Parity Final Rules Issued

parityMental Health Parity Final Rules were issued by the Obama Administration on November 9th, 2013.

Here is a preliminary summary of the rules and their implications, based in large part on the analysis of the American Psychiatric Association’s Government Affairs Department.

We were also lucky enough to have an experienced attorney with a lot of knowledge of health care law review the rules and add her comments to the APA’s review.

Effective Date – 

In general, the final rule is effective for plan years beginning on or after July 1, 2014. Since most insurance plans cover calendar years, the effective date for most plans will be January 1, 2015, but it may be earlier for some plans.

Until the new final rules become applicable, interim Parity rules have the force of law. COMMENT from the attorney who reviewed the rules. 

Residential Care – 

A lot of attention has been focused on the fact that, despite parity regulations, many plans refused to cover mental health residential care. A series of court cases have found that these restrictions were not legal. This final parity rule states that residential (or “intermediate care” – meaning intermediate between a hospital and outpatient) must be covered to the extent that intermediate care is covered for non-psychiatric diagnoses.

In other words, if the plan covers medical skilled nursing facilities or rehabilitation hospitals and covers them just as it covers inpatient benefits, then the plan must likewise treat any covered care in residential treatment facilities for mental health or substance use disorders as an inpatient benefit. In addition, if a plan treats home health care as an outpatient benefit, then any covered intensive outpatient mental health or substance use disorder services and partial hospitalization must be considered outpatient benefits as well.The net effect of this provision is that parity requirements extend to intermediate levels of mental health and substance use care. 

 

Non-Quantitative Treatment Limitations (NQTLs)
One aspect of managed care’s discriminatory treatment that has been hard to address are the set of “medical necessity” rules it applies to reimbursement for mental health care, and the different standards for access to care and for the adequacy of a provider network for mental health as opposed to other health care. These are all considered Non-Quantitative Treatment Limitations (NQTL’s) – a quantitative treatment limitation would be a limit on the number of days or number of services covered.
There are 2 kinds of treatment limitations:  quantitative treatment limitations (such as the number of days of hospitalization that will be reimbursed) & non-quantitative treatment limitations (such as whether partial hospitalization will be covered).  The latter is abbreviated NQTL’s.  There is a special mathematical test to determine what parity means in the realm of quantitative treatment limitations. – COMMENT. 
The final rule eliminates the provision in earlier versions that allowed plans to apply discriminatory limits on mental health/substance use disorder  treatment if there was a “clinically recognized standard of care that permitted a difference,” since plans seemed to have been pretty creative about finding clinically recognized standards of care that justified discriminating against mental health coverage.
  • Under the final rule, parity requirements for NQTLs are expanded to include restrictions on geographic location, facility type, provider specialty and other criteria that limit the scope or duration of benefits for services (including access to intermediate levels of care).
  • The final rule defines the standard for judging whether an NQTL is discriminatory, rules governing mental health approval must be “comparable and no more stringent” – but it still doesn’t define these terms – so we can expect argument about what this means from the plans.  

Processes, standards including evidentiary standards, and other factors influencing reimbursement decisions cannot be specifically designed to limit access to mental health or substance abuse services.  This refers to in-&-out-of-network geographical limitations, situations where the patient is a threat to self or others, exclusions of court-ordered & involuntary holds, experimental treatment limitations, service coding, exclusions for services provided by clinical social workers, & network standards (among other things?).  All of these must be applied in compliance with the final regulations. COMMENT.

  • Fortunately, it continues to require plans to disclose the “processes, strategies, evidentiary standards and other factors used by the plan or issuer to determine whether and to what extent a benefit that is subject to an NQTL be comparable and applied no more stringently for MH/SUD than for medical/surgical.” In other words, if the plans follow the rule, they should be sharing a lot of information about the specific rules used to decide whether or not to cover claims. 
  • The improvement in the final rule is that plan participants or those acting on their behalf will now be able to request a copy of all relevant documents used by the health plan to determine whether a claim is paid. Current or potential enrollees may request this information and plans are required to provide it within 30 days. In other words, if your claim is denied the plan has to give you access to all the rules it applied to deny the claim. 
  • The final rule confirms that provider reimbursement rates are a form of NQTL. In other words, reimbursement for mental health must be equivalent for comparable services.
    • The preamble clarifies that plans and issuers can look at an array of factors in determining provider payment rates such as service type, geographic market, demand for services, supply of providers, provider practice size, Medicare rates, training, experience and licensure of providers.
    • The final rule reconfirms that these factors must be applied comparably and no more stringently on mental health providers.

The licensure and experience of the provider may be a consideration in reimbursement rates, as long as it is done for behavioral health in the same way as for medical/surgical. COMMENT

    • Since plans have continued to reimburse psychiatrists less for the exact same service (procedure code) provided by an internist, it will be interesting to see if this very clear rule results in comparable reimbursement, or not.

Disclosure and Transparency

 

The criteria for “medical necessity” determinations (deciding whether to pay for a service or not) must be made available to any current or potential enrollee or contracting provider upon request. 
The reason for the denial of coverage or reimbursement must be made available upon request. 
  • New requirements in the final rule will require plans to provide written documentation within 30 days of how their processes, strategies, evidentiary standards and other factors used to apply an NQTL were imposed on both medical/surgical and mental health / substance use benefits.
    • In other words, if a plan denied coverage for a mental health service they will have to show that they used comparable standards to deny coverage for a medical service. 
  • Under the final rule plans and issuers must provide the claimant, free of charge, during the appeals process with any new additional evidence considered relied upon or generated by the plan or issuers in connection with a claim. 
    • In other words, if they come up with a new rule in the course of reviewing your claim, they also have to give that new rule to you.
Enforcement
The final rule clarifies that the states have primary enforcement authority over health insurance companies.
  • State insurance commissioners and their staff will be the primary means of enforcing implementation of parity.
    • While this is not a surprise, it will mean that in states where there exists a cozy relationship between the insurance commissioner and the insurance industry, enforcement may be less than adequate.
    • The rule says that the Department of Health and Human Services (HHS), through its Centers for Medicare and Medicaid Services (CMS), has enforcement authority over issuers in a state that does not comply. It isn’t clear what this means…
  • The Department of Labor (DOL) has primary enforcement authority over self-insured ERISA plans (when a company is very large it usually hires insurance companies to manage claims, but is ultimately responsible for all the costs of claims – in other words it is self-insured). 
    • Since a lot of people are covered by ERISA plans (by some estimates as many as half the people covered in California) this is an important part of the new rule, and one that hasn’t gotten enough attention.
State Preemption
More consumer protective state laws are not preempted. Which means that the parts of California parity law that are clearer or stronger are still in force, although only for non-ERISA plans. 
Medicaid Managed Care, CHIP and Alternative Benefit Plans 
The final rule does not apply to Medicaid managed care organizations, Children’s Health Insurance Program (CHIP) or Alternative Benefit Plans (i.e. Medicaid Expansion Plans under the ACA) even though the rule states the statute applies to these entities. As stated, the January 2013 CMS State Health Official Letter will continue to govern implementation of Medicaid managed care parity. The final rule states more guidance on this will be forthcoming. 
  • In other words, how this rule applies to those currently and newly covered by Medicaid (MediCal in California) is still unclear.
Cost Exemption for Plans and Issuers
The original law said that if the cost of parity implementation was more than 2% of the total cost of all healthcare covered under the insurance plan, the company could request an exemption from parity.
  • The final rule provides a formula for how plans and issuers can file a cost exemption if the changes necessary to comply with the law raise costs by at least 2% in the first year.
    • Unless there is “creative accounting” this shouldn’t happen, since mental health care currently runs less than 8% of total healthcare costs in a typical insurance plan, so the cost of mental health care would have to go up by 25% for the 2% increase threshold to be met.
Tiered Networks
The final rule allows plans and issuers to use multiple provider network tiers (preferred providers, etcetera) but only if they are not imposing these tiered networks more stringently on mental health providers.
Application to the Individual Market
The final rule applies to the individual market to both grandfathered and non-grandfathered plans for plan years beginning on or after July 1, 2014.
Non-Federal Governmental Plans
Local and state self-funded plans may continue to apply to CMS for an exemption from parity requirements. (In other words state and county employees may not be covered). 
Multi-Tiered Prescription Drugs
A plan may have multi-tiered prescription drug programs (applying different levels of copayment to different tiers of prescription drugs). 
  • A plan may not apply these tiered prescription drug programs more stringently on mental health prescription drugs than other drugs.
    • What more stringently means in this case is going to be hard to define….