Vol. 78 Wednesday, 

No. 219 November 13, 2013 

Part III 

Department of the Treasury 

Internal Revenue Service 

26 CFR Part 54 

Department of Labor 

Employee Benefits Security Administration 

29 CFR Part 2590 

Department of Health and Human Services 

45 CFR Parts 146 and 147 

Final Rules Under the Paul Wellstone and Pete Domenici Mental Health 

Parity and Addiction Equity Act of 2008; Technical Amendment to External 

Review for Multi-State Plan Program; Final Rule 


emcdonald on DSK67QTVN1PROD with RULES3
68240 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

1A technical correction to the effective date for 

collectively bargained plans was made by Public 

Law 110–460, enacted on December 23, 2008. 

2These final regulations apply to both 

grandfathered and non-grandfathered health plans. 

See section 1251 of the Affordable Care Act and its 

implementing regulations at 26 CFR 54.9815– 

1251T, 29 CFR 2590.715–1251, and 45 CFR 

147.140. Under section 1251 of the Affordable Care 

Act, grandfathered health plans are exempted only 

from certain Affordable Care Act requirements 

enacted in Subtitles A and C of Title I of the 

Affordable Care Act. The provisions extending 

MHPAEA requirements to the individual market 

and requiring that qualified health plans comply 

with MHPAEA were not part of these sections. 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 54 

[TD 9640] 

RIN 1545–BI70 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Part 2590 

RIN 1210–AB30 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

[CMS–4140–F] 

45 CFR Parts 146 and 147 

RIN 0938–AP65 

Final Rules Under the Paul Wellstone 

and Pete Domenici Mental Health 

Parity and Addiction Equity Act of 

2008; Technical Amendment to 

External Review for Multi-State Plan 

Program 

AGENCY: Internal Revenue Service, 

Department of the Treasury; Employee 

Benefits Security Administration, 

Department of Labor; Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services. 

ACTION: Final rules. 

SUMMARY: This document contains final 

rules implementing the Paul Wellstone 

and Pete Domenici Mental Health Parity 

and Addiction Equity Act of 2008, 

which requires parity between mental 

health or substance use disorder 

benefits and medical/surgical benefits 

with respect to financial requirements 

and treatment limitations under group 

health plans and group and individual 

health insurance coverage. This 

document also contains a technical 

amendment relating to external review 

with respect to the multi-state plan 

program administered by the Office of 

Personnel Management. 

DATES: Effective date. These final 

regulations are effective on January 13, 

2014, except that the technical 

amendments to 29 CFR 2590.715–2719 

and 45 CFR 147.136 are effective on 

December 13, 2013. 

Applicability date. The mental health 

parity provisions of these final 

regulations apply to group health plans 

and health insurance issuers for plan 

years (or, in the individual market, 

policy years) beginning on or after July 

1, 2014. Until the final rules become 

applicable, plans and issuers must 

continue to comply with the mental 

health parity provisions of the interim 

final regulations. 

FOR FURTHER INFORMATION CONTACT: 

Amy Turner or Amber Rivers, Employee 

Benefits Security Administration, 

Department of Labor, at (202) 693–8335; 

Karen Levin, Internal Revenue Service, 

Department of the Treasury, at (202) 

622–6080 or (202) 317–5500; Jacob 

Ackerman, Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, at (410) 

786–1565. 

Customer service information: 

Individuals interested in obtaining 

information from the Department of 

Labor concerning employment-based 

health coverage laws, including the 

mental health parity provisions, may 

call the EBSA Toll-Free Hotline at 1– 

866–444–EBSA (3272) or visit the 

Department of Labor’s Web site (http:// 

www.dol.gov/ebsa). In addition, 

information from HHS on private health 

insurance for consumers (such as 

mental health and substance use 

disorder parity) can be found on the 

Centers for Medicare & Medicaid 

Services (CMS) Web site (www.cms.gov/ 

cciio) and information on health reform 

can be found at www.HealthCare.gov. In 

addition, information about mental 

health is available at 

www.mentalhealth.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Paul Wellstone and Pete 

Domenici Mental Health Parity and 

Addiction Equity Act of 2008 

(MHPAEA) was enacted on October 3, 

2008 as sections 511 and 512 of the Tax 

Extenders and Alternative Minimum 

Tax Relief Act of 2008 (Division C of 

Pub. L. 110–343).1 MHPAEA amends 

the Employee Retirement Income 

Security Act of 1974 (ERISA), the Public 

Health Service Act (PHS Act), and the 

Internal Revenue Code of 1986 (Code). 

In 1996, Congress enacted the Mental 

Health Parity Act of 1996 (MHPA 1996), 

which required parity in aggregate 

lifetime and annual dollar limits for 

mental health benefits and medical/

surgical benefits. Those mental health 

parity provisions were codified in 

section 712 of ERISA, section 2705 of 

the PHS Act, and section 9812 of the 

Code, and applied to employmentrelated group health plans and health 

insurance coverage offered in 

connection with a group health plan. 

The changes made by MHPAEA were 

codified in these same sections and 

consist of new requirements, including 

parity for substance use disorder 

benefits, as well as amendments to the 

existing mental health parity provisions. 

The changes made by MHPAEA are 

generally effective for plan years 

beginning after October 3, 2009. 

The Patient Protection and Affordable 

Care Act, Public Law 111–148, was 

enacted on March 23, 2010, and the 

Health Care and Education 

Reconciliation Act of 2010, Public Law 

111–152, was enacted on March 30, 

2010 (collectively, the ‘‘Affordable Care 

Act’’). The Affordable Care Act 

reorganizes, amends, and adds to the 

provisions of part A of title XXVII of the 

PHS Act relating to group health plans 

and health insurance issuers in the 

group and individual markets. The 

Affordable Care Act adds section 

715(a)(1) to ERISA and section 

9815(a)(1) to the Code to incorporate the 

provisions of part A of title XXVII of the 

PHS Act into ERISA and the Code, and 

to make them applicable to group health 

plans and health insurance issuers 

providing health insurance coverage in 

connection with group health plans. 

The PHS Act sections incorporated by 

these references are sections 2701 

through 2728. 

The Affordable Care Act extended 

MHPAEA to apply to the individual 

health insurance market and 

redesignated MHPAEA in the PHS Act 

as section 2726.2 Additionally, section 

1311(j) of the Affordable Care Act 

applies section 2726 of the PHS Act to 

qualified health plans (QHPs) in the 

same manner and to the same extent as 

such section applies to health insurance 

issuers and group health plans. 

Furthermore, the Department of Health 

and Human Services (HHS) final 

regulation regarding essential health 

benefits (EHB) requires health insurance 

issuers offering non-grandfathered 

health insurance coverage in the 

individual and small group markets, 

through an Affordable Insurance 

Exchange (Exchange, also called a 

Health Insurance Marketplace or 

Marketplace) or outside of an Exchange, 

to comply with the requirements of the 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68241 

3See 45 CFR 147.150 and 156.115 (78 FR 12834, 

February 25, 2013). 

4The six classifications of benefits are inpatient, 

in-network; inpatient, out-of-network; outpatient, 

in-network; outpatient, out-of-network; emergency 

care; and prescription drugs. 

5See FAQ About Mental Health Parity and 

Addiction Equity Act, available at http://

www.dol.gov/ebsa/faqs/faq-mhpaea.html. 

6See FAQs about Affordable Care Act 

Implementation (Part V) and Mental Health Parity 

Implementation, available at http://www.dol.gov/

ebsa/faqs/faq-aca5.html and http://www.cms.gov/

CCIIO/Resources/Fact-Sheets-and-FAQs/aca_

implementation_faqs5.html, and FAQs about 

Affordable Care Act Implementation (Part VII) and 

Mental Health Parity Implementation, available at 

http://www.dol.gov/ebsa/faqs/faq-aca7.html and 

http://www.cms.gov/CCIIO/Resources/Fact-Sheetsand-FAQs/aca_implementation_faqs7.html#Mental 

Health Parity and Addiction Equity Act of 2008. 

7See FAQs about Affordable Care Act 

Implementation (Part V) and Mental Health Parity 

Implementation, questions 8–11, available at 

http://www.dol.gov/ebsa/faqs/faq-aca5.html and 

http://www.cms.gov/CCIIO/Resources/Fact-Sheetsand-FAQs/aca_implementation_faqs5.html. 

8See FAQs about Affordable Care Act 

Implementation (Part VII) and Mental Health Parity 

Implementation, questions 2–6, available at http:// 

Continued 

MHPAEA regulations in order to satisfy 

the requirement to cover EHB.3

On April 28, 2009, the Departments of 

the Treasury, Labor, and HHS published 

in the Federal Register (74 FR 19155) a 

request for information (RFI) soliciting 

comments on the requirements of 

MHPAEA. (Subsequent references to the 

‘‘Departments’’ include all three 

Departments, unless the headings or 

context indicate otherwise.) On 

February 2, 2010, after consideration of 

the comments received in response to 

the RFI, the Departments published in 

the Federal Register (75 FR 5410) 

comprehensive interim final regulations 

implementing MHPAEA (interim final 

regulations). The interim final 

regulations generally became applicable 

to group health plans and group health 

insurance issuers for plan years 

beginning on or after July 1, 2010. 

The interim final regulations 

established six classifications of 

benefits 4 and provided that the parity 

requirements be applied on a 

classification-by-classification basis. 

The general parity requirement set forth 

in paragraph (c)(2) of the interim final 

regulations prohibited plans and issuers 

from imposing a financial requirement 

or quantitative treatment limitation on 

mental health and substance use 

disorder benefits in any classification 

that is more restrictive than the 

predominant financial requirement or 

quantitative treatment limitation that 

applies to substantially all medical/

surgical benefits in the same 

classification. For this purpose, the 

interim final regulations incorporated 

the two-thirds ‘‘substantially all’’ 

numerical standard from the regulations 

implementing MHPA 1996, and 

quantified ‘‘predominant’’ to mean that 

more than one-half of medical/surgical 

benefits in the classification are subject 

to the financial requirement or 

quantitative treatment limitation in the 

relevant classification. Using these 

numerical standards, the Departments 

established a mathematical test by 

which plans and issuers could 

determine what level of a financial 

requirement or quantitative treatment 

limitation, if any, is the most restrictive 

level that could be imposed on mental 

health or substance use disorder 

benefits within a classification. (This 

mathematical test is referred to in this 

preamble as the quantitative parity 

analysis.) 

The interim final regulations also 

prohibited plans and issuers from 

applying cumulative financial 

requirements (such as deductibles or 

out-of-pocket maximums) or cumulative 

quantitative treatment limitations (such 

as annual or lifetime day or visit limits) 

to mental health or substance use 

disorder benefits in a classification that 

accumulate separately from any such 

cumulative financial requirements or 

cumulative quantitative treatment 

limitations established for medical/

surgical benefits in the same 

classification. 

Additionally, the interim final 

regulations set forth parity protections 

with respect to nonquantitative 

treatment limitations (NQTLs), which 

are limits on the scope or duration of 

treatment that are not expressed 

numerically (such as medical 

management techniques like prior 

authorization). The interim final 

regulations stated that a plan or issuer 

may not impose an NQTL with respect 

to mental health or substance use 

disorder benefits in any classification 

unless, under the terms of the plan as 

written and in operation, any processes, 

strategies, evidentiary standards, or 

other factors used in applying the NQTL 

to mental health or substance use 

disorder benefits in the classification are 

comparable to, and are applied no more 

stringently than, the processes, 

strategies, evidentiary standards, or 

other factors used in applying the 

limitation with respect to medical/

surgical benefits in the same 

classification, except to the extent that 

recognized clinically appropriate 

standards of care may permit a 

difference. The Departments also set 

forth a special rule for evaluating parity 

of multi-tiered prescription drug 

benefits. The interim final regulations 

included several examples to illustrate 

each of these parity standards. 

The interim final regulations also 

implemented MHPAEA’s disclosure 

provisions requiring that the criteria for 

medical necessity determinations and 

the reason for any denial of 

reimbursement or payment under a 

group health plan (or health insurance 

coverage) with respect to mental health 

or substance use disorder benefits be 

made available upon request in certain 

circumstances. 

The interim final regulations also 

specifically requested comments in 

several areas, including whether 

additional examples would be helpful to 

illustrate the application of the NQTL 

rule to other features of medical 

management or general plan design; 

whether and to what extent MHPAEA 

addresses the ‘‘scope of services’’ or 

‘‘continuum of care’’ provided by a 

group health plan or health insurance 

coverage; what additional clarifications 

might be helpful to facilitate compliance 

with the disclosure requirement for 

medical necessity criteria or denials of 

mental health or substance use disorder 

benefits; and implementing the new 

statutory requirements for the increased 

cost exemption under MHPAEA, as well 

as information on how many plans 

expect to use the exemption. 

In light of the comments and other 

feedback received in response to the 

interim final regulations, the 

Departments issued clarifications in 

several rounds of Frequently Asked 

Questions (FAQs). In the first FAQ 

about MHPAEA, the Departments set 

forth an enforcement safe harbor under 

which the Departments would not take 

enforcement action against plans and 

issuers that divide benefits furnished on 

an outpatient basis into two subclassifications—(1) office visits, and (2) 

all other outpatient items and services— 

for purposes of applying the financial 

requirement and treatment limitation 

rules under MHPAEA.5

The Departments issued additional 

FAQs providing further clarifications.6

The FAQs issued in December 2010 

addressed the changes made to the 

definition of ‘‘small employer’’ after the 

enactment of the Affordable Care Act, 

made clear how the disclosure 

requirements under MHPAEA interact 

with other ERISA disclosure 

requirements (and that health care 

providers are entitled to request such 

information on behalf of participants), 

and provided temporary information on 

how to claim the increased cost 

exemption.7 Additional FAQs issued in 

November 2011 addressed specific 

NQTLs, such as prior authorization and 

concurrent review.8 The Departments 


emcdonald on DSK67QTVN1PROD with RULES3
68242 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

www.dol.gov/ebsa/faqs/faq-aca7.html and http://

www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs7.html#Mental 

Health Parity and Addiction Equity Act of 2008. 

9See FAQs about Affordable Care Act 

Implementation (Part VII) and Mental Health Parity 

Implementation, question 7, available at http://

www.dol.gov/ebsa/faqs/faq-aca7.html and http://

www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs7.html#Mental 

Health Parity and Addiction Equity Act of 2008. 

10See FAQ About Mental Health Parity and 

Addiction Equity Act, available at http://

www.dol.gov/ebsa/faqs/faq-mhpaea.html. 

11Under PHS Act section 2719A (incorporated 

into ERISA and the Code) and its implementing 

regulations, non-grandfathered group health plans 

and non-grandfathered group or individual health 

insurance coverage are prohibited from imposing 

any cost-sharing requirement expressed as a 

copayment amount or coinsurance rate with respect 

to a participant or beneficiary for out-of-network 

emergency services that exceeds the cost-sharing 

requirement imposed with respect to a participant 

or beneficiary if the services were provided inalso clarified that plans and issuers may 

charge the specialist copayment for 

mental health and substance use 

disorder benefits only if it is determined 

that this level of copayment is the 

predominant level that applies to 

substantially all medical/surgical 

benefits within a classification.9

After consideration of the comments 

and other feedback received from 

stakeholders, the Departments are 

publishing these final regulations. 

II. Overview of the Regulations 

In general, these final regulations 

incorporate clarifications issued by the 

Departments through FAQs since the 

issuance of the interim final regulations, 

and provide new clarifications on issues 

such as NQTLs and the increased cost 

exemption. The HHS final regulation 

also implements the provisions of 

MHPAEA for the individual health 

insurance market. 

A. Meaning of Terms 

Under MHPAEA and the interim final 

regulations, the term ‘‘medical/surgical 

benefits’’ means benefits for medical or 

surgical services, as defined under the 

terms of the plan or health insurance 

coverage. This term does not include 

mental health or substance use disorder 

benefits. The terms ‘‘mental health 

benefits’’ and ‘‘substance use disorder 

benefits’’ mean benefits with respect to 

services for mental health conditions or 

substance use disorders, respectively, as 

defined under the terms of the plan and 

in accordance with applicable Federal 

and State law. The interim final 

regulations further provided that the 

plan terms defining whether the benefits 

are medical/surgical benefits or mental 

health or substance use disorder 

benefits must be consistent with 

generally recognized standards of 

current medical practice (for example, 

the most current version of the 

Diagnostic and Statistical Manual of 

Mental Disorders (DSM), the most 

current version of the International 

Classification of Diseases (ICD), or State 

guidelines). 

These final regulations make minor, 

technical changes to the meaning of 

these terms for consistency and clarity. 

Specifically, the final regulations clarify 

that the definitions of ‘‘medical/surgical 

benefits,’’ ‘‘mental health benefits,’’ and 

‘‘substance use disorder benefits’’ 

include benefits for items as well as 

services. The final regulations also 

clarify that medical conditions and 

surgical procedures, and mental health 

conditions and substance use disorders, 

are defined under the terms of the plan 

or coverage and in accordance with 

applicable Federal and State law. 

One commenter suggested that the 

definitions of mental health benefits and 

substance use disorder benefits should 

be revised to refer only to the terms of 

the plan and applicable State law. The 

Departments decline to adopt this 

suggestion. The statutory definitions 

provided in MHPAEA specifically refer 

to applicable Federal law. Moreover, the 

reference to Federal law is appropriate 

because State law does not apply to all 

group health plans, and Federal law also 

identifies EHB categories, including the 

category of mental health and substance 

use disorder services, that nongrandfathered health plans in the 

individual and small group markets are 

required to cover beginning in 2014. 

B. Clarifications—Parity Requirements 

1. Classification of Benefits 

As described earlier in this preamble, 

the interim final regulations set forth 

that the parity analysis be conducted on 

a classification-by-classification basis in 

six specific classifications of benefits. 

Subsequent to the issuance of the 

interim final regulations, several plans 

and issuers brought to the Departments’ 

attention that, with respect to outpatient 

benefits, many plans and issuers require 

a copayment for office visits (such as 

physician or psychologist visits) and 

coinsurance for all other outpatient 

services (such as outpatient surgery). In 

response to this information, the 

Departments published an FAQ 

establishing an enforcement safe harbor 

under which the Departments would 

not take enforcement action against 

plans and issuers that divide benefits 

furnished on an outpatient basis into 

two sub-classifications ((1) office visits 

and (2) all other outpatient items and 

services) for purposes of applying the 

financial requirement and treatment 

limitation rules under MHPAEA.10

The Departments have incorporated 

the terms of the FAQ in paragraph 

(c)(3)(iii)(C) of these final regulations, 

permitting sub-classifications for office 

visits, separate from other outpatient 

services. Other sub-classifications not 

specifically permitted in these final 

regulations, such as separate subclassifications for generalists and 

specialists, must not be used for 

purposes of determining parity. After 

the sub-classifications are established, a 

plan or issuer may not impose any 

financial requirement or quantitative 

treatment limitation on mental health or 

substance use disorder benefits in any 

sub-classification (i.e., office visits or 

non-office visits) that is more restrictive 

than the predominant financial 

requirement or quantitative treatment 

limitation that applies to substantially 

all medical/surgical benefits in the subclassification using the methodology set 

forth in paragraph (c)(3)(i) of these final 

regulations. Example 6 under paragraph 

(c)(3)(iv) of these final regulations 

illustrates the approach that plans and 

issuers may employ when dividing 

outpatient benefits into subclassifications in accordance with these 

final regulations. 

Additionally, commenters requested 

that the final regulations permit plans 

and issuers to create sub-classifications 

to address plan designs that have two or 

more network tiers of providers. 

Commenters asserted that utilizing 

tiered networks helps plans manage the 

costs and quality of care and requested 

that the final regulations allow plans to 

conduct the parity analysis separately 

with respect to these various network 

tiers. 

The Departments have considered 

these comments and recognize that 

tiered networks have become an 

important tool for health plan efforts to 

manage care and control costs. 

Therefore, for purposes of applying the 

financial requirement and treatment 

limitation rules under MHPAEA, these 

final regulations provide that if a plan 

(or health insurance coverage) provides 

in-network benefits through multiple 

tiers of in-network providers (such as an 

in-network tier of preferred providers 

with more generous cost sharing to 

participants than a separate in-network 

tier of participating providers), the plan 

may divide its benefits furnished on an 

in-network basis into sub-classifications 

that reflect those network tiers, if the 

tiering is based on reasonable factors 

and without regard to whether a 

provider is a mental health or substance 

use disorder provider or a medical/

surgical provider.11 After the subVerDate Mar<15>2010 17:41 Nov 12, 2013 Jkt 232001 PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 E:\FR\FM\13NOR3.SGM 13NOR3

emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68243 

network. 26 CFR 54.9815–2719AT(b); 29 CFR 

2590.715–2719A(b); 45 CFR 147.138(b). 

classifications are established, the plan 

or issuer may not impose any financial 

requirement or quantitative treatment 

limitation on mental health or substance 

use disorder benefits in any subclassification that is more restrictive 

than the predominant financial 

requirement or quantitative treatment 

limitation that applies to substantially 

all medical/surgical benefits in the subclassification using the methodology set 

forth in paragraph (c)(3)(i) of these final 

regulations. 

The Departments are aware that some 

plans may have an uneven number of 

tiers between medical/surgical 

providers and mental health or 

substance use disorder providers (e.g., 3 

tiers for medical/surgical providers and 

2 tiers for mental health or substance 

use disorder providers). The 

Departments may provide additional 

guidance if questions persist with 

respect to plans with an uneven number 

of tiers or if the Departments become 

aware of tier structures that may be 

inconsistent with the parity analysis 

required under these final regulations. 

Until the issuance of further guidance, 

the Departments will consider a plan or 

issuer to comply with the financial 

requirement and quantitative treatment 

limitation rules under MHPAEA if a 

plan or issuer treats the least restrictive 

level of the financial requirement or 

quantitative treatment limitation that 

applies to at least two-thirds of medical/ 

surgical benefits across all provider tiers 

in a classification as the predominant 

level that it may apply to mental health 

or substance use disorder benefits in the 

same classification. 

Some commenters requested 

clarification that all medical/surgical 

benefits and mental health or substance 

use disorder benefits offered by a plan 

or coverage must be contained within 

the six classifications of benefits and 

that plans and issuers could not classify 

certain benefits outside of the six 

classifications in order to avoid the 

parity requirements. Other commenters 

suggested that specific mental health or 

substance use disorder benefits be crosswalked or paired with specific medical/ 

surgical benefits (e.g., physical 

rehabilitation with substance use 

disorder rehabilitation) for purposes of 

the parity analysis. 

The final regulations retain the six 

classifications enumerated in the 

interim final regulations, specify the 

permissible sub-classifications, and 

provide that the parity analysis be 

performed within each classification 

and sub-classification. The 

classifications and sub-classifications 

are intended to be comprehensive and 

cover the complete range of medical/

surgical benefits and mental health or 

substance use disorder benefits offered 

by health plans and issuers. Medical/

surgical benefits and mental health or 

substance use disorder benefits cannot 

be categorized as being offered outside 

of these classifications and therefore not 

subject to the parity analysis. 

Cross-walking or pairing specific 

mental health or substance use disorder 

benefits with specific medical/surgical 

benefits is a static approach that the 

Departments do not believe is feasible, 

given the difficulty in determining 

‘‘equivalency’’ between specific 

medical/surgical benefits and specific 

mental health and substance use 

disorder benefits and because of the 

differences in the types of benefits that 

may be offered by any particular plan. 

2. Measuring Plan Benefits 

Some commenters supported the 

‘‘substantially all’’ and ‘‘predominant’’ 

tests as formulated in the interim final 

regulations, while other commenters 

were concerned that they were too 

restrictive and may create an 

administrative burden on plans. A few 

commenters requested clarification that 

the parity analysis would not need to be 

performed annually absent changes in 

plan design or indications that 

assumptions or data were inaccurate. 

The interim final regulations 

incorporated the two-thirds 

‘‘substantially all’’ numerical standard 

from the regulations implementing 

MHPA 1996, and quantified 

‘‘predominant’’ to mean more than onehalf of medical/surgical benefits in the 

classification are subject to the financial 

requirement or quantitative treatment 

limitation. The Departments believe 

group health plans and issuers have 

developed the familiarity and expertise 

to implement these parity requirements 

and therefore retain the numerical 

standards as set forth in the interim 

final regulations. The Departments 

clarify that a plan or issuer is not 

required to perform the parity analysis 

each plan year unless there is a change 

in plan benefit design, cost-sharing 

structure, or utilization that would 

affect a financial requirement or 

treatment limitation within a 

classification (or sub-classification). 

These final regulations, like the 

interim final regulations, provide that 

the determination of the portion of 

medical/surgical benefits in a 

classification of benefits subject to a 

financial requirement or quantitative 

treatment limitation (or subject to any 

level of a financial requirement or 

quantitative treatment limitation) is 

based on the dollar amount of all plan 

payments for medical/surgical benefits 

in the classification expected to be paid 

under the plan for the plan year. Any 

reasonable method may be used to 

determine the dollar amount expected 

to be paid under the plan for medical/ 

surgical benefits subject to a financial 

requirement or quantitative treatment 

limitation. One commenter asked 

whether plan benefits are measured 

based on allowed plan costs, for 

purposes of the ‘‘substantially all’’ and 

‘‘predominant’’ tests. The dollar amount 

of plan payments is based on the 

amount the plan allows (before enrollee 

cost sharing) rather than the amount the 

plan pays (after enrollee cost sharing) 

because payment based on the allowed 

amount covers the full scope of the 

benefits being provided. 

3. Cumulative Financial Requirements 

and Cumulative Quantitative Treatment 

Limitations 

The interim final regulations provide 

that a plan or issuer may not apply 

cumulative financial requirements (such 

as deductibles and out-of-pocket 

maximums) or cumulative quantitative 

treatment limitations (such as annual or 

lifetime day or visit limits) for mental 

health or substance use disorder 

benefits in a classification that 

accumulate separately from any 

cumulative requirement or limitation 

established for medical/surgical benefits 

in the same classification. These final 

regulations retain this standard and 

continue to provide that cumulative 

requirements and limitations must also 

satisfy the quantitative parity analysis. 

Accordingly, these final regulations 

continue to prohibit plans and issuers 

from applying separate cumulative 

financial requirements and cumulative 

quantitative treatment limitations to 

medical/surgical and mental health and 

substance use disorder benefits in a 

classification, and continue to provide 

that such cumulative requirements or 

limitations are only permitted to be 

applied for mental health and substance 

use disorder benefits in a classification 

to the extent that such unified 

cumulative requirements or limitations 

also apply to substantially all medical/ 

surgical benefits in the classification. 

Several commenters argued that the 

requirement in the interim final 

regulations to use a single, combined 

deductible in a classification was 

burdensome and would require 

significant resources to implement, 

especially for Managed Behavioral 

Health Organizations (MBHOs) that 

often work with multiple plans. One 

commenter asserted that this 


emcdonald on DSK67QTVN1PROD with RULES3
68244 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

12Final Report: Consistency of Large Employer 

and Group Health Plan Benefits with Requirements 

of the Paul Wellstone and Pete Domenici Mental 

Health Parity and Addiction Equity Act of 2008. 

NORC at the University of Chicago for the Office of 

the Assistant Secretary for Planning and Evaluation. 

This study analyzed information on large group 

health plan benefit designs from 2009 through 2011 

in several databases maintained by benefits 

consulting firms that advise plans on compliance 

with MHPAEA as well as other requirements. 

13The 2010 Kaiser Family Foundation/HRET and 

the 2010 Mercer survey found that fewer than 2% 

of firms with over 50 employees dropped coverage 

of mental health or substance use disorder benefits. 

Final Report: Consistency of Large Employer and 

Group Health Plan Benefits with Requirements of 

the Paul Wellstone and Pete Domenici Mental 

Health Parity and Addiction Equity Act of 2008. 

NORC at the University of Chicago for the Office of 

the Assistant Secretary for Planning and Evaluation, 

pp. 43–44. 

14See section 1302(b)(1)(E) of the Affordable Care 

Act. 

15For self-insured group health plans, large group 

market health plans, and grandfathered health 

plans, to determine which benefits are EHB for 

purposes of complying with PHS Act section 2711, 

the Departments have stated that they will consider 

the plan to have used a permissible definition of 

EHB under section 1302(b) of the Affordable Care 

Act if the definition is one that is authorized by the 

Secretary of HHS (including any available 

benchmark option, supplemented as needed to 

ensure coverage of all ten statutory categories). 

Furthermore, the Departments intend to use their 

enforcement discretion and work with those plans 

that make a good faith effort to apply an authorized 

definition of EHB to ensure there are no annual or 

lifetime dollar limits on EHB. See FAQ–10 of 

Frequently Asked Questions on Essential Health 

Benefits Bulletin (published February 17, 2012), 

available at: http://www.cms.gov/CCIIO/Resources/

Files/Downloads/ehb-faq-508.pdf. 

16See 26 CFR 54.9815–2713T; 29 CFR 2590.715– 

2713; 45 CFR 147.130. 

requirement could impact the 

willingness of plan sponsors to offer 

mental health or substance use disorder 

benefits. A study sponsored by HHS, 

however, found that nearly all plans had 

eliminated the use of separate 

deductibles for mental health and 

substance use disorder benefits by 

2011.12 According to this study, even in 

2010, only a very small percentage of 

plans were using separate deductibles. 

This study and other research 13 have 

shown that the overwhelming majority 

of plans have retained mental health 

and substance use disorder coverage 

after issuance of the interim final 

regulations and, for the very small 

percent of plans that have dropped 

mental health or substance use disorder 

coverage, there is no clear evidence they 

did so because of MHPAEA. 

Accordingly, these final regulations 

retain the requirement that plans and 

issuers use a single, combined 

deductible in a classification. 

4. Interaction With PHS Act Section 

2711 (No Lifetime or Annual Limits) 

MHPA 1996 and paragraph (b) of the 

interim final regulations set forth the 

parity requirements with respect to 

aggregate lifetime and annual dollar 

limits on mental health benefits or 

substance use disorder benefits where a 

group health plan or health insurance 

coverage provides both medical/surgical 

benefits and mental health benefits or 

substance use disorder benefits. 

PHS Act section 2711, as added by the 

Affordable Care Act, prohibits lifetime 

and annual limits on the dollar amount 

of EHB, as defined in section 1302(b) of 

the Affordable Care Act. The definition 

of EHB includes ‘‘mental health and 

substance use disorder services, 

including behavioral health 

treatment.’’ 14 Thus, notwithstanding 

the provisions of MHPAEA that permit 

aggregate lifetime and annual dollar 

limits with respect to mental health or 

substance use disorder benefits as long 

as those limits are in accordance with 

the parity requirements for such limits, 

such dollar limits are prohibited with 

respect to mental health or substance 

use disorder benefits that are covered as 

EHB. While these final regulations 

generally retain the provisions of the 

interim final regulations regarding the 

application of the parity requirements to 

aggregate lifetime and annual dollar 

limits on mental health or substance use 

disorder benefits, language has been 

added specifying that these final 

regulations do not address the 

requirements of PHS Act section 2711. 

That is, the parity requirements 

regarding annual and lifetime limits 

described in these final regulations only 

apply to the provision of mental health 

and substance use disorder benefits that 

are not EHB. Because this greatly 

reduces the instances in which annual 

or lifetime limits will be permissible, 

the examples from the interim final 

regulations that expressly demonstrated 

how a plan could apply lifetime or 

annual dollar limits have been 

deleted.15

5. Interaction With PHS Act Section 

2713 (Coverage of Preventive Health 

Services) 

The interim final regulations provide 

that if a plan or issuer provides mental 

health or substance use disorder 

benefits in any classification, mental 

health or substance use disorder 

benefits must be provided in every 

classification in which medical/surgical 

benefits are provided. Under PHS Act 

section 2713, as added by the Affordable 

Care Act, non-grandfathered group 

health plans and health insurance 

issuers offering non-grandfathered 

group and individual coverage are 

required to provide coverage for certain 

preventive services without cost 

sharing.16 These preventive services 

presently include, among other things, 

alcohol misuse screening and 

counseling, depression counseling, and 

tobacco use screening as provided for in 

the guidelines issued by the United 

States Preventive Services Task Force. 

The Departments received several 

comments asking whether or to what 

extent a non-grandfathered plan that 

provides mental health or substance use 

disorder benefits pursuant to PHS Act 

section 2713 is subject to the 

requirements of MHPAEA. Many 

commenters urged the Departments to 

clarify that the provision of mental 

health and substance use disorder 

benefits in this circumstance does not 

trigger a broader requirement to comply 

with MHPAEA for non-grandfathered 

plans that do not otherwise offer mental 

health or substance use disorder 

benefits. 

The Departments agree that 

compliance with PHS Act section 2713 

should not, for that reason alone, 

require that the full range of benefits for 

a mental health condition or substance 

user disorder be provided under 

MHPAEA. Accordingly, paragraph 

(e)(3)(ii) of these final regulations 

provides that nothing in these 

regulations requires a group health plan 

(or health insurance issuer offering 

coverage in connection with a group 

health plan) that provides mental health 

or substance use disorder benefits only 

to the extent required under PHS Act 

section 2713 to provide additional 

mental health or substance use disorder 

benefits in any classification. 

C. Nonquantitative Treatment 

Limitations 

1. Exceptions for Clinically Appropriate 

Standards of Care 

The final regulations generally retain 

the provision in the interim final 

regulations setting forth the parity 

requirements with respect to NQTLs. 

Under both the interim final regulations 

and these final regulations, a plan or 

issuer may not impose an NQTL with 

respect to mental health or substance 

use disorder benefits in any 

classification unless, under the terms of 

the plan as written and in operation, 

any processes, strategies, evidentiary 

standards, or other factors used in 

applying the NQTL to mental health or 

substance use disorder benefits in the 

classification are comparable to, and are 

applied no more stringently than, the 

processes, strategies, evidentiary 

standards, or other factors used in 

applying the limitation with respect to 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68245 

17HHS convened a technical expert panel on 

March 3, 2011 to provide input on the use of 

NQTLs for mental health and substance use 

disorder benefits. The panel was comprised of 

individuals with clinical expertise in mental health 

and substance use disorder treatment as well as 

general medical treatment. These experts were 

unable to identify situations for which the clinically 

appropriate standard of care exception was 

warranted—in part because of the flexibility 

inherent in the NQTL standard itself. 

18See FAQs About Affordable Care Act 

Implementation (Part VII) and Mental Health Parity 

Implementation, question 5, available at: http://

www.dol.gov/ebsa/faqs/faq-aca7.html and http://

www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs7.html. 

19The Departments reiterated the different parity 

standards with respect to quantitative treatment 

limitations and nonquantitative treatment 

limitations in an FAQ. See FAQs on Understanding 

Implementation of the Mental Health Parity and 

Addiction Equity Act of 2008, question 6, available 

at http://www.dol.gov/ebsa/faqs/faqmhpaeaimplementation.html. 

medical/surgical benefits in the same 

classification. 

The interim final regulations also 

contained an exception to the NQTL 

requirements allowing for variation ‘‘to 

the extent that recognized clinically 

appropriate standards of care may 

permit a difference.’’ A few commenters 

expressed support for the exception, 

emphasizing inherent differences in 

treatment for medical/surgical 

conditions and mental health conditions 

and substance use disorders. Many 

other commenters raised concerns that 

this exception could be subject to abuse 

and recommended the Departments set 

clear standards for what constitutes a 

‘‘recognized clinically appropriate 

standard of care.’’ For example, 

commenters suggested a recognized 

clinically appropriate standard of care 

must reflect input from multiple 

stakeholders and experts; be accepted 

by multiple nationally recognized 

provider, consumer, or accrediting 

organizations; be based on independent 

scientific evidence; and not be 

developed solely by a plan or issuer. 

Additionally, since publication of the 

interim final regulations, some plans 

and issuers may have attempted to 

invoke the exception to justify applying 

an NQTL to all mental health or 

substance use disorder benefits in a 

classification, while only applying the 

NQTL to a limited number of medical/ 

surgical benefits in the same 

classification. These plans and issuers 

generally argue that fundamental 

differences in treatment of mental 

health and substance use disorders and 

medical/surgical conditions, justify 

applying stricter NQTLs to mental 

health or substance use disorder 

benefits than to medical/surgical 

benefits under the exception in the 

interim final regulations. 

In consideration of these comments, 

the Departments are removing the 

specific exception for ‘‘recognized 

clinically appropriate standards of 

care.’’ 17 Plans and issuers will continue 

to have the flexibility contained in the 

NQTL requirements to take into account 

clinically appropriate standards of care 

when determining whether and to what 

extent medical management techniques 

and other NQTLs apply to medical/

surgical benefits and mental health and 

substance use disorder benefits, as long 

as the processes, strategies, evidentiary 

standards, and other factors used in 

applying an NQTL to mental health and 

substance use disorder benefits are 

comparable to, and applied no more 

stringently than, those with respect to 

medical/surgical benefits. In particular, 

the regulations do not require plans and 

issuers to use the same NQTLs for both 

mental health and substance use 

disorder benefits and medical/surgical 

benefits, but rather that the processes, 

strategies, evidentiary standards, and 

other factors used by the plan or issuer 

to determine whether and to what 

extent a benefit is subject to an NQTL 

are comparable to and applied no more 

stringently for mental health or 

substance use disorder benefits than for 

medical/surgical benefits. Disparate 

results alone do not mean that the 

NQTLs in use do not comply with these 

requirements. The final regulations 

provide examples of how health plans 

and issuers can comply with the NQTL 

requirements absent the exception for a 

recognized clinically appropriate 

standard of care. 

However, MHPAEA specifically 

prohibits separate treatment limitations 

that are applicable only with respect to 

mental health or substance use disorder 

benefits. Moreover, as reflected in 

FAQs 18 released in November 2011, it 

is unlikely that a reasonable application 

of the NQTL requirement would result 

in all mental health or substance use 

disorder benefits being subject to an 

NQTL in the same classification in 

which less than all medical/surgical 

benefits are subject to the NQTL. 

2. Parity Standards for NQTLs Versus 

Quantitative Treatment Limitations 

As mentioned earlier in this 

preamble, MHPAEA and the interim 

final regulations prohibit plans and 

issuers from imposing a financial 

requirement or quantitative treatment 

limitation on mental health and 

substance use disorder benefits that is 

more restrictive than the predominant 

financial requirement or quantitative 

treatment limitation that applies to 

substantially all medical/surgical 

benefits in the same classification. The 

interim final regulations incorporated 

the two-thirds ‘‘substantially all’’ 

numerical standard from the rules 

implementing the requirements of 

MHPA 1996, and quantified 

‘‘predominant’’ to mean more than onehalf. Using these numerical standards, 

the Departments established a 

mathematical test by which plans and 

issuers could determine what level of a 

financial requirement or quantitative 

treatment limitation, if any, is the most 

restrictive level that could be imposed 

on mental health or substance use 

disorder benefits within a classification. 

The Departments recognized that 

plans and issuers impose a variety of 

NQTLs affecting the scope or duration 

of benefits that are not expressed 

numerically. Some commenters 

recommended that the Departments 

adopt the same quantitative parity 

analysis for NQTLs. While NQTLs are 

subject to the parity requirements, the 

Departments understood that such 

limitations cannot be evaluated 

mathematically. These final regulations 

continue to provide different parity 

standards with respect to quantitative 

treatment limitations and NQTLs, 

because although both kinds of 

limitations operate to limit the scope or 

duration of mental health and substance 

use disorder benefits, they apply to such 

benefits differently.19

3. Clarification Regarding the 

Application of Certain NQTLs 

Under the interim final regulations, 

the Departments set forth the parity 

requirement with respect to NQTLs and 

provided an illustrative list of NQTLs 

that plans and issuers commonly use. 

These NQTLs included: medical 

management standards limiting or 

excluding benefits based on medical 

necessity or medical appropriateness, or 

based on whether the treatment is 

experimental or investigative; formulary 

design for prescription drugs; standards 

for provider admission to participate in 

a network, including reimbursement 

rates; plan methods for determining 

usual, customary, and reasonable 

charges; refusal to pay for higher-cost 

therapies until it can be shown that a 

lower-cost therapy is not effective (also 

known as fail-first policies or step 

therapy protocols); and exclusions 

based on failure to complete a course of 

treatment. The interim final regulations 

also included examples illustrating the 

operation of the requirements for 

NQTLs. 

After the interim final regulations 

were issued, some stakeholders asked 

questions regarding the application of 


emcdonald on DSK67QTVN1PROD with RULES3
68246 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

20See 45 CFR 147.150 and 156.115 (78 FR 12834, 

February 25, 2013). 

the NQTL rule to other features of 

medical management or general plan 

design not specifically addressed in the 

interim final regulations. Many 

commenters requested that the 

Departments address additional NQTLs, 

such as prior authorization and 

concurrent review, service coding, 

provider network criteria, policy 

coverage conditions, and both in- and 

out-of-network limitations. 

These final regulations make clear 

that, while an illustrative list is 

included in these final regulations, all 

NQTLs imposed on mental health and 

substance use disorder benefits by plans 

and issuers subject to MHPAEA are 

required to be applied in accordance 

with these requirements. To the extent 

that a plan standard operates to limit the 

scope or duration of treatment with 

respect to mental health or substance 

use disorder benefits, the processes, 

strategies, evidentiary standards, or 

other factors used to apply the standard 

must be comparable to, and applied no 

more stringently than, those imposed 

with respect to medical/surgical 

benefits. By being comparable, the 

processes, strategies, evidentiary 

standards and other factors cannot be 

specifically designed to restrict access to 

mental health or substance use disorder 

benefits. Specifically, plan standards, 

such as in- and out-of-network 

geographic limitations, limitations on 

inpatient services for situations where 

the participant is a threat to self or 

others, exclusions for court-ordered and 

involuntary holds, experimental 

treatment limitations, service coding, 

exclusions for services provided by 

clinical social workers, and network 

adequacy, while not specifically 

enumerated in the illustrative list of 

NQTLs, must be applied in a manner 

that complies with these final 

regulations. In response to the 

comments received, in paragraph 

(c)(4)(ii) of these final regulations, the 

Departments added two additional 

examples of NQTLs to the illustrative 

list: network tier design and restrictions 

based on geographic location, facility 

type, provider specialty and other 

criteria that limit the scope or duration 

of benefits for services provided under 

the plan or coverage. Furthermore, the 

Departments included additional and 

revised examples on how NQTLs, 

enumerated in these final regulations or 

otherwise, may be applied in 

accordance with the requirements of 

these final regulations. 

The Departments are aware that some 

commenters have asked how the NQTL 

requirements apply to provider 

reimbursement rates. Plans and issuers 

may consider a wide array of factors in 

determining provider reimbursement 

rates for both medical/surgical services 

and mental health and substance use 

disorder services, such as service type; 

geographic market; demand for services; 

supply of providers; provider practice 

size; Medicare reimbursement rates; and 

training, experience and licensure of 

providers. The NQTL provisions require 

that these or other factors be applied 

comparably to and no more stringently 

than those applied with respect to 

medical/surgical services. Again, 

disparate results alone do not mean that 

the NQTLs in use fail to comply with 

these requirements. The Departments 

may provide additional guidance if 

questions persist with respect to 

provider reimbursement rates. 

Some commenters requested that the 

Departments require plans and issuers 

to comply with certain guidelines, 

independent national or international 

standards, or State government 

guidelines. While plans and issuers are 

not required under these final 

regulations to comply with any such 

guidelines or standards with respect to 

the development of their NQTLs, these 

standards, such as the behavioral health 

accreditation standards set forth by the 

National Committee for Quality 

Assurance or the standards for 

implementing parity in managed care 

set forth by URAC, may be used as 

references and best practices in 

implementing NQTLs, if they are 

applied in a manner that complies with 

these final regulations. 

D. Scope of Services 

In response to the RFI and interim 

final regulations, the Departments 

received many comments addressing an 

issue characterized as ‘‘scope of 

services’’ or ‘‘continuum of care.’’ Scope 

of services generally refers to the types 

of treatment and treatment settings that 

are covered by a group health plan or 

health insurance coverage. Some 

commenters requested that, with respect 

to a mental health condition or 

substance use disorder that is otherwise 

covered, the regulations clarify that a 

plan or issuer is not required to provide 

benefits for any particular treatment or 

treatment setting (such as counseling or 

non-hospital residential treatment) if 

benefits for the treatment or treatment 

setting are not provided for medical/

surgical conditions. Other commenters 

requested that the regulations require 

plans and issuers to provide benefits for 

the full scope of medically appropriate 

services to treat a mental health 

condition or substance use disorder if 

the plan or issuer covers the full scope 

of medically appropriate services to 

treat medical/surgical conditions, even 

if some treatments or treatment settings 

are not otherwise covered by the plan or 

coverage. Other commenters requested 

that MHPAEA be interpreted to require 

that group health plans and issuers 

provide benefits for any evidence-based 

treatment. 

The interim final regulations 

established six broad classifications that 

in part define the scope of services 

under MHPAEA. The interim final 

regulations require that, if a plan or 

issuer provides coverage for mental 

health or substance use disorder 

benefits in any classification, mental 

health or substance use disorder 

benefits must be provided in every 

classification in which medical/surgical 

benefits are provided. The interim final 

regulations did not, however, address 

the scope of services that must be 

covered within those classifications. 

The Departments invited comments on 

whether and to what extent the final 

regulations should address the scope of 

services or continuum of care provided 

by a group health plan or health 

insurance coverage. 

Many commenters requested that the 

Departments clarify how MHPAEA 

affects the scope of coverage for 

intermediate services (such as 

residential treatment, partial 

hospitalization, and intensive outpatient 

treatment) and how these services fit 

within the six classifications set forth by 

the interim final regulations. Some 

commenters suggested that the final 

regulations establish what intermediate 

mental health and substance use 

disorder services would be analogous to 

various intermediate medical/surgical 

services for purposes of the MHPAEA 

parity analysis. Other commenters 

suggested that the Departments not 

address scope of services in the final 

regulations. 

The Departments did not intend that 

plans and issuers could exclude 

intermediate levels of care covered 

under the plan from MHPAEA’s parity 

requirements. At the same time, the 

Departments did not intend to impose a 

benefit mandate through the parity 

requirement that could require greater 

benefits for mental health conditions 

and substance use disorders than for 

medical/surgical conditions. In 

addition, the Departments’ approach 

defers to States to define the package of 

insurance benefits that must be 

provided in a State through EHB.20

Although the interim final regulations 

did not define the scope of the six 

classifications of benefits, they directed 

that plans and issuers assign mental 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68247 

21See FAQs for Employees about the Mental 

Health Parity and Addiction Equity Act, available 

at http://www.dol.gov/ebsa/faqs/faq-mhpaea2.html; 

FAQs about Affordable Care Act Implementation 

(Part V) and Mental Health Parity Implementation, 

available at http://www.dol.gov/ebsa/faqs/faqaca5.html and http://www.cms.gov/CCIIO/

Resources/Fact-Sheets-and-FAQs/aca_

implementation_faqs5.html. 

22 29 CFR 2520.104b 1. 23ERISA section 3(7) defines the term 

‘‘participant’’ to include any employee or former 

employee who is or may become eligible to receive 

a benefit of any type from an employee benefit plan 

or whose beneficiaries may become eligible to 

receive any such benefit. Accordingly, employees 

who are not enrolled but are, for example, in a 

waiting period for coverage, or who are otherwise 

shopping amongst benefit package options at open 

season, generally are considered plan participants 

for this purpose. 

24 29 CFR 2560.503–1. See also 26 CFR 54.9815– 

2719T(b)(2)(i), 29 CFR 2590.715–2719(b)(2)(i), and 

45 CFR 147.136(b)(2)(i), requiring nongrandfathered plans and issuers to incorporate the 

internal claims and appeals processes set forth in 

29 CFR 2560.503–1. 

25See 29 CFR 2560.503–1. The Department of 

Labor’s claim procedure regulation stipulates 

specific timeframes in which a plan administrator 

must notify a claimant of the plan’s benefit 

determination, which includes, in the case of an 

adverse benefit determination, the reason for the 

denial. Accordingly, a plan administrator must 

notify a claimant of the plan’s benefit determination 

with respect to a pre-service claim within a 

reasonable time period appropriate to the medical 

circumstances, but not later than 15 days after the 

receipt of the claim. With respect to post-service 

claims, a plan administrator must notify the 

claimant within a reasonable time period, but not 

later than 30 days after the receipt of the claim. In 

the case of an urgent care claim, a plan 

administrator must notify the claimant of the plan’s 

benefit determination, as soon as possible, taking 

into account the medical exigencies, but not later 

than 72 hours after the receipt of the claimant’s 

request. 

health and substance use disorder 

benefits and medical/surgical benefits to 

these classifications in a consistent 

manner. This general rule also applies 

to intermediate services provided under 

the plan or coverage. Plans and issuers 

must assign covered intermediate 

mental health and substance use 

disorder benefits to the existing six 

benefit classifications in the same way 

that they assign comparable 

intermediate medical/surgical benefits 

to these classifications. For example, if 

a plan or issuer classifies care in skilled 

nursing facilities or rehabilitation 

hospitals as inpatient benefits, then the 

plan or issuer must likewise treat any 

covered care in residential treatment 

facilities for mental health or substance 

user disorders as an inpatient benefit. In 

addition, if a plan or issuer treats home 

health care as an outpatient benefit, 

then any covered intensive outpatient 

mental health or substance use disorder 

services and partial hospitalization must 

be considered outpatient benefits as 

well. 

These final regulations also include 

additional examples illustrating the 

application of the NQTL rules to plan 

exclusions affecting the scope of 

services provided under the plan. The 

new examples clarify that plan or 

coverage restrictions based on 

geographic location, facility type, 

provider specialty, and other criteria 

that limit the scope or duration of 

benefits for services must comply with 

the NQTL parity standard under these 

final regulations. 

E. Disclosure of Underlying Processes 

and Standards 

MHPAEA requires that the criteria for 

plan medical necessity determinations 

with respect to mental health or 

substance use disorder benefits (or 

health insurance coverage offered in 

connection with the plan with respect to 

such benefits) be made available by the 

plan administrator (or the health 

insurance issuer offering such coverage) 

to any current or potential participant, 

beneficiary, or contracting provider 

upon request in accordance with 

regulations. MHPAEA also requires that 

the reason for any denial under the plan 

(or coverage) of reimbursement or 

payment for services with respect to 

mental health or substance use disorder 

benefits in the case of any participant or 

beneficiary must be made available on 

request or as otherwise required by the 

plan administrator (or health insurance 

issuer) to the participant or beneficiary 

in accordance with regulations. 

Several commenters expressed 

concern about the lack of health plan 

transparency, or made 

recommendations to improve 

transparency, including a request that 

plans and issuers be required to provide 

sufficient information to determine 

whether a plan is applying medical 

necessity criteria and other factors 

comparably to medical/surgical benefits 

and mental health and substance use 

disorder benefits. In addition, since the 

issuance of the interim final regulations, 

stakeholders have expressed concern 

that it is difficult to understand whether 

a plan complies with the NQTL 

provisions without information showing 

that the processes, strategies, 

evidentiary standards, and other factors 

used in applying an NQTL to mental 

health or substance use disorder 

benefits and medical/surgical benefits 

are comparable, impairing plan 

participants’ means of ensuring 

compliance with MHPAEA. 

In response to these concerns, the 

Departments published several FAQs 

clarifying the breadth of disclosure 

requirements applicable to group health 

plans and health insurance issuers 

under both MHPAEA and other 

applicable law, including ERISA and 

the Affordable Care Act.21 The 

substance of these FAQs is included in 

new paragraph (d)(3) of the final 

regulations, which reminds plans, 

issuers, and individuals that compliance 

with MHPAEA’s disclosure 

requirements is not determinative of 

compliance with any other provision of 

applicable Federal or State law. In 

particular, in addition to MHPAEA’s 

disclosure requirements, provisions of 

other applicable law require disclosure 

of information relevant to medical/

surgical, mental health, and substance 

use disorder benefits. For example, 

ERISA section 104 and the Department 

of Labor’s implementing regulations 22

provide that, for plans subject to ERISA, 

instruments under which the plan is 

established or operated must generally 

be furnished by the plan administrator 

to plan participants 23 within 30 days of 

request. Instruments under which the 

plan is established or operated include 

documents with information on medical 

necessity criteria for both medical/

surgical benefits and mental health and 

substance use disorder benefits, as well 

as the processes, strategies, evidentiary 

standards, and other factors used to 

apply an NQTL with respect to medical/ 

surgical benefits and mental health or 

substance use disorder benefits under 

the plan. 

In addition, the Department of Labor’s 

claims procedure regulations 

(applicable to ERISA plans), as well as 

the Departments’ claims and appeals 

regulations under the Affordable Care 

Act (applicable to all non-grandfathered 

group health plans and health insurance 

issuers in the group and individual 

markets),24 set forth rules regarding 

claims and appeals, including the right 

of claimants (or their authorized 

representative) upon appeal of an 

adverse benefit determination (or a final 

internal adverse benefit determination) 

to be provided by the plan or issuer, 

upon request and free of charge, 

reasonable access to and copies of all 

documents, records, and other 

information relevant to the claimant’s 

claim for benefits.25 In addition, the 

plan or issuer must provide the claimant 

with any new or additional evidence 

considered, relied upon, or generated by 

the plan or issuer (or at the direction of 

the plan or issuer) in connection with a 

claim. If the plan or issuer is issuing an 

adverse benefit determination on review 

based on a new or additional rationale, 

the claimant must be provided, free of 

charge, with the rationale. Such 

evidence or rationale must be provided 

as soon as possible and sufficiently in 

advance of the date on which the notice 

of adverse benefit determination on 


emcdonald on DSK67QTVN1PROD with RULES3
68248 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

26See 26 CFR 54.9815–2719T(b)(2)(ii)(C), 29 CFR 

2590.715–2719(b)(2)(ii)(C), and 45 CFR 

147.136(b)(2)(ii)(C). 

27For other disclosure requirements that may be 

applicable to plans and issuers under existing 

Federal law, including disclosure requirements 

regarding prescription drug formulary coverage, see 

the summary plan description requirements for 

ERISA plans under 29 CFR 2520.102–3(j)(2) and 

(j)(3) and the preamble discussion at 65 FR 70226, 

70237 (Nov. 11, 2000), as well as Department of 

Labor Advisory Opinion 96–14A (available at 

http://www.dol.gov/ebsa/programs/ori/advisory96/ 

96-14a.htm). See also the summary of benefits and 

coverage requirements under 26 CFR 54.9815– 

2715(a)(2)(i)(K), 29 CFR 2590.715–2715(a)(2)i)(K), 

and 45 CFR 147.200(a)(2)(i)(K). 

28Available at http://www.dol.gov/ebsa/ 

healthreform/ and http://www.cms.gov/cciio/ 

Resources/Fact-Sheets-and-FAQs/index.html. 

29See section 1304(b)(3) of the Affordable Care 

Act. 

30See FAQs about Affordable Care Act 

Implementation (Part V) and Mental Health Parity 

Implementation, question 8, available at http:// 

www.dol.gov/ebsa/faqs/faq-aca5.html and http:// 

www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs5.html. 

31 78 FR 12834. 

32An employer or issuer may elect to continue to 

provide mental health and substance use disorder 

benefits in compliance with this section with 

respect to the plan or coverage involved regardless 

of any increase in total costs. That is, mere 

eligibility for the exemption does not require an 

employer or issuer to use it. An exempt plan or 

coverage can continue to provide mental health and 

substance use disorder benefits during the 

exemption period in compliance with some, all, or 

none of the parity provisions. 

33 62 FR 66932, December 22, 1997. 

review is required to be provided to give 

the claimant a reasonable opportunity to 

respond prior to that date.26 The 

information required to be provided 

under these provisions includes 

documents of a comparable nature with 

information on medical necessity 

criteria for both medical/surgical 

benefits and mental health and 

substance use disorder benefits, as well 

as the processes, strategies, evidentiary 

standards, and other factors used to 

apply an NQTL with respect to medical/ 

surgical benefits and mental health or 

substance use disorder benefits under 

the plan. 

Even with these important disclosure 

requirements under existing law,27 the 

Departments remain focused on 

transparency and whether individuals 

have the necessary information to 

compare NQTLs of medical/surgical 

benefits and mental health or substance 

use disorder benefits under the plan to 

effectively ensure compliance with 

MHPAEA. Accordingly, 

contemporaneous with the publication 

of these final regulations, the 

Departments of Labor and HHS are also 

publishing another set of MHPAEA 

FAQs, which, among other things, 

solicit comments on whether and how 

to ensure greater transparency and 

compliance. 28

F. Small Employer Exemption 

Paragraph (f) of these final regulations 

implements the exemption for a group 

health plan (or health insurance issuer 

offering coverage in connection with a 

group health plan) for a plan year of a 

small employer. Prior to the Affordable 

Care Act, MHPAEA defined a small 

employer, in connection with a group 

health plan with respect to a calendar 

year and a plan year, as an employer 

who employed an average of not more 

than 50 employees on business days 

during the preceding calendar year. 

Section 2791 of the PHS Act was 

amended by the Affordable Care Act to 

define a small employer as one that has 

100 or fewer employees, while also 

providing States the option to use 50 

employees rather than 100 for 2014 and 

2015.29 This definition is incorporated 

by reference in the MHPAEA provisions 

contained in section 2726 of the PHS 

Act. However, the MHPAEA provisions 

codified in ERISA section 712 and Code 

section 9812, together with section 

732(a) of ERISA and section 8931(a) of 

the Code, continue to define an exempt 

small employer as one that has 50 or 

fewer employees. The Departments 

issued an FAQ 30 in December 2010 

stating that, ‘‘for group health plans and 

health insurance issuers subject to 

ERISA and the Code, the Departments 

will continue to treat group health plans 

of employers with 50 or fewer 

employees as exempt from the 

MHPAEA requirements under the small 

employer exemption, regardless of any 

State insurance law definition of small 

employer.’’ The FAQ also acknowledged 

that, for non-Federal governmental 

plans, which are not subject to ERISA or 

the Code, the PHS Act was amended to 

define a small employer as one that has 

100 or fewer employees. Consistent with 

the FAQs, the Department of Labor and 

the Department of the Treasury final 

regulations continue to exempt group 

health plans and group health insurance 

coverage of employers with 50 or fewer 

employees from MHPAEA. The HHS 

final regulations, which generally apply 

to non-Federal governmental plans, 

exempt group health plans and group 

health insurance coverage of employers 

with 100 or fewer employees (subject to 

State law flexibility for 2014 and 2015). 

Despite this difference, and certain 

other differences, in the applicability of 

the provisions of the Code, ERISA, and 

the PHS Act, the Departments do not 

find there to be a conflict in that no 

entity will be put in a position in which 

compliance with all of the provisions 

applicable to that entity is impossible. 

At the same time, plans and issuers 

providing coverage in connection with 

group health plans sponsored by small 

employers should be aware that, on 

February 25, 2013, HHS published a 

final regulation on EHB31 that requires 

issuers of non-grandfathered plans in 

the individual and small group markets 

to ensure that such plans provide all 

EHB, including mental health and 

substance use disorder benefits. The 

extent of the coverage of EHB is 

determined based on benchmark plans 

that are selected by the States. 

Furthermore, the EHB final regulation at 

45 CFR 156.115(a)(3) requires issuers 

providing EHB to provide mental health 

and substance use disorder benefits in 

compliance with the requirements of the 

MHPAEA regulations, even where those 

requirements would not otherwise 

apply directly. Thus, all insured, nongrandfathered, small group plans must 

cover EHB in compliance with the 

MHPAEA regulations, regardless of 

MHPAEA’s small employer exemption. 

(Also, as discussed in section H.1. 

below, MHPAEA was amended to 

include individual health insurance 

coverage. Accordingly, both 

grandfathered and non-grandfathered 

coverage in the individual market must 

comply with MHPAEA.) 

G. Increased Cost Exemption 

MHPAEA contains an increased cost 

exemption that is available for plans 

and health insurance issuers that make 

changes to comply with the law and 

incur an increased cost of at least two 

percent in the first year that MHPAEA 

applies to the plan or coverage or at 

least one percent in any subsequent 

plan or policy year. Under MHPAEA, 

plans or coverage that comply with the 

parity requirements for one full plan 

year and that satisfy the conditions for 

the increased cost exemption are 

exempt from the parity requirements for 

the following plan or policy year, and 

the exemption lasts for one plan or 

policy year. Thus, the increased cost 

exemption may only be claimed for 

alternating plan or policy years.32

The interim final regulations reserved 

paragraph (g) regarding the increased 

cost exemption and solicited comments. 

The Departments issued guidance 

establishing an interim enforcement safe 

harbor under which a plan that has 

incurred an increased cost of two 

percent during its first year of 

compliance can obtain an exemption for 

the second plan year by following the 

exemption procedures described in the 

Departments’ 1997 regulations 

implementing MHPA 1996,33 except 

that, as required under MHPAEA, for 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68249 

34See FAQs about Affordable Care Act 

Implementation (Part V) and Mental Health Parity 

Implementation, question 11, available at: http://

www.dol.gov/ebsa/faqs/faq-aca5.html and http://

www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs5.html. 35See 45 CFR 156.135(b). 

the first year of compliance the 

applicable percentage of increased cost 

is two percent and the exemption lasts 

only one year.34

The Departments received several 

comments on the interim final 

regulations that requested guidance on 

attribution of cost increases to 

MHPAEA. Some commenters 

emphasized that the cost exemption 

must be based on actual total plan costs 

measured at the end of the plan year. 

Other commenters stated that plans 

should be permitted to estimate claims 

that have not yet been reported for 

purposes of calculating incurred 

expenditures. Additionally, some 

commenters stated that a plan’s costs for 

purposes of the increased cost 

exemption should include not only 

claims costs, but also administrative 

expenses associated with complying 

with the parity requirements. 

Paragraph (g) of these final regulations 

generally applies standards and 

procedures for claiming an increased 

cost exemption under MHPAEA 

consistent with MHPAEA’s statutory 

standards and procedures as well as 

prior procedures set forth in the 

Departments’ regulations implementing 

MHPA 1996. The test for an exemption 

must be based on the estimated increase 

in actual costs incurred by the plan or 

issuer that is directly attributable to 

expansion of coverage due to the 

requirements of this section and not 

otherwise due to occurring trends in 

utilization and prices, a random change 

in claims experience that is unlikely to 

persist, or seasonal variation commonly 

experienced in claims submission and 

payment patterns. 

Under the final regulations, the 

increase in actual total costs attributable 

to MHPAEA is described by the formula 

[(E1 ¥ E0)/T0] ¥ D > k, where E 

represents the level of health plan 

spending with respect to mental health 

and substance use disorder benefits over 

the measurement period, T is a measure 

of total actual costs incurred by a plan 

or coverage on all benefits (medical/

surgical benefits and mental health and 

substance use disorder benefits under 

the plan), D is the average change in 

spending over the prior five years, and 

k is the applicable percentage of 

increased cost for qualifying for the cost 

exemption (i.e., one percent or two 

percent depending on the year). k will 

be expressed as a fraction for the 

purposes of this formula. The subscripts 

1 and 0 refer to a base period and the 

most recent benefit period preceding the 

base period, respectively. Costs incurred 

under E include paid claims by the plan 

or coverage for services to treat mental 

health conditions and substance use 

disorders, and administrative costs 

associated with providing mental health 

or substance use disorder benefits 

(amortized over time). 

In estimating the costs attributable to 

MHPAEA, a plan or issuer must rely on 

actual claims or encounter data incurred 

in the benefit period reported within 90 

days of the end of the benefit period. 

Although MHPAEA specifies that 

determinations with regard to the cost 

exemption shall be made after a plan 

has complied with the law for six 

months of the plan year involved, the 

provision does not require that the 

benefit period used to make this 

calculation be limited to six months. 

Data from a six month period will not 

typically reflect seasonal variation in 

claims experience. To estimate E1 ¥ E0, 

a plan or coverage must first calculate 

secular trends over five years in the 

volume of services and the prices paid 

for services for the major classifications 

of services by applying the formula (E1

¥ E0)/T0 to mental health and substance 

use disorder spending to each of the five 

prior years and then calculating the 

average change in spending. The 

components of spending are estimated 

because secular trends can occur in 

prices and volume. After the average 

change in spending across the five years 

is calculated for each service type, the 

change in mental health and substance 

use disorder benefits spending 

attributable to MHPAEA is calculated 

net of the average annual spending 

growth that is due to a secular trend. 

This change in calculation is the main 

difference from the previous 

methodology used under prior 

guidance. It is recognized that for some 

smaller employers covered by 

MHPAEA, year to year spending may be 

somewhat unstable. In this case, an 

employer or issuer may propose an 

alternative estimation method. It is 

important to note that the language of 

the statute indicates that the base period 

against which the impact of MHPAEA is 

assessed moves up each year to the year 

prior to the current benefit year. 

Administrative costs attributable to 

the implementation of MHPAEA must 

be reasonable and supported with 

detailed documentation from 

accounting records. Software and 

computing expenses associated with 

implementation of the prohibition on 

separate cumulative financial 

requirements or other provisions of the 

regulation should be based on a straightline depreciation over the estimated 

useful life of the asset (computer 

hardware five years; software three 

years, according to the American 

Hospital Association’s Estimated Useful 

Life of depreciable Hospital Assets). 

Any other fixed administrative costs 

should also be amortized. 

Some commenters suggested 

additional clarifications regarding the 

statutory provision that determinations 

as to increases in actual costs must be 

made and certified by a qualified and 

licensed actuary who is a member in 

good standing of the American 

Academy of Actuaries. Some 

commenters suggested that the actuary 

must be qualified to perform such work 

based on meeting the Qualification 

Standards for Actuaries Issuing 

Statements of Actuarial Opinion in the 

United States. Other commenters 

suggested that the actuary must be 

independent and not employed by the 

group health plan or health insurance 

issuer claiming the exemption. The 

Departments believe the statutory 

language is sufficient to ensure reliable 

cost increase determinations. Moreover, 

this approach is consistent with the 

approach applicable to EHB in that the 

only qualification required for actuaries 

is that they be a member in good 

standing of the American Academy of 

Actuaries.35 Accordingly, the 

Departments decline to adopt these 

suggestions. Determinations as to 

increases in actual costs attributable to 

implementation of the requirements of 

MHPAEA must be made and certified by 

a qualified and licensed actuary who is 

a member in good standing of the 

American Academy of Actuaries. All 

such determinations must be based on 

the formula specified in these final 

regulations in a written report prepared 

by the actuary. Additionally, the written 

report, along with all supporting 

documentation relied upon by the 

actuary, must be maintained by the 

group health plan or health insurance 

issuer for a period of six years. 

Several commenters expressed 

concern regarding the administrative 

burden that would result from 

qualifying for the increased cost 

exemption for one year and then having 

to comply with the law the following 

year. MHPAEA’s statutory language 

specifies that plans and issuers may 

qualify for the increased cost exemption 

for only one year at a time, stating that 

if the application of MHPAEA ‘‘results 

in an increase for the plan year involved 

of the actual total costs of coverage . . . 

by an amount that exceeds the 

applicable percentage . . . the 


emcdonald on DSK67QTVN1PROD with RULES3
68250 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

36Code section 9812(c)(2), ERISA 712(c)(2), PHS 

Act section 2726(c)(2). 

37See FAQs about Affordable Care Act 

Implementation (Part V) and Mental Health Parity 

Implementation, question 11, available at: http:// 

www.dol.gov/ebsa/faqs/faq-aca5.html and http://

www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs5.html. 

provisions of this section shall not 

apply to such plan (or coverage) during 

the following plan year, and such 

exemption shall apply to the plan (or 

coverage) for 1 plan year.’’ 36

Before a group health plan or health 

insurance issuer may claim the 

increased cost exemption, it must 

furnish a notice of the plan’s exemption 

from the parity requirements to 

participants and beneficiaries covered 

under the plan, the Departments (as 

described below), and appropriate State 

agencies. The notification requirements 

for the increased cost exemption under 

these final regulations are consistent 

with the requirements under the 

Departments’ 1997 regulations 

implementing MHPA 1996. 

With respect to participants and 

beneficiaries, a group health plan 

subject to ERISA may satisfy this 

requirement by providing a summary of 

material reductions in covered services 

or benefits under 29 CFR 2520.104b– 

3(d), if it includes all the information 

required by these final regulations. 

With respect to notification to the 

Departments, a plan or issuer must 

furnish a notice that satisfies the 

requirements of these final regulations. 

A group health plan that is a church 

plan (as defined in section 414(e) of the 

Code) must notify the Department of the 

Treasury. A group health plan subject to 

Part 7 of Subtitle B of Title I of ERISA 

must notify the Department of Labor. A 

group health plan that is a non-Federal 

governmental plan or a health insurance 

issuer must notify HHS. In all cases, the 

exemption is not effective until 30 days 

after notice has been sent to both 

participants and beneficiaries and to the 

appropriate Federal agency. The 

Departments will designate addresses 

for delivery of these notices in future 

guidance. 

Finally, a plan or issuer must make 

available to participants and 

beneficiaries (or their representatives), 

on request and at no charge, a summary 

of the information on which the 

exemption was based. For purposes of 

this paragraph (g), an individual who is 

not a participant or beneficiary and who 

presents a notice described in paragraph 

(g)(6) of the final regulations is 

considered to be a representative. Such 

a representative may request the 

summary of information by providing 

the plan a copy of the notice provided 

to the participant or beneficiary with 

any personally identifiable information 

redacted. The summary of information 

must include the incurred expenditures, 

the base period, the dollar amount of 

claims incurred during the base period 

that would have been denied under the 

terms of the plan absent amendments 

required to comply with parity, and the 

administrative expenses attributable to 

complying with the parity requirements. 

In no event should a summary of 

information include individually 

identifiable information. 

The increased cost exemption 

provision in paragraph (g) of these final 

regulations is effective for plan or policy 

years beginning on or after July 1, 2014 

(see paragraph (i) of these final 

regulations), which for calendar year 

plans means the provisions apply on 

January 1, 2015. Accordingly, plans and 

issuers must use the formula specified 

in paragraph (g) of these final 

regulations to determine whether they 

qualify for the increased cost exemption 

in plan or policy years beginning on or 

after July 1, 2014. For claiming the 

increased cost exemption in plan or 

policy years beginning before July 1, 

2014, plans and issuers should follow 

the interim enforcement safe harbor 

outlined in previously issued FAQs.37

H. General Applicability Provisions and 

Application to Certain Types of Plans 

and Coverage 

The interim final regulations 

combined in paragraph (e)(1) what had 

been separate rules under MHPA 1996 

for (1) determining if a plan provides 

both medical/surgical and mental health 

or substance use disorder benefits; (2) 

applying the parity requirements on a 

benefit-package-by-benefit-package 

basis; and (3) counting the number of 

plans that an employer or employee 

organization maintains. The combined 

rule provides that (1) the parity 

requirements apply to a group health 

plan offering both medical/surgical 

benefits and mental health or substance 

use disorder benefits, (2) the parity 

requirements apply separately with 

respect to each combination of medical/ 

surgical coverage and mental health or 

substance use disorder coverage that 

any participant (or beneficiary) can 

simultaneously receive from an 

employer’s or employee organization’s 

arrangement or arrangements to provide 

medical care benefits, and (3) all such 

combinations constitute a single group 

health plan for purposes of the parity 

requirements. Some comments 

expressed concern that the new 

combined rule would disrupt benefit 

programs that employers have 

maintained as separate plans for 

important reasons having nothing to do 

with a desire to escape the parity 

requirements and that the rule should 

be rescinded or issued only in proposed 

form. Other comments welcomed the 

rule as an important protection to 

prevent evasion of the parity 

requirements. The final regulations do 

not change the combined rule from the 

interim final regulations. In the 

Departments’ view, the combined rule is 

necessary to prevent potential evasion 

of the parity requirements by allocating 

mental health or substance use disorder 

benefits to a plan or benefit package 

without medical/surgical benefits (when 

medical/surgical benefits are also 

otherwise available). 

The preamble to the interim final 

regulations illustrated how the parity 

requirements would apply to various 

benefit package configurations, 

including multiple medical/surgical 

benefit packages combined with a single 

mental health and substance use 

disorder benefit package. One 

commenter asked for clarification in the 

case of a plan with an HMO option and 

a PPO option in which mental health 

and substance use disorder benefits are 

an integral part of each option. In such 

a case, the parity requirements apply 

separately to the HMO option and the 

PPO option. 

The Departments are aware that 

employers and health insurance issuers 

sometimes contract with MBHOs or 

similar entities to provide or administer 

mental health or substance use disorder 

benefits in group health plans or in 

health insurance coverage. The fact that 

an employer or issuer contracts with 

one or more entities to provide or 

administer mental health or substance 

use disorder benefits does not, however, 

relieve the employer, issuer, or both of 

their obligations under MHPAEA. The 

coverage as a whole must still comply 

with the applicable provisions of 

MHPAEA, and the responsibility for 

compliance rests on the group health 

plan and/or the health insurance issuer, 

depending on whether the coverage is 

insured or self-insured. This means that 

the plan or issuer will need to provide 

sufficient information in terms of plan 

structure and benefits to the MBHO to 

ensure that the mental health and 

substance use disorder benefits are 

coordinated with the medical/surgical 

benefits for purposes of compliance 

with the requirements of MHPAEA. 

Liability for any violation of MHPAEA 

rests with the group health plan and/or 

health insurance issuer. 

Several commenters requested 

clarification about whether a plan or 

issuer may exclude coverage for specific 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68251 

38There are two sections numbered 1563 in the 

Affordable Care Act. The section 1563 that is the 

basis for this rulemaking is the section titled 

‘‘Conforming amendments.’’ 

39See Memo on Amendments to the HIPAA OptOut Provision Made by the Affordable Care Act 

(September 21, 2010). Available at: http://

www.cms.gov/CCIIO/Resources/Files/Downloads/

opt_out_memo.pdf. 

40See Self-Funded Non-Federal Governmental 

Plans: Procedures and Requirements for HIPAA 

Exemption Election. Available at: http://

www.cms.gov/CCIIO/Resources/Files/hipaa_

exemption_election_instructions_04072011.html. 

41Prior to the enactment of the Affordable Care 

Act, the PHS Act had a parallel provision at section 

2721(a); however, after the Affordable Care Act 

amended, reorganized, and renumbered title XXVII 

of the PHS Act, that exception no longer exists. See 

75 FR 34538–34539. 

42See FAQs About the Affordable Care Act 

Implementation Part III, question 1, available at 

http://www.dol.gov/ebsa/faqs/faq-aca3.html and 

http://www.cms.gov/CCIIO/Resources/Fact-Sheetsand-FAQs/aca_implementation_faqs3.html, which 

states that ‘‘statutory provisions in effect since 1997 

exempting group health plans with ‘less than two 

participants who are current employees’ from 

HIPAA also exempt such plans from the group 

market reform requirements of the Affordable Care 

Act.’’ 

43Additionally, as provided in the interim final 

regulations regarding grandfathered health plans, 

HHS does not intend to use its resources to enforce 

the requirements of title XXVII of the PHS Act, 

including the requirements of MHPAEA and these 

final regulations, with respect to non-Federal 

governmental retiree-only plans and encourages 

States not to apply those provisions to issuers of 

retiree-only plans. HHS will not cite a State for 

failing to substantially enforce the provisions of 

part A of title XXVII of the PHS Act in these 

situations. See 75 FR at 34538, 34540 (June 17, 

2010). 

44See Example 5 in paragraph (c)(4)(iii) of the 

interim final regulations. 

45See Example 6 in paragraph (c)(4)(iii) of the 

final regulations. 

46 26 CFR 54.9831–1(c), 29 CFR 2590.732(c), 45 

CFR 146.145(c). 

47See IRS Notice 2013–54 (available at http://

www.irs.gov/pub/irs-drop/n-13-54.pdf) and DOL 

Technical Release 2013–03 (available at http://

www.dol.gov/ebsa/newsroom/tr13-03.html), Q&A 9. 

See also CMS Insurance Standards Bulletin— 

Application of Affordable Care Act Provisions to 

Certain Healthcare Arrangements (available at 

http://www.cms.gov/CCIIO/Resources/Regulationsand-Guidance/Downloads/cms-hra-notice-9-16- 

2013.pdf). 

diagnoses or conditions under 

MHPAEA. These final regulations 

continue to provide that nothing in 

these regulations requires a plan or 

issuer to provide any mental health 

benefits or substance use disorder 

benefits. Moreover, the provision of 

benefits for one or more mental health 

conditions or substance use disorders 

does not require the provision of 

benefits for any other condition or 

disorder. Other Federal and State laws 

may prohibit the exclusion of particular 

disorders from coverage where 

applicable, such as the Americans with 

Disabilities Act. Other Federal and State 

laws may also require coverage of 

mental health or substance use disorder 

benefits, including the EHB 

requirements under section 2707 of the 

PHS Act and section 1302(a) of the 

Affordable Care Act. 

1. Individual Health Insurance Market 

Section 1563(c)(4) of the Affordable 

Care Act 38 amended section 2726 of the 

PHS Act to apply MHPAEA to health 

insurance issuers in the individual 

health insurance market. These changes 

are effective for policy years beginning 

on or after January 1, 2014. The HHS 

final regulation implements these 

requirements in new section 147.160 of 

title 45 of the Code of Federal 

Regulations. Under these provisions, 

unless otherwise specified, the parity 

requirements outlined in 45 CFR 

146.136 of these final regulations apply 

to health insurance coverage offered by 

a health insurance issuer in the 

individual market in the same manner 

and to the same extent as such 

provisions apply to health insurance 

coverage offered by a health insurance 

issuer in connection with a group health 

plan in the large group market. These 

provisions apply to both grandfathered 

and non-grandfathered individual 

health insurance coverage for policy 

years beginning on or after the 

applicability dates set forth in paragraph 

(i) of these final regulations. 

2. Non-Federal Governmental Plans 

Prior to enactment of the Affordable 

Care Act, sponsors of self-funded, nonFederal governmental plans were 

permitted to elect to exempt those plans 

from (‘‘opt out of’’) certain provisions of 

title XXVII of the PHS Act. This election 

was authorized under section 2721(b)(2) 

of the PHS Act (renumbered as section 

2722(a)(2) by the Affordable Care Act). 

The Affordable Care Act made a number 

of changes, with the result that sponsors 

of self-funded, non-Federal 

governmental plans can no longer opt 

out of as many requirements of title 

XXVII of the PHS Act. However, under 

the PHS Act, sponsors of self-funded, 

non-Federal governmental plans may 

continue to opt out of the requirements 

of MHPAEA.39 If the sponsor of a selffunded, non-Federal governmental plan 

wishes to exempt its plan from the 

requirements of MHPAEA, it must 

follow the procedures and requirements 

outlined in section 2722 and 

corresponding Centers for Medicare & 

Medicaid Services (CMS) guidance, 

which includes notifying CMS to that 

effect in writing.40

3. Retiree-Only Plans 

Some commenters requested 

clarification regarding the applicability 

of these final regulations to retiree-only 

plans. ERISA section 732(a) generally 

provides that part 7 of ERISA—and 

Code section 9831(a) generally provides 

that chapter 100 of the Code—does not 

apply to group health plans with less 

than two participants who are current 

employees (including retiree-only plans 

that, by definition, cover less than two 

participants who are current 

employees).41 The Departments 

previously clarified in FAQs that the 

exceptions of ERISA section 732 and 

Code section 9831, including the 

exception for retiree-only health plans, 

remain in effect.42 Since the provisions 

of MHPAEA contained in ERISA section 

712 and Code section 9812 are 

contained in part 7 of ERISA and 

chapter 100 of the Code, respectively, 

group health plans that do not cover at 

least two employees who are current 

employees (such as plans in which only 

retirees participate) are exempt from the 

requirements of MHPAEA and these 

final regulations.43

4. Employee Assistance Programs 

Several comments also requested 

clarification regarding the applicability 

of the parity requirements to employee 

assistance programs (EAPs). An example 

in the interim final regulations clarified 

that a plan or issuer that limits 

eligibility for mental health and 

substance use disorder benefits until 

after benefits under an EAP are 

exhausted has established an NQTL 

subject to the parity requirements, and 

stated that if no comparable requirement 

applies to medical/surgical benefits, 

such a requirement could not be applied 

to mental health or substance use 

disorder benefits.44 The final 

regulations retain this example and 

approach.45

The Departments have also received 

questions regarding whether benefits 

under an EAP are considered to be 

excepted benefits. The Departments 

recently published guidance 

announcing their intentions to amend 

the excepted benefits regulations 46 to 

provide that benefits under an EAP are 

considered to be excepted benefits, but 

only if the program does not provide 

significant benefits in the nature of 

medical care or treatment.47 Under this 

approach, EAPs that qualify as excepted 

benefits will not be subject to MHPAEA 

or these final regulations. 

The guidance provides that until 

rulemaking regarding EAPs is finalized, 

through at least 2014, the Departments 

will consider an EAP to constitute 

excepted benefits only if the EAP does 

not provide significant benefits in the 

nature of medical care or treatment. For 


emcdonald on DSK67QTVN1PROD with RULES3
68252 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

48Application of the Mental Health Parity and 

Addiction Equity Act to Medicaid MCOs, CHIP, and 

Alternative Benefit (Benchmark) Plans, available at: 

http://www.medicaid.gov/Federal-Policy-Guidance/

downloads/SHO-13-001.pdf. 

49The preemption provision of PHS Act section 

2724 also applies to individual health insurance 

coverage. 

50See House Conf. Rep. No. 104–736, at 205, 

reprinted in 1996 U.S. Code Cong. & Admin. News 

2008. 

51There is a special effective date for group 

health plans maintained pursuant to one or more 

collective bargaining agreements ratified before 

October 3, 2008, which states that the requirements 

of the interim final regulations do not apply to the 

plan (or health insurance coverage offered in 

connection with the plan) for plan years beginning 

before the later of either the date on which the last 

of the collective bargaining agreements relating to 

the plan terminates (determined without regard to 

any extension agreed to after October 3, 2008), or 

July 1, 2010. MHPAEA also provides that any plan 

amendment made pursuant to a collective 

bargaining agreement solely to conform to the 

requirements of MHPAEA will not be treated as a 

termination of the agreement. 

this purpose, employers may use a 

reasonable, good faith interpretation of 

whether an EAP provides significant 

benefits in the nature of medical care or 

treatment. 

5. Medicaid and CHIP Managed Care 

Plans 

These final regulations apply to group 

health plans and health insurance 

issuers. These final regulations do not 

apply to Medicaid managed care 

organizations (MCOs), alternative 

benefit plans (ABPs), or the Children’s 

Health Insurance Program (CHIP). 

However, MHPAEA requirements are 

incorporated by reference into statutory 

provisions that do apply to those 

entities. On January 16, 2013, CMS 

released a State Health Official Letter 

regarding the application of the 

MHPAEA requirements to Medicaid 

MCOs, ABPs, and CHIP.48 In this 

guidance, CMS adopted the basic 

framework of MHPAEA and applied the 

statutory principles as appropriate 

across these Medicaid and CHIP 

authorities. The letter also stated that 

CMS intends to issue additional 

guidance that will assist States in their 

efforts to implement the MHPAEA 

requirements in their Medicaid 

programs. 

I. Interaction With State Insurance Laws 

Several commenters requested that 

the final regulations clearly describe 

how MHPAEA interacts with State 

insurance laws. Commenters sought 

clarification as to how MHPAEA may or 

may not preempt State laws that require 

parity for mental health or substance 

use disorder benefits, mandate coverage 

of mental health or substance use 

disorder benefits, or require a minimum 

level of coverage (such as a minimum 

dollar, day, or visit level) for mental 

health conditions or substance use 

disorders. These commenters expressed 

a desire that the final regulations 

articulate that existing State laws on 

mental health or substance use disorder 

benefits would remain in effect to the 

extent they did not prevent the 

application of MHPAEA. 

The preemption provisions of section 

731 of ERISA and section 2724 of the 

PHS Act (added by the Health Insurance 

Portability and Accountability Act of 

1996 (HIPAA) and implemented in 29 

CFR 2590.731 and 45 CFR 146.143(a)) 

apply so that the MHPAEA 

requirements are not to be ‘‘construed to 

supersede any provision of State law 

which establishes, implements, or 

continues in effect any standard or 

requirement solely relating to health 

insurance issuers in connection with 

group health insurance coverage except 

to the extent that such standard or 

requirement prevents the application of 

a requirement’’ of MHPAEA and other 

applicable provisions.49 The HIPAA 

conference report indicates that this is 

intended to be the ‘‘narrowest’’ 

preemption of State laws.50

For example, a State law may 

mandate that an issuer offer coverage for 

a particular condition or require that an 

issuer offer a minimum dollar amount of 

mental health or substance use disorder 

benefits. (While MHPAEA does not 

require plans or issuers to offer any 

mental health benefits, once benefits are 

offered, for whatever reason (except as 

previously described related to PHS Act 

section 2713), MHPAEA applies to the 

benefits.) These State law provisions do 

not prevent the application of 

MHPAEA, and therefore would not be 

preempted. To the extent the State law 

mandates that an issuer provide some 

coverage for any mental health 

condition or substance use disorder, 

benefits for that condition or disorder 

must be provided in parity with 

medical/surgical benefits under 

MHPAEA. This means that an issuer 

subject to MHPAEA may be required to 

provide mental health or substance use 

disorder benefits beyond the State law 

minimum in order to comply with 

MHPAEA. 

J. Enforcement 

Comments received in response to the 

interim final regulations suggested some 

confusion and concern regarding the 

Departments’ authority to impose 

penalties and ensure compliance with 

the requirements under MHPAEA. The 

enforcement responsibilities of the 

Federal government and the States with 

respect to health insurance issuers are 

set forth in the PHS Act. Pursuant to 

PHS Act section 2723(a), States have 

primary enforcement authority over 

health insurance issuers regarding the 

provisions of part A of title XXVII of the 

PHS Act, including MHPAEA. HHS 

(through CMS) has enforcement 

authority over the issuers in a State if 

the State notifies CMS that it has not 

enacted legislation to enforce or is 

otherwise not enforcing, or if CMS 

determines that the State is not 

substantially enforcing, a provision (or 

provisions) of part A of title XXVII of 

the PHS Act. Currently, CMS believes 

that most States have the authority to 

enforce MHPAEA and are acting in the 

areas of their responsibility. In States 

that lack the authority to enforce 

MHPAEA, CMS is either directly 

enforcing MHPAEA or collaborating 

with State departments of insurance to 

ensure enforcement. 

The Departments of Labor and the 

Treasury generally have primary 

enforcement authority over private 

sector employment-based group health 

plans, while HHS has primary 

enforcement authority over non-Federal 

governmental plans, such as those 

sponsored by State and local 

government employers. 

Some commenters suggested that 

States need a stronger understanding of 

MHPAEA and its implementing 

regulations to better inform the public 

about the protections of the law and to 

ensure proper compliance by issuers. 

These commenters believed that States 

would benefit from additional and 

continued guidance from CMS regarding 

the requirements of MHPAEA and its 

impact upon State law. The 

Departments encourage State regulators 

to familiarize themselves with the 

MHPAEA requirements, in particular 

the rules governing NQTLs, and any 

guidance issued by the Departments, so 

that the States can instruct issuers in 

their jurisdictions on the correct 

implementation of the statute and 

regulations, and appropriately enforce 

the provisions. The Departments will 

continue to provide technical assistance 

to State regulators either individually or 

through the National Association of 

Insurance Commissioners to ensure that 

the States have the tools they need to 

implement and enforce MHPAEA. 

K. Applicability Dates 

MHPAEA’s statutory provisions were 

self-implementing and generally became 

effective for plan years beginning after 

October 3, 2009.51 The requirements of 

the interim final regulations generally 

became effective on the first day of the 

first plan year beginning on or after July 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68253 

52For additional examples and other 

clarifications published by the Departments to 

facilitate compliance under the interim final rules, 

see also http://www.dol.gov/ebsa/faqs/faqmhpaea.html; FAQs about Affordable Care Act 

Implementation (Part V) and Mental Health Parity 

Implementation, available at http://www.dol.gov/

ebsa/faqs/faq-aca5.html and http://www.cms.gov/

CCIIO/Resources/Fact-Sheets-and-FAQs/aca_

implementation_faqs5.html; FAQs about Affordable 

Care Act Implementation (Part VII) and Mental 

Health Parity Implementation, available at http://

www.dol.gov/ebsa/faqs/faq-aca7.html and http://

www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs7.html; FAQs on 

Understanding Implementation of the Mental 

Health Parity and Addiction Equity Act of 2008, 

available at http://www.dol.gov/ebsa/faqs/faqmhpaeaimplementation.html; and FAQs for 

Employees about the Mental Health Parity and 

Addiction Equity Act, available at http://

www.dol.gov/ebsa/faqs/faq-mhpaea2.html. 

53The interim final regulations relating to 

internal claims and appeals and external review 

processes are codified at 26 CFR 54.9815–2719T, 29 

CFR 2590.715–2719, and 45 CFR 147.136. These 

requirements do not apply to grandfathered health 

plans. The interim final regulations relating to 

status as a grandfathered health plan are codified 

at 26 CFR 54.9815–1251T, 29 CFR 2590.715–1251, 

and 45 CFR 147.140. 

54More information on the regulatory 

requirements for State external review processes, 

including the regulations, Uniform Health Carrier 

External Review Model Act promulgated by the 

National Association of Insurance Commissioners, 

technical releases, and other guidance, is available 

at http://www.dol.gov/ebsa and http://

cciio.cms.gov. 55More information on the regulatory 

requirements for the Federal external review 

process, including the regulations, technical 

releases, and other guidance, is available at http:// 

www.dol.gov/ebsa and http://cciio.cms.gov. 56See the OPM proposed rule on establishment 

of the MSPP, 77 FR 72582, 72585 (Dec. 5, 2012); 

see also the final rule, 78 FR 15559, 15574 (Mar. 

11, 2013) (‘‘we believe our approach to external 

review is required by section 1334 of the Affordable 

Care Act[.]’’. 

57See 45 CFR 800.115(k) and 45 CFR part 800; 

see also 78 FR at 15574 (‘‘the level playing field 

provisions of section 1324 of the Affordable Care 

Act would not be triggered because MSPs and 

MSPP issuers would comply with the external 

review requirements in section 2719(b) of the PHS 

Act, just as other health insurance issuers in the 

group and individual markets are required to do.’’). 

58Treasury is not adopting amendments to the 

external review regulations in 26 CFR at this time. 

Any changes to the Treasury external review 

regulations will be made when the entire section of 

those regulations is adopted as final regulations. 

1, 2010. These final regulations apply to 

group health plans and health insurance 

issuers offering group health insurance 

coverage on the first day of the first plan 

year beginning on or after July 1, 2014. 

Examples, cross-references, and other 

clarifications have been added in some 

places to facilitate compliance and 

address common questions, much of 

which has already been published by 

the Departments.52 Each plan or issuer 

subject to the interim final regulations 

must continue to comply with the 

applicable provisions of the interim 

final regulations until the corresponding 

provisions of these final regulations 

become applicable to that plan or issuer. 

L. Technical Amendment Relating to 

OPM Multi-State Plan Program and 

External Review 

This document also contains a 

technical amendment relating to 

external review with respect to the 

Multi-State Plan Program (MSPP) 

administered by the Office of Personnel 

Management (OPM). Section 2719 of the 

PHS Act and its implementing 

regulations provide that group health 

plans and health insurance issuers must 

comply with either a State external 

review process or the Federal external 

review process. Generally, if a State has 

an external review process that meets, at 

a minimum, the consumer protections 

set forth in the interim final regulations 

on internal claims and appeals and 

external review,53 then an issuer (or a 

plan) subject to the State process must 

comply with the State process.54 For 

plans and issuers not subject to an 

existing State external review process 

(including self-insured plans), a Federal 

external review process applies.55 The 

statute requires the Departments to 

establish standards, ‘‘through 

guidance,’’ governing a Federal external 

review process. Through guidance 

issued by the Departments, HHS has 

established a Federal external review 

process for self-insured non-Federal 

governmental health plans, as well as 

for plans and issuers in States that do 

not have an external review process that 

meets the minimum consumer 

protections in the regulations. 

In proposed regulations published on 

March 21, 2013 (78 FR 17313), the 

Departments proposed to amend the 

interim final regulations implementing 

PHS Act section 2719 to specify that 

MSPs will be subject to the Federal 

external review process under PHS Act 

section 2719(b)(2) and paragraph (d) of 

the internal claims and appeals and 

external review regulations. This 

proposal reflects the Departments’ 

interpretation of section 2719(b)(2) as 

applicable to all plans not subject to a 

State’s external review process. OPM 

has interpreted section 1334(a)(4) of the 

Affordable Care Act to require OPM to 

maintain authority over external review 

because Congress directed that OPM 

implement the MSPP in a manner 

similar to the manner in which it 

implements the contracting provisions 

of the FEHBP, and in the FEHBP, OPM 

resolves all external appeals on a 

nationwide basis as a part of its contract 

administration responsibilities.56 This 

assures consistency in benefit 

administration for those OPM plans that 

are offered on a nationwide basis. 

Accordingly, under OPM’s 

interpretation, it would be inconsistent 

with section 1334(a)(4) of the Affordable 

Care Act for MSPs and MSPP issuers to 

follow State-specific external review 

processes under section 2719(b)(1) of 

the PHS Act. OPM’s final rule on the 

establishment of the multi-State plan 

program nonetheless does require the 

MSPP external review process to meet 

the requirements of PHS Act section 

2719 and its implementing 

regulations.57

The Departments also proposed to 

amend the interim final regulations 

implementing PHS Act section 2719 to 

specify that the scope of the Federal 

external review process, as described in 

paragraph (d)(1)(ii), is the minimum 

required scope of claims eligible for 

external review for plans using a 

Federal external review process, and 

that Federal external review processes 

developed in accordance with 

paragraph (d) may have a scope that 

exceeds the minimum requirements. 

The Departments did not receive any 

comments relating to these proposed 

amendments and therefore retain the 

amendments in this final rule without 

change, except for one minor 

correction.58 The Departments made a 

typographical error in the March 21, 

2013 proposed rule, inadvertently 

omitting the word ‘‘internal’’ from 

paragraph (d)(1)(i). That provision 

should have stated that the Federal 

external review process ‘‘applies, at a 

minimum, to any adverse benefit 

determination or final internal adverse 

benefit determination. . . .’’ (emphasis 

added). The Departments did not intend 

to remove the word ‘‘internal’’ from the 

interim final rule through the proposed 

amendment, and we are correcting the 

final amendment to include the word. 

III. Economic Impact and Paperwork 

Burden 

Executive Orders 12866 (Regulatory 

Planning and Review, September 30, 

1993) and 13563 (Improving Regulation 

and Regulatory Review, February 2, 

2011) direct agencies to propose or 

adopt a regulation only upon a reasoned 

determination that its benefits justify its 

costs, to assess the costs and benefits of 

regulatory alternatives, and to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety effects, distributive impacts, 

and equity). 

Agencies must determine whether a 

regulatory action is ‘‘significant’’ which 

is defined in Executive Order 12866 as 

an action that is likely to result in a rule 

(1) having an annual effect on the 


emcdonald on DSK67QTVN1PROD with RULES3
68254 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

59Final Report: Consistency of Large Employer 

and Group Health Plan Benefits with Requirements 

of the Paul Wellstone and Pete Domenici Mental 

Health Parity and Addiction Equity Act of 2008. 

NORC at the University of Chicago for the Office of 

the Assistant Secretary for Planning and Evaluation. 

This study analyzed information on large group 

health plan benefit designs from 2009 through 2011 

in several databases maintained by benefits 

consulting firms that advise plans on compliance 

with MHPAEA as well as other requirements. 

60 Ibid. 

61 Ibid. 

62See discussion in the preamble to the interim 

final rule on the effect of managed care in 

controlling health plan spending on mental health 

and substance use disorder treatment under state 

parity laws and in the Federal Employee Health 

Benefit Program, Interim Final Rules Under the 

Paul Wellstone and Pete Domenici Mental Health 

Parity and Addiction Equity Act of 2008, 75 Fed. 

Reg. 5410, 5424–5425 (see e.g., footnote 46) 

(February 2, 2010). 

63 General Accountability Office, Mental Health 

Parity Act: Despite New Federal Standards, Mental 

Health Benefits Remain Limited, May 2000, (GAO/ 

HEHS–00–95), p. 5. In this report, GAO found that 

87 percent of compliant plans contained at least one 

more restrictive provision for mental health benefits 

with the most prevalent being limits on the number 

of outpatient office visits and hospital day limits. 

economy of $100 million or more, or 

adversely and materially affecting a 

sector of the economy, productivity, 

competition, jobs, the environment, 

public health or safety, or State, local or 

tribal governments or communities (also 

referred to as ‘‘economically 

significant’’); (2) creating a serious 

inconsistency or otherwise interfering 

with an action taken or planned by 

another agency; (3) materially altering 

the budgetary impacts of entitlement 

grants, user fees, or loan programs or the 

rights and obligations of recipients 

thereof; or (4) raising novel legal or 

policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

Order. 

A. Summary—Department of Labor and 

Department of Health and Human 

Services 

The Departments have determined 

that this regulatory action is 

economically significant within the 

meaning of section 3(f)(1) of the 

Executive Order, because it is likely to 

have an effect on the economy of $100 

million or more in at least one year. 

Accordingly, the Departments provide 

the following assessment of the 

potential costs and benefits of these 

final regulations. As elaborated below, 

the Departments believe that the 

benefits of the rule justify its costs. 

As described earlier in this preamble, 

these final regulations expand on the 

protections and parity requirements set 

forth in the interim final regulations, 

incorporate clarifications issued by the 

Departments through sub-regulatory 

guidance since the issuance of the 

interim final regulations, and provide 

clarifications related to NQTLs and 

disclosure requirements. These final 

regulations also include additional 

clarifications and examples illustrating 

the parity requirements and their 

applicability, as well as provisions to 

implement the increased cost exemption 

with respect to financial requirements 

and treatment limitations. The HHS 

final regulation also implements the 

parity requirements for individual 

health insurance coverage. 

A recent study on plan responses to 

MHPAEA indicates that by 2011, most 

plans had removed most financial 

requirements and treatment limitations 

that did not meet the requirements of 

MHPAEA and the interim final 

regulations.59 The use of higher copays 

and coinsurance for inpatient mental 

health and substance use disorder 

services declined rapidly in large 

employer plans following 

implementation of MHPAEA.60 In 

addition, nearly all plans had 

eliminated the use of separate 

deductibles for mental health or 

substance use disorder out-of-pocket 

costs by 2011.61 (Even by 2010, only 3.2 

percent of plans had used separate 

deductibles.) The HHS study also found 

that the number of plans that applied 

unequal inpatient day limits, outpatient 

visit limits or other quantitative 

treatment limitations for mental health 

or substance use disorder benefits had 

dropped significantly by 2011. 

Since this study found that the 

implementation of the requirements of 

MHPAEA has progressed consistent 

with the interim final rules, this impact 

analysis includes estimates of any 

additional costs and benefits resulting 

from changes made to the provisions in 

the interim final regulations by these 

final regulations. As background, in 

section III.D of this preamble, the 

Departments summarize the cost 

estimates included in the interim final 

regulations. 

B. Need for Regulatory Action 

Congress directed the Departments to 

issue regulations implementing the 

MHPAEA provisions. In response to this 

Congressional directive, these final 

regulations clarify and interpret the 

MHPAEA provisions under section 712 

of ERISA, section 2726 of the PHS Act, 

and section 9812 of the Code. 

Historically, plans have offered coverage 

for mental health conditions and 

substance use disorders at lower levels 

than coverage for other conditions. 

Plans limited coverage through 

restrictive benefit designs that 

discouraged enrollment by individuals 

perceived to be high-cost due to their 

behavioral health conditions and by 

imposing special limits on mental 

health and substance use disorder 

benefits out of concern that otherwise 

utilization and costs would be 

unsustainable. Parity advocates argued 

that these approaches were unfair and 

limited access to needed treatment for 

vulnerable populations. In addition, 

research demonstrated that restrictive 

benefit designs were not the only way 

to address costs.62 Initially, MHPA 1996 

was designed to eliminate more 

restrictive annual and lifetime dollar 

limits on mental health benefits. 

However, as illustrated in a General 

Accountability Office report on 

implementation of MHPA 1996, the 

statute had an unintended consequence: 

most plans coming into compliance 

instead turned to more restrictive 

financial requirements and treatment 

limitations.63

These final regulations provide the 

specificity and clarity needed to 

effectively implement the provisions of 

MHPAEA and prevent the use of 

prohibited limits on coverage, including 

nonquantitative treatment limitations 

that disproportionately limit coverage of 

treatment for mental health conditions 

or substance use disorders. The 

requirements in these final regulations 

are needed to address questions and 

concerns that have been raised 

regarding the implications of the interim 

final regulations with regard to 

intermediate level services, NQTLs, and 

the increasing use of multi-tiered 

provider networks. The Departments’ 

assessment of the expected economic 

effects of these regulations is discussed 

in detail below. 

C. Response to Comments on the 

Economic Impact Analysis for the 

Interim Final Regulations—Department 

of Labor and Department of Health and 

Human Services 

The Departments received the 

following public comments regarding 

the economic impact analysis in the 

interim final regulations. 

One commenter urged that the 

discussion on cost implications for 

increased utilization of mental health 

and substance use disorder services 

must take into account the cost savings 

that will result from the elimination of 

the costs associated with ‘‘unique and 

discriminatory medical management 

controls’’ (or NQTLs). Although the 

Departments concur that the nature and 

rigor of utilization management affects 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68255 

64Final Report: Consistency of Large Employer 

and Group Health Plan Benefits with Requirements 

of the Paul Wellstone and Pete Domenici Mental 

Health Parity and Addiction Equity Act of 2008. 

NORC at the University of Chicago for the Office of 

the Assistant Secretary for Planning and Evaluation. 

This study analyzed information on large group 

health plan benefit designs from 2009 through 2011 

in several databases maintained by benefits 

consulting firms that advise plans on compliance 

with MHPAEA as well as other requirements. 

65FEHB Program Carrier Letter, No. 2009–08, 

April 20, 2009. 

66 Vt. Stat. Ann tit. 8, § 4089b (1998). 

67 Ibid. 

68Rosenbach M, Lake T, Young C, et al. Effects 

of the Vermont Mental Health and Substance Abuse 

Parity Law. DHHS Pub. No. SMA 03–3822, 

Rockville, MD: Substance Abuse and Mental Health 

Services Administration, 2003. 

69Q&A Oregon Mental Health Parity Law for 

Providers. Oregon Insurance Division Web site. 

http://www.cbs.state.or.us/ins/FAQs/mental-healthparity_provider-faqs.pdf. 

70McConnell JK, Gast SH, Ridgely SM. Behavioral 

health insurance parity: Does Oregon’s experience 

presage the national experience with the Mental 

Health Parity and Addiction Equity Act? American 

Journal of Psychiatry 2012; 169(1): 31–38. 

the cost of care and the administrative 

expenses associated with care 

management, there is scant evidence at 

this time on the way that utilization 

management will evolve under 

MHPAEA. Existing evidence suggests 

that plans and issuers can apply a range 

of tools to manage care and that even 

when management of care is consistent 

with the principles of parity, care 

management continues. (See the 

discussion of Oregon state parity law 

later in this preamble). 

Several commenters asserted that the 

Departments had underestimated the 

cost and burden of complying with the 

interim final regulations. However, a 

study sponsored by HHS found that by 

2011 most plans had removed most 

financial requirements that did not meet 

the requirements of MHPAEA and the 

interim final regulations.64 In addition, 

the number of plans that applied 

unequal inpatient day limits, outpatient 

visit limits, or other quantitative 

treatment limitations for mental health 

or substance use disorder benefits had 

dropped significantly by 2011. Yet, 

there is no evidence that plans’ costs 

and burdens have been significantly 

impacted by the requirements of the 

statute and its implementing interim 

final regulations. Research has shown 

that only a very small percentage of 

plans have dropped mental health or 

substance use disorder benefits after 

implementation of MHPAEA and even 

for those plans that did so, there is no 

clear evidence that they dropped mental 

health or substance use disorder 

benefits because of MHPAEA. Moreover, 

no plans have applied for the increased 

cost exemption under MHPAEA. 

Finally, in spending reports that have 

been reported in the aggregate, there is 

no evidence that spending growth for 

behavioral health saw a significant 

upturn in 2011, the first full year in 

which the interim final regulations 

generally were in effect. 

One commenter asserted that plans 

are not set up to conduct a parity 

analysis within the six classifications 

and as a result the interim final 

regulations impose a substantial burden, 

especially on employers that offer 

multiple plans. In response, the 

Departments note that the alternative to 

using the six classifications would 

require conducting a parity analysis 

across all types of benefits grouped 

together that would have resulted in 

incongruous and unintended 

consequences with, for example, day 

limits for inpatient care being the 

standard for outpatient benefits. 

Moreover, there is no evidence that 

plans or issuers have found these 

requirements to be overly burdensome. 

One commenter stated that the 

Federal Employees’ Health Benefits 

Program (FEHBP) parity requirements 

and State parity laws are not 

comparable to the standards in the 

interim final regulations and therefore 

are not predictive of the possible cost 

impacts of the interim final regulations, 

especially regarding NQTLs. In 

response, the Departments note that, 

like MHPAEA, the parity requirements 

for FEHBP apply to financial 

requirements and treatment limitations 

for both mental health conditions and 

substance use disorders. Furthermore, 

the FEHBP requirements are more 

expansive in that ‘‘plans must cover all 

categories of mental health or substance 

use disorders to the extent that the 

services are included in authorized 

treatment plans . . . developed in 

accordance with evidence-based clinical 

guidelines, and meet[ing] medical 

necessity criteria.’’ 65 Under the 

MHPAEA statute, plans and issuers 

have discretion as to which diagnoses 

and conditions are covered under the 

plan. 

Several State parity laws are very 

similar to MHPAEA. For example, 

Vermont’s parity law applies to both 

mental health and substance use 

disorder benefits.66 The Vermont parity 

law also requires that management of 

care for these conditions be in 

accordance with rules adopted by the 

State Department of Insurance to assure 

that timely and appropriate access to 

care is available; that the quantity, 

location and specialty distribution of 

health care providers is adequate and 

that administrative or clinical protocols 

do not serve to reduce access to 

medically necessary treatment.67 These 

requirements are very similar to the 

NQTL requirements under MHPAEA 

which likewise seek to ensure plans and 

issuers do not inequitably limit access 

to mental health or substance use 

disorder treatment. In addition, the 

NQTLs requirements likewise require 

comparable approaches to utilization 

management through protocols and 

other strategies in determining coverage 

of mental health and substance use 

disorder treatment compared to 

medical/surgical treatment. A study of 

this State parity law also did not find 

significant increases in cost.68

The Oregon State parity law is also 

very similar to MHPAEA in that it 

applies to mental health and substance 

use disorder financial requirements and 

treatment limitations and also applies to 

NQTLs. According to the Oregon 

Insurance Division, utilization 

management tools such as ‘‘selectively 

contracted panels of providers, health 

policy benefit differential designs, 

preadmission screening, prior 

authorization, case management, 

utilization review, or other mechanisms 

designed to limit eligible expenses to 

treatment that is medically necessary’’ 

may not be used for management of 

mental health or substance use disorder 

benefits unless they were used in the 

same manner that such methods were 

used for other medical conditions.69 A 

study of the Oregon parity law found 

that plans removed coverage limits as 

required and used management 

techniques to the same degree or less 

under this law and the impact on 

mental health and substance use 

disorder spending was minimal.70

Together, the similarities between the 

FEHBP, Vermont, and Oregon parity 

requirements lead the Departments to 

conclude that any differences in terms 

of the impacts on cost would be small. 

Several commenters argued that the 

requirement in the interim final 

regulations to use a single or shared 

deductible in a classification is overly 

burdensome and would require 

significant resources to implement, 

particularly by MBHOs since they often 

work with multiple plans. One 

commenter asserted that this 

requirement could impact the 

willingness of sponsors to offer mental 

health or substance use disorder 

benefits. In response, the Departments 

note that a study sponsored by HHS 

found that nearly all plans had 

eliminated the use of separate 

deductibles for mental health and 

substance use disorder benefits by 


emcdonald on DSK67QTVN1PROD with RULES3
68256 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

71Final Report: Consistency of Large Employer 

and Group Health Plan Benefits with Requirements 

of the Paul Wellstone and Pete Domenici Mental 

Health Parity and Addiction Equity Act of 2008. 

NORC at the University of Chicago for the Office of 

the Assistant Secretary for Planning and Evaluation. 

72Application of the Mental Health Parity and 

Addiction Equity Act to Medicaid MCOs, CHIP, and 

Alternative Benefit (Benchmark) Plans, available at: 

http://www.medicaid.gov/Federal-Policy-Guidance/

downloads/SHO-13-001.pdf. 

73McConnell JK, Gast SH, Ridgely SM. Behavioral 

health insurance parity: does Oregon’s experience 

presage the national experience with the Mental 

Health Parity and Addiction Equity Act? American 

Journal of Psychiatry 2012; 169(1): 31–38. 

2011.71 According to this study, even in 

2010, only a very small percentage of 

plans were using separate deductibles. 

This study and other research have 

shown that only a very small percent of 

plans have dropped mental health or 

substance use disorder benefits after 

implementation of MHPAEA and there 

is no clear evidence they did so because 

of MHPAEA. 

One commenter urged that the 

regulations be revised to be less 

burdensome for plans that are part of a 

more comprehensive network of 

benefits within Medicaid healthcare 

delivery systems. These final 

regulations apply to group health plans 

and health insurance issuers but do not, 

by their own terms, apply to Medicaid. 

In response, the Departments note that 

CMS oversees implementation of federal 

requirements for the Medicaid program. 

CMS issued a state health official letter 

on the application of MHPAEA to 

Medicaid managed care organizations, 

the Children’s Health Insurance 

Program, and Alternative Benefit 

(Benchmark) plans on January 16, 

2013.72

Two commenters raised concerns 

about the burden imposed on plans by 

the requirement that provider 

reimbursement rates be based on 

comparable criteria particularly for 

MBHOs that may as a result have to use 

multiple rate schedules. The 

Departments believe that the process of 

establishing rate schedules is already 

complex, that MBHOs that contract with 

other multiple plans are likely to 

already have multiple rate schedules, 

and that adding a parity requirement to 

ensure that rates for behavioral health 

providers are based on comparable 

criteria to those used for medical/

surgical providers does not add much to 

this complexity. 

One commenter argued that the costs 

for outpatient mental health and 

substance use disorder benefits will be 

higher than estimated because the 

NQTL parity standard would hamper 

plans’ ability to manage care and control 

costs. In response, the Departments note 

that, as discussed above, the Oregon 

State parity law also applies to NQTLs 

and a study of this law found that plans 

in that State removed coverage limits as 

required and used management 

techniques to the same degree or less 

under the Oregon law and the impact on 

mental health and substance use 

disorder spending was minimal.73

D. Summary of the Regulatory Impact 

Analysis for the Interim Final 

Regulations—Department of Labor and 

Department of Health and Human 

Services 

In the regulatory impact analysis for 

the interim final regulations, the 

Departments quantified the costs 

associated with three aspects of that 

rulemaking: The cost of implementing a 

unified deductible, compliance review 

costs, and costs associated with 

information disclosure requirements in 

MHPAEA. The Departments estimated 

the cost of developing the interface 

necessary to implement a single 

deductible as $35,000 per affected 

interface between a managed behavioral 

health company and a group health plan 

with a total estimated cost at $39.2 

million (amounting to $0.60 per health 

plan enrollee) in the first year. The 

interim final regulations’ impact 

analysis estimated the cost to health 

plans and insurance issuers of 

reviewing coverage for compliance with 

MHPAEA and the interim final 

regulations at $27.8 million total. This 

estimate was based on findings that 

there were about 460 issuers and at least 

120 MBHOs and assumed that per-plan 

compliance costs would be low because 

third party administrators for selfinsured plans would spread the cost 

across multiple client plans. 

Regarding the requirement to disclose 

medical necessity criteria, the 

Departments assumed that each plan 

would receive one such request on 

average, that it would take a trained staff 

person about five minutes to respond, 

and with an average hourly rate of $27, 

the total annual cost would be about $1 

million. The Departments assumed only 

38 percent of requests would be 

delivered electronically with de 

minimis cost and that the materials, 

printing and postage costs of responding 

to about 290,000 requests by paper 

would be an additional $192,000 for a 

total of about $1.2 million per year. 

These costs totaled $114.6 million 

undiscounted over ten years (2010– 

2019). The Departments did not include 

a cost for the requirement in MHPAEA 

to disclose the reasons for any claims 

denials because the Department of 

Labor’s claims procedure regulation (at 

29 CFR 2560.503–1) already required 

such disclosures and the same thirdparty administrators and insurers are 

hired by ERISA and non-ERISA covered 

plans so both types of plans were likely 

to already be in compliance with these 

rules. 

In terms of transfers, in the interim 

final regulations impact analysis, the 

Departments estimated premiums 

would rise 0.4 percent due to MHPAEA, 

reflecting a transfer from individuals not 

using mental health and substance use 

disorder benefits to those that do. This 

estimated increase in premiums 

amounted to a transfer of $2.36 billion 

in 2010 gradually increasing each year 

over a ten year period to $2.81 billion 

in 2019. This estimate was based on 

findings in the literature. For a more 

complete discussion, see section III.I 

later in this preamble. 

E. Summary of the Impacts of the Final 

Rule—Department of Labor and 

Department of Health and Human 

Services 

Table 1, below, summarizes the costs 

associated with the final regulations 

above the costs estimated for the interim 

final regulations. Over a five-year period 

of 2014 to 2018, the total undiscounted 

cost of the rule is estimated to be $1.16 

billion in 2012 dollars. Columns D and 

E display the costs discounted at 3 

percent and 7 percent, respectively. 

Column F shows a transfer of $3.5 

billion over the five-year period. All 

other numbers included in the text are 

not discounted, except where noted. 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68257 

74The Departments’ estimates of the numbers of 

affected participants are based on DOL estimates 

using the 2012 CPS. ERISA plan counts are based 

on DOL estimates using the 2011 MEP–IC and 

Census Bureau statistics. The number of State and 

local government employer-sponsored plans was 

estimated using 2012 Census data and DOL 

estimates. Please note that the estimates are based 

on survey data that is not broken down by the 

employer size covered by MHPAEA making it 

difficult to exclude from estimates those 

participants employed by employers who employed 

an average of at least 2 but no more than 50 

employees on the first day of the plan year. 

75The Departments’ estimate of the number of 

insurers is based on medical loss ratio reports 

submitted by issuers for 2012 reporting year and 

industry trade association membership. Please note 

that these estimates could undercount small Stateregulated insurers. 

76 ‘‘Effects on Health Insurance and the Federal 

Budget for the Insurance Coverage Provisions in the 

Affordable Care Act—May 2013 Baseline,’’ 

Congressional Budget Office, May 14, 2013. 

77ASPE Issue Brief, ‘‘Essential Health Benefits: 

Individual Market Coverage,’’ ed. U.S. Department 

of Health & Human Services (2011). 

78ASPE Issue Brief, ‘‘Essential Health Benefits: 

Comparing Benefits in Small Group Products and 

State and Federal Employee Plans,’’ ed. U.S. 

Department of Health & Human Services (2011). 

79See the interim final regulations for a fuller 

discussion of the legislative history. 

80Final Report: Consistency of Large Employer 

and Group Health Plan Benefits with Requirements 

of the Paul Wellstone and Pete Domenici Mental 

Health Parity and Addiction Equity Act of 2008 at 

pages vii–ix. NORC at the University of Chicago for 

the Office of the Assistant Secretary for Planning 

and Evaluation. This study analyzed information on 

large group health plan benefit designs from 2009 

through 2011 in several databases maintained by 

benefits consulting firms that advise plans on 

compliance with MHPAEA as well as other 

requirements. 

TABLE 1—TOTAL COSTS OF FINAL REGULATIONS

[In millions of 2012 dollars] 

Year 

Incremental 

change in 

individual 

market plan 

spending 

Disclosure 

requirements 

Total 

undiscounted 

costs 

Total 3% 

discounted 

costs 

Total 7% 

discounted 

costs 

Transfers 

(undiscounted) 

(A) (B) A+B (D) (E) (F) 

2014 ................................. $189.9 $4.3 $194.2 $194.2 $194.2 $699.2 

2015 ................................. 208.4 4.3 212.7 206.5 198.8 732.0 

2016 ................................. 226.8 4.3 231.1 217.9 201.9 764.8 

2017 ................................. 245.3 4.3 249.6 228.4 203.7 797.6 

2018 ................................. 263.8 4.3 268.1 238.2 204.5 830.4 

Total .......................... 1,134.2 21.5 1,155.6 1085.1 1,003.1 3,824.0 

1. Estimated Number of Affected 

Entities 

MHPAEA has already brought about 

coverage changes for approximately 103 

million participants in 420,700 ERISAcovered employment-based group 

health plans with more than 50 

participants, and an estimated 29.5 

million participants in the 

approximately 23,000 public, nonFederal employer group health plans 

with more than 50 participants 

sponsored by State and local 

governments. Plans with 50 or fewer 

participants were previously exempt 

from MHPAEA.74 In addition, 

approximately 510 health insurance 

issuers providing mental health or 

substance use disorder benefits in the 

group and individual health insurance 

markets and at least 120 MBHOs 

providing mental health or substance 

use disorder benefits to group health 

plans are also affected by these final 

regulations.75

As discussed earlier, the Affordable 

Care Act extended MHPAEA to apply to 

a health insurance issuer offering 

individual health insurance coverage 

and the HHS final regulation regarding 

EHB requires QHPs and nongrandfathered health insurance plans in 

the individual and small group markets 

to provide covered mental health and 

substance use disorder services in a 

manner that complies with the parity 

requirements of the MHPAEA 

implementing regulations in order to 

satisfy the requirement to cover EHB. 

According to the 2012 Medical Loss 

Ratio filings, about 11 million people 

are covered in the individual market; 

another 7 million are expected to gain 

coverage in 2014 under the Affordable 

Care Act.76 There are an estimated 12.3 

million participants in about 837,000 

non-grandfathered ERISA-covered 

employment-based group plans with 50 

or fewer participants, and an estimated 

800,000 participants in approximately 

59,000 non-grandfathered public, nonFederal employer group health plans 

with 50 or fewer participants sponsored 

by State and local governments which 

were previously exempt from MHPAEA. 

About one-third of those who are 

currently covered in the individual 

market have no coverage for substance 

use disorder services and nearly 20 

percent have no coverage for mental 

health services, including outpatient 

therapy visits and inpatient crisis 

intervention and stabilization.77 In 

addition, even when individual market 

plans provide these benefits, the federal 

parity law previously did not apply to 

these plans to ensure that coverage for 

mental health and substance use 

disorder services is generally 

comparable to coverage for medical and 

surgical care. 

In the small group market, coverage of 

mental health and substance use 

disorder treatment is more common 

than in the individual market. We 

estimate that about 95 percent of those 

with small group market coverage have 

substance abuse and mental health 

benefits.78 Again, the federal parity law 

previously did not apply to small group 

plans. In many States, State parity laws 

offer those covered in this market some 

parity protection, but most State parity 

laws are narrower than the federal 

parity requirement. 

2. Anticipated Benefits 

a. Benefits Attributable to the Statute or 

Interim Final Regulations 

In enacting MHPAEA, one of 

Congress’ primary objectives was to 

improve access to mental health and 

substance use disorder benefits by 

eliminating more restrictive visit limits 

and inpatient days covered as well as 

higher cost-sharing for mental health 

and substance use disorder benefits that 

were prevalent in private insurance 

plans after implementation of MHPA 

1996.79

A recent study funded by HHS found 

that large group health plans and 

insurance issuers have made significant 

changes to financial requirements and 

treatment limitations for mental health 

and substance use disorder benefits in 

the first few years following enactment 

of MHPAEA.80 The statute went into 

effect for plan years beginning after 

October 3, 2009 (calendar year 2010 for 


emcdonald on DSK67QTVN1PROD with RULES3
68258 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

81 Ibid at page xii. 

82 Ibid at page xi. 

83Robertson CT, R Egelhof, M Hoke, Get Sick, Get 

Out: The Medical Causes of Home Mortgage 

Foreclosures, Health Matrix 18:65–105, 2008. 

84 Dranove D and ML Millenson, Medical 

Bankruptcy: Myth Versus Fact, Health Affairs 25, 

w74–w83 February 28, 2006. 

85 Dranove D and ML Millenson, Medical 

Bankruptcy: Myth Versus Fact, Health Affairs 25, 

w74–w83 February 28, 2006. 

86Social Security Administration (SSA). (2012). 

Annual Statistical Report on the Social Security 

Disability Insurance Program, 2011. SSA 

Publication No. 13–11826. 

87Stewart, W.F., Ricci, J.A., Chee, E., Hahn, S.R. 

& Morgenstein, D. (2003, June 18). ‘‘Cost of lost 

productive work time among US workers with 

depression.’’JAMA: Journal of the American 

Medical Association. 289, 23, 3135–3144; Kessler, 

R.C., Akiskal, H.S., Ames, M., Birnbaum, H., 

Greenberg, P., Hirschfeld, H.M.A. et al. (2006). 

‘‘Prevalence and effects of mood disorders on work 

performance in a nationally representative sample 

of U.S. workers.’’ American Journal of Psychiatry, 

163, 1561–1568. 

88Stewart, W.F., Ricci, J.A., Chee, E., Hahn, S.R. 

& Morgenstein, D. (2003, June 18). ‘‘Cost of lost 

productive work time among US workers with 

depression.’’ JAMA: Journal of the American 

Medical Association. 289, 23, 3135–3144. 

many plans) and the interim final 

regulations went into effect for plans 

years beginning on or after July 10, 2010 

(calendar year 2011 for many plans). 

This HHS study found that by 2011, 

most plans had removed most financial 

requirements and treatment limitations 

that did not meet the requirements of 

MHPAEA and its implementing interim 

final regulations. 

According to this HHS study, in 2010, 

ten percent of a nationally 

representative sample of large 

employers’ behavioral health benefits 

had inpatient financial requirements 

(e.g., deductibles, co-pays, or coinsurance) that needed modification to 

comply with MHPAEA. Analysis of a 

separate set of large employer-based 

plans for 2011 found virtually all 230 

large employer-based plans included 

had inpatient benefits that conformed to 

MHPAEA standards. A third database of 

plan designs from 2009 through 2011 

confirmed that the use of higher 

copayments and coinsurance for 

inpatient mental health and substance 

use disorder services declined rapidly 

in large employer plans following 

implementation of MHPAEA.81

Among the representative sample of 

plans for 2010 included in this study, 

more than 30 percent had copayments 

or coinsurance rates for outpatient 

mental health and substance use 

disorder benefits that were inconsistent 

with MHPAEA. In a separate sample of 

large employer-based plans for 2011, the 

use of higher coinsurance for mental 

health and substance use disorder 

benefits dropped dramatically. 

However, the study found that about 20 

percent of the 140 plans tested 

continued to utilize outpatient innetwork co-pays that failed to meet 

MHPAEA standards. A third database of 

plan designs for 2009 through 2011 

confirmed a dramatic decline in the use 

of more restrictive cost-sharing for 

outpatient mental health and substance 

use disorder benefits although a 

minority continued to use high copays. 

Nearly all plans had eliminated the 

use of separate deductibles for mental 

health or substance use disorder out-ofpocket costs by 2011. (Even by 2010, 

only 3.2 percent of plans had used 

separate deductibles.) 82

The HHS study also found that the 

number of plans that applied unequal 

inpatient day limits, outpatient visit 

limits or other quantitative treatment 

limitations for mental health or 

substance use disorder benefits had 

dropped significantly by 2011. In 2010, 

it found that most large employer-based 

plans used day limits on mental health 

inpatient benefits that generally 

conformed to MHPAEA standards. 

While almost 20 percent of these plans 

imposed more restrictive day limits on 

in-network, inpatient benefits for 

substance use disorders than applied to 

medical/surgical benefits, the separate 

sample of 2011 large employer-based 

plans indicated a significant decline 

with only eight percent of plans using 

stricter day limits for inpatient benefits 

for substance use disorders. These 

findings were corroborated by analysis 

of an additional database of plan 

designs from 2009 through 2011, which 

also indicated a dramatic decline in the 

proportion of plans using more 

restrictive inpatient day limits on 

mental health and substance use 

disorder benefits (from 50 percent in 

2009 to ten percent in 2010). 

In 2010, more than 50 percent of large 

employer-based plans in the study’s 

representative sample used more 

restrictive visit limits for outpatient 

mental health and substance use 

disorder services that did not conform 

to MHPAEA standards. But, in the 2011 

sample of large employer-based health 

plans, less than seven percent were 

using unequal visit limits. This trend 

was also evident in the plan design 

database comparing plans across 2009, 

2010, and 2011. There too, substantial 

reductions in quantitative treatment 

limitations for mental health and 

substance use disorder benefits in large 

employer-based plans were seen after 

enactment of MHPAEA. 

b. Potential Benefits of the Final 

Regulations 

The Departments expect that 

MHPAEA and these final regulations 

will have their greatest impact on 

people needing the most intensive 

treatment and financial protection. The 

Departments cannot estimate how large 

this impact will be, but the numbers of 

beneficiaries who have a medical 

necessity for substantial amount of care 

are likely to be relatively small. 

Improving coverage in the small 

group and individual markets will also 

expand financial protection for a 

significant segment of those covered and 

soon to be covered by private health 

insurance. One indicator of the 

consequences of unprotected financial 

risk is bankruptcies. The literature on 

bankruptcies identifies mental health 

care as a source of high spending that 

is less protected than other areas of 

health care.83 One estimate is that about 

17 percent of bankruptcies are due to 

health care bills.84 Another estimate 

using the same data is that about ten 

percent of medical bankruptcies are 

attributable to high mental health care 

costs, and an additional two to three 

percent of bankruptcies are attributable 

to drug and alcohol abuse.85

Improvements in coverage of mental 

health and substance use disorder 

services expected to result from 

implementation of MHPAEA can be 

expected to reduce some of the financial 

risk and also yield successful treatment 

for people with mental health or 

substance use disorder problems. 

Earlier entry into treatment may have 

a salutary impact on entry into 

disability programs. Of the 8.6 million 

disabled workers receiving Social 

Security Disability Insurance benefits, 

28 percent are identified as having a 

disability related to mental disorders, 

not including intellectual disability. 

Mental disorders are the second largest 

diagnostic category among awards to 

disabled workers, after conditions 

associated with the musculoskeletal 

system and connective tissue (29 

percent) but ahead of those related to 

the circulatory system (8.5 percent).86

Improving coverage of mental health 

and substance use disorder treatment 

could also more generally improve 

productivity and improve earnings 

among those with these conditions. 

Studies have shown that the high 

prevalence of depression causes $31 

billion to $51 billion annually in lost 

productivity in the United States.87

More days of work loss and work 

impairment are caused by mental illness 

than by various other chronic 

conditions, including diabetes and 

lower back pain.88 A recent metaanalysis of randomized studies that 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68259 

89Timbie JW, M Horvitz-Lennon, RG Frank and 

SLT Normand, A Meta-Analysis of Labor Supply 

Interventions for Major Depressive Disorder, 

Psychiatric Services 57(2) 212–219, 2006. 

90Wang PS, GE Simon, J Avorn et al, Telephone 

Screening, Outreach, and Care Management for 

Depressed Workers and Impact on Clinical and 

Work Productivity Outcomes, JAMA 298(12) 1401– 

1411, 2007. 

91Bateman A, Fonagy P: Treatment of borderline 

personality disorder with psychoanalytically 

oriented partial hospitalization: an 18-month 

follow-up. Am J Psychiatry 2001; 158:36–42. 

92Horvitz-Lennon M, Normand SL, Gaccione P 

and Frank RG. ‘‘Partial vs. Full Hospitalization for 

Adults in Psychiatric Distress: A Systematic Review 

of the Published Literature.’’ American Journal of 

Psychiatry, 158(5), 2001. 

93 Drake, Robert E., Erica L. O’Neal, and Michael 

A. Wallach. ‘‘A systematic review of psychosocial 

research on psychosocial interventions for people 

with co-occurring severe mental and substance use 

disorders.’’ Journal of substance abuse treatment 

34.1 (2008): 123–138. 

94Final Report for ASPE: Consistency of Large 

Employer and Group Health Plan Benefits with 

Requirements of the Paul Wellstone and Pete 

Domenici Mental Health Parity and Addiction 

Equity Act of 2008 at page x. NORC at the 

University of Chicago for the Office of the Assistant 

Secretary for Planning and Evaluation. 

95 Ibid at page xi. 

96Mark, TL, Vandivort-Warren, R, Miller, K, 

Mental health spending by private insurance: 

Implications for the Mental Health Parity and 

Addiction Equity Act, Psych Services, 2012; 63(4): 

313–318. 

97 Ibid. 

98 Ibid. 

99 Ibid. 

100Mark, TL, Vandivort-Warren, R, Spending 

trends on substance abuse treatment under private 

employer-sponsored insurance, 2001–2009, Drug 

and Alcohol Dependence, 2012; 125:203–207. 

101Short-Term Analysis to Support Mental Health 

and Substance Use Disorder Parity Implementation. 

RAND Corporation for the Office of the Assistant 

Secretary for Planning and Evaluation. February 8, 

2012 (http://aspe.hhs.gov/daltcp/reports/2012/

mhsud.shtml); internal analysis of claims data for 

large self-insured employers and health plans. 

examined the impact of treating 

depression on labor market outcomes 

showed that while the labor supply 

effects were smaller than the impact on 

clinical symptoms, there were 

consistently significant and positive 

effects of treatment on labor supply.89 90

Although the expected impact of 

MHPAEA on labor supply is likely 

modest for large employers, it is 

probably considerably larger for small 

group and individual plans where preMHPAEA coverage was more limited 

than in the large group market. 

As stated earlier, these final 

regulations clarify that the general rule 

regarding consistency in classification 

of benefits applies to intermediate 

services provided under the plan or 

coverage. These final regulations are 

expected to maintain or perhaps slightly 

improve coverage for intermediate 

levels of care. These services that fall 

between inpatient care for acute 

conditions and regular outpatient care 

can be effective at improving outcomes 

for people with mental health 

conditions or substance use 

disorders.91 92 93

This final rule allows for policies 

such as multi-tiered provider networks. 

Multi-tiered networks are spreading 

rapidly among large group policies. 

There is some early evidence that such 

approaches can successfully attenuate 

costs and improve quality of care. 

3. Anticipated Costs 

a. Illustrative Results From Past Policy 

Interventions 

Existing evidence on implementation 

of parity in States and FEHBP suggests 

there will not be significant increases in 

plan expenditures and premiums as a 

result of the increased access to mental 

health and substance use disorder 

services that are expected to result from 

these final regulations. Since the 

effective date of the interim final 

regulations, no employer has applied for 

a cost exemption. A recent research 

study funded by HHS shows that in 

general, large employer-sponsored plans 

eliminated higher financial 

requirements and more limited 

inpatient day limits, outpatient visit 

limits and other quantitative treatment 

limitations for mental health or 

substance use disorder benefits fairly 

quickly in the first few years following 

the enactment of MHPAEA. Differences 

in cost sharing for prescription 

medications and emergency care also 

declined, and by 2011 almost all large 

employer-based plans studied appeared 

to comply with MHPAEA for those 

benefits.94 Over that same period, a very 

small percent of employers dropped 

mental health or substance use disorder 

coverage. Moreover, there is no clear 

evidence that the small number of plans 

that did drop mental health and 

substance use disorder coverage did so 

because of MHPAEA. 

Furthermore, evidence suggests that 

plans did not exclude more mental 

health or substance use disorder 

diagnoses from coverage in response to 

MHPAEA and there is no evidence that 

plans or employers reduced medical/

surgical benefits to comply with parity 

requirements.95 All of these findings 

indicate that any increases in the costs 

of covering mental health and substance 

use disorder benefits following 

implementation of MHPAEA did not 

have a substantial impact on overall 

plan spending. 

Other recent analyses of claims data 

from self-insured employer-sponsored 

group health plans have suggested that 

an overwhelming majority of privately 

insured individuals who used mental 

health or substance use disorder 

services prior to MHPAEA did so at a 

rate far below pre-parity limits on 

benefits.96 Using econometric models to 

estimate the effect of MHPAEA on highutilization beneficiaries who are most 

likely to use expanded coverage, 

researchers have estimated that 

MHPAEA may at most increase total 

health care costs by 0.6 percent.97

Furthermore, a recent study of 

substance use disorder spending from 

2001 to 2009 by large employersponsored health plans shows that 

substance use disorder spending 

remained a relatively constant share of 

all health spending, comprising about 

0.4 percent of all health spending in 

2009. This low share of overall spending 

means that even large increases in 

utilization of substance use disorder 

treatment are unlikely to have a 

significant impact on premiums.98

Although most State parity laws are 

more limited than MHPAEA, some are 

comparable, and studies on the impact 

of these more comparable laws provide 

a fair indication of the effect of 

MHPAEA. For example, Oregon’s State 

parity law enacted in 2007 is quite 

comparable in that it applies to 

treatment limits (including NQTLs) and 

financial requirements for mental health 

and substance use disorder benefits. A 

study of the Oregon parity law found 

that plans removed coverage limits and 

used management techniques more 

consistently but did not significantly 

increase spending on mental health and 

substance use disorder care.99

Vermont’s parity law also applies to 

both mental health and substance use 

disorder services. A study of this State 

parity law also did not find significant 

increases in spending.100

b. Costs (and Transfers) Attributable to 

the Final Regulations 

The Departments do not expect the 

clarification that plans should classify 

intermediate services consistently for 

mental health and substance use 

disorders and medical/surgical benefits 

will result in a significant increase in 

costs. Nor do the Departments expect 

the clarification that the NQTL rules 

apply to these types of services to cause 

a substantial increase in plan spending. 

Analyses of claims data for large group 

health plans conducted by two different 

contractors for HHS indicate that most 

plans cover intermediate behavioral 

health services, particularly partial 

hospitalization and intensive outpatient 

services, but intermediate services 

account for less than one percent of total 

health plan spending.101 Internal 


emcdonald on DSK67QTVN1PROD with RULES3
68260 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

102Thomas JM, G Nalli AF Cockburn. What we 

know and don’t know about tiered provider 

networks, Journal of Health Care Finance 33(4), 53– 

67, 2007; Sinaiko AD, Tiered provider Networks as 

a Strategy to Improve Health Care Quality and 

Efficiency, NICHM Foundation February 2012. 

103 Ibid. 

104Whitmore H, JR Gabel, J Pickreign R McDevitt, 

The Individual Insurance Market Before Reform: 

Low Premiums and Low Benefits, Medical Care 

Research and Review 68(5): 594–606, 2011. 

105Technical Appendix to the Regulatory Impact 

Analysis for the Interim Final Rule for Health 

Insurance Issuers Implementing the Medical Loss 

Ratio Requirements under the Patient Protection 

and Affordable Care Act, Office of Consumer 

Information and Insurance Oversight, Department 

of Health and Human Services, November 22, 2010, 

available at http://www.cms.gov/CCIIO/Resources/

Files/Downloads/mlr_20101122_technical_

appendix.pdf. 

106Substance Abuse and Mental Health Services 

Administration. National Expenditures for Mental 

Health Services and Substance Abuse Treatment, 

1986–2009. HHS Publication No. SMA–13–4740. 

Rockville, MD: Substance Abuse and Mental Health 

Services Administration, 2013. 

107Meyerhoefer CD and Zuvekas, S, ‘‘New 

Estimates of the Demand for Physical and Mental 

Health Treatment’’, Health Economics 19(3): 297– 

research and analysis by HHS indicates 

that the number of enrollees who use 

intermediate services for mental health 

and substance use disorders is very 

small. Furthermore, those who used 

intermediate services did so at modest 

rates. In addition, the number of 

enrollees who used intermediate 

services for medical/surgical benefits 

was similarly small. Available data 

suggest that intermediate behavioral 

health services account for between 

eight percent and eleven percent of total 

behavioral health spending in private 

insurance. This means that since 

behavioral health care accounts for 

about 5.5 percent of health plan 

spending, intermediate behavioral 

health spending amounts to between 0.4 

and 0.6 percent of total health plan 

spending. In light of the small number 

of enrollees that utilize this 

intermediate level of care and the small 

percentage of total costs that 

intermediate mental health and 

substance use disorder services 

comprise, the Departments expect that 

any increase in coverage would be very 

unlikely to have any significant effect 

on total health plan spending. 

Moreover, the Departments 

investigated the patterns of 

classification of intermediate services 

and found that they are generally 

covered in the six classifications set out 

in the interim final regulations. 

Behavioral health intermediate services 

are generally categorized in a similar 

fashion as analogous medical services; 

for example, residential treatment tends 

to be categorized in the same way as 

skilled nursing facility care in the 

inpatient classification. Thus, the 

Departments do not expect much 

change in how most plans consider 

intermediate behavioral health care in 

terms of the six existing benefit 

classifications. 

Tiered provider networks are 

expanding in private health insurance. 

The interim final regulations made no 

allowance for such insurance 

innovations. The final regulations 

clarify how the parity requirements 

apply to multi-tiered provider networks. 

The evidence on the impact of these 

networks is beginning to emerge.102

There is some evidence that points to 

small reductions in health spending 

associated with tiered provider 

networks. There are also studies 

showing little to no savings associated 

with these network designs. Some 

modest impact on quality has been 

observed in some cases and none in 

others.103 The Departments are therefore 

assuming no cost impact of this 

provision. 

There is limited data on spending for 

mental health and substance use 

disorder treatment under individual 

health insurance plans. The 

Departments therefore rely on some 

recent tabulations from the Medical 

Expenditure Panel Survey (MEPS) and a 

recent report on premiums and coverage 

in the individual health insurance 

market along with information from 

several other sources to make 

projections of the likely impact of 

applying MHPAEA to the individual 

market.104 The Departments began by 

estimating baseline spending in the 

individual market. The Departments 

calculate the weighted average premium 

for the individual insurance market 

from the paper by Whitmore and 

colleagues that was reported in 2007 

dollars and inflate it to 2012 dollars 

using the GDP deflator. Because 

premiums report more than just health 

care costs, the Departments convert the 

premium into plan payments for 

services by applying the medical loss 

ratio of 0.70 reported in the technical 

appendix to the Medical Loss Ratio 

interim final rule.105 The resulting 

estimate is $2437 in 2012 dollars. That 

figure represents total health spending 

by plans per member per year. The 

Departments obtain an estimate of the 

behavioral health costs by assuming that 

about four percent of those expenditures 

are for behavioral health. That figure is 

obtained by recognizing that coverage 

for behavioral health in the individual 

market is more limited than in the 

employer sponsored insurance market 

where mental health and substance use 

disorder care accounts for about 5.5 

percent of spending overall.106

Applying the four percent figure to the 

plan spending estimates results in an 

estimate of $98 per member per year in 

plan spending for mental health and 

substance use disorder benefits. The 

Departments then calculate the share of 

spending paid out-of-pocket by using 

the MEPS data to obtain an estimate of 

outpatient mental health and substance 

use disorder out-of-pocket spending, 

because outpatient services generally 

carry higher cost sharing than inpatient 

care and because overall non-inpatient 

care accounts for about 65 to 70 percent 

of behavioral health care. The MEPS 

data indicate that out-of-pocket costs for 

mental health and substance use 

disorder care accounts for 47 percent of 

total spending. This contrasts with an 

estimate of 26 percent for medical/

surgical care. The implication of this is 

a total (plan and out-of-pocket) 

spending estimate for mental health and 

substance use disorder benefits of $185 

per member per year in 2012. It is 

important to recognize that roughly 40 

percent of total behavioral health 

spending in private insurance is 

accounted for by spending on 

psychotropic drugs and drug benefits 

will remain relatively unchanged, to the 

extent prescription drug tiers are based 

on neutral factors independent of 

whether a particular drug is prescribed 

to treat a medical/surgical condition, or 

a mental health condition or substance 

use disorder. This is because 

psychotropic drugs are typically under 

the same benefit design and formulary 

rules as all other drugs in private health 

insurance. Thus the baseline spending 

that would be affected by MHPAEA is 

estimated to be $111 per member per 

year. 

To obtain the impact of extending 

MHPAEA to the individual market, the 

Departments assume that a primary 

impact of MHPAEA is to equalize cost 

sharing arrangements between mental 

health and substance use disorder 

benefits and medical/surgical benefits. 

The Departments therefore assume that 

the out-of-pocket share for mental 

health and substance use disorder 

services covered in the individual 

insurance market will decline from 47 

percent to 26 percent. The Departments 

apply an estimate of the price elasticity 

of demand to the total spending level for 

mental health and substance use 

disorder for people covered in the 

individual market. Two recent studies 

have shown that the price elasticity of 

demand for mental health and substance 

use disorder care has declined 

significantly in the era of managed 

care.107 They show that the elasticity of 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68261 

315 2010;. Lu C, Frank, RG and McGuire TG. 

‘‘Demand Response of Mental Health Services to 

Cost Sharing Under Managed Care.’’ Journal of 

Mental Health Policy and Economics 11(3):113–126 

2008. 

108 ‘‘Effects on Health Insurance and the Federal 

Budget for the Insurance Coverage Provisions in the 

Affordable Care Act—May 2013 Baseline,’’ 

Congressional Budget Office, May 14, 2013. 

109The figure of 11 million enrollees based on the 

2012 MLR filings data discussed earlier in this 

preamble is added to the CBO estimate of enrollees 

in the individual market in 2014. 

110Congressional Budget Office, Letter to the 

Honorable Paul Ryan: Analysis of the 

Administration’s Announced delay of certain 

Requirements Under the Affordable Care Act, July 

30, 2013; and CBO’s May 2013 Estimates of the 

Effects of the Affordable Care Act on Health 

Insurance Coverage, May 14, 2013. 

111 Kaiser Family Foundation and Health 

Research and Educational Trust, Employer Health 

Benefits—2012 Annual Survey. 

112McDevitt R, J Gabel, R Lore et al, Group 

Insurance: A Better Deal for Most People than 

Individual Plans, Health Affairs 29(1): 156–164, 

2010. 

113McConnell KJ, SHN Gast, MS Ridgely et al. 

Behavioral Health Insurance Parity: Does Oregon’s 

Experience Presage the National Experience with 

the Mental Health Parity and Addiction Equity 

Act?, American Journal of Psychiatry 2012; 169(1): 

31–38. 

demand for ambulatory care fell 

between -0.16 and -0.26. This is relevant 

because the Whitmore paper reports that 

roughly 95 percent of individual 

policies are either under managed care 

arrangements of some form or are part 

of a Health Savings Account policy 

(17.5 percent). The Departments 

therefore apply an elasticity of -0.21 to 

the 45 percent reduction in out-ofpocket costs for people using mental 

health and substance use disorder care. 

That yields a projected 9.5 percent 

increase in total spending for mental 

health and substance use disorder care 

for people in the individual market. 

Applying the 9.5 percent estimate to the 

$111 baseline subject to MHPAEA 

provisions results in an impact estimate 

of $10.55 per covered person in 2012 or 

a 5.7 percent increase in total mental 

health and substance use disorder 

spending and a 0.04 percent change in 

total plan spending. The Departments 

apply the per insured person cost of 

mental health and substance use 

disorder care in the individual market 

estimate to an estimate of the 

population that would be covered under 

individual coverage after January of 

2014. Based on the Congressional 

Budget Office estimates of the impact of 

the Affordable Care Act, the 

Departments expect enrollment in the 

individual market to be approximately 

18 million people as of 2014.108

Applying the $10.55 estimate to the 18 

million people 109 suggests a total 

spending increase of about $189.9 

million in 2012 dollars. The 

Departments project that, by 2018, the 

25 million-enrollee estimate shown in 

CBO’s report will capture all individual 

plan coverage. Assuming a constant rate 

of growth in enrollment, the five year 

cost will be $1.13 billion. This estimate 

reflects increased spending on mental 

health and substance use disorder 

services resulting from coverage 

expansion that is attributable to 

MHPAEA above and beyond historical 

levels in the small group and individual 

markets and beyond the EHB coverage 

requirements for mental health and 

substance use disorder coverage. 

MHPAEA can be expected to affect 

coverage in the small group market 

through the provisions governing EHBs. 

The Departments estimate that there are 

currently approximately 27 million 

people insured under small group 

benefits. The Congressional Budget 

Office (CBO) and HHS projections are in 

agreement that there will be little 

change in the size of this market in the 

coming years. Thus for the purposes of 

this analysis the Departments assume 

that the market will remain stable at 

27.3 million insured (including 26.1 

million in ERISA plans and 1.2 million 

in public plans).110 In examining 

coverage in the small group market 

using data from 2012, the Departments 

find that plans used comparable levels 

of management to large group plans in 

that less than 1 percent of either small 

group or large group enrollees are 

covered by indemnity insurance 

arrangements. HMOs account for 15 

percent of small group and 16 percent 

of large group enrollees. PPOs/POS 

plans account for 61 percent of small 

group and 67 percent of large group 

enrollees. High deductible plans make 

up 17 percent of small group and 24 

percent of large group enrollees.111 In 

addition, other recent analyses show 

that the actuarial value of health 

insurance benefits in large and small 

group plans are largely identical.112

Data from recent studies of parity 

implementation in Oregon that focused 

in great part on small group coverage 

shows that parity had the effect of 

reducing out-of-pocket spending. Yet 

because it was done in the context of 

managed care arrangements (including 

regulations of management practices) 

there was no statistically significant 

impact on total spending on mental 

health and substance use disorder 

services attributable to parity.113 For 

this reason, the Departments assume 

that virtually all the impact of MHPAEA 

on the small group market involves a 

shift of final responsibility for payment 

from households to insurers. The 

Oregon parity results (McConnell et al., 

2012) are consistent with a shift of 

roughly 0.5 percent of spending. This 

shift in cost constitutes a transfer (see 

additional analysis in section III.D.4 

below). 

The final regulations retain the 

disclosure provisions for group health 

plans and health insurance coverage 

offered in connection with a group 

health plan. In addition, these 

disclosure provisions are extended to 

non-grandfathered insurance coverage 

in the small group market through the 

EHB requirements and to the individual 

market as a result of the amendments to 

the PHS Act under the Affordable Care 

Act as discussed in section II.F and 

II.H.1 of this preamble. The burden and 

cost related to these disclosure 

requirements are discussed in detail in 

the Paperwork Reduction Act section 

below and are estimated to be 

approximately $4.3 million per year. 

4. Transfers 

The application of MHPAEA to the 

individual market will also shift 

responsibility for some existing 

payments from individuals to health 

plans by reducing cost sharing from 47 

percent to 26 percent, or $336 million 

in the first year increasing to $467 

million by 2018 reflecting increases in 

the number of individual enrollees. The 

Departments estimate that this shift in 

cost-sharing to plans combined with the 

increase in spending due to increased 

utilization discussed above could be 

expected to lead to an increase of 0.8% 

in premiums in the individual market. 

The small group plan average premium 

in 2012 was $5588. Applying the 0.5 

percent estimated shift in spending 

derived above in section III.E.3 to the 

average premium as a proxy for plan 

spending, the Departments obtain a 

figure of $27.94. Multiplying that figure 

by 13 million enrollees in small group 

plans yields an estimated transfer 

amount of $363 million per year. 

Likewise, premiums in the small group 

market may be expected to increase by 

0.5%. 

F. Regulatory Alternatives 

In addition to the regulatory approach 

outlined in these final regulations, the 

Departments considered several 

alternatives when developing policy 

regarding NQTLs, disclosure 

requirements, multi-tier provider 

networks, and how parity applies to 

intermediate services. 

Multiple stakeholders requested 

clarification regarding the application of 

the parity requirements to NQTLs. The 

Departments considered narrowing the 

clinically appropriate standard of care 

exception instead of eliminating it. 


emcdonald on DSK67QTVN1PROD with RULES3
68262 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

114Short-Term Analysis to Support Mental Health 

and Substance Use Disorder Parity Implementation. 

RAND Corporation for the Office of the Assistant 

Secretary for Planning and Evaluation. February 8, 

2012 (http://aspe.hhs.gov/daltcp/reports/2012/

mhsud.shtml). 

115Available at: http://www.dol.gov/ebsa/

healthreform/and http://www.cms.gov/cciio/

Resources/Fact-Sheets-and-FAQs/index.html. 

116 ‘‘Table of Small Business Size Standards 

Matched To North American Industry Classification 

System Codes,’’ effective July 23, 2013, U.S. Small 

Business Administration, available at http://

www.sba.gov. 

However, this approach could result in 

even more confusion regarding how to 

apply the parity standard for NQTLs. 

Moreover, a technical expert panel 

comprised of individuals with clinical 

expertise in mental health and 

substance use disorder treatment as well 

as general medical treatment, and 

experience developing and using 

evidence-based practice guidelines, 

could not identify situations in which 

the exception allowing a clinically 

appropriate standard of care to justify a 

different use of NQTLs would be 

needed.114 Thus, the Departments 

believe that clarification in paragraph 

(c)(4) of the regulations will not reduce 

the flexibility afforded to plans and 

issuers by the underlying rule. 

As stated earlier, concerns have also 

been raised regarding disclosure and 

transparency. The Departments 

considered whether participants and 

beneficiaries have adequate access to 

information regarding the processes, 

strategies, evidentiary standards, or 

other factors used to apply the NQTL 

and also comparable information 

regarding medical/surgical benefits to 

ensure compliance with MHPAEA. 

These final regulations make clear that 

plans and issuers are required to make 

this information available in accordance 

with MHPAEA and other applicable 

law, such as ERISA and the Affordable 

Care Act, more generally. The 

Departments also are publishing 

contemporaneously with publication of 

these final regulations, another set of 

FAQs.115 Among other things, these 

FAQs solicit comments on whether 

more should be done, and how, to 

ensure transparency and compliance. 

The Departments are aware of the 

increasing use of multi-tier provider 

networks and commenters have asked 

how parity requirements should apply 

to those arrangements. The Departments 

considered as an alternative requiring 

plans to collapse their provider tiers in 

conducting an assessment of 

compliance with parity. However, this 

would have negated a primary reason to 

have provider tiers which is to offer 

incentives for providers to accept lower 

reimbursement in exchange for lower 

copays for their services and 

presumably greater patient volume. The 

Departments considered this alternative 

to be interfering unreasonably with 

legitimate plan cost-management 

techniques. The approach in the final 

regulations strikes a reasonable balance 

between allowing plans to use provider 

tiers to effectively manage costs and the 

policy principles of MHPAEA. 

As described earlier in this preamble, 

many commenters to the interim final 

regulations requested that the 

Departments clarify how MHPAEA 

affects the scope of coverage for 

intermediate services (such as 

residential treatment for substance use 

disorders or mental health conditions, 

partial hospitalization, and intensive 

outpatient treatment) and how these 

services fit within the six classifications 

set forth by the interim final regulations. 

Some stakeholders recommended 

establishing a separate classification for 

this intermediate level of care. The 

Departments considered this approach 

but determined that whereas the 

existing classifications—inpatient, innetwork; inpatient, out-of-network; 

outpatient, in-network; outpatient, outof-network; emergency care, and 

prescription medications—are 

classifications commonly used by health 

plans and issuers, a separate 

classification for intermediate care is 

not commonly used by plans and 

issuers. The Departments believe that a 

clearer, more reasonable approach is to 

incorporate the principles of parity into 

existing benefit designs and care 

management strategies. Thus, the final 

regulations provide examples of 

intermediate services and clarify that 

plans and issuers must assign covered 

intermediate level mental health and 

substance use disorder benefits to the 

existing six benefit classifications in the 

same way that they assign comparable 

intermediate medical/surgical benefits 

to these classifications. 

G. Regulatory Flexibility Act— 

Department of Labor and Department of 

Health and Human Services 

The Regulatory Flexibility Act (RFA) 

requires agencies that issue a rule to 

analyze options for regulatory relief of 

small businesses if a rule has a 

significant impact on a substantial 

number of small entities. The RFA 

generally defines a ‘‘small entity’’ as— 

(1) a proprietary firm meeting the size 

standards of the Small Business 

Administration (SBA), (2) a nonprofit 

organization that is not dominant in its 

field, or (3) a small government 

jurisdiction with a population of less 

than 50,000 (States and individuals are 

not included in the definition of ‘‘small 

entity’’). A change in revenues of more 

than 3 percent to 5 percent is often used 

by the Departments of Labor and HHS 

as the measure of significant economic 

impact on a substantial number of small 

entities. 

As discussed in the Web Portal 

interim final rule with comment period 

published on May 5, 2010 (75 FR 

24481), HHS examined the health 

insurance industry in depth in the 

Regulatory Impact Analysis for the 

proposed rule on establishment of the 

Medicare Advantage program (69 FR 

46866, August 3, 2004). In that analysis 

it was determined that there were few, 

if any, insurance firms underwriting 

comprehensive health insurance 

policies (in contrast, for example, to 

travel insurance policies or dental 

discount policies) that fell below the 

size thresholds for ‘‘small’’ business 

(currently $35.5 million in annual 

receipts for health insurance issuers).116

HHS also used the data from Medical 

Loss Ratio annual report submissions 

for the 2012 reporting year to develop 

an estimate of the number of small 

entities that offer comprehensive major 

medical coverage. These estimates may 

overstate the actual number of small 

health insurance issuers that would be 

affected by these regulations, since they 

do not include receipts from these 

companies’ other lines of business. It is 

estimated that there are 58 small entities 

with less than $35.5 million each in 

earned premiums that offer individual 

or group health insurance coverage and 

would therefore be subject to the 

requirements of these regulations. Fortythree percent of these small issuers 

belong to larger holding groups, and 

many, if not all, of these small issuers 

are likely to have other lines of business 

that would result in their revenues 

exceeding $35.5 million. For these 

reasons, the Departments expect that 

these final regulations will not 

significantly affect a substantial number 

of small issuers. 

As noted previously, MHPAEA 

provisions are extended to nongrandfathered insurance coverage in the 

small group market through the EHB 

requirements. Group health plans and 

health insurance coverage offered by 

small employers will incur costs to 

comply with the provisions of these 

final regulations. There are an estimated 

837,000 ERISA-covered nongrandfathered employer group health 

plans with 50 or fewer participants, and 

an estimated 59,000 non-grandfathered 

public, non-Federal employer group 

health plans with 50 or fewer 

participants sponsored by State and 

local governments which were 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68263 

previously exempt from MHPAEA. 

Approximately 13 million participants 

of these plans will benefit from the 

provisions of these regulations. As 

explained earlier in this impact 

analysis, virtually all the impact of 

MHPAEA on the small group market 

will involve a shift of final 

responsibility for payment from 

households to insurers, resulting in an 

estimated increase of 0.5 percent in 

spending. The cost related to the 

disclosure requirements is estimated to 

be approximately $2.4 million for nongrandfathered small group plans that 

were previously exempt from MHPAEA. 

The Departments expect the rules to 

reduce the compliance burden imposed 

on plans and insurers by the statute and 

the implementing interim final 

regulations by clarifying definitions and 

terms contained in the statute and 

providing examples of acceptable 

methods to comply with specific 

provisions. 

H. Special Analyses—Department of the 

Treasury 

For purposes of the Department of the 

Treasury, it has been determined that 

this Treasury decision is not a 

significant regulatory action for 

purposes of Executive Order 12866, as 

supplemented by Executive Order 

13563. Therefore, a regulatory 

assessment is not required. It has also 

been determined that section 553(b) of 

the Administrative Procedure Act (5 

U.S.C. chapter 5) does not apply to these 

regulations. It is hereby certified that the 

collections of information contained in 

these final regulations will not have a 

significant impact on a substantial 

number of small entities. Accordingly, a 

regulatory flexibility analysis is not 

required. 

The final regulations generally apply 

to employers who provide health 

coverage through group health plans to 

employees that include benefits for 

mental health or substance use disorder 

conditions. The IRS expects the final 

regulations to reduce the compliance 

burden imposed on plans and issuers by 

clarifying definitions and terms 

contained in the statute and providing 

examples of acceptable methods to 

comply with specific provisions. 

MHPAEA and the regulations under it 

do not apply to employers with 50 or 

fewer employees (although, separately, 

the EHB regulations adopt MHPAEA). 

Moreover, small employers subject to 

the rule that have more than 50 

employees will generally provide any 

health coverage through insurance or a 

third-party administrator. The issuers of 

insurance or other third-party 

administrators of the health plans, 

rather than the small employers, will as 

a practical matter, satisfy the 

requirements of the regulations in order 

to provide a marketable product. For 

this reason, the burden imposed by the 

reporting requirement of the statute and 

these final regulations on small entities 

is expected to be near zero. Pursuant to 

section 7805(f) of the Code, the notice 

of proposed rulemaking preceding these 

final regulations was submitted to the 

Chief Counsel for Advocacy of the Small 

Business Administration for comment 

on its impact on small businesses. 

I. Paperwork Reduction Act 

The table below summarizes the hour 

burden and costs related to the 

disclosure requirements in these 

regulations. For plans that use issuers or 

third party administrators, the costs are 

reported as cost burden while for plans 

that administer claims in-house, the 

burden is reported as hour burden. 

Plan type Number of 

respondents Labor hours Cost burden 

ERISA-Covered Employer Group Health Plans .......................................................................... 1,258,000 11,976 $2,989,000 

Public, Non-Federal Employer Group Health Plans .................................................................... 82,324 2,517 1,375,312 

Individual Market Health Plans .................................................................................................... 418 25,465 51,066 

1. Departments of Labor and the 

Treasury 

In accordance with the requirements 

of the Paperwork Reduction Act of 1995 

(PRA) (44 U.S.C. 3506(c)(2)), the interim 

final regulations solicited comments on 

the information collections included 

therein. The Departments submitted an 

information collection request (ICR) to 

OMB in accordance with 44 U.S.C. 

3507(d), contemporaneously with the 

publication of the interim final 

regulations for OMB’s review. OMB 

approved the ICR on April 27, 2010, 

under OMB Control Numbers 1210– 

0138 (Department of Labor) and 1545– 

2165 (Department of the Treasury/IRS). 

The Departments also submitted an ICR 

to OMB in accordance with 44 U.S.C. 

3507(d) for the ICR as revised by the 

final regulations. OMB approved the 

ICR under OMB control numbers 1210– 

0138 and 1545–2165, which will expire 

on November 30, 2016. 

As discussed earlier in this preamble, 

the final regulations retain the 

disclosure provisions for group health 

plans and health insurance coverage 

offered in connection with a group 

health plan. (In addition, these 

disclosure provisions are extended to 

non-grandfathered insurance coverage 

in the small group market through the 

EHB requirements and to the individual 

market as a result of the amendments to 

the PHS Act under the Affordable Care 

Act, as discussed in section II.F and 

II.H.1 of this preamble.) 

The MHPAEA disclosures are 

information collection requests (ICRs) 

subject to the PRA. The final regulations 

(29 CFR 2590.712(d)(2)) require a 

Claims Denial Disclosure to be made 

available upon request or as otherwise 

required by the plan administrator (or 

the health insurance issuer offering such 

coverage) to a participant or beneficiary 

that provides the reason for any denial 

under a group health plan (or health 

insurance coverage) of reimbursement 

or payment for services with respect to 

mental health or substance use disorder 

benefits. 

The Departments did not submit an 

IRC to OMB for the Claims Denial 

Disclosure, because the Department of 

Labor’s ERISA claims procedure 

regulation (29 CFR 2560.503–1) and 

disclosure regulation (29 CFR 

2520.104b–1) already require such 

disclosure. The same third-party 

administrators and insurers are hired by 

ERISA and non-ERISA covered plans, so 

both types of plans were likely to 

already be in compliance with the 

Department of Labor rules. Therefore, 

the hour and cost burden associated 

with the claims denial notice already is 

accounted in the ICR for the ERISA 

claims procedure regulation that was 

approved under OMB Control Number 

1210–0053. 

The final regulations (29 CFR 

2590.712(d)(1)) also require plan 

administrators to make the plan’s 

medical necessity determination criteria 

available upon request to potential 

participants, beneficiaries, or 

contracting providers. The Departments 

are unable to estimate with certainty the 

number of requests for medical 

necessity criteria disclosures that will 

be received by plan administrators; 

however, the Departments have 

assumed that, on average, each plan 

affected by the rule will receive one 


emcdonald on DSK67QTVN1PROD with RULES3
68264 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

117EBSA estimates based on the National 

Occupational Employment Survey (June 2012, 

Bureau of Labor Statistics) and the Employment 

Cost Index (September 2012, Bureau of Labor 

Statistics). 

118This estimate is based on an average document 

size of four pages, $.05 cents per page material and 

printing costs, $.44 cent postage costs. 

119 5 CFR 1320.1 through 1320.18. 

120 29 CFR 2560.503–1. See also 26 CFR 54.9815– 

2719T(b)(2)(i), 29 CFR 2590.715–2719(b)(2)(i), and 

45 CFR 147.136(b)(2)(i), requiring nongrandfathered plans and issuers to incorporate the 

internal claims and appeals processes set forth in 

29 CFR 2560.503–1. 

121As described earlier in this preamble, this 

includes documents with information on medical 

necessity criteria for both medical/surgical benefits 

and mental health and substance use disorder 

benefits, as well as the processes, strategies, 

evidentiary standards, and other factors used to 

apply a nonquantitative treatment limitation with 

respect to medical/surgical benefits and mental 

health or substance use disorder benefits under the 

plan. 

122Non-Federal governmental plans may opt-out 

of MHPAEA and certain other requirements under 

section 2721 of the PHS Act. Since past experience 

has shown that the number of non-Federal 

governmental plans that opt-out is small, the impact 

of the opt-out election should be immaterial on the 

Department’s estimates. 

123EBSA estimates based on the National 

Occupational Employment Survey (June 2012, 

Bureau of Labor Statistics) and the Employment 

Cost Index (September 2012, Bureau of Labor 

Statistics). 

124Estimate based on medical loss ratio reports 

submitted by issuers for 2012 reporting year and 

from the study ‘‘Effects on Health Insurance and the 

Federal Budget for the Insurance Coverage 

Provisions in the Affordable Care Act—May 2013 

Baseline,’’ by Congressional Budget Office, May 14, 

2013. 

request. The Departments estimate that 

there are about 1,258,000 ERISA 

covered health plans affected by the 

regulations. The Departments estimate 

that approximately seven percent of 

large plans and all small plans 

administer claims using service 

providers; therefore, about 11 percent of 

the medical necessity criteria 

disclosures will be done in-house. For 

PRA purposes, plans using service 

providers will report the costs as a cost 

burden, while plans administering 

claims in-house will report the burden 

as an hour burden. 

The Departments assume that it will 

take a medically trained clerical staff 

member five minutes to respond to each 

request at a wage rate of $26.85 117 per 

hour. This results in an annual hour 

burden of nearly 12,000 hours and an 

associated equivalent cost of nearly 

$322,000 for the approximately 144,000 

requests done in-house by plans. The 

remaining 1,114,000 medical necessity 

criteria disclosures will be provided 

through service providers resulting in a 

cost burden of approximately 

$2,493,000. 

The Departments also calculated the 

cost to deliver the requested medical 

necessity criteria disclosures. Many 

insurers and plans already may have the 

information prepared in electronic form, 

and the Departments assume that 38 

percent of requests will be delivered 

electronically resulting in a de minimis 

cost. The Departments estimate that the 

cost burden associated with distributing 

the approximately 780,000 medical 

necessity criteria disclosures sent by 

paper will be approximately 

$496,000.118 The Departments note that 

persons are not required to respond to, 

and generally are not subject to any 

penalty for failing to comply with, an 

ICR unless the ICR has a valid OMB 

control number.119 The Departments 

will provide notice of OMB approval via 

a Federal Register notice. 

These paperwork burden estimates 

are summarized as follows: 

Type of Review: Ongoing. 

Agencies: Employee Benefits Security 

Administration, Department of Labor; 

Internal Revenue Service, U.S. 

Department of the Treasury, 

Title: Notice of Medical Necessity 

Criteria under the Mental Health Parity 

and Addition Equity Act of 2008. 

OMB Number: 1210–0138; 1545– 

2165. 

Affected Public: Business or other forprofit; not-for-profit institutions. 

Total Respondents: 1,258,000. 

Total Responses: 1,258,000. 

Frequency of Response: Occasionally. 

Estimated Total Annual Burden 

Hours: 5,988 hours (Employee Benefits 

Security Administration); 5,988 hours 

(Internal Revenue Service). 

Estimated Total Annual Burden Cost: 

$1,494,000 (Employee Benefits Security 

Administration); $1,494,000 (Internal 

Revenue Service). 

2. Department of Health and Human 

Services 

As discussed earlier in this preamble, 

the final regulations retain the 

disclosure provisions for group health 

plans and health insurance coverage 

offered in connection with a group 

health plan. (In addition, these 

disclosure provisions are extended to 

non-grandfathered insurance coverage 

in the small group market through the 

EHB requirements and to the individual 

market as a result of the amendments to 

the PHS Act under the Affordable Care 

Act, as discussed in section II.F and 

II.H.1 of this preamble.) The burden 

estimates below have been updated to 

reflect these changes. 

In addition, as described earlier in 

this preamble, the final regulations 

reiterate that, in addition to MHPAEA’s 

disclosure requirements, provisions of 

other applicable law require disclosure 

of information relevant to medical/

surgical, mental health, and substance 

use disorder benefits. For example, the 

Departments’ claims and appeals 

regulations under the Affordable Care 

Act (applicable to non-grandfathered 

group health plans (including nonERISA plans) and non-grandfathered 

health insurance issuers in the group 

and individual markets),120 set forth 

rules regarding claims and appeals, 

including the right of claimants (or their 

authorized representative) upon appeal 

of an adverse benefit determination (or 

a final internal adverse benefit 

determination) to be provided, upon 

request and free of charge, reasonable 

access to and copies of all documents, 

records, and other information relevant 

to the claimant’s claim for benefits.121

The burden associated with this 

disclosure is accounted for in the ICR 

approved under OMB control number 

0938–1099. 

Medical Necessity Disclosure 

HHS estimates that there are about 

30.2 million participants covered by 

approximately 82,0004 State and local 

public plans that are subject to the 

MHPAEA disclosure requirements.122

HHS is unable to estimate with certainty 

the number of requests for medical 

necessity criteria disclosures that will 

be received by plan administrators; 

however, HHS has assumed that, on 

average, each plan affected by the rule 

will receive one request. HHS estimates 

that approximately 93 percent of large 

plans administer claims using third 

party administrators. Furthermore the 

vast majority of all smaller employers 

usually are fully insured such that 

issuers will be administering their 

claims. Therefore 5.1 percent of claims 

are administered in-house. For plans 

that use issuers or third party 

administrators, the costs are reported as 

cost burden while for plans that 

administer claims in-house, the burden 

is reported as hour burden. For 

purposes of this estimate, HHS assumes 

that it will take a medically trained 

clerical staff member five minutes to 

respond to each request at a wage rate 

of $26.85 123 per hour. This results in an 

annual hour burden of 350 hours and an 

associated equivalent cost of about 

$9,000 for the approximately 4,200 

requests handled by plans. The 

remaining 78,000 claims (94.9 percent) 

are provided through a third-party 

administrator or an issuer and results in 

a cost burden of approximately 

$175,000. 

In the individual market there will be 

an estimated 18 million enrollees 124

enrolled in plans offered by 418 issuers 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68265 

125Following the assumption in the ERISA claims 

regulation, it was assumed 75 percent of the 

explanation of denials disclosures would be 

delivered electronically, while it was assumed that 

38 percent of non-denial related requests for the 

medical necessity criteria would be delivered 

electronically. 

126This estimate is based on an average document 

size of four pages, $.05 cents per page material and 

printing costs, $0.46 cent postage costs. 

offering coverage in multiple states. 

Assuming that, on average, each issuer 

will receive one request in each State 

that it offers coverage in, there will be 

a total of about 2,600 requests in each 

year. The annual burden to issuers for 

sending the medical necessity 

disclosures is estimated to be 220 hours 

with an associated equivalent cost of 

approximately $6,000. 

Claims Denial Disclosure 

As described earlier in this preamble, 

the Department of Labor’s ERISA claims 

procedure regulation (29 CFR 2560.503– 

1) already requires such disclosures. 

Although non-ERISA covered plans, 

such as plans sponsored by State and 

local governments and individual plans 

that are subject to the PHS Act, are not 

required to comply with the ERISA 

claims procedure regulation, the final 

regulations provide that these plans 

(and health insurance coverage offered 

in connection with such plans) will be 

deemed to satisfy the MHPAEA claims 

denial disclosure requirement if they 

comply with the ERISA claims 

procedure regulation. 

Using assumptions similar to those 

used for the ERISA claims procedure 

regulation, HHS estimates that for State 

and local public plans, there will be 

approximately 30.9 million claims for 

mental health or substance use disorder 

benefits with approximately 4.6 million 

denials that could result in a request for 

the reason for denial. HHS has no data 

on the percent of denials that will result 

in a request for an explanation, but 

assumed that ten percent of denials will 

result in a request for an explanation 

(464,000 requests). HHS estimates that a 

medically trained clerical staff member 

may require five minutes to respond to 

each request at a labor rate of $26.85 per 

hour. This results in an annual burden 

of nearly 2,000 hours and an associated 

equivalent cost of nearly $53,000 for the 

approximately 24,000 requests 

completed by plans. The remaining 

440,000 are provided through an issuer 

or a third-party administrator, which 

results in a cost burden of 

approximately $984,000. In the 

individual market, under similar 

assumptions, HHS estimates that there 

will be approximately 18.4 million 

claims for mental health or substance 

use disorder benefits with 

approximately 2.75 million denials that 

could result in a request for explanation 

of denial. Assuming ten percent of 

denials result in such a request, it is 

estimated that there will be about 

275,000 requests for an explanation of 

reason for denial, which will be 

completed with a burden of 23,000 

hours and equivalent cost of 

approximately $616,000. 

In association with the explanation of 

denial, participants may request a copy 

of the medical necessity criteria. While 

HHS does not know how many notices 

of denial will result in a request for the 

criteria of medical necessity, HHS 

assumes that ten percent of those 

requesting an explanation of the reason 

for denial will also request the criteria 

of medical necessity, resulting in about 

46,000 requests, 2,400 of which will be 

completed in-house with a burden of 

200 hours and equivalent cost of 

approximately $5,000 and about 44,000 

requests handled by issuers or thirdparty providers with a cost burden of 

approximately $98,000. In the 

individual market, under similar 

assumptions, HHS estimates that there 

will be about 27,500 requests for 

medical necessity criteria, which will be 

completed with a burden of 2,295 hours 

and equivalent cost of approximately 

$62,000. 

HHS also calculated the cost to 

deliver the requested information. Many 

insurers or plans may already have the 

information prepared in electronic 

format, and HHS assumes that requests 

will be delivered electronically resulting 

in a de minimis cost.125 HHS estimates 

that the cost burden associated with 

distributing the approximately 256,000 

disclosures sent by paper will be 

approximately $169,000.126

The ICRs associated with the medical 

necessity and claims denial disclosures 

are currently approved under OMB 

control number 0938–1080. The 

Department will seek OMB approval for 

revised ICRs that will include the 

burden to small group health plans and 

individual market plans related to the 

disclosure requirements in the final 

regulations. A Federal Register notice 

will be published, providing the public 

with an opportunity to comment on the 

ICRs. 

J. Unfunded Mandates Reform Act 

Section 202 of the Unfunded 

Mandates Reform Act (UMRA) of 1995 

requires that agencies assess anticipated 

costs and benefits before issuing any 

final rule that includes a Federal 

mandate that could result in 

expenditure in any one year by State, 

local or tribal governments, in the 

aggregate, or by the private sector, of 

$100 million in 1995 dollars, updated 

annually for inflation. In 2013, that 

threshold level is approximately $141 

million. These regulations are not 

subject to the UMRA because they were 

not preceded by a notice of proposed 

rulemaking. However, consistent with 

policy embodied in the UMRA, these 

regulations have been designed to be a 

low-burden alternative for State, local 

and tribal governments, and the private 

sector while achieving the objectives of 

MHPAEA. 

K. Federalism Statement—Department 

of Labor and Department of Health and 

Human Services 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a final 

rule that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

In the Departments’ view, these 

regulations have Federalism 

implications, because they have direct 

effects on the States, the relationship 

between the Federal government and 

States, or on the distribution of power 

and responsibilities among various 

levels of government. However, in the 

Departments’ view, the Federalism 

implications of these regulations are 

substantially mitigated because, with 

respect to health insurance issuers, the 

Departments expect that the majority of 

States have enacted or will enact laws 

or take other appropriate action 

resulting in their meeting or exceeding 

the Federal MHPAEA standards. 

In general, through section 514, 

ERISA supersedes State laws to the 

extent that they relate to any covered 

employee benefit plan, and preserves 

State laws that regulate insurance, 

banking, or securities. While ERISA 

prohibits States from regulating a plan 

as an insurance or investment company 

or bank, the preemption provisions of 

section 731 of ERISA and section 2724 

of the PHS Act (implemented in 29 CFR 

2590.731(a) and 45 CFR 146.143(a)) 

apply so that the MHPAEA 

requirements are not to be ‘‘construed to 

supersede any provision of State law 

which establishes, implements, or 

continues in effect any standard or 

requirement solely relating to health 

insurance issuers in connection with 

group health insurance coverage except 

to the extent that such standard or 

requirement prevents the application of 

a requirement’’ of MHPAEA. The 

conference report accompanying HIPAA 

indicates that this is intended to be the 

‘‘narrowest’’ preemption of State laws. 

(See House Conf. Rep. No. 104–736, at 


emcdonald on DSK67QTVN1PROD with RULES3
68266 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

205, reprinted in 1996 U.S. Code Cong. 

& Admin. News 2018.) 

States may continue to apply State 

law requirements except to the extent 

that such requirements prevent the 

application of the MHPAEA 

requirements that are the subject of this 

rulemaking. State insurance laws that 

are more stringent than the Federal 

requirements are unlikely to ‘‘prevent 

the application of’’ MHPAEA, and be 

preempted. Accordingly, States have 

significant latitude to impose 

requirements on health insurance 

issuers that are more restrictive than the 

Federal law. 

In compliance with the requirement 

of Executive Order 13132 that agencies 

examine closely any policies that may 

have Federalism implications or limit 

the policy making discretion of the 

States, the Departments have engaged in 

numerous efforts to consult with and 

work cooperatively with affected State 

and local officials. For example, HHS 

has provided training on MHPAEA for 

state regulators though the National 

Association Insurance Commissioners 

(NAIC) and has been available to State 

regulators to address any issues that 

arise. HHS has also collaborated with 

regulators in a number of States on 

MHPAEA enforcement strategies with 

the goal of maintaining state regulator 

involvement in the implementation and 

enforcement of MHPAEA in their States. 

It is expected that the Departments will 

continue to act in a similar fashion in 

enforcing the MHPAEA requirements. 

Throughout the process of developing 

these regulations, to the extent feasible 

within the specific preemption 

provisions of HIPAA as it applies to 

MHPAEA, the Departments have 

attempted to balance the States’ 

interests in regulating health insurance 

issuers, and Congress’ intent to provide 

uniform minimum protections to 

consumers in every State. By doing so, 

it is the Departments’ view that they 

have complied with the requirements of 

Executive Order 13132. 

Pursuant to the requirements set forth 

in section 8(a) of Executive Order 

13132, and by the signatures affixed to 

these regulations, the Departments 

certify that the Employee Benefits 

Security Administration and the 

Centers for Medicare & Medicaid 

Services have complied with the 

requirements of Executive Order 13132 

for the attached regulations in a 

meaningful and timely manner. 

L. Congressional Review Act 

These final regulations are subject to 

the Congressional Review Act 

provisions of the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (5 U.S.C. 801 et seq.), which 

specifies that before a rule can take 

effect, the Federal agency promulgating 

the rule shall submit to each House of 

the Congress and to the Comptroller 

General a report containing a copy of 

the rule along with other specified 

information, and have been transmitted 

to Congress and the Comptroller General 

for review. 

IV. Statutory Authority 

The Department of the Treasury 

regulations are adopted pursuant to the 

authority contained in sections 7805 

and 9833 of the Code. 

The Department of Labor regulations 

are adopted pursuant to the authority 

contained in 29 U.S.C. 1027, 1059, 1135, 

1161–1168, 1169, 1181–1183, 1181 note, 

1185, 1185a, 1185b, 1191, 1191a, 1191b, 

and 1191c; sec. 101(g), Public Law 104– 

191, 110 Stat. 1936; sec. 401(b), Public 

Law 105–200, 112 Stat. 645 (42 U.S.C. 

651 note); sec. 512(d), Public Law 110– 

343, 122 Stat. 3765; Public Law 110– 

460, 122 Stat. 5123; Secretary of Labor’s 

Order 1–2011, 77 FR 1088 (January 9, 

2012). 

The Department of Health and Human 

Services regulations are adopted 

pursuant to the authority contained in 

sections 2701 through 2763, 2791, and 

2792 of the PHS Act (42 USC 300gg 

through 300gg–63, 300gg–91, and 

300gg–92), as amended. 

List of Subjects 

26 CFR Part 54 

Excise taxes, Health care, Health 

insurance, Pensions, Reporting and 

recordkeeping requirements. 

29 CFR Part 2590 

Continuation coverage, Disclosure, 

Employee benefit plans, Group health 

plans, Health care, Health insurance, 

Medical child support, Reporting and 

recordkeeping requirements. 

45 CFR Parts 146 and 147 

Health care, Health insurance, 

Reporting and recordkeeping 

requirements, and State regulation of 

health insurance. 

John Dalrymple, 

Deputy Commissioner for Services and 

Enforcement, Internal Revenue Service. 

Approved: November 6, 2013. 

Mark J. Mazur, 

Assistant Secretary of the Treasury (Tax 

Policy). 

Signed this 6th day of November, 2013. 

Phyllis C. Borzi, 

Assistant Secretary, Employee Benefits 

Security Administration, Department of 

Labor. 

Dated: October 25, 2013. 

Marilyn Tavenner, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Dated: November 5, 2013. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Chapter I 

Accordingly, 26 CFR Part 54 is 

amended as follows: 

PART 54—PENSION EXCISE TAXES 

■ Paragraph 1. The authority citation 

for part 54 is amended by removing the 

entry for § 54.9812–1T and by adding an 

entry in numerical order to read as 

follows: 

Authority: 26 U.S.C. 7805 * * * 

Section 54.9812–1 also issued under 26 

U.S.C. 9833. * * * 

■ Par. 2. Section 54.9812–1T is 

removed. 

■ Par. 3. Section 54.9812–1 is added to 

read as follows: 

§ 54.9812–1 Parity in mental health and 

substance use disorder benefits. 

(a) Meaning of terms. For purposes of 

this section, except where the context 

clearly indicates otherwise, the 

following terms have the meanings 

indicated: 

Aggregate lifetime dollar limit means 

a dollar limitation on the total amount 

of specified benefits that may be paid 

under a group health plan (or health 

insurance coverage offered in 

connection with such a plan) for any 

coverage unit. 

Annual dollar limit means a dollar 

limitation on the total amount of 

specified benefits that may be paid in a 

12-month period under a group health 

plan (or health insurance coverage 

offered in connection with such a plan) 

for any coverage unit. 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68267 

Coverage unit means coverage unit as 

described in paragraph (c)(1)(iv) of this 

section. 

Cumulative financial requirements 

are financial requirements that 

determine whether or to what extent 

benefits are provided based on 

accumulated amounts and include 

deductibles and out-of-pocket 

maximums. (However, cumulative 

financial requirements do not include 

aggregate lifetime or annual dollar limits 

because these two terms are excluded 

from the meaning of financial 

requirements.) 

Cumulative quantitative treatment 

limitations are treatment limitations that 

determine whether or to what extent 

benefits are provided based on 

accumulated amounts, such as annual 

or lifetime day or visit limits. 

Financial requirements include 

deductibles, copayments, coinsurance, 

or out-of-pocket maximums. Financial 

requirements do not include aggregate 

lifetime or annual dollar limits. 

Medical/surgical benefits means 

benefits with respect to items or services 

for medical conditions or surgical 

procedures, as defined under the terms 

of the plan or health insurance coverage 

and in accordance with applicable 

Federal and State law, but does not 

include mental health or substance use 

disorder benefits. Any condition 

defined by the plan or coverage as being 

or as not being a medical/surgical 

condition must be defined to be 

consistent with generally recognized 

independent standards of current 

medical practice (for example, the most 

current version of the International 

Classification of Diseases (ICD) or State 

guidelines). 

Mental health benefits means benefits 

with respect to items or services for 

mental health conditions, as defined 

under the terms of the plan or health 

insurance coverage and in accordance 

with applicable Federal and State law. 

Any condition defined by the plan or 

coverage as being or as not being a 

mental health condition must be 

defined to be consistent with generally 

recognized independent standards of 

current medical practice (for example, 

the most current version of the 

Diagnostic and Statistical Manual of 

Mental Disorders (DSM), the most 

current version of the ICD, or State 

guidelines). 

Substance use disorder benefits 

means benefits with respect to items or 

services for substance use disorders, as 

defined under the terms of the plan or 

health insurance coverage and in 

accordance with applicable Federal and 

State law. Any disorder defined by the 

plan as being or as not being a substance 

use disorder must be defined to be 

consistent with generally recognized 

independent standards of current 

medical practice (for example, the most 

current version of the DSM, the most 

current version of the ICD, or State 

guidelines). 

Treatment limitations include limits 

on benefits based on the frequency of 

treatment, number of visits, days of 

coverage, days in a waiting period, or 

other similar limits on the scope or 

duration of treatment. Treatment 

limitations include both quantitative 

treatment limitations, which are 

expressed numerically (such as 50 

outpatient visits per year), and 

nonquantitative treatment limitations, 

which otherwise limit the scope or 

duration of benefits for treatment under 

a plan or coverage. (See paragraph 

(c)(4)(ii) of this section for an illustrative 

list of nonquantitative treatment 

limitations.) A permanent exclusion of 

all benefits for a particular condition or 

disorder, however, is not a treatment 

limitation for purposes of this 

definition. 

(b) Parity requirements with respect to 

aggregate lifetime and annual dollar 

limits. This paragraph (b) details the 

application of the parity requirements 

with respect to aggregate lifetime and 

annual dollar limits. This paragraph (b) 

does not address the provisions of PHS 

Act section 2711, as incorporated in 

ERISA section 715 and Code section 

9815, which prohibit imposing lifetime 

and annual limits on the dollar value of 

essential health benefits. 

(1) General—(i) General parity 

requirement. A group health plan (or 

health insurance coverage offered by an 

issuer in connection with a group health 

plan) that provides both medical/

surgical benefits and mental health or 

substance use disorder benefits must 

comply with paragraph (b)(2), (b)(3), or 

(b)(5) of this section. 

(ii) Exception. The rule in paragraph 

(b)(1)(i) of this section does not apply if 

a plan (or health insurance coverage) 

satisfies the requirements of paragraph 

(f) or (g) of this section (relating to 

exemptions for small employers and for 

increased cost). 

(2) Plan with no limit or limits on less 

than one-third of all medical/surgical 

benefits. If a plan (or health insurance 

coverage) does not include an aggregate 

lifetime or annual dollar limit on any 

medical/surgical benefits or includes an 

aggregate lifetime or annual dollar limit 

that applies to less than one-third of all 

medical/surgical benefits, it may not 

impose an aggregate lifetime or annual 

dollar limit, respectively, on mental 

health or substance use disorder 

benefits. 

(3) Plan with a limit on at least twothirds of all medical/surgical benefits. If 

a plan (or health insurance coverage) 

includes an aggregate lifetime or annual 

dollar limit on at least two-thirds of all 

medical/surgical benefits, it must 

either— 

(i) Apply the aggregate lifetime or 

annual dollar limit both to the medical/ 

surgical benefits to which the limit 

would otherwise apply and to mental 

health or substance use disorder 

benefits in a manner that does not 

distinguish between the medical/

surgical benefits and mental health or 

substance use disorder benefits; or 

(ii) Not include an aggregate lifetime 

or annual dollar limit on mental health 

or substance use disorder benefits that 

is less than the aggregate lifetime or 

annual dollar limit, respectively, on 

medical/surgical benefits. (For 

cumulative limits other than aggregate 

lifetime or annual dollar limits, see 

paragraph (c)(3)(v) of this section 

prohibiting separately accumulating 

cumulative financial requirements or 

cumulative quantitative treatment 

limitations.) 

(4) Determining one-third and twothirds of all medical/surgical benefits. 

For purposes of this paragraph (b), the 

determination of whether the portion of 

medical/surgical benefits subject to an 

aggregate lifetime or annual dollar limit 

represents one-third or two-thirds of all 

medical/surgical benefits is based on the 

dollar amount of all plan payments for 

medical/surgical benefits expected to be 

paid under the plan for the plan year (or 

for the portion of the plan year after a 

change in plan benefits that affects the 

applicability of the aggregate lifetime or 

annual dollar limits). Any reasonable 

method may be used to determine 

whether the dollar amount expected to 

be paid under the plan will constitute 

one-third or two-thirds of the dollar 

amount of all plan payments for 

medical/surgical benefits. 

(5) Plan not described in paragraph 

(b)(2) or (b)(3) of this section—(i) In 

general. A group health plan (or health 

insurance coverage) that is not 

described in paragraph (b)(2) or (b)(3) of 

this section with respect to aggregate 

lifetime or annual dollar limits on 

medical/surgical benefits, must either— 

(A) Impose no aggregate lifetime or 

annual dollar limit, as appropriate, on 

mental health or substance use disorder 

benefits; or 

(B) Impose an aggregate lifetime or 

annual dollar limit on mental health or 

substance use disorder benefits that is 

no less than an average limit calculated 

for medical/surgical benefits in the 

following manner. The average limit is 

calculated by taking into account the 


emcdonald on DSK67QTVN1PROD with RULES3
68268 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

weighted average of the aggregate 

lifetime or annual dollar limits, as 

appropriate, that are applicable to the 

categories of medical/surgical benefits. 

Limits based on delivery systems, such 

as inpatient/outpatient treatment or 

normal treatment of common, low-cost 

conditions (such as treatment of normal 

births), do not constitute categories for 

purposes of this paragraph (b)(5)(i)(B). 

In addition, for purposes of determining 

weighted averages, any benefits that are 

not within a category that is subject to 

a separately-designated dollar limit 

under the plan are taken into account as 

a single separate category by using an 

estimate of the upper limit on the dollar 

amount that a plan may reasonably be 

expected to incur with respect to such 

benefits, taking into account any other 

applicable restrictions under the plan. 

(ii) Weighting. For purposes of this 

paragraph (b)(5), the weighting 

applicable to any category of medical/

surgical benefits is determined in the 

manner set forth in paragraph (b)(4) of 

this section for determining one-third or 

two-thirds of all medical/surgical 

benefits. 

(c) Parity requirements with respect to 

financial requirements and treatment 

limitations—(1) Clarification of terms— 

(i) Classification of benefits. When 

reference is made in this paragraph (c) 

to a classification of benefits, the term 

‘‘classification’’ means a classification 

as described in paragraph (c)(2)(ii) of 

this section. 

(ii) Type of financial requirement or 

treatment limitation. When reference is 

made in this paragraph (c) to a type of 

financial requirement or treatment 

limitation, the reference to type means 

its nature. Different types of financial 

requirements include deductibles, 

copayments, coinsurance, and out-ofpocket maximums. Different types of 

quantitative treatment limitations 

include annual, episode, and lifetime 

day and visit limits. See paragraph 

(c)(4)(ii) of this section for an illustrative 

list of nonquantitative treatment 

limitations. 

(iii) Level of a type of financial 

requirement or treatment limitation. 

When reference is made in this 

paragraph (c) to a level of a type of 

financial requirement or treatment 

limitation, level refers to the magnitude 

of the type of financial requirement or 

treatment limitation. For example, 

different levels of coinsurance include 

20 percent and 30 percent; different 

levels of a copayment include $15 and 

$20; different levels of a deductible 

include $250 and $500; and different 

levels of an episode limit include 21 

inpatient days per episode and 30 

inpatient days per episode. 

(iv) Coverage unit. When reference is 

made in this paragraph (c) to a coverage 

unit, coverage unit refers to the way in 

which a plan (or health insurance 

coverage) groups individuals for 

purposes of determining benefits, or 

premiums or contributions. For 

example, different coverage units 

include self-only, family, and employeeplus-spouse. 

(2) General parity requirement—(i) 

General rule. A group health plan (or 

health insurance coverage offered by an 

issuer in connection with a group health 

plan) that provides both medical/

surgical benefits and mental health or 

substance use disorder benefits may not 

apply any financial requirement or 

treatment limitation to mental health or 

substance use disorder benefits in any 

classification that is more restrictive 

than the predominant financial 

requirement or treatment limitation of 

that type applied to substantially all 

medical/surgical benefits in the same 

classification. Whether a financial 

requirement or treatment limitation is a 

predominant financial requirement or 

treatment limitation that applies to 

substantially all medical/surgical 

benefits in a classification is determined 

separately for each type of financial 

requirement or treatment limitation. The 

application of the rules of this 

paragraph (c)(2) to financial 

requirements and quantitative treatment 

limitations is addressed in paragraph 

(c)(3) of this section; the application of 

the rules of this paragraph (c)(2) to 

nonquantitative treatment limitations is 

addressed in paragraph (c)(4) of this 

section. 

(ii) Classifications of benefits used for 

applying rules—(A) In general. If a plan 

(or health insurance coverage) provides 

mental health or substance use disorder 

benefits in any classification of benefits 

described in this paragraph (c)(2)(ii), 

mental health or substance use disorder 

benefits must be provided in every 

classification in which medical/surgical 

benefits are provided. In determining 

the classification in which a particular 

benefit belongs, a plan (or health 

insurance issuer) must apply the same 

standards to medical/surgical benefits 

and to mental health or substance use 

disorder benefits. To the extent that a 

plan (or health insurance coverage) 

provides benefits in a classification and 

imposes any separate financial 

requirement or treatment limitation (or 

separate level of a financial requirement 

or treatment limitation) for benefits in 

the classification, the rules of this 

paragraph (c) apply separately with 

respect to that classification for all 

financial requirements or treatment 

limitations (illustrated in examples in 

paragraph (c)(2)(ii)(C) of this section). 

The following classifications of benefits 

are the only classifications used in 

applying the rules of this paragraph (c): 

(1) Inpatient, in-network. Benefits 

furnished on an inpatient basis and 

within a network of providers 

established or recognized under a plan 

or health insurance coverage. See 

special rules for plans with multiple 

network tiers in paragraph (c)(3)(iii) of 

this section. 

(2) Inpatient, out-of-network. Benefits 

furnished on an inpatient basis and 

outside any network of providers 

established or recognized under a plan 

or health insurance coverage. This 

classification includes inpatient benefits 

under a plan (or health insurance 

coverage) that has no network of 

providers. 

(3) Outpatient, in-network. Benefits 

furnished on an outpatient basis and 

within a network of providers 

established or recognized under a plan 

or health insurance coverage. See 

special rules for office visits and plans 

with multiple network tiers in 

paragraph (c)(3)(iii) of this section. 

(4) Outpatient, out-of-network. 

Benefits furnished on an outpatient 

basis and outside any network of 

providers established or recognized 

under a plan or health insurance 

coverage. This classification includes 

outpatient benefits under a plan (or 

health insurance coverage) that has no 

network of providers. See special rules 

for office visits in paragraph (c)(3)(iii) of 

this section. 

(5) Emergency care. Benefits for 

emergency care. 

(6) Prescription drugs. Benefits for 

prescription drugs. See special rules for 

multi-tiered prescription drug benefits 

in paragraph (c)(3)(iii) of this section. 

(B) Application to out-of-network 

providers. See paragraph (c)(2)(ii)(A) of 

this section, under which a plan (or 

health insurance coverage) that provides 

mental health or substance use disorder 

benefits in any classification of benefits 

must provide mental health or 

substance use disorder benefits in every 

classification in which medical/surgical 

benefits are provided, including out-ofnetwork classifications. 

(C) Examples. The rules of this 

paragraph (c)(2)(ii) are illustrated by the 

following examples. In each example, 

the group health plan is subject to the 

requirements of this section and 

provides both medical/surgical benefits 

and mental health and substance use 

disorder benefits. 

Example 1. (i) Facts. A group health plan 

offers inpatient and outpatient benefits and 

does not contract with a network of 

providers. The plan imposes a $500 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68269 

deductible on all benefits. For inpatient 

medical/surgical benefits, the plan imposes a 

coinsurance requirement. For outpatient 

medical/surgical benefits, the plan imposes 

copayments. The plan imposes no other 

financial requirements or treatment 

limitations. 

(ii) Conclusion. In this Example 1, because 

the plan has no network of providers, all 

benefits provided are out-of-network. 

Because inpatient, out-of-network medical/

surgical benefits are subject to separate 

financial requirements from outpatient, outof-network medical/surgical benefits, the 

rules of this paragraph (c) apply separately 

with respect to any financial requirements 

and treatment limitations, including the 

deductible, in each classification. 

Example 2. (i) Facts. A plan imposes a 

$500 deductible on all benefits. The plan has 

no network of providers. The plan generally 

imposes a 20 percent coinsurance 

requirement with respect to all benefits, 

without distinguishing among inpatient, 

outpatient, emergency care, or prescription 

drug benefits. The plan imposes no other 

financial requirements or treatment 

limitations. 

(ii) Conclusion. In this Example 2, because 

the plan does not impose separate financial 

requirements (or treatment limitations) based 

on classification, the rules of this paragraph 

(c) apply with respect to the deductible and 

the coinsurance across all benefits. 

Example 3. (i) Facts. Same facts as 

Example 2, except the plan exempts 

emergency care benefits from the 20 percent 

coinsurance requirement. The plan imposes 

no other financial requirements or treatment 

limitations. 

(ii) Conclusion. In this Example 3, because 

the plan imposes separate financial 

requirements based on classifications, the 

rules of this paragraph (c) apply with respect 

to the deductible and the coinsurance 

separately for— 

(A) Benefits in the emergency care 

classification; and 

(B) All other benefits. 

Example 4. (i) Facts. Same facts as 

Example 2, except the plan also imposes a 

preauthorization requirement for all inpatient 

treatment in order for benefits to be paid. No 

such requirement applies to outpatient 

treatment. 

(ii) Conclusion. In this Example 4, because 

the plan has no network of providers, all 

benefits provided are out-of-network. 

Because the plan imposes a separate 

treatment limitation based on classifications, 

the rules of this paragraph (c) apply with 

respect to the deductible and coinsurance 

separately for— 

(A) Inpatient, out-of-network benefits; and 

(B) All other benefits. 

(3) Financial requirements and 

quantitative treatment limitations—(i) 

Determining ‘‘substantially all’’ and 

‘‘predominant’’—(A) Substantially all. 

For purposes of this paragraph (c), a 

type of financial requirement or 

quantitative treatment limitation is 

considered to apply to substantially all 

medical/surgical benefits in a 

classification of benefits if it applies to 

at least two-thirds of all medical/

surgical benefits in that classification. 

(For this purpose, benefits expressed as 

subject to a zero level of a type of 

financial requirement are treated as 

benefits not subject to that type of 

financial requirement, and benefits 

expressed as subject to a quantitative 

treatment limitation that is unlimited 

are treated as benefits not subject to that 

type of quantitative treatment 

limitation.) If a type of financial 

requirement or quantitative treatment 

limitation does not apply to at least twothirds of all medical/surgical benefits in 

a classification, then that type cannot be 

applied to mental health or substance 

use disorder benefits in that 

classification. 

(B) Predominant—(1) If a type of 

financial requirement or quantitative 

treatment limitation applies to at least 

two-thirds of all medical/surgical 

benefits in a classification as 

determined under paragraph (c)(3)(i)(A) 

of this section, the level of the financial 

requirement or quantitative treatment 

limitation that is considered the 

predominant level of that type in a 

classification of benefits is the level that 

applies to more than one-half of 

medical/surgical benefits in that 

classification subject to the financial 

requirement or quantitative treatment 

limitation. 

(2) If, with respect to a type of 

financial requirement or quantitative 

treatment limitation that applies to at 

least two-thirds of all medical/surgical 

benefits in a classification, there is no 

single level that applies to more than 

one-half of medical/surgical benefits in 

the classification subject to the financial 

requirement or quantitative treatment 

limitation, the plan (or health insurance 

issuer) may combine levels until the 

combination of levels applies to more 

than one-half of medical/surgical 

benefits subject to the financial 

requirement or quantitative treatment 

limitation in the classification. The least 

restrictive level within the combination 

is considered the predominant level of 

that type in the classification. (For this 

purpose, a plan may combine the most 

restrictive levels first, with each less 

restrictive level added to the 

combination until the combination 

applies to more than one-half of the 

benefits subject to the financial 

requirement or treatment limitation.) 

(C) Portion based on plan payments. 

For purposes of this paragraph (c), the 

determination of the portion of medical/ 

surgical benefits in a classification of 

benefits subject to a financial 

requirement or quantitative treatment 

limitation (or subject to any level of a 

financial requirement or quantitative 

treatment limitation) is based on the 

dollar amount of all plan payments for 

medical/surgical benefits in the 

classification expected to be paid under 

the plan for the plan year (or for the 

portion of the plan year after a change 

in plan benefits that affects the 

applicability of the financial 

requirement or quantitative treatment 

limitation). 

(D) Clarifications for certain threshold 

requirements. For any deductible, the 

dollar amount of plan payments 

includes all plan payments with respect 

to claims that would be subject to the 

deductible if it had not been satisfied. 

For any out-of-pocket maximum, the 

dollar amount of plan payments 

includes all plan payments associated 

with out-of-pocket payments that are 

taken into account towards the out-ofpocket maximum as well as all plan 

payments associated with out-of-pocket 

payments that would have been made 

towards the out-of-pocket maximum if it 

had not been satisfied. Similar rules 

apply for any other thresholds at which 

the rate of plan payment changes. (See 

also PHS Act section 2707(b) and 

Affordable Care Act section 1302(c), 

which establish limitations on annual 

deductibles for non-grandfathered 

health plans in the small group market 

and annual limitations on out-of-pocket 

maximums for all non-grandfathered 

health plans.) 

(E) Determining the dollar amount of 

plan payments. Subject to paragraph 

(c)(3)(i)(D) of this section, any 

reasonable method may be used to 

determine the dollar amount expected 

to be paid under a plan for medical/

surgical benefits subject to a financial 

requirement or quantitative treatment 

limitation (or subject to any level of a 

financial requirement or quantitative 

treatment limitation). 

(ii) Application to different coverage 

units. If a plan (or health insurance 

coverage) applies different levels of a 

financial requirement or quantitative 

treatment limitation to different 

coverage units in a classification of 

medical/surgical benefits, the 

predominant level that applies to 

substantially all medical/surgical 

benefits in the classification is 

determined separately for each coverage 

unit. 

(iii) Special rules—(A) Multi-tiered 

prescription drug benefits. If a plan (or 

health insurance coverage) applies 

different levels of financial 

requirements to different tiers of 

prescription drug benefits based on 

reasonable factors determined in 

accordance with the rules in paragraph 

(c)(4)(i) of this section (relating to 

requirements for nonquantitative 


emcdonald on DSK67QTVN1PROD with RULES3
68270 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

treatment limitations) and without 

regard to whether a drug is generally 

prescribed with respect to medical/

surgical benefits or with respect to 

mental health or substance use disorder 

benefits, the plan (or health insurance 

coverage) satisfies the parity 

requirements of this paragraph (c) with 

respect to prescription drug benefits. 

Reasonable factors include cost, 

efficacy, generic versus brand name, and 

mail order versus pharmacy pick-up. 

(B) Multiple network tiers. If a plan (or 

health insurance coverage) provides 

benefits through multiple tiers of innetwork providers (such as an innetwork tier of preferred providers with 

more generous cost-sharing to 

participants than a separate in-network 

tier of participating providers), the plan 

may divide its benefits furnished on an 

in-network basis into sub-classifications 

that reflect network tiers, if the tiering 

is based on reasonable factors 

determined in accordance with the rules 

in paragraph (c)(4)(i) of this section 

(such as quality, performance, and 

market standards) and without regard to 

whether a provider provides services 

with respect to medical/surgical benefits 

or mental health or substance use 

disorder benefits. After the subclassifications are established, the plan 

or issuer may not impose any financial 

requirement or treatment limitation on 

mental health or substance use disorder 

benefits in any sub-classification that is 

more restrictive than the predominant 

financial requirement or treatment 

limitation that applies to substantially 

all medical/surgical benefits in the subclassification using the methodology set 

forth in paragraph (c)(3)(i) of this 

section. 

(C) Sub-classifications permitted for 

office visits, separate from other 

outpatient services. For purposes of 

applying the financial requirement and 

treatment limitation rules of this 

paragraph (c), a plan or issuer may 

divide its benefits furnished on an 

outpatient basis into the two subclassifications described in this 

paragraph (c)(3)(iii)(C). After the subclassifications are established, the plan 

or issuer may not impose any financial 

requirement or quantitative treatment 

limitation on mental health or substance 

use disorder benefits in any subclassification that is more restrictive 

than the predominant financial 

requirement or quantitative treatment 

limitation that applies to substantially 

all medical/surgical benefits in the subclassification using the methodology set 

forth in paragraph (c)(3)(i) of this 

section. Sub-classifications other than 

these special rules, such as separate subclassifications for generalists and 

specialists, are not permitted. The two 

sub-classifications permitted under this 

paragraph (c)(3)(iii)(C) are: 

(1) Office visits (such as physician 

visits), and 

(2) All other outpatient items and 

services (such as outpatient surgery, 

facility charges for day treatment 

centers, laboratory charges, or other 

medical items). 

(iv) Examples. The rules of 

paragraphs (c)(3)(i), (c)(3)(ii), and 

(c)(3)(iii) of this section are illustrated 

by the following examples. In each 

example, the group health plan is 

subject to the requirements of this 

section and provides both medical/

surgical benefits and mental health and 

substance use disorder benefits. 

Example 1. (i) Facts. For inpatient, out-ofnetwork medical/surgical benefits, a group 

health plan imposes five levels of 

coinsurance. Using a reasonable method, the 

plan projects its payments for the upcoming 

year as follows: 

Coinsurance rate ............................................. 0% 10% 15% 20% 30% Total. 

Projected payments ......................................... $200x $100x $450x $100x $150x $1,000x. 

Percent of total plan costs ............................... 20% 10% 45% 10% 15% 

Percent subject to coinsurance level ............... N/A 12.5% 

(100x/800x) 

56.25% 

(450x/800x) 

12.5% 

(100x/800x) 

18.75% 

(150x/800x) 

The plan projects plan costs of $800x to be 

subject to coinsurance ($100x + $450x + 

$100x + $150x = $800x). Thus, 80 percent 

($800x/$1,000x) of the benefits are projected 

to be subject to coinsurance, and 56.25 

percent of the benefits subject to coinsurance 

are projected to be subject to the 15 percent 

coinsurance level. 

(ii) Conclusion. In this Example 1, the twothirds threshold of the substantially all 

standard is met for coinsurance because 80 

percent of all inpatient, out-of-network 

medical/surgical benefits are subject to 

coinsurance. Moreover, the 15 percent 

coinsurance is the predominant level because 

it is applicable to more than one-half of 

inpatient, out-of-network medical/surgical 

benefits subject to the coinsurance 

requirement. The plan may not impose any 

level of coinsurance with respect to 

inpatient, out-of-network mental health or 

substance use disorder benefits that is more 

restrictive than the 15 percent level of 

coinsurance. 

Example 2. (i) Facts. For outpatient, innetwork medical/surgical benefits, a plan 

imposes five different copayment levels. 

Using a reasonable method, the plan projects 

payments for the upcoming year as follows: 

Copayment amount ......................................... $0 $10 $15 $20 $50 Total. 

Projected payments ......................................... $200x $200x $200x $300x $100x $1,000x. 

Percent of total plan costs ............................... 20% 20% 20% 30% 10% 

Percent subject to copayments ....................... N/A 25% 

(200x/800x) 

25% 

(200x/800x) 

37.5% 

(300x/800x) 

12.5% 

(100x/800x) 

The plan projects plan costs of $800x to be 

subject to copayments ($200x + $200x 

+$300x + $100x = $800x). Thus, 80 percent 

($800x/$1,000x) of the benefits are projected 

to be subject to a copayment. 

(ii) Conclusion. In this Example 2, the twothirds threshold of the substantially all 

standard is met for copayments because 80 

percent of all outpatient, in-network medical/ 

surgical benefits are subject to a copayment. 

Moreover, there is no single level that applies 

to more than one-half of medical/surgical 

benefits in the classification subject to a 

copayment (for the $10 copayment, 25%; for 

the $15 copayment, 25%; for the $20 

copayment, 37.5%; and for the $50 

copayment, 12.5%). The plan can combine 

any levels of copayment, including the 

highest levels, to determine the predominant 

level that can be applied to mental health or 

substance use disorder benefits. If the plan 

combines the highest levels of copayment, 

the combined projected payments for the two 

highest copayment levels, the $50 copayment 

and the $20 copayment, are not more than 

one-half of the outpatient, in-network 

medical/surgical benefits subject to a 

copayment because they are exactly one-half 

($300x + $100x = $400x; $400x/$800x = 

50%). The combined projected payments for 

the three highest copayment levels—the $50 

copayment, the $20 copayment, and the $15 

copayment—are more than one-half of the 

outpatient, in-network medical/surgical 

benefits subject to the copayments ($100x + 

$300x + $200x = $600x; $600x/$800x = 

75%). Thus, the plan may not impose any 

copayment on outpatient, in-network mental 

health or substance use disorder benefits that 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68271 

is more restrictive than the least restrictive 

copayment in the combination, the $15 

copayment. 

Example 3. (i) Facts. A plan imposes a 

$250 deductible on all medical/surgical 

benefits for self-only coverage and a $500 

deductible on all medical/surgical benefits 

for family coverage. The plan has no network 

of providers. For all medical/surgical 

benefits, the plan imposes a coinsurance 

requirement. The plan imposes no other 

financial requirements or treatment 

limitations. 

(ii) Conclusion. In this Example 3, because 

the plan has no network of providers, all 

benefits are provided out-of-network. 

Because self-only and family coverage are 

subject to different deductibles, whether the 

deductible applies to substantially all 

medical/surgical benefits is determined 

separately for self-only medical/surgical 

benefits and family medical/surgical benefits. 

Because the coinsurance is applied without 

regard to coverage units, the predominant 

coinsurance that applies to substantially all 

medical/surgical benefits is determined 

without regard to coverage units. 

Example 4. (i) Facts. A plan applies the 

following financial requirements for 

prescription drug benefits. The requirements 

are applied without regard to whether a drug 

is generally prescribed with respect to 

medical/surgical benefits or with respect to 

mental health or substance use disorder 

benefits. Moreover, the process for certifying 

a particular drug as ‘‘generic’’, ‘‘preferred 

brand name’’, ‘‘non-preferred brand name’’, 

or ‘‘specialty’’ complies with the rules of 

paragraph (c)(4)(i) of this section (relating to 

requirements for nonquantitative treatment 

limitations). 

Tier 1 Tier 2 Tier 3 Tier 4 

Tier description Generic drugs 

Preferred 

brand name 

drugs 

Non-preferred 

brand name 

drugs (which 

may have Tier 

1 or Tier 2 

alternatives) 

Specialty 

drugs 

Percent paid by plan ........................................................................................ 90% 80% 60% 50% 

(ii) Conclusion. In this Example 4, the 

financial requirements that apply to 

prescription drug benefits are applied 

without regard to whether a drug is generally 

prescribed with respect to medical/surgical 

benefits or with respect to mental health or 

substance use disorder benefits; the process 

for certifying drugs in different tiers complies 

with paragraph (c)(4) of this section; and the 

bases for establishing different levels or types 

of financial requirements are reasonable. The 

financial requirements applied to 

prescription drug benefits do not violate the 

parity requirements of this paragraph (c)(3). 

Example 5. (i) Facts. A plan has two-tiers 

of network of providers: a preferred provider 

tier and a participating provider tier. 

Providers are placed in either the preferred 

tier or participating tier based on reasonable 

factors determined in accordance with the 

rules in paragraph (c)(4)(i) of this section, 

such as accreditation, quality and 

performance measures (including customer 

feedback), and relative reimbursement rates. 

Furthermore, provider tier placement is 

determined without regard to whether a 

provider specializes in the treatment of 

mental health conditions or substance use 

disorders, or medical/surgical conditions. 

The plan divides the in-network 

classifications into two sub-classifications 

(in-network/preferred and in-network/

participating). The plan does not impose any 

financial requirement or treatment limitation 

on mental health or substance use disorder 

benefits in either of these sub-classifications 

that is more restrictive than the predominant 

financial requirement or treatment limitation 

that applies to substantially all medical/

surgical benefits in each sub-classification. 

(ii) Conclusion. In this Example 5, the 

division of in-network benefits into subclassifications that reflect the preferred and 

participating provider tiers does not violate 

the parity requirements of this paragraph 

(c)(3). 

Example 6. (i) Facts. With respect to 

outpatient, in-network benefits, a plan 

imposes a $25 copayment for office visits and 

a 20 percent coinsurance requirement for 

outpatient surgery. The plan divides the 

outpatient, in-network classification into two 

sub-classifications (in-network office visits 

and all other outpatient, in-network items 

and services). The plan or issuer does not 

impose any financial requirement or 

quantitative treatment limitation on mental 

health or substance use disorder benefits in 

either of these sub-classifications that is more 

restrictive than the predominant financial 

requirement or quantitative treatment 

limitation that applies to substantially all 

medical/surgical benefits in each subclassification. 

(ii) Conclusion. In this Example 6, the 

division of outpatient, in-network benefits 

into sub-classifications for office visits and 

all other outpatient, in-network items and 

services does not violate the parity 

requirements of this paragraph (c)(3). 

Example 7. (i) Facts. Same facts as 

Example 6, but for purposes of determining 

parity, the plan divides the outpatient, innetwork classification into outpatient, innetwork generalists and outpatient, innetwork specialists. 

(ii) Conclusion. In this Example 7, the 

division of outpatient, in-network benefits 

into any sub-classifications other than office 

visits and all other outpatient items and 

services violates the requirements of 

paragraph (c)(3)(iii)(C) of this section. 

(v) No separate cumulative financial 

requirements or cumulative quantitative 

treatment limitations—(A) A group 

health plan (or health insurance 

coverage offered in connection with a 

group health plan) may not apply any 

cumulative financial requirement or 

cumulative quantitative treatment 

limitation for mental health or 

substance use disorder benefits in a 

classification that accumulates 

separately from any established for 

medical/surgical benefits in the same 

classification. 

(B) The rules of this paragraph 

(c)(3)(v) are illustrated by the following 

examples: 

Example 1. (i) Facts. A group health plan 

imposes a combined annual $500 deductible 

on all medical/surgical, mental health, and 

substance use disorder benefits. 

(ii) Conclusion. In this Example 1, the 

combined annual deductible complies with 

the requirements of this paragraph (c)(3)(v). 

Example 2. (i) Facts. A plan imposes an 

annual $250 deductible on all medical/

surgical benefits and a separate annual $250 

deductible on all mental health and 

substance use disorder benefits. 

(ii) Conclusion. In this Example 2, the 

separate annual deductible on mental health 

and substance use disorder benefits violates 

the requirements of this paragraph (c)(3)(v). 

Example 3. (i) Facts. A plan imposes an 

annual $300 deductible on all medical/

surgical benefits and a separate annual $100 

deductible on all mental health or substance 

use disorder benefits. 

(ii) Conclusion. In this Example 3, the 

separate annual deductible on mental health 

and substance use disorder benefits violates 

the requirements of this paragraph (c)(3)(v). 

Example 4. (i) Facts. A plan generally 

imposes a combined annual $500 deductible 

on all benefits (both medical/surgical benefits 

and mental health and substance use 

disorder benefits) except prescription drugs. 

Certain benefits, such as preventive care, are 

provided without regard to the deductible. 

The imposition of other types of financial 

requirements or treatment limitations varies 

with each classification. Using reasonable 

methods, the plan projects its payments for 

medical/surgical benefits in each 

classification for the upcoming year as 

follows: 


emcdonald on DSK67QTVN1PROD with RULES3
68272 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

Classification 

Benefits 

subject to 

deductible 

Total benefits 

Percent 

subject to 

deductible 

Inpatient, in-network .................................................................................................................... $1,800x $2,000x 90 

Inpatient, out-of-network .............................................................................................................. 1,000x 1,000x 100 

Outpatient, in-network .................................................................................................................. 1,400x 2,000x 70 

Outpatient, out-of-network ........................................................................................................... 1,880x 2,000x 94 

Emergency care ........................................................................................................................... 300x 500x 60 

(ii) Conclusion. In this Example 4, the twothirds threshold of the substantially all 

standard is met with respect to each 

classification except emergency care because 

in each of those other classifications at least 

two-thirds of medical/surgical benefits are 

subject to the $500 deductible. Moreover, the 

$500 deductible is the predominant level in 

each of those other classifications because it 

is the only level. However, emergency care 

mental health and substance use disorder 

benefits cannot be subject to the $500 

deductible because it does not apply to 

substantially all emergency care medical/

surgical benefits. 

(4) Nonquantitative treatment 

limitations—(i) General rule. A group 

health plan (or health insurance 

coverage) may not impose a 

nonquantitative treatment limitation 

with respect to mental health or 

substance use disorder benefits in any 

classification unless, under the terms of 

the plan (or health insurance coverage) 

as written and in operation, any 

processes, strategies, evidentiary 

standards, or other factors used in 

applying the nonquantitative treatment 

limitation to mental health or substance 

use disorder benefits in the 

classification are comparable to, and are 

applied no more stringently than, the 

processes, strategies, evidentiary 

standards, or other factors used in 

applying the limitation with respect to 

medical/surgical benefits in the 

classification. 

(ii) Illustrative list of nonquantitative 

treatment limitations. Nonquantitative 

treatment limitations include— 

(A) Medical management standards 

limiting or excluding benefits based on 

medical necessity or medical 

appropriateness, or based on whether 

the treatment is experimental or 

investigative; 

(B) Formulary design for prescription 

drugs; 

(C) For plans with multiple network 

tiers (such as preferred providers and 

participating providers), network tier 

design; 

(D) Standards for provider admission 

to participate in a network, including 

reimbursement rates; 

(E) Plan methods for determining 

usual, customary, and reasonable 

charges; 

(F) Refusal to pay for higher-cost 

therapies until it can be shown that a 

lower-cost therapy is not effective (also 

known as fail-first policies or step 

therapy protocols); 

(G) Exclusions based on failure to 

complete a course of treatment; and 

(H) Restrictions based on geographic 

location, facility type, provider 

specialty, and other criteria that limit 

the scope or duration of benefits for 

services provided under the plan or 

coverage. 

(iii) Examples. The rules of this 

paragraph (c)(4) are illustrated by the 

following examples. In each example, 

the group health plan is subject to the 

requirements of this section and 

provides both medical/surgical benefits 

and mental health and substance use 

disorder benefits. 

Example 1. (i) Facts. A plan requires prior 

authorization from the plan’s utilization 

reviewer that a treatment is medically 

necessary for all inpatient medical/surgical 

benefits and for all inpatient mental health 

and substance use disorder benefits. In 

practice, inpatient benefits for medical/

surgical conditions are routinely approved 

for seven days, after which a treatment plan 

must be submitted by the patient’s attending 

provider and approved by the plan. On the 

other hand, for inpatient mental health and 

substance use disorder benefits, routine 

approval is given only for one day, after 

which a treatment plan must be submitted by 

the patient’s attending provider and 

approved by the plan. 

(ii) Conclusion. In this Example 1, the plan 

violates the rules of this paragraph (c)(4) 

because it is applying a stricter 

nonquantitative treatment limitation in 

practice to mental health and substance use 

disorder benefits than is applied to medical/ 

surgical benefits. 

Example 2. (i) Facts. A plan applies 

concurrent review to inpatient care where 

there are high levels of variation in length of 

stay (as measured by a coefficient of variation 

exceeding 0.8). In practice, the application of 

this standard affects 60 percent of mental 

health conditions and substance use 

disorders, but only 30 percent of medical/

surgical conditions. 

(ii) Conclusion. In this Example 2, the plan 

complies with the rules of this paragraph 

(c)(4) because the evidentiary standard used 

by the plan is applied no more stringently for 

mental health and substance use disorder 

benefits than for medical/surgical benefits, 

even though it results in an overall difference 

in the application of concurrent review for 

mental health conditions or substance use 

disorders than for medical/surgical 

conditions. 

Example 3. (i) Facts. A plan requires prior 

approval that a course of treatment is 

medically necessary for outpatient, innetwork medical/surgical, mental health, and 

substance use disorder benefits and uses 

comparable criteria in determining whether a 

course of treatment is medically necessary. 

For mental health and substance use disorder 

treatments that do not have prior approval, 

no benefits will be paid; for medical/surgical 

treatments that do not have prior approval, 

there will only be a 25 percent reduction in 

the benefits the plan would otherwise pay. 

(ii) Conclusion. In this Example 3, the plan 

violates the rules of this paragraph (c)(4). 

Although the same nonquantitative treatment 

limitation—medical necessity—is applied 

both to mental health and substance use 

disorder benefits and to medical/surgical 

benefits for outpatient, in-network services, it 

is not applied in a comparable way. The 

penalty for failure to obtain prior approval 

for mental health and substance use disorder 

benefits is not comparable to the penalty for 

failure to obtain prior approval for medical/ 

surgical benefits. 

Example 4. (i) Facts. A plan generally 

covers medically appropriate treatments. For 

both medical/surgical benefits and mental 

health and substance use disorder benefits, 

evidentiary standards used in determining 

whether a treatment is medically appropriate 

(such as the number of visits or days of 

coverage) are based on recommendations 

made by panels of experts with appropriate 

training and experience in the fields of 

medicine involved. The evidentiary 

standards are applied in a manner that is 

based on clinically appropriate standards of 

care for a condition. 

(ii) Conclusion. In this Example 4, the plan 

complies with the rules of this paragraph 

(c)(4) because the processes for developing 

the evidentiary standards used to determine 

medical appropriateness and the application 

of these standards to mental health and 

substance use disorder benefits are 

comparable to and are applied no more 

stringently than for medical/surgical benefits. 

This is the result even if the application of 

the evidentiary standards does not result in 

similar numbers of visits, days of coverage, 

or other benefits utilized for mental health 

conditions or substance use disorders as it 

does for any particular medical/surgical 

condition. 

Example 5. (i) Facts. A plan generally 

covers medically appropriate treatments. In 

determining whether prescription drugs are 

medically appropriate, the plan 

automatically excludes coverage for 

antidepressant drugs that are given a black 

box warning label by the Food and Drug 

Administration (indicating the drug carries a 

significant risk of serious adverse effects). For 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68273 

other drugs with a black box warning 

(including those prescribed for other mental 

health conditions and substance use 

disorders, as well as for medical/surgical 

conditions), the plan will provide coverage if 

the prescribing physician obtains 

authorization from the plan that the drug is 

medically appropriate for the individual, 

based on clinically appropriate standards of 

care. 

(ii) Conclusion. In this Example 5, the plan 

violates the rules of this paragraph (c)(4). 

Although the standard for applying a 

nonquantitative treatment limitation is the 

same for both mental health and substance 

use disorder benefits and medical/surgical 

benefits—whether a drug has a black box 

warning—it is not applied in a comparable 

manner. The plan’s unconditional exclusion 

of antidepressant drugs given a black box 

warning is not comparable to the conditional 

exclusion for other drugs with a black box 

warning. 

Example 6. (i) Facts. An employer 

maintains both a major medical plan and an 

employee assistance program (EAP). The EAP 

provides, among other benefits, a limited 

number of mental health or substance use 

disorder counseling sessions. Participants are 

eligible for mental health or substance use 

disorder benefits under the major medical 

plan only after exhausting the counseling 

sessions provided by the EAP. No similar 

exhaustion requirement applies with respect 

to medical/surgical benefits provided under 

the major medical plan. 

(ii) Conclusion. In this Example 6, limiting 

eligibility for mental health and substance 

use disorder benefits only after EAP benefits 

are exhausted is a nonquantitative treatment 

limitation subject to the parity requirements 

of this paragraph (c). Because no comparable 

requirement applies to medical/surgical 

benefits, the requirement may not be applied 

to mental health or substance use disorder 

benefits. 

Example 7. (i) Facts. Training and State 

licensing requirements often vary among 

types of providers. A plan applies a general 

standard that any provider must meet the 

highest licensing requirement related to 

supervised clinical experience under 

applicable State law in order to participate in 

the plan’s provider network. Therefore, the 

plan requires master’s-level mental health 

therapists to have post-degree, supervised 

clinical experience but does not impose this 

requirement on master’s-level general 

medical providers because the scope of their 

licensure under applicable State law does 

require clinical experience. In addition, the 

plan does not require post-degree, supervised 

clinical experience for psychiatrists or Ph.D. 

level psychologists since their licensing 

already requires supervised training. 

(ii) Conclusion. In this Example 7, the plan 

complies with the rules of this paragraph 

(c)(4). The requirement that master’s-level 

mental health therapists must have 

supervised clinical experience to join the 

network is permissible, as long as the plan 

consistently applies the same standard to all 

providers even though it may have a 

disparate impact on certain mental health 

providers. 

Example 8. (i) Facts. A plan considers a 

wide array of factors in designing medical 

management techniques for both mental 

health and substance use disorder benefits 

and medical/surgical benefits, such as cost of 

treatment; high cost growth; variability in 

cost and quality; elasticity of demand; 

provider discretion in determining diagnosis, 

or type or length of treatment; clinical 

efficacy of any proposed treatment or service; 

licensing and accreditation of providers; and 

claim types with a high percentage of fraud. 

Based on application of these factors in a 

comparable fashion, prior authorization is 

required for some (but not all) mental health 

and substance use disorder benefits, as well 

as for some medical/surgical benefits, but not 

for others. For example, the plan requires 

prior authorization for: outpatient surgery; 

speech, occupational, physical, cognitive and 

behavioral therapy extending for more than 

six months; durable medical equipment; 

diagnostic imaging; skilled nursing visits; 

home infusion therapy; coordinated home 

care; pain management; high-risk prenatal 

care; delivery by cesarean section; 

mastectomy; prostate cancer treatment; 

narcotics prescribed for more than seven 

days; and all inpatient services beyond 30 

days. The evidence considered in developing 

its medical management techniques includes 

consideration of a wide array of recognized 

medical literature and professional standards 

and protocols (including comparative 

effectiveness studies and clinical trials). This 

evidence and how it was used to develop 

these medical management techniques is also 

well documented by the plan. 

(ii) Conclusion. In this Example 8, the plan 

complies with the rules of this paragraph 

(c)(4). Under the terms of the plan as written 

and in operation, the processes, strategies, 

evidentiary standards, and other factors 

considered by the plan in implementing its 

prior authorization requirement with respect 

to mental health and substance use disorder 

benefits are comparable to, and applied no 

more stringently than, those applied with 

respect to medical/surgical benefits. 

Example 9. (i) Facts. A plan generally 

covers medically appropriate treatments. The 

plan automatically excludes coverage for 

inpatient substance use disorder treatment in 

any setting outside of a hospital (such as a 

freestanding or residential treatment center). 

For inpatient treatment outside of a hospital 

for other conditions (including freestanding 

or residential treatment centers prescribed for 

mental health conditions, as well as for 

medical/surgical conditions), the plan will 

provide coverage if the prescribing physician 

obtains authorization from the plan that the 

inpatient treatment is medically appropriate 

for the individual, based on clinically 

appropriate standards of care. 

(ii) Conclusion. In this Example 9, the plan 

violates the rules of this paragraph (c)(4). 

Although the same nonquantitative treatment 

limitation—medical appropriateness—is 

applied to both mental health and substance 

use disorder benefits and medical/surgical 

benefits, the plan’s unconditional exclusion 

of substance use disorder treatment in any 

setting outside of a hospital is not 

comparable to the conditional exclusion of 

inpatient treatment outside of a hospital for 

other conditions. 

Example 10. (i) Facts. A plan generally 

provides coverage for medically appropriate 

medical/surgical benefits as well as mental 

health and substance use disorder benefits. 

The plan excludes coverage for inpatient, 

out-of-network treatment of chemical 

dependency when obtained outside of the 

State where the policy is written. There is no 

similar exclusion for medical/surgical 

benefits within the same classification. 

(ii) Conclusion. In this Example 10, the 

plan violates the rules of this paragraph 

(c)(4). The plan is imposing a nonquantitative 

treatment limitation that restricts benefits 

based on geographic location. Because there 

is no comparable exclusion that applies to 

medical/surgical benefits, this exclusion may 

not be applied to mental health or substance 

use disorder benefits. 

Example 11. (i) Facts. A plan requires prior 

authorization for all outpatient mental health 

and substance use disorder services after the 

ninth visit and will only approve up to five 

additional visits per authorization. With 

respect to outpatient medical/surgical 

benefits, the plan allows an initial visit 

without prior authorization. After the initial 

visit, the plan pre-approves benefits based on 

the individual treatment plan recommended 

by the attending provider based on that 

individual’s specific medical condition. 

There is no explicit, predetermined cap on 

the amount of additional visits approved per 

authorization. 

(ii) Conclusion. In this Example 11, the 

plan violates the rules of this paragraph 

(c)(4). Although the same nonquantitative 

treatment limitation—prior authorization to 

determine medical appropriateness—is 

applied to both mental health and substance 

use disorder benefits and medical/surgical 

benefits for outpatient services, it is not 

applied in a comparable way. While the plan 

is more generous with respect to the number 

of visits initially provided without preauthorization for mental health benefits, 

treating all mental health conditions and 

substance use disorders in the same manner, 

while providing for individualized treatment 

of medical conditions, is not a comparable 

application of this nonquantitative treatment 

limitation. 

(5) Exemptions. The rules of this 

paragraph (c) do not apply if a group 

health plan (or health insurance 

coverage) satisfies the requirements of 

paragraph (f) or (g) of this section 

(relating to exemptions for small 

employers and for increased cost). 

(d) Availability of plan information— 

(1) Criteria for medical necessity 

determinations. The criteria for medical 

necessity determinations made under a 

group health plan with respect to 

mental health or substance use disorder 

benefits (or health insurance coverage 

offered in connection with the plan with 

respect to such benefits) must be made 

available by the plan administrator (or 

the health insurance issuer offering such 

coverage) to any current or potential 

participant, beneficiary, or contracting 

provider upon request. 

(2) Reason for any denial. The reason 

for any denial under a group health plan 


emcdonald on DSK67QTVN1PROD with RULES3
68274 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

(or health insurance coverage offered in 

connection with such plan) of 

reimbursement or payment for services 

with respect to mental health or 

substance use disorder benefits in the 

case of any participant or beneficiary 

must be made available by the plan 

administrator (or the health insurance 

issuer offering such coverage) to the 

participant or beneficiary in accordance 

with this paragraph (d)(2). 

(i) Plans subject to ERISA. If a plan is 

subject to ERISA, it must provide the 

reason for the claim denial in a form 

and manner consistent with the 

requirements of 29 CFR 2560.503–1 for 

group health plans. 

(ii) Plans not subject to ERISA. If a 

plan is not subject to ERISA, upon the 

request of a participant or beneficiary 

the reason for the claim denial must be 

provided within a reasonable time and 

in a reasonable manner. For this 

purpose, a plan that follows the 

requirements of 29 CFR 2560.503–1 for 

group health plans complies with the 

requirements of this paragraph (d)(2)(ii). 

(3) Provisions of other law. 

Compliance with the disclosure 

requirements in paragraphs (d)(1) and 

(d)(2) of this section is not 

determinative of compliance with any 

other provision of applicable Federal or 

State law. In particular, in addition to 

those disclosure requirements, 

provisions of other applicable law 

require disclosure of information 

relevant to medical/surgical, mental 

health, and substance use disorder 

benefits. For example, ERISA section 

104 and 29 CFR 2520.104b–1 provide 

that, for plans subject to ERISA, 

instruments under which the plan is 

established or operated must generally 

be furnished to plan participants within 

30 days of request. Instruments under 

which the plan is established or 

operated include documents with 

information on medical necessity 

criteria for both medical/surgical 

benefits and mental health and 

substance use disorder benefits, as well 

as the processes, strategies, evidentiary 

standards, and other factors used to 

apply a nonquantitative treatment 

limitation with respect to medical/

surgical benefits and mental health or 

substance use disorder benefits under 

the plan. In addition, 29 CFR 2560.503– 

1 and 29 CFR 2590.715–2719 set forth 

rules regarding claims and appeals, 

including the right of claimants (or their 

authorized representative) upon appeal 

of an adverse benefit determination (or 

a final internal adverse benefit 

determination) to be provided upon 

request and free of charge, reasonable 

access to and copies of all documents, 

records, and other information relevant 

to the claimant’s claim for benefits. This 

includes documents with information 

on medical necessity criteria for both 

medical/surgical benefits and mental 

health and substance use disorder 

benefits, as well as the processes, 

strategies, evidentiary standards, and 

other factors used to apply a 

nonquantitative treatment limitation 

with respect to medical/surgical benefits 

and mental health or substance use 

disorder benefits under the plan. 

(e) Applicability—(1) Group health 

plans. The requirements of this section 

apply to a group health plan offering 

medical/surgical benefits and mental 

health or substance use disorder 

benefits. If, under an arrangement or 

arrangements to provide medical care 

benefits by an employer or employee 

organization (including for this purpose 

a joint board of trustees of a 

multiemployer trust affiliated with one 

or more multiemployer plans), any 

participant (or beneficiary) can 

simultaneously receive coverage for 

medical/surgical benefits and coverage 

for mental health or substance use 

disorder benefits, then the requirements 

of this section (including the exemption 

provisions in paragraph (g) of this 

section) apply separately with respect to 

each combination of medical/surgical 

benefits and of mental health or 

substance use disorder benefits that any 

participant (or beneficiary) can 

simultaneously receive from that 

employer’s or employee organization’s 

arrangement or arrangements to provide 

medical care benefits, and all such 

combinations are considered for 

purposes of this section to be a single 

group health plan. 

(2) Health insurance issuers. The 

requirements of this section apply to a 

health insurance issuer offering health 

insurance coverage for mental health or 

substance use disorder benefits in 

connection with a group health plan 

subject to paragraph (e)(1) of this 

section. 

(3) Scope. This section does not— 

(i) Require a group health plan (or 

health insurance issuer offering 

coverage in connection with a group 

health plan) to provide any mental 

health benefits or substance use 

disorder benefits, and the provision of 

benefits by a plan (or health insurance 

coverage) for one or more mental health 

conditions or substance use disorders 

does not require the plan or health 

insurance coverage under this section to 

provide benefits for any other mental 

health condition or substance use 

disorder; 

(ii) Require a group health plan (or 

health insurance issuer offering 

coverage in connection with a group 

health plan) that provides coverage for 

mental health or substance use disorder 

benefits only to the extent required 

under PHS Act section 2713 to provide 

additional mental health or substance 

use disorder benefits in any 

classification in accordance with this 

section; or 

(iii) Affect the terms and conditions 

relating to the amount, duration, or 

scope of mental health or substance use 

disorder benefits under the plan (or 

health insurance coverage) except as 

specifically provided in paragraphs (b) 

and (c) of this section. 

(4) Coordination with EHB 

requirements. Nothing in paragraph (f) 

or (g) of this section changes the 

requirements of 45 CFR 147.150 and 45 

CFR 156.115, providing that a health 

insurance issuer offering nongrandfathered health insurance coverage 

in the individual or small group market 

providing mental health and substance 

use disorder services, including 

behavioral health treatment services, as 

part of essential health benefits required 

under 45 CFR 156.110(a)(5) and 

156.115(a), must comply with the 

provisions of 45 CFR 146.136 to satisfy 

the requirement to provide essential 

health benefits. 

(f) Small employer exemption—(1) In 

general. The requirements of this 

section do not apply to a group health 

plan (or health insurance issuer offering 

coverage in connection with a group 

health plan) for a plan year of a small 

employer. For purposes of this 

paragraph (f), the term small employer 

means, in connection with a group 

health plan with respect to a calendar 

year and a plan year, an employer who 

employed an average of at least two (or 

one in the case of an employer residing 

in a State that permits small groups to 

include a single individual) but not 

more than 50 employees on business 

days during the preceding calendar 

year. See section 9831(a) and § 54.9831– 

1(b), which provide that this section 

(and certain other sections) does not 

apply to any group health plan for any 

plan year if, on the first day of the plan 

year, the plan has fewer than two 

participants who are current employees. 

(2) Rules in determining employer 

size. For purposes of paragraph (f)(1) of 

this section— 

(i) All persons treated as a single 

employer under subsections (b), (c), (m), 

and (o) of section 414 are treated as one 

employer; 

(ii) If an employer was not in 

existence throughout the preceding 

calendar year, whether it is a small 

employer is determined based on the 

average number of employees the 

employer reasonably expects to employ 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68275 

on business days during the current 

calendar year; and 

(iii) Any reference to an employer for 

purposes of the small employer 

exemption includes a reference to a 

predecessor of the employer. 

(g) Increased cost exemption—(1) In 

general. If the application of this section 

to a group health plan (or health 

insurance coverage offered in 

connection with such plans) results in 

an increase for the plan year involved of 

the actual total cost of coverage with 

respect to medical/surgical benefits and 

mental health and substance use 

disorder benefits as determined and 

certified under paragraph (g)(3) of this 

section by an amount that exceeds the 

applicable percentage described in 

paragraph (g)(2) of this section of the 

actual total plan costs, the provisions of 

this section shall not apply to such plan 

(or coverage) during the following plan 

year, and such exemption shall apply to 

the plan (or coverage) for one plan year. 

An employer or issuer may elect to 

continue to provide mental health and 

substance use disorder benefits in 

compliance with this section with 

respect to the plan or coverage involved 

regardless of any increase in total costs. 

(2) Applicable percentage. With 

respect to a plan or coverage, the 

applicable percentage described in this 

paragraph (g) is— 

(i) 2 percent in the case of the first 

plan year in which this section is 

applied to the plan or coverage; and 

(ii) 1 percent in the case of each 

subsequent plan year. 

(3) Determinations by actuaries—(i) 

Determinations as to increases in actual 

costs under a plan or coverage that are 

attributable to implementation of the 

requirements of this section shall be 

made and certified by a qualified and 

licensed actuary who is a member in 

good standing of the American 

Academy of Actuaries. All such 

determinations must be based on the 

formula specified in paragraph (g)(4) of 

this section and shall be in a written 

report prepared by the actuary. 

(ii) The written report described in 

paragraph (g)(3)(i) of this section shall 

be maintained by the group health plan 

or health insurance issuer, along with 

all supporting documentation relied 

upon by the actuary, for a period of six 

years following the notification made 

under paragraph (g)(6) of this section. 

(4) Formula. The formula to be used 

to make the determination under 

paragraph (g)(3)(i) of this section is 

expressed mathematically as follows: 

[(E1¥E0)/T0]¥D > k 

(i) E1 is the actual total cost of 

coverage with respect to mental health 

and substance use disorder benefits for 

the base period, including claims paid 

by the plan or issuer with respect to 

mental health and substance use 

disorder benefits and administrative 

costs (amortized over time) attributable 

to providing these benefits consistent 

with the requirements of this section. 

(ii) E0 is the actual total cost of 

coverage with respect to mental health 

and substance use disorder benefits for 

the length of time immediately before 

the base period (and that is equal in 

length to the base period), including 

claims paid by the plan or issuer with 

respect to mental health and substance 

use disorder benefits and administrative 

costs (amortized over time) attributable 

to providing these benefits. 

(iii) T0 is the actual total cost of 

coverage with respect to all benefits 

during the base period. 

(iv) k is the applicable percentage of 

increased cost specified in paragraph 

(g)(2) of this section that will be 

expressed as a fraction for purposes of 

this formula. 

(v) D is the average change in 

spending that is calculated by applying 

the formula (E1¥E0)/T0 to mental health 

and substance use disorder spending in 

each of the five prior years and then 

calculating the average change in 

spending. 

(5) Six month determination. If a 

group health plan or health insurance 

issuer seeks an exemption under this 

paragraph (g), determinations under 

paragraph (g)(3) of this section shall be 

made after such plan or coverage has 

complied with this section for at least 

the first 6 months of the plan year 

involved. 

(6) Notification. A group health plan 

or health insurance issuer that, based on 

the certification described under 

paragraph (g)(3) of this section, qualifies 

for an exemption under this paragraph 

(g), and elects to implement the 

exemption, must notify participants and 

beneficiaries covered under the plan, 

the Secretary, and the appropriate State 

agencies of such election. 

(i) Participants and beneficiaries—(A) 

Content of notice. The notice to 

participants and beneficiaries must 

include the following information: 

(1) A statement that the plan or issuer 

is exempt from the requirements of this 

section and a description of the basis for 

the exemption. 

(2) The name and telephone number 

of the individual to contact for further 

information. 

(3) The plan or issuer name and plan 

number (PN). 

(4) The plan administrator’s name, 

address, and telephone number. 

(5) For single-employer plans, the 

plan sponsor’s name, address, and 

telephone number (if different from 

paragraph (g)(6)(i)(A)(3) of this section) 

and the plan sponsor’s employer 

identification number (EIN). 

(6) The effective date of such 

exemption. 

(7) A statement regarding the ability 

of participants and beneficiaries to 

contact the plan administrator or health 

insurance issuer to see how benefits 

may be affected as a result of the plan’s 

or issuer’s election of the exemption. 

(8) A statement regarding the 

availability, upon request and free of 

charge, of a summary of the information 

on which the exemption is based (as 

required under paragraph (g)(6)(i)(D) of 

this section). 

(B) Use of summary of material 

reductions in covered services or 

benefits. A plan or issuer may satisfy the 

requirements of paragraph (g)(6)(i)(A) of 

this section by providing participants 

and beneficiaries (in accordance with 

paragraph (g)(6)(i)(C) of this section) 

with a summary of material reductions 

in covered services or benefits 

consistent with 29 CFR 2520.104b–3(d) 

that also includes the information 

specified in paragraph (g)(6)(i)(A) of this 

section. However, in all cases, the 

exemption is not effective until 30 days 

after notice has been sent. 

(C) Delivery. The notice described in 

this paragraph (g)(6)(i) is required to be 

provided to all participants and 

beneficiaries. The notice may be 

furnished by any method of delivery 

that satisfies the requirements of section 

104(b)(1) of ERISA (29 U.S.C. 

1024(b)(1)) and its implementing 

regulations (for example, first-class 

mail). If the notice is provided to the 

participant and any beneficiaries at the 

participant’s last known address, then 

the requirements of this paragraph 

(g)(6)(i) are satisfied with respect to the 

participant and all beneficiaries residing 

at that address. If a beneficiary’s last 

known address is different from the 

participant’s last known address, a 

separate notice is required to be 

provided to the beneficiary at the 

beneficiary’s last known address. 

(D) Availability of documentation. 

The plan or issuer must make available 

to participants and beneficiaries (or 

their representatives), on request and at 

no charge, a summary of the information 

on which the exemption was based. (For 

purposes of this paragraph (g), an 

individual who is not a participant or 

beneficiary and who presents a notice 

described in paragraph (g)(6)(i) of this 

section is considered to be a 

representative. A representative may 

request the summary of information by 


emcdonald on DSK67QTVN1PROD with RULES3
68276 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

providing the plan a copy of the notice 

provided to the participant under 

paragraph (g)(6)(i) of this section with 

any personally identifiable information 

redacted.) The summary of information 

must include the incurred expenditures, 

the base period, the dollar amount of 

claims incurred during the base period 

that would have been denied under the 

terms of the plan or coverage absent 

amendments required to comply with 

paragraphs (b) and (c) of this section, 

the administrative costs related to those 

claims, and other administrative costs 

attributable to complying with the 

requirements of this section. In no event 

should the summary of information 

include any personally identifiable 

information. 

(ii) Federal agencies—(A) Content of 

notice. The notice to the Secretary must 

include the following information: 

(1) A description of the number of 

covered lives under the plan (or 

coverage) involved at the time of the 

notification, and as applicable, at the 

time of any prior election of the cost 

exemption under this paragraph (g) by 

such plan (or coverage); 

(2) For both the plan year upon which 

a cost exemption is sought and the year 

prior, a description of the actual total 

costs of coverage with respect to 

medical/surgical benefits and mental 

health and substance use disorder 

benefits; and 

(3) For both the plan year upon which 

a cost exemption is sought and the year 

prior, the actual total costs of coverage 

with respect to mental health and 

substance use disorder benefits under 

the plan. 

(B) Reporting with respect to church 

plans. A church plan (as defined in 

section 414(e)) claiming the exemption 

of this paragraph (g) for any benefit 

package, must provide notice to the 

Department of the Treasury. This 

requirement is satisfied if the plan sends 

a copy, to the address designated by the 

Secretary in generally applicable 

guidance, of the notice described in 

paragraph (g)(6)(ii)(A) of this section 

identifying the benefit package to which 

the exemption applies. 

(C) Reporting with respect to ERISA 

plans. See 29 CFR 2590.712(g)(6)(ii) for 

delivery with respect to ERISA plans. 

(iii) Confidentiality. A notification to 

the Secretary under this paragraph (g)(6) 

shall be confidential. The Secretary 

shall make available, upon request and 

not more than on an annual basis, an 

anonymous itemization of each 

notification that includes— 

(A) A breakdown of States by the size 

and type of employers submitting such 

notification; and 

(B) A summary of the data received 

under paragraph (g)(6)(ii) of this section. 

(iv) Audits. The Secretary may audit 

the books and records of a group health 

plan or a health insurance issuer 

relating to an exemption, including any 

actuarial reports, during the 6 year 

period following notification of such 

exemption under paragraph (g)(6) of this 

section. A State agency receiving a 

notification under paragraph (g)(6) of 

this section may also conduct such an 

audit with respect to an exemption 

covered by such notification. 

(h) Sale of nonparity health insurance 

coverage. A health insurance issuer may 

not sell a policy, certificate, or contract 

of insurance that fails to comply with 

paragraph (b) or (c) of this section, 

except to a plan for a year for which the 

plan is exempt from the requirements of 

this section because the plan meets the 

requirements of paragraph (f) or (g) of 

this section. 

(i) Applicability dates—(1) In general. 

Except as provided in paragraph (i)(2) of 

this section, this section applies to 

group health plans and health insurance 

issuers offering group health insurance 

coverage on the first day of the first plan 

year beginning on or after July 1, 2014. 

(2) Special effective date for certain 

collectively-bargained plans. For a 

group health plan maintained pursuant 

to one or more collective bargaining 

agreements ratified before October 3, 

2008, the requirements of this section 

do not apply to the plan (or health 

insurance coverage offered in 

connection with the plan) for plan years 

beginning before the date on which the 

last of the collective bargaining 

agreements terminates (determined 

without regard to any extension agreed 

to after October 3, 2008). 

Employee Benefits Security 

Administration 

29 CFR Chapter XXV 

29 CFR Part 2590 is amended as 

follows: 

PART 2590—RULES AND 

REGULATIONS FOR GROUP HEALTH 

PLANS 

■ 1. The authority citation for Part 2590 

is revised to read as follows: 

Authority: 29 U.S.C. 1027, 1059, 1135, 

1161–1168, 1169, 1181–1183, 1181 note, 

1185, 1185a, 1185b, 1191, 1191a, 1191b, and 

1191c; sec. 101(g), Public Law 104–191, 110 

Stat. 1936; sec. 401(b), Public Law 105–200, 

112 Stat. 645 (42 U.S.C. 651 note); sec. 

512(d), Public Law 110–343, 122 Stat. 3765; 

Public Law 110–460, 122 Stat. 5123; 

Secretary of Labor’s Order 1–2011, 77 FR 

1088 (January 9, 2012). 

■ 2. Section 2590.712 is revised to read 

as follows: 

§ 2590.712 Parity in mental health and 

substance use disorder benefits. 

(a) Meaning of terms. For purposes of 

this section, except where the context 

clearly indicates otherwise, the 

following terms have the meanings 

indicated: 

Aggregate lifetime dollar limit means 

a dollar limitation on the total amount 

of specified benefits that may be paid 

under a group health plan (or health 

insurance coverage offered in 

connection with such a plan) for any 

coverage unit. 

Annual dollar limit means a dollar 

limitation on the total amount of 

specified benefits that may be paid in a 

12-month period under a group health 

plan (or health insurance coverage 

offered in connection with such a plan) 

for any coverage unit. 

Coverage unit means coverage unit as 

described in paragraph (c)(1)(iv) of this 

section. 

Cumulative financial requirements 

are financial requirements that 

determine whether or to what extent 

benefits are provided based on 

accumulated amounts and include 

deductibles and out-of-pocket 

maximums. (However, cumulative 

financial requirements do not include 

aggregate lifetime or annual dollar limits 

because these two terms are excluded 

from the meaning of financial 

requirements.) 

Cumulative quantitative treatment 

limitations are treatment limitations that 

determine whether or to what extent 

benefits are provided based on 

accumulated amounts, such as annual 

or lifetime day or visit limits. 

Financial requirements include 

deductibles, copayments, coinsurance, 

or out-of-pocket maximums. Financial 

requirements do not include aggregate 

lifetime or annual dollar limits. 

Medical/surgical benefits means 

benefits with respect to items or services 

for medical conditions or surgical 

procedures, as defined under the terms 

of the plan or health insurance coverage 

and in accordance with applicable 

Federal and State law, but does not 

include mental health or substance use 

disorder benefits. Any condition 

defined by the plan or coverage as being 

or as not being a medical/surgical 

condition must be defined to be 

consistent with generally recognized 

independent standards of current 

medical practice (for example, the most 

current version of the International 

Classification of Diseases (ICD) or State 

guidelines). 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68277 

Mental health benefits means benefits 

with respect to items or services for 

mental health conditions, as defined 

under the terms of the plan or health 

insurance coverage and in accordance 

with applicable Federal and State law. 

Any condition defined by the plan or 

coverage as being or as not being a 

mental health condition must be 

defined to be consistent with generally 

recognized independent standards of 

current medical practice (for example, 

the most current version of the 

Diagnostic and Statistical Manual of 

Mental Disorders (DSM), the most 

current version of the ICD, or State 

guidelines). 

Substance use disorder benefits 

means benefits with respect to items or 

services for substance use disorders, as 

defined under the terms of the plan or 

health insurance coverage and in 

accordance with applicable Federal and 

State law. Any disorder defined by the 

plan as being or as not being a substance 

use disorder must be defined to be 

consistent with generally recognized 

independent standards of current 

medical practice (for example, the most 

current version of the DSM, the most 

current version of the ICD, or State 

guidelines). 

Treatment limitations include limits 

on benefits based on the frequency of 

treatment, number of visits, days of 

coverage, days in a waiting period, or 

other similar limits on the scope or 

duration of treatment. Treatment 

limitations include both quantitative 

treatment limitations, which are 

expressed numerically (such as 50 

outpatient visits per year), and 

nonquantitative treatment limitations, 

which otherwise limit the scope or 

duration of benefits for treatment under 

a plan or coverage. (See paragraph 

(c)(4)(ii) of this section for an illustrative 

list of nonquantitative treatment 

limitations.) A permanent exclusion of 

all benefits for a particular condition or 

disorder, however, is not a treatment 

limitation for purposes of this 

definition. 

(b) Parity requirements with respect to 

aggregate lifetime and annual dollar 

limits. This paragraph (b) details the 

application of the parity requirements 

with respect to aggregate lifetime and 

annual dollar limits. This paragraph (b) 

does not address the provisions of PHS 

Act section 2711, as incorporated in 

ERISA section 715 and Code section 

9815, which prohibit imposing lifetime 

and annual limits on the dollar value of 

essential health benefits. For more 

information, see 29 CFR 2590.715–2711. 

(1) General—(i) General parity 

requirement. A group health plan (or 

health insurance coverage offered by an 

issuer in connection with a group health 

plan) that provides both medical/

surgical benefits and mental health or 

substance use disorder benefits must 

comply with paragraph (b)(2), (b)(3), or 

(b)(5) of this section. 

(ii) Exception. The rule in paragraph 

(b)(1)(i) of this section does not apply if 

a plan (or health insurance coverage) 

satisfies the requirements of paragraph 

(f) or (g) of this section (relating to 

exemptions for small employers and for 

increased cost). 

(2) Plan with no limit or limits on less 

than one-third of all medical/surgical 

benefits. If a plan (or health insurance 

coverage) does not include an aggregate 

lifetime or annual dollar limit on any 

medical/surgical benefits or includes an 

aggregate lifetime or annual dollar limit 

that applies to less than one-third of all 

medical/surgical benefits, it may not 

impose an aggregate lifetime or annual 

dollar limit, respectively, on mental 

health or substance use disorder 

benefits. 

(3) Plan with a limit on at least twothirds of all medical/surgical benefits. If 

a plan (or health insurance coverage) 

includes an aggregate lifetime or annual 

dollar limit on at least two-thirds of all 

medical/surgical benefits, it must 

either— 

(i) Apply the aggregate lifetime or 

annual dollar limit both to the medical/ 

surgical benefits to which the limit 

would otherwise apply and to mental 

health or substance use disorder 

benefits in a manner that does not 

distinguish between the medical/

surgical benefits and mental health or 

substance use disorder benefits; or 

(ii) Not include an aggregate lifetime 

or annual dollar limit on mental health 

or substance use disorder benefits that 

is less than the aggregate lifetime or 

annual dollar limit, respectively, on 

medical/surgical benefits. (For 

cumulative limits other than aggregate 

lifetime or annual dollar limits, see 

paragraph (c)(3)(v) of this section 

prohibiting separately accumulating 

cumulative financial requirements or 

cumulative quantitative treatment 

limitations.) 

(4) Determining one-third and twothirds of all medical/surgical benefits. 

For purposes of this paragraph (b), the 

determination of whether the portion of 

medical/surgical benefits subject to an 

aggregate lifetime or annual dollar limit 

represents one-third or two-thirds of all 

medical/surgical benefits is based on the 

dollar amount of all plan payments for 

medical/surgical benefits expected to be 

paid under the plan for the plan year (or 

for the portion of the plan year after a 

change in plan benefits that affects the 

applicability of the aggregate lifetime or 

annual dollar limits). Any reasonable 

method may be used to determine 

whether the dollar amount expected to 

be paid under the plan will constitute 

one-third or two-thirds of the dollar 

amount of all plan payments for 

medical/surgical benefits. 

(5) Plan not described in paragraph 

(b)(2) or (b)(3) of this section—(i) In 

general. A group health plan (or health 

insurance coverage) that is not 

described in paragraph (b)(2) or (b)(3) of 

this section with respect to aggregate 

lifetime or annual dollar limits on 

medical/surgical benefits, must either— 

(A) Impose no aggregate lifetime or 

annual dollar limit, as appropriate, on 

mental health or substance use disorder 

benefits; or 

(B) Impose an aggregate lifetime or 

annual dollar limit on mental health or 

substance use disorder benefits that is 

no less than an average limit calculated 

for medical/surgical benefits in the 

following manner. The average limit is 

calculated by taking into account the 

weighted average of the aggregate 

lifetime or annual dollar limits, as 

appropriate, that are applicable to the 

categories of medical/surgical benefits. 

Limits based on delivery systems, such 

as inpatient/outpatient treatment or 

normal treatment of common, low-cost 

conditions (such as treatment of normal 

births), do not constitute categories for 

purposes of this paragraph (b)(5)(i)(B). 

In addition, for purposes of determining 

weighted averages, any benefits that are 

not within a category that is subject to 

a separately-designated dollar limit 

under the plan are taken into account as 

a single separate category by using an 

estimate of the upper limit on the dollar 

amount that a plan may reasonably be 

expected to incur with respect to such 

benefits, taking into account any other 

applicable restrictions under the plan. 

(ii) Weighting. For purposes of this 

paragraph (b)(5), the weighting 

applicable to any category of medical/

surgical benefits is determined in the 

manner set forth in paragraph (b)(4) of 

this section for determining one-third or 

two-thirds of all medical/surgical 

benefits. 

(c) Parity requirements with respect to 

financial requirements and treatment 

limitations—(1) Clarification of terms— 

(i) Classification of benefits. When 

reference is made in this paragraph (c) 

to a classification of benefits, the term 

‘‘classification’’ means a classification 

as described in paragraph (c)(2)(ii) of 

this section. 

(ii) Type of financial requirement or 

treatment limitation. When reference is 

made in this paragraph (c) to a type of 

financial requirement or treatment 

limitation, the reference to type means 


emcdonald on DSK67QTVN1PROD with RULES3
68278 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

its nature. Different types of financial 

requirements include deductibles, 

copayments, coinsurance, and out-ofpocket maximums. Different types of 

quantitative treatment limitations 

include annual, episode, and lifetime 

day and visit limits. See paragraph 

(c)(4)(ii) of this section for an illustrative 

list of nonquantitative treatment 

limitations. 

(iii) Level of a type of financial 

requirement or treatment limitation. 

When reference is made in this 

paragraph (c) to a level of a type of 

financial requirement or treatment 

limitation, level refers to the magnitude 

of the type of financial requirement or 

treatment limitation. For example, 

different levels of coinsurance include 

20 percent and 30 percent; different 

levels of a copayment include $15 and 

$20; different levels of a deductible 

include $250 and $500; and different 

levels of an episode limit include 21 

inpatient days per episode and 30 

inpatient days per episode. 

(iv) Coverage unit. When reference is 

made in this paragraph (c) to a coverage 

unit, coverage unit refers to the way in 

which a plan (or health insurance 

coverage) groups individuals for 

purposes of determining benefits, or 

premiums or contributions. For 

example, different coverage units 

include self-only, family, and employeeplus-spouse. 

(2) General parity requirement—(i) 

General rule. A group health plan (or 

health insurance coverage offered by an 

issuer in connection with a group health 

plan) that provides both medical/

surgical benefits and mental health or 

substance use disorder benefits may not 

apply any financial requirement or 

treatment limitation to mental health or 

substance use disorder benefits in any 

classification that is more restrictive 

than the predominant financial 

requirement or treatment limitation of 

that type applied to substantially all 

medical/surgical benefits in the same 

classification. Whether a financial 

requirement or treatment limitation is a 

predominant financial requirement or 

treatment limitation that applies to 

substantially all medical/surgical 

benefits in a classification is determined 

separately for each type of financial 

requirement or treatment limitation. The 

application of the rules of this 

paragraph (c)(2) to financial 

requirements and quantitative treatment 

limitations is addressed in paragraph 

(c)(3) of this section; the application of 

the rules of this paragraph (c)(2) to 

nonquantitative treatment limitations is 

addressed in paragraph (c)(4) of this 

section. 

(ii) Classifications of benefits used for 

applying rules—(A) In general. If a plan 

(or health insurance coverage) provides 

mental health or substance use disorder 

benefits in any classification of benefits 

described in this paragraph (c)(2)(ii), 

mental health or substance use disorder 

benefits must be provided in every 

classification in which medical/surgical 

benefits are provided. In determining 

the classification in which a particular 

benefit belongs, a plan (or health 

insurance issuer) must apply the same 

standards to medical/surgical benefits 

and to mental health or substance use 

disorder benefits. To the extent that a 

plan (or health insurance coverage) 

provides benefits in a classification and 

imposes any separate financial 

requirement or treatment limitation (or 

separate level of a financial requirement 

or treatment limitation) for benefits in 

the classification, the rules of this 

paragraph (c) apply separately with 

respect to that classification for all 

financial requirements or treatment 

limitations (illustrated in examples in 

paragraph (c)(2)(ii)(C) of this section). 

The following classifications of benefits 

are the only classifications used in 

applying the rules of this paragraph (c): 

(1) Inpatient, in-network. Benefits 

furnished on an inpatient basis and 

within a network of providers 

established or recognized under a plan 

or health insurance coverage. See 

special rules for plans with multiple 

network tiers in paragraph (c)(3)(iii) of 

this section. 

(2) Inpatient, out-of-network. Benefits 

furnished on an inpatient basis and 

outside any network of providers 

established or recognized under a plan 

or health insurance coverage. This 

classification includes inpatient benefits 

under a plan (or health insurance 

coverage) that has no network of 

providers. 

(3) Outpatient, in-network. Benefits 

furnished on an outpatient basis and 

within a network of providers 

established or recognized under a plan 

or health insurance coverage. See 

special rules for office visits and plans 

with multiple network tiers in 

paragraph (c)(3)(iii) of this section. 

(4) Outpatient, out-of-network. 

Benefits furnished on an outpatient 

basis and outside any network of 

providers established or recognized 

under a plan or health insurance 

coverage. This classification includes 

outpatient benefits under a plan (or 

health insurance coverage) that has no 

network of providers. See special rules 

for office visits in paragraph (c)(3)(iii) of 

this section. 

(5) Emergency care. Benefits for 

emergency care. 

(6) Prescription drugs. Benefits for 

prescription drugs. See special rules for 

multi-tiered prescription drug benefits 

in paragraph (c)(3)(iii) of this section. 

(B) Application to out-of-network 

providers. See paragraph (c)(2)(ii)(A) of 

this section, under which a plan (or 

health insurance coverage) that provides 

mental health or substance use disorder 

benefits in any classification of benefits 

must provide mental health or 

substance use disorder benefits in every 

classification in which medical/surgical 

benefits are provided, including out-ofnetwork classifications. 

(C) Examples. The rules of this 

paragraph (c)(2)(ii) are illustrated by the 

following examples. In each example, 

the group health plan is subject to the 

requirements of this section and 

provides both medical/surgical benefits 

and mental health and substance use 

disorder benefits. 

Example 1. (i) Facts. A group health plan 

offers inpatient and outpatient benefits and 

does not contract with a network of 

providers. The plan imposes a $500 

deductible on all benefits. For inpatient 

medical/surgical benefits, the plan imposes a 

coinsurance requirement. For outpatient 

medical/surgical benefits, the plan imposes 

copayments. The plan imposes no other 

financial requirements or treatment 

limitations. 

(ii) Conclusion. In this Example 1, because 

the plan has no network of providers, all 

benefits provided are out-of-network. 

Because inpatient, out-of-network medical/

surgical benefits are subject to separate 

financial requirements from outpatient, outof-network medical/surgical benefits, the 

rules of this paragraph (c) apply separately 

with respect to any financial requirements 

and treatment limitations, including the 

deductible, in each classification. 

Example 2. (i) Facts. A plan imposes a 

$500 deductible on all benefits. The plan has 

no network of providers. The plan generally 

imposes a 20 percent coinsurance 

requirement with respect to all benefits, 

without distinguishing among inpatient, 

outpatient, emergency care, or prescription 

drug benefits. The plan imposes no other 

financial requirements or treatment 

limitations. 

(ii) Conclusion. In this Example 2, because 

the plan does not impose separate financial 

requirements (or treatment limitations) based 

on classification, the rules of this paragraph 

(c) apply with respect to the deductible and 

the coinsurance across all benefits. 

Example 3. (i) Facts. Same facts as 

Example 2, except the plan exempts 

emergency care benefits from the 20 percent 

coinsurance requirement. The plan imposes 

no other financial requirements or treatment 

limitations. 

(ii) Conclusion. In this Example 3, because 

the plan imposes separate financial 

requirements based on classifications, the 

rules of this paragraph (c) apply with respect 

to the deductible and the coinsurance 

separately for— 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68279 

(A) Benefits in the emergency care 

classification; and 

(B) All other benefits. 

Example 4. (i) Facts. Same facts as 

Example 2, except the plan also imposes a 

preauthorization requirement for all inpatient 

treatment in order for benefits to be paid. No 

such requirement applies to outpatient 

treatment. 

(ii) Conclusion. In this Example 4, because 

the plan has no network of providers, all 

benefits provided are out-of-network. 

Because the plan imposes a separate 

treatment limitation based on classifications, 

the rules of this paragraph (c) apply with 

respect to the deductible and coinsurance 

separately for— 

(A) Inpatient, out-of-network benefits; and 

(B) All other benefits. 

(3) Financial requirements and 

quantitative treatment limitations—(i) 

Determining ‘‘substantially all’’ and 

‘‘predominant’’—(A) Substantially all. 

For purposes of this paragraph (c), a 

type of financial requirement or 

quantitative treatment limitation is 

considered to apply to substantially all 

medical/surgical benefits in a 

classification of benefits if it applies to 

at least two-thirds of all medical/

surgical benefits in that classification. 

(For this purpose, benefits expressed as 

subject to a zero level of a type of 

financial requirement are treated as 

benefits not subject to that type of 

financial requirement, and benefits 

expressed as subject to a quantitative 

treatment limitation that is unlimited 

are treated as benefits not subject to that 

type of quantitative treatment 

limitation.) If a type of financial 

requirement or quantitative treatment 

limitation does not apply to at least twothirds of all medical/surgical benefits in 

a classification, then that type cannot be 

applied to mental health or substance 

use disorder benefits in that 

classification. 

(B) Predominant—(1) If a type of 

financial requirement or quantitative 

treatment limitation applies to at least 

two-thirds of all medical/surgical 

benefits in a classification as 

determined under paragraph (c)(3)(i)(A) 

of this section, the level of the financial 

requirement or quantitative treatment 

limitation that is considered the 

predominant level of that type in a 

classification of benefits is the level that 

applies to more than one-half of 

medical/surgical benefits in that 

classification subject to the financial 

requirement or quantitative treatment 

limitation. 

(2) If, with respect to a type of 

financial requirement or quantitative 

treatment limitation that applies to at 

least two-thirds of all medical/surgical 

benefits in a classification, there is no 

single level that applies to more than 

one-half of medical/surgical benefits in 

the classification subject to the financial 

requirement or quantitative treatment 

limitation, the plan (or health insurance 

issuer) may combine levels until the 

combination of levels applies to more 

than one-half of medical/surgical 

benefits subject to the financial 

requirement or quantitative treatment 

limitation in the classification. The least 

restrictive level within the combination 

is considered the predominant level of 

that type in the classification. (For this 

purpose, a plan may combine the most 

restrictive levels first, with each less 

restrictive level added to the 

combination until the combination 

applies to more than one-half of the 

benefits subject to the financial 

requirement or treatment limitation.) 

(C) Portion based on plan payments. 

For purposes of this paragraph (c), the 

determination of the portion of medical/ 

surgical benefits in a classification of 

benefits subject to a financial 

requirement or quantitative treatment 

limitation (or subject to any level of a 

financial requirement or quantitative 

treatment limitation) is based on the 

dollar amount of all plan payments for 

medical/surgical benefits in the 

classification expected to be paid under 

the plan for the plan year (or for the 

portion of the plan year after a change 

in plan benefits that affects the 

applicability of the financial 

requirement or quantitative treatment 

limitation). 

(D) Clarifications for certain threshold 

requirements. For any deductible, the 

dollar amount of plan payments 

includes all plan payments with respect 

to claims that would be subject to the 

deductible if it had not been satisfied. 

For any out-of-pocket maximum, the 

dollar amount of plan payments 

includes all plan payments associated 

with out-of-pocket payments that are 

taken into account towards the out-ofpocket maximum as well as all plan 

payments associated with out-of-pocket 

payments that would have been made 

towards the out-of-pocket maximum if it 

had not been satisfied. Similar rules 

apply for any other thresholds at which 

the rate of plan payment changes. (See 

also PHS Act section 2707(b) and 

Affordable Care Act section 1302(c), 

which establish limitations on annual 

deductibles for non-grandfathered 

health plans in the small group market 

and annual limitations on out-of-pocket 

maximums for all non-grandfathered 

health plans.) 

(E) Determining the dollar amount of 

plan payments. Subject to paragraph 

(c)(3)(i)(D) of this section, any 

reasonable method may be used to 

determine the dollar amount expected 

to be paid under a plan for medical/

surgical benefits subject to a financial 

requirement or quantitative treatment 

limitation (or subject to any level of a 

financial requirement or quantitative 

treatment limitation). 

(ii) Application to different coverage 

units. If a plan (or health insurance 

coverage) applies different levels of a 

financial requirement or quantitative 

treatment limitation to different 

coverage units in a classification of 

medical/surgical benefits, the 

predominant level that applies to 

substantially all medical/surgical 

benefits in the classification is 

determined separately for each coverage 

unit. 

(iii) Special rules—(A) Multi-tiered 

prescription drug benefits. If a plan (or 

health insurance coverage) applies 

different levels of financial 

requirements to different tiers of 

prescription drug benefits based on 

reasonable factors determined in 

accordance with the rules in paragraph 

(c)(4)(i) of this section (relating to 

requirements for nonquantitative 

treatment limitations) and without 

regard to whether a drug is generally 

prescribed with respect to medical/

surgical benefits or with respect to 

mental health or substance use disorder 

benefits, the plan (or health insurance 

coverage) satisfies the parity 

requirements of this paragraph (c) with 

respect to prescription drug benefits. 

Reasonable factors include cost, 

efficacy, generic versus brand name, and 

mail order versus pharmacy pick-up. 

(B) Multiple network tiers. If a plan (or 

health insurance coverage) provides 

benefits through multiple tiers of innetwork providers (such as an innetwork tier of preferred providers with 

more generous cost-sharing to 

participants than a separate in-network 

tier of participating providers), the plan 

may divide its benefits furnished on an 

in-network basis into sub-classifications 

that reflect network tiers, if the tiering 

is based on reasonable factors 

determined in accordance with the rules 

in paragraph (c)(4)(i) of this section 

(such as quality, performance, and 

market standards) and without regard to 

whether a provider provides services 

with respect to medical/surgical benefits 

or mental health or substance use 

disorder benefits. After the subclassifications are established, the plan 

or issuer may not impose any financial 

requirement or treatment limitation on 

mental health or substance use disorder 

benefits in any sub-classification that is 

more restrictive than the predominant 

financial requirement or treatment 

limitation that applies to substantially 

all medical/surgical benefits in the subVerDate Mar<15>2010 17:41 Nov 12, 2013 Jkt 232001 PO 00000 Frm 00041 Fmt 4701 Sfmt 4700 E:\FR\FM\13NOR3.SGM 13NOR3

emcdonald on DSK67QTVN1PROD with RULES3
68280 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

classification using the methodology set 

forth in paragraph (c)(3)(i) of this 

section. 

(C) Sub-classifications permitted for 

office visits, separate from other 

outpatient services. For purposes of 

applying the financial requirement and 

treatment limitation rules of this 

paragraph (c), a plan or issuer may 

divide its benefits furnished on an 

outpatient basis into the two subclassifications described in this 

paragraph (c)(3)(iii)(C). After the subclassifications are established, the plan 

or issuer may not impose any financial 

requirement or quantitative treatment 

limitation on mental health or substance 

use disorder benefits in any subclassification that is more restrictive 

than the predominant financial 

requirement or quantitative treatment 

limitation that applies to substantially 

all medical/surgical benefits in the subclassification using the methodology set 

forth in paragraph (c)(3)(i) of this 

section. Sub-classifications other than 

these special rules, such as separate subclassifications for generalists and 

specialists, are not permitted. The two 

sub-classifications permitted under this 

paragraph (c)(3)(iii)(C) are: 

(1) Office visits (such as physician 

visits), and 

(2) All other outpatient items and 

services (such as outpatient surgery, 

facility charges for day treatment 

centers, laboratory charges, or other 

medical items). 

(iv) Examples. The rules of 

paragraphs (c)(3)(i), (c)(3)(ii), and 

(c)(3)(iii) of this section are illustrated 

by the following examples. In each 

example, the group health plan is 

subject to the requirements of this 

section and provides both medical/

surgical benefits and mental health and 

substance use disorder benefits. 

Example 1. (i) Facts. For inpatient, out-ofnetwork medical/surgical benefits, a group 

health plan imposes five levels of 

coinsurance. Using a reasonable method, the 

plan projects its payments for the upcoming 

year as follows: 

Coinsurance rate ............................................. 0% 10% 15% 20% 30% Total. 

Projected payments ......................................... $200x $100x $450x $100x $150x $1,000x. 

Percent of total plan costs ............................... 20% 10% 45% 10% 15% 

Percent subject to coinsurance level ............... N/A 12.5% 

(100x/800x) 

56.25% 

(450x/800x) 

12.5% 

(100x/800x) 

18.75% 

(150x/800x) 

The plan projects plan costs of $800x to be 

subject to coinsurance ($100x + $450x + 

$100x + $150x = $800x). Thus, 80 percent 

($800x/$1,000x) of the benefits are projected 

to be subject to coinsurance, and 56.25 

percent of the benefits subject to coinsurance 

are projected to be subject to the 15 percent 

coinsurance level. 

(ii) Conclusion. In this Example 1, the twothirds threshold of the substantially all 

standard is met for coinsurance because 80 

percent of all inpatient, out-of-network 

medical/surgical benefits are subject to 

coinsurance. Moreover, the 15 percent 

coinsurance is the predominant level because 

it is applicable to more than one-half of 

inpatient, out-of-network medical/surgical 

benefits subject to the coinsurance 

requirement. The plan may not impose any 

level of coinsurance with respect to 

inpatient, out-of-network mental health or 

substance use disorder benefits that is more 

restrictive than the 15 percent level of 

coinsurance. 

Example 2. (i) Facts. For outpatient, innetwork medical/surgical benefits, a plan 

imposes five different copayment levels. 

Using a reasonable method, the plan projects 

payments for the upcoming year as follows: 

Copayment amount ......................................... $0 $10 $15 $20 $50 Total. 

Projected payments ......................................... $200x $200x $200x $300x $100x $1,000x. 

Percent of total plan costs ............................... 20% 20% 20% 30% 10% 

Percent subject to copayments ....................... N/A 25% 

(200x/800x) 

25% 

(200x/800x) 

37.5% 

(300x/800x) 

12.5% 

(100x/800x) 

The plan projects plan costs of $800x to be 

subject to copayments ($200x + $200x 

+$300x + $100x = $800x). Thus, 80 percent 

($800x/$1,000x) of the benefits are projected 

to be subject to a copayment. 

(ii) Conclusion. In this Example 2, the twothirds threshold of the substantially all 

standard is met for copayments because 80 

percent of all outpatient, in-network medical/ 

surgical benefits are subject to a copayment. 

Moreover, there is no single level that applies 

to more than one-half of medical/surgical 

benefits in the classification subject to a 

copayment (for the $10 copayment, 25%; for 

the $15 copayment, 25%; for the $20 

copayment, 37.5%; and for the $50 

copayment, 12.5%). The plan can combine 

any levels of copayment, including the 

highest levels, to determine the predominant 

level that can be applied to mental health or 

substance use disorder benefits. If the plan 

combines the highest levels of copayment, 

the combined projected payments for the two 

highest copayment levels, the $50 copayment 

and the $20 copayment, are not more than 

one-half of the outpatient, in-network 

medical/surgical benefits subject to a 

copayment because they are exactly one-half 

($300x + $100x = $400x; $400x/$800x = 

50%). The combined projected payments for 

the three highest copayment levels—the $50 

copayment, the $20 copayment, and the $15 

copayment—are more than one-half of the 

outpatient, in-network medical/surgical 

benefits subject to the copayments ($100x + 

$300x + $200x = $600x; $600x/$800x = 

75%). Thus, the plan may not impose any 

copayment on outpatient, in-network mental 

health or substance use disorder benefits that 

is more restrictive than the least restrictive 

copayment in the combination, the $15 

copayment. 

Example 3. (i) Facts. A plan imposes a 

$250 deductible on all medical/surgical 

benefits for self-only coverage and a $500 

deductible on all medical/surgical benefits 

for family coverage. The plan has no network 

of providers. For all medical/surgical 

benefits, the plan imposes a coinsurance 

requirement. The plan imposes no other 

financial requirements or treatment 

limitations. 

(ii) Conclusion. In this Example 3, because 

the plan has no network of providers, all 

benefits are provided out-of-network. 

Because self-only and family coverage are 

subject to different deductibles, whether the 

deductible applies to substantially all 

medical/surgical benefits is determined 

separately for self-only medical/surgical 

benefits and family medical/surgical benefits. 

Because the coinsurance is applied without 

regard to coverage units, the predominant 

coinsurance that applies to substantially all 

medical/surgical benefits is determined 

without regard to coverage units. 

Example 4. (i) Facts. A plan applies the 

following financial requirements for 

prescription drug benefits. The requirements 

are applied without regard to whether a drug 

is generally prescribed with respect to 

medical/surgical benefits or with respect to 

mental health or substance use disorder 

benefits. Moreover, the process for certifying 

a particular drug as ‘‘generic’’, ‘‘preferred 

brand name’’, ‘‘non-preferred brand name’’, 

or ‘‘specialty’’ complies with the rules of 

paragraph (c)(4)(i) of this section (relating to 

requirements for nonquantitative treatment 

limitations). 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68281 

Tier 1 Tier 2 Tier 3 Tier 4 

Tier description Generic drugs 

Preferred 

brand name 

drugs 

Non-preferred 

brand name 

drugs (which 

may have Tier 

1 or Tier 2 

alternatives) 

Specialty 

drugs 

Percent paid by plan ........................................................................................ 90% 80% 60% 50% 

(ii) Conclusion. In this Example 4, the 

financial requirements that apply to 

prescription drug benefits are applied 

without regard to whether a drug is generally 

prescribed with respect to medical/surgical 

benefits or with respect to mental health or 

substance use disorder benefits; the process 

for certifying drugs in different tiers complies 

with paragraph (c)(4) of this section; and the 

bases for establishing different levels or types 

of financial requirements are reasonable. The 

financial requirements applied to 

prescription drug benefits do not violate the 

parity requirements of this paragraph (c)(3). 

Example 5. (i) Facts. A plan has two-tiers 

of network of providers: a preferred provider 

tier and a participating provider tier. 

Providers are placed in either the preferred 

tier or participating tier based on reasonable 

factors determined in accordance with the 

rules in paragraph (c)(4)(i) of this section, 

such as accreditation, quality and 

performance measures (including customer 

feedback), and relative reimbursement rates. 

Furthermore, provider tier placement is 

determined without regard to whether a 

provider specializes in the treatment of 

mental health conditions or substance use 

disorders, or medical/surgical conditions. 

The plan divides the in-network 

classifications into two sub-classifications 

(in-network/preferred and in-network/

participating). The plan does not impose any 

financial requirement or treatment limitation 

on mental health or substance use disorder 

benefits in either of these sub-classifications 

that is more restrictive than the predominant 

financial requirement or treatment limitation 

that applies to substantially all medical/

surgical benefits in each sub-classification. 

(ii) Conclusion. In this Example 5, the 

division of in-network benefits into subclassifications that reflect the preferred and 

participating provider tiers does not violate 

the parity requirements of this paragraph 

(c)(3). 

Example 6. (i) Facts. With respect to 

outpatient, in-network benefits, a plan 

imposes a $25 copayment for office visits and 

a 20 percent coinsurance requirement for 

outpatient surgery. The plan divides the 

outpatient, in-network classification into two 

sub-classifications (in-network office visits 

and all other outpatient, in-network items 

and services). The plan or issuer does not 

impose any financial requirement or 

quantitative treatment limitation on mental 

health or substance use disorder benefits in 

either of these sub-classifications that is more 

restrictive than the predominant financial 

requirement or quantitative treatment 

limitation that applies to substantially all 

medical/surgical benefits in each subclassification. 

(ii) Conclusion. In this Example 6, the 

division of outpatient, in-network benefits 

into sub-classifications for office visits and 

all other outpatient, in-network items and 

services does not violate the parity 

requirements of this paragraph (c)(3). 

Example 7. (i) Facts. Same facts as 

Example 6, but for purposes of determining 

parity, the plan divides the outpatient, innetwork classification into outpatient, innetwork generalists and outpatient, innetwork specialists. 

(ii) Conclusion. In this Example 7, the 

division of outpatient, in-network benefits 

into any sub-classifications other than office 

visits and all other outpatient items and 

services violates the requirements of 

paragraph (c)(3)(iii)(C) of this section. 

(v) No separate cumulative financial 

requirements or cumulative quantitative 

treatment limitations—(A) A group 

health plan (or health insurance 

coverage offered in connection with a 

group health plan) may not apply any 

cumulative financial requirement or 

cumulative quantitative treatment 

limitation for mental health or 

substance use disorder benefits in a 

classification that accumulates 

separately from any established for 

medical/surgical benefits in the same 

classification. 

(B) The rules of this paragraph 

(c)(3)(v) are illustrated by the following 

examples: 

Example 1. (i) Facts. A group health plan 

imposes a combined annual $500 deductible 

on all medical/surgical, mental health, and 

substance use disorder benefits. 

(ii) Conclusion. In this Example 1, the 

combined annual deductible complies with 

the requirements of this paragraph (c)(3)(v). 

Example 2. (i) Facts. A plan imposes an 

annual $250 deductible on all medical/

surgical benefits and a separate annual $250 

deductible on all mental health and 

substance use disorder benefits. 

(ii) Conclusion. In this Example 2, the 

separate annual deductible on mental health 

and substance use disorder benefits violates 

the requirements of this paragraph (c)(3)(v). 

Example 3. (i) Facts. A plan imposes an 

annual $300 deductible on all medical/

surgical benefits and a separate annual $100 

deductible on all mental health or substance 

use disorder benefits. 

(ii) Conclusion. In this Example 3, the 

separate annual deductible on mental health 

and substance use disorder benefits violates 

the requirements of this paragraph (c)(3)(v). 

Example 4. (i) Facts. A plan generally 

imposes a combined annual $500 deductible 

on all benefits (both medical/surgical benefits 

and mental health and substance use 

disorder benefits) except prescription drugs. 

Certain benefits, such as preventive care, are 

provided without regard to the deductible. 

The imposition of other types of financial 

requirements or treatment limitations varies 

with each classification. Using reasonable 

methods, the plan projects its payments for 

medical/surgical benefits in each 

classification for the upcoming year as 

follows: 

Classification 

Benefits 

subject to 

deductible 

Total benefits 

Percent 

subject to 

deductible 

Inpatient, in-network .................................................................................................................... $1,800x $2,000x 90 

Inpatient, out-of-network .............................................................................................................. 1,000x 1,000x 100 

Outpatient, in-network .................................................................................................................. 1,400x 2,000x 70 

Outpatient, out-of-network ........................................................................................................... 1,880x 2,000x 94 

Emergency care ........................................................................................................................... 300x 500x 60 

(ii) Conclusion. In this Example 4, the twothirds threshold of the substantially all 

standard is met with respect to each 

classification except emergency care because 

in each of those other classifications at least 

two-thirds of medical/surgical benefits are 

subject to the $500 deductible. Moreover, the 

$500 deductible is the predominant level in 

each of those other classifications because it 

is the only level. However, emergency care 

mental health and substance use disorder 

benefits cannot be subject to the $500 


emcdonald on DSK67QTVN1PROD with RULES3
68282 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

deductible because it does not apply to 

substantially all emergency care medical/

surgical benefits. 

(4) Nonquantitative treatment 

limitations—(i) General rule. A group 

health plan (or health insurance 

coverage) may not impose a 

nonquantitative treatment limitation 

with respect to mental health or 

substance use disorder benefits in any 

classification unless, under the terms of 

the plan (or health insurance coverage) 

as written and in operation, any 

processes, strategies, evidentiary 

standards, or other factors used in 

applying the nonquantitative treatment 

limitation to mental health or substance 

use disorder benefits in the 

classification are comparable to, and are 

applied no more stringently than, the 

processes, strategies, evidentiary 

standards, or other factors used in 

applying the limitation with respect to 

medical/surgical benefits in the 

classification. 

(ii) Illustrative list of nonquantitative 

treatment limitations. Nonquantitative 

treatment limitations include— 

(A) Medical management standards 

limiting or excluding benefits based on 

medical necessity or medical 

appropriateness, or based on whether 

the treatment is experimental or 

investigative; 

(B) Formulary design for prescription 

drugs; 

(C) For plans with multiple network 

tiers (such as preferred providers and 

participating providers), network tier 

design; 

(D) Standards for provider admission 

to participate in a network, including 

reimbursement rates; 

(E) Plan methods for determining 

usual, customary, and reasonable 

charges; 

(F) Refusal to pay for higher-cost 

therapies until it can be shown that a 

lower-cost therapy is not effective (also 

known as fail-first policies or step 

therapy protocols); 

(G) Exclusions based on failure to 

complete a course of treatment; and 

(H) Restrictions based on geographic 

location, facility type, provider 

specialty, and other criteria that limit 

the scope or duration of benefits for 

services provided under the plan or 

coverage. 

(iii) Examples. The rules of this 

paragraph (c)(4) are illustrated by the 

following examples. In each example, 

the group health plan is subject to the 

requirements of this section and 

provides both medical/surgical benefits 

and mental health and substance use 

disorder benefits. 

Example 1. (i) Facts. A plan requires prior 

authorization from the plan’s utilization 

reviewer that a treatment is medically 

necessary for all inpatient medical/surgical 

benefits and for all inpatient mental health 

and substance use disorder benefits. In 

practice, inpatient benefits for medical/

surgical conditions are routinely approved 

for seven days, after which a treatment plan 

must be submitted by the patient’s attending 

provider and approved by the plan. On the 

other hand, for inpatient mental health and 

substance use disorder benefits, routine 

approval is given only for one day, after 

which a treatment plan must be submitted by 

the patient’s attending provider and 

approved by the plan. 

(ii) Conclusion. In this Example 1, the plan 

violates the rules of this paragraph (c)(4) 

because it is applying a stricter 

nonquantitative treatment limitation in 

practice to mental health and substance use 

disorder benefits than is applied to medical/ 

surgical benefits. 

Example 2. (i) Facts. A plan applies 

concurrent review to inpatient care where 

there are high levels of variation in length of 

stay (as measured by a coefficient of variation 

exceeding 0.8). In practice, the application of 

this standard affects 60 percent of mental 

health conditions and substance use 

disorders, but only 30 percent of medical/

surgical conditions. 

(ii) Conclusion. In this Example 2, the plan 

complies with the rules of this paragraph 

(c)(4) because the evidentiary standard used 

by the plan is applied no more stringently for 

mental health and substance use disorder 

benefits than for medical/surgical benefits, 

even though it results in an overall difference 

in the application of concurrent review for 

mental health conditions or substance use 

disorders than for medical/surgical 

conditions. 

Example 3. (i) Facts. A plan requires prior 

approval that a course of treatment is 

medically necessary for outpatient, innetwork medical/surgical, mental health, and 

substance use disorder benefits and uses 

comparable criteria in determining whether a 

course of treatment is medically necessary. 

For mental health and substance use disorder 

treatments that do not have prior approval, 

no benefits will be paid; for medical/surgical 

treatments that do not have prior approval, 

there will only be a 25 percent reduction in 

the benefits the plan would otherwise pay. 

(ii) Conclusion. In this Example 3, the plan 

violates the rules of this paragraph (c)(4). 

Although the same nonquantitative treatment 

limitation—medical necessity—is applied 

both to mental health and substance use 

disorder benefits and to medical/surgical 

benefits for outpatient, in-network services, it 

is not applied in a comparable way. The 

penalty for failure to obtain prior approval 

for mental health and substance use disorder 

benefits is not comparable to the penalty for 

failure to obtain prior approval for medical/ 

surgical benefits. 

Example 4. (i) Facts. A plan generally 

covers medically appropriate treatments. For 

both medical/surgical benefits and mental 

health and substance use disorder benefits, 

evidentiary standards used in determining 

whether a treatment is medically appropriate 

(such as the number of visits or days of 

coverage) are based on recommendations 

made by panels of experts with appropriate 

training and experience in the fields of 

medicine involved. The evidentiary 

standards are applied in a manner that is 

based on clinically appropriate standards of 

care for a condition. 

(ii) Conclusion. In this Example 4, the plan 

complies with the rules of this paragraph 

(c)(4) because the processes for developing 

the evidentiary standards used to determine 

medical appropriateness and the application 

of these standards to mental health and 

substance use disorder benefits are 

comparable to and are applied no more 

stringently than for medical/surgical benefits. 

This is the result even if the application of 

the evidentiary standards does not result in 

similar numbers of visits, days of coverage, 

or other benefits utilized for mental health 

conditions or substance use disorders as it 

does for any particular medical/surgical 

condition. 

Example 5. (i) Facts. A plan generally 

covers medically appropriate treatments. In 

determining whether prescription drugs are 

medically appropriate, the plan 

automatically excludes coverage for 

antidepressant drugs that are given a black 

box warning label by the Food and Drug 

Administration (indicating the drug carries a 

significant risk of serious adverse effects). For 

other drugs with a black box warning 

(including those prescribed for other mental 

health conditions and substance use 

disorders, as well as for medical/surgical 

conditions), the plan will provide coverage if 

the prescribing physician obtains 

authorization from the plan that the drug is 

medically appropriate for the individual, 

based on clinically appropriate standards of 

care. 

(ii) Conclusion. In this Example 5, the plan 

violates the rules of this paragraph (c)(4). 

Although the standard for applying a 

nonquantitative treatment limitation is the 

same for both mental health and substance 

use disorder benefits and medical/surgical 

benefits—whether a drug has a black box 

warning—it is not applied in a comparable 

manner. The plan’s unconditional exclusion 

of antidepressant drugs given a black box 

warning is not comparable to the conditional 

exclusion for other drugs with a black box 

warning. 

Example 6. (i) Facts. An employer 

maintains both a major medical plan and an 

employee assistance program (EAP). The EAP 

provides, among other benefits, a limited 

number of mental health or substance use 

disorder counseling sessions. Participants are 

eligible for mental health or substance use 

disorder benefits under the major medical 

plan only after exhausting the counseling 

sessions provided by the EAP. No similar 

exhaustion requirement applies with respect 

to medical/surgical benefits provided under 

the major medical plan. 

(ii) Conclusion. In this Example 6, limiting 

eligibility for mental health and substance 

use disorder benefits only after EAP benefits 

are exhausted is a nonquantitative treatment 

limitation subject to the parity requirements 

of this paragraph (c). Because no comparable 

requirement applies to medical/surgical 

benefits, the requirement may not be applied 

to mental health or substance use disorder 

benefits. 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68283 

Example 7. (i) Facts. Training and State 

licensing requirements often vary among 

types of providers. A plan applies a general 

standard that any provider must meet the 

highest licensing requirement related to 

supervised clinical experience under 

applicable State law in order to participate in 

the plan’s provider network. Therefore, the 

plan requires master’s-level mental health 

therapists to have post-degree, supervised 

clinical experience but does not impose this 

requirement on master’s-level general 

medical providers because the scope of their 

licensure under applicable State law does 

require clinical experience. In addition, the 

plan does not require post-degree, supervised 

clinical experience for psychiatrists or Ph.D. 

level psychologists since their licensing 

already requires supervised training. 

(ii) Conclusion. In this Example 7, the plan 

complies with the rules of this paragraph 

(c)(4). The requirement that master’s-level 

mental health therapists must have 

supervised clinical experience to join the 

network is permissible, as long as the plan 

consistently applies the same standard to all 

providers even though it may have a 

disparate impact on certain mental health 

providers. 

Example 8. (i) Facts. A plan considers a 

wide array of factors in designing medical 

management techniques for both mental 

health and substance use disorder benefits 

and medical/surgical benefits, such as cost of 

treatment; high cost growth; variability in 

cost and quality; elasticity of demand; 

provider discretion in determining diagnosis, 

or type or length of treatment; clinical 

efficacy of any proposed treatment or service; 

licensing and accreditation of providers; and 

claim types with a high percentage of fraud. 

Based on application of these factors in a 

comparable fashion, prior authorization is 

required for some (but not all) mental health 

and substance use disorder benefits, as well 

as for some medical/surgical benefits, but not 

for others. For example, the plan requires 

prior authorization for: outpatient surgery; 

speech, occupational, physical, cognitive and 

behavioral therapy extending for more than 

six months; durable medical equipment; 

diagnostic imaging; skilled nursing visits; 

home infusion therapy; coordinated home 

care; pain management; high-risk prenatal 

care; delivery by cesarean section; 

mastectomy; prostate cancer treatment; 

narcotics prescribed for more than seven 

days; and all inpatient services beyond 30 

days. The evidence considered in developing 

its medical management techniques includes 

consideration of a wide array of recognized 

medical literature and professional standards 

and protocols (including comparative 

effectiveness studies and clinical trials). This 

evidence and how it was used to develop 

these medical management techniques is also 

well documented by the plan. 

(ii) Conclusion. In this Example 8, the plan 

complies with the rules of this paragraph 

(c)(4). Under the terms of the plan as written 

and in operation, the processes, strategies, 

evidentiary standards, and other factors 

considered by the plan in implementing its 

prior authorization requirement with respect 

to mental health and substance use disorder 

benefits are comparable to, and applied no 

more stringently than, those applied with 

respect to medical/surgical benefits. 

Example 9. (i) Facts. A plan generally 

covers medically appropriate treatments. The 

plan automatically excludes coverage for 

inpatient substance use disorder treatment in 

any setting outside of a hospital (such as a 

freestanding or residential treatment center). 

For inpatient treatment outside of a hospital 

for other conditions (including freestanding 

or residential treatment centers prescribed for 

mental health conditions, as well as for 

medical/surgical conditions), the plan will 

provide coverage if the prescribing physician 

obtains authorization from the plan that the 

inpatient treatment is medically appropriate 

for the individual, based on clinically 

appropriate standards of care. 

(ii) Conclusion. In this Example 9, the plan 

violates the rules of this paragraph (c)(4). 

Although the same nonquantitative treatment 

limitation—medical appropriateness—is 

applied to both mental health and substance 

use disorder benefits and medical/surgical 

benefits, the plan’s unconditional exclusion 

of substance use disorder treatment in any 

setting outside of a hospital is not 

comparable to the conditional exclusion of 

inpatient treatment outside of a hospital for 

other conditions. 

Example 10. (i) Facts. A plan generally 

provides coverage for medically appropriate 

medical/surgical benefits as well as mental 

health and substance use disorder benefits. 

The plan excludes coverage for inpatient, 

out-of-network treatment of chemical 

dependency when obtained outside of the 

State where the policy is written. There is no 

similar exclusion for medical/surgical 

benefits within the same classification. 

(ii) Conclusion. In this Example 10, the 

plan violates the rules of this paragraph 

(c)(4). The plan is imposing a nonquantitative 

treatment limitation that restricts benefits 

based on geographic location. Because there 

is no comparable exclusion that applies to 

medical/surgical benefits, this exclusion may 

not be applied to mental health or substance 

use disorder benefits. 

Example 11. (i) Facts. A plan requires prior 

authorization for all outpatient mental health 

and substance use disorder services after the 

ninth visit and will only approve up to five 

additional visits per authorization. With 

respect to outpatient medical/surgical 

benefits, the plan allows an initial visit 

without prior authorization. After the initial 

visit, the plan pre-approves benefits based on 

the individual treatment plan recommended 

by the attending provider based on that 

individual’s specific medical condition. 

There is no explicit, predetermined cap on 

the amount of additional visits approved per 

authorization. 

(ii) Conclusion. In this Example 11, the 

plan violates the rules of this paragraph 

(c)(4). Although the same nonquantitative 

treatment limitation—prior authorization to 

determine medical appropriateness—is 

applied to both mental health and substance 

use disorder benefits and medical/surgical 

benefits for outpatient services, it is not 

applied in a comparable way. While the plan 

is more generous with respect to the number 

of visits initially provided without preauthorization for mental health benefits, 

treating all mental health conditions and 

substance use disorders in the same manner, 

while providing for individualized treatment 

of medical conditions, is not a comparable 

application of this nonquantitative treatment 

limitation. 

(5) Exemptions. The rules of this 

paragraph (c) do not apply if a group 

health plan (or health insurance 

coverage) satisfies the requirements of 

paragraph (f) or (g) of this section 

(relating to exemptions for small 

employers and for increased cost). 

(d) Availability of plan information— 

(1) Criteria for medical necessity 

determinations. The criteria for medical 

necessity determinations made under a 

group health plan with respect to 

mental health or substance use disorder 

benefits (or health insurance coverage 

offered in connection with the plan with 

respect to such benefits) must be made 

available by the plan administrator (or 

the health insurance issuer offering such 

coverage) to any current or potential 

participant, beneficiary, or contracting 

provider upon request. 

(2) Reason for any denial. The reason 

for any denial under a group health plan 

(or health insurance coverage offered in 

connection with such plan) of 

reimbursement or payment for services 

with respect to mental health or 

substance use disorder benefits in the 

case of any participant or beneficiary 

must be made available by the plan 

administrator (or the health insurance 

issuer offering such coverage) to the 

participant or beneficiary in a form and 

manner consistent with the 

requirements of § 2560.503–1 of this 

chapter for group health plans. 

(3) Provisions of other law. 

Compliance with the disclosure 

requirements in paragraphs (d)(1) and 

(d)(2) of this section is not 

determinative of compliance with any 

other provision of applicable Federal or 

State law. In particular, in addition to 

those disclosure requirements, 

provisions of other applicable law 

require disclosure of information 

relevant to medical/surgical, mental 

health, and substance use disorder 

benefits. For example, ERISA section 

104 and § 2520.104b–1 of this chapter 

provide that, for plans subject to ERISA, 

instruments under which the plan is 

established or operated must generally 

be furnished to plan participants within 

30 days of request. Instruments under 

which the plan is established or 

operated include documents with 

information on medical necessity 

criteria for both medical/surgical 

benefits and mental health and 

substance use disorder benefits, as well 

as the processes, strategies, evidentiary 

standards, and other factors used to 


emcdonald on DSK67QTVN1PROD with RULES3
68284 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

apply a nonquantitative treatment 

limitation with respect to medical/

surgical benefits and mental health or 

substance use disorder benefits under 

the plan. In addition, §§ 2560.503–1 and 

2590.715–2719 of this chapter set forth 

rules regarding claims and appeals, 

including the right of claimants (or their 

authorized representative) upon appeal 

of an adverse benefit determination (or 

a final internal adverse benefit 

determination) to be provided upon 

request and free of charge, reasonable 

access to and copies of all documents, 

records, and other information relevant 

to the claimant’s claim for benefits. This 

includes documents with information 

on medical necessity criteria for both 

medical/surgical benefits and mental 

health and substance use disorder 

benefits, as well as the processes, 

strategies, evidentiary standards, and 

other factors used to apply a 

nonquantitative treatment limitation 

with respect to medical/surgical benefits 

and mental health or substance use 

disorder benefits under the plan. 

(e) Applicability—(1) Group health 

plans. The requirements of this section 

apply to a group health plan offering 

medical/surgical benefits and mental 

health or substance use disorder 

benefits. If, under an arrangement or 

arrangements to provide medical care 

benefits by an employer or employee 

organization (including for this purpose 

a joint board of trustees of a 

multiemployer trust affiliated with one 

or more multiemployer plans), any 

participant (or beneficiary) can 

simultaneously receive coverage for 

medical/surgical benefits and coverage 

for mental health or substance use 

disorder benefits, then the requirements 

of this section (including the exemption 

provisions in paragraph (g) of this 

section) apply separately with respect to 

each combination of medical/surgical 

benefits and of mental health or 

substance use disorder benefits that any 

participant (or beneficiary) can 

simultaneously receive from that 

employer’s or employee organization’s 

arrangement or arrangements to provide 

medical care benefits, and all such 

combinations are considered for 

purposes of this section to be a single 

group health plan. 

(2) Health insurance issuers. The 

requirements of this section apply to a 

health insurance issuer offering health 

insurance coverage for mental health or 

substance use disorder benefits in 

connection with a group health plan 

subject to paragraph (e)(1) of this 

section. 

(3) Scope. This section does not— 

(i) Require a group health plan (or 

health insurance issuer offering 

coverage in connection with a group 

health plan) to provide any mental 

health benefits or substance use 

disorder benefits, and the provision of 

benefits by a plan (or health insurance 

coverage) for one or more mental health 

conditions or substance use disorders 

does not require the plan or health 

insurance coverage under this section to 

provide benefits for any other mental 

health condition or substance use 

disorder; 

(ii) Require a group health plan (or 

health insurance issuer offering 

coverage in connection with a group 

health plan) that provides coverage for 

mental health or substance use disorder 

benefits only to the extent required 

under PHS Act section 2713 to provide 

additional mental health or substance 

use disorder benefits in any 

classification in accordance with this 

section; or 

(iii) Affect the terms and conditions 

relating to the amount, duration, or 

scope of mental health or substance use 

disorder benefits under the plan (or 

health insurance coverage) except as 

specifically provided in paragraphs (b) 

and (c) of this section. 

(4) Coordination with EHB 

requirements. Nothing in paragraph (f) 

or (g) of this section changes the 

requirements of 45 CFR 147.150 and 45 

CFR 156.115, providing that a health 

insurance issuer offering nongrandfathered health insurance coverage 

in the individual or small group market 

providing mental health and substance 

use disorder services, including 

behavioral health treatment services, as 

part of essential health benefits required 

under 45 CFR 156.110(a)(5) and 

156.115(a), must comply with the 

provisions of 45 CFR 146.136 to satisfy 

the requirement to provide essential 

health benefits. 

(f) Small employer exemption—(1) In 

general. The requirements of this 

section do not apply to a group health 

plan (or health insurance issuer offering 

coverage in connection with a group 

health plan) for a plan year of a small 

employer. For purposes of this 

paragraph (f), the term small employer 

means, in connection with a group 

health plan with respect to a calendar 

year and a plan year, an employer who 

employed an average of at least two (or 

one in the case of an employer residing 

in a State that permits small groups to 

include a single individual) but not 

more than 50 employees on business 

days during the preceding calendar 

year. See section 732(a) of ERISA and 

§ 2590.732(b), which provide that this 

section (and certain other sections) does 

not apply to any group health plan (and 

health insurance issuer offering 

coverage in connection with a group 

health plan) for any plan year if, on the 

first day of the plan year, the plan has 

fewer than two participants who are 

current employees. 

(2) Rules in determining employer 

size. For purposes of paragraph (f)(1) of 

this section— 

(i) All persons treated as a single 

employer under subsections (b), (c), (m), 

and (o) of section 414 of the Code are 

treated as one employer; 

(ii) If an employer was not in 

existence throughout the preceding 

calendar year, whether it is a small 

employer is determined based on the 

average number of employees the 

employer reasonably expects to employ 

on business days during the current 

calendar year; and 

(iii) Any reference to an employer for 

purposes of the small employer 

exemption includes a reference to a 

predecessor of the employer. 

(g) Increased cost exemption—(1) In 

general. If the application of this section 

to a group health plan (or health 

insurance coverage offered in 

connection with such plans) results in 

an increase for the plan year involved of 

the actual total cost of coverage with 

respect to medical/surgical benefits and 

mental health and substance use 

disorder benefits as determined and 

certified under paragraph (g)(3) of this 

section by an amount that exceeds the 

applicable percentage described in 

paragraph (g)(2) of this section of the 

actual total plan costs, the provisions of 

this section shall not apply to such plan 

(or coverage) during the following plan 

year, and such exemption shall apply to 

the plan (or coverage) for one plan year. 

An employer or issuer may elect to 

continue to provide mental health and 

substance use disorder benefits in 

compliance with this section with 

respect to the plan or coverage involved 

regardless of any increase in total costs. 

(2) Applicable percentage. With 

respect to a plan or coverage, the 

applicable percentage described in this 

paragraph (g) is— 

(i) 2 percent in the case of the first 

plan year in which this section is 

applied to the plan or coverage; and 

(ii) 1 percent in the case of each 

subsequent plan year. 

(3) Determinations by actuaries—(i) 

Determinations as to increases in actual 

costs under a plan or coverage that are 

attributable to implementation of the 

requirements of this section shall be 

made and certified by a qualified and 

licensed actuary who is a member in 

good standing of the American 

Academy of Actuaries. All such 

determinations must be based on the 

formula specified in paragraph (g)(4) of 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68285 

this section and shall be in a written 

report prepared by the actuary. 

(ii) The written report described in 

paragraph (g)(3)(i) of this section shall 

be maintained by the group health plan 

or health insurance issuer, along with 

all supporting documentation relied 

upon by the actuary, for a period of six 

years following the notification made 

under paragraph (g)(6) of this section. 

(4) Formula. The formula to be used 

to make the determination under 

paragraph (g)(3)(i) of this section is 

expressed mathematically as follows: 

[(E1 ¥ E0)/T0] ¥D > k 

(i) E1 is the actual total cost of 

coverage with respect to mental health 

and substance use disorder benefits for 

the base period, including claims paid 

by the plan or issuer with respect to 

mental health and substance use 

disorder benefits and administrative 

costs (amortized over time) attributable 

to providing these benefits consistent 

with the requirements of this section. 

(ii) E0 is the actual total cost of 

coverage with respect to mental health 

and substance use disorder benefits for 

the length of time immediately before 

the base period (and that is equal in 

length to the base period), including 

claims paid by the plan or issuer with 

respect to mental health and substance 

use disorder benefits and administrative 

costs (amortized over time) attributable 

to providing these benefits. 

(iii) T0 is the actual total cost of 

coverage with respect to all benefits 

during the base period. 

(iv) k is the applicable percentage of 

increased cost specified in paragraph 

(g)(2) of this section that will be 

expressed as a fraction for purposes of 

this formula. 

(v) D is the average change in 

spending that is calculated by applying 

the formula (E1 ¥ E0)/T0 to mental 

health and substance use disorder 

spending in each of the five prior years 

and then calculating the average change 

in spending. 

(5) Six month determination. If a 

group health plan or health insurance 

issuer seeks an exemption under this 

paragraph (g), determinations under 

paragraph (g)(3) of this section shall be 

made after such plan or coverage has 

complied with this section for at least 

the first 6 months of the plan year 

involved. 

(6) Notification. A group health plan 

or health insurance issuer that, based on 

the certification described under 

paragraph (g)(3) of this section, qualifies 

for an exemption under this paragraph 

(g), and elects to implement the 

exemption, must notify participants and 

beneficiaries covered under the plan, 

the Secretary, and the appropriate State 

agencies of such election. 

(i) Participants and beneficiaries—(A) 

Content of notice. The notice to 

participants and beneficiaries must 

include the following information: 

(1) A statement that the plan or issuer 

is exempt from the requirements of this 

section and a description of the basis for 

the exemption. 

(2) The name and telephone number 

of the individual to contact for further 

information. 

(3) The plan or issuer name and plan 

number (PN). 

(4) The plan administrator’s name, 

address, and telephone number. 

(5) For single-employer plans, the 

plan sponsor’s name, address, and 

telephone number (if different from 

paragraph (g)(6)(i)(A)(3) of this section) 

and the plan sponsor’s employer 

identification number (EIN). 

(6) The effective date of such 

exemption. 

(7) A statement regarding the ability 

of participants and beneficiaries to 

contact the plan administrator or health 

insurance issuer to see how benefits 

may be affected as a result of the plan’s 

or issuer’s election of the exemption. 

(8) A statement regarding the 

availability, upon request and free of 

charge, of a summary of the information 

on which the exemption is based (as 

required under paragraph (g)(6)(i)(D) of 

this section). 

(B) Use of summary of material 

reductions in covered services or 

benefits. A plan or issuer may satisfy the 

requirements of paragraph (g)(6)(i)(A) of 

this section by providing participants 

and beneficiaries (in accordance with 

paragraph (g)(6)(i)(C) of this section) 

with a summary of material reductions 

in covered services or benefits 

consistent with § 2520.104b–3(d) of this 

chapter that also includes the 

information specified in paragraph 

(g)(6)(i)(A) of this section. However, in 

all cases, the exemption is not effective 

until 30 days after notice has been sent. 

(C) Delivery. The notice described in 

this paragraph (g)(6)(i) is required to be 

provided to all participants and 

beneficiaries. The notice may be 

furnished by any method of delivery 

that satisfies the requirements of section 

104(b)(1) of ERISA (29 U.S.C. 

1024(b)(1)) and its implementing 

regulations (for example, first-class 

mail). If the notice is provided to the 

participant and any beneficiaries at the 

participant’s last known address, then 

the requirements of this paragraph 

(g)(6)(i) are satisfied with respect to the 

participant and all beneficiaries residing 

at that address. If a beneficiary’s last 

known address is different from the 

participant’s last known address, a 

separate notice is required to be 

provided to the beneficiary at the 

beneficiary’s last known address. 

(D) Availability of documentation. 

The plan or issuer must make available 

to participants and beneficiaries (or 

their representatives), on request and at 

no charge, a summary of the information 

on which the exemption was based. (For 

purposes of this paragraph (g), an 

individual who is not a participant or 

beneficiary and who presents a notice 

described in paragraph (g)(6)(i) of this 

section is considered to be a 

representative. A representative may 

request the summary of information by 

providing the plan a copy of the notice 

provided to the participant under 

paragraph (g)(6)(i) of this section with 

any personally identifiable information 

redacted.) The summary of information 

must include the incurred expenditures, 

the base period, the dollar amount of 

claims incurred during the base period 

that would have been denied under the 

terms of the plan or coverage absent 

amendments required to comply with 

paragraphs (b) and (c) of this section, 

the administrative costs related to those 

claims, and other administrative costs 

attributable to complying with the 

requirements of this section. In no event 

should the summary of information 

include any personally identifiable 

information. 

(ii) Federal agencies—(A) Content of 

notice. The notice to the Secretary must 

include the following information: 

(1) A description of the number of 

covered lives under the plan (or 

coverage) involved at the time of the 

notification, and as applicable, at the 

time of any prior election of the cost 

exemption under this paragraph (g) by 

such plan (or coverage); 

(2) For both the plan year upon which 

a cost exemption is sought and the year 

prior, a description of the actual total 

costs of coverage with respect to 

medical/surgical benefits and mental 

health and substance use disorder 

benefits; and 

(3) For both the plan year upon which 

a cost exemption is sought and the year 

prior, the actual total costs of coverage 

with respect to mental health and 

substance use disorder benefits under 

the plan. 

(B) Reporting. A group health plan, 

and any health insurance coverage 

offered in connection with a group 

health plan, must provide notice to the 

Department of Labor. This requirement 

is satisfied if the plan sends a copy, to 

the address designated by the Secretary 

in generally applicable guidance, of the 

notice described in paragraph 

(g)(6)(ii)(A) of this section identifying 


emcdonald on DSK67QTVN1PROD with RULES3
68286 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

the benefit package to which the 

exemption applies. 

(iii) Confidentiality. A notification to 

the Secretary under this paragraph (g)(6) 

shall be confidential. The Secretary 

shall make available, upon request and 

not more than on an annual basis, an 

anonymous itemization of each 

notification that includes— 

(A) A breakdown of States by the size 

and type of employers submitting such 

notification; and 

(B) A summary of the data received 

under paragraph (g)(6)(ii) of this section. 

(iv) Audits. The Secretary may audit 

the books and records of a group health 

plan or a health insurance issuer 

relating to an exemption, including any 

actuarial reports, during the 6 year 

period following notification of such 

exemption under paragraph (g)(6) of this 

section. A State agency receiving a 

notification under paragraph (g)(6) of 

this section may also conduct such an 

audit with respect to an exemption 

covered by such notification. 

(h) Sale of nonparity health insurance 

coverage. A health insurance issuer may 

not sell a policy, certificate, or contract 

of insurance that fails to comply with 

paragraph (b) or (c) of this section, 

except to a plan for a year for which the 

plan is exempt from the requirements of 

this section because the plan meets the 

requirements of paragraph (f) or (g) of 

this section. 

(i) Applicability dates—(1) In general. 

Except as provided in paragraph (i)(2) of 

this section, this section applies to 

group health plans and health insurance 

issuers offering group health insurance 

coverage on the first day of the first plan 

year beginning on or after July 1, 2014. 

Until the applicability date, plans and 

issuers are required to continue to 

comply with the corresponding sections 

of 29 CFR 2590.712 contained in the 29 

CFR, parts 1927 to end, edition revised 

as of July 1, 2013. 

(2) Special effective date for certain 

collectively-bargained plans. For a 

group health plan maintained pursuant 

to one or more collective bargaining 

agreements ratified before October 3, 

2008, the requirements of this section 

do not apply to the plan (or health 

insurance coverage offered in 

connection with the plan) for plan years 

beginning before the date on which the 

last of the collective bargaining 

agreements terminates (determined 

without regard to any extension agreed 

to after October 3, 2008). 

■ 3. Section 2590.715–2719 is amended 

by adding a sentence to the end of the 

introductory text of paragraph (d) and 

revising paragraph (d)(1)(i) to read as 

follows: 

§ 2590.712 Internal claims and appeals and 

external review processes. 

* * * * * 

(d) * * * A Multi State Plan or MSP, 

as defined by 45 CFR 800.20, must 

provide an effective Federal external 

review process in accordance with this 

paragraph (d). 

(1) * * * 

(i) In general. Subject to the 

suspension provision in paragraph 

(d)(1)(ii) of this section and except to 

the extent provided otherwise by the 

Secretary in guidance, the Federal 

external review process established 

pursuant to this paragraph (d) applies, 

at a minimum, to any adverse benefit 

determination or final internal adverse 

benefit determination (as defined in 

paragraphs (a)(2)(i) and (a)(2)(v) of this 

section), except that a denial, reduction, 

termination, or a failure to provide 

payment for a benefit based on a 

determination that a participant or 

beneficiary fails to meet the 

requirements for eligibility under the 

terms of a group health plan is not 

eligible for the Federal external review 

process under this paragraph (d). 

* * * * * 

Department of Health and Human 

Services 

45 CFR Subtitle A 

For the reasons set forth in the 

preamble, the Department of Health and 

Human Services adopts as final the 

interim final rule with comment period 

amending 45 CFR part 146, which was 

published on February 2, 2010, in the 

Federal Register at 75 FR 5410, with the 

following changes, and further amends 

part 147 as set forth below: 

PART 146—REQUIREMENTS FOR THE 

GROUP HEALTH INSURANCE 

MARKET 

■ 1. The authority citation for Part 146 

continues to read as follows: 

Authority: Secs. 2702 through 2705, 2711 

through 2723, 2791, and 2792 of the PHS Act 

(42 U.S.C. 300gg–1 through 300gg–5, 300gg– 

11 through 300gg–23, 300gg–91, and 300gg– 

92). 

■ 2. Section 146.136 is revised to read 

as follows: 

§ 146.136 Parity in mental health and 

substance use disorder benefits. 

(a) Meaning of terms. For purposes of 

this section, except where the context 

clearly indicates otherwise, the 

following terms have the meanings 

indicated: 

Aggregate lifetime dollar limit means 

a dollar limitation on the total amount 

of specified benefits that may be paid 

under a group health plan (or health 

insurance coverage offered in 

connection with such a plan) for any 

coverage unit. 

Annual dollar limit means a dollar 

limitation on the total amount of 

specified benefits that may be paid in a 

12-month period under a group health 

plan (or health insurance coverage 

offered in connection with such a plan) 

for any coverage unit. 

Coverage unit means coverage unit as 

described in paragraph (c)(1)(iv) of this 

section. 

Cumulative financial requirements 

are financial requirements that 

determine whether or to what extent 

benefits are provided based on 

accumulated amounts and include 

deductibles and out-of-pocket 

maximums. (However, cumulative 

financial requirements do not include 

aggregate lifetime or annual dollar limits 

because these two terms are excluded 

from the meaning of financial 

requirements.) 

Cumulative quantitative treatment 

limitations are treatment limitations that 

determine whether or to what extent 

benefits are provided based on 

accumulated amounts, such as annual 

or lifetime day or visit limits. 

Financial requirements include 

deductibles, copayments, coinsurance, 

or out-of-pocket maximums. Financial 

requirements do not include aggregate 

lifetime or annual dollar limits. 

Medical/surgical benefits means 

benefits with respect to items or services 

for medical conditions or surgical 

procedures, as defined under the terms 

of the plan or health insurance coverage 

and in accordance with applicable 

Federal and State law, but does not 

include mental health or substance use 

disorder benefits. Any condition 

defined by the plan or coverage as being 

or as not being a medical/surgical 

condition must be defined to be 

consistent with generally recognized 

independent standards of current 

medical practice (for example, the most 

current version of the International 

Classification of Diseases (ICD) or State 

guidelines). 

Mental health benefits means benefits 

with respect to items or services for 

mental health conditions, as defined 

under the terms of the plan or health 

insurance coverage and in accordance 

with applicable Federal and State law. 

Any condition defined by the plan or 

coverage as being or as not being a 

mental health condition must be 

defined to be consistent with generally 

recognized independent standards of 

current medical practice (for example, 

the most current version of the 

Diagnostic and Statistical Manual of 

Mental Disorders (DSM), the most 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68287 

current version of the ICD, or State 

guidelines). 

Substance use disorder benefits 

means benefits with respect to items or 

services for substance use disorders, as 

defined under the terms of the plan or 

health insurance coverage and in 

accordance with applicable Federal and 

State law. Any disorder defined by the 

plan as being or as not being a substance 

use disorder must be defined to be 

consistent with generally recognized 

independent standards of current 

medical practice (for example, the most 

current version of the DSM, the most 

current version of the ICD, or State 

guidelines). 

Treatment limitations include limits 

on benefits based on the frequency of 

treatment, number of visits, days of 

coverage, days in a waiting period, or 

other similar limits on the scope or 

duration of treatment. Treatment 

limitations include both quantitative 

treatment limitations, which are 

expressed numerically (such as 50 

outpatient visits per year), and 

nonquantitative treatment limitations, 

which otherwise limit the scope or 

duration of benefits for treatment under 

a plan or coverage. (See paragraph 

(c)(4)(ii) of this section for an illustrative 

list of nonquantitative treatment 

limitations.) A permanent exclusion of 

all benefits for a particular condition or 

disorder, however, is not a treatment 

limitation for purposes of this 

definition. 

(b) Parity requirements with respect to 

aggregate lifetime and annual dollar 

limits. This paragraph (b) details the 

application of the parity requirements 

with respect to aggregate lifetime and 

annual dollar limits. This paragraph (b) 

does not address the provisions of PHS 

Act section 2711, which prohibit 

imposing lifetime and annual limits on 

the dollar value of essential health 

benefits. For more information, see 

§ 147.126 of this subchapter. 

(1) General—(i) General parity 

requirement. A group health plan (or 

health insurance coverage offered by an 

issuer in connection with a group health 

plan) that provides both medical/

surgical benefits and mental health or 

substance use disorder benefits must 

comply with paragraph (b)(2), (b)(3), or 

(b)(5) of this section. 

(ii) Exception. The rule in paragraph 

(b)(1)(i) of this section does not apply if 

a plan (or health insurance coverage) 

satisfies the requirements of paragraph 

(f) or (g) of this section (relating to 

exemptions for small employers and for 

increased cost). 

(2) Plan with no limit or limits on less 

than one-third of all medical/surgical 

benefits. If a plan (or health insurance 

coverage) does not include an aggregate 

lifetime or annual dollar limit on any 

medical/surgical benefits or includes an 

aggregate lifetime or annual dollar limit 

that applies to less than one-third of all 

medical/surgical benefits, it may not 

impose an aggregate lifetime or annual 

dollar limit, respectively, on mental 

health or substance use disorder 

benefits. 

(3) Plan with a limit on at least twothirds of all medical/surgical benefits. If 

a plan (or health insurance coverage) 

includes an aggregate lifetime or annual 

dollar limit on at least two-thirds of all 

medical/surgical benefits, it must 

either— 

(i) Apply the aggregate lifetime or 

annual dollar limit both to the medical/ 

surgical benefits to which the limit 

would otherwise apply and to mental 

health or substance use disorder 

benefits in a manner that does not 

distinguish between the medical/

surgical benefits and mental health or 

substance use disorder benefits; or 

(ii) Not include an aggregate lifetime 

or annual dollar limit on mental health 

or substance use disorder benefits that 

is less than the aggregate lifetime or 

annual dollar limit, respectively, on 

medical/surgical benefits. (For 

cumulative limits other than aggregate 

lifetime or annual dollar limits, see 

paragraph (c)(3)(v) of this section 

prohibiting separately accumulating 

cumulative financial requirements or 

cumulative quantitative treatment 

limitations.) 

(4) Determining one-third and twothirds of all medical/surgical benefits. 

For purposes of this paragraph (b), the 

determination of whether the portion of 

medical/surgical benefits subject to an 

aggregate lifetime or annual dollar limit 

represents one-third or two-thirds of all 

medical/surgical benefits is based on the 

dollar amount of all plan payments for 

medical/surgical benefits expected to be 

paid under the plan for the plan year (or 

for the portion of the plan year after a 

change in plan benefits that affects the 

applicability of the aggregate lifetime or 

annual dollar limits). Any reasonable 

method may be used to determine 

whether the dollar amount expected to 

be paid under the plan will constitute 

one-third or two-thirds of the dollar 

amount of all plan payments for 

medical/surgical benefits. 

(5) Plan not described in paragraph 

(b)(2) or (b)(3) of this section—(i) In 

general. A group health plan (or health 

insurance coverage) that is not 

described in paragraph (b)(2) or (b)(3) of 

this section with respect to aggregate 

lifetime or annual dollar limits on 

medical/surgical benefits, must either— 

(A) Impose no aggregate lifetime or 

annual dollar limit, as appropriate, on 

mental health or substance use disorder 

benefits; or 

(B) Impose an aggregate lifetime or 

annual dollar limit on mental health or 

substance use disorder benefits that is 

no less than an average limit calculated 

for medical/surgical benefits in the 

following manner. The average limit is 

calculated by taking into account the 

weighted average of the aggregate 

lifetime or annual dollar limits, as 

appropriate, that are applicable to the 

categories of medical/surgical benefits. 

Limits based on delivery systems, such 

as inpatient/outpatient treatment or 

normal treatment of common, low-cost 

conditions (such as treatment of normal 

births), do not constitute categories for 

purposes of this paragraph (b)(5)(i)(B). 

In addition, for purposes of determining 

weighted averages, any benefits that are 

not within a category that is subject to 

a separately-designated dollar limit 

under the plan are taken into account as 

a single separate category by using an 

estimate of the upper limit on the dollar 

amount that a plan may reasonably be 

expected to incur with respect to such 

benefits, taking into account any other 

applicable restrictions under the plan. 

(ii) Weighting. For purposes of this 

paragraph (b)(5), the weighting 

applicable to any category of medical/

surgical benefits is determined in the 

manner set forth in paragraph (b)(4) of 

this section for determining one-third or 

two-thirds of all medical/surgical 

benefits. 

(c) Parity requirements with respect to 

financial requirements and treatment 

limitations—(1) Clarification of terms— 

(i) Classification of benefits. When 

reference is made in this paragraph (c) 

to a classification of benefits, the term 

‘‘classification’’ means a classification 

as described in paragraph (c)(2)(ii) of 

this section. 

(ii) Type of financial requirement or 

treatment limitation. When reference is 

made in this paragraph (c) to a type of 

financial requirement or treatment 

limitation, the reference to type means 

its nature. Different types of financial 

requirements include deductibles, 

copayments, coinsurance, and out-ofpocket maximums. Different types of 

quantitative treatment limitations 

include annual, episode, and lifetime 

day and visit limits. See paragraph 

(c)(4)(ii) of this section for an illustrative 

list of nonquantitative treatment 

limitations. 

(iii) Level of a type of financial 

requirement or treatment limitation. 

When reference is made in this 

paragraph (c) to a level of a type of 

financial requirement or treatment 


emcdonald on DSK67QTVN1PROD with RULES3
68288 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

limitation, level refers to the magnitude 

of the type of financial requirement or 

treatment limitation. For example, 

different levels of coinsurance include 

20 percent and 30 percent; different 

levels of a copayment include $15 and 

$20; different levels of a deductible 

include $250 and $500; and different 

levels of an episode limit include 21 

inpatient days per episode and 30 

inpatient days per episode. 

(iv) Coverage unit. When reference is 

made in this paragraph (c) to a coverage 

unit, coverage unit refers to the way in 

which a plan (or health insurance 

coverage) groups individuals for 

purposes of determining benefits, or 

premiums or contributions. For 

example, different coverage units 

include self-only, family, and employeeplus-spouse. 

(2) General parity requirement—(i) 

General rule. A group health plan (or 

health insurance coverage offered by an 

issuer in connection with a group health 

plan) that provides both medical/

surgical benefits and mental health or 

substance use disorder benefits may not 

apply any financial requirement or 

treatment limitation to mental health or 

substance use disorder benefits in any 

classification that is more restrictive 

than the predominant financial 

requirement or treatment limitation of 

that type applied to substantially all 

medical/surgical benefits in the same 

classification. Whether a financial 

requirement or treatment limitation is a 

predominant financial requirement or 

treatment limitation that applies to 

substantially all medical/surgical 

benefits in a classification is determined 

separately for each type of financial 

requirement or treatment limitation. The 

application of the rules of this 

paragraph (c)(2) to financial 

requirements and quantitative treatment 

limitations is addressed in paragraph 

(c)(3) of this section; the application of 

the rules of this paragraph (c)(2) to 

nonquantitative treatment limitations is 

addressed in paragraph (c)(4) of this 

section. 

(ii) Classifications of benefits used for 

applying rules—(A) In general. If a plan 

(or health insurance coverage) provides 

mental health or substance use disorder 

benefits in any classification of benefits 

described in this paragraph (c)(2)(ii), 

mental health or substance use disorder 

benefits must be provided in every 

classification in which medical/surgical 

benefits are provided. In determining 

the classification in which a particular 

benefit belongs, a plan (or health 

insurance issuer) must apply the same 

standards to medical/surgical benefits 

and to mental health or substance use 

disorder benefits. To the extent that a 

plan (or health insurance coverage) 

provides benefits in a classification and 

imposes any separate financial 

requirement or treatment limitation (or 

separate level of a financial requirement 

or treatment limitation) for benefits in 

the classification, the rules of this 

paragraph (c) apply separately with 

respect to that classification for all 

financial requirements or treatment 

limitations (illustrated in examples in 

paragraph (c)(2)(ii)(C) of this section). 

The following classifications of benefits 

are the only classifications used in 

applying the rules of this paragraph (c): 

(1) Inpatient, in-network. Benefits 

furnished on an inpatient basis and 

within a network of providers 

established or recognized under a plan 

or health insurance coverage. See 

special rules for plans with multiple 

network tiers in paragraph (c)(3)(iii) of 

this section. 

(2) Inpatient, out-of-network. Benefits 

furnished on an inpatient basis and 

outside any network of providers 

established or recognized under a plan 

or health insurance coverage. This 

classification includes inpatient benefits 

under a plan (or health insurance 

coverage) that has no network of 

providers. 

(3) Outpatient, in-network. Benefits 

furnished on an outpatient basis and 

within a network of providers 

established or recognized under a plan 

or health insurance coverage. See 

special rules for office visits and plans 

with multiple network tiers in 

paragraph (c)(3)(iii) of this section. 

(4) Outpatient, out-of-network. 

Benefits furnished on an outpatient 

basis and outside any network of 

providers established or recognized 

under a plan or health insurance 

coverage. This classification includes 

outpatient benefits under a plan (or 

health insurance coverage) that has no 

network of providers. See special rules 

for office visits in paragraph (c)(3)(iii) of 

this section. 

(5) Emergency care. Benefits for 

emergency care. 

(6) Prescription drugs. Benefits for 

prescription drugs. See special rules for 

multi-tiered prescription drug benefits 

in paragraph (c)(3)(iii) of this section. 

(B) Application to out-of-network 

providers. See paragraph (c)(2)(ii)(A) of 

this section, under which a plan (or 

health insurance coverage) that provides 

mental health or substance use disorder 

benefits in any classification of benefits 

must provide mental health or 

substance use disorder benefits in every 

classification in which medical/surgical 

benefits are provided, including out-ofnetwork classifications. 

(C) Examples. The rules of this 

paragraph (c)(2)(ii) are illustrated by the 

following examples. In each example, 

the group health plan is subject to the 

requirements of this section and 

provides both medical/surgical benefits 

and mental health and substance use 

disorder benefits. 

Example 1. (i) Facts. A group health plan 

offers inpatient and outpatient benefits and 

does not contract with a network of 

providers. The plan imposes a $500 

deductible on all benefits. For inpatient 

medical/surgical benefits, the plan imposes a 

coinsurance requirement. For outpatient 

medical/surgical benefits, the plan imposes 

copayments. The plan imposes no other 

financial requirements or treatment 

limitations. 

(ii) Conclusion. In this Example 1, because 

the plan has no network of providers, all 

benefits provided are out-of-network. 

Because inpatient, out-of-network medical/

surgical benefits are subject to separate 

financial requirements from outpatient, outof-network medical/surgical benefits, the 

rules of this paragraph (c) apply separately 

with respect to any financial requirements 

and treatment limitations, including the 

deductible, in each classification. 

Example 2. (i) Facts. A plan imposes a 

$500 deductible on all benefits. The plan has 

no network of providers. The plan generally 

imposes a 20 percent coinsurance 

requirement with respect to all benefits, 

without distinguishing among inpatient, 

outpatient, emergency care, or prescription 

drug benefits. The plan imposes no other 

financial requirements or treatment 

limitations. 

(ii) Conclusion. In this Example 2, because 

the plan does not impose separate financial 

requirements (or treatment limitations) based 

on classification, the rules of this paragraph 

(c) apply with respect to the deductible and 

the coinsurance across all benefits. 

Example 3. (i) Facts. Same facts as 

Example 2, except the plan exempts 

emergency care benefits from the 20 percent 

coinsurance requirement. The plan imposes 

no other financial requirements or treatment 

limitations. 

(ii) Conclusion. In this Example 3, because 

the plan imposes separate financial 

requirements based on classifications, the 

rules of this paragraph (c) apply with respect 

to the deductible and the coinsurance 

separately for— 

(A) Benefits in the emergency care 

classification; and 

(B) All other benefits. 

Example 4. (i) Facts. Same facts as 

Example 2, except the plan also imposes a 

preauthorization requirement for all inpatient 

treatment in order for benefits to be paid. No 

such requirement applies to outpatient 

treatment. 

(ii) Conclusion. In this Example 4, because 

the plan has no network of providers, all 

benefits provided are out-of-network. 

Because the plan imposes a separate 

treatment limitation based on classifications, 

the rules of this paragraph (c) apply with 

respect to the deductible and coinsurance 

separately for— 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68289 

(A) Inpatient, out-of-network benefits; and 

(B) All other benefits. 

(3) Financial requirements and 

quantitative treatment limitations—(i) 

Determining ‘‘substantially all’’ and 

‘‘predominant’’—(A) Substantially all. 

For purposes of this paragraph (c), a 

type of financial requirement or 

quantitative treatment limitation is 

considered to apply to substantially all 

medical/surgical benefits in a 

classification of benefits if it applies to 

at least two-thirds of all medical/

surgical benefits in that classification. 

(For this purpose, benefits expressed as 

subject to a zero level of a type of 

financial requirement are treated as 

benefits not subject to that type of 

financial requirement, and benefits 

expressed as subject to a quantitative 

treatment limitation that is unlimited 

are treated as benefits not subject to that 

type of quantitative treatment 

limitation.) If a type of financial 

requirement or quantitative treatment 

limitation does not apply to at least twothirds of all medical/surgical benefits in 

a classification, then that type cannot be 

applied to mental health or substance 

use disorder benefits in that 

classification. 

(B) Predominant—(1) If a type of 

financial requirement or quantitative 

treatment limitation applies to at least 

two-thirds of all medical/surgical 

benefits in a classification as 

determined under paragraph (c)(3)(i)(A) 

of this section, the level of the financial 

requirement or quantitative treatment 

limitation that is considered the 

predominant level of that type in a 

classification of benefits is the level that 

applies to more than one-half of 

medical/surgical benefits in that 

classification subject to the financial 

requirement or quantitative treatment 

limitation. 

(2) If, with respect to a type of 

financial requirement or quantitative 

treatment limitation that applies to at 

least two-thirds of all medical/surgical 

benefits in a classification, there is no 

single level that applies to more than 

one-half of medical/surgical benefits in 

the classification subject to the financial 

requirement or quantitative treatment 

limitation, the plan (or health insurance 

issuer) may combine levels until the 

combination of levels applies to more 

than one-half of medical/surgical 

benefits subject to the financial 

requirement or quantitative treatment 

limitation in the classification. The least 

restrictive level within the combination 

is considered the predominant level of 

that type in the classification. (For this 

purpose, a plan may combine the most 

restrictive levels first, with each less 

restrictive level added to the 

combination until the combination 

applies to more than one-half of the 

benefits subject to the financial 

requirement or treatment limitation.) 

(C) Portion based on plan payments. 

For purposes of this paragraph (c), the 

determination of the portion of medical/ 

surgical benefits in a classification of 

benefits subject to a financial 

requirement or quantitative treatment 

limitation (or subject to any level of a 

financial requirement or quantitative 

treatment limitation) is based on the 

dollar amount of all plan payments for 

medical/surgical benefits in the 

classification expected to be paid under 

the plan for the plan year (or for the 

portion of the plan year after a change 

in plan benefits that affects the 

applicability of the financial 

requirement or quantitative treatment 

limitation). 

(D) Clarifications for certain threshold 

requirements. For any deductible, the 

dollar amount of plan payments 

includes all plan payments with respect 

to claims that would be subject to the 

deductible if it had not been satisfied. 

For any out-of-pocket maximum, the 

dollar amount of plan payments 

includes all plan payments associated 

with out-of-pocket payments that are 

taken into account towards the out-ofpocket maximum as well as all plan 

payments associated with out-of-pocket 

payments that would have been made 

towards the out-of-pocket maximum if it 

had not been satisfied. Similar rules 

apply for any other thresholds at which 

the rate of plan payment changes. (See 

also PHS Act section 2707(b) and 

Affordable Care Act section 1302(c), 

which establish limitations on annual 

deductibles for non-grandfathered 

health plans in the small group market 

and annual limitations on out-of-pocket 

maximums for all non-grandfathered 

health plans.) 

(E) Determining the dollar amount of 

plan payments. Subject to paragraph 

(c)(3)(i)(D) of this section, any 

reasonable method may be used to 

determine the dollar amount expected 

to be paid under a plan for medical/

surgical benefits subject to a financial 

requirement or quantitative treatment 

limitation (or subject to any level of a 

financial requirement or quantitative 

treatment limitation). 

(ii) Application to different coverage 

units. If a plan (or health insurance 

coverage) applies different levels of a 

financial requirement or quantitative 

treatment limitation to different 

coverage units in a classification of 

medical/surgical benefits, the 

predominant level that applies to 

substantially all medical/surgical 

benefits in the classification is 

determined separately for each coverage 

unit. 

(iii) Special rules—(A) Multi-tiered 

prescription drug benefits. If a plan (or 

health insurance coverage) applies 

different levels of financial 

requirements to different tiers of 

prescription drug benefits based on 

reasonable factors determined in 

accordance with the rules in paragraph 

(c)(4)(i) of this section (relating to 

requirements for nonquantitative 

treatment limitations) and without 

regard to whether a drug is generally 

prescribed with respect to medical/

surgical benefits or with respect to 

mental health or substance use disorder 

benefits, the plan (or health insurance 

coverage) satisfies the parity 

requirements of this paragraph (c) with 

respect to prescription drug benefits. 

Reasonable factors include cost, 

efficacy, generic versus brand name, and 

mail order versus pharmacy pick-up. 

(B) Multiple network tiers. If a plan (or 

health insurance coverage) provides 

benefits through multiple tiers of innetwork providers (such as an innetwork tier of preferred providers with 

more generous cost-sharing to 

participants than a separate in-network 

tier of participating providers), the plan 

may divide its benefits furnished on an 

in-network basis into sub-classifications 

that reflect network tiers, if the tiering 

is based on reasonable factors 

determined in accordance with the rules 

in paragraph (c)(4)(i) of this section 

(such as quality, performance, and 

market standards) and without regard to 

whether a provider provides services 

with respect to medical/surgical benefits 

or mental health or substance use 

disorder benefits. After the subclassifications are established, the plan 

or issuer may not impose any financial 

requirement or treatment limitation on 

mental health or substance use disorder 

benefits in any sub-classification that is 

more restrictive than the predominant 

financial requirement or treatment 

limitation that applies to substantially 

all medical/surgical benefits in the subclassification using the methodology set 

forth in paragraph (c)(3)(i) of this 

section. 

(C) Sub-classifications permitted for 

office visits, separate from other 

outpatient services. For purposes of 

applying the financial requirement and 

treatment limitation rules of this 

paragraph (c), a plan or issuer may 

divide its benefits furnished on an 

outpatient basis into the two subclassifications described in this 

paragraph (c)(3)(iii)(C). After the subclassifications are established, the plan 

or issuer may not impose any financial 


emcdonald on DSK67QTVN1PROD with RULES3
68290 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

requirement or quantitative treatment 

limitation on mental health or substance 

use disorder benefits in any subclassification that is more restrictive 

than the predominant financial 

requirement or quantitative treatment 

limitation that applies to substantially 

all medical/surgical benefits in the subclassification using the methodology set 

forth in paragraph (c)(3)(i) of this 

section. Sub-classifications other than 

these special rules, such as separate subclassifications for generalists and 

specialists, are not permitted. The two 

sub-classifications permitted under this 

paragraph (c)(3)(iii)(C) are: 

(1) Office visits (such as physician 

visits), and 

(2) All other outpatient items and 

services (such as outpatient surgery, 

facility charges for day treatment 

centers, laboratory charges, or other 

medical items). 

(iv) Examples. The rules of 

paragraphs (c)(3)(i), (c)(3)(ii), and 

(c)(3)(iii) of this section are illustrated 

by the following examples. In each 

example, the group health plan is 

subject to the requirements of this 

section and provides both medical/

surgical benefits and mental health and 

substance use disorder benefits. 

Example 1. (i) Facts. For inpatient, out-ofnetwork medical/surgical benefits, a group 

health plan imposes five levels of 

coinsurance. Using a reasonable method, the 

plan projects its payments for the upcoming 

year as follows: 

Coinsurance rate ............................................. 0% 10% 15% 20% 30% Total. 

Projected payments ......................................... $200x $100x $450x $100x $150x $1,000x. 

Percent of total plan costs ............................... 20% 10% 45% 10% 15% 

Percent subject to coinsurance level ............... N/A 12.5% 

(100x/800x) 

56.25% 

(450x/800x) 

12.5% 

(100x/800x) 

18.75% 

(150x/800x) 

The plan projects plan costs of $800x to be 

subject to coinsurance ($100x + $450x + 

$100x + $150x = $800x). Thus, 80 percent 

($800x/$1,000x) of the benefits are projected 

to be subject to coinsurance, and 56.25 

percent of the benefits subject to coinsurance 

are projected to be subject to the 15 percent 

coinsurance level. 

(ii) Conclusion. In this Example 1, the twothirds threshold of the substantially all 

standard is met for coinsurance because 80 

percent of all inpatient, out-of-network 

medical/surgical benefits are subject to 

coinsurance. Moreover, the 15 percent 

coinsurance is the predominant level because 

it is applicable to more than one-half of 

inpatient, out-of-network medical/surgical 

benefits subject to the coinsurance 

requirement. The plan may not impose any 

level of coinsurance with respect to 

inpatient, out-of-network mental health or 

substance use disorder benefits that is more 

restrictive than the 15 percent level of 

coinsurance. 

Example 2. (i) Facts. For outpatient, innetwork medical/surgical benefits, a plan 

imposes five different copayment levels. 

Using a reasonable method, the plan projects 

payments for the upcoming year as follows: 

Copayment amount ......................................... $0 $10 $15 $20 $50 Total. 

Projected payments ......................................... $200x $200x $200x $300x $100x $1,000x. 

Percent of total plan costs ............................... 20% 20% 20% 30% 10% 

Percent subject to copayments ....................... N/A 25% 

(200x/800x) 

25% 

(200x/800x) 

37.5% 

(300x/800x) 

12.5% 

(100x/800x) 

The plan projects plan costs of $800x to be 

subject to copayments ($200x + $200x + 

$300x + $100x = $800x). Thus, 80 percent 

($800x/$1,000x) of the benefits are projected 

to be subject to a copayment. 

(ii) Conclusion. In this Example 2, the twothirds threshold of the substantially all 

standard is met for copayments because 80 

percent of all outpatient, in-network medical/ 

surgical benefits are subject to a copayment. 

Moreover, there is no single level that applies 

to more than one-half of medical/surgical 

benefits in the classification subject to a 

copayment (for the $10 copayment, 25%; for 

the $15 copayment, 25%; for the $20 

copayment, 37.5%; and for the $50 

copayment, 12.5%). The plan can combine 

any levels of copayment, including the 

highest levels, to determine the predominant 

level that can be applied to mental health or 

substance use disorder benefits. If the plan 

combines the highest levels of copayment, 

the combined projected payments for the two 

highest copayment levels, the $50 copayment 

and the $20 copayment, are not more than 

one-half of the outpatient, in-network 

medical/surgical benefits subject to a 

copayment because they are exactly one-half 

($300x + $100x = $400x; $400x/$800x = 

50%). The combined projected payments for 

the three highest copayment levels—the $50 

copayment, the $20 copayment, and the $15 

copayment—are more than one-half of the 

outpatient, in-network medical/surgical 

benefits subject to the copayments ($100x + 

$300x + $200x = $600x; $600x/$800x = 

75%). Thus, the plan may not impose any 

copayment on outpatient, in-network mental 

health or substance use disorder benefits that 

is more restrictive than the least restrictive 

copayment in the combination, the $15 

copayment. 

Example 3. (i) Facts. A plan imposes a 

$250 deductible on all medical/surgical 

benefits for self-only coverage and a $500 

deductible on all medical/surgical benefits 

for family coverage. The plan has no network 

of providers. For all medical/surgical 

benefits, the plan imposes a coinsurance 

requirement. The plan imposes no other 

financial requirements or treatment 

limitations. 

(ii) Conclusion. In this Example 3, because 

the plan has no network of providers, all 

benefits are provided out-of-network. 

Because self-only and family coverage are 

subject to different deductibles, whether the 

deductible applies to substantially all 

medical/surgical benefits is determined 

separately for self-only medical/surgical 

benefits and family medical/surgical benefits. 

Because the coinsurance is applied without 

regard to coverage units, the predominant 

coinsurance that applies to substantially all 

medical/surgical benefits is determined 

without regard to coverage units. 

Example 4. (i) Facts. A plan applies the 

following financial requirements for 

prescription drug benefits. The requirements 

are applied without regard to whether a drug 

is generally prescribed with respect to 

medical/surgical benefits or with respect to 

mental health or substance use disorder 

benefits. Moreover, the process for certifying 

a particular drug as ‘‘generic’’, ‘‘preferred 

brand name’’, ‘‘non-preferred brand name’’, 

or ‘‘specialty’’ complies with the rules of 

paragraph (c)(4)(i) of this section (relating to 

requirements for nonquantitative treatment 

limitations). 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68291 

Tier 1 Tier 2 Tier 3 Tier 4 

Tier description Generic drugs 

Preferred 

brand name 

drugs 

Non-preferred 

brand name 

drugs (which 

may have Tier 

1 or Tier 2 

alternatives) 

Specialty 

drugs 

Percent paid by plan ........................................................................................ 90% 80% 60% 50% 

(ii) Conclusion. In this Example 4, the 

financial requirements that apply to 

prescription drug benefits are applied 

without regard to whether a drug is generally 

prescribed with respect to medical/surgical 

benefits or with respect to mental health or 

substance use disorder benefits; the process 

for certifying drugs in different tiers complies 

with paragraph (c)(4) of this section; and the 

bases for establishing different levels or types 

of financial requirements are reasonable. The 

financial requirements applied to 

prescription drug benefits do not violate the 

parity requirements of this paragraph (c)(3). 

Example 5. (i) Facts. A plan has two-tiers 

of network of providers: A preferred provider 

tier and a participating provider tier. 

Providers are placed in either the preferred 

tier or participating tier based on reasonable 

factors determined in accordance with the 

rules in paragraph (c)(4)(i) of this section, 

such as accreditation, quality and 

performance measures (including customer 

feedback), and relative reimbursement rates. 

Furthermore, provider tier placement is 

determined without regard to whether a 

provider specializes in the treatment of 

mental health conditions or substance use 

disorders, or medical/surgical conditions. 

The plan divides the in-network 

classifications into two sub-classifications 

(in-network/preferred and in-network/

participating). The plan does not impose any 

financial requirement or treatment limitation 

on mental health or substance use disorder 

benefits in either of these sub-classifications 

that is more restrictive than the predominant 

financial requirement or treatment limitation 

that applies to substantially all medical/

surgical benefits in each sub-classification. 

(ii) Conclusion. In this Example 5, the 

division of in-network benefits into subclassifications that reflect the preferred and 

participating provider tiers does not violate 

the parity requirements of this paragraph 

(c)(3). 

Example 6. (i) Facts. With respect to 

outpatient, in-network benefits, a plan 

imposes a $25 copayment for office visits and 

a 20 percent coinsurance requirement for 

outpatient surgery. The plan divides the 

outpatient, in-network classification into two 

sub-classifications (in-network office visits 

and all other outpatient, in-network items 

and services). The plan or issuer does not 

impose any financial requirement or 

quantitative treatment limitation on mental 

health or substance use disorder benefits in 

either of these sub-classifications that is more 

restrictive than the predominant financial 

requirement or quantitative treatment 

limitation that applies to substantially all 

medical/surgical benefits in each subclassification. 

(ii) Conclusion. In this Example 6, the 

division of outpatient, in-network benefits 

into sub-classifications for office visits and 

all other outpatient, in-network items and 

services does not violate the parity 

requirements of this paragraph (c)(3). 

Example 7. (i) Facts. Same facts as 

Example 6, but for purposes of determining 

parity, the plan divides the outpatient, innetwork classification into outpatient, innetwork generalists and outpatient, innetwork specialists. 

(ii) Conclusion. In this Example 7, the 

division of outpatient, in-network benefits 

into any sub-classifications other than office 

visits and all other outpatient items and 

services violates the requirements of 

paragraph (c)(3)(iii)(C) of this section. 

(v) No separate cumulative financial 

requirements or cumulative quantitative 

treatment limitations—(A) A group 

health plan (or health insurance 

coverage offered in connection with a 

group health plan) may not apply any 

cumulative financial requirement or 

cumulative quantitative treatment 

limitation for mental health or 

substance use disorder benefits in a 

classification that accumulates 

separately from any established for 

medical/surgical benefits in the same 

classification. 

(B) The rules of this paragraph 

(c)(3)(v) are illustrated by the following 

examples: 

Example 1. (i) Facts. A group health plan 

imposes a combined annual $500 deductible 

on all medical/surgical, mental health, and 

substance use disorder benefits. 

(ii) Conclusion. In this Example 1, the 

combined annual deductible complies with 

the requirements of this paragraph (c)(3)(v). 

Example 2. (i) Facts. A plan imposes an 

annual $250 deductible on all medical/

surgical benefits and a separate annual $250 

deductible on all mental health and 

substance use disorder benefits. 

(ii) Conclusion. In this Example 2, the 

separate annual deductible on mental health 

and substance use disorder benefits violates 

the requirements of this paragraph (c)(3)(v). 

Example 3. (i) Facts. A plan imposes an 

annual $300 deductible on all medical/

surgical benefits and a separate annual $100 

deductible on all mental health or substance 

use disorder benefits. 

(ii) Conclusion. In this Example 3, the 

separate annual deductible on mental health 

and substance use disorder benefits violates 

the requirements of this paragraph (c)(3)(v). 

Example 4. (i) Facts. A plan generally 

imposes a combined annual $500 deductible 

on all benefits (both medical/surgical benefits 

and mental health and substance use 

disorder benefits) except prescription drugs. 

Certain benefits, such as preventive care, are 

provided without regard to the deductible. 

The imposition of other types of financial 

requirements or treatment limitations varies 

with each classification. Using reasonable 

methods, the plan projects its payments for 

medical/surgical benefits in each 

classification for the upcoming year as 

follows: 

Classification 

Benefits 

subject to 

deductible 

Total benefits 

Percent 

subject to 

deductible 

Inpatient, in-network .................................................................................................................... $1,800x $2,000x 90 

Inpatient, out-of-network .............................................................................................................. 1,000x 1,000x 100 

Outpatient, in-network .................................................................................................................. 1,400x 2,000x 70 

Outpatient, out-of-network ........................................................................................................... 1,880x 2,000x 94 

Emergency care ........................................................................................................................... 300x 500x 60 

(ii) Conclusion. In this Example 4, the twothirds threshold of the substantially all 

standard is met with respect to each 

classification except emergency care because 

in each of those other classifications at least 

two-thirds of medical/surgical benefits are 

subject to the $500 deductible. Moreover, the 

$500 deductible is the predominant level in 

each of those other classifications because it 

is the only level. However, emergency care 

mental health and substance use disorder 

benefits cannot be subject to the $500 


emcdonald on DSK67QTVN1PROD with RULES3
68292 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

deductible because it does not apply to 

substantially all emergency care medical/ 

surgical benefits. 

(4) Nonquantitative treatment 

limitations—(i) General rule. A group 

health plan (or health insurance 

coverage) may not impose a 

nonquantitative treatment limitation 

with respect to mental health or 

substance use disorder benefits in any 

classification unless, under the terms of 

the plan (or health insurance coverage) 

as written and in operation, any 

processes, strategies, evidentiary 

standards, or other factors used in 

applying the nonquantitative treatment 

limitation to mental health or substance 

use disorder benefits in the 

classification are comparable to, and are 

applied no more stringently than, the 

processes, strategies, evidentiary 

standards, or other factors used in 

applying the limitation with respect to 

medical/surgical benefits in the 

classification. 

(ii) Illustrative list of nonquantitative 

treatment limitations. Nonquantitative 

treatment limitations include— 

(A) Medical management standards 

limiting or excluding benefits based on 

medical necessity or medical 

appropriateness, or based on whether 

the treatment is experimental or 

investigative; 

(B) Formulary design for prescription 

drugs; 

(C) For plans with multiple network 

tiers (such as preferred providers and 

participating providers), network tier 

design; 

(D) Standards for provider admission 

to participate in a network, including 

reimbursement rates; 

(E) Plan methods for determining 

usual, customary, and reasonable 

charges; 

(F) Refusal to pay for higher-cost 

therapies until it can be shown that a 

lower-cost therapy is not effective (also 

known as fail-first policies or step 

therapy protocols); 

(G) Exclusions based on failure to 

complete a course of treatment; and 

(H) Restrictions based on geographic 

location, facility type, provider 

specialty, and other criteria that limit 

the scope or duration of benefits for 

services provided under the plan or 

coverage. 

(iii) Examples. The rules of this 

paragraph (c)(4) are illustrated by the 

following examples. In each example, 

the group health plan is subject to the 

requirements of this section and 

provides both medical/surgical benefits 

and mental health and substance use 

disorder benefits. 

Example 1. (i) Facts. A plan requires prior 

authorization from the plan’s utilization 

reviewer that a treatment is medically 

necessary for all inpatient medical/surgical 

benefits and for all inpatient mental health 

and substance use disorder benefits. In 

practice, inpatient benefits for medical/ 

surgical conditions are routinely approved 

for seven days, after which a treatment plan 

must be submitted by the patient’s attending 

provider and approved by the plan. On the 

other hand, for inpatient mental health and 

substance use disorder benefits, routine 

approval is given only for one day, after 

which a treatment plan must be submitted by 

the patient’s attending provider and 

approved by the plan. 

(ii) Conclusion. In this Example 1, the plan 

violates the rules of this paragraph (c)(4) 

because it is applying a stricter 

nonquantitative treatment limitation in 

practice to mental health and substance use 

disorder benefits than is applied to medical/ 

surgical benefits. 

Example 2. (i) Facts. A plan applies 

concurrent review to inpatient care where 

there are high levels of variation in length of 

stay (as measured by a coefficient of variation 

exceeding 0.8). In practice, the application of 

this standard affects 60 percent of mental 

health conditions and substance use 

disorders, but only 30 percent of medical/ 

surgical conditions. 

(ii) Conclusion. In this Example 2, the plan 

complies with the rules of this paragraph 

(c)(4) because the evidentiary standard used 

by the plan is applied no more stringently for 

mental health and substance use disorder 

benefits than for medical/surgical benefits, 

even though it results in an overall difference 

in the application of concurrent review for 

mental health conditions or substance use 

disorders than for medical/surgical 

conditions. 

Example 3. (i) Facts. A plan requires prior 

approval that a course of treatment is 

medically necessary for outpatient, innetwork medical/surgical, mental health, and 

substance use disorder benefits and uses 

comparable criteria in determining whether a 

course of treatment is medically necessary. 

For mental health and substance use disorder 

treatments that do not have prior approval, 

no benefits will be paid; for medical/surgical 

treatments that do not have prior approval, 

there will only be a 25 percent reduction in 

the benefits the plan would otherwise pay. 

(ii) Conclusion. In this Example 3, the plan 

violates the rules of this paragraph (c)(4). 

Although the same nonquantitative treatment 

limitation—medical necessity—is applied 

both to mental health and substance use 

disorder benefits and to medical/surgical 

benefits for outpatient, in-network services, it 

is not applied in a comparable way. The 

penalty for failure to obtain prior approval 

for mental health and substance use disorder 

benefits is not comparable to the penalty for 

failure to obtain prior approval for medical/ 

surgical benefits. 

Example 4. (i) Facts. A plan generally 

covers medically appropriate treatments. For 

both medical/surgical benefits and mental 

health and substance use disorder benefits, 

evidentiary standards used in determining 

whether a treatment is medically appropriate 

(such as the number of visits or days of 

coverage) are based on recommendations 

made by panels of experts with appropriate 

training and experience in the fields of 

medicine involved. The evidentiary 

standards are applied in a manner that is 

based on clinically appropriate standards of 

care for a condition. 

(ii) Conclusion. In this Example 4, the plan 

complies with the rules of this paragraph 

(c)(4) because the processes for developing 

the evidentiary standards used to determine 

medical appropriateness and the application 

of these standards to mental health and 

substance use disorder benefits are 

comparable to and are applied no more 

stringently than for medical/surgical benefits. 

This is the result even if the application of 

the evidentiary standards does not result in 

similar numbers of visits, days of coverage, 

or other benefits utilized for mental health 

conditions or substance use disorders as it 

does for any particular medical/surgical 

condition. 

Example 5. (i) Facts. A plan generally 

covers medically appropriate treatments. In 

determining whether prescription drugs are 

medically appropriate, the plan 

automatically excludes coverage for 

antidepressant drugs that are given a black 

box warning label by the Food and Drug 

Administration (indicating the drug carries a 

significant risk of serious adverse effects). For 

other drugs with a black box warning 

(including those prescribed for other mental 

health conditions and substance use 

disorders, as well as for medical/surgical 

conditions), the plan will provide coverage if 

the prescribing physician obtains 

authorization from the plan that the drug is 

medically appropriate for the individual, 

based on clinically appropriate standards of 

care. 

(ii) Conclusion. In this Example 5, the plan 

violates the rules of this paragraph (c)(4). 

Although the standard for applying a 

nonquantitative treatment limitation is the 

same for both mental health and substance 

use disorder benefits and medical/surgical 

benefits—whether a drug has a black box 

warning—it is not applied in a comparable 

manner. The plan’s unconditional exclusion 

of antidepressant drugs given a black box 

warning is not comparable to the conditional 

exclusion for other drugs with a black box 

warning. 

Example 6. (i) Facts. An employer 

maintains both a major medical plan and an 

employee assistance program (EAP). The EAP 

provides, among other benefits, a limited 

number of mental health or substance use 

disorder counseling sessions. Participants are 

eligible for mental health or substance use 

disorder benefits under the major medical 

plan only after exhausting the counseling 

sessions provided by the EAP. No similar 

exhaustion requirement applies with respect 

to medical/surgical benefits provided under 

the major medical plan. 

(ii) Conclusion. In this Example 6, limiting 

eligibility for mental health and substance 

use disorder benefits only after EAP benefits 

are exhausted is a nonquantitative treatment 

limitation subject to the parity requirements 

of this paragraph (c). Because no comparable 

requirement applies to medical/surgical 

benefits, the requirement may not be applied 

to mental health or substance use disorder 

benefits. 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68293 

Example 7. (i) Facts. Training and State 

licensing requirements often vary among 

types of providers. A plan applies a general 

standard that any provider must meet the 

highest licensing requirement related to 

supervised clinical experience under 

applicable State law in order to participate in 

the plan’s provider network. Therefore, the 

plan requires master’s-level mental health 

therapists to have post-degree, supervised 

clinical experience but does not impose this 

requirement on master’s-level general 

medical providers because the scope of their 

licensure under applicable State law does 

require clinical experience. In addition, the 

plan does not require post-degree, supervised 

clinical experience for psychiatrists or Ph.D. 

level psychologists since their licensing 

already requires supervised training. 

(ii) Conclusion. In this Example 7, the plan 

complies with the rules of this paragraph 

(c)(4). The requirement that master’s-level 

mental health therapists must have 

supervised clinical experience to join the 

network is permissible, as long as the plan 

consistently applies the same standard to all 

providers even though it may have a 

disparate impact on certain mental health 

providers. 

Example 8. (i) Facts. A plan considers a 

wide array of factors in designing medical 

management techniques for both mental 

health and substance use disorder benefits 

and medical/surgical benefits, such as cost of 

treatment; high cost growth; variability in 

cost and quality; elasticity of demand; 

provider discretion in determining diagnosis, 

or type or length of treatment; clinical 

efficacy of any proposed treatment or service; 

licensing and accreditation of providers; and 

claim types with a high percentage of fraud. 

Based on application of these factors in a 

comparable fashion, prior authorization is 

required for some (but not all) mental health 

and substance use disorder benefits, as well 

as for some medical/surgical benefits, but not 

for others. For example, the plan requires 

prior authorization for: Outpatient surgery; 

speech, occupational, physical, cognitive and 

behavioral therapy extending for more than 

six months; durable medical equipment; 

diagnostic imaging; skilled nursing visits; 

home infusion therapy; coordinated home 

care; pain management; high-risk prenatal 

care; delivery by cesarean section; 

mastectomy; prostate cancer treatment; 

narcotics prescribed for more than seven 

days; and all inpatient services beyond 30 

days. The evidence considered in developing 

its medical management techniques includes 

consideration of a wide array of recognized 

medical literature and professional standards 

and protocols (including comparative 

effectiveness studies and clinical trials). This 

evidence and how it was used to develop 

these medical management techniques is also 

well documented by the plan. 

(ii) Conclusion. In this Example 8, the plan 

complies with the rules of this paragraph 

(c)(4). Under the terms of the plan as written 

and in operation, the processes, strategies, 

evidentiary standards, and other factors 

considered by the plan in implementing its 

prior authorization requirement with respect 

to mental health and substance use disorder 

benefits are comparable to, and applied no 

more stringently than, those applied with 

respect to medical/surgical benefits. 

Example 9. (i) Facts. A plan generally 

covers medically appropriate treatments. The 

plan automatically excludes coverage for 

inpatient substance use disorder treatment in 

any setting outside of a hospital (such as a 

freestanding or residential treatment center). 

For inpatient treatment outside of a hospital 

for other conditions (including freestanding 

or residential treatment centers prescribed for 

mental health conditions, as well as for 

medical/surgical conditions), the plan will 

provide coverage if the prescribing physician 

obtains authorization from the plan that the 

inpatient treatment is medically appropriate 

for the individual, based on clinically 

appropriate standards of care. 

(ii) Conclusion. In this Example 9, the plan 

violates the rules of this paragraph (c)(4). 

Although the same nonquantitative treatment 

limitation—medical appropriateness—is 

applied to both mental health and substance 

use disorder benefits and medical/surgical 

benefits, the plan’s unconditional exclusion 

of substance use disorder treatment in any 

setting outside of a hospital is not 

comparable to the conditional exclusion of 

inpatient treatment outside of a hospital for 

other conditions. 

Example 10. (i) Facts. A plan generally 

provides coverage for medically appropriate 

medical/surgical benefits as well as mental 

health and substance use disorder benefits. 

The plan excludes coverage for inpatient, 

out-of-network treatment of chemical 

dependency when obtained outside of the 

State where the policy is written. There is no 

similar exclusion for medical/surgical 

benefits within the same classification. 

(ii) Conclusion. In this Example 10, the 

plan violates the rules of this paragraph 

(c)(4). The plan is imposing a nonquantitative 

treatment limitation that restricts benefits 

based on geographic location. Because there 

is no comparable exclusion that applies to 

medical/surgical benefits, this exclusion may 

not be applied to mental health or substance 

use disorder benefits. 

Example 11. (i) Facts. A plan requires 

prior authorization for all outpatient mental 

health and substance use disorder services 

after the ninth visit and will only approve up 

to five additional visits per authorization. 

With respect to outpatient medical/surgical 

benefits, the plan allows an initial visit 

without prior authorization. After the initial 

visit, the plan pre-approves benefits based on 

the individual treatment plan recommended 

by the attending provider based on that 

individual’s specific medical condition. 

There is no explicit, predetermined cap on 

the amount of additional visits approved per 

authorization. 

(ii) Conclusion. In this Example 11, the 

plan violates the rules of this paragraph 

(c)(4). Although the same nonquantitative 

treatment limitation—prior authorization to 

determine medical appropriateness—is 

applied to both mental health and substance 

use disorder benefits and medical/surgical 

benefits for outpatient services, it is not 

applied in a comparable way. While the plan 

is more generous with respect to the number 

of visits initially provided without preauthorization for mental health benefits, 

treating all mental health conditions and 

substance use disorders in the same manner, 

while providing for individualized treatment 

of medical conditions, is not a comparable 

application of this nonquantitative treatment 

limitation. 

(5) Exemptions. The rules of this 

paragraph (c) do not apply if a group 

health plan (or health insurance 

coverage) satisfies the requirements of 

paragraph (f) or (g) of this section 

(relating to exemptions for small 

employers and for increased cost). 

(d) Availability of plan information— 

(1) Criteria for medical necessity 

determinations. The criteria for medical 

necessity determinations made under a 

group health plan with respect to 

mental health or substance use disorder 

benefits (or health insurance coverage 

offered in connection with the plan with 

respect to such benefits) must be made 

available by the plan administrator (or 

the health insurance issuer offering such 

coverage) to any current or potential 

participant, beneficiary, or contracting 

provider upon request. 

(2) Reason for any denial. The reason 

for any denial under a group health plan 

(or health insurance coverage offered in 

connection with such plan) of 

reimbursement or payment for services 

with respect to mental health or 

substance use disorder benefits in the 

case of any participant or beneficiary 

must be made available by the plan 

administrator (or the health insurance 

issuer offering such coverage) to the 

participant or beneficiary. For this 

purpose, a non-Federal governmental 

plan (or health insurance coverage 

offered in connection with such plan) 

that provides the reason for the claim 

denial in a form and manner consistent 

with the requirements of 29 CFR 

2560.503–1 for group health plans 

complies with the requirements of this 

paragraph (d)(2). 

(3) Provisions of other law. 

Compliance with the disclosure 

requirements in paragraphs (d)(1) and 

(d)(2) of this section is not 

determinative of compliance with any 

other provision of applicable Federal or 

State law. In particular, in addition to 

those disclosure requirements, 

provisions of other applicable law 

require disclosure of information 

relevant to medical/surgical, mental 

health, and substance use disorder 

benefits. For example, § 147.136 of this 

subchapter sets forth rules regarding 

claims and appeals, including the right 

of claimants (or their authorized 

representative) upon appeal of an 

adverse benefit determination (or a final 

internal adverse benefit determination) 

to be provided upon request and free of 

charge, reasonable access to and copies 


emcdonald on DSK67QTVN1PROD with RULES3
68294 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

of all documents, records, and other 

information relevant to the claimant’s 

claim for benefits. This includes 

documents with information on medical 

necessity criteria for both medical/

surgical benefits and mental health and 

substance use disorder benefits, as well 

as the processes, strategies, evidentiary 

standards, and other factors used to 

apply a nonquantitative treatment 

limitation with respect to medical/

surgical benefits and mental health or 

substance use disorder benefits under 

the plan. 

(e) Applicability—(1) Group health 

plans. The requirements of this section 

apply to a group health plan offering 

medical/surgical benefits and mental 

health or substance use disorder 

benefits. If, under an arrangement or 

arrangements to provide medical care 

benefits by an employer or employee 

organization (including for this purpose 

a joint board of trustees of a 

multiemployer trust affiliated with one 

or more multiemployer plans), any 

participant (or beneficiary) can 

simultaneously receive coverage for 

medical/surgical benefits and coverage 

for mental health or substance use 

disorder benefits, then the requirements 

of this section (including the exemption 

provisions in paragraph (g) of this 

section) apply separately with respect to 

each combination of medical/surgical 

benefits and of mental health or 

substance use disorder benefits that any 

participant (or beneficiary) can 

simultaneously receive from that 

employer’s or employee organization’s 

arrangement or arrangements to provide 

medical care benefits, and all such 

combinations are considered for 

purposes of this section to be a single 

group health plan. 

(2) Health insurance issuers. The 

requirements of this section apply to a 

health insurance issuer offering health 

insurance coverage for mental health or 

substance use disorder benefits in 

connection with a group health plan 

subject to paragraph (e)(1) of this 

section. 

(3) Scope. This section does not— 

(i) Require a group health plan (or 

health insurance issuer offering 

coverage in connection with a group 

health plan) to provide any mental 

health benefits or substance use 

disorder benefits, and the provision of 

benefits by a plan (or health insurance 

coverage) for one or more mental health 

conditions or substance use disorders 

does not require the plan or health 

insurance coverage under this section to 

provide benefits for any other mental 

health condition or substance use 

disorder; 

(ii) Require a group health plan (or 

health insurance issuer offering 

coverage in connection with a group 

health plan) that provides coverage for 

mental health or substance use disorder 

benefits only to the extent required 

under PHS Act section 2713 to provide 

additional mental health or substance 

use disorder benefits in any 

classification in accordance with this 

section; or 

(iii) Affect the terms and conditions 

relating to the amount, duration, or 

scope of mental health or substance use 

disorder benefits under the plan (or 

health insurance coverage) except as 

specifically provided in paragraphs (b) 

and (c) of this section. 

(4) Coordination with EHB 

requirements. Nothing in paragraph (f) 

or (g) of this section changes the 

requirements of §§ 147.150 and 156.115 

of this subchapter, providing that a 

health insurance issuer offering nongrandfathered health insurance coverage 

in the individual or small group market 

providing mental health and substance 

use disorder services, including 

behavioral health treatment services, as 

part of essential health benefits required 

under §§ 156.110(a)(5) and 156.115(a) of 

this subchapter, must comply with the 

provisions of this section to satisfy the 

requirement to provide essential health 

benefits. 

(f) Small employer exemption—(1) In 

general. The requirements of this 

section do not apply to a group health 

plan (or health insurance issuer offering 

coverage in connection with a group 

health plan) for a plan year of a small 

employer (as defined in section 2791 of 

the PHS Act). 

(2) Rules in determining employer 

size. For purposes of paragraph (f)(1) of 

this section— 

(i) All persons treated as a single 

employer under subsections (b), (c), (m), 

and (o) of section 414 of the Internal 

Revenue Code are treated as one 

employer; 

(ii) If an employer was not in 

existence throughout the preceding 

calendar year, whether it is a small 

employer is determined based on the 

average number of employees the 

employer reasonably expects to employ 

on business days during the current 

calendar year; and 

(iii) Any reference to an employer for 

purposes of the small employer 

exemption includes a reference to a 

predecessor of the employer. 

(g) Increased cost exemption—(1) In 

general. If the application of this section 

to a group health plan (or health 

insurance coverage offered in 

connection with such plans) results in 

an increase for the plan year involved of 

the actual total cost of coverage with 

respect to medical/surgical benefits and 

mental health and substance use 

disorder benefits as determined and 

certified under paragraph (g)(3) of this 

section by an amount that exceeds the 

applicable percentage described in 

paragraph (g)(2) of this section of the 

actual total plan costs, the provisions of 

this section shall not apply to such plan 

(or coverage) during the following plan 

year, and such exemption shall apply to 

the plan (or coverage) for one plan year. 

An employer or issuer may elect to 

continue to provide mental health and 

substance use disorder benefits in 

compliance with this section with 

respect to the plan or coverage involved 

regardless of any increase in total costs. 

(2) Applicable percentage. With 

respect to a plan or coverage, the 

applicable percentage described in this 

paragraph (g) is— 

(i) 2 percent in the case of the first 

plan year in which this section is 

applied to the plan or coverage; and 

(ii) 1 percent in the case of each 

subsequent plan year. 

(3) Determinations by actuaries—(i) 

Determinations as to increases in actual 

costs under a plan or coverage that are 

attributable to implementation of the 

requirements of this section shall be 

made and certified by a qualified and 

licensed actuary who is a member in 

good standing of the American 

Academy of Actuaries. All such 

determinations must be based on the 

formula specified in paragraph (g)(4) of 

this section and shall be in a written 

report prepared by the actuary. 

(ii) The written report described in 

paragraph (g)(3)(i) of this section shall 

be maintained by the group health plan 

or health insurance issuer, along with 

all supporting documentation relied 

upon by the actuary, for a period of six 

years following the notification made 

under paragraph (g)(6) of this section. 

(4) Formula. The formula to be used 

to make the determination under 

paragraph (g)(3)(i) of this section is 

expressed mathematically as follows: 

[(E1¥E0)/T0] ¥D > k 

(i) E1 is the actual total cost of 

coverage with respect to mental health 

and substance use disorder benefits for 

the base period, including claims paid 

by the plan or issuer with respect to 

mental health and substance use 

disorder benefits and administrative 

costs (amortized over time) attributable 

to providing these benefits consistent 

with the requirements of this section. 

(ii) E0 is the actual total cost of 

coverage with respect to mental health 

and substance use disorder benefits for 

the length of time immediately before 

the base period (and that is equal in 


emcdonald on DSK67QTVN1PROD with RULES3
Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 68295 

length to the base period), including 

claims paid by the plan or issuer with 

respect to mental health and substance 

use disorder benefits and administrative 

costs (amortized over time) attributable 

to providing these benefits. 

(iii) T0 is the actual total cost of 

coverage with respect to all benefits 

during the base period. 

(iv) k is the applicable percentage of 

increased cost specified in paragraph 

(g)(2) of this section that will be 

expressed as a fraction for purposes of 

this formula. 

(v) D is the average change in 

spending that is calculated by applying 

the formula (E1¥E0)/T0 to mental health 

and substance use disorder spending in 

each of the five prior years and then 

calculating the average change in 

spending. 

(5) Six month determination. If a 

group health plan or health insurance 

issuer seeks an exemption under this 

paragraph (g), determinations under 

paragraph (g)(3) of this section shall be 

made after such plan or coverage has 

complied with this section for at least 

the first 6 months of the plan year 

involved. 

(6) Notification. A group health plan 

or health insurance issuer that, based on 

the certification described under 

paragraph (g)(3) of this section, qualifies 

for an exemption under this paragraph 

(g), and elects to implement the 

exemption, must notify participants and 

beneficiaries covered under the plan, 

the Secretary, and the appropriate State 

agencies of such election. 

(i) Participants and beneficiaries—(A) 

Content of notice. The notice to 

participants and beneficiaries must 

include the following information: 

(1) A statement that the plan or issuer 

is exempt from the requirements of this 

section and a description of the basis for 

the exemption. 

(2) The name and telephone number 

of the individual to contact for further 

information. 

(3) The plan or issuer name and plan 

number (PN). 

(4) The plan administrator’s name, 

address, and telephone number. 

(5) For single-employer plans, the 

plan sponsor’s name, address, and 

telephone number (if different from 

paragraph (g)(6)(i)(A)(3) of this section) 

and the plan sponsor’s employer 

identification number (EIN). 

(6) The effective date of such 

exemption. 

(7) A statement regarding the ability 

of participants and beneficiaries to 

contact the plan administrator or health 

insurance issuer to see how benefits 

may be affected as a result of the plan’s 

or issuer’s election of the exemption. 

(8) A statement regarding the 

availability, upon request and free of 

charge, of a summary of the information 

on which the exemption is based (as 

required under paragraph (g)(6)(i)(D) of 

this section). 

(B) Use of summary of material 

reductions in covered services or 

benefits. A plan or issuer may satisfy the 

requirements of paragraph (g)(6)(i)(A) of 

this section by providing participants 

and beneficiaries (in accordance with 

paragraph (g)(6)(i)(C) of this section) 

with a summary of material reductions 

in covered services or benefits 

consistent with 29 CFR 2520.104b–3(d) 

that also includes the information 

specified in paragraph (g)(6)(i)(A) of this 

section. However, in all cases, the 

exemption is not effective until 30 days 

after notice has been sent. 

(C) Delivery. The notice described in 

this paragraph (g)(6)(i) is required to be 

provided to all participants and 

beneficiaries. The notice may be 

furnished by any method of delivery 

that satisfies the requirements of section 

104(b)(1) of ERISA (29 U.S.C. 

1024(b)(1)) and its implementing 

regulations (for example, first-class 

mail). If the notice is provided to the 

participant and any beneficiaries at the 

participant’s last known address, then 

the requirements of this paragraph 

(g)(6)(i) are satisfied with respect to the 

participant and all beneficiaries residing 

at that address. If a beneficiary’s last 

known address is different from the 

participant’s last known address, a 

separate notice is required to be 

provided to the beneficiary at the 

beneficiary’s last known address. 

(D) Availability of documentation. 

The plan or issuer must make available 

to participants and beneficiaries (or 

their representatives), on request and at 

no charge, a summary of the information 

on which the exemption was based. (For 

purposes of this paragraph (g), an 

individual who is not a participant or 

beneficiary and who presents a notice 

described in paragraph (g)(6)(i) of this 

section is considered to be a 

representative. A representative may 

request the summary of information by 

providing the plan a copy of the notice 

provided to the participant under 

paragraph (g)(6)(i) of this section with 

any personally identifiable information 

redacted.) The summary of information 

must include the incurred expenditures, 

the base period, the dollar amount of 

claims incurred during the base period 

that would have been denied under the 

terms of the plan or coverage absent 

amendments required to comply with 

paragraphs (b) and (c) of this section, 

the administrative costs related to those 

claims, and other administrative costs 

attributable to complying with the 

requirements of this section. In no event 

should the summary of information 

include any personally identifiable 

information. 

(ii) Federal agencies—(A) Content of 

notice. The notice to the Secretary must 

include the following information: 

(1) A description of the number of 

covered lives under the plan (or 

coverage) involved at the time of the 

notification, and as applicable, at the 

time of any prior election of the cost 

exemption under this paragraph (g) by 

such plan (or coverage); 

(2) For both the plan year upon which 

a cost exemption is sought and the year 

prior, a description of the actual total 

costs of coverage with respect to 

medical/surgical benefits and mental 

health and substance use disorder 

benefits; and 

(3) For both the plan year upon which 

a cost exemption is sought and the year 

prior, the actual total costs of coverage 

with respect to mental health and 

substance use disorder benefits under 

the plan. 

(B) Reporting by health insurance 

coverage offered in connection with a 

church plan. See 26 CFR 

54.9812(g)(6)(ii)(B) for delivery with 

respect to church plans. 

(C) Reporting by health insurance 

coverage offered in connection with a 

group health plans subject to Part 7 of 

Subtitle B of Title I of ERISA. See 29 

CFR 2590.712(g)(6)(ii) for delivery with 

respect to group health plans subject to 

ERISA. 

(D) Reporting with respect to nonFederal governmental plans and health 

insurance issuers in the individual 

market. A group health plan that is a 

non-Federal governmental plan, or a 

health insurance issuer offering health 

insurance coverage in the individual 

market, claiming the exemption of this 

paragraph (g) for any benefit package 

must provide notice to the Department 

of Health and Human Services. This 

requirement is satisfied if the plan or 

issuer sends a copy, to the address 

designated by the Secretary in generally 

applicable guidance, of the notice 

described in paragraph (g)(6)(ii)(A) of 

this section identifying the benefit 

package to which the exemption 

applies. 

(iii) Confidentiality. A notification to 

the Secretary under this paragraph (g)(6) 

shall be confidential. The Secretary 

shall make available, upon request and 

not more than on an annual basis, an 

anonymous itemization of each 

notification that includes— 

(A) A breakdown of States by the size 

and type of employers submitting such 

notification; and 


emcdonald on DSK67QTVN1PROD with RULES3
68296 Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations 

(B) A summary of the data received 

under paragraph (g)(6)(ii) of this section. 

(iv) Audits. The Secretary may audit 

the books and records of a group health 

plan or a health insurance issuer 

relating to an exemption, including any 

actuarial reports, during the 6 year 

period following notification of such 

exemption under paragraph (g)(6) of this 

section. A State agency receiving a 

notification under paragraph (g)(6) of 

this section may also conduct such an 

audit with respect to an exemption 

covered by such notification. 

(h) Sale of nonparity health insurance 

coverage. A health insurance issuer may 

not sell a policy, certificate, or contract 

of insurance that fails to comply with 

paragraph (b) or (c) of this section, 

except to a plan for a year for which the 

plan is exempt from the requirements of 

this section because the plan meets the 

requirements of paragraph (f) or (g) of 

this section. 

(i) Applicability dates—(1) In general. 

Except as provided in paragraph (i)(2) of 

this section, this section applies to 

group health plans and health insurance 

issuers offering group health insurance 

coverage on the first day of the first plan 

year beginning on or after July 1, 2014. 

Until the applicability date, plans and 

issuers are required to continue to 

comply with the corresponding sections 

of § 146.136 contained in the 45 CFR, 

parts 1 to 199, edition revised as of 

October 1, 2013. 

(2) Special effective date for certain 

collectively-bargained plans. For a 

group health plan maintained pursuant 

to one or more collective bargaining 

agreements ratified before October 3, 

2008, the requirements of this section 

do not apply to the plan (or health 

insurance coverage offered in 

connection with the plan) for plan years 

beginning before the date on which the 

last of the collective bargaining 

agreements terminates (determined 

without regard to any extension agreed 

to after October 3, 2008). 

PART 147—HEALTH INSURANCE 

REFORM REQUIREMENTS FOR THE 

GROUP HEALTH INSURANCE 

MARKETS 

■ 3. The authority citation for part 147 

continues to read as follows: 

Authority: Secs. 2701 through 2763, 2791, 

and 2792 of the Public Health Service Act (42 

U.S.C. 300gg through 300gg–63, 300gg–91, 

and 300gg–92), as amended. 

■ 4. Section 147.136 is amended by 

adding a sentence to the end of the 

introductory text of paragraph (d) and 

revising paragraph (d)(1)(i) to read as 

follows: 

§ 147.136 Internal claims and appeals and 

external review processes. 

* * * * * 

(d) * * * A Multi State Plan or MSP, 

as defined by 45 CFR 800.20, must 

provide an effective Federal external 

review process in accordance with this 

paragraph (d). 

(1) * * * 

(i) In general. Subject to the 

suspension provision in paragraph 

(d)(1)(ii) of this section and except to 

the extent provided otherwise by the 

Secretary in guidance, the Federal 

external review process established 

pursuant to this paragraph (d) applies, 

at a minimum, to any adverse benefit 

determination or final internal adverse 

benefit determination (as defined in 

paragraphs (a)(2)(i) and (a)(2)(v) of this 

section), except that a denial, reduction, 

termination, or a failure to provide 

payment for a benefit based on a 

determination that a participant or 

beneficiary fails to meet the 

requirements for eligibility under the 

terms of a group health plan is not 

eligible for the Federal external review 

process under this paragraph (d). 

* * * * * 

■ 5. Section 147.160 is added to read as 

follows: 

§ 147.160 Parity in mental health and 

substance use disorder benefits. 

(a) In general. The provisions of 

§ 146.136 of this subchapter apply to 

health insurance coverage offered by 

health insurance issuer in the 

individual market in the same manner 

and to the same extent as such 

provisions apply to health insurance 

coverage offered by a health insurance 

issuer in connection with a group health 

plan in the large group market. 

(b) Applicability date. The provisions 

of this section apply for policy years 

beginning on or after the applicability 

dates set forth in § 146.136(i) of this 

subchapter. This section applies to nongrandfathered and grandfathered health 

plans as defined in § 147.140. 

[FR Doc. 2013–27086 Filed 11–8–13; 11:15 am] 

BILLING CODE 4830–01; 4510–29; 4120–01–P 


emcdonald on DSK67QTVN1PROD with RULES3