iFor over two decades, federal law has required covered health plans and insurers to ensure that certain mental health benefits are in parity with offered medical/surgical benefits. The meaning of "parity," however, has expanded over time, most significantly with the passage of the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act ("the MHPAEA") and the regulations that followed. With the final regulations having gone into effect for plan years starting on July 1, 2014, we are observing a noticeable uptick in enforcement activity and decisions from the courts. This article reviews the statutory and regulatory scheme and case law developments under the MHPAEA, and offers some practical considerations for plan sponsors and fiduciaries moving forward.
The Mental Health Parity Act of 1996
The Mental Health Parity Act of 1996 ("MHPA '96") for the first time prohibited imposing annual or lifetime limits on mental health benefits that were more restrictive than the limits on medical/surgical benefits. MHPA '96 had its limitations, however. For example, it did not restrict common cost management techniques, such as step therapy, requiring pre-certification, limiting the number of visits to specialists, or limiting the types of services that would be covered. MHPA '96 also contained three exemptions: (i) businesses that chose not to provide mental health coverage; (ii) businesses with less than fifty employees; and (iii) businesses that documented at least a one percent increase in premiums due to implementation of parity requirements. Given those limitations and exclusions, MHPA '96 had a limited impact on plan sponsors and insurers.
The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act
MHPA '96 was superseded by the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act (MHPAEA), which Congress passed as rider legislation on the Troubled Asset Relief Program, signed into law by President Bush in October 2008. The MHPAEA is codified in ERISA § 712, Internal Revenue Code § 9812, and Public Health Services Act § 2705.
The MHPAEA broadened the meaning of parity. It requires parity with respect to "financial requirements" and "treatment limitations" in covered plans—generally, group health plans maintained by employers with more than fifty employees. Specifically, the statute prohibits:
- Imposing financial requirements for mental health or substance use disorder benefits that are more restrictive than the predominant financial requirements applied to substantially all medical/surgical benefits covered by the plan, or imposing separate cost sharing requirements for mental health or substance use disorder benefits; and
- Imposing treatment limitations for mental health or substance use disorder benefits that are more restrictive than the predominant treatment limitations applied to substantially all medical/surgical benefits, or imposing separate treatment limitations for mental health or substance use disorder benefits.
The MHPAEA does not mandate that plans provide coverage for any particular type of condition. But if a plan provides coverage for a mental health or substance use condition, the MHPAEA requires that cost sharing arrangements and treatment limits be in line with such limits for analogous medical/surgical conditions. For example, the MHPAEA generally prohibits imposing a higher co-pay for a covered mental health benefit or capping the number of visits or covered days in a hospital for substance abuse, unless comparable caps apply for analogous medical/surgical conditions.
MHPAEA Regulations
The U.S. Departments of Labor, Health and Human Services, and Treasury issued regulations interpreting the requirements of the MHPAEA. The regulations apply for plan years starting on and after July 1, 2014, and provide guidance on how to evaluate parity. See 29 C.F.R. § 2590.712 (DOL); 26 C.F.R. § 54.9812-1 (IRS); 45 C.F.R. § 146.136 (HHS). Highlights from the regulations include the following:
- The regulations state that a type of financial requirement or treatment limitation is considered to apply to "substantially all" medical/surgical benefits in a classification of benefits only if it applies to at least two-thirds of all medical/surgical benefits in that classification. This means that a financial requirement or treatment limitation for a mental health/substance use disorder benefit (e.g., imposing a co-pay or requiring precertification) must also apply for at least two-thirds of medical/surgical benefits in the applicable classification.
- The regulations define the "predominant" level of each permissible financial requirement or treatment limitation within a classification as the level that applies to more than half of the medical/surgical benefits in the classification that are subject to the financial requirement or treatment limitation. For example, a $40 co-pay for visiting an in-network mental health professional is permitted only if: (i) a co-pay is required for at least two-thirds ("substantially all") of outpatient visits with in-network medical/surgical professionals, and (ii) the level of co-pay required for at least half of outpatient visits with in-network medical/surgical professionals (excluding any types of visits for which a co-pay is not required) is at least $40 (the "predominant" level).
- The regulations explain that mental health and substance use disorder benefits must be combined with medical/surgical benefits for purposes of tracking financial requirements (deductibles, co-insurance, etc.) and treatment limits. Separate requirements and limits for particular types of treatment are prohibited.
The final regulations provide numerous examples to illustrate the applicability of these rules.
Enforcement Activity
Since the final regulations became effective, it appears that the Department of Labor (DOL) has stepped up its enforcement activity with respect to the MHPAEA. The DOL issued a Fact Sheet in January 2016 that summarized enforcement activity in the aggregate for 2010 through 2015. It reported 170 violations of the MHPAEA for those years combined. A DOL Enforcement Fact Sheet for 2016 reported 191 reviews for MHPAEA compliance (out of 330 closed health plan investigations) with violations found in 44 cases. The violations in the most recent Fact Sheet included:
- Unlawful non-quantitative limitations, such as imposing pre-certification requirements or step therapy that are not required for at least two-thirds of medical/surgical conditions in the applicable category;
- Unlawful financial limits and quantitative limitations; and
- Other violations, such as unlawful dollar and treatment limits.
Litigation Activity
Among the more significant litigations asserting claims for violation of the MHPAEA are claims for coverage of certain Autism Spectrum Disorder treatments, wilderness therapy, and residential treatment for mental health and substance abuse. In each case, plaintiffs allege impermissible treatment limitations (usually non-quantitative, such as a refusal to cover the particular treatment for an otherwise-covered condition). Below we take a look at a few of these cases.
Autism Treatment
To date, we are aware of only one decision, among the many cases filed, that has reached the merits of a complaint alleging violations of the MHPAEA for failure to provide coverage for Applied Behavior Analysis ("ABA") treatment for Autism Spectrum Disorder ("ASD"). In A.F. ex rel. Legaard v. Providence Health Plan, 35 F. Supp. 3d 1298 (D. Or. 2014), the plaintiffs challenged the denial of ABA treatment based on a "Developmental Disability Exclusion" that excluded coverage for services "related to developmental disabilities, developmental delays, or learning disabilities." The plan argued that there was no violation of the MHPAEA because the Act does not require a plan to cover any particular benefit or condition. The plaintiffs argued that, because the plan covered certain treatments for autism, the plan could not exclude expensive treatments for the condition unless a comparable exclusion also applied for substantially all of the medical/surgical benefits in the particular classification. The court agreed with the plaintiffs, concluding that the exclusion violated the MHPAEA because it applied specifically and exclusively to developmental disabilities (a mental health condition), and there was no similar exclusion for medical/surgical conditions.
Another court denied a motion to dismiss where the plaintiff challenged the denial of ABA treatment based on a "Developmental Delay Exclusion," by which a plan excluded coverage for "therapy for learning disability, communication delay, perceptual disorders, sensory deficit, developmental disability and related conditions." The court ruled that it could not determine on a motion to dismiss whether the plan covered ASD at all, and thus whether the exclusion of ABA was a permissible blanket exclusion of a condition or an impermissible treatment limitation for a covered condition. D.T. v. NECA/IBEW Family Med. Care Plan, No. 17-civ-4, 2017 WL 5756870 (W.D. Wash. Nov. 27, 2017).
Other decisions involving claims for ABA treatment for ASD generally have addressed class certification or procedural issues, not the merits of the claims. See Wilson v. Anthem Health Plans of Kentucky, Inc., 14-civ-743, 2017 WL 56064 (W.D. Ky. Jan. 4, 2017) (certifying a class in a lawsuit claiming that a plan covering ABA treatment impermissibly imposed more restrictive time and dollar limitations for ABA treatment than for analogous medical/surgical benefits); Whitley v. Dr. Pepper Snapple Grp., Inc., 17-civ-0047, 2017 WL 4155257 (E.D. Tex. Sept. 19, 2017) (granting motion to dismiss for failure to exhaust the plan's claims procedures); Coleman v. Alcatel-Lucent USA, Inc., 16-civ-00108 (N.D. Ala. Sept. 1, 2017) (denying motion to dismiss for failure to exhaust the plan's claims procedures); W.P. v. Anthem Ins. Companies Inc., No. 15-civ-562, 2017 WL 605079 (S.D. Ind. Feb. 15, 2017) (concluding that plaintiffs could not pursue their claim under ERISA § 502(a)(3) for equitable relief when they also asserted a claim for benefits).
Wilderness Therapy
A number of lawsuits have challenged the denial of wilderness therapy to treat certain mental health or substance use disorders. There do not appear to be any publicly available decisions on the merits of these claims. In one case, a plaintiff sought coverage for a wilderness therapy program in Utah to treat depression, low self-esteem, and suicidal thoughts. The case was dismissed for failure to show a comparison between the limitation imposed on the mental health condition and those on medical/surgical analogues, but the plaintiff has since filed an amended complaint. Welp v. Cigna Health & Life Ins. Co., No. 17-civ-80237, 2017 WL 3263138 (S.D. Fla. July 20, 2017). In another case, a court denied defendants' statute of limitations defense. The court has not yet reached the merits. William G. v. United Healthcare, No. 16-civ-144, 2017 WL 2414607 (D. Utah June 2, 2017).
Residential Treatment
There have been a number of lawsuits challenging exclusions of residential treatment for mental health and substance use disorders. In one case, a plan participant was denied coverage for treatment at a residential treatment center for her anorexia nervosa, general anxiety disorder, and major depressive disorder. The district court denied the motion to dismiss because the plaintiff sufficiently alleged that the conditions were covered and that the plan categorically excluded residential treatment for mental health without imposing a comparable limit on long-term inpatient (non-hospital) treatment for medical/surgical conditions. Natalie V. v. Health Care Serv. Corp., No. 15-civ-09174, 2016 WL 4765709 (N.D. Ill. Sept. 13, 2016). In so ruling, the court cautioned that the plan could prevail after discovery, if it could show that the denial of plaintiff's coverage used the "same non-quantitative treatment limitation standard—that is, it used the same processes, strategies, evidentiary standards, or other factors when applying treatment limitations to all inpatient benefits—when deciding whether it could categorically exclude coverage for residential treatment centers." The parties ultimately settled the case on undisclosed terms.
In another case, the plaintiff prevailed on summary judgment because she established that a residential treatment exclusion was aimed only at mental health conditions like her depression, despite the plan's argument that residential treatment services were excluded for all disorders, whether mental health, medical, or surgical. Joseph F. v. Sinclair Servs. Co., 158 F. Supp. 3d 1239 (D. Utah 2016). Another court found that "[t]he practical effect of the [residential treatment exclusion] is that [plaintiff] receives fewer hours (or days) of coverage for medically necessary nursing care than, for example, an elderly person would receive to rehabilitate a broken hip." Craft v. Health Care Serv. Corp., 84 F. Supp. 3d 748, 749 (N.D. Ill. 2015). The court subsequently issued an order granting preliminary approval of a $5.25 million settlement.
In contrast to the cases above, Aetna recently prevailed on summary judgment in a case concerning residential treatment for mental, behavioral, and emotional disorders. As in the other cases, the plaintiffs alleged that the plan's conditions for coverage in the residential treatment facility were more stringent than the plan's conditions for physical rehabilitation facilities and skilled nursing facilities. The court rejected plaintiffs' argument because there was no evidence that the plan's denial of coverage was not properly based on clinically appropriate standards—even though application of those standards resulted in fewer visits or days covered for mental health than for a particular medical/surgical condition. The court held that MHPAEA compliance should be tested by comparing evidentiary standards for mental health conditions to evidentiary standards for medical/surgical conditions, rather than by looking at the resulting level of coverage that is approved. Michael P. v. Aetna Life Ins. Co., No. 16-civ-439, 2017 WL 4011153 (D. Utah Sept. 11, 2017).
Proskauer's Perspective
The DOL's published enforcement statistics suggest that the DOL is continuing to investigate compliance with the MHPAEA, and our own experience assisting clients with DOL audits suggests the same. The experience in litigation thus far suggests a fairly low burden to state a claim under the MHPAEA that survives a motion to dismiss. But the case law in this area is still developing and there are still ways to manage the costs of treatment. Plan sponsors should review cost management techniques with counsel to ensure they are designed to mitigate risk in this area.
