Mental Health Parity Rule Pushes Employers to Rethink Status Quo

A new federal rule will spur employer-sponsored health plans to take a broad look at how they provide mental health benefits compared to those for medical and surgical treatments to ensure they’re meeting strengthened requirements.

The rule (RIN: 1210-AC11) finalized Sept. 9 by the departments of Health and Human Services, Labor, and Treasury aims to strengthen access to mental health care by requiring health plans to perform detailed comparisons between mental health and medical coverage.

It introduces several new parity tests under the 2008 Mental Health Parity and Addiction Equity Act for “non-quantitative treatment limitations,” such as “prior authorizations” that require patients to obtain approval from their insurance companies before receiving a drug or service.

Industry backlash is raising questions about how the rule might fare against a legal challenge following the US Supreme Court’s decision in Loper Bright Enterprises v. Raimondo, which overturned the Chevron doctrine of deferring to reasonable agency interpretations of ambiguous laws. Administration officials have pledged to work with plans on compliance, but one employer group is considering suing.

The industry confusion stems from an “age-old” problem of lack of guidance around mental health parity, said Rebecca Hanson, a partner with Reed Smith LLP. While the rule added more clarity by further outlining what the departments are looking for in the comparisons, the agencies have not yet released specific examples of how to follow the new regulation.

“The biggest question is still how to comply,” she said.

Employer groups have said the administrative burden in documenting NQTLs could force employers to drop mental health coverage altogether. The rule prohibits plans from imposing restrictions on mental health coverage unless it’s the predominant restriction used in “substantially all” of the plan’s medical benefits in the same classification.

Though the final rule eliminated a requirement from the proposed version to use mathematical tests to evaluate whether a restriction has been used in “substantially all” benefits, employer plans must still show they are collecting and evaluating relevant data to show the impact of NQTLs and demonstrate parity. They will also be required to comply with additional design and application standards to back up their NQTL use.

While the rule’s enforcement has largely been delayed until 2026, plans should start gathering data from third-party vendors now, Hanson said, because they only have 10 business days to respond to a request for a comparative analysis from the departments.

“Make sure that you have a good pipeline of information, that you’ve talked to all your stakeholders, and you’ve put everyone on notice that we need these kinds of datasets,” she said.

Most clients already have robust parity programs in place, which makes it easier, said Kevin Malone, who advises health plans on mental health parity as a member of Epstein Becker & Green P.C. But uncertainty still exists.

“There’s no way to be 100% certain that you’re compliant because you’re rebutting a presumption of discrimination,” he said, adding, “But we know where to start.”

Revisiting the Status Quo

The overall message to plans is not to rely on the status quo, said Legal Action Center Senior Health Policy Attorney Deborah Steinberg, who works to expand state and federal parity regulations.

She cited a case involving one plan that hadn’t updated its out-of-network reimbursement rates since 1983. Just because the rates for both mental and physical care dated to the same year doesn’t mean they’re not discriminatory, Steinberg said, because they came well before the 2008 law.

“Those rates were not established using equitable information. At the time they weren’t required to comply with the parity act,” she said. “You can’t just keep doing the things you have always been doing.”

The industry is awaiting further guidance for now, Malone said. Clients are specifically looking for metrics the departments will use to evaluate whether a plan is meeting the rule’s thresholds on NQTLs for everything from provider admission criteria to audits and investigations to exclusions and claims denials.

“All of those are subject to parity and they’re all very different activities,” he said. “So the data you’re supposed to use to sort of evaluate the disparate impact of those functions, if they’re discriminatory or not—just figuring out what the data is is something of a challenge.”

He pointed to network adequacy standards—which help determine whether enrollees have sufficient access to both mental health and traditional medical providers—as an example of requirements that could have an outsize impact on broader plan design. The agencies solicited feedback in the proposed rule that they plan to use in future guidance.

“This could be an enormous deal if the tri-agencies go forward and finalize basically a new network adequacy standard,” he said. “That is just for the purposes of parity, but it still applies to the whole benefit package.”

Strengthening provider networks is one of the most significant components of the rule for consumer advocates as well. Finding an in-network provider is one of the most common problems that patients face, Steinberg said. The nation’s mental health provider shortage alone doesn’t always account for a plan’s lack of in-network options either, she noted.

She pointed to an April 2024 study the rule cited from RTI International, which found patients go out-of-network for mental health care 3.5 times more than medical and surgical care.

“There are undoubtedly a significant number of places in the country where there is a mental health provider shortage area, but if people are able to access this care out-of-network, that means there are providers available and so plans need to do more to get those providers into their networks,” she said.