By Tim Kennedy and Anne Hall (October 18, 2021)

Recent developments suggest that the U.S. Department of Labor is taking a renewed and more aggressive approach to enforcing the Mental Health  Parity and Addiction Equity Act, or MHPAEA. First, the Consolidated Appropriations Act, or CAA, added a new and complex documentation requirement that will force group health plans and health insurance issuers to take significant, proactive steps to demonstrate compliance. 

Second, in a departure from its typical enforcement actions, the DOL  recently settled a lawsuit with United Healthcare Insurance Co. for  MHPAEA violations. 

These developments should be a wake-up call for plans and insurers to pay more attention to MHPAEA compliance than they might have done in the past. However, compliance will not be easy, especially for plans that are self-funded. 

The purpose of this article is: 

  • To discuss the new MHPAEA requirement, the DOL’s recent  settlement and why both of these items matter;
  • Highlight some issues plans — especially self-funded plans — and insurers are facing  in attempting to comply with this new requirement; and 
  • Provide action steps that plans and insurers can take to help meet this requirement. 

Background 

The MHPAEA, signed into law in 2008, is a federal law that generally prevents plans and insurers that provide mental health or substance use disorder benefits in addition to medical-surgical benefits from imposing less favorable benefit limitations on mental health or substance use disorder benefits. This parity requirement extends to the application of both quantitative treatment limitations — e.g., number of permitted stays in a treatment facility  — and nonquantitative treatment limitations, or NQTLs. 

An NQTL is any restriction on the scope or duration of a treatment or service that is not expressed numerically. NQTLs include, for example, the need for preauthorization, or a  determination of medical necessity, before coverage is allowed. 

Under the MHPAEA, a plan or insurer cannot impose NQTLs on mental health or substance  

use disorder benefits unless it first performs a comparative analysis to ensure that the standards used in applying the NQTLs to mental health or substance use disorder benefits are comparable to those applied to medical surgical benefits. 

DOL’s Increased Focus on MHPAEA 

Both the new MHPAEA requirement and the DOL’s lawsuit suggest a renewed effort by the  DOL to focus on and enforce MHPAEA compliance. In addition, perhaps because the DOL’s  new efforts have raised awareness of the MHPAEA, participant lawsuits against plans and insurers for MPHAEA violations appear to be on the rise. 

Each of these factors is discussed below. 

New MHPAEA Requirement 

The CAA, which took effect on Feb. 10, amended the MHPAEA to require plans and insurers to not only conduct a detailed comparative analysis of the application of the NQTLs — which they already should have been doing — but to also (1) document that analysis, and importantly, (2) be prepared to provide, upon request, their comparative analysis to the  DOL, the U.S Department of the Treasury, and the U.S. Department of Health and Human  Services. 

Participants can also request a comparative analysis. 

As such, plans and insurers need to have this documentation available upon request at any time, otherwise they risk being noncompliant. 

Furthermore, the CAA imposes an obligation on the departments to publish an annual report each October that will be made available to the public. Among other things, the report is required to list each plan or insurer that failed to comply with the MHPAEA. This is a key component of the DOL’s new enforcement position, because the DOL understands that plans and insurers will want to do everything possible to avoid being included on this list. 

DOL Lawsuit and Settlement 

In addition to amending the MHPAEA, on Aug. 12, the DOL entered into a settlement agreement with United Healthcare Insurance Co., United Behavioral Health and Oxford  Health Insurance Inc., collectively UHC, for MHPAEA violations. The settlement is in connection with the case Walsh v. United Behavioral Health, where the DOL, the New York  Attorney General and participants alleged various MHPAEA violations. 

For its part, the DOL alleged that UHC effectively overcharged mental health or substance  use disorder patients by applying a lower reimbursement rate for those participants who sought mental health or substance use disorder services from an out-of-network provider.  Under the settlement agreement, UHC is required to pay over $16 million in claims resolutions and penalties. 

The UHC case and settlement is notable in that it is the first time the DOL has initiated litigation to enforce the MHPAEA. In the past, the DOL typically took less drastic enforcement measures, imposing small penalties or requiring corrective action — e.g., the reprocessing of denied claims. 

The lawsuit and settlement with UHC is another clear indication of the DOL’s new, more assertive approach to MHPAEA enforcement and compliance. 

Participant Lawsuits 

It is also worth noting that participant lawsuits against plans and insurers appear to be on the rise. Complaints recently have been filed by participants against both Cigna Health and  Life Insurance Co.[1] and Aetna Inc.[2] for MHPAEA violations. 

The suit against Cigna as third-party administrator claims Cigna, in denying mental health or substance use disorder benefits, applied a higher standard of medical necessity, resulting in less coverage for mental health or substance use disorder benefits. Similar claims were made against United Behavioral Health in a separate 2014 lawsuit — Wit v. United  Behavioral Health.[3] 

In the UBH matter, the judge ordered UBH to rewrite its coverage standards and reprocess nearly 67,000 claims that had been rejected from 2011 to 2017 under the previous standards. 

In the Aetna case, the complaint alleges that Aetna imposed a set of internal criteria for treatment at a mental health or substance use disorder residential facility that was far more restrictive than the set of criteria needed for admittance to a medical surgical treatment facility. 

A number of other participant lawsuits have been filed against purported noncompliant  MHPAEA plans, including a class action filed in 2017 against a self-insured medical plan for union employees.[4] In this case — D.T. v. NECA/IBEW Family Medical Care Plan — the plan ultimately settled for $1.7 million rather than defend allegations that it improperly refused to cover treatments for autism and other developmental health conditions. 

Compliance Contingent Upon Information Provided by Third Parties 

While plans and insurers have been required since 2008 to perform a comparative analysis to ensure a comparable application of NQTLs between mental health or substance use disorder and medical surgical benefits, the requirement to document this analysis in a detailed and methodical way has forced plans and insurers to seek out, review and document the plan’s data. 

Obtaining this plan data, however, is proving to be difficult, especially for self-funded plans. 

For example, under guidance issued by the departments, a plan’s or insurer’s comparative analysis must include a demonstration “that the processes, strategies, evidentiary standards, and other factors used to apply the NQTLs to [mental health or substance use disorder] benefits” are comparable to those used for medical surgical benefits. The information needed to perform this demonstration requires insight into plan processes that most self-funded plans do not have. 

These plans almost always engage a third-party administrator, or TPA, who handles most, if not all, administrative functions of the plan. In addition to day-to-day administrative operations, these TPA functions include claims processing, appeals and coverage determinations. 

As such, plans typically have little or no knowledge of plan operations and no access to the plan information needed to comply.

Making matters worse, at least for now, most TPAs and other third-party vendors — i.e.,  those entities that do have the plan data needed to perform a comprehensive comparative analysis — despite requests, are proving reluctant to share this data for competitive or proprietary reasons. 

What should plan sponsors, eager to comply with the new MHPAEA disclosure rules and avoid DOL scrutiny, do? 

Action Steps 

Even though adequately conducting a compliant comparative analysis is challenging, even where plan data is accessible, plans and insurers should make every effort to comply as fully as possible. 

Efforts to comply should include the following: 

Review the MHPAEA disclosure guidance. 

As an initial step, plans and insurers should review the DOL’s FAQ document on implementing mental health and substance use disorder parity,[5] and the DOL’s self-compliance tool for the MHPAEA.[6] 

Reach out to the TPA. 

Next, contact the plan’s TPA or other applicable vendors to (1) confirm that the data needed to conduct the comparative analysis is prepared and documented; (2) request that the TPA  or service provider provide a copy of their comparative analysis — including any supporting data; and (3) document each of these outreaches and requests. 

Collaborate with the TPA. 

Review and analyze any data and analysis provided by the TPA. Identify gaps, deficiencies,  and/or coverage disparities. Work closely with the TPA to address these deficiencies. 

Finalize the comparative analysis. 

To the extent possible, and with the data provided by the TPA or service provider, ensure that the comparative analysis follows the recommendations provided in the DOL’s self-compliance tool and FAQs. 

Negotiate new and existing service agreements to include MHPAEA compliance assurances. 

When negotiating TPA and other service provider agreements, require, as a stipulation of continued or new engagement, that the TPA (1) maintain responsibility for preparing the comparative analysis, and (2) commit to timely provide this analysis to the plan upon request. 

Include the MHPAEA compliance requirement in future requests for proposals. 

Going forward, future proposal requests seeking a TPA or other vendor should include a  focus on MHPAEA comparative analysis compliance, efforts, obligations and responsibilities.

Plan Sponsors Must Act Now to Avoid the Horrors of MHPAEA Noncompliance 

To conclude, the DOL has increased its focus on MHPAEA violations. Plans and insurers are therefore encouraged to focus on their MHPAEA compliance efforts. Failure to do so could lead to harsh results, including penalties of $110 per day for failure to timely provide the comparative analysis and, because the IRS also has enforcement authority over the  MHPAEA, the IRS could also impose a separate tax of $100 per day for MHPAEA violations. 

Worse, in addition to being publicly listed in the departments annual report, non-compliant plans and insurers could face a lawsuit initiated by the DOL. At a minimum, even where compliance may be difficult because needed data is not accessible, plans and insurers should follow the steps listed above to help avoid these significant and costly consequences. 


Tim Kennedy is a partner, and Anne Tyler Hall is founding attorney and principal, at Hall  Benefits Law. 

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice. 

[1] RJ v. Cigna Behavioral Health, Inc., No. 5:20-CV-02255-EJD (N.D. Cal., filed Apr. 2,  2020. 

[2] H.H. v. Aetna Ins. Co., 342 F. Supp. 3d 1311 (S.D. Fla., 2018.) 

[3] Wit v. United Behavioral Health, No. 3:13-CV-02346-JCS (N.D. Cal., filed May 21,  2014). 

[4] See, D.T. v. NECA/IBEW Family Med. Care Plan, No. 2:17-CV-00004-RAJ (W.D. Wash.,  filed Jan. 4, 2017). 

[5] https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource center/faqs/aca-part-45.pdf. 

[6] https://www.dol.gov/sites/dolgov/files/EBSA/laws-and-regulations/laws/mental-health parity/self-compliance-tool.pdf.

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