Mental Health Coverage Test Slammed as Undermining Cost Controls

A new test embedded in Biden administration mental health parity rule proposals has caused trepidation within the health-care industry that common techniques used to control costs for employee health plans could soon be eliminated.

The near-finalized proposal’s “substantially all” test says that under the Mental Health Parity and Addiction Equity Act, “non-quantitative treatment limitations” must be applied at similar levels to medical and surgical benefits if they are applied to mental health benefits.

The Departments of Health and Human Services, Labor, and the Treasury have said in the proposal that NQTLs can include requirements such as prior authorization for care, or concurrent review of coverage, which is oversight insurers conduct while patients receive care to scrutinize its necessity.

Groups representing employer-sponsored health plans have been particularly vocal in pushing back against the proposed rules, arguing they will have to stop using many NQTLs as they would cause plans to fail the new substantially all test. The Biden administration issued its proposal in response to calls from the industry for more clarity in meeting mental health parity requirements after finding that many health insurers are failing to comply with them.

If health plans and insurers are blocked from applying techniques such as prior authorization and concurrent reviews that allow them to determine whether medical care is necessary “you really subvert the whole insurance scheme,” said Harvey Rochman, a partner in the Los Angeles office of Manatt, Phelps & Phillips LLP, who works with health-care entities.

The problem with the August 2023 (RIN 1210-AC11) proposed rules from the agencies is mental health and substance use treatment differs substantially from medical and surgical care, making coverage difficult to compare, many in the health-care industry say.

The MHPAEA requires that mental health and substance use disorder coverage must be comparable to medical and surgical coverage if a health plan provides mental health coverage. The law doesn’t require plans to provide mental health benefits, but the “vast majority of large group plans” already did pre-MHPAEA, according to the American Psychological Association.

Under the substantially all test, if a plan wants to apply an NQTL to mental health benefits, at least two-thirds of medical benefits in the same classification must also be subject to an NQTL. Classifications include inpatient care in and out of network, as well as emergency care and prescription drugs. The substantially all test is based on expected plan payments for benefits.

Outcome-Based

The overall uneven distribution of types of treatment between mental health and medical benefits makes the substantially all test difficult to comply with while still maintaining necessary plan cost-savings measures, critics say.

Only about 41% of general medical visits are for chronic conditions that are more likely to be subject to utilization management techniques such as concurrent review, compared to between 64% and 69% of mental health visits for conditions such as depression and anxiety, according to data cited in an October comment letter filed by Brookings on the proposed rule.

Mathematically, that means that “even if all chronic visits in general medical practice were subject to concurrent review, any concurrent review for mental health or substance use disorder services would fail the ‘substantially all’ test,” the letter said.

Richard Frank, director of the Brookings Institution’s Center on Health Policy said this “automatically wipes out the ability of mental health systems” to put utilization management techniques like concurrent reviews in place that allow insurers to evaluate the appropriateness of ongoing care.

Rather than basing the rule on process, it should be based on outcomes, according to Frank.

“The way to judge it is—do people have comparable access,” he said. Plans could examine whether people with chronic medical conditions like diabetes get treated at the same rate that people with depression and anxiety get treated, he said. “If the answer is yes, then you don’t have a problem. If the answer is no, maybe you do have a problem and then you have to look deeper” to figure out if utilization management requirements are blocking access, he said.

The administration says its proposal would enforce MHPAEA better by making clear “that health plans need to evaluate the outcomes of their coverage rules to make sure people have equivalent access between their mental health and medical benefits,” according to a fact sheet released with the proposal.

That includes evaluating the health plan’s provider network, how much it pays out-of-network providers, and how often prior authorization is required and the rate at which prior authorization requests are denied, the fact sheet said.

Utilization Management

The substantially all test would be most likely to affect concurrent review and prior authorization, the utilization management techniques that are most widely used, according to Rochman.

It’s important for health insurers to determine medical necessity so that health plans don’t cover ineffective care, Rochman said. “That is how they actually limit the costs” and spread them among all members, he said.

Henry Harbin, an adviser to the Bowman Family Foundation, which advocates on mental health issues, said the substantially all test wouldn’t necessarily prevent plans from utilization management of mental health benefits.

A plan could require prior authorization for the broad category of medical inpatient services, but exempt diagnosis-related group (DRG) bundled prices for episodes of care from being counted in the pool of services being evaluated by the substantially all test, he said. The plan could still apply prior authorization to mental health inpatient services and meet the substantially all test, he added.

Harbin said he believes that may resolve the problem cited by health plans.

In the comment letter on the proposed rules, the Bowman Family Foundation suggested that the administration make it clear that health plans wouldn’t be liable if they met the standards Harbin suggested.

“The rule is aimed at dealing with discrimination,” Maureen Maguire, associate director of payer relations and insurance coverage with the American Psychiatric Association, said. “They can use utilization management. The rule doesn’t say they can’t. They’ve got to follow the rules and run through the tests and do their comparative analysis,” she said.

Proponents of MHPAEA argue that despite concerns over cost control mechanisms, the Biden rules are a win-win, as improving access to mental health care can also help alleviate physical health problems, thereby reducing overall expenses.

“To the extent that we take care of mental health, we’re probably going to see improvements in chronic physical conditions,” Maguire said. “When people get diagnosed with diabetes, they often experience depression as well. And then, because of the depression, they’re not taking good care of themselves in terms of their diabetes, which worsens that physical condition.”