Parity Implementation Update

Department of Labor releases new FAQs on parity implementation

FAQs address issues of non-quantitative treatment limitations and specialty copayments

By Legal and Regulatory Affairs staff

January 12, 2012—On November 17, 2011, the Department of Labor – one of the three federal agencies responsible for enforcement of the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act – released a list of frequently asked questions (FAQs) (PDF, 79KB) to help people understand and benefit from the 2008 federal parity law. The FAQs were developed jointly with the other two enforcement agencies, the Departments of Health and Human Services (HHS) and Treasury.

The FAQs deal with two of the most common questions raised by psychologists with regard to the February 2010 Interim Final Rule, the regulations that implement and expand on the parity law. Those questions are: (1) the application of the non-quantitative treatment limitations (NQTLs) rule to prior authorization requirements; and (2) specialty copayments (co-pays).

Background on NQTLs

An NQTL is a limitation that is not expressed numerically, but otherwise limits the scope or duration of benefits for treatment. For example, a limit of 20 therapy sessions per year, a $50 co-pay or a $2,000 annual maximum is a quantitative limitation, while medical management techniques such as requiring pre-authorization to determine medical necessity are NQTLs.

Plans that require a prior authorization for all mental health benefits but do not require such prior authorization for medical/surgical benefits are applying a NQTL that violates the parity law. Additionally, a plan is not allowed to apply a stricter NQTL to mental health benefits than is applied to medical/surgical benefits.

Some differences in prior authorization practices are allowed based on standards of care. However, plans are not allowed to apply stricter limitations to all mental health benefits than for those applied for medical/surgical benefits.

Mental health NQTLs must be “comparable to” and applied “no more stringently than” those processes used in applying limitations to medical/surgical benefits.

The “no more stringently” component is aimed at limitations that look equal on their face but are applied in a disparate way. For example, a company might appear to be in compliance with the parity law if it applied to similar, recurring medical/surgical and mental health services a requirement that the medical necessity of further services be reviewed after five sessions. If, however, that review resulted in 90 percent approval of further medical/surgical services, but only 20 percent approval of further mental health services, this result would strongly suggest that the same limitation is being applied more stringently to mental health services and generally is not permissible under the parity law.

New guidance

In FAQ 3, the Department of Labor indicates that a plan cannot routinely allow several days of care without a treatment plan being filed in regards to medical/surgical treatment but then only allow one day of care prior to filing a treatment plan for mental health benefits.

Conversely, the response to FAQ 4 indicates that the approach to applying prior authorization requirements that some health insurers use is acceptable. In this approach, the company uses the same criteria for both medical/surgical and mental health services in determining what services require prior authorization. The result may be that some but not all services are subject to comparable application of prior authorization requirements.

The criteria for determining when to require authorization listed in Question 4 are the same as some companies actually employ, including: variability in cost and quality; provider discretion in determining diagnosis or type and duration of treatment; and clinical efficacy of the proposed treatment.

The response to FAQ 7 regarding specialty co-pays is more technical and requires more detailed explanation. The FAQ is as follows:

Q7: Is my group health plan always limited in the amount that it can charge for all mental health/substance use disorder providers to the same rate as medical/surgical generalists?

A: No. The standard for determining the maximum copayment that can be applied to mental health/substance use disorder benefits is determined by the predominant copayment that applies to substantially all medical/surgical benefits within a classification. If the copayment that meets this standard is the one charged for a medical/surgical specialist, that copayment can be charged for all mental health/substance use disorder benefits within that classification. On the other hand, if the copayment that meets this standard is the one charged for a medical/surgical generalist, then that is the copayment that can be charged to all mental health/substance use disorder benefits within that classification

(NOTE: “Classifications” refers to the six broad categories of services specified in the federal parity law to be used for making comparisons between mental health benefits and medical/surgical benefits – for example, inpatient, out-of-network visits or outpatient, in-network visits. Under the parity law, the “substantially all" test compares all medical/surgical services in a classification to the services in the same classification for mental health.)

The point of this FAQ is that regardless of whether a co-pay is called a generalist or specialist co-pay, the dollar amount must meet the “substantially all” or “two-thirds” test that applies to quantitative limitations before it can be applied to mental health services. The example provided in the FAQ seems to assume that a health plan will have just two co-pay amounts for medical/surgical, for example, a $50 specialist co-pay and a $25 generalist co-pay.

While the “substantially all” test is a bit complicated, essentially it means that if a $50 specialist co-pay is applied to two-thirds of medical/surgical services in a classification (for example, outpatient, in-network office visits), then that same $50 co-pay can be applied to mental health services in the same classification. But if a $25 generalist co-pay can meet the “substantially all” test for that classification while a $50 co-pay does not, then $25 is the maximum co-pay that can be applied to mental health services in that classification.

The FAQs can be found on the Department of Labor site. Additionally, previously issued FAQ guidance can also be found from June 30, 2010 and December 22, 2010.

For more information, contact the Legal and Regulatory Affairs department by email or at (202) 336-5886.

Please note: Legal issues are complex and highly fact specific and require legal expertise that cannot be provided by any single article. In addition, laws change over time and vary by jurisdiction. The information in this article does not constitute legal advice and should not be used as a substitute for obtaining personal legal advice and consultation prior to making decisions regarding individual circumstances.