mental health parity rules Archives - EMPLOYEE BENEFITS BLOG

Code § 4980D and Violations of the NQTL Analysis Requirement Under the Proposed MHPAEA Regulations

This post continues our investigation of proposed regulations under the Mental Health Parity and Addiction Equity Act (MHPAEA) issued by the US Departments of Labor, Health and Human Services and the Treasury (the Departments). Our previous MHPAEA content is available here.

The proposed regulations establish a formal structure for how the Departments will enforce the requirement that plans and issuers comply with their obligations to provide a nonquantitative treatment limitation (NQTL) analysis on request. The structure includes the following steps:

Plans and health insurance issuers must provide the NQTL analysis within 10 business days of receipt of the request.
If the Departments determine that the NQTL analysis is deficient, upon notification, the plan/issuer has 10 business days to furnish any additional information to the Departments.
If the Departments determine that the NQTL analysis is deficient, plans/issuers must also undertake corrective actions and resubmit to the Departments a compliant NQTL analysis no later than 45 calendar days after notification of a noncompliant NQTL analysis.
If the plan or issuer remains out of compliance following the 45-calendar-day corrective action period, the plan or issuer must notify the plan participants of the plan’s/issuer’s noncompliance within seven calendar days of the receipt of the final determination of noncompliance.
The plan or issuer must also provide a copy of the notice to the Department of Labor or Health and Human Services, any service provider involved in the claims process and any fiduciary responsible for deciding benefit claims within the same seven calendar days.

These are not the only remedies or sanctions, however. Internal Revenue Code (Code) Section 4980D generally imposes a nondeductible excise tax of $100 per day per affected individual for failure to comply with Code Chapter 100, group health plan requirements. Noncompliant plans must self-report the Section 4980D excise tax on Form 8928. MHPAEA amends the Code, the Employee Retirement Income Security Act and the Public Health Service Act. The provisions amending the Code are in Section 9812, which is in Chapter 100. Thus, Code Section 4980D applies to violations of MHPAEA, including the requirement to prepare and provide NQTL analyses upon request.

According to a 2023 report to Congress, the Department of Labor alone sent some 182 requests, none of which were initially compliant. Shouldn’t all these plans (and many others) be self-reporting violations and paying excise taxes under Section 4980D? The proposed regulation takes up 117 pages of the Federal Register. Section 4980D is mentioned only once in a footnote. The accompanying text says merely that “plan sponsors are generally responsible for ensuring compliance and could, in certain circumstances, be liable for penalties for any violations.”

The application of Section 4980D to MHPAEA is an area that would benefit from regulatory attention and, hopefully, relief. For example, penalties should not at least in our view be enforced against plan sponsors acting in good faith whose NQTL analyses are initially deficient but are brought into compliance.

The ‘Data Evaluation Requirement’ for NQTLs Under the Newly Proposed MHPAEA Regulations

Last week’s post examined the “no more restrictive” requirement that would apply to non-quantitative treatment limitations (NQTLs) set out in recently proposed regulations under the Mental Health Parity and Addiction Equity Act (MHPAEA). (Our description of the proposed regulations is available here.) The proposed regulations deal principally with NQTLs, which are non-numeric benefit coverage limits that must be no more restrictive for mental health and substance use disorder (MH/SUD) benefits than for medical surgical (M/S) benefits. We previously claimed that “if adopted in final form [the proposed regulations] would vastly complicate compliance by group health plans and health insurance issuers with an already challenging set of mental health parity rules.” Our views have not changed.

The proposed regulations would, if adopted, impose a series of new requirements on NQTLs that include a “data evaluation requirement.” This new requirement would provide that the plan or issuer designing and applying an NQTL collect and evaluate relevant data to assess the impact of the NQTL on access to MH/SUD and M/S benefits. The plan or issuer would also consider whether the NQTL, in operation, complies with the mental health parity rules. The specific type, form, and manner of data collection and evaluation will be the subject of future guidance. (A technical release accompanied the proposed regulations, described here, which invites comment and suggests a possible, narrow safe harbor.)

The proposed regulations establish two new network-related rules governing NQTLs:

For NQTLs not involving network composition, a material difference in the metrics/data gathering for the NQTL as applied to MH/SUD and M/S benefits would be considered a strong indicator of a violation.
For NQTLs involving network composition, a violation is deemed to occur if the relevant data shows material differences in access to in-network MH/SUD benefits as compared to in-network M/S benefits.

The proposed regulations would make compliance depend on outcomes. This position represents a significant shift in, if not an outright reversal of, existing law. Under the 2013 final MHPAEA regulations, outcomes are not determinative of compliance. Rather, comparability turns on the application of processes, strategies, evidentiary standards and other design-based factors. Compliance under current law thus turns on an examination of inputs, not outcomes. While the proposed regulations include exceptions for professional medical/clinical standards and for standards to detect fraud, waste and abuse, the preamble to the proposed regulations advises that “these exceptions should be narrowly tailored.”