Legislation Addresses Mental Health Parity, Eating Disorders, HIPAA, and HRAs for Small Employers

Practical Law Legal Update w-004-9255 (Approx. 9 pages)

Legislation Addresses Mental Health Parity, Eating Disorders, HIPAA, and HRAs for Small Employers

by Practical Law Employee Benefits & Executive Compensation

Mental Health Parity Compliance

The legislation includes several provisions intended to enhance group health plan compliance with the mental health parity and substance use disorder rules (29 U.S.C. § 1185a; 26 U.S.C. § 9812; see Practice Note, Mental Health Parity). The legislation requires the Departments of Labor (DOL), Health and Human Services (HHS), and Treasury (collectively, the Departments) to issue compliance program guidance to improve compliance with these rules. This program guidance may reflect a 2016 publication titled Warning Signs – Plan or Policy Nonquantitative Treatment Limitations (NQTLs) that Require Additional Analysis to Determine Mental Health Parity Compliance. The compliance guidance will include examples of previous findings of compliance and noncompliance with the mental health parity rules, based on investigations of violations of these rules. The compliance guidance must use de-identified information, meaning that the information does not disclose PHI or individually identifiable information.

The compliance guidance will contain:

Examples illustrating requirements for information disclosures and nonquantitative treatment limitations.
Descriptions of violations revealed through the investigations.

For examples involving findings of compliance (or noncompliance) with the mental health parity rules' nonquantitative treatment limitations, the examples must contain enough detail to fully explain the findings, including:

Descriptions of the criteria for approving medical and surgical benefits.
The criteria for approving mental health and substance use disorder benefits.

In developing and issuing the compliance program guidance, the Departments must enter into interagency agreements with one another (and attempt to enter into agreements with the states) to share compliance and noncompliance findings regarding the legislation's mental health parity-related requirements, as well as the mental health parity rules under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code (Code).

The compliance program guidance must:

Include recommendations to advance mental health parity compliance.
Encourage development and use of internal controls to monitor adherence to applicable statutes, regulations, and program requirements.

The internal controls may include illustrative examples of nonquantitative treatment limitations on mental health and substance use disorder benefits that may fail to comply with the rules regarding nonquantitative treatment limitations on medical and surgical benefits.

The Departments must update the compliance program guidance every two years.

Additional Compliance Guidance

The legislation expands the mental health parity provisions of the Public Health Service Act (PHSA) (42 U.S.C. § 300gg–26(a)) to require the Departments to issue guidance to assist group health plans and health insurers offering group or individual health insurance coverage in satisfying the mental health parity requirements. The guidance must include clarifying information and illustrative examples of methods that plans and insurers can use to:

Disclose information for ensuring compliance with the mental health parity requirements.
Provide participants, beneficiaries, contracting providers, or authorized representatives with information that must be disclosed to these individuals and entities.

The guidance must include information that is comparative in nature regarding:

Nonquantitative treatment limits for medical/surgical benefits and mental health and substance use disorder benefits.
The processes, strategies, evidentiary standards, and other factors used to apply the limits.
Application of the limits to ensure that they are applied in parity regarding medical/surgical benefits and mental health and substance use disorder benefits.

The guidance must include clarifying information and examples of methods, processes, strategies, evidentiary standards, and other factors for use by plans and insurers in developing and applying nonquantitative treatment limitations to ensure compliance with the mental health parity rules. The guidance also must include examples of:

Methods of determining appropriate types of nonquantitative treatment limitations for medical/surgical benefits and mental health and substance use disorder benefits, including nonquantitative treatment limitations for:
- medical management standards based on medical necessity or appropriateness, or whether a treatment is experimental or investigative;
- limits on prescription drug formulary design; and
- use of fail-first or step therapy protocols.
Methods for determining:
- network admission standards (for example, credentialing); and
- factors used in provider reimbursement methodologies (for example, service type, geographic market, demand for services, provider supply, practice size, training, experience, and licensure) as these factors apply to network adequacy.
Information sources that may serve as evidentiary standards for developing and applying nonquantitative treatment limitations.
Specific factors (and the evidentiary standards used to evaluate the factors) used by plans or insurers in performing nonquantitative treatment limitation analysis.
How specific evidentiary standards may be used to determine whether treatments are considered experimental or investigative.
How specific evidentiary standards may be applied to each service category or benefit classifications.
Methods of reaching appropriate coverage determinations for new mental health or substance use disorder treatments (for example, evidence-based early intervention programs for individuals with a serious mental illness and types of medical management techniques).
Methods of reaching appropriate coverage determinations for which there is an indirect relationship between the covered mental health or substance use disorder benefit and a traditional covered medical and surgical benefit (for example, residential treatment or hospitalizations involving voluntary or involuntary commitment).

The guidance also must include examples of methods, processes, strategies, evidentiary standards, and other factors for which the Departments determine that additional guidance is necessary to improve compliance with the mental health parity rules.

Availability of Plan Information; Action Plan

The legislation includes several provisions intended to simplify disclosure tools for information provided to participants, beneficiaries, and others regarding mental health parity compliance. The Departments must request feedback on these issues from the public and share this feedback with the National Association of Insurance Commissioners (NAIC).

Related provisions include a requirement for a public meeting with industry stakeholders to create an "action plan" for improved federal and state coordination on mental health parity compliance (including comparable state-law provisions). The resulting action plan will include objectives, an implementation timeline, and examples of how the objectives can be met.

Required Audits Following Five or More Violations; Report on Investigations

If the Departments determine that a plan or insurer has violated the mental health parity requirements under the PHSA, ERISA, or the Code at least five times, the appropriate agency (that is, DOL, HHS, or Treasury) must audit the plan's or insurer's plan documents in the plan year after the Department's determination, with a goal of improving compliance.

The legislation also requires the Departments to submit to Congress a report summarizing all closed federal investigations regarding mental health parity in the prior year, along with findings of any serious violations. The report must include:

The number of closed investigations conducted during the period reported.
Each benefit classification examined under the investigation.
The investigation's subject matter, including compliance with quantitative and nonquantitative treatment limitations.
A summary of the basis of final decisions made for each closed investigation during the period that resulted in a finding of serious violation.

Also, the Comptroller General of the US Government Accountability Office (GAO) must issue a study detailing compliance with the mental health parity rules. Among other issues, the study must address:

How the Departments ensure that plans and insurers comply (including an assessment of the use of plan audits).
Recommendations for additional enforcement, education, and coordination activities between the federal and state departments and agencies.

Eating Disorders

Under the legislation, a plan or insurer that provides coverage for eating disorder benefits (including residential treatment) must provide these benefits consistent with the parity requirements for mental health and substance use disorder benefits under the PHSA, ERISA, and the Code.

Relatedly, the legislation authorizes HHS to:

Update information, fact sheets, and resource lists addressing eating disorders on HHS's website.
Make available information addressing obesity prevention programs.
Advance public awareness on the types of eating disorders (including their comorbidities and health consequences).

Permitted Uses and Disclosures Under HIPAA

In a section titled "compassionate communication," the legislation:

Acknowledges ongoing confusion in the health care community regarding permissible practices under HIPAA's implementing regulations (see Practice Note, HIPAA Privacy Rule: Permitted and Prohibited Uses and Disclosures of Health Information and HIPAA Privacy, Security, and Breach Notification Toolkit).
Cites the need for clarification to HIPAA's privacy regulations regarding permitted uses and disclosures of health information by health care professionals in communicating with caregivers for adults with serious mental illnesses to facilitate treatment.

The legislation instructs HHS to ensure availability of resources regarding appropriate uses and disclosures of PHI. Implementing guidance required under this provision must address circumstances that:

Require a patient's consent.
Require providing a patient with the opportunity to object.
Involve the exercise of professional judgment regarding whether a patient would object when the opportunity to do so cannot practicably be provided because of:
- a patient's incapacity; or
- an emergency treatment situation.
Involve uses or disclosures in a patient's best interest, based on the exercise of professional judgment.

Regarding communications with family members and caregivers, guidance under this provision must clarify permitted uses or disclosures of PHI for communicating with:

An adult or minor patient's family member, caregiver, or other individual involved in the patient's care.
Family members and caregivers of the patient (or others) when the patient presents a serious and imminent threat of harm to self or others.
Law enforcement and family members or caregivers of the patient about the patient's admission to receive care at, or the release of a patient from, a facility for an emergency psychiatric hold or involuntary treatment.

The guidance also must address permitted uses or disclosures:

Involving a patient's family members, caregivers, or others involved in the patient's care or care plan, including facilitating treatment and medication adherence.
For listening to the patient, or receiving patient information from the patient's family or caregiver.

Health Reimbursement Arrangements

The legislation amends the Code to provide an exception from the group health plan requirements for "Qualified Small Employer Health Reimbursement Arrangements" (QSEHRA) (see Practice Note, Defined Contribution Health Plans: Overview). A QSEHRA must:

Be provided on the same terms to all of an eligible employer's eligible employees.
Be funded solely by an eligible employer, and no salary reduction contributions may be made under the arrangement.
Provide for the payment (or reimbursement) of an eligible employee for Code Section 213(d) medical care expenses that are incurred by the employee or the employee's family member (as determined under the arrangement) (26 U.S.C. § 213(d)).

Payments or reimbursements under a QSEHRA for a year are capped at either:

$4,950, for an employee.
$10,000, if the QSEHRA provides payments or reimbursements for the employee's family members.

Limited Variation Permitted

The "provided on the same terms" requirement is not violated merely because an employee's permitted benefit under a QSEHRA varies consistent with price variation for an insurance policy in the individual health insurance market based on two factors. These factors are:

The eligible employee's age (or, if applicable, the age of the employee's family members).
The number of the employee's family members whose medical expenses are covered under the QSEHRA.

Employers Eligible to Fund QSEHRAs

An employer is eligible to fund a QSEHRA if it:

Is not an applicable large employer under the Affordable Care Act's (ACA) employer mandate rules (see Practice Note, Employer Mandate Under the ACA: Large Employers and Members Are Subject to Employer Mandate).
Does not offer a group health plan to any of its employees.

Notice Requirement

An employer that funds a QSEHRA for a year must provide a written notice containing specified information to each eligible employee. The notice must be provided no later than 90 days before the beginning of the year. Alternatively, for an employee who is not eligible to participate in the QSEHRA as of the beginning of the year, the notice must be provided on the date the employee is first eligible.

The notice must include a statement:

Of the amount that would be the employee's permitted benefit under the arrangement for the year.
That the eligible employee should provide specified information to any ACA health insurance exchange to which the employee applies for advance payment of the premium assistance tax credit.
That if the employee is not covered under minimum essential coverage for any month:
- the employee may be subject to tax under Code Section 5000A for the month (26 U.S.C. § 5000A); and
- reimbursements under the arrangement may be includible in gross income.

A corresponding amendment to ERISA's definition of group health plan states that the term does not include QSEHRAs.

Practical Impact

The legislation reflects a clear intent to improve compliance with the mental health parity rules, at the same time that it acknowledges (through the emphasis on additional compliance resources and otherwise) the complexity of these rules (see Practice Note, Mental Health Parity). Under the current administration, mental health parity compliance has been a recurring topic of agency guidance during 2016 (see Legal Updates, Parity Portal, Opioids, and Fail-First Requirements Addressed in Latest Guidance and Colonoscopies, Mental Health Parity, and More at Issue in Latest FAQs). Some of this guidance (like the new legislation) has focused on nonquantitative treatment limitations. It remains to be seen whether mental health parity in general, and implementation of certain of the provisions in the new legislation, will be a priority under the incoming administration.

Legislation Addresses Mental Health Parity, Eating Disorders, HIPAA, and HRAs for Small Employers | Practical Law