The Mental Health Parity and Addiction Equity Act (“MHPAEA”) Final Rule and its Intersection with the §1557 Final Rule

The Mental Health Parity Addiction and Equity Act (“MHPAEA”) provides regulations designed to ensure parity between employee benefit plans covering Mental Health and Substance Use Disorders (“MH/SUD”, or collectively “Behavioral Health”) and plans covering Medical and Surgical benefits (“M/S”). Section 1557 of the Affordable Care Act of 2010 (“ACA”) was designed to prevent discrimination in health programs and activities based on race, color, national origin, sex (including pregnancy, sexual orientation, gender identity, and sex characteristics), and age. These two final rules intersect with one another on the topic of treatment of the Behavioral Health condition of gender dysphoria.

Employer Action Items

• Examine plan documents and other participant disclosures to assure they are compliant with the requirements of MHPAEA and Section 1557;
• Verify the compliance strategies of your third-party administrators (“TPAs”), service providers, and issuers, to confirm their compliance with both MHPAEA and Section 1557; and
• Ensure that any plan-level design or administrative modifications are fully implemented, and that the employer’s implementation process is well documented.

Summary

MHPAEA is a federal law that generally prevents group health plans and health insurance issuers that provide MH/SUD benefits from imposing less favorable benefit limitations on those benefits than on medical/surgical (“M/S”) benefits. MHPAEA expanded on the Mental Health Parity Act of 1996 (“MHPA”) which focused on the financial requirements (coinsurance, copays, out-of-pocket expenses, etc.) and treatment limitations (visit limitations, refill limitations, etc.) imposed upon Behavioral Health benefits. Consequently, these plan designed features cannot have more restrictive requirements than the financial requirements and treatment limitations that apply to M/S benefits.

Another area that MHPAEA expanded upon was into the range of Non-quantitative Treatment Limitations (“NQTLs”) by defining NQTLs and requiring health plans and issuers to conduct comparative analyses of the design and application of NQTLs used for MH/SUD benefits. An example of a NQTL that has been defined by MHPAEA would be, refusal to pay for higher-cost therapies until it can be shown that a lower-cost therapy is not effective (fail-first or step therapy protocols), or plan methods for determining usual, customary and reasonable charges.

Note that MHPAEA does NOT require group health plans or health insurance issuers to cover Behavioral Health related treatments and services; instead, MHPAEA’s substantive provisions are applicable to benefit plans that already cover these benefits.

MHPAEA Final Rule

The Final Rule regarding MHPAEA that the Departments of Labor, Treasury, and Health and Human Services (“Departments”) published on September 9th, 2024, contained 2 significant changes and several minor changes and clarifications.

The first significant change was regarding the proposed rule’s application of the mathematical “substantially all” and “predominant” tests to NQTLs.¹ In the final rule the Departments chose to eliminate the application of these tests to NQTLs. The Departments’ reasoning behind their decision was driven by the expected challenges to such a test in the courts after the Supreme Court’s recent Loper Bright decision, which overturned the judicial doctrine that courts should give deference to agency rulemaking.

The second significant change put forth in the final rule provides that the Departments will treat data collection and evaluation to show that an NQTL contributes to material differences in access to Behavioral Health benefits, as compared to M/S benefits as a “strong indicator” of a violation of MHPAEA.

The issuance of the MHPAEA Final Rule applies to health plans and issuers for plan years beginning on or after January 1, 2025; however, some key requirements, such as the requirements on NQTL data evaluation, apply for plan years beginning on or after January 1, 2026. If the plan’s comparative analysis was completed prior to the effective dates of these changes, the Final Rule requires that the comparative analysis be complete utilizing the most recent guidelines and methodologies, unfortunately requiring preparation of a new comparative written analysis.

Section 1557 Final Rule

Section 1557 is the non-discrimination provision of the ACA and is applicable to specified health programs and activities, including those that receive federal financial assistance. Section 1557 prohibits discrimination based on race, color, national origin, sex (including pregnancy status and gender identity), age, or disability. For example, if a plan covers mastectomies (breast reconstructive surgery) arising in the context of the treatment of a cancer patient but does not cover mastectomies arising from gender affirmation procedures (as a surgical intervention for gender dysphoria), a Section 1557 conflict arises. The Section 1557 conflict arises because the plan treats coverage of mastectomies differently, creating sex-based discrimination respecting the coverage of the procedure.

MHPAEA Final Rule Intersection with Section 1557’s Final Rule

Evaluated under MHPAEA, this same factual situation would be considered in the context of the prevailing NQTL analysis, because the requirements that the patient needs to meet to be eligible for coverage of a mental health disorder procedure are not in parity with the M/S treatment and coverage requirements. Parity is likely nonexistent because there is a barrier to care (or NQTL) imposed for gender dysphoria (a mental health disorder), but not for cancer (a medical disorder). Consequently, the mastectomy limitation is applied in a prohibited manner, which creates an inference of sex-based discrimination associated with the denial of treatment for gender dysphoria, but not for cancer.

On July 3, 2024, several states sued the US Department of Health & Human Services (“HHS”). Therein, a Mississippi District Court judge issued a preliminary nationwide injunction suspending enforcement of Section 1557 mandates as related to pregnancy status and gender identify based sex-discrimination. Additionally, a Florida federal district court judge blocked enforcement of OCR’s interpretation of discrimination “on the basis of sex” as it relates to gender identity, also postponing the effective date of the rule regarding certain other provisions (limited exclusively to jurisdictions in Florida). Then, a Texas federal district court judge postponed the effective date of the rule in its entirety, but only as to Texas and Montana.

These legal cases create an interesting MHPAEA proposition for gender dysphoria related treatments and services. Remember that the MHPAEA final rule intersects with section 1557 of the ACA because the most recent versions of both the International Classification of Diseases (“ICD”) and the Diagnostic and Statistical Manual of Mental Disorders (“DSM”) include gender dysphoria as a mental health condition. The ICD and DSM provide the standards for medical diagnosis, billing and coding, and the inclusion of a particular condition or disorder therein is deemed controlling with respect to the condition or disorder’s status as a mental health related condition or disorder. Consequently, the condition of gender dysphoria is covered by both 1557 and MHPAEA (with quite different outcomes), and while Section 1557 rules may be subject to various and national judicial injunctions, MHPAEA and its implementing regulations remain unencumbered by such judicial orders.

Therefore, respecting gender dysphoria related treatments and services, MHPAEA stands as an effective and instant remedy for the individual advocating the favorable resolution of a gender dysphoria related request for coverage, simply by another name. Rather than sex-based discrimination under 1557, the denial of treatment very likely morphs into a prohibited MHPAEA NQTL, and in the instance of a prohibited NQTL, the participating member has right to a private right of action under MHPAEA to bring the charge to federal district court. So, while a 1557 claim is subject to certain federal administrative rules and procedures, MHPAEA can pack a larger punch due to its private right of action, as afforded to employees participating in employer sponsored health insurance plans. And if the question simply comes down to coverage of the surgery, MHPAEA advances as the easier, and more direct, of the two regulatory remedies.²

Additional Resources:

• Section 1557 Final Rule.
• Additional information on MHPAEA from the DOL.
• Additional Information on MHPAEA from CMS.
• MHPAEA Final Rule.
• Section 1557 Final Rule: FAQs.

¹ While a staple of compliance in the realm of QTLs, these mathematical tests have never been applied by the Departments as dispositive respecting NQTLs.

² This is not to say that Section 1557 remedies are ineffective, just that MHPAEA may be the better of the two remedies, particularly considering that MHPAEA opponents have been generally unsuccessful in tying up its protections in protracted district and appellate court litigation. This is likely due, at least in part, to the complex nature of MHPAEA’s substantive requirements.