Editorial Note on Part 457
Editorial Note: Nomenclature changes to part 457 appear at 75 FR 48852, Aug. 11, 2010 and 77 FR 17213, 2013.

§ 457.496 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 State plan or a Managed Care Entity (MCE) (as defined at § 457.10) that contracts with the State plan. State plans must meet the requirements of § 457.480.
*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 State plan or a MCE that contracts with a State plan. State plans must meet the requirements at § 457.480.
*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.)
*Early and Periodic Screening, Diagnostic and Treatment (EPSDT) benefits* has the meaning defined in section 1905(r) of the Act and must be provided in accordance with section 1902(a)(43) of the Act.
*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 for items or services for medical conditions or surgical procedures, as defined under the terms of the State plan in accordance with applicable Federal and State law, but does not include mental health or substance use disorder benefits. Any condition defined by the State plan as being or 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 generally applicable State guidelines). Medical/surgical benefits include long term care services.
*Mental health benefits* means benefits for items or services that treat or otherwise address mental health conditions, as defined under the terms of the State plan in accordance with applicable Federal and State law, and consistent with generally recognized independent standards of current medical practice. Standards of current medical practice can be based on the most current version of the DSM, the most current version of the ICD, or generally applicable State guidelines. The term includes long term care services.
*State Plan* has the meaning assigned at §§ 457.10 and 457.50.
*Substance use disorder benefits* means benefits for items or services for substance use disorder, as defined under the terms of the State plan in accordance with applicable Federal and State law, and consistent with generally recognized independent standards of current medical practice. Standards of current medical practice can be based on the most current version of the DSM, the most current version of the ICD, or generally applicable State guidelines. The term includes long term care services.
*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 the State plan. (*See* paragraph (d)(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 ) *State plan providing EPSDT benefits.* ( 1 ) A State child health plan is deemed to be in compliance with this section if— ( i ) The State elects in the State child health plan to cover Secretary-approved coverage defined in § 457.450(a) that includes all EPSDT benefits, as defined in section 1905(r) of the Act, in accordance with the requirement applied under section 1905(r)(5) of the Act to provide necessary health care, diagnostic services, treatment, and other measures described in section 1905(a) of the Act to correct or ameliorate defects and physical and mental illnesses and conditions discovered by the screening services, as well as the informing and administrative requirements under 1902(a)(43) of the Act and the approved State Medicaid plan; and
( ii ) The State child health plan does not exclude EPSDT benefits for any particular condition, disorder, or diagnosis.
( 2 ) The child health plan must include a description of how the State will comply with paragraph (b)(1)(i) of this section.
( 3 ) If a State has elected in its state plan to cover EPSDT benefits only for certain populations enrolled in the state child health plan, the State is deemed compliant with this section only with respect to such children.
( c ) *Parity requirements for aggregate lifetime and annual dollar limits.* This paragraph (c) details the application of the parity requirements for aggregate lifetime and annual dollar limits. A State plan that provides both medical/surgical benefits and mental health or substance use disorder benefits must comply with paragraph (c)(1), (2), or (4) of this section. ( 1 ) *Plan with no limit or limits on less than one-third of all medical/surgical benefits.* If a State plan 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.
( 2 ) *State plans with a limit on at least two-thirds of all medical/surgical benefits.* If a State plan 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 more restrictive 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 (d)(3)(iii) of this section prohibiting separately accumulating cumulative financial requirements.)
( 3 ) *Determining one-third and two-thirds of all medical/surgical benefits.* For purposes of this paragraph (c), 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 State plan for the State 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 State plan will constitute one-third or two-thirds of the dollar amount of all plan payments for medical/surgical benefits.
( 4 ) *Plan not described in this section* — ( i ) *In general.* A State plan that is not described in paragraph (c)(1) or (2) of this section for 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 more restrictive 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 (c)(4)(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 for such benefits, taking into account any other applicable restrictions under the plan.
( ii ) *Weighting.* For purposes of this paragraph (c)(4), the weighting applicable to any category of medical/surgical benefits is determined in the manner set forth in paragraph (c)(3) of this section for determining one-third or two-thirds of all medical/surgical benefits.
( d ) *Parity requirements for financial requirements and treatment limitations* — ( 1 ) *Clarification of terms* — ( i ) *Classification of benefits.* When reference is made in this paragraph (d) to a classification of benefits, the term “classification” means a classification as described in paragraph (d)(2)(ii) of this section.
( ii ) *Type of financial requirement or treatment limitation.* When reference is made in this paragraph (d) 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-of-pocket maximums. Different types of quantitative treatment limitations include annual, episode, and lifetime day and visit limits. *See* paragraph (d)(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 (d) 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.
( 2 ) *General parity requirement* — ( i ) *General rule.* A State plan or a MCE that contracts with CHIP through its State plan that provides both medical/surgical benefits and mental health or substance use disorder benefits, including when such benefits are delivered through an MCE, 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 (d)(2) to financial requirements and quantitative treatment limitations is addressed in paragraph (d)(3) of this section; the application of the rules of this paragraph (d)(2) to nonquantitative treatment limitations is addressed in paragraph (d)(4) of this section.
( ii ) *Classifications of benefits used for applying rules.* If a State plan provides mental health or substance use disorder benefits in any classification of benefits described in this paragraph (d)(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, the same reasonable standards must apply to medical/surgical benefits and to mental health or substance use disorder benefits. To the extent that a State plan 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 (d) apply separately for that classification for all financial requirements or treatment limitations. The following classifications of benefits are the only classifications used in applying the rules of this paragraph (d): ( A ) *Inpatient.* Benefits furnished on an inpatient basis.
( B ) *Outpatient.* Benefits furnished on an outpatient basis. See special rules for office visits in paragraph (d)(3)(iii) of this section.
( C ) *Emergency care.* Benefits for emergency care.
( D ) *Prescription drugs.* Benefits for prescription drugs. See special rules for multi-tiered prescription drug benefits in paragraph (d)(3)(iii) of this section.
( 3 ) *Financial requirements and quantitative treatment limitations* — ( i ) *Determining “substantially all” and “predominant”* — ( A ) *Substantially all.* For purposes of this paragraph (d), 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. If a type of financial requirement or quantitative treatment limitation does not apply to at least two-thirds 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 (d)(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, for 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 State 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 State 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 (d), 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 State plan payments and combinations of MCE payments for medical/surgical benefits in the classification expected to be paid under the plan or MCE or combination that contracts with the State 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 a State plan payments includes all plan payments for claims that would be subject to the deductible if it had not been satisfied. In accordance with the cumulative cost-sharing maximum in § 457.560, or any other out-of-pocket maximum in the State plan, the dollar amount of plan payments includes all State plan payments associated with out-of-pocket payments that are taken into account towards the out-of-pocket 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 health plan payment changes.
( E ) *Determining the dollar amount of State plan payments.* Subject to paragraph (d)(3)(i)(D) of this section, any reasonable method may be used to determine the dollar amount expected to be paid under a State 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 ) *Special rules* — ( A ) *Multi-tiered prescription drug benefits.* If a State plan 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 (d)(4)(i) of this section (relating to requirements for nonquantitative treatment limitations) and without regard to whether a drug is generally prescribed for medical/surgical benefits or for mental health or substance use disorder benefits, the health plan satisfies the parity requirements of this paragraph (d) for prescription drug benefits. Reasonable factors include cost, efficacy, generic versus brand name, and mail order versus pharmacy pick-up/delivery.
( B ) *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 (d), a State plan may divide its benefits furnished on an outpatient basis into the two sub-classifications described in this paragraph (d)(3)(ii)(B). After the sub-classifications are established, the State plan may not impose any financial requirement or quantitative treatment limitation on mental health or substance use disorder benefits in any sub-classification that is more restrictive than the predominant financial requirement or quantitative treatment limitation that applies to substantially all medical/surgical benefits in the sub-classification using the methodology set forth in paragraph (d)(3)(i) of this section. Sub-classifications other than these special rules, such as separate sub-classifications for generalists and specialists, are not permitted. The two sub-classifications permitted under this paragraph (d)(3)(ii)(B) 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).
( iii ) *No separate cumulative financial requirements.* A State plan may not apply any cumulative financial requirement 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.
( 4 ) *Nonquantitative treatment limitations* — ( i ) *General rule.* A State plan may not impose a nonquantitative treatment limitation for mental health or substance use disorder benefits in any classification unless, under the terms of the CHIP State plan 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 for 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;
( 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; and
( I ) Standards for providing access to out-of-network providers.
( 5 ) *Application to out-of-network providers.* Any State plan providing access to out-of-network providers for medical/surgical benefits within a classification must use processes, strategies, evidentiary standards, or other factors in determining access to out-of-network providers for mental health or substance use disorder benefits that are comparable to, and applied no more stringently than, the processes, strategies, evidentiary standards, or other factors in determining access to out-of-network providers for medical/surgical benefits.
( e ) *Availability of plan information* — ( 1 ) *Criteria for medical necessity determinations.* The criteria for medical necessity determinations made under a State plan including when benefits are furnished through a MCE contractor for mental health or substance use disorder benefits must be made available by the plan administrator (or the State offering the coverage) to any current enrollee or potential enrollee or contracting provider upon request. Health plans operating in compliance with § 438.236(c) of this chapter will be deemed compliant with the requirements in this paragraph (e).
( 2 ) *Reason for any denial.* The reason for any denial under a health plan of reimbursement or payment for services for mental health or substance use disorder benefits in the case of any enrollee must be made available by the plan administrator or the State to the enrollee.
( 3 ) *Provisions of other law.* Compliance with the disclosure requirements in paragraphs (e)(1) and (2) of this section is not determinative of compliance with any other provision of applicable Federal or State law.
( f ) *Applicability* — ( 1 ) *State plans.* The requirements of this section apply to State plans offering medical/surgical benefits and mental health or substance use disorder benefits to their enrollees including when benefits are furnished under a contract with MCEs. If, under an arrangement or arrangements to provide State plan benefits any enrollee can simultaneously receive coverage for medical/surgical benefits and coverage for mental health or substance use disorder benefits, then the requirements of this section apply separately for each combination of medical/surgical benefits and of mental health or substance use disorder benefits that any enrollee can simultaneously receive from the State. ( i ) *Standard for defining benefits.* States must indicate the standard used for defining the following benefits in the State plan: ( A ) Medical/surgical benefits.
( B ) Mental health benefits.
( C ) Substance use disorder benefits.
( ii ) [Reserved]
( 2 ) *Scope.* This section does not— ( i ) Require a State plan or a MCE that contracts with a State plan to provide any mental health benefits or substance use disorder benefits, and the provision of benefits by a State plan or a MCE that contracts with a State plan 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 ) Affect the terms and conditions relating to the amount, duration, or scope of mental health or substance use disorder benefits under the State plan or a MCE that contracts with a CHIP State plan except as specifically provided in paragraphs (c) and (d) of this section.
( g ) *Compliance dates* — ( 1 ) *In general.* State plans (including those that contract with a MCE) must comply with the requirements of this section no later than October 2, 2017.
( 2 ) [Reserved]
[81 FR 18842, Mar. 30, 2016]