Vol. 80 Friday, 

No. 69 April 10, 2015 

Part II 

Department of Health and Human Services 

Centers for Medicare & Medicaid Services 

42 CFR Parts 438, 440, 456, et al. 

Medicaid and Children’s Health Insurance Programs; Mental Health Parity 

and Addiction Equity Act of 2008; the Application of Mental Health Parity 

Requirements to Coverage Offered by Medicaid Managed Care 

Organizations, the Children’s Health Insurance Program (CHIP), and 

Alternative Benefit Plans; Proposed Rule 


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19418 Federal Register / Vol. 80, No. 69 / Friday, April 10, 2015 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 438, 440, 456, and 457 

[CMS–2333–P] 

RIN 0938–AS24 

Medicaid and Children’s Health 

Insurance Programs; Mental Health 

Parity and Addiction Equity Act of 

2008; the Application of Mental Health 

Parity Requirements to Coverage 

Offered by Medicaid Managed Care 

Organizations, the Children’s Health 

Insurance Program (CHIP), and 

Alternative Benefit Plans 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

address application of certain 

requirements set forth in the Public 

Health Service Act, as amended by the 

Paul Wellstone and Pete Domenici 

Mental Health Parity and Addiction 

Equity Act of 2008, to coverage offered 

by Medicaid managed care 

organizations, Medicaid Alternative 

Benefit Plans, and Children’s Health 

Insurance Programs. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on June 9, 2015. 

ADDRESSES: In commenting, please refer 

to file code CMS–2333–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–2333–P, P.O. Box 8016, Baltimore, 

MD 21244–8016. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address ONLY: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–2333–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. Alternatively, 

you may deliver (by hand or courier) 

your written comments ONLY to the 

following addresses prior to the close of 

the comment period: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, call 

telephone number (410) 786–7195 in 

advance to schedule your arrival with 

one of our staff members. 

Comments erroneously mailed to the 

addresses indicated as appropriate for 

hand or courier delivery may be delayed 

and received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: John 

O’Brien or Jean Close at (410) 786–5529 

(Alternative Benefit Plan), Debra 

Dombrowski at (312) 353–1403 

(Managed Care) or Amy Lutzky (410) 

786–0721. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http://

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

a.m. to 4 p.m. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 

Acronyms, Abbreviations, and Short 

Forms 

Because of the many terms to which 

we refer by acronym, abbreviation, or 

short form in this proposed rule, we are 

listing the acronyms, abbreviation, and 

short forms used and their 

corresponding terms in alphabetical 

order below. 

2008 Extenders Act Tax Extenders and 

Alternative Minimum Tax Relief Act of 

2008 (Division C) 

The Act Social Security Act 

The Affordable Care Act Patient Protection 

and Affordable Care Act (Pub. L. 111– 

148, enacted on March 23, 2010), as 

amended by the Health Care and 

Education Reconciliation Act of 2010 

(Pub. L. 111–152) 

The Departments Departments of the 

Treasury, Labor, and Health and Human 

Services 

ABP Alternative Benefit Plan 

BBA Balanced Budget Act of 1997 

CHIP Children’s Health Insurance Program 

CHIPRA Children’s Health Insurance 

Program Reauthorization Act of 2009 

CMS Centers for Medicare and Medicaid 

Services 

The Code Internal Revenue Code of 1986 

DOL Department of Labor 

DSM Diagnostic and Statistical Manual of 

Mental Disorders (current edition) 

EHB Essential Health Benefit 

EPSDT Early and Periodic Screening, 

Diagnostic and Treatment 

ERISA Employee Retirement Income 

Security Act of 1974 

FFS Fee for Service 

HHS Department of Health and Human 

Services 

ICD International Classification of Diseases 

MCE Managed Care Entity 

MCO Managed Care Organization 

MH Mental Health 

MH/SUD Mental Health or Substance Use 

Disorder 

MHPA Mental Health Parity Act of 1996 

MHPAEA Paul Wellstone and Pete 

Domenici Mental Health Parity and 

Addiction Equity Act of 2008 

NQTL Nonquantitative Treatment 

Limitation 

PAHP Prepaid Ambulatory Health Plan 

PHS Act Public Health Service Act 

PIHP Prepaid Inpatient Health Plan 

SHO State Health Official 

SUD Substance Use Disorder 

Treasury Department of the Treasury 

Table of Contents 

I. Executive Summary 

II. Background 

A. Introduction 

B. Legislative Overview 

III. Provisions of the Proposed Rule 

A. Meaning of Terms 

B. Parity Requirements for Aggregate, 

Lifetime and Annual Limits 


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C. Parity Requirements for Financial 

Requirements and Treatment Limitations 

D. Cumulative Financial Requirements 

E. Compliance With Other Cost-sharing 

Rules 

F. Nonquantitative Treatment Limitations 

(NQTLs) 

G. Application to CHIP and EPSDT 

Deemed Compliance 

H. Availability of Information 

I. Application to EHBs and other ABP 

Benefits 

J. Application of Parity Requirements to 

the Medicaid State Plan 

K. Scope and Applicability of the Proposed 

Rule 

L. Scope of Services 

M. ABP State Plan Requirements 

N. Increased Cost Exemption 

O. Enforcement, Managed Care Rate Setting 

and Contract Review and Approval 

P. Applicability and Compliance 

Q. Utilization Management 

IV. Collection of Information Requirements 

V. Response to Comments 

VI. Regulatory Impact Statement 

I. Executive Summary 

This proposed rule addresses the 

application of certain provisions added 

to the Public Health Service Act (PHS 

Act) (mental health parity requirements) 

by the provisions of the Paul Wellstone 

and Pete Domenici Mental Health Parity 

and Addiction Equity Act of 2008 

(MHPAEA) (Pub. L. 110–343, enacted 

on October 3, 2008) to: (1) Medicaid 

managed care organizations (MCOs) as 

described in section 1903(m) of the 

Social Security Act (the Act); (2) 

Medicaid benchmark and benchmarkequivalent plans (referred to in this 

proposed rule as Medicaid Alternative 

Benefit Plans) as described in section 

1937 of the Act; and (3) Children’s 

Health Insurance Program (CHIP) under 

title XXI of the Act. 

Under section 1932(b)(8) of the Act, 

Medicaid MCOs are required to comply 

with the requirements of subpart 2 of 

part A of title XXVII of the PHS Act, to 

the same extent that those requirements 

apply to a health insurance issuer that 

offers group health insurance. Subpart 2 

includes mental health parity 

requirements added by MHPAEA at 

section 2726 of the PHS Act (as 

renumbered; formerly section 2705 of 

the PHS Act). Under section 1937(b)(6) 

of the Act, Medicaid Alternative Benefit 

Plans (ABPs) that are not offered by an 

MCO and that provide both medical and 

surgical benefits and mental health or 

substance use disorder benefits are 

required to ensure that financial 

requirements and treatment limitations 

for such benefits comply with the 

mental health parity requirements of the 

PHS Act (referencing section 2705(a) of 

the PHS Act, which is now renumbered 

2726(a) of the PHS Act), in the same 

manner as such requirements apply to a 

group health plan. The section 1937 

provision applies only to ABPs that are 

not offered by MCOs; ABPs offered by 

MCOs are already required to comply 

with these requirements under section 

1932(b)(8) of the Act. Section 2103(c)(6) 

of the Act requires that state CHIP plans 

that provide both medical and surgical 

benefits and mental health or substance 

use disorder benefits shall ensure that 

financial requirements and treatment 

limitations for such benefits comply 

with mental health parity requirements 

of the PHS Act (referencing section 

2705(a) of the PHS Act, now 

renumbered as section 2726(a) of the 

PHS Act) to the same extent as such 

requirements apply to a group health 

plan. In addition, section 2103(f)(2) of 

the Act requires that CHIP benchmark or 

benchmark equivalent plans comply 

with all of the requirements of subpart 

2 of part A of the title XXVII of the PHS 

Act, which includes the mental health 

parity requirements of the PHS Act, 

insofar as such requirements apply to 

health insurance issuers that offer group 

health insurance coverage. 

This proposed rule would incorporate 

these requirements into our regulations. 

II. Background 

A. Introduction 

On September 26, 1996, the Congress 

enacted the Mental Health Parity Act of 

1996 (Pub. L. 104–204) (MHPA), 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 2726 of the PHS Act 

(renumbered under section 1001 of the 

Affordable Care Act), and section 9812 

of the Code, and applied to 

employment-related group health plans 

and health insurance coverage offered in 

connection with a group health plan. 

The Balanced Budget Act of 1997 (Pub. 

L. 105–33, enacted on August 5, 1997) 

(BBA) added sections 1932(b)(8) and 

2103(f)(2) of the Act to generally apply 

certain aspects of MHPA, including the 

provisions of section 2726 of the PHS 

Act, to Medicaid MCOs and CHIP 

benefits. 

MHPAEA was enacted as sections 511 

and 512 of the Tax Extenders and 

Alternative Minimum Tax Relief Act of 

2008 (Division C of Pub. L. 110–343) 

(the 2008 Extenders Act). MHPAEA 

amends the Employee Retirement 

Income Security Act of 1974 (ERISA), 

the PHS Act, and the Internal Revenue 

Code of 1986 (the Code). The changes 

made by MHPAEA consist of new 

standards, including parity for 

substance use disorder benefits, as well 

as amendments to the existing mental 

health parity provisions enacted in 

MHPA. 

In 2009, section 502 of the Children’s 

Health Insurance Program 

Reauthorization Act of 2009 (Pub. L. 

111–3) (CHIPRA) amended section 

2103(c) of the Act by adding paragraph 

(6), which requires that CHIP plans that 

provide both medical and surgical 

benefits and mental health or substance 

use disorder benefits comply with the 

provisions of section 2705(a) of the PHS 

Act, as amended by MHPAEA, in the 

same manner as a group health plan. 

The Patient Protection and Affordable 

Care Act (Pub. L. 111–148) was enacted 

on March 23, 2010 and the Health Care 

and Education Reconciliation Act of 

2010 (Pub. L. 111–152) was enacted on 

March 30, 2010 (collectively referred to 

as the ‘‘Affordable Care Act’’). Section 

1001 of the Affordable Care Act 

reorganized and renumbered certain 

provisions of the PHS Act, including 

renumbering section 2705 of the PHS 

Act as section 2726 of the PHS Act. The 

Affordable Care Act did not make 

conforming changes to cross-references 

to the renumbered provisions, and 

contained new cross-references to the 

former section numbers. But there was 

no indication that Congress intended to 

alter the meaning of the existing crossreferences. As a result, we read the 

cross-references to continue to refer to 

the same section originally referenced, 

as renumbered. We believe it is clear 

that the new cross-references were also 

intended to refer to the renumbered 

provisions. 

The Affordable Care Act expanded the 

application of section 2705(a) of the 

PHS Act, as amended by MHPAEA, and 

renumbered as section 2726(a) of the 

PHS Act, to benefits in Medicaid ABPs 

delivered outside of a MCO. ABPs 

delivered through a MCO would already 

have to comply with these requirements 

under section 1932(b)(8) of the Act. 

Also, effective on March 23, 2010, 

section 2001(c) of the Affordable Care 

Act modified the benefit provisions of 

section 1937 of the Act. Specifically, 

section 2001(c) of the Affordable Care 

Act added mental health benefits and 

prescription drug coverage to the list of 

benefits that must be included in 

benchmark-equivalent coverage; 

required the inclusion of essential 

health benefits (EHBs) beginning in 

2014; and directed that plans described 

in section 1937 of the Act (now known 

as ABPs) that include medical/surgical 

benefits and mental health or substance 

use disorder benefits ensure that the 

financial requirements and treatment 

limitations applicable to such mental 


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1http://www.medicaid.gov/federal-policyguidance/downloads/sho-13-001.pdf. 

2http://downloads.cms.gov/cmsgov/archiveddownloads/SMDL/downloads/SHO110409.pdf. 

3The MHPAEA final regulations generally apply 

to group health plans and health insurance issuers 

on the first day of the first plan year beginning on 

or after July 1, 2014. The preamble to the MHPAEA 

final regulations stated that each plan or issuer 

subject to the interim final regulations, issued on 

February 2, 2010 (75 FR 5410), 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 (78 FR 68252 and 

253). Note: For ease of reference, the citations to 

provisions of the MHPAEA final rules throughout 

this document will only refer to the provisions 

adopted by HHS in 45 CFR part 146. 

health or substance use disorder (MH/

SUD) benefits comply with the mental 

health parity provisions of the PHS Act. 

In 2013, we released a State Health 

Official (SHO) letter that provided 

guidance to states regarding the 

implementation of requirements under 

MHPAEA to Medicaid benchmark and 

benchmark-equivalent plans (referred to 

in the letter as ABPs) as described in 

section 1937 of the Act, CHIP under title 

XXI of the Act, and MCOs as described 

in section 1903(m) of the Act.1 We 

previously issued a SHO letter on 

November 4, 2009, concerning the 

application of section 502 of CHIPRA.2

The Departments of Health and 

Human Services (HHS), Labor, and the 

Treasury (collectively the Departments) 

published interim final regulations 

implementing MHPAEA on February 2, 

2010 (75 FR 5410), and final regulations 

applicable to group health plans and 

health insurance issuers on November 

13, 2013 (78 FR 68240) (MHPAEA final 

regulations).3 The MHPAEA final 

regulations do not apply to Medicaid 

MCOs, ABPs, or CHIP state plans. In 

this proposed rule, we are proposing 

regulations to address how the 

MHPAEA requirements in section 2726 

of the PHS Act, as implemented in the 

MHPAEA final regulations, will apply 

to MCOs, ABPs and CHIP. 

III. Provisions of the Proposed Rule 

This proposed rule generally mirrors 

the policies set forth in the MHPAEA 

final regulations to implement the 

statutory provisions that require MCOs, 

ABPs and CHIP to comply with certain 

requirements of section 2726 of the PHS 

Act (mental health parity requirements). 

State Medicaid programs vary in their 

coverage of MH/SUD services. For 

example, most MH/SUD services are 

optional services under the traditional 

Medicaid benefits package, so states can 

choose to cover some services and not 

others, or can choose to cover these 

services but impose treatment 

limitations (for example, day or visit 

limits). Additionally, states have the 

flexibility to provide services through a 

managed care delivery mechanism using 

entities other than MCOs, such as 

prepaid inpatient health plans (PIHPs) 

or prepaid ambulatory health plans 

(PAHPs). PIHPs and PAHPs are defined 

in § 438.2 as entities that provide 

medical services on the basis of prepaid 

capitation payments but provide a more 

limited benefit package than a 

comprehensive MCO defined in section 

1903(m) of the Act and are subject to the 

requirements for managed care entities 

as specified in 42 CFR part 438. These 

entities are not described in section 

1932 of the Act, which refers only to the 

application of mental health parity 

requirements to Medicaid MCOs. In 

many instances, states will provide the 

medical/surgical services through an 

MCO, but will not include in the MCO 

benefit package some or all of their MH/ 

SUD state plan services. Instead, these 

services will be delivered through a 

PIHP or a PAHP or a non-managed care 

delivery system, typically fee-for-service 

(FFS). In many states, MCOs provide 

some MH/SUD services (for example, 

emergency department services 

regardless of presenting condition, or 

MH/SUD medications), and PIHPs, 

PAHPs, or FFS provide a more robust 

set of services for those individuals with 

serious mental health conditions or 

substance use disorders. These unique 

state MH/SUD delivery systems are an 

important distinction between Medicaid 

coverage and coverage available through 

the commercial market. Because the 

statutory provisions making mental 

health parity requirements applicable to 

MCOs do not explicitly address the 

situation in which medical/surgical 

benefits and MH/SUD benefits included 

in coverage are furnished through 

separate but interrelated and 

interdependent service delivery 

systems, additional guidance is needed. 

As a general matter, this proposed 

rule would require that each MCO 

enrollee in a state must be provided 

access to a set of benefits that meets the 

requirements of this rule regardless of 

whether the MH/SUD services are 

provided by the MCO or through 

another service delivery system. We 

propose to apply MHPAEA in this way 

as we interpret section 1932(b)(8) of the 

Act to require that, if a state uses private 

health plans, or MCOs, to provide any 

of its state plan benefits under an MCO 

contract, enrollees in those MCOs 

(whether under a voluntary or 

mandatory managed care program) must 

receive the protections of MHPAEA 

parity requirements for MH/SUD 

services. We are concerned that the 

exclusion of MH/SUD services from 

MCO contracts could result in the 

elimination of the application of section 

1932(b)(8) of the Act. To ensure that the 

goal of parity is met, we are proposing 

to require, by relying on our authority 

in section 1902(a)(4) of the Act to 

specify methods ‘‘necessary for the 

proper and efficient operation of the 

state plan,’’ that if MH/SUD state plan 

services are provided to MCO enrollees 

through a PIHP, PAHP, or under 

Medicaid FFS (because such services 

are carved out of the MCO contract 

scope), MCO enrollees will still receive 

the MHPAEA parity protections for MH/ 

SUD state plan services. Specifically, 

states that do not provide all services 

through the MCO will be required to 

provide evidence of compliance with 

this rule when they submit MCO 

contracts to the CMS Regional Office for 

review and approval. Contracts with 

PIHPs and PAHPs would also be 

required to provide that the PIHPs and 

PAHPs take steps necessary to ensure 

such compliance with this proposed 

rule. For states that offer MH/SUD 

services to MCO enrollees through FFS 

(other than when the services are part of 

an ABP, as discussed below), states 

would similarly be obligated to ensure 

that MH/SUD services provided on a 

FFS basis, when combined with services 

furnished by the MCO, comply with 

MHPAEA. In such an instance, the state 

would have the option of either (1) 

making changes to the non-ABP state 

plan to provide MH/SUD services 

through the FFS system in a manner 

that is on parity with the MCO-provided 

medical/surgical services consistent 

with this proposed rule or (2) including 

relevant MH/SUD services in the MCO 

contract (or PIHP or PAHP contract as 

applicable), in which case the managed 

care entity would have to comply with 

this proposed rule. Failure to adopt 

these additional requirements using our 

authority under section 1902(a)(4) of the 

Act, as well as section 1932(b)(8) of the 

Act would result in de facto 

nullification of the MHPAEA 

protections that are provided in section 

1932(b)(8) of the Act if states carved out 

MH/SUD benefits from the MCO 

contract. 

We considered alternatives such as 

requiring, based as well on our authority 

at section 1902(a)(4) of the Act, that all 

state plan MH/SUD services be included 

under MCO contracts as the way to 

ensure that MCO enrollees receive the 

full protections of MHPAEA as we 

believe the Congress intended in section 

1932(b)(8) of the Act, again relying on 

our authority under section 1902(a)(4) of 

the Act. But, we believe that the 


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4Our proposal is for this provision to be codified 

as part of the regulations controlling rate setting for 

MCOs, PIHPs and PAHPs and the paragraph 

designation may vary. 

approach we are proposing would allow 

states the most flexibility when 

applying mental health parity 

requirements to their Medicaid services 

across delivery systems. Given that 

there are many different delivery system 

configurations that carve out MH/SUD 

services, this would allow states to 

comport with parity requirements for 

MCO enrollees without completely 

carving out MH/SUD services from their 

MCO or dropping MH/SUD coverage 

altogether. We solicit comments on 

whether to require that all state plan 

MH/SUD services be included under 

MCO contracts. 

We recognize that this proposed 

regulation would require an analysis by 

the state to determine if the overall 

delivery system complies with the 

provisions of this proposed rule when 

all services are not included in the 

benefit package of a single MCO. In 

states where the MCO has sole 

responsibility for offering MH/SUD 

services, the MCO would be responsible 

for undertaking the parity analysis and 

informing the state what changes will be 

needed to the MCO contract to comply 

with the provisions of this proposed 

rule. As proposed in § 438.920, states 

would be required to make available to 

the public their methods of complying 

with these proposed rules within 18 

months after the rule is finalized. 

In states where some or all MH/SUD 

services are provided through some 

combination of MCOs, PIHPs, PAHPs or 

FFS, the state would have the 

responsibility for undertaking the parity 

analysis across these delivery systems 

and determining if the benefits and any 

financial requirements or treatment 

limitations are consistent with proposed 

§ 438.920(b). The state, based on this 

analysis, would take the necessary steps 

to ensure mental health parity 

compliance for its Medicaid MCO 

enrollees. As previously discussed, we 

believe that the provisions of section 

1902(a)(4) of the Act authorize CMS to 

adopt rules that require the state to 

perform the parity analysis when MH/ 

SUD services are offered across delivery 

systems because we believe that this 

administrative responsibility is 

necessary and essential for full 

implementation of section 1932(b)(8) of 

the Act. In addition, we are proposing 

at § 438.920(b) that the state make 

available documentation of compliance 

with these proposed regulations to the 

general public within 18 months of the 

effective date of this rule and post it on 

the state Medicaid Web site. 

For beneficiaries who are not enrolled 

in a MCO (FFS only), and thus not 

covered by section 1932(b)(8) of the Act, 

our proposed rule would not affect 

coverage (other than when the services 

are part of an alternative benefit plan, as 

discussed below). However, we 

encourage states to provide state plan 

benefits in a way that comports with the 

mental health parity requirements of 

section 2726 of the PHS Act. 

We note that payment to MCOs must 

be actuarially sound under section 

1903(m) of the Act; regulations 

implementing that requirement are 

currently codified at § 438.6 and are 

applicable to other managed care 

entities based on separate statutory 

authority. In particular, § 438.6(e) 

provides that actuarially sound rates 

may only be based on the cost to 

provide services covered under the state 

plan. As part of our proposal to 

implement the mental health parity 

requirements, we propose to revise 

§ 438.6(e) to specify development of 

actuarially sound rates for MCOs, PIHPs 

and PAHPs that provide MH/SUD 

services may take into account the cost 

of providing services beyond those 

specified in the state plan which are 

necessary for the MCO, PIHP or PAHP 

to comply with the mental health parity 

requirements. Proposed § 438.6(e) 4

would require that states base the 

capitation rates set for MCOs, PIHPs, 

and PAHPs, where MH/SUD benefits are 

provided under contract with these 

entities, on their provision of a benefit 

package that is compliant with these 

proposed parity requirements even if 

services go beyond what is in the state 

plan; the additional non-state plan 

services that are used to develop the 

capitation rates would have to be 

necessary to comply with the 

requirements of new subpart K of part 

438. This would ensure that states 

maintain an actuarially sound ratesetting structure that provides for 

payment of capitation rates to managed 

care plans rate that reflect the full scope 

of benefits the managed care plans are 

obligated to provide. To the extent this 

new subpart K would obligate an MCO, 

PIHP or PAHP to provide services that 

are not otherwise included in the state 

plan, costs associated with services that 

would not be included but for the parity 

requirements should be part of the 

actuarially sound capitation rates. We 

believe that proposed § 438.6(e) is 

sufficiently specific to only permit 

states to include those services needed 

for compliance with these proposed 

rules. Section 438.6(e) allows a state’s 

rate-setting structure to account for 

services covered by an MCO, PIHP, or 

PAHP in excess of services and/or 

treatment limits that are listed in the 

state plan only to the extent that such 

services are necessary for the MCO, 

PIHP or PAHP to comply with § 438.910 

of this rule. However, we are concerned 

about the potential for inappropriately 

broad readings of the regulation text and 

consequent use of this proposed section 

to include non-State plan services in 

rate setting for to the MCO, PIHP or 

PAHP benefit package that are not 

strictly necessary for compliance with 

these proposed parity requirements. We 

request comments on this risk and how 

we might mitigate it, such as a need for 

more prescriptive language or specific 

oversight activities to ensure that 

managed care plans and states develop 

rates that include only state plan 

services and the additional services 

necessary for compliance with subpart 

K. For states that offer MH/SUD services 

to MCO enrollees through FFS (other 

than when the services are part of an 

alternative benefit plan, as discussed 

below), states would similarly be 

obligated to ensure that MH/SUD 

services provided on a FFS basis, when 

combined with services furnished by an 

MCO, comply with the proposed parity 

provisions in part 438, subpart K. To 

ensure this full implementation of 

section 1932(b)(8) of the Act, we rely on 

our authority under section 1902(a)(4) of 

the Act to require methods of 

administration necessary for the proper 

and efficient administration of the state 

plan. If a state provides MH/SUD 

benefits to MCO enrollees through FFS, 

the state would have the option of either 

(1) making changes to the non-ABP state 

plan to provide MH/SUD services 

through the FFS system in a manner 

that is on parity with the MCO-provided 

medical/surgical services consistent 

with this rule, or (2) including relevant 

MH/SUD services in a MCO contract (or 

PIHP or PAHP contract when relevant), 

in which case the managed care entity 

would have to comply with this rule. 

To ensure the appropriate application 

of mental health parity requirements to 

Medicaid services, we propose to amend 

current regulations to apply mental 

health parity requirements under 

section 2726 of the PHS Act to services 

provided to enrollees of Medicaid MCOs 

regardless of delivery system or 

limitations in the state plan. 

Specifically, we propose amending part 

438 by adding a new subpart K to 

extend these mental health parity 

requirements to MCOs, and to PIHPs 

and PAHPs as applicable, to ensure that 

all enrollees of the MCO are provided 

access to a MHPAEA-compliant set of 

services when the state plan includes 


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some MH/SUD services. Second, we are 

proposing to add a new provision in 

§ 438.6 to require that all MCO 

contracts, and any PIHP and PAHP 

contracts providing services to MCO 

enrollees, ensure that enrollees receive 

services that are in compliance with the 

requirements of new subpart K insofar 

as those requirements are applicable. 

We would not apply mental health 

parity requirements to state plan 

services provided to beneficiaries 

covered only through a FFS delivery 

system, even if care for other 

beneficiaries is delivered through a 

managed care delivery system. 

However, as indicated in our 2013 SHO 

letter, we strongly encourage states to 

consider changes to the state plan 

benefit package to comport with the 

mental health parity requirements of 

section 2726 of the PHS Act. Several 

states have already implemented the 

necessary changes in their state plan (for 

example, adding SUD outpatient 

services and removing or aligning 

treatment limitations) to make their 

MH/SUD benefits consistent for all 

Medicaid beneficiaries. For clarity, we 

are not applying mental health parity 

requirements under section 2726 of the 

PHS Act to Medicare Parts A, B, or D 

services covered by Medicaid MCOs, 

such as those covered by integrated 

plans for people who are dually eligible 

for Medicare and Medicaid; Medicare 

benefits are controlled by the Medicare 

statute and regulations, which are not 

within the scope of this proposed rule. 

The proposed rules pertaining to 

ABPs and CHIP cross-reference the 

proposed rules governing MCOs, PIHPs 

or PAHPs when states are using these 

organizations as their delivery system 

for ABP or CHIP benefits. Regardless of 

whether services are delivered in 

managed care or non-managed care 

arrangements, all Medicaid ABPs 

(including benchmark equivalent and 

Secretary–approved benchmark plans) 

and CHIP plans are required to meet the 

financial requirements and treatment 

limitations component of the mental 

health parity provisions set forth at 

section 2726(a) of the PHS Act. 

Section 2726 of the PHS Act contains 

an increased cost exemption that is 

available for group health plans and 

health insurance issuers that make 

changes to comply with the law and 

incur an increased cost of at least 2 

percent in the first year that mental 

health parity requirements apply to the 

plan or coverage, or an increased cost of 

at least 1 percent in any subsequent 

plan or policy year. Plans or issueroffered 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. 

This proposed rule does not include 

an increased cost exemption for MCOs, 

PIHPs, or PAHPs, and we do not believe 

that these Medicaid managed care 

entities will incur any net increase in 

costs because we are also proposing 

here that the actuarially sound payment 

methodology will take costs of 

compliance with parity requirements 

into account. As noted, we are 

proposing to allow states to include the 

cost of providing services beyond what 

is specified in the state plan which may 

include adding services or removing or 

aligning treatment limitations in 

managed care benefits into the 

actuarially sound rate methodology so 

long as those services beyond what is 

specified in the state plan are necessary 

to comply with mental health parity 

requirements. These changes to the 

managed care rate setting process would 

authorize states, in instances where they 

choose not to change their state plan, to 

include the cost of services beyond what 

is specified in the state plan into the 

capitation rate development to the 

extent the services are required to be 

provided by the MCO, PIHP or PAHP 

and outlined under contract to comply 

with this proposed rule. Therefore, the 

Medicaid program rather than the plan 

will bear the costs of these changes. 

This is different from the circumstances 

of the commercial market and removes 

the rationale for an increased cost 

exemption for Medicaid MCOs, PIHPs 

and PAHPs. In addition, we understand 

that few if any issuers and group health 

plans have sought an increased cost 

exemption in the commercial market. 

Therefore, in this proposed rule, we are 

not extending the cost exemption 

provision to the Medicaid and CHIP 

programs. 

We recognize that state budgeting and 

contracting processes may necessitate 

additional time for compliance with 

these new contracting and rate setting 

parameters. We propose to afford states 

up to 18 months after the date of the 

publication of the final rule to comply 

with the finalized provisions of this 

proposed rule. This proposal would 

allow states to come into compliance 

with these regulations and take the 

actions to make the necessary budget 

requests to add new services or 

additional service units. Some states 

have a biannual budget cycle and may 

need this length of time to develop and 

obtain approval of these budget 

requests. In addition, states would need 

to make the necessary contract changes 

to their MCOs, PIHPs, or PAHPs once 

the budget has been approved. Some 

states may choose to request approval 

from CMS to make changes to their nonABP state plan for services delivered 

through FFS. We believe that 18 months 

should provide states with sufficient 

time to implement the necessary policy, 

contract and budget changes to comply 

with the final regulations and are 

proposing a delayed compliance 

deadline accordingly. We invite 

comments on this proposal regarding 

the delay of required compliance and 

the treatment of a cost-based exemption. 

The statutory requirements applying 

mental health parity requirements to 

CHIP are structured differently than the 

statutory direction to apply those 

requirements to Medicaid MCOs. For 

CHIP programs, sections 2103(c)(6) and 

2103(f)(2) of the Act generally provide 

that MH/SUD parity requirements apply 

to all delivery systems, including FFS 

and managed care. Except where the 

CHIP state plan provides full coverage 

of EPSDT and the MHPAEA 

requirements are deemed as met, the 

MHPAEA parity requirements apply to 

the CHIP state plan in the same manner 

as the law applies to health insurance 

issuers and group health plans. Our 

proposal reflects this in the proposed 

regulations for part 457. 

For CHIP enrollees in an MCO, we 

propose to apply all mental health 

parity provisions of section 2726 of the 

PHS Act. In addition to the language at 

sections 2103(c)(6) and section 

2103(f)(2) of the Act previously 

discussed, section 2103(f)(3) of the Act 

makes applicable to CHIP MCOs certain 

requirements under section 1932 of the 

Act, including section 1932(b)(8) of the 

Act which requires that MCOs comply 

with MHPAEA parity requirements. 

Furthermore, we propose to require 

parity in connection with coverage 

provided by PIHPs and PAHPs to CHIP 

MCO enrollees. 

For ABP benefits offered only through 

FFS delivery systems, financial 

requirements and treatment limitations 

under section 2726(a) of the PHS Act are 

the only mental health parity provisions 

that apply (based on section 1937(b)(6) 

of the Act). Section 2726(a)(3)(B) of the 

PHS Act excludes from the definition of 

the term ‘‘financial requirement’’ 

aggregate lifetime or annual dollar limits 

on benefits, and thus these are not 

included in the ‘‘financial requirements 

and treatment limitations’’ parity 

requirements applicable to Medicaid 

ABPs furnished through FFS service 

delivery systems. (Annual and lifetime 

limits are addressed separately under 

MHPAEA from financial requirements, 

at sections 2726(a)(1) and (2) of the PHS 


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Act.). In addition, the following mental 

health parity provisions are not 

applicable to FFS delivery systems for 

Medicaid ABP benefits because they are 

not ‘‘financial or treatment limitations:’’ 

those regarding access to out-of-network 

providers and the increased cost 

exemption. For ABP benefits provided 

through an MCO, PIHP or PAHP, our 

proposal is to require compliance with 

the part 438 provisions addressing 

MHPAEA parity requirements for 

Medicaid managed care. 

A. Meaning of Terms (§ 438.900, 

§ 440.395, § 457.496) 

The definitions of terms in this 

proposed rule include most terms 

included in the MHPAEA final 

regulation at 45 CFR 146.136(a). This 

proposed rule proposes to modify or 

add several terms to reflect the 

terminology used in the Medicaid 

program and CHIP statutes, regulations 

or policies. Some terms that are not 

relevant to the Medicaid program or 

CHIP are not included in this proposed 

rule. For each term described in this 

proposed rule, when appropriate, we 

have identified where we have 

modified, added or deleted language 

that deviates from those definitions in 

the MHPAEA final regulations. The 

proposed terms are as follows: 

For the definition of ‘‘Aggregate 

lifetime dollar limit,’’ we are proposing 

to replace the words ‘‘group health plan 

(or health insurance coverage offered in 

connection with such a plan) for any 

coverage unit’’ with ‘‘MCO, PIHP or 

PAHP’’ or ‘‘ABP’’ to reflect the common 

terms for health plans in the Medicaid 

program. For CHIP, we are proposing to 

replace these words with ‘‘CHIP state 

plan or a Managed Care Entity (MCE).’’ 

In § 440.395, we are proposing to add 

the term ‘‘Alternative Benefit Plans’’. 

For the definition of ‘‘Annual dollar 

limit,’’ we are proposing to replace the 

words ‘‘group health plan (or health 

insurance coverage offered in 

connection with such a plan) for any 

coverage unit’’ with ‘‘MCO, PIHP or 

PAHP’’ to reflect the common terms for 

health plans in the Medicaid program 

and ‘‘a CHIP state plan or a MCE’’ for 

CHIP. 

We are proposing to add the 

definition of ‘‘Early and Periodic 

Screening, Diagnostic and Treatment 

(EPSDT) benefits’’. Under section 

1905(r) of the Act, EPSDT is a required 

benefit under the Medicaid program for 

categorically needy individuals under 

age 21. The EPSDT benefit is optional 

for the medically needy population and 

if elected for that population, the EPSDT 

benefit must be made available to all 

Medicaid eligible individuals under age 

21. Under the EPSDT benefit, states 

must provide for screening, vision, 

hearing and dental services at intervals 

which meet reasonable standards of 

medical and dental practice established 

after consultation with recognized 

medical and dental organizations 

involved in child health care. States 

must also provide for medically 

necessary screening, vision, hearing and 

dental services regardless of whether 

such services coincide with established 

periodicity schedules for these services. 

Additionally, the Act requires that other 

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 identified by the screening 

services, must be provided to EPSDT 

beneficiaries whether or not such 

services are otherwise covered under 

the Medicaid state plan. 

In the proposed ABP parity rules, we 

are also proposing to add the definition 

of ‘‘essential health benefits (EHB).’’ 

Since 2014, all non-grandfathered 

health insurance coverage in the 

individual and small group markets, 

Medicaid benchmark and benchmarkequivalent plans (now also known as 

ABPs), and Basic Health Programs (if 

applicable) must cover EHBs, which 

include items and services in 10 

statutory benefit categories, that are 

substantially equal in scope to a typical 

employer health plan. Consistent with 

the requirements set forth in 45 CFR 

part 156, EHBs are comprised of (1) 

Ambulatory patient services; (2) 

Emergency services; (3) Hospitalization; 

(4) Maternity and newborn care; (5) 

Mental health and substance use 

disorder services, including behavioral 

health treatment; (6) Prescription drugs; 

(7) Rehabilitative and habilitative 

services and devices; (8) Laboratory 

services; (9) Preventive and wellness 

services and chronic disease 

management; and (10) Pediatric 

services, including oral and vision care. 

We are proposing a different 

definition for the term ‘‘medical/

surgical benefits,’’ to reflect that the 

state defines these benefits in the 

Medicaid and CHIP contexts. Under 

existing Medicaid law, the state has the 

responsibility of identifying what is a 

covered benefit for MCOs, PIHPs, 

PAHPs, ABPs, and CHIP; MCOs, PIHPs 

or PAHPs are responsible for providing 

the covered benefits identified by the 

state. This is different from the 

MHPAEA final regulations, where 

medical/surgical benefits are defined 

under the terms of the group health plan 

or health insurance coverage and in 

accordance with applicable federal or 

state law. We are also proposing that the 

definition of ‘‘medical/surgical 

services’’ clearly exclude long term care 

services in the Medicaid and CHIP 

context. We believe this clarification is 

consistent with the intent of the 

MHPAEA final regulations, as the kinds 

of long term care services included in 

benefit packages for Medicaid and CHIP 

beneficiaries are not commonly 

provided in the commercial market as 

part of health benefits coverage. We are 

seeking comments on our proposal to 

exclude long term care services from the 

definition of medical/surgical services. 

This proposed rule further provides that 

states define which benefits are 

medical/surgical 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). 

We propose to define ‘‘mental health 

benefits’’ and ‘‘substance use disorder 

benefits’’, under these regulations, as 

benefits for items and services for 

mental health conditions and substance 

use disorders, respectively, as defined 

by the state and in accordance with 

applicable federal and state law. Thus, 

our proposal here for the terms ‘‘mental 

health benefits’’ and ‘‘substance use 

disorder benefits’’ in this Medicaid and 

CHIP context also varies from the 

MHPAEA final regulations, similar to 

our proposed definition for medical/

surgical benefits, to reflect that the state 

(not the MCO, PIHP or PAHP) is 

responsible for defining these benefits. 

This proposed rule also proposes that 

when states define what benefits are 

MH/SUD benefits, the definitions must 

be consistent with generally recognized 

independent standards of current 

medical practice. Consistent with the 

MHPAEA final regulations, this 

requirement is included to ensure that 

a benefit is not misclassified to avoid 

complying with the parity requirements. 

The word ‘‘generally’’ in the 

requirement ‘‘to be consistent with 

generally recognized independent 

standards of current medical practice’’ 

is not meant to imply that the standard 

must be a national standard, but instead 

that a standard is largely accepted in the 

relevant medical community. There are 

many different sources that would meet 

this requirement. For example, a state 

may follow the most current version of 

the Diagnostic and Statistical Manual of 

Mental Disorders (current edition) 

(DSM), ICD, or a state guideline. All of 

these would be considered acceptable 

resources to determine whether benefits 

for a particular condition are classified 


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as medical/surgical or MH/SUD benefits 

for purposes of these rules. 

This proposed rule duplicates the 

definition of the term ‘‘treatment 

limitations’’ in the MHPAEA final 

regulations, including distinguishing 

between a quantitative and a 

nonquantitative treatment limitation 

(NQTL). This proposed rule proposes 

that the parity requirements in the 

statute apply to both quantitative 

treatment limitations and NQTLs. A 

quantitative treatment limitation is a 

restriction that is expressed 

numerically, such as a limit of 50 

outpatient visits per year. A NQTL is a 

restriction that is not expressed 

numerically, but otherwise limits the 

scope or duration of benefits for 

treatment, such as requirements for 

prior authorization for services. A nonexhaustive list of NQTLs is included in 

proposed § 438.910(d)(2), § 440.395(b) 

and § 457.496. This list, as well as the 

application of these regulations to 

NQTLs, is further discussed later in this 

proposed rule. However, these 

regulations propose that a permanent 

exclusion of all benefits for a specific 

condition or disorder is not a treatment 

limitation. 

B. Parity Requirements for Aggregate 

Lifetime and Annual Dollar Limits 

Proposed §§ 438.905 and 457.496(c) 

address the parity requirements for 

aggregate lifetime and annual dollar 

limits. The application of these 

requirements is generally the same as 

under the MHPAEA final regulations 

(45 CFR 146.136(b)). We note that for 

managed care arrangements, we are 

using our authority in section 1902(a)(4) 

of the Act to require PIHPs and PAHPs 

to comply with mental health parity 

requirements for MCO enrollees. 

C. Parity Requirements for Financial 

Requirements and Treatment 

Limitations 

Sections 438.910, 440.395(b), and 

457.496(d) of this proposed rule set 

forth parity requirements for financial 

requirements and treatment limitations. 

1. Clarification of Terms 

In addition to proposing the meaning 

of terms in § 438.900, § 440.395, and 

§ 457.496, this proposed rule clarifies 

certain terms that have been given 

specific meanings for purposes of 

MHPAEA. 

a. Classification of Benefits 

For the purposes of this proposed 

rule, ‘‘classification of benefits’’ means 

a classification as described in 

§ 438.910, § 440.395(b), and 

§ 457.496(d). This proposed rule would 

modify the classification of benefits set 

forth in the regulations that were 

adopted by the Departments, as 

discussed in section III.C.2.a of this 

proposed rule, and would provide that 

the parity requirements for financial 

requirements and treatment limitations 

are applied on a classification-byclassification basis. 

b. Type 

This proposed rule uses the term 

‘‘type’’ to refer to financial requirements 

and treatment limitations of the same 

nature. Different types of financial 

requirements and treatment limitations 

include copayments, coinsurance, 

annual visit limits, and episode visit 

limits. States sometimes apply more 

than one financial requirement or 

treatment limitation to benefits. Also, 

this proposed rule specifies that a 

financial requirement or treatment 

limitation must be compared only to 

financial requirements or treatment 

limitations of the same type within a 

classification. For example, copayments 

are compared only to other copayments, 

and annual visit limits are compared 

only to other annual visit limits; 

copayments are not compared to 

coinsurance, and annual visit limits are 

not compared to episode visit limits. 

c. Level 

In this proposed rule, a ‘‘level’’ of a 

type of financial requirement or 

treatment limitation refers to the 

magnitude (such as, the dollar, 

percentage, day, or visit amount) of the 

financial requirement or treatment 

limitation. For example, a plan might 

impose a 20 unit annual limit on 

outpatient visits or a $3 copayment 

depending on the medical/surgical or 

MH/SUD benefit. 

2. General Parity Requirement for 

Financial Requirements and Treatment 

Limitations 

The general parity requirement 

proposed in § 438.910(b), § 440.395(b), 

and § 457.496(d) of this proposed rule 

prohibits a MCO, PIHP, or PAHP (when 

providing benefits to an MCO enrollee), 

or ABP (when used in a non-managed 

care arrangement), or CHIP state plan 

from applying any financial requirement 

or treatment limitation to MH/SUD 

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. For 

this purpose, the general parity 

requirement of MHPAEA applies 

separately for each type of financial 

requirement or treatment limitation (for 

example, unit limits are compared to 

unit limits). This general parity 

requirement also applies to NQTLs, 

which is discussed later in this 

proposed rule. 

a. Classifications of Benefits 

The MHPAEA final regulations at 45 

CFR 146.136(c)(2)(ii) set forth the 

following classifications of benefits: 

Inpatient in-network; inpatient out-ofnetwork; outpatient in-network; 

outpatient out-of-network; emergency 

care; and prescription drugs. Under 

those MHPAEA regulations, if a group 

health plan or health insurance coverage 

provides MH/SUD benefits in any 

classification of benefits, MH/SUD 

benefits must be provided in every 

classification in which medical/surgical 

benefits are provided. The parity 

requirements are applied to financial 

requirements and treatment limitations 

within each classification separately. 

The benefit structure of traditional 

Medicaid (non-ABP state plan services), 

ABPs and CHIP may vary significantly 

from commercial health insurance 

coverage. For example, nursing facility 

long-term care services are a mandatory 

service in traditional Medicaid, but are 

not commonly provided in the 

commercial market as part of health 

benefits coverage. Additional long term 

care services and supports, such as 

personal care, home and community 

based services, or long term psychosocial rehabilitation programs, are also 

commonly included in benefit packages 

for all or targeted populations of 

Medicaid and CHIP beneficiaries, but 

these benefits are not typically provided 

in a commercial environment. 

Additionally, the cost-sharing structure 

and out-of-network coverage of 

Medicaid and CHIP services is often 

different than benefits provided in the 

commercial market. Therefore, issues 

arise over how similar or different the 

classifications should be for the 

Medicaid and CHIP programs. Our 

proposal follows the general structure of 

the classifications used in the MHPAEA 

final regulations with a significant 

distinction. For this proposed rule, we 

eliminated the in-network and out-ofnetwork distinctions for the inpatient 

and outpatient classifications and 

propose four classifications: Inpatient; 

Outpatient; Emergency care; and 

Prescription drugs. We propose these 

classifications for the following reasons: 

• Medicaid and CHIP are held to 

certain cost-sharing requirements for 

either managed care or non-managed 

care delivery systems. The dollar 

amount the beneficiary pays varies by 

income, and whether services are 

received through a network model does 


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not impact the amount for which the 

beneficiary is responsible. 

• When CHIP or ABPs use a FFS 

delivery system or other non-managed 

care arrangement, payment is made for 

services to beneficiaries furnished by 

any qualified providers that have signed 

a Medicaid or CHIP provider agreement. 

Absent a waiver of section 

1902(a)(23)(A) of the Act, beneficiaries 

have a choice from among qualified 

providers and are not limited to a 

network. 

• In a Medicaid managed care 

environment, § 438.206(b)(4) states that 

if a managed care plan’s provider 

network is unable to provide necessary 

services covered under the contract to a 

particular enrollee, the MCO, PIHP or 

PAHP must adequately (and on a timely 

basis) cover these services out-ofnetwork for the enrollee for as long as 

the MCO, PIHP or PAHP is unable to 

provide them in network. This 

provision is not specific to medical/

surgical services or MH/SUD services. 

We understand there may be continued 

concerns that access to out-of-network 

providers is provided by MCOs, PIHPs 

and PAHPs in compliance with 

MHPAEA. To address this concern, we 

are proposing to add access to out-ofnetwork providers to the illustrative list 

of NQTLs. 

For purposes of applying parity 

requirements to Medicaid, the 

classifications of benefits should relate 

to how states construct and manage 

their Medicaid benefits. All Medicaid 

benefits provided, with the exception of 

long term care services, should fall into 

one of the classifications of benefits. 

We are proposing that parity 

requirements for financial requirements 

and treatment limitations are generally 

applied on a classification-byclassification basis. The four 

classifications proposed in this rule are 

the only classifications to be used for 

purposes of applying the parity 

requirements of MHPAEA to Medicaid 

and CHIP. Moreover, these 

classifications must be used for all 

financial requirements and treatment 

limitations to the extent that a MCO, 

PIHP, PAHP, ABP or CHIP 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 MHPAEA final regulations 

discussed the application of parity 

requirements to intermediate services 

(such as residential treatment, partial 

hospitalization, and intensive outpatient 

treatment) provided under the health 

plan. Specifically, the MHPAEA final 

regulations required group health plans 

and issuers to assign covered 

intermediate MH/SUD benefits to a 

benefit classification in the same 

manner they assign comparable 

intermediate medical/surgical benefits 

to a classification. The MHPAEA final 

regulations do not specifically define 

intermediate services; nor do the 

Medicaid and CHIP programs define 

intermediate services within state plan 

benefits. Therefore, we are not 

proposing to specify an intermediate 

classification to be used in the parity 

analysis for Medicaid or CHIP programs. 

As in the MHPAEA final rule, we 

propose to allow the applicable 

regulated entity (the MCO, PIHP or 

PAHP, or state in connection with the 

ABP and CHIP) to assign intermediate 

level services to any of the 

classifications listed, but assignment to 

those classifications must be done in a 

consistent manner for medical/surgical 

services and MH/SUD services. We 

request comment on this approach, as 

well as alternatives. 

Similar to the MHPAEA final rule, 

this proposed rule would not define 

what services are included in the 

inpatient, outpatient, or emergency care 

classifications. These terms are subject 

to the design of a state’s managed care 

program and their meanings may differ 

depending on the benefit packages. 

State health insurance laws may define 

these terms and in the event that these 

are not defined we would expect each 

regulated entity within a state to define 

these classifications in a similar 

manner. Further, each regulated 

managed care plan (MCOs, PIHPs and 

PAHPs) or the state in connection with 

ABP or CHIP must apply these terms 

uniformly for both medical/surgical 

benefits and MH/SUD benefits. 

3. Applying the General Parity 

Requirement to Financial Requirements 

and Quantitative Treatment Limitations 

Sections 438.910(c), 440.395(b) and, 

457.496(d) of this proposed rule address 

the application of the general parity 

requirement of MHPAEA to financial 

requirements and quantitative treatment 

limitations in MCOs, PIHPs, PAHPs, 

ABP or CHIP state plans. 

a. Determining the Portion of Medical/ 

Surgical Benefits Subject to a Financial 

Requirement or Quantitative Treatment 

Limitation 

As noted above, the general parity 

requirement proposed in § 438.910(b), 

§ 440.395(b), and § 457.496(d) of this 

proposed rule prohibits a MCO, PIHP, or 

PAHP, or ABP state plan (when used in 

a non-managed care arrangement), or 

CHIP state plan or MCE contracting with 

a CHIP state plan from applying any 

financial requirement or treatment 

limitation to MH/SUD 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. In these paragraphs of the 

proposed regulations, we propose 

standards similar to those in the 

MHPAEA final regulations for 

determining the portion of medical/

surgical benefits subject to a financial 

requirement or quantitative treatment 

limitation for purposes of the parity 

analysis. Under this proposed rule, the 

portion of medical/surgical benefits in a 

classification subject to a financial 

requirement or quantitative treatment 

limitation would be based on the dollar 

amount of all payments for medical/

surgical benefits in the classification 

expected to be paid during a specific 

year. For MCOs, PIHPS and PAHPs, this 

would be dollar amounts for payment 

during a contract year. For ABPs and 

CHIP state plans, it would be for the 

year starting the effective date of the 

approved ABP or CHIP state plan; 

effective dates for these plans will vary 

based on the date the ABP or CHIP state 

plan was approved by CMS. For 

purposes of this calculation, the MCOs, 

PIHPs and PAHPs (when such 

organizations are responsible for MH/

SUD benefit) would collectively (with 

the assistance of the state) determine the 

total amount projected to be expended 

(including FFS) to determine the twothirds threshold as discussed below. We 

are requesting comment on the 

approach to determine the threshold 

when there are multiple managed care 

delivery systems (for example, MCOs, 

PIHPs and PAHPs). 

b. ‘‘Substantially all’’ 

Similar to the MHPAEA final 

regulations, the first step in applying the 

general parity requirement of MHPAEA 

to a given financial requirement or 

quantitative treatment limitation is to 

determine whether a type of financial 

requirement or quantitative treatment 

limitation applies to substantially all 

medical/surgical benefits in a 

classification. This proposed rule would 

define ‘‘substantially all’’ as meaning at 

least two-thirds of the medical/surgical 

benefits in that classification as 

measured by the total dollar amount of 

payments for medical/surgical benefits 

in the classification expected to be paid 

within a measurement year. In this 

proposed rule, we would apply 

‘‘substantially all’’ consistent with the 

MHPAEA final regulations. 


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c. ‘‘Predominant’’ 

If a type of financial requirement or 

quantitative treatment limitation applies 

to substantially all medical/surgical 

benefits in a classification, the second 

step is to determine the predominant 

level of that type of financial 

requirement or quantitative treatment 

limitation that may be applied to MH/ 

SUD benefits in the classification. 

Under this proposed rule, the level of a 

type of financial requirement or 

quantitative treatment limitation would 

be the predominant level if it applies to 

more than one-half of medical/surgical 

benefits subject to the financial 

requirement or quantitative treatment 

limitation in that classification. If a 

single level of a type of financial 

requirement or quantitative treatment 

limitation applies to more than one-half 

of medical/surgical benefits subject to 

the financial requirement or quantitative 

treatment limitation in a classification 

(based on expected payments, as 

discussed earlier in this proposed rule), 

the applicable regulated entity (under 

proposed §§ 438.910(b), 440.395(b), or 

457.496(d)) may not apply that 

particular financial requirement or 

quantitative treatment limitation to MH/ 

SUD benefits at a level that is higher (for 

example, more expensive beneficiary 

cost-sharing) or more restrictive than the 

level that has been determined to be 

predominant for medical/surgical 

benefits. As proposed in § 438.920(b), 

states that choose to use PIHPs, PAHPs 

or the FFS delivery system to provide 

some of the MH/SUD benefits to MCO 

enrollees would be required to complete 

an analysis to determine if the benefits 

comply with these rules. For example, 

all projected payments for services 

provided to the MCO enrollees 

(regardless of whether the payments are 

made by the MCO, PIHP, PAHP or FFS) 

would need to be considered in 

determining if the level of financial 

requirement or treatment limitation is 

the predominant level. If no single level 

applies to more than one-half of 

medical/surgical benefits subject to the 

financial requirement or quantitative 

treatment limitation in a classification, 

multiple levels of the same type of 

financial requirement or quantitative 

treatment limitation can be combined by 

the state, in cases where some MH/SUD 

services are provided outside the MCO, 

or the MCO, in cases where all services 

are carved-in, until the portion of 

medical/surgical benefits subject to the 

financial requirement or quantitative 

treatment limitation exceeds one-half. 

For any combination of levels that 

applies to more than one-half of 

medical/surgical benefits subject to the 

financial requirement or quantitative 

treatment limitation in a classification, 

the state or the MCO may not apply that 

particular financial requirement or 

quantitative treatment limitation to MH/ 

SUD benefits at a level that is more 

restrictive than the least restrictive level 

within the combination. The state or the 

MCO may combine projected payments 

for benefits subject to 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. The 

following example illustrates the 

application of quantitative treatment 

limitations to medical/surgical and MH/ 

SUD benefits. 

Example. Facts. A state is providing a 

comprehensive service package through 

an MCO. The MCO is currently 

providing coverage of services with 

limits that are consistent with the 

approved state plan. The MCO benefit 

package includes: 

• Inpatient Hospital services for 

medical/surgical—30 days per year limit 

• Inpatient Hospital services for MH/ 

SUD—30 days per year limit 

• Primary Care Physician Services for 

medical/surgical—unlimited 

• Specialist Physician Services for 

medical/surgical—50 visits per year 

• Outpatient MH services—20 visits 

per year limit 

• Physical Therapy—20 visits per 

year limit 

• Occupational Therapy—20 visits 

per year limit 

• Emergency Services—Unlimited for 

medical/surgical or MH/SUD 

The MCO projects its payments as 

follows for medical/surgical benefits: 

TABLE 1—EXAMPLE OF QUANTITATIVE TREATMENT LIMIT

Benefit/classification—medical/surgical Projected payment Percent of total 

costs 

Percent of 

classification 

subject to a limit 

Inpatient Hospital ....................................................................................................... $400x 100 100 

Inpatient total ...................................................................................................... 400x 100 100 

Physician Services ..................................................................................................... 150x 27 0 

Specialist Services ..................................................................................................... 250x 46 46 

Physical Therapy ....................................................................................................... 75x 13.5 13.5 

Occupational Therapy ................................................................................................ 75x 13.5 13.5 

Outpatient total ................................................................................................... 550x 100 73 

Emergency Services .................................................................................................. 100x 100 0 

Emergency total .................................................................................................. 100x 100 0 

Example. Conclusion. In this 

example, the MCO would be able to 

maintain some level of day and visit 

limits on benefits in both the inpatient 

and outpatient MH/SUD classifications 

because both classifications meet the 

‘‘substantially all’’ standard—in other 

words, more than two-thirds of the 

medical/surgical benefits in each 

classification are subject to those types 

of limits (100 percent of all medical/

surgical inpatient benefits are subject to 

a day limit, and 73 percent of all 

medical/surgical outpatient benefits are 

subject to a visit limit). 

With regards to the level of the 

quantitative treatment limitation on 

inpatient MH/SUD services, the MCO 

may maintain its 30 day limit because 

100 percent of all inpatient medical/

surgical benefits are also subject to a 30 

day limit, making it the predominant 

level. 

However, with regards to the level of 

the quantitative treatment limitation on 

outpatient MH/SUD services, the MCO 

may not maintain its current limit of 20 

visits per year. Of the total amount of 

outpatient medical/surgical benefits 

subject to a visit limit ($400x), 62.5 

percent ($250x) are subject to a 50 visit 

limit (specialist services), and only 37.5 

percent ($150x) are subject to a 20 visit 

limit (physical therapy and 

occupational therapy). Because the 20 

visit limitation is not the predominant 

level (that is, it does not apply to at least 

50 percent of the medical/surgical 

benefits in the classification subject to 


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the visit limit), the MCO would need to 

either remove the visit limits altogether 

on outpatient MH/SUD services or 

increase the visit limitation to at least 50 

visits per year to align with the least 

restrictive level of visit limits on 

outpatient medical/surgical benefits. 

Lastly, because there are currently 

unlimited emergency visits under the 

medical/surgical benefits, the MCO 

would need to maintain unlimited visits 

for emergency services for MH/SUD, 

and would not be able to impose any 

limits on MH/SUD unless limits were 

also imposed on medical/surgical 

services and such limits were consistent 

with parity requirements. 

4. Special Rules for Multi-Tiered 

Prescription Drug Benefits and Other 

Benefits (§§ 438.910(c)(2), 

440.395(b)(3)(ii), 457.496(d)(3)(ii)) 

In addition, the MHPAEA final 

regulations at 45 CFR 

146.136(c)(3)(iii)(A) permit plans under 

certain circumstances to apply different 

levels of financial requirements to 

different tiers of prescription drugs and 

still satisfy the parity requirements. This 

proposed rule would allow a MCO, 

PIHP, PAHP, ABP or CHIP state plan to 

subdivide the prescription drug 

classification into tiers based on 

reasonable factors as described in the 

proposed regulations and without 

regard to whether a drug is generally 

prescribed for medical/surgical benefits 

or for MH/SUD benefits. 

The MHPAEA final regulations at 45 

CFR 146.136(c)(3)(iii)(C) permit a subclassification for office visits, separate 

from other outpatient items and 

services. Other sub-classifications not 

specifically permitted, such as separate 

sub-classifications for generalists and 

specialists, cannot be used for purposes 

of determining parity. We propose to 

retain this approach to subclassifications in the application of 

these parity requirements established in 

parts 438, 440 and 457 (that is, to 

services provided to enrollees in 

Medicaid MCOs, and to ABPs and 

CHIP). After the sub-classifications are 

established, a MCO, PIHP, PAHP, ABP 

or CHIP state plan may not impose any 

financial requirement or quantitative 

treatment limitation on MH/SUD 

benefits in any sub-classification (for 

example, 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 parity analysis 

for financial requirements and 

quantitative treatment limitations. 

In the MHPAEA final regulations, the 

Departments recognized 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, the MHPAEA 

final regulations provide that 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 in any 

classification), the plan may divide its 

benefits furnished on an in-network 

basis into sub-classifications that reflect 

those network tiers, if the tiering is done 

without regard to whether a provider is 

a MH/SUD provider or a medical/

surgical provider. While network tiers 

may also be used in Medicaid managed 

care, we do not believe that the use of 

network tiers for the purposes of the 

parity analysis is needed. As discussed 

later in section F. of this proposed rule, 

Medicaid cost-sharing rules apply 

regardless of network status. 

Additionally, any quantitative treatment 

limitation outlined in the contract must 

be applied to the service broadly and 

therefore cannot have separate 

limitations based on network tiers. We 

recognize there may be network tiers 

used to commonly refer enrollees or for 

purposes of building the network and 

have varying payment rates to 

providers, but the use of multiple 

network tiers for NQTLs is discussed in 

section E. of this proposed rule. 

D. Cumulative Financial Requirements 

(§ 438.910(c)(3), § 440.395(b)(3)(iii), 

§ 457.496(d)(3)(iii)) 

While financial requirements such as 

copayments and coinsurance generally 

apply separately to each covered 

expense, other financial requirements 

(in particular, deductibles) accumulate 

across covered expenses. In the case of 

deductibles, generally an amount of 

otherwise covered expenses must be 

accumulated before the plan pays 

benefits. Financial requirements that 

determine whether and to what extent 

benefits are provided based on 

accumulated amounts are defined in 

these proposed rules as cumulative 

financial requirements. The MHPAEA 

final regulations provide that a group 

health plan or issuer may not apply 

cumulative financial requirements or 

cumulative quantitative treatment 

limitations to MH/SUD 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. As in the MHPAEA final 

rule at 45 CFR 146.136(c)(2)(v), we 

propose that any separate cumulative 

financial requirement (separate for 

mental health, substance use or 

medical/surgical) will not be permitted 

for entities subject to our proposed 

requirements (namely, MCOs, PIHPs 

and PAHPs in connection with coverage 

provided to MCO enrollees, and in ABP 

and CHIP). However, we propose to 

permit quantitative treatment 

limitations to accumulate separately for 

medical/surgical and MH/SUD services 

as long as they comply with the general 

parity requirement. We are proposing to 

allow this separate accumulation of 

treatment limits in Medicaid and CHIP 

for several reasons. First, benefits for 

MCO beneficiaries must be provided in 

at least the same amount, duration and 

scope as set forth in the state plan. 

Requiring plans to have cumulative 

limits across medical/surgical benefits 

and MH/SUD benefits within a 

classification may incentivize MCOs to 

retain the quantitative treatment 

limitation level applied on the medical/ 

surgical benefits in the state plan as the 

total cumulative limit for both medical/ 

surgical and MH/SUD benefits. This 

would comply with the requirements of 

parity, but would not meet the 

requirements of providing at least what 

is in the state plan. In addition, we 

believe that requiring quantitative 

treatment limitations within a 

classification of benefits to accumulate 

jointly toward a unified limit level may 

be operationally challenging for states 

with multiple delivery systems. 

Specifically, in Medicaid the state 

determines which entities will provide 

the specific medical/surgical and MH/

SUD benefits covered under their 

respective contracts, including if some 

services will be provided under FFS. 

These potentially complex service 

delivery arrangements in Medicaid in 

turn determine whether the MCO or the 

state have the responsibility for 

complying with parity requirements. In 

commercial coverage, the parity 

obligations remain with the same 

entity—the group health plan or 

issuer—that determines which entities 

will provide each individual medical/

surgical or MH/SUD benefits. Due to the 

difficulty that the MCO will face in 

administering unified treatment limits 

that accumulate across entities that the 

MCO has no contractual relationship 

with, we propose to permit the MCO, 

PIHP or PAHP to maintain separate 

treatment limitations, provided such 

limit for MH/SUD benefits is no more 


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5See § 438.206(b)(4). 

restrictive than the predominant limit 

applied to substantially all medical/

surgical benefits in a given 

classification. 

E. Compliance With Other Cost-Sharing 

Rules (§ 438.910(c)(4)) 

States and the MCOs, PIHPs and 

PAHPs that contract with states are 

bound by the existing Medicaid and 

CHIP cost-sharing rules (§ 438.108 and 

part 457, subpart E). As previously 

indicated, the Medicaid program and 

CHIP are held to strict cost-sharing 

requirements for both managed care and 

non-managed care delivery systems. We 

emphasize here that all financial 

requirements included in a MHPAEA 

analysis must also be in compliance 

with both existing cost-sharing rules 

and the requirements of this proposed 

rule. Compliance with the parity 

requirements does not mean that a state, 

or MCO, PIHP or PAHP can violate 

existing cost-sharing requirements. 

Therefore, some cost-sharing structures 

in a state’s Medicaid program or CHIP 

may need to change to be compliant 

with MHPAEA. To clarify this, we 

propose at § 438.910(c)(4) to reiterate 

that requirement with a cross-reference 

to the cost-sharing rules applicable to 

MCOs, PIHPs and PAHPs. 

F. Nonquantitative Treatment 

Limitations (NQTLs) (§ 438.910(d), 

§ 440.395(b)(4), and § 457.496(d)(4)) 

MCOs, PIHPs, PAHPs, ABP and CHIP 

state plans may impose a variety of 

limits affecting the scope or duration of 

benefits that are not expressed 

numerically (nonquantitative treatment 

limitations or NTQLs). Nonetheless, 

such nonquantitative provisions are also 

treatment limitations affecting the scope 

or duration of benefits. Sections 

438.910(d), 440.395(b)(4), and 

457.496(d)(4) of this proposed rule 

would prohibit the imposition of any 

NQTL to MH/SUD benefits unless 

certain requirements are met. In 

addition, this proposed rule provides an 

illustrative list of NQTLs, including 

medical management standards; 

prescription drug formulary design; 

standards for provider admission to 

participate in a network; and 

conditioning benefits on completion of 

a course of treatment. 

Under the MHPAEA final regulations 

at 45 CFR 146.136(c)(4), an NQTL may 

not be imposed for MH/SUD benefits in 

any classification unless, under the 

terms of the plan (or health insurance 

coverage) as written and in operation, 

any factors used in applying the NQTL 

to MH/SUD benefits in a classification 

are comparable to and applied no more 

stringently than factors used in applying 

the limitation for medical surgical/

benefits in the classification. For these 

purposes, factors mean the processes, 

strategies, evidentiary standards, or 

other considerations used in 

determining limitations on coverage of 

services. The phrase ‘‘applied no more 

stringently’’ requires that any processes, 

strategies, evidentiary standards, or 

other factors that are comparable on 

their face be applied in the same 

manner to medical/surgical benefits and 

MH/SUD benefits. 

We propose to duplicate this 

approach to NQTLs in the application of 

parity requirements to Medicaid MCOs, 

PIHPs and PAHPs providing services to 

MCO enrollees, ABPs, and CHIP state 

plans. For states that are using a nonmanaged care delivery system for their 

ABPs and CHIP, the state (through its 

ABP and CHIP state plan) may only 

impose an NQTL on a MH/SUD benefit 

in any classification if it has written and 

operable processes, strategies, 

evidentiary standards or other factors 

used in applying—to MH/SUD benefits 

in that classification—the NQTL that are 

comparable to or less restrictive and 

applied no more stringently than any 

processes, strategies, evidentiary 

standards, or other factors used in 

applying the limitation for medical/

surgical services in that classification. 

In addition, we propose to add 

another example of an NQTL regarding 

standards for accessing out-of-network 

providers. As discussed earlier in this 

proposed rule, in the context of CHIP or 

ABPs that use a FFS delivery system or 

other non-managed care arrangement, 

beneficiaries may choose from any 

qualified provider that has signed a 

Medicaid or CHIP provider agreement 

and are not limited to a network. In a 

Medicaid managed care environment, if 

a provider network is unable to provide 

necessary services covered under the 

contract to a particular enrollee, the 

MCO, PIHP or PAHP must adequately 

(and on a timely basis) cover these 

services out-of-network for the enrollee 

as long as the MCO, PIHP or PAHP is 

unable to provide them in-network.5 To 

address continued concerns about 

access to these services out-of-network 

when they cannot be provided innetwork, these proposed rules would 

add this example of an NQTL, so that 

providing access to out-of-network 

providers for MH/SUD benefits in any 

classification would have to use the 

same processes, strategies, evidentiary 

standards, or other factors as are used in 

providing access to out-of-network 

providers for medical/surgical benefits 

within the same classification. If MCOs, 

PIHPs or PAHPs, and ABPs provided 

through managed care, are found to be 

in compliance with § 438.206(b)(4), that 

would be evidence that they are in 

compliance with proposed 

§ 438.910(d)(3), although the state will 

want to review how the plan is doing 

this in practice. This additional example 

of an NQTL is not relevant for states that 

are using a non-managed care delivery 

system for ABPs and CHIP state plan, 

since providers must be enrolled in 

Medicaid or CHIP and would not be 

considered out-of-network. 

We note that we propose to use in 

§ 438.910(d)(2)(iii), the example of an 

NQTL pertaining to network design for 

MCOs, PIHPs and PAHPs with multiple 

network tiers because although network 

tiers may not be used to impose 

financial requirements or quantitative 

treatment limitations in Medicaid and 

CHIP, we believe MCOs, PIHPs and 

PAHPs may still use them in developing 

NQTLs. For example, the MCO, PIHP or 

PAHP may use network tiers when 

recommending providers to enrollees, or 

how they structure their provider 

directories. MCOs, PIHPs and PAHPs 

with multiple network tiers should be 

constructing them and providing 

beneficiary access to them in a way that 

is consistent with the parity standard for 

NQTLs. 

The examples below illustrate the 

operation of the requirements for 

NQTLs. 

Example 1. Facts. A MCO requires 

prior authorization that a treatment is 

medically necessary for all inpatient 

medical/surgical benefits and for all 

inpatient MH/SUD benefits. In practice, 

inpatient benefits for medical/surgical 

conditions are routinely approved for 7 

days, after which a treatment plan must 

be submitted by the patient’s attending 

provider and approved by the MCO. 

Conversely, for inpatient MH/SUD 

benefits, routine approval is given only 

for 1 day, after which a treatment plan 

must be submitted by the beneficiary’s 

attending provider and approved by the 

MCO. 

Example 1. Conclusion. In this 

example, the MCO violates the NQTL 

provision of this proposed rule 

(§ 438.910(d)) because it is applying a 

stricter NQTL in practice to MH/SUD 

benefits than is applied to medical/

surgical benefits. 

Example 2. Facts. A MCO 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 MH/

SUDs, but only 30 percent of medical/ 

surgical conditions. 


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Example 2. Conclusion. In this 

example, the MCO complies with the 

NQTL provisions of this proposed rule 

because the evidentiary standard used 

by the MCO is applied no more 

stringently for MH/SUD benefits than 

for medical/surgical benefits, even 

though it results in an overall difference 

in the application of concurrent review 

for MH/SUDs than for medical/surgical 

conditions. 

Example 3. Facts. A MCO requires 

prior approval that a course of treatment 

is medically necessary for outpatient 

medical/surgical and MH/SUD benefits 

and uses comparable criteria in 

determining whether a course of 

treatment is medically necessary. For 

MH/SUD treatments that do not have 

prior approval, no benefits will be paid; 

for medical/surgical treatments that do 

not have prior approval, providers will 

only receive a 25 percent reduction in 

payments for these treatments from the 

MCO. 

Example 3. Conclusion. In this 

example, the MCO violates the NQTL 

provision of this proposed rule. 

Although the same NQTL—medical 

necessity—is applied both to MH/SUD 

benefits and to medical/surgical benefits 

for outpatient services, it is not applied 

in a comparable way. The penalty for 

failure to obtain prior approval for MH/ 

SUD benefits is not comparable to the 

penalty for failure to obtain prior 

approval for medical/surgical benefits. 

Example 4. Facts. A MCO generally 

covers medically appropriate 

treatments. For both medical/surgical 

benefits and MH/SUD benefits, 

evidentiary standards used in 

determining whether a treatment is 

medically appropriate 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. 

Example 4. Conclusion. In this 

example, the MCO complies with the 

NQTL provision of the proposed rule 

because the processes for developing the 

evidentiary standards used to determine 

medical appropriateness and the 

application of these standards to MH/

SUD 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 

MH/SUDs as it does for any particular 

medical/surgical condition. 

Example 5. Facts. Training and state 

licensing requirements often vary 

among types of providers. A MCO 

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 MCO’s provider 

network. Therefore, the MCO 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 already requires supervised clinical 

experience. In addition, the MCO does 

not require post-degree, supervised 

clinical experience for psychiatrists or 

Ph.D. level psychologists since their 

licensing already requires supervised 

training. 

Example 5. Conclusion. In this 

example, the MCO complies with the 

provision of this proposed rule 

pertaining to NQTLs. The requirement 

that master’s-level mental health 

therapists must have supervised clinical 

experience to join the network is 

permissible, as long as the MCO 

consistently applies the same standard 

to all providers, even though it may 

have a disparate impact on certain 

mental health providers. 

Example 6. Facts. A state contracts 

with an external utilization review 

entity to review inpatient admissions for 

all beneficiaries participating in its ABP. 

All inpatient services in the ABP are 

delivered on a FFS basis. The state’s 

utilization review contractor considers a 

wide array of factors in designing 

medical management techniques for 

both MH/SUD and medical/surgical 

inpatient 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) inpatient MH/SUD benefits, as 

well as for some (but not all) medical/ 

surgical benefits. 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 state’s utilization review 

organization. 

Example 6. Conclusion. In this 

example, the state and its utilization 

review contractor comply with the 

NQTL rules. Under the terms of the ABP 

as written and in operation, the 

processes, strategies, evidentiary 

standards, and other factors considered 

by the contractor in implementing the 

prior authorization requirement for MH/ 

SUD inpatient benefits are comparable 

to, and applied no more stringently 

than, those applied to medical/surgical 

benefits. 

Example 7. Facts. A MCO provides 

coverage for medically appropriate 

medical/surgical benefits, as well as 

MH/SUD benefits. The MCO excludes 

coverage for inpatient SUD services 

when obtained outside of the state. 

There is no similar exclusion for 

medical/surgical benefits within the 

same classification. 

Example 7. Conclusion. In this 

example, the MCO violates the NQTL 

provisions of this proposed rule. The 

MCO is imposing a NQTL 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 MH/SUD benefits. 

Example 8. Facts. A state’s CHIP 

program requires prior authorization for 

all outpatient MH/SUD services after the 

ninth visit and will only approve up to 

5 additional visits per authorization. For 

outpatient medical/surgical benefits, the 

state’s CHIP program allows an initial 

visit without prior authorization. After 

the initial visit, benefits must be preapproved 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. 

Example 8. Conclusion. In this 

example, the state’s CHIP program 

violates the NQTL provisions of the 

proposed rule. Although the same 

NQTL—prior authorization to determine 

medical appropriateness—is applied to 

both MH/SUD benefits and medical/

surgical benefits for outpatient services, 

it is not applied in a comparable way. 

While the state CHIP plan is more 

generous in the number of visits 

initially provided without preauthorization for MH/SUD benefits, 

treating all MH/SUDs in the same 

manner, while providing for 

individualized treatment of medical 

conditions, is not a comparable 

application of this NQTL. 

Example 9. Facts. A state provides an 

ABP that is compliant with EHB 


ebenthall on DSK5SPTVN1PROD with PROPOSALS2
19430 Federal Register / Vol. 80, No. 69 / Friday, April 10, 2015 / Proposed Rules 

6The requirements of 29 CFR 2560.503–1 are 

applicable to ERISA plans, as well as all nongrandfathered group health plans and health 

insurance issuers in the group and individual 

markets, through the claims and appeals regulations 

adopted under the Affordable Care Act. See 78 FR 

68247 for a full discussion. 

requirements, including the provision of 

MH/SUD services. The state aligns its 

ABP’s outpatient benefits with those 

described in the state plan and applies 

the same prior authorization 

requirements. For outpatient MH/SUD 

services, prior authorization is required 

for each individual treatment session. In 

contrast, for outpatient medical/surgical 

services, a series of treatments is 

provided under a single authorization. 

Example 9. Conclusion. In this 

example, the state’s ABP design does 

not comply with the NQTL provisions 

of this proposed rule. Although the 

same NQTL—prior authorization to 

determine medical appropriateness—is 

applied to both MH/SUD benefits and 

medical/surgical benefits for outpatient 

services, it is not applied in a 

comparable way. 

Example 10. Facts. A state’s ABP 

requires preauthorization for all 

outpatient substance use disorder 

services. The state APB does not require 

preauthorization for any medical/

surgical services. 

Example 10. Conclusion. The state 

ABP does not comply with the NQTL 

requirements in this proposed rule. If a 

state plan requires preauthorization for 

each outpatient SUD service it cannot 

remain in compliance if there is no 

comparable limitation on medical/

surgical services. 

Example 11. Facts. In cases where an 

MCO is unable to provide necessary 

outpatient services to a particular 

enrollee, the MCO requires that the 

enrollee must get prior approval in 

order to see any outpatient out-ofnetwork provider. The MCO approves 

the use of an out-of-network provider 

for medical/surgical outpatient services 

if there is not an in-network provider 

within 10 miles of the person’s 

residence. Approval of an out-ofnetwork provider for outpatient MH/

SUD services is only authorized if there 

is not an in-network provider within 30 

miles of a person’s residence. 

Example 11. Conclusion. In this 

example, the MCO violates the NQTL 

provisions of this proposed rule. The 

MCO is imposing a restriction that 

limits access to out-of-network 

providers. Although the same 

nonquantitative treatment limitation is 

applied to both the MH/SUD benefits 

and to medical/surgical benefits for 

outpatient services, it is not applied in 

a comparable way. 

G. Application to CHIP and EPSDT 

Deemed Compliance (§ 457.496(b)) 

The CHIPRA applies MH/SUD parity 

requirements to the entire ‘‘state child 

health plan’’ including, but not limited 

to, any MCOs that contract with the 

state CHIP. Specifically, section 502 of 

the CHIPRA requires that state child 

health plans ensure financial 

requirements and treatment limitations 

applicable to MH/SUD benefits comply 

with the requirements of section 2726(a) 

of the PHS Act (as renumbered) ‘‘in the 

same manner’’ as such requirements 

apply to a group health plan. Therefore, 

if a CHIP state plan provides both 

medical/surgical benefits and MH/SUD 

benefits, any treatment limitations, 

lifetime or annual dollar limits or 

financial requirements (such as out-ofpocket costs) on MH/SUD benefits must 

comply with the provisions of section 

2726 of the PHS Act made applicable to 

CHIP by section 502 of the CHIPRA 

adding section 2103(c)(6) to the Act and 

by section 2103(f)(2) of the Act. Section 

2103(c)(6)(B) of the Act also specifies 

that state CHIP plans are deemed to 

satisfy the requirement under section 

2103(c)(6)(A) of the Act to ensure that 

financial requirements and treatment 

limitations comply with the provisions 

of section 2726 of the PHS Act if they 

provide coverage of EPSDT benefits (as 

defined under title XIX of the Act). For 

individuals receiving EPSDT services 

through the CHIP state plan, proposed 

§ 457.496(b) provides that the state will 

be deemed to meet parity requirements 

for financial requirements and treatment 

limitations. However, states that do 

apply NQTLs to EPSDT services must 

ensure that these limitations are applied 

consistent with the intent of MHPAEA. 

H. Availability of Information 

(§ 438.915, § 440.395(c), § 457.496(e)) 

Under the MHPAEA final regulations, 

the criteria for medical necessity 

determinations made under a group 

health plan or health insurance coverage 

for MH/SUD benefits must be made 

available by the plan administrator or 

the health insurance issuer offering such 

coverage in accordance with regulations 

to any current or potential participant, 

beneficiary, or contracting provider 

upon request. The MHPAEA final 

regulations also state that the reason for 

any denial under a group health plan or 

health insurance coverage of 

reimbursement or payment for services 

for MH/SUD benefits in the case of any 

participant or beneficiary must be made 

available, upon request or as otherwise 

required, by the plan administrator or 

the health insurance issuer to the 

participant or beneficiary in accordance 

with the regulations. Through this 

proposed rule, we are proposing to 

apply the requirements imposed on the 

health insurance issuer through the 

MHPAEA final regulations regarding 

availability of information in a similar 

manner to MCOs and to PIHPs and 

PAHPs that provide coverage to MCO 

enrollees. We propose to add 

§ 438.915(a) to provide that MCOs, 

PIHPs and PAHPs subject to MHPAEA 

requirements must make their medical 

necessity criteria for MH/SUD benefits 

available to any enrollee, potential 

enrollee or contracting provider upon 

request. MCOs, PIHPs and PAHPs found 

to be in compliance with § 438.236(c)— 

which requires dissemination by MCOs, 

PIHPs and PAHPs of practice guidelines 

to all affected providers and, upon 

request, to enrollees and potential 

enrollees—will be deemed to meet this 

proposed requirement. As proposed, 

§ 438.915(b) would also require the 

MCO, PIHP or PAHP to make available 

the reason for any denial of 

reimbursement or payment for services 

for MH/SUD benefits to the enrollee. We 

also note that § 438.210(c) requires each 

contract with an MCO, PIHP, or PAHP 

to provide for the MCO, PIHP, or PAHP 

to notify the requesting provider and 

give the enrollee written notice of any 

decision by the MCO, PIHP, or PAHP to 

deny a service authorization request or 

to authorize a service in an amount, 

duration, or scope that is less than 

requested. 

The MHPAEA final regulations, at 45 

CFR 146.136(d)(2), state that non-federal 

governmental group health plans (or 

health insurance coverage offered in 

connection with such plans) providing 

the reason for claim denial in a form 

and manner consistent with the 

requirements of 29 CFR 2560.503–1 for 

group health plans will be found in 

compliance with the reason for denial 

disclosure requirements.6 The 

provisions under 29 CFR 2560.503–1 

which discuss requirements related to 

notices for group health plans subject to 

ERISA, do not apply to Medicaid, and 

we are not proposing to make them 

applicable as a condition for deemed 

compliance because similar 

requirements are already applicable. 

MCOs, PIHPs, PAHPs and states are 

required to give a ‘‘reason’’ for any 

adverse benefit determinations under 

requirements for notices in, 

respectively, § 438.404 and § 431.210. 

The information provided in this 

disclosure of the reason for the adverse 

benefit determination must be made in 

compliance with these and all other 

provisions of applicable federal or state 

law, as noted in proposed § 438.915(c). 


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For similar reasons, we are not 

proposing to make the claim denial 

requirements of 29 CFR 2560.503–1 a 

condition of deemed compliance for 

CHIP programs. CHIP enrollees have an 

opportunity for an external review of 

denials, reduction or suspension of 

health services under § 457.1130. 

Although the statute that applies 

MHPAEA to ABPs does not include 

specific provisions regarding the 

availability of plan information, we 

propose to use our authority under 

section 1902(a)(4) of the Act to extend 

this provision to all ABPs, as well as 

those ABPs with services delivered 

through MCOs, PIHPs and all PAHP. At 

§ 440.395(c)(1), we propose that all 

states delivering ABP services through a 

non-MCO must make available to 

beneficiaries and contracting providers 

on request the criteria for medical 

necessity determinations for MH/SUD 

benefits. Similarly, § 440.395(c)(2) 

would require the state to make 

available to the enrollee the reason for 

any denial of reimbursement or 

payment for services for MH/SUD 

benefits. 

Current rules related to notices of 

adverse benefit determinations are 

consistent with the intent of 29 CFR 

2560.503–1. This proposed rule 

proposes to apply provisions regarding 

the availability of plan information for 

ABP services. We request comment on 

any additional provisions concerning 

the availability of plan information or 

notice of adverse determinations that 

may be necessary to facilitate 

compliance with MHPAEA for MCOs, 

PIHPs, PAHPs, ABPs and CHIP. 

I. Application to EHBs and Other ABP 

Benefits (§ 440.395 and § 440.347) 

Section 1937(b)(6) of the Act, as 

added by section 2001(c) of the 

Affordable Care Act, and implemented 

through regulations at § 440.345(c) 

directs that ABPs that provide both 

medical/surgical benefits and MH or 

SUD benefits must comply with certain 

parity requirements. Further, ABPs must 

provide the 10 EHBs, including MH/

SUD services. As states determine their 

ABP service package, states must use all 

of the EHB services from the basebenchmark plan selected by the state to 

define EHBs, consistent with the 

applicable requirements in 45 CFR part 

156. 

Section 1937 of the Act offers 

flexibility for states to provide medical 

assistance by designing different benefit 

packages, including other services 

beyond the EHBs for different groups of 

eligible individuals, as long as each 

benefit package contains all of the EHBs 

and meets certain other requirements, 

including parity provisions under 

section 2726 of the PHS Act. 

J. Application of Parity Requirements to 

the Medicaid State Plan 

The provisions of section 2726 of the 

PHS Act that are incorporated through 

section 1932 of the Act do not apply 

directly to the benefit design for 

Medicaid non-ABP state plan services. 

Under this proposed rule, the 

requirements would apply to the 

benefits offered by the MCO (or, as 

discussed above, if benefits are carved 

out, to all benefits provided to MCO 

enrollees regardless of service delivery 

system) but do not apply to all Medicaid 

state plan benefit designs. As stated 

earlier in this proposed rule, states that 

have individuals enrolled in MCOs and 

have MH/SUD services offered through 

FFS will have the option of amending 

their non-ABP state plan to be 

consistent with these proposed 

regulations or offering MH/SUD services 

through a managed care delivery system 

(MCOs, PIHPs, and/or PAHPs) to be 

compliant with these proposed rules. 

K. Scope and Applicability of the 

Proposed Rule (§ 438.920(a) and (b), 

§ 440.395(d), and § 457.496(f)(1)) 

Sections 438.920, 440.395(d), and 

457.496(f) propose to address the 

applicability and scope of this proposed 

rule. Specifically under our proposal: 

• Section 438.920(a) would provide 

that the requirements of the subpart 

apply to delivery of Medicaid services 

when an MCO is used to deliver some 

or all of the Medicaid services; section 

438.920(b) (also discussed below) 

addresses state responsibilities when 

the MCO delivers only some of the 

Medicaid services. 

• Section 440.395 would apply to 

ABPs that are not delivered through 

managed care. 

• Section 457.496 would apply to 

CHIP state plans, including when 

benefits are furnished under a contract 

with MCEs. 

The MHPAEA final regulations state 

that if a group health plan or health 

insurance coverage provides MH/SUD 

benefits in any classification of benefits, 

MH/SUD benefits must be provided in 

every classification in which medical/

surgical benefits are provided. Under 

our proposed amendments to part 438, 

for these parity standards to apply, a 

beneficiary must be enrolled in an MCO 

under a Medicaid contract. Whether the 

MCO provides medical/surgical or MH/ 

SUD benefits under that contract is 

irrelevant. 

While many Medicaid MCOs are 

contracted to offer benefits in each of 

the classifications of benefits described 

in this proposed rule, there are other 

state-initiated ‘‘carve out’’ arrangements 

(for example, PIHPs, PAHPs or FFS) in 

which the MCOs are only contracted to 

provide benefits in one MH/SUD 

classification, while PIHPs, PAHPs, 

FFS, or a combination of all 3 provide 

coverage of benefits in other 

classifications. For example, MCOs in 

these carve out arrangements are likely 

to have contracts that include MH/SUD 

benefits in the prescription drug and 

emergency care classifications of 

benefits, but some or all of the MH/SUD 

outpatient or inpatient benefits may be 

offered instead through a PIHP, PAHP or 

FFS delivery system. 

In instances where the MH/SUD 

services are delivered through multiple 

managed care delivery vehicles, we are 

proposing in § 438.920 that parity 

provisions apply across the managed 

care delivery systems in the Medicaid 

program and CHIP. MHPAEA 

requirements apply to the entire 

package of services MCO enrollees 

receive, whether from the MCO, PIHP, 

PAHP, or FFS. If states carve out some 

MH/SUD services from the MCO 

contract and furnish those services by 

PIHPs, PAHPs, or FFS, we are proposing 

to apply the foregoing MHPAEA 

requirement to the entire package of 

services MCO enrollees receive. 

Requiring the standards for parity to be 

applied to the overall package of 

benefits received by MCO enrollees will 

allow MCOs to comply with MHPAEA 

requirements without requiring 

inclusion of additional MH/SUD 

benefits in the MCO benefit package, as 

long as these MH/SUD benefits are 

provided elsewhere within the delivery 

system. In states where MH/SUD 

benefits are provided across multiple 

delivery systems (including FFS), we 

propose in § 438.920(b) that states 

would be required to review the full 

scope of benefits provided to MCO 

enrollees to ensure compliance with the 

proposed parity requirements. As part of 

complying with this regulation, we 

would expect states to work with their 

MCOs (or PIHPs and PAHPs) to 

determine the best method of achieving 

compliance with these proposed parity 

requirements for benefits provided to 

the MCO enrollees. For MH/SUD 

benefits offered through FFS, states 

would not necessarily be required to 

amend their non-ABP state plan to meet 

parity requirements, but could use their 

existing state plan or waiver services to 

achieve parity when individuals are 

receiving some MH/SUD benefits from a 

MCO (including PIHPs or PAHPs) and 

also some benefits through FFS. 

However, if a state did not have MH/


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SUD benefits in every classification in 

which medical/surgical benefits are 

provided across all authorities, the state 

would have to choose either to offer 

these services through a MCO, PIHP or 

PAHP or amend its state plan (or a 

waiver of its state plan) to include these 

benefits to achieve compliance with 

proposed § 438.920(a) and (b). Applying 

various parity provisions across the 

different delivery system would allow 

states the most flexibility in designing 

delivery systems while ensuring that 

parity in medical/surgical and MH/SUD 

services is provided to MCO enrollees. 

Given that there are many different 

delivery system configurations that 

carve out MH/SUD services, this would 

allow compliance with parity 

requirements while reducing incentives 

for states to completely carve in all MH/ 

SUD benefits to a MCO or carve out or 

terminate coverage of MH/SUD services. 

In states where the MCO has 

responsibility for offering all medical/

surgical and MH/SUD benefits, the MCO 

would be responsible for undertaking 

the parity analysis and informing the 

state what additional changes will be 

needed to the MCO contract to be 

compliant with parity requirements. In 

states where some or all MH/SUD 

benefits are provided through MCOs, 

PIHPs, PAHPs, or FFS, the state would 

have the responsibility for undertaking 

the parity analysis across these delivery 

systems and determining if the existing 

benefits and any financial or treatment 

limitations are consistent with 

MHPAEA. The state, based on this 

analysis, would have to make the 

necessary changes to ensure compliance 

with parity requirements for its 

Medicaid MCO enrollees. We also 

propose at § 438.920(b)(1) that the state 

provide documentation of its 

compliance with this analysis to the 

general public within 18 months of the 

effective date of this rule. 

If states offer benefits through an ABP 

or CHIP state plan with various delivery 

systems (managed care and nonmanaged care), the state would need to 

apply the provisions of the proposed 

rule across the delivery systems utilized 

for its ABP and CHIP state plan. 

For ABPs and CHIP state plans, we 

would also require states to apply the 

provisions of this proposed rule across 

all delivery systems to ensure that 

beneficiaries have access to MH/SUD 

benefits in every classification in which 

medical/surgical benefits are provided. 

These provisions would apply when 

states offer services through an ABP or 

CHIP state plan using only a nonmanaged care arrangement (FFS). If 

states offer services through an ABP or 

CHIP state plan with various delivery 

systems (managed care and nonmanaged care), the state would need to 

apply the provisions of the proposed 

rule across the delivery systems utilized 

for their ABP and CHIP state plan. 

Provided below is an example of how 

this proposed rule would be applied 

across the delivery system in Medicaid. 

Example 1. Facts. A Medicaid MCO 

enrollee can access Medicaid benefits in 

the following way at any given time 

during their MCO enrollment: 

• The MCO comprehensive benefits 

include inpatient medical/surgical 

benefits; outpatient medical/surgical 

benefits; emergency for medical/

surgical, MH, and SUD benefits; and 

prescription drugs for medical/surgical 

and MH/SUD benefits. 

• The PIHP carve out benefits include 

inpatient MH benefit and the outpatient 

MH benefit. 

• The PAHP carve out benefits 

include outpatient SUD benefits. 

• The FFS system provides access to 

inpatient SUD benefits. 

For purposes of this example, we 

assume there are no financial 

requirements or treatment limitations 

imposed on any of the benefits in any 

of the delivery systems noted above. 

Example 1. Conclusion. In this 

example, the MCO, PIHP or PAHP 

would not need to add any additional 

services to its benefit package because 

the MCO enrollee has access to MH/

SUD services through PIHPs, PAHPs 

and FFS and the state is responsible for 

undertaking the parity analysis across 

delivery systems and making sure the 

coverage complies with parity 

requirements under our proposed 

§ 438.920(a) and (b). The example 

would apply in the same way to a CHIP 

enrollee. 

L. Scope of Services (§ 438.920(c), 

§ 457.496(f)(2)) 

We propose provisions relating to the 

scope of the parity requirements for 

Medicaid MCOs and CHIP state plans 

that are similar to the provisions set 

forth in the MHPAEA final regulations 

(45 CFR 146.136(e)(3)). Specifically, the 

proposed regulations would not require 

a MCO, PIHP, or PAHP to provide any 

MH/SUD benefits for conditions or 

disorders beyond the conditions or 

disorders that are covered as required by 

their contract with the state. For MCOs, 

PIHPs or PAHPs that provide benefits 

for one or more specific MH conditions 

or SUDs under their contracts, the 

proposed regulations would not require 

the MCO, PIHP or PAHP to provide 

benefits for additional MH conditions or 

SUDs. The proposed regulations would 

not affect the terms and conditions 

relating to the amount, duration, or 

scope of MH/SUD benefits under the 

MCO, PIHP or PAHP contract except as 

specifically provided in § 438.905 and 

§ 438.910 of the part. 

M. ABP State Plan Requirements 

(§ 440.395(d)) 

We are proposing to add a section in 

part 440, subpart C that requires states 

using ABPs to provide sufficient 

information in ABP state plan 

amendment requests to assure 

compliance with MHPAEA. We will 

review ABP state plan amendments to 

ensure their compliance with applicable 

federal statutes and regulations, 

including MHPAEA, and EHB antidiscrimination provisions. 

N. Increased Cost Exemption 

As discussed above in this proposed 

rule, we are not proposing an increased 

cost exemption for MCOs, PIHPs or 

PAHPs. As indicated previously, we are 

proposing to change payment provisions 

in part 438 to allow states to include the 

cost of providing additional services or 

removing or aligning treatment 

limitations in their actuarially sound 

rate methodology where such costs are 

necessary to comply with the MHPAEA 

parity provisions. These proposed 

changes to the managed care rate setting 

process give states and MCOs the ability 

to fully comply with these mental 

health parity requirements by giving 

them flexibility to provide services 

compliant with this proposed regulation 

or remove or align service limits. We 

believe that the Medicaid program 

rather than the plan should bear the 

costs of these changes. We propose to 

provide states sufficient time to comply 

with this regulation: States would have 

up to 18 months after the date of the 

publication of the final rule to comply 

with the provisions of this regulation. 

This will allow states to take the actions 

to make the policy and budgetary 

changes needed for compliance. 

We are not proposing to permit states 

delivering services through an ABP or 

CHIP state plan to apply for a cost 

exemption due to the mandatory 

delivery of EHB and the requirement 

that ABPs be compliant with MHPAEA. 

O. Enforcement, Managed Care Rate 

Setting (§ 438.6(e)) and Contract Review 

and Approval (§ 438.6(n)) 

Medicaid and CHIP programs are 

administered by states in partnership 

with the federal government. States 

have the responsibility of administering 

the state plan in compliance with 

federal law, so states will be required to 

provide an assurance of compliance 

with parity requirements when 

submitting ABP or CHIP state plans. In 


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addition, we propose to require the state 

Medicaid agency to include contract 

provisions requiring compliance with 

parity requirements in all applicable 

MCO, PIHP, and PAHP contracts. As 

noted earlier in this proposed rule, we 

believe that the intent of the parity 

requirements implemented through 

section 1932(b)(8) of the Act is to 

provide access to services meeting 

parity requirements to any enrollee of a 

MCO in a state that provides some MH/ 

SUD benefits through its state plan, 

regardless of the scope of benefits 

covered through the MCO itself. 

Therefore, states would have the 

responsibility of ensuring that 

appropriate contract language is 

included in all MCO contracts and any 

applicable PIHP or PAHP contracts 

under proposed § 438.6(n). We expect 

that states will include in the MCO, 

PIHP and PAHP contracts a 

methodology for the MCO, PIHP or 

PAHP that will establish and 

demonstrate compliance with parity 

requirements (including, in some 

instances, developing a crosswalk with 

other entities that are part of the service 

delivery system for enrollees). This 

methodology would have to ensure that 

all MCOs, PIHPs, or PAHPs included in 

the delivery system work together to 

ensure any MCO enrollee in a state is 

provided access to a set of benefits that 

meets the requirements of this rule 

regardless of the MH/SUD benefits 

provided by the MCO. 

In accordance with section 1903(m) of 

the Act, all MCO contracts must comply 

with applicable requirements in section 

1932 of the Act, which includes section 

1932(b)(8) of the Act referencing 

MHPAEA provisions in the PHS Act. As 

we have discussed previously, if the 

state provides some MH/SUD benefits 

within its state plan, all MCO contracts 

must include provisions requiring 

compliance with parity requirements 

because all MCO enrollees must be 

provided access to MHPAEA compliant 

services even if the MCO itself does not 

provide the MH/SUD services. 

Therefore, if it is not shown through the 

MCO contract itself that an enrollee has 

access to MH/SUD services in each 

classification in which medical and 

surgical services are provided that are 

fully compliant with these parity 

requirements, the state will be asked to 

provide supplemental materials to the 

MCO contract or an amendment to the 

contract to demonstrate that the 

standards proposed here are met. 

Further, we may defer federal 

financial participation (FFP) on 

expenditures for the MCO contract to 

the extent that the state has not 

documented that the contract would 

comply with the requirements of section 

1903(m) of the Act, including the 

requirement that the MCO contract and 

the MCO itself comply with applicable 

provisions of section 1932 of the Act. 

We understand that with the flexibility 

afforded to states to provide MH/SUD 

services across the delivery system there 

may be services outside of the MCO 

contract that may be needed to 

demonstrate compliance. If this is the 

case, the state would be required to 

show how the MCO enrollees are 

provided all the services needed to 

comply with the requirements in this 

proposed rule, and if the state cannot 

provide evidence of this compliance 

outside of the MCO contract, CMS 

would have the ability to defer FFP on 

the MCO contract amount until 

evidence of compliance is provided. 

Again, a state would have the option to 

make changes to the MCO, PIHP or 

PAHP contracts or make changes to its 

Medicaid state plan to provide evidence 

of compliance. 

P. Applicability and Compliance 

(§ 438.930, § 440.395(d), § 457.496(f)) 

This proposed rule would be effective 

based on the date of the publication of 

the final rule. However, MCOs, PIHPs, 

PAHPs and states would have 18 

months to comply with the provisions 

of this final regulation. Specifically: 

• Managed care considerations: 

Although the requirements of MHPAEA 

have applied to Medicaid MCOs 

through section 1932(b)(8) of the Act 

since MHPAEA was passed in 2008, 

Medicaid MCOs, PIHPs or PAHPs 

would have to comply with the specific 

provisions in the proposed rule in 

contract years starting 18 months after 

the publication of the final rule. New 

managed care contracts, or amendments, 

would be required to be compliant in 

most cases. 

• ABPs: Although the requirements of 

MHPAEA have applied since January 1, 

2014, states would have 18 months after 

the publication of the final rule to have 

the ABPs compliant with provisions in 

this proposed rule. 

• CHIP: The requirements of 

MHPAEA have applied for CHIP since 

October 1, 2009, however, states would 

have 18 months after the publication 

date of the final rule for CHIP plans to 

be compliant with provisions in this 

proposed rule. 

Q. Utilization Management 

Current Medicaid regulations 

prescribe requirements for the control of 

utilization management of inpatient 

services in mental hospitals (§ 456.171). 

These regulations specifically require 

medical and other professionals within 

the Medicaid agency (or its designee) to 

evaluate each beneficiary’s need for 

admission into inpatient services in a 

mental hospital. There is not a similar 

requirement for the Medicaid agency to 

review medical/surgical admissions to 

other hospitals. States have indicated 

that this regulation presents challenges 

to achieving parity for inpatient services 

rendered in a mental hospital. In 

addition, these states have interpreted 

the term ‘‘mental hospitals’’ to include 

distinct part units of a general hospital, 

as well as freestanding institutions of 

mental diseases for children under the 

age of 21 and adults 65 years and older. 

This proposed rule would eliminate 

current language from existing 

regulations that require Medicaid 

agencies to evaluate the need for these 

admissions. A state could continue 

these evaluations, but would need to 

ensure that the standards and processes 

were consistent with the provisions in 

this regulation regarding 

nonquantitative treatment limits. 

IV. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995 (PRA), we are required to 

provide 60-day notice in the Federal 

Register and solicit public comment 

before a collection of information 

requirement is submitted to the Office of 

Management and Budget (OMB) for 

review and approval. To fairly evaluate 

whether an information collection 

should be approved by OMB, section 

3506(c)(2)(A) of the PRA requires that 

we solicit comment on the following 

issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

each of the section 3506(c)(2)(A)– 

required issues for the following 

information collection requirements. 

A. Wage Estimates 

To derive average costs, we used data 

from the U.S. Bureau of Labor Statistics’ 

May 2013 National Occupational 

Employment and Wage Estimates for all 

salary estimates (www.bls.gov/oes/

current/oes_nat.htm). In this regard, 

Table 2 presents the mean hourly wage, 

the cost of fringe benefits (calculated at 

100 percent of salary), and the adjusted 

hourly wage. 


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TABLE 2—PROPOSED HOURLY WAGE ESTIMATES

Occupation title Occupation 

code 

Mean hourly 

wage 

(per hr) 

Fringe benefit 

(at 100%) 

(per hr) 

Adjusted 

hourly wage 

(per hr) 

Business Operations Specialists ............................................................. 13–1000 $33.19 $33.19 $66.38 

Medical Secretaries ................................................................................. 43–6013 15.93 15.93 31.86 

We propose to adjust all our employee 

hourly wage estimates by a factor of 100 

percent. This is necessarily a rough 

adjustment, both because fringe benefits 

and overhead costs vary significantly 

from employer to employer, and 

because methods of estimating these 

costs vary widely from study to study. 

Nonetheless, there is no practical 

alternative and we believe that doubling 

the hourly wage to estimate total cost is 

a reasonably accurate estimation 

method. 

B. Proposed Information Collection 

Requirements (ICRs) 

1. ICRs Regarding the Availability of 

Information and the Criteria for Medical 

Necessity Determinations (§§ 438.915(a), 

440.395(c)(1), and 457.496(e)(1)) 

Proposed §§ 438.915(a), 440.395(c)(1), 

and 457.496(e)(1) would require that the 

medical necessity determination criteria 

used by regulated entities for MH/SUD 

benefits be made available to potential 

participants, beneficiaries, or 

contracting providers upon request. 

In the November 13, 2013, MHPAEA 

final rule, the regulatory impact analysis 

(78 FR 68253 through 68266) quantified 

the costs to disclose medical necessity 

criteria. For consistency and 

comparability, we are using the same 

method for determining this rule’s 

disclosure costs, with adjustments to 

account for Medicaid MCOs, ABP and 

CHIP and the population covered. 

Labor Costs for Medical Necessity 

Disclosures. We are unable to estimate 

with certainty the number of requests 

for medical necessity criteria 

disclosures that will be received by 

regulated entities. However, the 

MHPAEA final rule’s impact analysis 

did set forth assumptions that we 

believe are relevant for calculating costs 

for the Medicaid and CHIP program. In 

that impact analysis, it was assumed 

that each plan would receive three 

medical necessity criteria disclosure 

requests for every 1,000 beneficiaries. 

This assumption equated to 0.003 

requests per enrollee. This assumption 

was applied to the number of enrollees 

enrolled in Medicaid (33.1 million), 

ABP (8.7 million) and CHIP (5.7 

million) to project the number of 

expected requests: 99,328 for MCOs; 

26,100 for ABPs; and 16,975 for CHIP. 

To estimate the time it will take a 

medical staff to respond to each request, 

we used the same assumption as the 

MHPAEA final rule. Specifically, we 

assumed that it took a staff member (in 

this case, a Medical Secretary) 5 

minutes to respond to the request. In 

this proposed rule, this results in a total 

annual burden of 11,867 hours for 

Medicaid and CHIP programs. 

The adjusted hourly rate for Medical 

Secretaries responding to these requests 

is estimated to be $31.86/hour. 

Multiplying the total annual burden of 

11,867 hours by the hourly wage, yields 

an associated equivalent cost of about 

$378,083 for all requests to Medicaid 

and CHIP programs. 

Mailing and Supply Costs. The 

MHPAEA final rule’s impact analysis 

estimated that 38 percent of the requests 

would be delivered electronically with 

de minimis cost. The remaining requests 

would require materials, printing, and 

postage amounting to approximately 66 

cents per request. We believe that the 

same mailing and supply costs per 

request will apply to the disclosure 

requirements of this proposed rule. 

Table 3 displays the added burden 

estimates, nationally and per program, 

for Medicaid MCOs and CHIP to comply 

with the proposed medical necessity 

determination criteria’s disclosure 

procedures. The number of enrollees for 

MCOs/HIOs is based on the CMS 

national breakout as of July 2012 while 

the number for ABPs is based on the 

estimated enrollment growth due to 

Medicaid expansion (‘‘National Health 

Expenditure Projections 2012–2022,’’ 

CMS). CHIP enrollment is based on 

Medicaid and Children’s Health 

Insurance Program (CHIP) Payment and 

Access Commission’s 2014 estimates. 

The proposed requirements and burden 

will be submitted to OMB for approval 

under control number 0938–New (CMS– 

10556). 

TABLE 3—NATIONAL AND PER PROGRAM BURDEN FOR THE PROPOSED MEDICAL NECESSITY DETERMINATION CRITERIA’S

DISCLOSURE REQUIREMENTS

Plan type Number of 

enrollees 

Number of 

expected requests 

(.003 requests per 

enrollee) 

Time 

(@5 min/ 

response 

(hr) 

Labor cost 

($) @$31.86/hr 

Mailed 

responses 

(62% of 

expected 

enrollees) 

Mailing and 

supply cost 

($) @$.66/mailing 

Total cost 

($) 

MCO/HIO ................. 33,109,462 99,328 8,277 263,705 61,584 40,645 304,350 

ABP .......................... 8,700,000 26,100 2,175 69,296 16,182 10,680 79,976 

CHIP ......................... 5,658,460 16,975 1,415 45,082 10,525 6,947 52,029 

Total .................. 47,467,922 142,403 11,867 378,083 88,291 58,272 436,355 

2. ICRs Regarding the Availability of 

Information and Reason for Any Denial 

(§§ 438.915(b), 440.395(c)(2), and 

457.496(e)(2)) 

MHPAEA requires that the reason for 

any denial—under a group health plan 

or health insurance coverage—of 

reimbursement or payment for MH/SUD 

benefits must be made available (upon 

request or as otherwise required) by the 

plan administrator (or the health 

insurance issuer) to the beneficiary in 

accordance with MHPAEA regulations 

(45 CFR 146.136(d)(2)). 

For the proposed provisions, this 

proposed rule would not impose any 

new or revised third-party disclosure 

requirements, and therefore, does not 


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Federal Register / Vol. 80, No. 69 / Friday, April 10, 2015 / Proposed Rules 19435 

require additional OMB review under 

the authority of the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3501 

et seq.). The proposed text only clarifies 

the expectations for disclosing 

information concerning the denial of 

reimbursement or payment for MH/SUD 

benefits. We believe that the proposed 

requirements are already met by 

complying with existing disclosure 

requirements in part 438, and therefore, 

do not create any requirements or 

burden beyond what is currently 

approved by OMB under control 

number 0938–1080 (CMS–10307). We 

also believe that the proposed 

requirements are already met for CHIP 

by complying with existing notification 

and disclosure requirements in 

§§ 457.110 and 457.1130, and therefore, 

do not create any requirements or 

burden beyond what is currently 

approved by OMB under control 

number 0938–1148 (CMS–10398 #34) 

(formerly, CMS–R–211, control number 

0938–0707). Furthermore, the proposed 

provisions do not create any new or 

revised third-party disclosure 

requirements for ABPs beyond what is 

currently approved by OMB under 

control number 0938–1188 (CMS– 

10434). 

3. ICRs Regarding Parity in Mental 

Health and Substance Use Disorder 

Benefits Under § 440.395 (Alternative 

Benefit Plan) and § 457.496 (CHIP State 

Plan) 

The ABP State Plan Application is 

employed by states to identify benefits 

offered to Medicaid beneficiaries 

receiving services under section 1937 of 

the Act. The application requires that 

states identify the MH/SUD services that 

will be offered under the plan. The plan 

also collects information on any 

limitations (quantitative and 

nonquantitative treatment limitations) 

and financial requirements across all 

benefit categories (including all 

medical/surgical services). For states 

needing to come into compliance with 

MHPAEA, the state is required to 

submit an ABP SPA amendment. 

The parity requirements proposed in 

§ 440.395 would not impose any new or 

revised reporting, recordkeeping, or 

third-party disclosure requirements, and 

therefore, do not require additional 

OMB review under the authority of the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3501 et seq.). The proposed 

provisions only clarify parity 

requirements and the meaning of terms 

for ABPs and do not create any 

information collection requirements or 

burden beyond what is currently 

approved by OMB under control 

number 0938–1188 (CMS–10434). 

The single streamlined application is 

employed by states to determine 

Medicaid or CHIP eligibility. It is not 

used to determine benefits of any kind. 

However, states are required to review 

their respective CHIP state plans to 

determine if they are in compliance 

with MHPAEA. For states needing to 

come into compliance, the state must 

submit a CHIP SPA amendment. 

The parity requirements proposed in 

§ 457.496 would not impose any new or 

revised reporting, recordkeeping, or 

third-party disclosure requirements, and 

therefore, do not require additional 

OMB review under the authority of the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3501 et seq.). The information 

collection requirements and burden are 

approved by OMB under control 

number 0938–1148 (CMS–10398 #34) 

(formerly CMS–R–211, control number 

0938–0707). 

4. ICRs Regarding State Plan 

Amendments 

While this proposed rule discusses a 

number of optional and mandatory SPA 

amendments, this proposed rule would 

not impose any new or revised SPAspecific reporting, recordkeeping, or 

third-party disclosure requirements and 

therefore, does not require additional 

OMB review under the authority of the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3501 et seq.). The currently 

approved ABP SPA application was 

designed to capture the MHPAEA final 

rule classifications and identify if there 

are specific treatment limitations or 

financial requirements. The information 

collection requirements and burden are 

approved by OMB under control 

number 0938–1188 (CMS–10434). 

5. ICRs Regarding State Health Official 

(SHO) Letters SHO #09–014 (November 

4, 2009) and SHO #13–001 (January 16, 

2013) 

The January 2013 SHO letter 

addressed the application of the 

MHPAEA requirements in Medicaid and 

expanded upon the CMS’ CHIP 

guidance provided in the November 

2009 letter regarding section 502 of 

CHIPRA. The letters are discussed in 

section II.A. of this proposed rule as 

background. This proposed rule does 

not propose any new or revised 

reporting, recordkeeping, or third-party 

disclosure requirements pertaining to 

either of the letters. Consequently, the 

PRA does not apply. 

6. ICRs Regarding Contract 

Requirements (§ 438.6(n)) 

In § 438.6(n), states would be required 

to include contract provisions in all 

applicable MCO, PIHP, and PAHP 

contracts to comply with part 438, 

subpart K. We estimate a one-time state 

burden of 30 minutes for a Business 

Operations Specialist at $66.38/hour to 

amend each contract with the applicable 

requirements. In aggregate, we estimate 

301 hours (602 contracts × 0.5 hours) 

and $16,049 (301 hours × $53.32/hr). 

The proposed requirements and burden 

will be submitted to OMB for approval 

under control number 0938–New (CMS– 

10556). 

C. Summary of Proposed Burden 

Estimates 

TABLE 4—PROPOSED ANNUAL RECORDKEEPING AND REPORTING REQUIREMENTS

Regulation Section(s) 

under Title 42 of the CFR 

OMB Control 

No. 

(CMS ID No.) 

Respondents Total 

responses 

Burden per 

response 

(min) 

Total annual 

burden 

(hours) 

Hourly labor 

cost of 

reporting 

($/hr) 

Total labor 

cost of 

reporting 

($) 

Total capital/ 

maintenance 

costs 

($) 

Total cost 

($) 

438.915(a), 440.395(c)(1), 

and 457.496(e)(1).

0938–New 

(CMS– 

10556).

602 142,403 5 11,867 31.86 378,082 40,645 436,355 

438.6(n) ............................. ...................... 36 602 30 301 66.38 19,980 0 19,980 

Total ........................... ...................... 638 143,005 35 12,168 ...................... 398,062 40,645 456,335 

D. Submission of PRA-Related 

Comments 

We have submitted a copy of this 

proposed rule to OMB for its review of 

the rule’s information collection 

requirements. These requirements are 

not effective until they have been 

approved by OMB. 

To obtain copies of the supporting 

statement and any related forms for the 

proposed paperwork collections 

referenced above, access CMS’ Web site 


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19436 Federal Register / Vol. 80, No. 69 / Friday, April 10, 2015 / Proposed Rules 

7Calculations were based on the Substance Abuse 

and Mental Health Services Administration 

(SAMHSA) National Survey of Drug Use and 

Health. 

8Pastor PN, Reuben CA, Duran CR. Identifying 

Emotional And Behavioral Problems in Children 

Aged 4–17 Years: United States, 2001–2007. 

National Health Statistics Report No. 48. 

Hyattsville, MD: National Center for Health 

Statistics; 2012. 

at http://www.cms.hhs.gov/

PaperworkReductionActof1995; email 

your request, including your address, 

phone number, OMB control number, 

and CMS document identifier, to 

Paperwork@cms.hhs.gov; or call the 

Reports Clearance Office at 410–786– 

1326. 

We invite public comments on these 

potential information collection 

requirements. If you comment on these 

information collection and 

recordkeeping requirements, please 

submit your comments electronically as 

specified in the ADDRESSES section of 

this proposed rule. Please include 

‘‘CMS–2333–P,’’ the ICR’s OMB control 

number, and the CMS document ID 

number in your comment. 

PRA-specific comments must be 

received by June 9, 2015. 

V. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

VI. Regulatory Impact Analysis 

A. Statement of Need 

This proposed rule addresses the 

applicability of the requirements under 

the MHPAEA to Medicaid non-managed 

care benchmark and benchmarkequivalent plans (referred to in this 

proposed rule as Medicaid ABPs) as 

described in section 1937 of the Act, 

CHIP under title XXI of the Act, and 

Medicaid MCOs as described in section 

1932 of the Act. 

In 2013, we released a SHO letter that 

provided guidance to states regarding 

the implementation of requirements 

under MHPAEA to Medicaid benchmark 

and benchmark-equivalent plans 

(referred to in this letter as ABPs), CHIP, 

and Medicaid MCOs. 

Final regulations implementing 

MHPAEA were published by HHS, the 

Department of Labor, and the 

Department of Treasury in the 

November 13, 2013 Federal Register. 

The MHPAEA final regulations do not 

apply to Medicaid MCOs, ABPs, or 

CHIP state plans. 

We believe that in absence of a 

regulation specific to the application of 

the parity requirements under MHPAEA 

to Medicaid and CHIP, states would not 

be compelled to implement the 

necessary changes to these programs, 

resulting in an inequity between 

beneficiaries who have MH/SUD 

conditions in the commercial market 

(including the state and federal 

marketplace) and Medicaid and CHIP. 

Even for states that are attempting to 

comply with parity requirements under 

MHPAEA, the absence of regulation 

could lead to inconsistent state-specific 

policies based on a state’s interpretation 

of how policies set forth in the 

MHPAEA final regulations might apply 

in the Medicaid and CHIP contexts. 

This proposed rule provides the 

specificity and clarity needed to 

effectively implement the policies set 

forth by MHPAEA and prevent the use 

of prohibited limits on coverage, 

including nonquantitative treatment 

limitations that disproportionately limit 

coverage of treatment for MH/SUD 

conditions. The Department’s 

assessment of the expected economic 

effects of this proposed rule is discussed 

in detail below. 

B. Overall Impact 

We have examined the impacts of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), Executive 

Order 13563 on Improving Regulation 

and Regulatory Review (January 18, 

2011), the Regulatory Flexibility Act 

(RFA) (September 19, 1980, Pub. L. 96– 

354), section 1102(b) of the Act, section 

202 of the Unfunded Mandates Reform 

Act of 1995 (March 22, 1995; Pub. L. 

104–4), Executive Order 13132 on 

Federalism (August 4, 1999) and the 

Congressional Review Act (5 U.S.C. 

804(2). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Section 3(f) of Executive Order 

12866 defines a ‘‘significant regulatory 

action’’ as an action that is likely to 

result in a rule: (1) (Having an annual 

effect on the economy of $100 million 

or more in any 1 year, 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 regulatory impact analysis (RIA) 

must be prepared for major rules with 

economically significant effects ($100 

million or more in any 1 year). We 

estimate that this rulemaking is 

‘‘economically significant’’ as measured 

by the $100 million threshold, and 

hence, also a major rule under the 

Congressional Review Act. Accordingly, 

we have prepared a RIA, which to the 

best of our ability presents the costs and 

benefits of the rulemaking. 

Because the application of parity 

requirements to ABPs; MCOs and PIHPs 

and PAHPs providing services to MCO 

enrollees; and the CHIP is likely to have 

an effect on the economy of $100 

million or more in any given year, this 

proposed rule is economically 

significant within the meaning of 

section 3(f)(1) of the Executive Order As 

elaborated below, we believe the 

benefits of the rule justify the costs. 

C. Anticipated Effects 

This proposed rule would benefit 

approximately 21.6 million Medicaid 

beneficiaries and 850,000 CHIP 

beneficiaries in 2015, based on service 

utilization estimates from 2012 

Medicaid and CHIP enrollment. We 

expect that a significant benefit 

associated with the application of the 

parity requirements under MHPAEA 

and these proposed regulations will be 

derived from applying parity 

requirements to the quantitative 

treatment limits such as annual or 

lifetime day or visit limits. Applying 

parity requirements to visit or stay 

limits will help ensure that vulnerable 

populations—those accessing 

substantial amounts of MH/SUD 

services—have better access to 

appropriate care. Among adults aged 18 

through 64 with Medicaid coverage, 

approximately 9.6 percent have a 

serious mental illness, 30.5 percent have 

any mental illness, and 11.9 percent 

have a substance use disorder.7 Among 

CHIP beneficiaries, approximately 8 

percent of children experience serious 

behavioral or emotional difficulties.8


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9Medication-Assisted Treatment for Opioid 

Addiction in Opioid Treatment Programs. Rockville 

(MD): Substance Abuse and Mental Health Services 

Administration (US); 2005. Treatment Improvement 

Protocol (TIP) Series, No. 43. 

10Trivedi AN, Swaminathan S, Mor V. Insurance 

parity and the use of outpatient mental health care 

following a psychiatric hospitalization. JAMA. 2008 

Dec 24;300(24):2879–85. 

11Simpson D D, Joe G W, Rowan-Szal G. Drug 

abuse treatment retention and process effects on 

follow-up outcomes. Drug and Alcohol 

Dependence. 1997b;47(3):227–235. 

12Hartel D M, Schoenbaum E E. Methadone 

treatment protects against HIV infection: Two 

decades of experience in the Bronx, New York City. 

Public Health Reports. 1998;113(Suppl. 1):107–115. 

13Substance Abuse and Mental Health Services 

Administration (SAMHSA). Behavioral Health 

United States 2012. HHS Publication No. (SMA)13– 

4797. Rockville, MD: SAMHSA; 2013. 

14 GAO. Children’s Mental Health: Concerns 

Remain about Appropriate Services for Children in 

Medicaid and Foster Care. December 2012. http:// 

www.gao.gov/assets/660/650716.pdf. Accessed June 

27, 2014. 

15Affordability Most Frequent Reason for Not 

Receiving Mental Health Services. Rockville (MD): 

Substance Abuse and Mental Health Services 

Administration (US); 2013. The NSDUH Report 

Data Spotlight. 

16Results from the 2012 National Survey on Drug 

Use and Health: Summary of National Findings and 

Detailed Tables. Rockville (MD): Substance Abuse 

and Mental Health Services Administration (US); 

2013. 

17Zuvekas SH, Banthin JS, Selden TM. How 

would mental health parity affect the marginal price 

of care? Health Serv Res. 2001 Feb;35(6):1207–27. 

Review. 

18McConnell KJ. The effect of parity on 

expenditures for individuals with severe mental 

illness. Health Serv Res. 2013 Oct;48(5):1634–52. 

doi: 10.1111/1475–6773.12058. Epub 2013 Apr 5. 

19Barry CL, Busch SH. Do state parity laws 

reduce the financial burden on families of children 

with mental health care needs? Health Serv Res. 

2007 Jun;42(3 Pt 1):1061–84. 

20 Dunigan R, Acevedo A, Campbell K, Garnick 

DW, Horgan CM, Huber A, Lee MT, Panas L, Ritter 

GA. Engagement in outpatient substance abuse 

treatment and employment outcomes. J Behav 

Health Serv Res. 2014 Jan;41(1):20–36. doi: 

10.1007/s11414-013-9334–2 

21Wang P, Simon GE, Avorn J, Azocar F, Ludman 

EJ, McCulloch J, Petukhova MZ, Kessler RC. 

Telephone screening, outreach and care 

management for depressed workers and impact on 

clinical and work productivity outcomes. JAMA 

2007;298(12):1401–11. 

22Wickizer TM, Campbell K, Krupski A, Stark K. 

Employment outcomes among AFDC recipients 

treated for substance abuse in Washington State. 

Milbank Q. 2000;78(4):585–608, iv. PubMed PMID: 

11191450. 

23Liu, X., R. Sturm, and B. J. Cuffel. 2000. ‘‘The 

Impact of Prior Authorization on Outpatient 

Utilization in Managed Behavioral Health Plans.’’ 

Medical Care Research Review 57: 182–95. 

24Hodgkin D, Merrick EL, Horgan CM, Garnick 

DW, McLaughlin TJ. ‘‘Does Type of Gatekeeping 

Model Affect Access to Outpatient Specialty Mental 

Health Services?.’’ Health Services Research 42. 1 

(2007): 104–123. 

25Cuffel, B., McCulloch, J., Wade, R., Tam, L., 

Brown-Mitchell, R., & Goldman, W. (2000). Patients’ 

and providers’ perceptions of outpatient treatment 

termination in a managed behavioral health 

organization. Psychiatric Services, 51(4), 469–473. 

26Liu, X., Sturm, R., Cuffel, B. (2000) The impact 

of prior authorization on outpatient utilization in 

managed behavioral health plans. Med Care Res 

Rev. Jun;57(2):182–95. 

27 Druss BG, Walker ER. Mental disorders and 

medical comorbidity. Synth Proj Res Synth Rep. 

2011 Feb;(21):1–26. Review. 

28National Institute on Drug Abuse. (December 

2012). Medical Consequences of Drug Abuse. 

Retrieved from http://www.drugabuse.gov/relatedtopics/medical-consequences-drug-abuse. 

29Bouchery, E. E., Harwood, H. J., Sacks, J. J., 

Simon, C. J., & Brewer, R. D. (2011). Economic costs 

of excessive alcohol consumption in the US, 2006. 

American Journal of Preventive Medicine, 41(5), 

516–524. 

Evidence-based treatment for severe 

and persistent mental illness, and for 

substance use disorders, often requires 

prolonged (possibly lifetime) treatment 

that consists of pharmacotherapy, 

supportive counseling, and often 

rehabilitative services. Individuals with 

severe MH/SUD conditions often 

quickly exhaust their benefits under 

Medicaid managed care. In addition, 

CHIP programs may restrict coverage, 

such as covering only 40 hours of 

psychotherapy or 5 days of 

detoxification per year. These coverage 

restrictions often result in people 

forgoing outpatient treatment and a 

higher likelihood of non-adherence to 

treatment regimes, which produce poor 

health and welfare outcomes and create 

the potential for increased 

hospitalization costs.9 10 For those with 

substance use disorders, treatment 

retention is of key importance when 

assessing outcomes, where those who 

stayed in treatment longer had more 

success in decreasing their substance 

use.11 12 In 2011, approximately 8 

percent of adults with Medicaid 

coverage reported at least one 

occurrence in the past 12 months of 

feeling the need for mental health or 

substance use treatment or counseling 

but not receiving it.13 Between 2007 and 

2009, approximately 72 percent of 

children in Medicaid with a potential 

mental health need did not receive 

mental health services.14 The most 

frequently cited reasons for not seeking 

MH/SUD treatment are cost and/or a 

lack of health insurance coverage, low 

perceived need, stigma, or structural 

barriers (for example, no transportation, 

did not know where to go).15 16

Removing quantitative limits on 

treatment may be particularly beneficial 

for individuals with severe mental 

illness and substance use disorders who 

may need to receive more services than 

the average individual.17 18 Improved 

coverage may also reduce the financial 

burden on individuals and families, 

particularly those families of children 

mental health service needs.19 Finally, 

improving coverage of MH/SUD 

treatment may also improve 

employment, productivity, and earnings 

among those with these conditions.20

Wang, et al, found that implementing a 

care program for those identified with 

depression yielded not only enhanced 

clinical outcomes relative to depression, 

but also produced positive outcomes 

relative to decreased sick leave and 

increased productivity.21 Similarly, the 

State of Washington implemented a 

substance abuse treatment program for 

those receiving Aid to Families with 

Dependent Children (AFDC), and found 

that access to treatment increased both 

earnings for those with jobs, and 

increased rates of employment.22

Application of parity requirements 

may also result in changes to payers’ 

utilization management approaches, 

specifically when requiring 

preauthorization of mental health 

services. It was found that even when 

approval for continued access to mental 

health services was in essence 

guaranteed, patients sought out less 

treatment, perhaps believing they 

‘‘should not’’ access further needed 

treatment.23 Hodgkin, et al, found that 

removal of utilization management 

approaches (including preauthorization 

for the first set of mental health visits) 

increased use of mental health 

services.24 Cuffel, et al, note that there 

are various reasons for why an approach 

like preauthorization can impact 

provider behavior relative to mental 

health service. Providers may believe 

that the preauthorization process is too 

laborious and not worth their time; they 

may fear that those reviewing the 

request will penalize them for 

submitting a preauthorization request; 

they may assume that the set limits on 

services preclude additional requests for 

services; providers may believe that the 

initial limits are in place as an implied 

recommendation towards shorter 

treatment cycles; and some may believe 

requests for preauthorization simply 

will not be approved at all.25 Liu, et al, 

found a significant correlation between 

preauthorization processes and the 

probability of ending mental health 

treatment prematurely.26

Application of parity requirements 

under MHPAEA may also have benefits 

in terms of reduced medical costs. 

Mental health and physical health are 

interrelated, and individuals with poor 

mental health are likely to have physical 

health problems as well.27 28 29 Increased 

access to and utilization of MH/SUD 

benefits may result in a reduction of 

medical and surgical costs for 

individuals with mental health 

conditions and substance use disorders 

(so called ‘‘medical cost offsets’’). For 

example, after receiving treatment, 

individuals with substance use 


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19438 Federal Register / Vol. 80, No. 69 / Friday, April 10, 2015 / Proposed Rules 

30Wickizer, T. M., Mancuso, D., & Huber, A. 

(2012). Evaluation of an innovative Medicaid health 

policy initiative to expand substance abuse 

treatment in Washington State. Medical Care 

Research and Review, 69(5), 540–559. 

31Wickizer, T. M., Krupski, A., Stark, K. D., 

Mancuso, D., & Campbell, K. (2006). The effect of 

substance abuse treatment on Medicaid 

expenditures among general assistance welfare 

clients in Washington State. Milbank 

Quarterly,84(3), 555–576. 

32Simon GE, Katzelnick DJ. Depression, use of 

medical services and cost-offset effects. J 

Psychosom Res. 1997 Apr;42(4):333–44. Review. 

33Sturm R. Economic grand rounds: The myth of 

medical cost offset. PsychiatryServ. 2001 

Jun;52(6):738–40. 

34Sarata AK. Mental health parity and the Patient 

Protection and Affordable Care Act of 2010. 

Washington, DC: Congressional Research Service; 

2011. 

35McConnell KJ, Gast SH, Ridgely MS, Wallace 

N, Jacuzzi N, Rieckmann T, McFarland BH, 

McCarty D. Behavioral health insurance parity: 

Does Oregon’s experience presage the national 

experience with the Mental Health Parity and 

Addiction Equity Act? Am J Psychiatry 2012 

Jan;169(1):31–8. 

36McConnell KJ, Gast SH, Ridgely MS, Wallace 

N, Jacuzzi N, Rieckmann T, McFarland BH, 

McCarty D. Behavioral health insurance parity: 

Does Oregon’s experience presage the national 

experience with the Mental Health Parity and 

Addiction Equity Act? Am J Psychiatry 2012 

Jan;169(1):31–8. 

disorders may experience fewer 

hospitalizations and emergency room 

visits stemming from unintended 

injuries such as accidents and drug 

overdose. The evidence that treatment 

results in medical care offsets is stronger 

for substance abuse treatment than for 

mental health treatment. For example, 

an evaluation on the expansion of 

substance abuse treatment in 

Washington State’s Medicaid program 

found per member per month savings of 

$160 to $385 depending on the welfare 

cohort.30 Another study done on welfare 

clients in Washington State found that 

those accessing substance use disorder 

treatment had $2500 less in medical 

costs than those who did not access 

treatment. This estimated savings 

equaled the cost of SUD treatment for 

individuals accessing SUD treatment.31

While a similar reduction in medical 

costs may be expected from mental 

health treatment, most empirical studies 

have not found a significant medical 

cost offset from mental health 

treatment.32 33

1. Costs 

a. Cost Associated With Increased 

Utilization of MH/SUD Benefits 

A primary objective of Congress in 

enacting MHPAEA was to eliminate 

barriers that impeded access to and 

utilization of MH/SUD benefits. Cost 

increases and increases in capitated 

rates may occur as a result of increased 

access and utilization from the 

application of parity requirements and 

these proposed regulations, but the 

evidence suggests that any increases 

will not be large. The impact of parity 

requirements will depend on the extent 

to which MCOs, ABPs, and CHIP plans 

lack benefits in some classifications or 

manage these benefits inconsistent with 

such parity requirements. 

In the April 30, 2010 final rule on 

State Flexibility for Medicaid Benefit 

Packages (75 FR 23068), the 

assumptions utilized in modeling the 

estimated economic impact of the 

associated provisions took into account 

the costs of the benefit package for the 

new adult group served through ABPs. 

Coverage of these benefits was already 

accounted for in the April 30, 2010 final 

rule, and therefore, does not need to be 

repeated here. Because we approved 

ABPs only after ensuring compliance 

with MHPAEA, we project that this 

proposed regulation will result in no 

additional costs to ABPs. 

(1) Effect of Removing Non-Compliant 

Quantitative Treatment Limitations 

A review of Medicaid managed care 

benefits in all 50 states and the District 

of Columbia revealed that a subset of 

states (18 states) had Medicaid managed 

care plans that imposed quantitative 

treatment limits on outpatient visits, 

inpatient stays, and intermediate 

services (for example, intensive 

outpatient treatment). As indicated in 

the preamble, some of these quantitative 

treatment limits are a result of what is 

currently in a state’s Medicaid plan. 

A review of CHIP plans indicated that 

most are already compliant with 

MHPAEA. CHIP plans that include 

Medicaid EPSDT are already required to 

cover mental health and substance 

abuse services as needed and they are 

deemed compliant with MHPAEA 

parity requirements for financial 

requirements and treatment limitations. 

It is not permissible to apply annual or 

lifetime limits to the EPSDT benefit. 

CHIP stand-alone programs are also 

already compliant with MHPAEA 

because of changes to treatment 

limitations for both mental health or 

substance use disorder benefits and 

medical and surgical benefits required 

under the Affordable Care Act.34 Among 

CHIP plans that are Medicaid expansion 

plans, we found only one to have an 

explicit quantitative limit.35

We conducted an analysis to 

determine how the use of services might 

increase if quantitative limits on 

Medicaid MCO and CHIP programs 

were eliminated. Where quantitative 

limits exist that are non-compliant with 

parity requirements, states also have the 

option to align these limits for MH/SUD 

and medical/surgical benefits consistent 

with the provisions of this proposed 

rule. However, to estimate the highest 

possible cost impact that could be 

expected, we simulated the effect of 

removing visit and day limits in states 

with limits for treatment users by 

anticipating that utilization would 

increase for beneficiaries who were near 

or exceeded current limits to equal 

utilization patterns observed in states 

without limits for Medicaid managed 

care beneficiaries. This simulation 

indicated the maximum impact of 

removing quantitative day and visit 

limits on MH/SUD services by Medicaid 

MCOs to be $103 million nationwide 

(including federal and state costs) in 

undiscounted dollars in 2015. Using a 

similar approach, we estimated the 

maximum impact of removing 

quantitative limits on CHIP 

expenditures to be $39.1 million in 

undiscounted dollars in 2015. 

However, these estimates are the 

largest possible cost impacts and the 

actual impact is likely to be lower. One 

reason is that some states with 

quantitative limits may have 

mechanisms in place for beneficiaries to 

obtain hospital days or outpatient visits 

beyond the state’s limit if such care is 

determined to be medically necessary. 

In practice, we anticipate a potentially 

lower impact than estimated currently, 

given that quantitative limits may 

already be routinely exceeded. We 

found that in most of the 18 states with 

visit limits, a number of recipients (for 

example, 5 to 20 percent) used services 

beyond the treatment limit, suggesting 

that exceptions to the quantitative limits 

may occur in these states. This does not 

appear to be the case in all states, 

because in a few states with visit limits 

ranging from approximately 24 to 40 

visits, only 1 or 2 percent of recipients 

exceeded the limit. 

There are no studies to date on how 

the application of federal parity 

requirements affects Medicaid spending. 

However information from states that 

have passed state-specific parity 

legislation (which includes application 

to Medicaid) provides additional 

support for the projected impact of these 

proposed regulations on service 

utilization and spending. For instance, 

an evaluation of the Oregon parity law 

found no significant increases in 

aggregate behavioral health spending or 

in the percent of individuals using 

behavioral health services associated 

with its implementation.36 The 

evaluators surmised that the flexibility 

in quantitative limits prior to the parity 

law may be one reason that the 


ebenthall on DSK5SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 80, No. 69 / Friday, April 10, 2015 / Proposed Rules 19439 

37Rosenbach 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. 

38Busch SH, Epstein AJ, Harhay MO, Fiellin DA, 

Un H, Leader D Jr, Barry CL. The effects of federal 

parity on substance use disorder treatment. Am J 

Manag Care. 2014 Jan;20(1):76–82. 

39President’s Budget for Fiscal Year 2015, 

available at http://www.whitehouse.gov/omb/

budget/. 

implementation of parity did not lead to 

large increases in spending. 

Specifically, they found that prior to the 

implementation of the state parity law, 

approximately 5 percent of beneficiaries 

with any behavioral health visits 

exceeded the specified limits of that 

plan. 

Vermont’s parity law is also very 

similar to MHPAEA. A study of 

Vermont’s parity law found that the 

share of spending on mental and 

substance use disorders increased only 

slightly, from 2.30 percent to 2.47 

percent of total spending for one health 

plan.37

Finally, a recent evaluation of the 

effect of MHPAEA on the commercial 

market revealed a modest increase in 

spending on substance use disorder 

treatment per enrollee ($9.99, 95 percent 

CI: 2.54, 18.21), but no significant 

change in the percent of individuals 

using substance use disorder services.38

(2) Effect of Classification of Services 

Requirements 

This proposed rule requires that if the 

state provides for MH/SUD services 

under the state plan, MH/SUD services 

must be provided to MCO enrollees in 

every classification in which medical/

surgical benefits are provided. After 

reviewing the MH/SUD services 

provided under Medicaid managed care 

plans, we identified only two states 

providing for MH/SUD services under 

the state plan in which MH/SUD 

services were excluded from a 

classification in which medical/surgical 

benefits are provided. In both states, the 

excluded services were substance abuse 

inpatient services. For the purposes of 

this analysis, we assumed that 

substance abuse inpatient services 

would need to be included to the extent 

that they were provided in a distinct 

part or unit of a general hospital or 

facility with 16 or fewer beds. Using 

data on current use of Medicaid 

substance use disorder inpatient 

services and the cost of those services 

from Medicaid claims data, we 

estimated that the additional coverage 

for these services would have led to an 

increase of $11.7 million nationwide in 

undiscounted dollars in 2012. 

Table 5 displays the total costs of 

removing non-compliant QTLs by 

service and meeting classification of 

services requirements in 2012. 

TABLE 5—DETAILS OF ESTIMATED COSTS OF MEETING QTL AND CLASSIFICATION OF SERVICES REQUIREMENTS IN 2012 

Inpatient Outpatient Intermediate Administrative Total 

Mental Health—Medicaid ($million/year) 

$19.8 ................................................................................................ $62.3 $0 $0.3 $82.4 

Mental Health—CHIP ($million/year) 

0 ....................................................................................................... 30.8 0.4 0.04 31.2 

Substance Use Disorder—Medicaid ($million/year) 

11.7 .................................................................................................. 0 0 0 11.7 

Substance Use Disorder—CHIP ($million/year) 

0 ....................................................................................................... 0 0 0 0 

Total Costs of Removing Quantitative Limits in 2012 ($million/year) 

............................ ............................ ............................ 125.3 

Note: Administrative costs are listed once for Medicaid and CHIP because the expense is all-inclusive for each program; costs are not broken 

down by service. 

Costs for complying with parity rules 

for each service category were estimated 

based on a simulation of additional 

utilization states may incur as a result 

of removing quantitative treatment 

limits. For the analysis of intermediate 

services, we examined limits on partial 

hospitalization and intensive outpatient 

care. 

These figures are calculated based on 

2012 Medicaid and CHIP expenditures, 

which equate to approximately $125.3 

million in additional costs as a result of 

parity compliance. To determine the 

percent impact to Medicaid 

expenditures in 2012, we divided 

$125.3 million (the additional costs of 

increased utilization) by $408.8 billion 

(total Medicaid expenditures). Based on 

this calculation, Medicaid expenditures 

would increase by 0.03 percent each 

year. As total Medicaid expenditures 

increase over time, the cost impact of 

mental health parity is expected to rise 

proportionally. Therefore, given that 

Medicaid expenditures overall are 

projected to equal approximately $513.4 

billion in 2015,39 the predicted impact 

of mental health parity is expected to 

equal $157.4 million in 2015, and to rise 

in proportion to the growth in overall 

Medicaid spending in future years. 

Costs for 2015–2019 are displayed in 

Table 6. 


ebenthall on DSK5SPTVN1PROD with PROPOSALS2
19440 Federal Register / Vol. 80, No. 69 / Friday, April 10, 2015 / Proposed Rules 

40Baker CA, Diaz IS. Managed care plans and 

managed care features: Data from the EBS to the 

NCS. Compensation and Working Conditions 

Spring 2011:30–6. 41Claxton, G., DiJulio, B., Whitmore, H., 

Pickreign, J., McHugh, M., Finder, B., & Osei-Anto, 

A. (2009). Job-based health insurance: Costs climb 

at a moderate pace. Health Aff 2009; 28(6):w1002– 

12. 42Hodgkin D. The impact of private utilization 

management and psychiatric care: A review of the 

literature. Journal of Mental Health Administration 

1992; 19(2):143–57. 43 Dickey B, Azeni H. Impact of managed care on 

mental health services. Health Aff 1992 Fall; 

11(3):197–204. 44Frank RG, Brookmeyer R. Managed mental 

health care and patterns of inpatient utilization for 

treatment of affective disorders. Soc Psychiatry 

Psychiatric Epidemiol 1995 Aug; 30(5):220–3. 45Wickizer TM, Lessler D, Travis KM.. 

Controlling inpatient psychiatric utilization through 

managed care. Am J Psychiatry 1996; 153:339–45. 46Wickizer TM, Lessler D. Do treatment 

restrictions imposed by utilization management 

increase the likelihood of readmission for 

psychiatric patients? Med Care 1998; 36(6):844–50. 

47Levit KR, Mark TL, Coffey RM, Frankel S, 

Santora P, Vandivort-Warren R, Malone K. Federal 

spending on behavioral health accelerated during 

recession as individuals lost employer insurance. 

Health Aff 2013 May; 32(5):952–62. 

48Levit KR, Mark TL, Coffey RM, Frankel S, 

Santora P, Vandivort-Warren R, Malone K. Federal 

spending on behavioral health accelerated during 

recession as individuals lost employer insurance. 

Health Aff 2013 May; 32(5):952–62. 

49Frank RG, Goldman HH, Hogan M. Medicaid 

and mental health: Be careful what you ask for. 

Health Aff 2003 Jan–Feb; 22(1):101–13. 

TABLE 6—ESTIMATED COSTS OF CMS–2333 FY 2015–2019 

[In millions] 

FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 

Federal ................................................................................. 94.6 102.0 108.4 114.0 120.3 

State ..................................................................................... 62.8 66.8 71.2 75.0 79.4 

Total .............................................................................. 157.4 168.8 179.6 188.9 199.8 

(3) Effect of Medical Cost Offsets 

As described above, the cost of 

improving access to MH/SUD treatment 

may be offset by a decline in the 

expenditures on treatments for medical 

conditions resulting from substance use 

disorders. There is strong evidence from 

Medicaid programs to assume a cost 

offset resulting from improved access to 

substance use disorder benefits. In 

contrast, the evidence for cost offset 

resulting from improved access to 

mental health benefits is weaker. We 

anticipate that, on balance, costs 

stemming from increased utilization of 

substance use disorder services 

resulting from application of parity 

requirements will be largely offset by 

the savings from reduced medical costs, 

yielding very little increase in overall 

costs from increased utilization of 

substance use disorder services. 

However, given the difficulty of 

quantifying the precise cost impact of 

this reduced use of medical services that 

is expected to result from enhanced 

access to substance use disorder 

services, we have not included any cost 

offset in our estimates. 

b. Effect of Aligning NQTLs 

Under the MHPAEA final rules, 

medical management can be applied to 

MH/SUD benefits if the processes, 

strategies, evidentiary standards, or 

other factors used in applying medical 

management are comparable to, and are 

applied no more stringently than, the 

processes, strategies, evidentiary 

standards, or other factors used in 

applying medical management to 

medical and surgical benefits. It is 

difficult to determine whether, at 

baseline, Medicaid MCOs, ABPs and 

CHIP programs are applying medical 

management more stringently to MH/

SUD benefits than to medical and 

surgical benefits. A state-by-state search 

of available Medicaid documents 

indicated that most states that use 

inpatient utilization management 

techniques for MH/SUD services, such 

as prior approval or continuing 

utilization review for inpatient stays, 

have similar restrictions for medical and 

surgical conditions. Surveys of 

commercial plans have also found that 

inpatient managed care restrictions, 

such as pre-admission prior approval, 

are common for medical and surgical 

admissions.40 41 There may be important 

distinctions in the processes, strategies, 

evidentiary standards, or other factors 

between MH/SUD services and medical 

and surgical services, but current data 

do not indicate that this is the case in 

a way that would lead to a clear cost 

impact. 

Moreover, if some Medicaid plans 

have stricter management controls for 

MH/SUD services than for medical 

services, there is scant evidence at this 

time as to how utilization management 

will evolve with the application of 

parity requirements and whether stricter 

controls would result in higher costs.42

For example, stricter controls may lead 

to underutilization of sub-acute levels of 

care for MH/SUD conditions, leading to 

the worsening of both MH/SUD 

conditions and medical or surgical 

conditions that ultimately require more 

costly acute levels of care. Studies of the 

effect of utilization review and prior 

approval on MH/SUD inpatient services 

have revealed mixed results, with some 

studies showing that these managed 

care techniques result in lower costs, 

quantities of treatment, or both, and 

other studies finding only weak or no 

effects, or effects that are short 

term.43 44 45 46 As noted above, the 

studies of Oregon and Vermont, whose 

parity laws include similar restrictions 

on medical management, have not 

shown increases in costs resulting from 

application of these laws. There is 

uncertainty regarding the level of 

increased costs that will result from 

application of the parity requirement for 

NQTLs, but there is evidence that any 

increases may be small. We invite 

comments related to any additional 

evidence on the impact of aligning 

NQTLs for Medicaid services. 

2. Transfers Resulting From Increased 

Access Under Medicaid 

Transfer payments are monetary 

payments from one group to another 

that do not affect total resources 

available to society. There is a potential 

that application of parity requirements 

under MHPAEA will result in transfers 

among different government entities. 

MH/SUD services receive greater 

funding from public sources, such as 

Medicaid, federal government block 

grants, state government general funds, 

and local government funding, than do 

medical and surgical services.47 Over 

time, MH/SUD spending has been 

shifting away from state and local 

funding, toward federal financing, 

especially Medicaid.48 The potential 

increase in the availability of MH/SUD 

services under Medicaid and CHIP as a 

result of the MHPAEA parity 

requirements may result in a reduction 

in use of, and spending on, services 

financed by other public sources such as 

state and local governments and federal 

block grants.49 Limited sound evidence 

exists about the size of this effect on 

states. 


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50Centers for Medicare & Medicaid Services. 

National Health Expenditure Projections 2012– 

2022. Forecast Summary. http://www.cms.gov/

Research-Statistics-Data-and-Systems/StatisticsTrends-and-Reports/NationalHealthExpendData/

Downloads/Proj2012.pdf. Accessed June 25, 2014. 

D. Alternatives Considered 

We considered several other 

approaches for providing guidance to 

states regarding the application of the 

MHPAEA to Medicaid MCOs, ABPs, 

and CHIP. As stated in the preamble of 

this proposed rule, under our current 

policies, there is no affirmative 

obligation to ensure that MCO enrollees 

receive state plan benefits in a way that 

fully complies with MHPAEA. This is 

because section 1932(b)(8) of the Act 

does not apply to the design of the 

traditional Medicaid state plan, and 

state plans thus may be designed in a 

way that does not comply with 

MHPAEA requirements. Under current 

guidance, we have said that if an MCO 

is simply properly applying state plan 

benefits, there is no violation of section 

1932(b)(8) of the Act even if that benefit 

design does not conform to MHPAEA, 

because the MCO did not adopt that 

benefit design and thus was not at fault 

in its non-compliance. As explained 

above, we do not believe that this policy 

effectuates Congressional intent in 

enacting section 1932(b)(8) of the Act. 

Further, we believe that implementation 

of the statute requires that MCO 

enrollees receive benefits in a manner 

that complies with MHPAEA. 

We considered requiring that all state 

plan MH/SUD services be included 

under MCO contracts as the way to 

ensure that MCO enrollees receive the 

full protections of MHPAEA. However, 

we believe the approach we are 

proposing would allow states the most 

flexibility when applying mental health 

parity requirements to their Medicaid 

services across delivery systems. Given 

that there are many different delivery 

system configurations that carve out 

MH/SUD services, the proposed 

approach would allow states to comport 

with parity requirements for MCO 

enrollees without completely carving 

out MH/SUD services from their MCO 

or dropping MH/SUD coverage 

altogether. 

Also, under current statutes, 

regulations and policies, states would 

not be required under Federal law to 

apply MHPAEA provisions to PIHPs 

and PAHPs (many of which provide 

MH/SUD services) since these 

arrangements were not specifically 

addressed in section 1932(b)(8) of the 

Act, and MHPAEA does not directly 

apply to such contracts. Consideration 

of these unique state MH/SUD delivery 

systems is an important distinction in 

Medicaid when compared to the 

commercial market. Further, because 

the statutory provisions making mental 

health parity requirements applicable to 

MCOs do not explicitly address these 

situations, additional interpretation is 

needed. 

In addition to the delivery system 

issues, states would not be required to 

remove or align limits on services that 

were in the state plan for individuals 

enrolled in an MCO. As stated 

previously in this proposed regulation, 

these limits would be carried through in 

the development of rates, and cost of 

services outside of the state plan or a 

waiver of the state plan cannot be 

included. Without the proposed change 

in this rule, individuals enrolled in an 

MCO could still be subject to treatment 

limitations that are not compliant with 

parity requirements, which we believe 

is inconsistent with the intent of 

Congress in requiring in section 

1932(b)(8) of the Act that MCOs deliver 

services in a manner consistent with 

MHPAEA requirements and the policies 

regarding application of MHPAEA to 

ABPs and CHIP that operate in a FFS 

arrangement. In addition, without these 

changes to the managed care rate setting 

process, it will be difficult for MCOs to 

comply with statutory requirements 

regarding financial requirements and 

treatment limitations. 

Finally, there are mental health parity 

provisions that are not applicable to the 

FFS delivery systems for Medicaid ABP 

benefits. These include: Annual and 

lifetime dollar limits, availability of 

plan information, and access to out-ofnetwork providers. 

In addition, we considered the ability 

to provide guidance and enforce the 

provisions of MHPAEA’s application to 

Medicaid and CHIP through subregulatory guidance. Over the past 5 

years, we have used two SHO letters to 

provide guidance to states regarding 

MHPAEA and Medicaid and CHIP. 

While states and other stakeholders 

found this guidance useful, there were 

many questions or concerns regarding 

the lack of specificity regarding 

application of MHPAEA parity 

requirements to Medicaid and CHIP. 

There were several issues that states 

raised regarding this sub-regulatory 

guidance. One issue was the actuarial 

soundness requirements, which 

mandate that MCO payments be based 

on services as covered under state plans. 

Another was additional clarification of 

NQTLs and states’ concerns regarding 

existing federal and state policies that 

required utilization management 

strategies that were inconsistent with 

the intent of MHPAEA. States also 

raised additional questions regarding 

application of MHPAEA parity 

requirements to other delivery systems 

including PIHPs, PAHPs, and FFS. We 

do not believe that additional 

subregulatory guidance would provide 

the necessary authority for MCOs and 

states to implement or enforce MHPAEA 

parity requirements for Medicaid 

beneficiaries enrolled in an MCO. 

We request public comment on our 

rationale for having regulations that are 

specific to Medicaid and CHIP. 

E. Accounting Statement and Table 

As required by OMB Circular A–4 

(available at http://

www.whitehouse.gov/omb/circulars_

a004_a-4/), in Table 7 we have prepared 

an accounting statement showing the 

classification of the impacts associated 

with implementation of this proposed 

rule. 

The projected impact on costs in 2015 

was calculated by multiplying the 

percent anticipated increase in cost due 

to the application of parity requirements 

by expected Medicaid expenditures in 

2015. Based on our analysis, the parity 

rule will lead to an increase of 

approximately 0.03 percent in total 

Medicaid spending each year over 10 

years. In 2015, Medicaid expenditures 

overall are projected to equal 

approximately $513.4 billion.50 Thus, 

the undiscounted cost of the rule is 

estimated to be $157.4 million in 2015, 

and to rise proportionate to the growth 

in overall Medicaid spending in future 

years. These costs are split between the 

federal and state governments based on 

the population covered and the 

statutory matching rate. 


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TABLE 7—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED BENEFIT, COSTS, AND TRANSFERS

Category Estimates 

Units 

Year dollar Discount rate 

% Period covered 

Transfers from Federal Government to Providers 

Annualized Monetized ($million/year) ........................................................ 107.0 

107.5 

2015 

2015 

7 

3 

2015–2019 

2015–2019 

Transfers from State Government to Providers 

Annualized Monetized ($million/year) ........................................................ 70.5 

70.8 

2015 

2015 

7 

3 

2015–2019 

2015–2019 

Note. The displayed numbers are rounded to the nearest thousand and therefore may not add up to the totals. 

F. Regulatory Flexibility Act (RFA) 

The RFA requires agencies to analyze 

options for regulatory relief for small 

entities, if a rule has a significant impact 

on a substantial number of small 

entities. The great majority of hospitals 

and most other health care providers 

and suppliers are small entities, either 

by being nonprofit organizations or by 

meeting the SBA definition of a small 

business (having revenues of less than 

$7.5 million to $38.5 million in any 1 

year). States are not included in the 

definition of a small entity. This 

proposed rule does not change the rates 

at which providers would be 

reimbursed for any additional 

treatments and services that may be 

required, and MCOs, PIHPs, and PAHPs 

will be paid on an actuarially sound 

basis for any additional coverage that 

they will be required to provide. As 

indicated previously in this proposed 

rule, the increased costs will be borne 

by states and the federal government, 

which are not considered small entities. 

Therefore, the Secretary has determined 

that this proposed rule will not have a 

significant economic impact on a 

substantial number of small entities as 

that term is used in the RFA. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 603 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a metropolitan statistical area and has 

fewer than 100 beds. The Secretary has 

determined that this proposed rule will 

not have a significant impact on the 

operations of a substantial number of 

small rural hospitals. 

G. Unfunded Mandates Reform Act 

(UMRA) 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

also requires that agencies assess 

anticipated costs and benefits before 

issuing any rule whose mandates 

require spending in any 1 year of $100 

million in 1995 dollars, updated 

annually for inflation. In 2015, that is 

approximately $144 million. UMRA 

does not address the total cost of a rule. 

Rather, it focuses on certain categories 

of cost, mainly those ‘‘Federal mandate’’ 

costs resulting from (A) imposing 

enforceable duties on state, local, or 

tribal governments, or on the private 

sector, or (B) increasing the stringency 

of conditions in, or decreasing the 

funding of, state, local, or tribal 

governments under entitlement 

programs. The average state share of 

total Medicaid spending in 2015 is 

projected to be 39.9 percent. The total 

cost impact of this rule is estimated to 

be $157.4 million in 2015. Therefore, 

the total cost to states is projected to be 

approximately $62.8 million. Therefore, 

this proposed rule is not subject to 

UMRA. 

H. Federalism 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it issues a proposed 

rule (and subsequent final rule) that 

imposes substantial direct requirement 

costs on state and local governments, 

preempts state law, or otherwise has 

federalism implications. 

In the Secretary’s view, this proposed 

rule has Federalism implications, 

because it has 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 Secretary’s 

view, the Federalism implications of 

this proposed rule are substantially 

mitigated because, with regards to 

MCOs, ABPs, and CHIP, the Secretary 

expects that many states already offer 

benefits under their state plan and MCO 

contracts that meet or exceed the 

Federal mental health parity standards 

that would be implemented in this rule. 

Throughout the process of developing 

these regulations, to the extent feasible 

within the relevant provisions of the 

Act, PHS Act and MHPAEA, the 

Secretary has attempted to balance the 

latitude for states to structure their state 

plan services and MCO contracts 

according to the needs and preferences 

of the state, and the Congress’ intent to 

provide uniform minimum protections 

to Medicaid and CHIP beneficiaries in 

every state. By doing so, it is the 

Secretary’s view that this proposed rule 

complies with the requirements of 

Executive Order 13132. 

I. Conclusion 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

List of Subjects 

42 CFR Part 438 

Grant programs-health, Medicaid, 

Reporting and recordkeeping 

requirements. 

42 CFR Part 440 

Grant programs-health, Medicaid 

reporting. 

42 CFR Part 456 

Administrative practice and 

procedure, Drugs, Grant programshealth, Health facilities, Medicaid, 

Reporting and recordkeeping 

requirements. 

42 CFR Part 457 

Administrative practice and 

procedure, Grant programs-health, 

Health insurance, Reporting and 

recordkeeping requirements. 


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For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services proposes to amend 

42 CFR chapter IV as set forth below: 

PART 438—MANAGED CARE 

■ 1. The authority citation for part 438 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

Act (42 U.S.C. 1302). 

■ 2. Section 438.6 is amended by 

revising paragraph (e) and adding 

paragraph (n) to read as follows: 

§ 438.6 Contract requirements. 

* * * * * 

(e) Additional services that may be 

covered by a MCO, PIHP, or PAHP. A 

MCO, PIHP, or PAHP may cover, for 

enrollees, services that are in addition to 

those covered under the state plan as 

follows: 

(1) Any services necessary for 

compliance by the MCO, PIHP, or PAHP 

with the requirements of subpart K of 

this part and only to the extent such 

services are necessary for the MCO, 

PIHP, or PAHP to comply with 

§ 438.910; and 

(2) Any services that the MCO, PIHP, 

or PAHP voluntarily agrees to provide. 

(3) Only the costs associated with 

services in paragraph (e)(1) of this 

section may be included when 

determining the payment rates under 

paragraph (c) of this section. 

* * * * * 

(n) Parity in mental health and 

substance use disorder benefits. (1) All 

MCO contracts, and any PIHP and 

PAHP contracts providing services to 

MCO enrollees, must ensure that 

enrollees receive services that are 

compliant with the requirements of 

subpart K of this part insofar as those 

requirements are applicable. 

(2) Any state providing any services to 

MCO enrollees using a delivery system 

other than the MCO delivery system 

must provide documentation of how the 

requirements of subpart K of this part 

are met with the submission of the MCO 

contract for review and approval under 

paragraph (a) of this section. 

■ 3. Subpart K is added to part 438 to 

read as follows: 

Subpart K—Parity in Mental Health and 

Substance Use Disorder Benefits 

Sec. 

438.900 Meaning of terms. 

438.905 Parity requirements for aggregate 

lifetime and annual dollar limits. 

438.910 Parity requirements for financial 

requirements and treatment limitations. 

438.915 Availability of information. 

438.920 Applicability. 

438.930 Compliance dates. 

Subpart K—Parity in Mental Health and 

Substance Use Disorder Benefits 

§ 438.900 Meaning of terms. 

For purposes of this subpart, 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 MCO, PIHP, or PAHP. 

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 MCO, PIHP, or 

PAHP. 

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 are benefits defined in section 

1905(r) 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 by the state and in accordance 

with applicable federal and state law, 

but do not include mental health or 

substance use disorder benefits. Any 

condition defined by the state 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). Medical/surgical benefits 

do not include long-term care services. 

Mental health benefits means benefits 

for items or services for mental health 

conditions, as defined by the state and 

in accordance with applicable federal 

and state law. Any condition defined by 

the state 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). Mental health benefits do 

not include long-term care services. 

Substance use disorder benefits 

means benefits for items or services for 

substance use disorders, as defined by 

the state and in accordance with 

applicable federal and state law. Any 

disorder defined by the state 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). Substance 

use disorder benefits do not include 

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 

a plan or coverage. (See § 438.910(d)(2) 

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. 

§ 438.905 Parity requirements for 

aggregate lifetime and annual dollar limits. 

(a) General—(1) General parity 

requirement. Each MCO, PIHP, and 

PAHP providing services to MCO 

enrollees must comply with paragraphs 

(b), (c), or (e) of this section for all 

enrollees of a MCO in states that cover 

both medical/surgical benefits and 

mental health or substance use disorder 

benefits under the state plan. This 

section details the application of the 

parity requirements for aggregate 

lifetime and annual dollar limits. 

(b) MCOs, PIHPs, or PAHPs with no 

limit or limits on less than one-third of 

all medical/surgical benefits. If a MCO, 

PIHP, or PAHP 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 onethird of all medical/surgical benefits 

provided to enrollees through a contract 

with the state, it may not impose an 

aggregate lifetime or annual dollar limit, 

respectively, on mental health or 

substance use disorder benefits. 

(c) MCOs, PIHPs, or PAHPs with a 

limit on at least two-thirds of all 

medical/surgical benefits. If a MCO, 


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PIHP, or PAHP includes an aggregate 

lifetime or annual dollar limit on at least 

two-thirds of all medical/surgical 

benefits provided to enrollees through a 

contract with the state, it must either— 

(1) 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 

(2) 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. 

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

For purposes of this section, 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 

total dollar amount of all combinations 

of MCO, PIHP, and PAHP payments for 

medical/surgical benefits expected to be 

paid under the MCO, PIHP, or PAHP for 

a contract year (or for the portion of a 

contract year after a change in 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 

MCOs, PIHPs, and PAHPs will 

constitute one-third or two-thirds of the 

dollar amount of all payments for 

medical/surgical benefits. 

(e) MCO, PIHP, or PAHP not described 

in this section—(1) In general. A MCO, 

PIHP, or PAHP that is not described in 

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

aggregate lifetime or annual dollar limits 

on medical/surgical benefits, must 

either— 

(i) Impose no aggregate lifetime or 

annual dollar limit, on mental health or 

substance use disorder benefits; or 

(ii) 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 mechanisms, 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 (e)(1)(ii). 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 contract are taken into 

account as a single separate category by 

using an estimate of the upper limit on 

the dollar amount that a MCO, PIHP, or 

PAHP may reasonably be expected to 

incur for such benefits, taking into 

account any other applicable 

restrictions. 

(2) Weighting. For purposes of this 

paragraph (e), the weighting applicable 

to any category of medical/surgical 

benefits is determined in the manner set 

forth in paragraph (d) of this section for 

determining one-third or two-thirds of 

all medical/surgical benefits. 

§ 438.910 Parity requirements for financial 

requirements and treatment limitations. 

(a) Clarification of terms—(1) 

Classification of benefits. When 

reference is made in this section to a 

classification of benefits, the term 

‘‘classification’’ means a classification 

as described in paragraph (b)(2) of this 

section. 

(2) Type of financial requirement or 

treatment limitation. When reference is 

made in this section 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 

(d)(2) of this section for an illustrative 

list of nonquantitative treatment 

limitations. 

(3) Level of a type of financial 

requirement or treatment limitation. 

When reference is made in this section 

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. 

(b) General parity requirement—(1) 

General rule and scope. Each MCO, 

PIHP and PAHP providing services to 

MCO enrollees in a state that covers 

both medical/surgical benefits and 

mental health or substance use disorder 

benefits under the state plan, must 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 furnished to enrollees 

(whether or not the benefits are 

furnished by the same MCO, PIHP, or 

PAHP). 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 (b) to 

financial requirements and quantitative 

treatment limitations is addressed in 

paragraph (c) of this section; the 

application of the rules of this 

paragraph (b) to nonquantitative 

treatment limitations is addressed in 

paragraph (d) of this section. 

(2) Classifications of benefits used for 

applying rules. If an MCO enrollee is 

provided mental health or substance use 

disorder benefits in any classification of 

benefits described in this paragraph 

(b)(2), mental health or substance use 

disorder benefits must be provided to 

the enrollee in every classification in 

which medical/surgical benefits are 

provided. In determining the 

classification in which a particular 

benefit belongs, a MCO, PIHP, or PAHP 

must apply the same standards to 

medical/surgical benefits and to mental 

health or substance use disorder 

benefits. To the extent that a MCO, 

PIHP, or PAHP 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 section 

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 section: 

(i) Inpatient. Benefits furnished on an 

inpatient basis. 

(ii) Outpatient. Benefits furnished on 

an outpatient basis. See special rules for 

office visits in paragraph (c)(2) of this 

section. 

(iii) Emergency care. Benefits for 

emergency care. 

(iv) Prescription drugs. Benefits for 

prescription drugs. See special rules for 

multi-tiered prescription drug benefits 

in paragraph (c)(2) of this section. 

(c) Financial requirements and 

quantitative treatment limitations—(1) 

Determining ‘‘substantially all’’ and 

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

For purposes of this section, a type of 

financial requirement or quantitative 

treatment limitation is considered to 

apply to substantially all medical/


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surgical benefits in a classification of 

benefits if it applies to at least twothirds of all medical/surgical benefits in 

that classification. 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. 

(ii) Predominant. (A) 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)(1)(i) 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. 

(B) If, for a type of financial 

requirement or quantitative treatment 

limitation that applies to at least twothirds 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 MCO, PIHP, or PAHP 

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 MCO, PIHP, or PAHP 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.) 

(iii) Portion based on MCO, PIHP or 

PAHP payments. For purposes of this 

section, 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 total dollar amount of all 

combinations of MCO, PIHP, and PAHP 

payments for medical/surgical benefits 

in the classification expected to be paid 

under the MCOs, PIHPs, and PAHPs for 

a contract year (or for the portion of a 

contract year after a change in benefits 

that affects the applicability of the 

financial requirement or quantitative 

treatment limitation). 

(iv) Clarifications for certain 

threshold requirements. For any 

deductible, the dollar amount of MCO, 

PIHP, or PAHP payments includes all 

payments for claims that would be 

subject to the deductible if it had not 

been satisfied. For any out-of-pocket 

maximum, the dollar amount of MCO, 

PIHP, or PAHP payments includes all 

payments associated with out-of-pocket 

payments that are taken into account 

towards the out-of-pocket maximum as 

well as all 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 MCO, 

PIHP, or PAHP payment changes. 

(v) Determining the dollar amount of 

MCO, PIHP, or PAHP payments. Subject 

to paragraph (c)(1)(iv) of this section, 

any reasonable method may be used to 

determine the dollar amount expected 

to be paid under a MCO, PIHP, or PAHP 

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). 

(2) Special rules—(i) Multi-tiered 

prescription drug benefits. If a MCO, 

PIHP, or PAHP 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)(1) 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 MCO, PIHP, or 

PAHP satisfies the parity requirements 

of this section for prescription drug 

benefits. Reasonable factors include 

cost, efficacy, generic versus brand 

name, and mail order versus pharmacy 

pick-up/delivery. 

(ii) Sub-classifications permitted for 

office visits, separate from other 

outpatient services. For purposes of 

applying the financial requirement and 

treatment limitation rules of this 

section, a MCO, PIHP, or PAHP may 

divide its benefits furnished on an 

outpatient basis into the two subclassifications described in this 

paragraph (c)(2)(ii). After the subclassifications are established, the MCO, 

PIHP or PAHP 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 subclassification using the methodology set 

forth in paragraph (c)(1) 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)(2)(ii) are: 

(A) Office visits (such as physician 

visits); and 

(B) All other outpatient items and 

services (such as outpatient surgery, 

facility charges for day treatment 

centers, laboratory charges, or other 

medical items). 

(3) No separate cumulative financial 

requirements. A MCO, PIHP, or PAHP 

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) Compliance with other costsharing rules. Each MCO, PIHP. and 

PAHP must meet the cost-sharing 

requirements in § 438.108 when 

applying Medicaid cost-sharing. 

(d) Nonquantitative treatment 

limitations—(1) General rule. A MCO, 

PIHP, or PAHP may not impose a 

nonquantitative treatment limitation for 

mental health or substance use disorder 

benefits in any classification unless, 

under the policies and procedures of the 

MCO, PIHP, or PAHP 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. 

(2) Illustrative list of nonquantitative 

treatment limitations. Nonquantitative 

treatment limitations include— 

(i) Medical management standards 

limiting or excluding benefits based on 

medical necessity or medical 

appropriateness, or based on whether 

the treatment is experimental or 

investigative; 

(ii) Formulary design for prescription 

drugs; 

(iii) For MCOs, PIHPs, or PAHPs with 

multiple network tiers (such as 

preferred providers and participating 

providers), network tier design; 


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(iv) Standards for provider admission 

to participate in a network, including 

reimbursement rates; 

(v) MCO, PIHP, or PAHP methods for 

determining usual, customary, and 

reasonable charges; 

(vi) 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); 

(vii) Exclusions based on failure to 

complete a course of treatment; 

(viii) 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 MCO, PIHP, 

or PAHP; and 

(ix) Standards for providing access to 

out-of-network providers 

(3) Application to out-of-network 

providers. Any MCO, PIHP or PAHP 

providing access to out-of-network 

providers for medical/surgical benefits 

within a classification, must use the 

same processes, strategies, evidentiary 

standards, or other factors in 

determining access to out-of-network 

providers for MH/SUD benefits. If a 

MCO, PIHP or PAHP is found to be in 

compliance with § 438.206(b)(4), it will 

be deemed in compliance with the 

standards in this paragraph (d)(3). 

§ 438.915 Availability of information. 

(a) Criteria for medical necessity 

determinations. The criteria for medical 

necessity determinations, made by a 

MCO or by a PIHP or PAHP providing 

services to an MCO enrollee, for mental 

health or substance use disorder 

benefits must be made available by the 

MCO, PIHP, or PAHP administrator to 

any enrollee, potential enrollee, or 

contracting provider upon request. 

MCOs, PIHPs, and PAHPs operating in 

compliance with § 438.236(c) will be 

deemed compliant with the 

requirements in this paragraph (a). 

(b) Reason for any denial. The reason 

for any denial by a MCO, PIHP, or PAHP 

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 

MCO, PIHP, or PAHP administrator to 

the enrollee. 

(c) Provisions of other law. 

Compliance with the disclosure 

requirements in paragraphs (a) and (b) 

of this section is not determinative of 

compliance with any other provision of 

applicable federal or state law. 

§ 438.920 Applicability. 

(a) MCOs, PIHPs, and PAHPs. The 

requirements of this subpart apply to 

each MCO, PIHP, and PAHP offering 

services to enrollees of a MCO, in states 

covering medical/surgical and MH/SUD 

services under the state plan. These 

requirements regarding coverage for 

services that must be provided to 

enrollees of an MCO apply regardless of 

the delivery system of the medical/

surgical or MH/SUD services under the 

State plan. 

(b) State responsibilities. (1) In any 

instance where the full scope of 

medical/surgical and MH/SUD services 

are not provided through the MCO, the 

State must review the MH/SUD benefits 

provided in the MCO, PIHP, PAHP, or 

FFS state plan service to ensure the full 

scope of services available to all 

enrollees of the MCO complies with the 

requirements in this subpart. The state 

must provide documentation of 

compliance with requirements in this 

subpart to the general public within 18 

months of the effective date of the final 

rule. 

(2) In any instance where the full 

scope of medical/surgical and MH/SUD 

services are not provided through the 

MCO, the State must ensure that the 

enrollees of the MCO receive services in 

compliance with this subpart. 

(c) Scope. This subpart does not— 

(1) Require a MCO, PIHP, or PAHP to 

provide any mental health benefits or 

substance use disorder benefits beyond 

what is specified in its contract, and the 

provision of benefits by a MCO, PIHP, 

or PAHP for one or more mental health 

conditions or substance use disorders 

does not require the MCO, PIHP or 

PAHP to provide benefits for any other 

mental health condition or substance 

use disorder; 

(2) Require a MCO, PIHP, or PAHP 

that provides coverage for mental health 

or substance use disorder benefits only 

to the extent required under 

1905(a)(4)(D) of the Act to provide 

additional mental health or substance 

use disorder benefits in any 

classification in accordance with this 

section; or 

(3) Affect the terms and conditions 

relating to the amount, duration, or 

scope of mental health or substance use 

disorder benefits under the Medicaid 

MCO, PIHP, or PAHP contract except as 

specifically provided in §§ 438.905 and 

438.910. 

§ 438.930 Compliance dates. 

In general, contracts with MCOs, 

PIHPs, and PAHPs offering Medicaid 

state plan services to enrollees, and 

those entities, must comply with the 

requirements of this subpart no later 

than the beginning of the contract year 

starting 18 months after the [DATE OF 

PUBLICATION OF THE FINAL RULE]. 

PART 440—SERVICES: GENERAL 

PROVISIONS 

■ 4. The authority citation for part 440 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

Act (42 U.S.C. 1302). 

■ 5. Section 440.395 is added to read as 

follows: 

§ 440.395 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 an Alternative Benefit Plan 

(ABP). 

Annual dollar limit means a dollar 

limitation on the total amount of 

specified benefits that may be paid in a 

12-month period under an ABP. 

Alternative Benefit Plans (ABPs) mean 

benefit packages in one or more of the 

benchmark coverage packages described 

in §§ 440.330(a) through (c) and 

440.335. Benefits may be delivered 

through managed care and non-managed 

care delivery systems. Consistent with 

the requirements of § 440.385, states 

must comply with the managed care 

provisions at section 1932 of the Act 

and part 438 of this chapter, if 

benchmark and benchmark-equivalent 

benefits are provided through a 

managed care entity. 

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.) 

EPSDT means benefits defined in 

section 1905(r) 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 by the state under the terms of 

the ABP 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 state as being 

or as not being a medical/surgical 


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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). Medical/surgical benefits 

do not include long-term services. 

Mental health benefits means benefits 

for items or services for mental health 

conditions, as defined by the state under 

the terms of the ABP and in accordance 

with applicable federal and state law. 

Any condition defined by the state 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. Mental health 

benefits do not include long-term care 

services. 

Substance use disorder benefits 

means benefits for items or services for 

substance use disorders, as defined by 

the state under the terms of the ABP and 

in accordance with applicable federal 

and state law. Any disorder defined by 

the state 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). Substance use disorder 

benefits do not include 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 

an ABP. (See paragraph (b)(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 for financial 

requirements and treatment 

limitations—(1) Clarification of terms— 

(i) Classification of benefits. When 

reference is made in this paragraph (b) 

to a classification of benefits, the term 

‘‘classification’’ means a classification 

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

this section. 

(ii) Type of financial requirement or 

treatment limitation. When reference is 

made in this paragraph (b) 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 

(b)(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 (b) 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 may not apply 

within an ABP 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 (b)(2) to 

financial requirements and quantitative 

treatment limitations is addressed in 

paragraph (b)(3) of this section; the 

application of the rules of this 

paragraph (b)(2) to nonquantitative 

treatment limitations is addressed in 

paragraph (b)(4) of this section. 

(ii) Classifications of benefits used for 

applying rules. ABPs must include 

mental health or substance use disorder 

benefits in every classification of 

benefits described in this paragraph 

(b)(2)(ii) in which medical/surgical 

benefits are provided. In determining 

the classification in which a particular 

benefit belongs, the state must apply the 

same standards to medical/surgical 

benefits and to mental health or 

substance use disorder benefits. To the 

extent that a state provides ABP 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 

(b) 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 (b): 

(A) Inpatient. Benefits furnished on 

an inpatient basis. 

(B) Outpatient. Benefits furnished on 

an outpatient basis. See special rules for 

office visits in paragraph (b)(3)(ii)(B)(1) 

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 (b)(3)(ii) of this section. 

(3) Financial requirements and 

quantitative treatment limitations—(i) 

Determining ‘‘substantially all’’ and 

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

For purposes of this paragraph (b), 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 (b)(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 twothirds 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 may combine levels 

until the combination of levels applies 

to more than one-half of medical/

surgical benefits subject to the financial 


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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 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 ABP payments. 

For purposes of this paragraph (b), 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 ABP payments for 

medical/surgical benefits in the 

classification expected to be paid under 

the ABP for the plan year (or for the 

portion of the plan year after a change 

in ABP 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 ABP payments 

includes all payments for claims that 

would be subject to the deductible if it 

had not been satisfied. For any out-ofpocket maximum, the dollar amount of 

ABP payments includes all payments 

associated with out-of-pocket payments 

that are taken into account towards the 

out-of-pocket maximum as well as all 

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 payment changes. 

(E) Determining the dollar amount of 

ABP payments. Subject to paragraph 

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

reasonable method may be used to 

determine the dollar amount expected 

to be paid 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 or 

plan administrator 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 (b)(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 ABP 

satisfies the parity requirements of this 

paragraph (b) 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 (b), a state may divide its 

benefits furnished on an outpatient 

basis into the two sub-classifications 

described in this paragraph (b)(3)(ii)(B). 

After the sub-classifications are 

established, the state 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 

(b)(3)(i) of this section. Subclassifications other than these special 

rules, such as separate subclassifications for generalists and 

specialists, are not permitted. The two 

sub-classifications permitted under this 

paragraph (b)(3)(ii)(B) are: 

(1) Office visits (such as physician 

visits); and 

(2) All other outpatient items and 

services (such as outpatient surgery, 

laboratory services, or other medical 

items). 

(iii) No separate cumulative financial 

requirements. A state 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. 

(iv) Compliance with other costsharing rules. States must meet the 

requirements of §§ 447.50 through 

447.57 of this chapter when applying 

Medicaid cost-sharing. 

(4) Nonquantitative treatment 

limitations—(i) General rule. A state 

may not impose a nonquantitative 

treatment limitation for mental health or 

substance use disorder benefits in any 

classification unless, under the terms of 

the ABP 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) Standards for provider admission 

to participate in a network, including 

reimbursement rates; 

(D) Methods for determining usual, 

customary, and reasonable charges; 

(E) 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); 

(F) Exclusions based on failure to 

complete a course of treatment; and 

(G) Restrictions based on geographic 

location, facility type, provider 

specialty, and other criteria that limit 

the scope or duration of benefits or 

services provided under the ABP. 

(c) Availability of information—(1) 

Criteria for medical necessity 

determinations. The criteria for medical 

necessity determinations made by the 

state for beneficiaries served through the 

ABP for mental health or substance use 

disorder benefits must be made 

available by the state to any beneficiary 

or Medicaid provider upon request. 

(2) Reason for any denial. The reason 

for any denial made by the state in the 

case of a beneficiary served through an 

ABP of reimbursement or payment for 

services for mental health or substance 

use disorder benefits must be made 

available by the state to the beneficiary. 

(3) Provisions of other law. 

Compliance with the disclosure 

requirements in paragraphs (c)(1) and 

(2) of this section is not determinative 

of compliance with any other provision 

of applicable federal or state law. 

(d) Applicability—(1) Alternative 

Benefit Plans (ABPs). The requirements 

of this section apply to states providing 

benefits through ABPs. For those states 

providing ABPs through an MCO, PIHP, 

or PAHP the rules of 42 CFR part 438, 

subpart K also apply, and approved 

contracts will be viewed as evidence of 

compliance with the requirements of 

this section. 

(2) Scope. This section does not— 

(i) Require a state to provide any 

specific mental health benefits or 

substance use disorder benefits; 


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however, in providing coverage through 

an ABP, the state must include the ten 

essential health benefits as required in 

§ 440.347, which include mental health 

and substance use disorder benefits or 

(ii) Affect the terms and conditions 

relating to the amount, duration, or 

scope of mental health or substance use 

disorder benefits under the ABP except 

as specifically provided in paragraph (b) 

of this section. 

(3) State plan requirement. If a state 

plan provides for an ABP, the state must 

provide sufficient information in ABP 

state plan amendment requests to assure 

compliance with the requirements of 

this subpart. 

(4) Compliance dates—(i) In general. 

ABP coverage offered by states must 

comply with the requirements of this 

section no later than 18 months after the 

publication of the final rule. 

(ii) [Reserved] 

PART 456—UTILIZATION CONTROL 

■ 6. The authority citation for part 456 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

Act (42 U.S.C. 1302), unless otherwise noted. 

§ 456.171 [Removed and Reserved] 

■ 7. Section 456.171 is removed and 

reserved. 

PART 457—ALLOTMENTS AND 

GRANTS TO STATES 

■ 8. The authority citation for part 457 

continues to read as follows: 

Authority: Section 1102 of the Social 

Security Act (42 U.S.C. 1302). 

■ 9. Section 457.496 is added to subpart 

D to read as follows: 

§ 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 CHIP state plan or a Managed 

Care Entity (MCE) (as defined at 

§ 457.10) that contracts with the CHIP 

state plan. CHIP 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 CHIP state 

plan or a MCE that contracts with a 

CHIP state plan. CHIP state plans must 

meet the requirements at § 457.480. 

CHIP State Plan has the meaning 

assigned at § 457.50. 

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. 

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 CHIP 

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 CHIP 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 do not 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 CHIP 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 does not include long term 

care services. 

Substance use disorder benefits 

means benefits for items or services for 

substance use disorders, as defined 

under the terms of the CHIP 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 

does not include 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 CHIP 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 CHIP plan providing EPSDT 

benefits. A state CHIP plan that provides 

benefits through expansion of Medicaid 

programs and provides EPSDT benefits 

is deemed to be in compliance with the 

parity requirements for financial 

requirements and treatment limitations. 

Annual or lifetime limits are not 

permissible in EPSDT benefits. 

(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 

CHIP 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 CHIP 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) CHIP state plans with a limit on 

at least two-thirds of all medical/

surgical benefits. If a CHIP 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/


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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 twothirds 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 CHIP 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 

CHIP 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 CHIP 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-ofpocket 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 CHIP 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 CHIP 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 

standards must apply to medical/

surgical benefits and to mental health or 

substance use disorder benefits. To the 

extent that a CHIP 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. 


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(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 twothirds 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 CHIP 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 CHIP 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 CHIP 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 CHIP 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 CHIP 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 costsharing maximum in § 457.560, or any 

other out-of-pocket maximum in the 

CHIP state plan, the dollar amount of 

plan payments includes all CHIP state 

plan payments associated with out-ofpocket 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 

CHIP 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 CHIP 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 CHIP 

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 CHIP state plan may 

divide its benefits furnished on an 

outpatient basis into the two subclassifications described in this 

paragraph (d)(3)(ii)(B). After the subclassifications are established, the CHIP 

state plan 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 (d)(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 (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 CHIP 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 CHIP 

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; and 

(H) Restrictions based on geographic 

location, facility type, provider 


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19452 Federal Register / Vol. 80, No. 69 / Friday, April 10, 2015 / Proposed Rules 

specialty, and other criteria that limit 

the scope or duration of benefits for 

services provided under the plan or 

coverage. 

(I) Standards for providing access to 

out-of-network providers 

(5) Application to out-of-network 

providers. Any CHIP state plan 

providing access to out-of-network 

providers for medical/surgical benefits 

within a classification must use the 

same processes, strategies, evidentiary 

standards, or other factors in 

determining access to out-of-network 

providers for mental health and 

substance use disorder benefits. If the 

CHIP state plan is found to be in 

compliance with § 438.206(b)(4) of this 

chapter, they will be deemed in 

compliance with the standards in this 

paragraph (d)(5). 

(e) Availability of plan information— 

(1) Criteria for medical necessity 

determinations. The criteria for medical 

necessity determinations made under a 

CHIP 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 

determined 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) CHIP state 

plans. The requirements of this section 

apply to CHIP 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 

CHIP 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 Medicaid agency. 

(2) Scope. This section does not— 

(i) Require a CHIP state plan or a MCE 

that contracts with a CHIP state plan to 

provide any mental health benefits or 

substance use disorder benefits, and the 

provision of benefits by a CHIP state 

plan or a MCE that contracts with a 

CHIP 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 CHIP 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—(i) In general. 

CHIP state plans (including those that 

contract with a MCE) must comply with 

the requirements of this section no later 

than [DATE 18 MONTHS AFTER THE 

PUBLICATION OF THE FINAL RULE]. 

(ii) [Reserved] 

Dated: March 18, 2015. 

Andrew M. Slavitt, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Dated: April 1, 2015. 

Sylvia M. Burwell, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2015–08135 Filed 4–6–15; 4:15 pm] 

BILLING CODE 4120–01–P 


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