), a political advocacy and trade association of health insurance companies, formally opposed enacting the new rules proposed for MHPAEA, citing “significant legal, policy, and operational flaws” and stating they should “not be finalized.”

“The fundamental challenge before us is a significant increase in demand for MH/SUD treatment that has far outpaced the number of available licensed providers to adequately meet that demand. We are concerned these proposed rules focus on documentation and demonstration of compliance with arbitrary new standards that will do nothing to increase the number of available MH/SUD providers or facilitate access to quality MH/SUD care,” AHIP wrote, later on explaining that since 2013, “spending by commercial health plans on MH/SUD care has nearly doubled.”

The Department of Labor counters that the rules have become necessary, citing significant discrepancies in medical and mental health coverage in a July 2023 MHPAEA Comparative Analysis Report to Congress.

Current plan practices, the report says, “may serve as barriers that prevent MH/SUD providers from joining a plan’s network, and stricter prior authorization or medical necessity reviews for MH/SUD coverage. Reforming or removing those limitations in accordance with MHPAEA ensures that participants, beneficiaries, and enrollees have equitable access to MH/SUD benefits as compared to medical/surgical benefits.”

NOTE: Facilities may accept more than one type of payment. Actual participation, including acceptance of new Medicaid enrollees and the number of enrollees the facility accepts, may differ. Detailed state-level data is available on KFF state health facts. SOURCE: KFF Analysis of National Substance Use and Mental Health Services Survey (N-SUMHSS), 2022
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