1310 G Street, N.W. 

Washington, D.C. 20005 

202.626.4780 

Fax 202.626.4833 

May 3, 2010 

The Honorable Timothy Geithner 

Secretary, U.S. Department of the Treasury 

The Honorable Kathleen Sebelius 

Secretary, U.S. Department of Health and Human Services 

The Honorable Hilda Solis 

Secretary, U.S. Department of Labor 

By Electronic Mail 

Re: Comments on Interim Final Rules Under the Paul Wellstone and Pete 

Domenici Mental Health Parity and Addiction Equity Act of 2008 

Dear Mr. and Mmes. Secretary: 

The Blue Cross Blue Shield Association (“BCBSA”) appreciates the opportunity to 

provide comments to the Departments of Labor, Treasury, and Health and Human 

Services (the “Departments”) regarding the Interim Final Rules (the “Regulation”) under 

the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 

2008 (the “Act” or the “MHPAEA”). 75 Fed. Reg. 5410 (Feb. 2, 2010). BCBSA 

represents the 39 independent Blue Cross and Blue Shield Plans (“Plans”) that provide 

health coverage to nearly 100 million – one in three – Americans. 

As key stakeholders affected by the Regulation, Plans are committed to implementing 

the Regulation and to continuing to assist the Departments in developing reasonable 

and administrable standards for the provision of mental health and substance use 

disorder benefits to group health plans. BCBSA is filing these comments in response to 

the Departments’ request for comments on the Regulation as issued in the Federal 

Register on February 2, 2010. Our comments include specific recommendations for 

changes to the Regulation, as well as requests for clarification on particular areas of the 

Regulation. 
May 3, 2010 

Page 2 of 14 

BCBSA partnered with leading business, insurance, and mental health advocacy groups 

to work with Congress to enable the Act's passage. Clearly, the intent of the Act is to 

ensure that individuals do not face treatment or financial limitations that are more 

restrictive than those for medical and surgical services. However, BCBSA believes that 

Congress also intended to protect the ability of health insurers and sponsors of group 

health plans to establish benefits and manage services to ensure that members and 

purchasers receive value for their health care dollar. 

More specifically, we are very concerned that, without a modification to the “substantially 

all” test, many health plans will be forced to make changes in benefit design, such as 

replacing copays with coinsurance for medical/surgical benefits and mental 

health/substance use disorder benefits ("MH/SU"). We are also concerned that some 

aspects of the Regulation inadvertently restrict the ability of insurers and group health 

plans to manage mental health and substance use disorder benefits and likely will drive 

up health plan costs. 

To address these as well as other issues, we recommend the following: 

 Delaying the applicability date of the Regulation in light of the major new 

requirements envisioned by the Regulation and enactment of the Patient Protection 

and Affordable Care Act (the “PPACA”); 

 Ensuring an adequate transition to parity within the individual health insurance 

market by clarifying that these provisions are not effective until 2014 when 

exchanges become operational; 

 Ensuring that the “substantially all” and “predominant” tests do not 

undermine popular benefit designs by imposing inflexible requirements that could 

result in adverse changes to coverage for medical and surgical conditions simply to 

comply with the Regulation; 

 Eliminating the Regulation’s “non-quantitative treatment limitations," which 

create considerable uncertainty with regard to the use of managed care tools to 

control costs, a key condition of the negotiations that enabled the enactment of the 

MHPAEA; and 

 Maintaining the Regulation’s existing treatment with regard to scope of 

services, which appropriately allows plans the flexibility to limit treatments and 

treatment settings as envisioned in the MHPAEA. 

We urge the Departments to consider a more flexible approach to successfully meet the 

goals of the Act to ensure quality care as well as maximum value for health plan 

members. We provide our detailed comments on these and other important issues 

below. 

I. Request for Delay in Applicability Date 

BCBSA requests that the Departments delay the applicability date of the Regulation until 

the first plan year beginning on or after July 1, 2011. A delay in the applicability date is 

well justified since the July 1, 2010 date provides health insurance companies that issue 
May 3, 2010 

Page 3 of 14 

and renew policies throughout the year with less than five months to analyze the 

Regulation and prepare changes to policies, many of which require prior approval by 

state insurance departments. Moreover, many of the provisions of the Regulation, 

including the non-quantitative treatment limit rule and the “substantially all”/ 

”predominant” tests, could not have been anticipated by Plans prior to the issuance of 

the Regulation. As such, compliance is more difficult than expected. Finally, numerous 

significant changes have been made to the law under health care reform that also must 

be fully analyzed. 

At a minimum, the Departments should delay the Regulation so the impact of the 

recently enacted PPACA can be fully considered. For example, under new section 2713 

of the Public Health Service Act ("PHSA”), established by the PPACA, individual and 

group insurance coverage and group health plans are required to cover preventive care 

services with no cost-sharing. This rule applies to "non-grandfathered" coverage and 

plans for plan years beginning on or after September 23, 2010. This new requirement 

alone will impede the ability of health plans to apply cost sharing to mental health and 

substance use disorder benefits under the Regulation's “substantially all” and 

“predominant” tests. In addition, section 1562 of the PPACA (conforming amendments) 

extends the MHPAEA to individual insurance policies and increases the size of small 

employers for which the small employer exemption is available from 50 to 100 

employees for purposes of the PHSA (see sections 2726 and 2791 of the PHSA) without 

a specific conforming change in the small employer size under ERISA or the Internal 

Revenue Code. It is unclear when these substantial changes are effective. 

These factors could not have been considered when the Departments issued the 

Regulation as an interim final rule. In connection with a delay in the applicability date, 

BCBSA requests continuation of the good faith compliance period as Plans analyze the 

Regulation and PPACA and come into compliance with its requirements. Plans have 

already made changes to their policies to comply with the Act, but need additional time 

to come into compliance with the Regulation – particularly because of the regulatory 

environment in many states, which requires amendments be filed and approved in 

advance by the State insurance commission. If the Departments do not issue a general 

delay in the applicability date, BCBSA requests the simplifications set forth below 

(especially with regard to the “substantially all” test). 

II. Application to the Individual Health Insurance Market 

MHPAEA applied only to group health plans and did not impact the individual health 

insurance market. However, a provision in section 1562 of the PPACA (conforming 

amendments) extends the MHPAEA to individual insurance policies and does not 

include a specific effective date. 

Our understanding is that this provision was adopted in an amendment proposed by 

Senator Stabenow during mark-up of the legislation. According to a press release from 

Senator Stabenow, the provision was intended to ensure that the new exchange plans 

comply with federal “parity” laws to provide coverage for mental health services that is 

equivalent to coverage provided for physical health services.1

 

 

1

 Senator Stabenow’s press release can be found at: 

http://stabenow.senate.gov/press/2009/122409SenatePassesHistoricLegislationtoReformHealthIn

surancetoSaveLivesSaveMoneyandSaveJobs.htm_
May 3, 2010 

Page 4 of 14 

It is unlikely Congress intended this provision to be effective immediately. First, under 

the PPACA, Exchanges will not be operational until 2014. Second, the MHPAEA 

provided a year delay in the effective date for group health plans and then provided that 

the new requirements would apply to new plan years to provide time for large employers 

to comply with the Act. Third, Congress could not have reasonably envisioned making 

these changes effective in a timeframe that would not permit compliance. 

We believe that the application of parity to the individual market is to be applicable in 

2014. This is evidenced by the inclusion of "mental health and substance use disorder 

services, including behavioral health treatment" as an "essential benefit" that must be 

provided in all qualified health plans and all plans offered in the individual and small 

group markets in 2014. PPACA § 1302(b); amended PHSA § 2707(a). Additionally, 

section 1311(j) of the PPACA provides - 

"APPLICABILITY OF MENTAL HEALTH PARITY - Section 2726 of the Public Health 

Service Act shall apply to qualified health plans in the same manner and to the same 

extent as such section applies to health insurance issuers and group health plans." 

This section, like the rest of 1311, is effective in 2014. This section appears to make 

clear that, in 2014, when individual policies must provide mental health services as part 

of an essential benefit package, the policies must be offered in parity. Arguably, this 

section wouldn't be necessary if the mental health parity rules were effective for 

individual policies prior to 2014 (and therefore already applied to individual insurance). 

Application of the requirements of the MHPAEA to the individual health insurance market 

without a transition would entail substantial disruption. The individual market is 

composed of millions of insurance policies covering approximately 17 million people 

nationwide. Changes to these policies involve filing and receiving approval of changes 

with state health insurance regulators. It is not administratively feasible to comply with 

MHPAEA in the individual insurance market without a reasonable transition period. 

We respectfully request clarification that these provisions are not effective until 

Exchanges are operational in 2014. 

III. “Substantially All” / “Predominant” Tests (§ 2590.712(c)(3)(i)) 

The “substantially all” and “predominant” tests are unusually complicated and need to be 

simplified. Plans are gravely concerned about the cost impact of these tests and the 

design changes that would be required to pass these tests. Based on survey data 

collected by BCBSA, we believe that most products are failing these tests, which will 

potentially impact the benefits for tens of millions individuals. 

The complexity is clear. The test must be calculated for every plan option (HMO, PPO, 

and indemnity) and every combination of options where there is a mental 

health/substance use disorder carve-out offered in tandem with HMO, PPO, and 

indemnity options. The test must be calculated for every type of financial requirement 

(coinsurance, copays, deductibles, out-of-pocket maximums) and for every level of such 

financial requirement. The test must be calculated for every type of treatment limit 

 
May 3, 2010 

Page 5 of 14 

(days, visits, episodes) and for every level of such treatment limit. The test must be 

calculated for each classification of benefits for every benefit plan option (inpatient to 

inpatient, outpatient to outpatient). The test must be calculated for every coverage type 

(employee, employee plus one, family) for every benefit plan option, entailing dozens of 

calculations for each benefit plan. Some Plans have more than 10,000 different benefit 

plans they believe are subject to compliance review. The cost of just performing such 

calculations could exceed $1 million for an average-sized Blue Cross and Blue Shield 

Plan. 

In addition to administrative cost and complexity, the “substantially all” tests need to be 

modified to avoid unintended and negative impacts on plan benefits offered to plan 

participants. Under these tests, in order for any type of financial requirement (or 

treatment limit) to apply to mental health/substance use disorder benefits, that particular 

"type" of requirement must first apply to two-thirds of the medical/surgical benefits within 

a particular classification. This test may not be met for many plans for either copays or 

coinsurance, even though substantially all of the medical/surgical benefits in that 

category are subject to some cost sharing. 

 

The reason the “substantially all” test is not met with some frequency is that Plans do not 

uniformly use copays or coinsurance in a particular category – Plans seek to incentivize 

certain behavior as a measure of cost control as well as encourage certain wellnessrelated behaviors. Indeed, many Plans exempt certain types of preventive care or 

wellness visits from cost-sharing altogether. For example, well-child visits may be 

provided at $0 copay or coinsurance or office visits for diabetes care may be offered at a 

reduced copay. This is obviously beneficial to plan members. 

A survey of Blue Cross and Blue Shield Plans indicates that a majority of products are 

failing the “substantially all” test. Based on responses from twenty Plans, the median 

number of products failing the tests is 74%. Although testing has not been 

completed by all Plans reporting data, at least 118,530 employer group and 

18,329,324 members have plans that do not meet the test as set forth in the 

Regulation. In most cases, the problems concern the outpatient category, although 

problems have been identified with other categories as well. 

The following examples from Blue Cross and Blue Shield Plans further illustrate the 

problems with the test as currently drafted: 

Plan A: “We believe our plans currently meet the original intent of the Federal 

Statute. Our plans treat MH/SA and medical/surgical the same for a given 

classification (office visit copays are the same for MH/SA as for any other specialist; 

an inpatient stay, medical/surgical or MH/SU, is subject to the same overall 

deductible, coinsurance percentage, and coinsurance maximum for example). 

Having to apply the “substantially all” and “predominant” tests within designated 

classifications in the regulation has the unintended consequence of steering plans 

AWAY from parity. For example, if deductible and coinsurance become the 

“substantially all” financial requirement with the outpatient, in-network classification, 

then MH/SA services subject to copay today will have their benefit REDUCED 

because of the tests and will be subject to deductible and coinsurance.” 

Plan B: “Upon evaluation of the Interim Final Rules and the effects it is creating for 

our business, approximately 50% of our plans fail, causing us to change benefits for 
May 3, 2010 

Page 6 of 14 

more than 100,000 members in our fully insured plans and more than 700,000 

members in our self insured plans. We do not believe this was the intent of the 

Rules, especially because our plans consistently cover MH/SU services the same as 

any other service.... The outpatient classification, as traditionally defined by the 

industry and in our contracts is a very broad category that includes many different 

types of cost sharing arrangements. The reason our plans are failing is solely based 

on the fact that variations in cost sharing exist within the outpatient classification. 

92% of the plans that fail are failing for copays (and some of these plans also fail for 

deductible and/or coinsurance). 8% of the plans that fail are failing due to 

coinsurance and/or deductible only.” 

The above examples illustrate the significant issues Plans are encountering with the 

“substantially all” and “predominant” tests, particularly with popular products that 

emphasize the use of copays for office visits. 

In addition, the outpatient classification is too broad, and in practice, is a catch-all for 

plan costs that do not fit into one of the other specified classifications. Because so many 

services – and even products – are included in the outpatient classification, it makes 

passing the substantially all test very difficult with regard to financial requirements (i.e., 

cost-sharing) imposed on mental health benefits. For example, Plans often but not 

always apply coinsurance to facility charges, including facility charges associated with 

outpatient coverage. However, Plans typically apply copays for provider/professional 

charges. In such circumstances, most outpatient coverage is subject to cost-sharing, 

but in many cases neither type of cost-sharing (coinsurance or copays) would meet the 

two-thirds test as discussed below. 

As a result of the substantially all test, many health plans will have to modify their 

medical/surgical benefits so that copays or coinsurance will apply to two-thirds of the 

medical/surgical benefits in a particular classification. This will negatively impact 

participants by driving up their out-of-pocket costs for medical/surgical benefits, creating 

a barrier to those seeking care.2

 Alternatively, health plans will have to eliminate costsharing for mental health/substance use disorder benefits, which will drive up the costs 

of mental health/substance use disorder benefits, or they will narrow the scope of mental 

health/substance use disorder benefits. The problems with this test may also cause 

more employers to drop coverage of mental health services. 

BCBSA believes that these results are unintended consequences of the substantially all 

test and the narrow set of classifications permitted under the Regulation. To address 

these unintended consequences, and to generally ease compliance burdens associated 

with the test, BCBSA recommends the following: 

 Subclassifications should be allowed if necessary to pass the two-thirds test. 

Allowing outpatient benefits to be divided between facility charges and 

provider/professional charges is a good example. The Regulation should be 

modified to allow Plans to use other legitimate subclassifications for comparing 

 

2

 As an example, one Plan currently offers a "copay" rider to groups for an extra premium for 

outpatient provider charges. That copay rider, when elected, causes such policies to fail the 

substantially all test. As a result, the copay rider may be discontinued and only coinsurance may 

be available for office visits so that coinsurance can be applied to mental health/substance use 

benefits. 
May 3, 2010 

Page 7 of 14 

medical/surgical benefits to mental health/substance use benefits, including 

facility charges, provider charges, types of providers (primary versus specialist; 

physician versus other professionals), durable medical equipment (“DME”), and 

therapists. 

 

 Plans should be allowed to exclude services that are provided with no costsharing or at reduced cost-sharing from the substantially all test, particularly if 

offered to encourage wellness. This is particularly important since PHSA section 

2713, added by PPACA, mandates coverage of certain preventive services 

without cost sharing for plan years beginning 6 months after PPACA's date of 

enactment. 

 The final Regulation should clarify that amounts paid by the participant (copays, 

deductible, coinsurance) are included in the calculation of the “substantially all” 

and “predominant” tests. If a Plan is using prior year data to perform the parity 

tests, it may be difficult to separate cost-sharing amounts from the calculation of 

plan costs. And including these amounts provides total costs for the services, 

which gives a more accurate prediction of future plan costs which may have a 

different cost-share structure. 

 Plans should be allowed to develop an "actuarial equivalence" for cost-sharing in 

a particular classification that would take into account copays and coinsurance 

and an actuarially equivalent cost sharing should then be permitted for mental 

health/substance use, regardless of the type of cost-sharing. This would allow a 

blend of copays and coinsurance on the medical/surgical side, without imposing 

a significant financial burden to members seeking mental health services (i.e., 

coinsurance). 

 

 Guidance should be given on how frequently a plan must perform the 

calculations. As noted above, the calculations are very complicated and 

reducing the frequency of the calculations would relieve the administrative 

burden associated with compliance. The Regulation should provide that the 

calculations do not need to be repeated every year absent changes in plan 

design or indications that assumptions were wrong or data is not accurate. 

 Examples should be provided with illustrations of actuarial methods that health 

plans may use to estimate costs, but the guidance should provide that any 

method approved by an actuary as reasonable is permitted. 

IV. Non-quantitative treatment limits (§ 2590.712(c)(4)) 

One of the most unexpected requirements of the Regulation is the requirement for parity 

for non-quantitative treatment limits. Early legislative versions of the Act included parity 

rules for medical management, but those rules were not included as part of the final Act.3

 

Indeed, the Act only contemplates easily quantifiable treatment limits. As such, BCBSA 

urges the Departments to eliminate this aspect of the Regulation in its entirety. 

 

3 Add note re legislation. 
May 3, 2010 

Page 8 of 14 

A. Medical Management

Our understanding is that the category of non-quantitative treatment limitations, which 

include medical management, was created in response to comments submitted by 

mental health advocates who equated medical management with denial of access to 

services they argued were de facto treatment limitations. 

Medical management is an important tool in assuring appropriate use of services and 

assuring that our members receive high quality care. Our Plans have reported that they 

use medical management to drive quality improvement and assure appropriate care for 

their members. For example, Plans reported that they have programs to improve 

medication compliance and identify members with specific conditions that may benefit 

from medication and refer them to appropriate physicians for re-evaluation. They also 

have programs where they attempt to intervene and seek the appropriate level of 

treatment (up to and including inpatient) to prevent severe physiologic dysfunction and 

prevent disruptions in benefits during a course of treatment. 

The majority of companies that manage mental health/substance use conditions utilize 

medical management processes that are based on national accreditation standards. 

NCQA, which is an accrediting organization for managed care organizations, requires in 

its Managed Behavioral Health Organization (MBHO) Standard, Utilization Management 

2, that medical management processes are developed based upon written criteria that is 

based on sound clinical evidence. These criteria are objective, evidence based, and take 

individual circumstances and local delivery systems into account when determining 

appropriate health care services. Behavioral health practitioners are involved in 

developing, adopting, and reviewing these criteria. The criteria are reviewed at least 

annually and updated when appropriate. NCQA MBHO Standard, Utilization 

Management 4, also requires that behavioral health practitioners from the appropriate 

specialty area are used to make medical management decisions. 

URAC is the other accrediting body for managed care organizations and has similar 

requirements. Therefore, organizations that are accredited by either NCQA or URAC, or 

that comply with these criteria even if not accredited, are certainly using medical 

management processes that are clinically justifiable. 

In practice, medical management processes for mental health/substance use disorders 

are typically used to determine the appropriate level of care for persons with mental 

health/substance use conditions, not whether treatment is needed. In behavioral health, 

there is a legal principal known as the “least restrictive environment” which many States 

have also adopted by statute. As a result, there is an emphasis on limiting the number 

of days that a person has to be hospitalized. The treatment goal is to determine when it 

is appropriate to transition the person to an intermediate level of care, such as partial 

hospitalization or intensive outpatient treatment. 

Management of mental health/substance use disorders is based on unique and different 

purposes from those needed for medical/surgical conditions. Most patients receiving 

treatment for mental health/substance use disorders are receiving treatment from 

multiple clinicians. A primary care physician, a psychiatrist, and a behavioral health 

therapist may all be involved in treating the person. One of the goals is to ensure that 

there is appropriate coordination of care. Another purpose is verifying that the person is 

receiving the appropriate care that is needed. For example, if a patient has seen a 
May 3, 2010 

Page 9 of 14 

behavioral health therapist for an extended length of time and there is no indication that 

the patient’s condition is improving, case managers analyze whether medications have 

been prescribed and are being taken, or whether perhaps medications are needed, or 

whether the person needs to be treated in a higher level of care. Managing mental 

health/substance use disorders results in more appropriate access to services, 

increased quality of care, and better treatment outcomes. 

A health plan’s approach to medical management in the outpatient setting is also often 

dependent on provider type. For example, many Plans use a brief notification system 

when the treating provider is a physician/psychiatrist. However, Plans require more 

information from a non-physician provider such as a licensed counselor or psychologist 

to certify medical necessity for treatment/services. This practice is congruent to that 

employed on the medical/surgical management side, where the treating physician 

typically does not need to obtain pre-certification for outpatient care, while ancillary 

clinicians such as occupational and physical therapists are subject to closer scrutiny. 

The treatment of many mental health conditions/substance use disorder conditions is 

more uncertain than for medical/surgical benefits, and medical management tools are 

utilized to ensure the treatment is appropriate for a particular patient – not to impose 

arbitrary limits on treatment. These initiatives sometimes focus on outliers. The 

behavioral health literature indicates the mean number of times a patient visits a nonphysician provider for the treatment of a mental health condition/substance use disorder 

is approximately six visits. If the number of visits is substantially higher, there may be a 

need to manage the benefit. 

 

We believe that the intent of this Regulation is not to increase medical management for 

medical/surgical conditions, which would result in the unintended consequences of 

placing more limitations upon those with medical/surgical conditions. We request that, if 

the nonquantitative treatment limitation rule is not eliminated, this Regulation be clarified 

to provide such that any medical management processes merely need to be clinically 

justifiable. If the final Regulation retains the concept of parity for "non-quantitative" limits, 

the provision should be narrowed so that any non-quantitative treatment limit is truly 

"similar" to a day or visit limit as contemplated by the Act's statutory language. The 

provision could be narrowed so that it only addresses medical management programs 

that (1) are subterfuges for a quantitative limit (e.g., the utilization review program will 

never authorize more than 10 counseling sessions); or (2) facially discriminatory (e.g., 

there is only retrospective review for medical necessity for outpatient medical/surgical 

but all outpatient mental health/substance use is subject to preauthorization). 

B. Provider Access and Reimbursement

In addition to the provisions requiring parity for medical management, BCBSA is also 

concerned with the provision in the non-quantitative treatment limit rule that relates to 

provider network adequacy and admission standards. BCBSA believes that these 

criteria are simply not a treatment limit that is "similar" to a day or visit limit as 

contemplated by the Act. 

First, Congress specifically rejected network adequacy rules. Moreover, these rules are 

not needed since States already regulate provider networks for insured business and 

health insurers often use the same networks for their insured and self-insured business. 

For example, the state of Michigan requires that plans submit provider qualification 
May 3, 2010 

Page 10 of 14 

requirements, reimbursement arrangements, and provider contracts to the state 

insurance commissioner before the plan is allowed to implement. In addition, a variety 

of accrediting bodies, such as URAC and NCQA, already establish standards for health 

plans that address the adequacy of networks. 

Finally, BCBSA requests that the provisions that require parity in provider 

reimbursement or UCR charges be dropped from the Regulation. These criteria are 

simply not a treatment limit that is in any way "similar" to a day or visit limit, nor is it 

relevant to the policy behind the Act. 

The goal of the Act is to provide mental health and substance use benefits in parity to 

patients – not to provide parity (i.e., increases) in payment to providers. Compliance 

with these provisions would be particularly onerous. A typical Plan has contracts with 

80% of licensed physicians in the United States. There is no way that Plans can review 

thousands of provider agreements by July 1, 2010. In addition, if a Blue Plan provides 

medical/surgical benefits, but a separate carve out vendor provides mental 

health/substance use services, there is no way the plan sponsor (or the Blue Plan) could 

assure parity as to provider reimbursement or UCR charges. 

 

V. Scope (§ 2590.712(e)(3)) 

The Regulation currently provides that it does not affect plan terms and conditions 

relating to the amount, duration, or scope of mental health or substance use disorder 

benefits except as specifically required under the parity requirements with regard to 

lifetime and annual limits, financial requirements, and treatment limitations. 29 C.F.R. § 

2590.712(e)(3)(ii). The preamble to the Regulation requests comments on the scope of 

the Regulation. 75 Fed. Reg. at 5416-17. In particular, it appears the Departments are 

considering whether the Regulation should establish some standards regarding the 

coverage for certain treatments or treatment settings where a plan or policy covers a 

particular mental health or substance use condition. BCBSA opposes revisions to the 

Regulation that would mandate the scope or continuum of care and notes this is one of 

the few means by which health plans can control the cost and quality of mental health 

and substance use disorder benefits in light of the limits placed on medical management 

by the non-quantitative treatment limits provision of the Regulation as discussed below. 

Additionally, appropriate measurements regarding available treatments or treatment 

settings are intended to benefit the patient through encouraging the delivery of safe, high 

quality and effective care. Plans regularly have mental health clinicians and other 

experts review various treatments and treatment settings to ensure patients are offered 

clinically appropriate care by licensed healthcare professionals under the plan design. 

There is an enormous variety in the treatments and treatment settings available for 

mental health conditions and substance use disorders – and it is widely documented that 

not all of these treatments or treatment settings are clinically appropriate or effective, or 

are even available through licensed providers. This is in contrast to overall medical and 

surgical treatments which typically follow relatively-standardized treatment protocols in 

licensed medical facilities from licensed providers. For example, many plans exclude 

substance abuse treatments such as wilderness programs or boot camps that do not 

have licensure or a proven success rate. 

The Regulation has adopted the right scope in 29 C.F.R. § 2590.712(e)(3)(ii) and 

appropriately allows plans the flexibility to limit treatments and treatment settings for 
May 3, 2010 

Page 11 of 14 

otherwise covered mental health/substance use conditions. Plans need this continued 

flexibility to continue to determine the scope of services covered to treat a particular 

mental health condition or substance use disorder based on factors such as current 

standard medical practice, licensure, available clinical evidence regarding the efficacy of 

a particular treatment or treatment setting, and other factors. Further regulation and 

guidance on this is not needed and would drive up health plan costs and eliminate the 

flexibility that Congress intended. 

VI. Applicability/Single Group Health Plan Rule (§ 2590.712(e)(1)) 

It is common for a single employer group health plan to offer employees the option of 

enrolling in either an HMO or a PPO option. It is also common that the mental 

health/substance use benefits provided under the HMO or PPO option are provided by 

the same vendor and not by a carve-out mental health/substance vendor. The 

Regulation eliminates the provision in the prior mental health parity regulations that 

made clear that parity is analyzed on a benefit package by benefit package basis. The 

Regulation (in paragraph (e)(1)) provides that the plan has to test all combinations of 

benefits that an employee can simultaneously receive for parity and treats all such 

combinations as a single group health plan. This rule supplies a testing rule for when 

plans offer mental health/substance use options separately from medical/surgical 

options and clearly eliminates the possibility that a plan could carve out mental 

health/substance use benefits into a separate plan and circumvent the rule. 

The Regulation should clarify, however, that in a simple example of an HMO and PPO 

option being offered under a single plan, and where there is no carve out vendor for 

mental health/substance use, the testing would still occur separately within the HMO 

option and the PPO option. Plans would not have to combine both options for purposes 

of testing since employees can only enroll in one or the other at any given time (an 

individual could not simultaneously be in the HMO and PPO). Otherwise, the offering of 

an HMO may require that enrollees in the PPO get the lower HMO copays if the 

predominant copays for the HMO and PPO combined turned out to be the HMOs. 

The Regulation should also specifically confirm that, if a Plan offers mental health and 

substance use disorder benefits in all classifications and also offers an overlay of, for 

example, additional mental health services provided through an EAP or additional 

substance abuse services offered through a wellness program, the EAP or wellness 

program would not be subject to the parity requirements. 

VII. Requiring Coverage in All Classifications (§ 2590.712(c)(1)(ii)) 

The Act requires that out-of-network coverage for mental health/substance use benefits 

be provided under a Plan if out of network coverage is provided for medical/surgical 

benefits. However, the Act does not include any requirement mandating coverage for all 

categories of benefits. The Regulation goes beyond the Act to require that if mental 

health/substance use benefits are covered in any classification, mental health/substance 

use disorder benefits must be covered in all classifications. The preamble expands this 

rule even further by suggesting that a particular condition or disorder that is covered in 

one classification must be covered in all classifications for which medical/surgical 

benefits are provided, or the exclusion in certain classifications could be considered a 

treatment limitation. 75 Fed. Reg. at 5413. 
May 3, 2010 

Page 12 of 14 

In other words, if a plan expects to exclude coverage of mental health or substance use 

disorder conditions, it must do so in all classifications – including prescription drugs. 

However, primary care providers often diagnose mental disorders, drugs are prescribed 

that can be used for multiple uses (e.g., medical or mental health), and emergency 

services are often covered for substance use or mental health emergencies. For 

example, Valium is approved by the FDA to treat anxiety disorders and alcohol 

withdrawal, but is also used to treat seizures and as a muscle relaxant. As a practical 

matter, this provision of the Regulation could have unintended consequences – either 

plans will eliminate certain basic or emergency services or prescription drugs for mental 

health and substance use disorder services or plans will not be able to permanently 

exclude mental health or substance use disorder benefits, as specifically permitted 

under the Regulation. This creates an additional issue with regard to prescription drugs. 

Plans may decide to exclude dual-purpose drugs which would deny patients coverage of 

drugs like Xanax that are very effective for treating medical conditions. It would be cost 

prohibitive for a plan to review the condition for which a drug is prescribed. As such, this 

provision should be eliminated in the issuance of a final Regulation. 

VIII. Cost Exemption

The cost exemption in the Act permits plans to apply for a one year cost exemption, if, 

after six months, the plan can show that the application of the parity requirements 

resulted in an increase in total plan costs of two percent in the first year and one percent 

in subsequent plan years. ERISA § 712(c)(2). At the end of the six month period, the 

plan must obtain a written actuarial determination from a qualified and licensed actuary. 

The determination must be based on "actual total costs of coverage" attributable to the 

application of the parity provisions to the plan. Although the determination is done for 

an initial six month period, it appears that plans must comply with the law for the rest of 

the plan year. ERISA § 712(c)(2) ("the provisions of [the Act] shall not apply to such 

plan (or coverage) during the following plan year . . . ."). It then appears that plans must 

come back into compliance with the Act in the subsequent year because any exemption 

is expressly limited to one plan year. ERISA § 712(c)(2). 

We note that it would be extraordinarily difficult and costly for employers to administer 

this exemption and for participants to understand a group health plan that shifts in and 

out of compliance each plan year according to the Act's parity requirements. Employers 

would be required to redesign their plan every single year in order to comply with the 

cost exemption requirements. Participants would be unable to rely on their plan benefits 

and therefore plan lengthy treatments because their plans will be redesigned every year. 

We recognize the Departments are bound to a certain extent by the language of the 

statute. Nevertheless, we are requesting guidance that would simplify the cost 

exemption, as follows. 

 Once the cost exemption is met with actual total costs of coverage by a particular 

plan, an actuary can make a projected determination of total cost of coverage for 

subsequent plan years. To read the cost exemption otherwise would make the 

exemption virtually unavailable to employers because it would be too difficult to 

administer (and make it more likely that the employer would terminate all mental 

health and substance use benefits). 
May 3, 2010 

Page 13 of 14 

 "Cost" should include not only claims experience, but also administrative costs 

associated with complying with the parity requirements. 

 The previous regulations confirmed that the cost exemption would be calculated 

based on the incurred expenditures at the individual group level, but provided a 

special rule for plans in a rating pool. Group health plans/policies that are 

combined in a pool for rating purposes could therefore satisfy the cost exemption 

based on the incurred expenditures of the pool, even if all the plans in the pool 

did not participate in the pool for the entire base period. However, only the plans 

that have complied with the parity requirements for six months could take 

advantage of the cost exemption. We are requesting that the agencies adopt the 

special rating pool approach used in the regulations interpreting the cost 

exemption of the 1996 Act. 

 We request that, in adopting the special rule for pool rated plans (as discussed 

above), the Departments clarify that for experience and pool rated plans, if the 

majority of the premium rate is based on the pooled rate, the plan is able to 

satisfy the exemption using the special rule. 

 The Departments should issue guidance regarding what claim expenses are 

included in the cost comparison for the cost exemption. The previous regulations 

provided that the cost exemption calculation was based on "incurred 

expenditures," defined as actual claims incurred during the base period (first 6 

months of the plan year) and reported within two months following the base 

period, and administrative costs for all benefits under the group health plan, 

including mental health benefits and medical/surgical benefits during the base 

period. 29 C.F.R. § 2590.712(f)(2) (1997). Incurred expenditures did not include 

premiums. 29 C.F.R. § 2590.712(f)(2)(iii) (1997). The approach taken by the 

regulations in interpreting incurred expenditures for the 1996 Act should be 

adopted in the final Regulation implementing the increased cost exemption for 

the Act, but also include prescription drug claims incurred and any administrative 

expenses related to parity requirement compliance. Further, plans should be 

permitted to estimate claims that have not yet been reported for purposes of the 

incurred expenditure calculation. 

 Examples should be provided demonstrating how a plan would calculate the 

actual total costs of coverage under the plan as a result of the application of the 

parity requirements as opposed to other market conditions, or to comply with 

PPACA or state mandates. 

 Guidance should be issued confirming that costs associated with good faith 

compliance with the Act prior to the applicability date of the Regulation may be 

included in the cost comparison for purposes of the exemption. 

IX. Small Employer Exemption

Changes under PPACA have increased the size of the employer for whom the small 

employer exemption is available to employers with one to 100 employees for purposes 

of the PHSA. See PHSA §§ 2726, 2791. It appears, however, that the PHSA definition 

of small employer is not specifically incorporated into the parity requirements under 
May 3, 2010 

Page 14 of 14 

ERISA and the Code because ERISA section 715 and Code section 9815 do not 

incorporate by reference section 2791 (because it is not included in part A of title XXVII 

of the PHSA). As a result, the definition of small employer under ERISA and the Code 

would include employers with an average of two but not more than 50 employees on 

business days during the prior year. This creates an inconsistency for an employer who 

offers an insured plan that is covered by ERISA, the Code and the PHSA (with regard to 

the insurance issuer offering the policy). BCBSA requests guidance that incorporates 

the PHSA definition into ERISA and the Code, at least for purposes of insured plans, to 

resolve this inconsistency. Similar to the individual market rules, the small employer 

definition does not have a clear effective date from the language of PPACA. We request 

clarification that this provision is effective January 1, 2014. This definition has an impact 

on the small group rules as well. 

BCBSA also requests guidance confirming that the small employer exemption will 

continue to provide relief from the parity requirements for small employers in the small 

group market, even after mental health benefits are required to be provided in the small 

group market in 2014, as discussed below. Beginning in 2014, PPACA requires insurers 

in the individual and small group market to provide essential benefits. Essential benefits 

include mental health and substance use disorder services. Further, also in 2014, 

qualified health plans (sold through an Exchange) must comply with the mental health 

parity requirements, but only to the same extent as the requirements apply to health 

insurers and group health plans. This means that beginning in 2014, health insurance in 

the small group market (within or outside an Exchange) will be required to provide 

mental health benefits. However, we would like confirmation that as long as the small 

employer exemption remains in the mental health parity provisions, small group 

insurance (within or outside an Exchange) that is considered to be provided by a small 

employer should not have to comply with parity requirements because (a) the small 

employer exemption is still in effect under the PHSA, ERISA and the Code (hopefully 

with a consistent definition, as discussed as above), and (b) for insurance offered 

through the Exchange. PPACA requires only that the mental health parity requirement 

apply to qualified health plans in the same manner as they apply to plans outside of the 

Exchange (which permit the small employer exemptions). 

* * * 

Thank you for the opportunity to comment on the MHPAEA and for considering our 

suggested recommendations. We look forward to continuing to work with the 

Departments on implementation issues related to the Act. If you have any questions, 

please contact Kris Haltmeyer at 202.626.4814 or via email at 

kris.haltmeyer@bcbsa.com. 

Sincerely, 

Justine Handelman 

Executive Director 

Blue Cross Blue Shield Association