1

Response to Request for Information Regarding the Paul Wellstone and Pete Domenici Mental 

Health Parity and Addiction Equity Act of 2008 (MHPAEA) 

Submitted by Magellan Health Services, Inc. 

A. (i) What policies, procedures, or practices of group health plans and health insurance issuers 

may be impacted by MHPAEA? What direct or indirect costs would result? What direct or 

indirect benefits would result? Which stakeholders will be impacted by such benefits and costs? 

Group health plans and health insurance issuers will be impacted in the areas targeted by the 

MHPAEA - - financial requirements, treatment limitations, and out-of-network coverage. Policies, 

procedures, and practices in these targeted areas will have to be changed, and many of these changes 

will be felt both directly and indirectly by plan sponsors and participants. 

Out of Network (OON) Benefits. Many group health plans and health insurance issuers do not 

currently provide OON benefits for mental health or substance use disorder benefits. Because of 

the OON requirement in the MHPAEA, group health plans and health insurance issuers will now 

be required to provide OON mental health and substance use disorder benefits to a large number of 

plan participants who did not previously have such a benefit. (The other option, of course, would 

be to no longer provide OON coverage for medical and surgical benefits, and then the MHPAEA 

OON requirement would not apply.) OON services are very challenging to administer for plans 

and health insurance issuers because of the great difficulties in controlling the quality of the services 

and in coordinating care. Unlike in-network providers who have a contractual relationship with the 

plan or health insurance issuer, OON providers have no incentive to cooperate with plans or health 

insurance issuers as far as quality assurance activities, outcomes improvement measures, case 

management initiatives, or care coordination efforts. In addition, group health plans and health 

insurance issuers often encounter the situation where a provider refuses to join the network and 

chooses to remain OON, which is more expensive for the plan as well as the participants. Because 

OON services are more costly and harder to manage, it is expected that this provision of the 

MHPAEA will result in significantly higher costs for plans, health insurance issuers, plan 

administrators and plan participants. 

Financial Requirements. Traditionally within the two classes of benefits (medical and surgical 

benefits, and mental health or substance use disorder benefits) the financial requirements are varied 

based on two factors: the level of care (inpatient or outpatient) and whether the benefits are being 

obtained in-network or out-of-network. Absent clarification of the “predominant” and 

“substantially all” language contained within the MHPAEA’s financial requirements section, which 

we address in more detail below in our response to B.2., it is difficult to establish the impact of the 

new parity standard for financial requirements because it is not clear whether the traditional practice 

of varied financial requirements for mental health or substance use disorder benefits can still be 

continued. 

In addition, ambiguity in the MHPAEA’s financial requirements section that states “no separate cost 

sharing requirements that are applicable only with respect to mental health or substance use disorder 

benefits,” makes it unclear how group health plans and health insurance issuers must implement this 

requirement. Does this language mean that if a group health plan has a deductible for mental health 

or substance use disorder benefits, then it must also have a deductible for medical and surgical 

benefits (so long as the deductible for mental health or substance use disorder benefits is no more 

restrictive)? Or does this language mean that a group health plan cannot have any separate cost 

sharing requirements at all, such that all cost sharing requirements must be a single, combined 
2

amount for all benefits under the plan? Contradictory interpretations of the language in question are 

possible, but we strongly believe that the language in the MHPAEA is written to allow for group 

health plans and health insurance issuers to have the flexibility to apply either separate cost sharing 

requirements to mental health and substance use disorder benefits (as long as similar cost sharing 

requirements are applied to medical and surgical benefits as well) or combined cost sharing 

requirements for both mental health or substance use disorder benefits and medical and surgical 

benefits. Separate cost sharing requirements for mental health or substance use disorder benefits as 

compared to medical and surgical benefits are acceptable under the MHPAEA so long as those 

requirements (a) are not applied only to mental health and substance use disorders – meaning the 

plan must have a similar cost sharing requirement on the medical and surgical benefits, and (b) the 

cost sharing requirements are no more restrictive for the mental health or substance use disorder 

benefits than similar cost sharing requirements applied to the medical and surgical benefits. This will 

be discussed further in B1; we note it here because, as detailed below, a contrary interpretation 

engenders a very significant and negative cost impact to plans and plan participants. 

The contrary interpretation - - that a plan must only have combined cost-sharing requirements - -

would have a wide-ranging impact as most plans do not currently utilize this kind of plan design. 

Mental health and substance use disorder benefit administration and management is a highly 

specialized field; as a result, many group health plans and health insurance issuers have chosen to 

contract with a specialized managed behavioral healthcare organization to administer such 

behavioral health services (this is commonly referred to as a “carve-out” arrangement). In cases 

where a carve-out arrangement is utilized, there would be at least two organizations involved in 

administering the single, combined cost sharing amount approach: the entity administering the 

medical and surgical benefits and the entity, or carve-out vendor, administering the mental health or 

substance use disorder benefits. In order to ensure accurate application of the participants’ benefits 

under a combined cost-sharing design, these two separate organizations would have to develop 

program interfaces which would allow communication and sharing of accurate, real time data (such 

as deductible information). This would be an intensive administrative process with significant costs 

connected with establishing and maintaining these interfaces. A combined deductible in this context 

would require that the plan and its administrative services vendors build the necessary system 

interfaces to share and coordinate these various data feeds and exchanges, which would be 

exceedingly costly. These costs are typically passed on to the plan sponsors and plan participants. 

Furthermore, there can be a direct impact on the individual plan participant connected to this 

particular issue as well. For example, the general assumption is that a combined deductible is less 

costly for the plan participant since the costs for mental health or substance use disorder care and 

the costs for medical and surgical care are both applied toward one single deductible amount. 

However, approximately 95% of plan participants only access the medical and surgical benefits of 

their plan. As a result, the vast majority of plan participants would be negatively impacted in trying 

to meet a single $1,000 deductible for their physical health care needs rather than a separate $500 

deductible for each class of benefits (mental health/substance use disorders and medical/surgical). 

Similarly, the 5% of plan participants who do utilize the mental health or substance use disorder 

benefits of their plan could be at a serious disadvantage if they do not have significant physical 

health concerns to help contribute to meeting their deductible. This higher hurdle due to a 

combined deductible rather than a separate but equal (or even lower, since a lower amount would 

still be “no more restrictive”) deductible may be enough to discourage those plan participants from 

seeking the mental health or substance use disorder care they need. 

Treatment Limitations. The MHPAEA will remove or minimize treatment limitations such as 

annual outpatient visit limits, yearly inpatient day limits, and yearly or lifetime episode limits, which 
3

are typically based on state law requirements. For example, some plans limit outpatient visits to 20 

or 30 visits per year, and inpatient benefits to 30 days per year. Some plans allow for a limited 

number of substance abuse treatment episodes such as 2 per year or per lifetime. The removal of 

these limits – which function as cost controls – will have a significant impact on group health plans 

and health insurance issuers, who may need to pass along the cost to plan participants. While not all 

plans utilize such limits, and their removal may be an improvement for some plan participants, the 

removal of limits will increase the overall costs of the plan and the benefit coverage for all plan 

participants. Removal of benefit limits is also likely to exacerbate the difficulty in working with outof-network providers, who as discussed previously are more likely to take advantage of plans and 

health insurance issuers (as well as plan participants) by extending treatment beyond patient needs. 

The magnitude of the cost impact related to the removal of benefit limits will vary from plan to plan 

and is not easily quantified. Several studies have been performed following the implementation of 

in-network parity at the state level and for federal employee health benefit plans that have 

implemented parity previously. These studies have demonstrated the range of cost impact from 0% 

increase to a trend increase that exceeds 4% of total cost1-5. The studies also clearly delineate that 

with appropriate utilization and care management cost was consistently contained to less than a 2% 

increase in total plan cost. 

1. Branstrom, R.B., & Sturm, R. (2002). An early case study of the effects of California’s mental health parity 

legislation. Psychiatric Services, 53(10), 1215 

2. Barry, C.L., Frank, R.G., & McGuire, T.G. (2006). The costs of mental health parity: Still an impediment? Health 

Affairs, 25(3), 623-634. 

3. Goldman, H.H., Frank, R.G., Burnam, A., et al (2006). Behavioral health insurance parity for federal employees. 

New England Journal of Medicine, 354(13), 1378-1386. 

4. Melek, S.P., Pyenson, B.S., & Fitch, K.V. An actuarial analysis of the impact of HR 1424: “The Paul Wellstone 

Mental Health and Addiction Equity Act of 2007.” Milliman, Inc. July 5, 2007 

5. Rosenbach, M., Lake, T., Young, C., et al (2003). Effects of the Vermont Mental Health and Substance Abuse 

 Parity Law. U.S. Department of Health and Human Services. 

A. (ii) Are there unique costs and benefits for small entities subject to MHPAEA (that is, 

employers with greater than 50 employees that maintain plans with fewer than 100 

participants)? What special consideration, if any, is needed for these employers or plans? 

What costs and benefits have issuers and small employers experienced in implementing 

parity under State insurance laws or otherwise? 

Small group benefit plans, as defined in this question, will be subject to all of the issues outlined in 

our comments in section A.(i) above. These small groups are particularly vulnerable to the impact 

of “catastrophic cases” – meaning that one or two seriously ill members can have a dramatic impact 

on the costs of the overall plan given its small size. This is as true for mental health and substance 

abuse disorders as it is for medical and surgical cases. The impact of the changes discussed above in 

A.(i) creates an enormous pressure on these small groups to exclude mental health and substance 

use disorder benefits in an effort to control overall plan costs and the unpredictable, and potentially 

catastrophic, effect for the plan and its participants posed by the risk of unpredictable high cost 

cases. 

Special considerations within the discretion of the agencies are needed for small groups. At 

minimum, small groups should be shown greater latitude in demonstrating the cost impact of 

implementing parity, e.g., by permitting small groups to utilize actuarial statements that apply 

broadly to plans their size as opposed to actuarial statements that are specific to their plans. For 

many small plans, even the cost of obtaining an actuarial statement and pursuing a cost exemption 

will be prohibitive. The agencies might also consider creating a separate administrative track for 

processing small groups exemption requests, in order to expedite their relief from potentially 

devastating costs that could be incurred in connection with one or two cases. 
4

Parity implementation costs in states where there are existing specific parity requirements vary 

depending on the extent of the parity requirements. Increases of up to 15% in annual mental health 

and substance use disorder benefits costs are not unusual. To keep benefit costs affordable, small 

groups have tended to choose more restrictive policies. The ability of small groups to utilize such 

plan designs will be virtually eliminated under the MHPAEA since these plans typically do not have 

restrictions of the same type on substantially all of their medical and surgical benefits. The 

MHPAEA will put significant increased cost pressure on these small groups if they have members 

who need specialized mental health and substance use disorder needs. There is the potential for 

small, self-funded plans to drop mental health or substance use disorder benefits entirely for all 

these reasons. 

A. (iii) Are there additional paperwork burdens related to MHPAEA compared to those related 

to MHPA 1996, and, if so, what estimated hours and costs are associated with those 

additional burdens? 

The MHPAEA is a much more extensive piece of legislation in terms of its impact on the parity of 

mental health and substance use disorder benefits than the MHPA of 1996. The MHPAEA will 

increase the paperwork required for plan and health insurance issuers with respect to recordkeeping, 

reporting to governmental agencies and third-party disclosures. 

Typical steps that are necessary for plans to become MHPAEA compliant will generate a significant 

level of paperwork for recordkeeping purposes. For example, in order to document review and 

assessment of plan designs to ensure compliance with MHPAEA, plan administrators must compare 

their medical and surgical benefit plan offerings against their mental health and substance use 

disorder health plan offerings. In most groups, this involves comparing multiple medical and 

surgical benefit plans against multiple mental health and substance use disorder benefit plans. The 

comparison process very often results in significant plan design changes and creation of additional 

benefit plan offerings, all of which must be documented, submitted for legal review, and 

communicated to stakeholders - the plan participants, the plan administrators, applicable regulatory 

agencies etc. It is not possible to accurately estimate the specific impact in terms of hours or costs at 

this time but it must be noted that reviews and changes for each plan generates significant record –

keeping paperwork, third-party disclosures and filings with governmental agencies. 

B. 1. The statute provides that the term "financial requirement" includes deductibles, 

copayments, coinsurance and out-of-pocket expenses, but excludes an aggregate lifetime 

limit and an annual limit. The statute further provides that the term "treatment limitation" 

includes limits on the frequency of treatment, number of visits, days of coverage, or other 

similar limits on the scope or duration of treatment. Do plans currently impose other types 

of financial requirements or treatment limitations on benefits? 

The MHPAEA very precisely defines “financial requirements” to include “deductibles, copayments, 

coinsurance, and out of pocket expenses.” The MHPAEA does not address or otherwise set forth 

any language with respect to “other financial requirements.” Therefore, there are no “other types of 

financial requirements” applied by plans as addressed under the language of the MHPAEA. 

The definition of “treatment limitation” in the MHPAEA includes “limits on the frequency of 

treatment, number of visits, days of coverage, or other similar limits on the scope or duration of 

treatment.” In addition to the types of treatment limitations specifically listed (e.g., number of visits 

or days of coverage), group health plans and health insurance issuers will, in some cases, also apply 

other similar limits on the scope or duration of treatment. In answering this question, and 

considering the regulations to be proposed, the emphasis must be on the word SIMILAR. Any limits 
5

on the scope or duration of treatment must be similar to the concepts of frequency or number in 

order for the provisions of the MHPAEA to apply. The similarity of a treatment limitation for the 

purpose of the MHPAEA must have some temporal or durational aspect similar to the treatment 

limitations which the MHPAEA specifically lists such as number of visits or days of coverage. The 

only additional limit we would consider falling within this definition but not specifically listed by the 

MHPAEA is a limit on the number of episodes of treatment. For example, some group health plans 

and health insurance issuers limit the number of episodes of inpatient substance abuse detoxification 

treatment available to a plan participant to a certain number of episodes per lifetime. 

How do plans currently apply financial requirements or treatment limitations to (1) medical 

and surgical benefits and (2) mental health and substance abuse disorder benefits? Are 

these requirements or limitations applied differently to both classes of benefits? 

Group health plans and health insurance issuers currently utilize financial requirements and 

treatment limitations both in medical and surgical benefits and mental health and substance use 

disorder benefits. In some cases plans and health insurance issuers vary the application of financial 

requirements and treatment limitations between the two classes of benefits and in some cases plans 

and health insurance issuers plan designs are already designed such that there is no disparity between 

the application of financial requirements and treatment limitations between the two classes of 

benefits. There are some plans where parts of the mental health and substance use disorder benefit 

were more generous than the medical and surgical benefit because the plan sponsor wanted to 

encourage use of the mental health and substance use disorder benefit. However, it typically has 

been more common to see greater restrictions placed on the mental health and substance use 

disorder benefit in terms of financial requirements and treatment limitations. 

Do plans currently vary coverage levels within each class of benefits? 

Yes. It is extremely common for group health plans and health insurance issuers to apply varied 

financial requirements and treatment limitations within a class of benefits – meaning medical and 

surgical benefits as one “class of benefits” and mental health and substance use disorder benefits as 

a second “class of benefits.” Frequently plans and health insurance issuers will apply variances in 

benefit offerings and in the application of financial requirements and treatment limitations on the 

basis of the level of care involved. Level of care refers to the “setting” of treatment. The most 

notable and predominant levels of care are inpatient care and outpatient care for both classes of 

benefits. 

In addition, in many cases plans and health insurance issuers often delineate a separation within each 

class of benefits between in-network benefits and out-of-network benefits and apply differing levels 

of financial requirements and treatment limitations to those sub-divisions within the class of 

benefits. So for example, a plan may provide in-network benefits for inpatient coverage of 80% 

coverage with 20% coinsurance for the plan participant but for in-network outpatient visits the 

coverage may be 100% after payment by the plan participant of a $20 copayment. That same plan 

for out-of-network benefits might only provide for out-of-network inpatient coverage of 60% 

coverage with 40% coinsurance and for out-of-network outpatient visits coverage might only be 

50% with a 50% coinsurance. Thus, plans typically vary coverage within a class of benefits based on 

in-network and out-of-network coverage and inpatient and outpatient levels of care. 

In assessing plans for compliance with the MPHAEA, plans and health insurance issuers presume 

that the requirements of the MHPAEA will apply the “predominant” financial requirements and 

treatment limitations applicable to “substantially all medical and surgical benefits covered by the plan 
6

(or coverage)” with respect to similar levels of coverage. In other words, the plan or health 

insurance issuer will ensure that in-network inpatient coverage financial requirements and treatment 

limitations for mental health and substance use disorder benefits are aligned with, and no more 

restrictive than, the predominant financial requirements and treatment limitations on in-network 

inpatient treatment for medical and surgical benefits and likewise for in-network outpatient coverage 

financial requirements and treatment limitations, and so on. This interpretation should be clearly 

articulated in the regulations with respect to the terms “predominant” and “substantially all” 

contained in the MHPAEA. We discuss the need for this clarification in detail in B.2. below. 

2. What terms or provisions require additional clarification to facilitate compliance? What 

specific clarifications would be helpful? 

Overall, the MHPAEA provides clear, defined application of rules to ensure the objective of 

equitable treatment of mental health and substance use disorder benefits with those benefits 

provided for medical and surgical treatment. However, there are a number of areas where further 

clarity regarding the application of parity within the bounds of the legislative language would be of 

assistance to all stakeholders. We believe clarification of the following items specifically discussed 

below is vital for all stakeholders. 

Flexibility on Design of Financial Requirements: 

 

As discussed previously in A(i), it is essential that group health plans, plan sponsors, and health 

insurance issuers have the flexibility to design benefit plans with either combined or separate 

deductibles and out-of-pocket expense maximums. A combined deductible or out-of-pocket 

expense limit would involve a single deductible or out-of-pocket expense maximum applicable to 

both the medical and surgical benefits and to the mental health and substance use disorder benefits. 

A separate deductible or out-of-pocket expense maximum would involve two parallel deductibles or 

out-of-pocket expense maximums, with one applicable to the medical and surgical benefits and one 

applicable to the mental health and substance use disorder benefits. Separate deductibles and outof-pocket expense maximums would be designed to meet the parity standard established by 

MHPAEA – namely that the financial requirements applicable to mental health and substance use 

disorder benefits be no more restrictive than those applicable to comparable medical and surgical 

benefits. 

 

The MHPAEA states that plans must ensure that “there are no separate cost sharing requirements 

that are applicable only with respect to mental health or substance use disorder benefits.” (emphasis 

added). We interpret this language to mean that a plan cannot have a financial requirement 

(deductible, copayment, coinsurance and out-of-pocket expense) for mental health and substance 

use disorders that it does not also have for medical and surgical benefits. That is, the plan cannot 

have a separate financial requirement that is applicable ONLY to mental health and substance use 

disorder benefits. This provision of MHPAEA does plainly allow for separate but no more 

restrictive deductibles and out-of-pocket expense maximums. The “no more restrictive” language 

would be meaningless unless the MHPAEA allowed for financial requirements that were separately 

applied to mental health and substance use disorder benefits; if separate requirements are not 

permitted at all, then there is no basis or need to make them “no more restrictive.” 

Furthermore, if the intent of the law was to prohibit separate but equal (or lower) cost sharing 

provisions for mental health or substance use disorder benefits, the use of the word “only” in the 

language would be meaningless. If Congress had intended to eliminate the ability of a plan to have 
7

separate but equal (or lower) cost sharing elements, the language of the MHPAEA would simply 

prohibit any separate cost-sharing requirements. 

In addition, the interpretation permitting separate but equal (or lower) cost sharing requirements 

would be consistent with the existing requirements under the MHPA of 1996 which allows plans to 

apply annual and lifetime limits either by means of a combined aggregate limit for medical and 

surgical and mental health benefits, or through separate limits for medical and surgical benefits and 

mental health benefits so long as the limit for mental health is no more restrictive. 

Management of the Benefit: 

The MHPAEA clearly was drafted with the intention to allow plans and health insurance issuers to 

manage mental health and substance use disorder benefits, as is currently done. The law amends the 

construction clause in Section 712(b) of ERISA which contains language which states “Nothing in 

this section shall be construed...” and the amendment made by MHPAEA adds “in the case of a 

group health plan (or heath insurance coverage offered in connection with such a plan) that provides 

mental health or substance use disorder benefits, as affecting the terms and conditions of the plan or 

coverage relating to such benefits under the plan or coverage, except as provided in subsection (a)” 

(emphasis added). This means that the only terms and conditions of the plan or coverage that the 

MHPAEA applies to are financial requirements, treatment limitations, out-of-network availability, 

and plan information as set forth in the MHPAEA. The specific placement of this provision into 

this particular section of the law was purposeful and was done so that the ability to manage the 

benefit falls outside of the scope of the parity requirement. This interpretation allows plans and 

health insurance issuers to continue managing mental health and substance use disorder benefits to 

keep costs down and ensure quality of care. Further, plans and health insurance issuers need not 

necessarily manage mental health and substance use disorder benefits in the same way as the medical 

and surgical benefits are managed, in recognition of the very real differences between the two classes 

of benefits. 

Management of the benefit is critical in keeping down the costs of the MHPAEA’s parity 

requirements, and the Congressional Budget Office (CBO) took into account the use of managed 

care arrangements in their analysis of the MHPAEA. Utilization management and utilization review 

are hallmarks of the managed care approach to health benefit plans. Without the ability to uniquely 

manage the mental health and substance use disorder benefit costs using other plan terms and 

conditions not addressed under the MHPAEA, costs will increase substantially over the estimates 

done by the CBO. (See our response to A(i) above for additional discussion on this issue). 

In addition, mental health and substance use disorder diagnoses and courses of treatment are not as 

clear and objectively defined as most medical and surgical diagnoses. Whereas medical and surgical 

services have numerous tests and lab analyses to diagnose an illness or condition and then determine 

the subsequent appropriate course of treatment and the successful resolution of the 

illness/condition, mental health and substance use disorder care does not always have similar 

concrete biological markers to illuminate the diagnosis and treatment planning process in such an 

objective fashion. Also, most medical and surgical episodes of care are short and treatment end 

points are specific. Treatment for a broken arm or an ear infection is clearly defined and both the 

patient and the provider know if the treatment worked. In contrast, mental health and substance 

use disorder treatment can continue for much longer periods of time and there aren’t always brightline indicators for the termination of therapy. Unlike the predominant cases of substantially all 

medical and surgical treatment, there are no specific end points to some mental health and substance 

use disorder treatments, and furthermore these treatments are variably defined by patient self-
8

reporting of functionality or through observable, subjective, elimination of symptoms. As a result, 

mental health and substance use disorder treatment requires a different management strategy that is 

extremely case- and provider-specific and that infuses reviews against practice standards, outcomes 

management, concurrent and retrospective reviews/consultations during the course of the treatment 

and/or treatment record reviews to ensure not only the quality and efficacy of the treatment, but 

also that coverage for services does not continue beyond the point of medical necessity. 

Accordingly, we believe the regulations should clarify and reinforce that the MHPAEA does not 

require parity in all aspects of plan terms and conditions, such as management of the benefit, but 

instead just those elements specifically addressed in MHPAEA – namely financial requirements, 

treatment limitations, and out-of-network coverage. 

Definition Clarification: “Predominant” & “Substantially All:”

The MHPAEA requires that the financial requirements applicable to any mental health or substance 

use disorder benefits provided by the plan must be no more restrictive than the “predominant” 

financial requirements applied to “substantially all” medical and surgical benefits covered by the 

plan. The MHPAEA goes on to state that the “predominant” financial requirement means “the 

most common or frequent of such type” of financial requirement. Therefore, the MHPAEA could 

be interpreted to require that each type of financial requirement (i.e., deductible, copayment, and 

coinsurance) for mental health or substance use disorder benefits can only be a single amount across 

the board, regardless of the mental health specialty or level of care involved. 

Additionally, that single financial requirement amount must be compared for parity purposes to the 

most common financial requirement (i.e., deductible, copayment, and coinsurance) from the entire 

scope of medical and surgical benefits of the plan combined, due to the use of the term 

“substantially all.” This single “across-the-board” method is not how financial requirements are 

currently applied to mental health or substance use disorder benefits (as discussed above in our 

response to B.1.) , and would necessitate a significant change to the current practices of plans. This 

approach fails to take into account the fact that plans apply varying dollar amounts within each type 

of financial requirement (i.e., deductible, copayment, and coinsurance) for medical and surgical 

benefits in order to reflect the medical specialty, level of care, and cost of care involved. The 

MHPAEA could be interpreted to prohibit the health plan from doing likewise for mental health or 

substance use disorder benefits, which is a radical departure from accepted plan design and 

administration practice and would create a striking and vast negative impact on health care costs for 

plans and plan participants. 

To illustrate this point using one type of financial requirement: Medical and surgical benefits utilize a 

range of copayment amounts depending on the type of service and/or level of care. For example, 

an office visit to the primary care physician (PCP) has a $15 copayment, a visit to a cardiologist has a 

specialty copayment of $35, a $100 copayment is applied to an emergency room visit, and a $250 

copayment is assessed per admission for inpatient hospital care. Higher levels of care also typically 

have a coinsurance component to them. Similarly, health plans currently apply varying copayment 

amounts for mental health or substance use disorder benefits as well, depending on the type of 

service or level of care. However, the MHPAEA could be interpreted to require that there be only 

one single financial requirement applied to all mental health or substance use disorder benefits, 

regardless of the type of service or level of care involved. Further, the MHPAEA requires that 

financial requirement amount to be compared to the “predominant” financial requirement for 

“substantially all” medical and surgical benefits. Without further guidance and clarification from the 

regulations, this could result in the plan or health insurance issuer being left to collect an inpatient 
9

psychiatric admission copayment of only $15 and no co-insurance, since PCP visits are arguably the 

most “predominant” service utilized under medical and surgical benefits and therefore the 

copayment for PCP visits will be the “predominant” financial requirement which must be applied to 

all mental health or substance use disorder benefits. This lopsided result would increase health plan 

costs substantially and create significant disparity between medical and surgical benefits and 

behavioral health benefits. 

As a result of this ambiguity, the definition of “predominant” needs further clarification, as we do 

not believe that the intent of the MHPAEA was to eliminate the plan’s ability to impose varying 

copayment and coinsurance and deductible amounts based on the level of care provided. 

Similarly, the term “substantially all” requires clarification. We believe that the intent of the 

MHPAEA was for financial requirements applicable to mental health or substance use disorder 

benefits provided by the health plan to be no more restrictive than the “predominant” financial 

requirements applied to similar levels of care for the medical and surgical benefits covered by the 

plan. This interpretation permits each type of mental health or substance use disorder benefit to be 

compared to its medical and surgical benefit counterpart for purposes of determining the applicable 

financial requirement and ensuring compliance with the MHPAEA. 

Outpatient mental health or substance use disorder benefits would have a copayment and 

coinsurance that is no more restrictive than the “predominant” copayment and coinsurance for 

similar outpatient medical and surgical benefits. Inpatient mental health or substance use disorder 

benefits would have a copayment and coinsurance that is no more restrictive than the 

“predominant” copayment and coinsurance for similar inpatient medical and surgical benefits. This 

same methodology would apply to other levels of care as appropriate. Accordingly we urge you to 

clarify this matter in the final regulations in a manner that supports this intended interpretation and 

states that for purposes of parity compliance the “predominant” requirement be the most common 

or frequent type of such requirement with respect to the similar coverage within the class of 

benefits, e.g. comparing inpatient mental health and substance use disorder requirements to 

analogous inpatient medical and surgical requirements. The term “substantially all” should likewise 

be defined with respect to similar coverage within the class of benefits.

Definition Clarification: “Financial Requirements” & “Cost-Sharing Requirements”:

The MHPAEA requires that the “...financial requirements applicable to such mental health or 

substance use disorder benefits are no more restrictive than the predominant financial requirements 

applied to substantially all medical and surgical benefits covered by the plan (or coverage), and that 

there are not separate cost sharing requirements that are applicable only with respect to mental 

health or substance use disorder benefits...” We note that the MHPAEA defines “financial 

requirement” but contains no definition of “cost sharing requirements.” The language of the 

section, as currently written, cannot be fully and clearly interpreted and applied absent clarifying 

regulations specifically defining “cost-sharing requirements.” 

The defined term “financial requirements” already subsumes those elements which are considered 

within the industry to constitute cost sharing mechanisms – namely deductibles, copayments, 

coinsurance and out-of-pocket expense requirements. We believe the term “cost sharing 

requirements” is redundant to the existing defined term “financial requirements” since there is 

nothing identified as a cost sharing requirement that is not already listed in the definition of 

“financial requirement” provided in the MHPAEA. In addition, we note that in examining the 

language of the similarly worded provision with respect to “treatment limitations,” the language 
10

there is consistent in using the single defined term “treatment limitation” throughout the section. 

Accordingly, the regulations should clarify that the term “cost sharing requirements” should be 

defined the same way as “financial requirements,” such as something like the following: “The term 

‘cost sharing requirement’ includes those requirements which are ‘financial requirements’ as defined 

above.” 

Definition Clarification: “Treatment Limitation”: 

The definition of the term “treatment limitation” contains unduly open-ended and ambiguous 

language. In contrast to the definition of “financial requirement” which lists those specific plan 

design elements which constitute “financial requirements” without any undefined terms, the 

definition of “treatment limitation” contains the vague and unclear catch-all phrase “or other similar 

limits on the scope or duration of treatment.” 

We believe that examination of the already enumerated types of limitations included in the definition 

of treatment limitations coupled with the language “or other similar limits on the scope or duration 

of treatment” provides a framework upon which the regulations can, and should, build in terms of 

providing a clear unambiguous definition of those plan design elements which constitute “treatment 

limitations” which must comply with the parity requirements of the MHPAEA. As previously 

discussed above, in our response to item B.1., the treatment limitations to be considered must be 

SIMILAR limits on the scope or duration of treatment in order for the provisions of the MHPAEA 

to apply. The “similarity” of a treatment limitation for the purpose of the MHPAEA must have 

some temporal or durational aspect similar to the specific enumerated treatment limitations which 

the MHPAEA specifically lists in the definition of “treatment limitation” such as number of visits or 

days of treatment. 

Therefore, the regulations should clarify that the term “other similar limits on the scope or duration 

of treatment” includes only those elements of a plan design which limit the treatment in terms of 

time, frequency, or duration. We do not believe it was the intent of the legislation to include, nor 

does the actual language support inclusion of, non-numerical or non-quantifiable limits like type of 

treatment as a “similar limit on the scope or duration of treatment.” Limitations on treatment types 

are not “similar” to limitations on the number of visits or days of coverage. Also, plans and health 

insurance issuers do not require coverage of all evidence-based treatments for medical and surgical 

benefits. Interpretation of this provision to require coverage of all evidence-based treatments for 

mental health or substance use disorder benefits goes against the clear intent of the law, is not 

supported by the statutory language, and would result in significant increased costs not considered in 

the cost studies referenced above. 

Implementation & Enforcement:

The MHPAEA stipulates that regulations will be promulgated by October 3, 2009; however, the 

guidance contained within such regulations will not be timely enough for many plans with a roll-out 

date of January 1, 2010. Most plans and health insurance issuers make plan design decisions and 

changes well prior to January 1 to ensure that communication of changes, and the enrollment and 

implementation processes, can occur efficiently and seamlessly. For example, it is common for plans 

to finalize plan decisions as early as 6 to 8 months prior to the beginning of the plan year. 

Realistically, regulations promulgated even now, let alone by October 3, 2009, will be too late to 

provide guidance for plans (particularly those with a January 1, 2010 compliance effective date) to 

incorporate into plan designs and plan disclosure materials necessary for plan participants to make 

informed plan enrollment choices. 
11

Accordingly, we request that if a plan implements a plan design based on a good faith interpretation 

of the provisions of the MHPAEA as set forth in the statute without the benefit of being able to 

review and implement the upcoming regulations at the time of filing and/or rolling out the benefit 

plan, then the plan should be exempt from any enforcement action and monetary penalties if it is 

later determined that the plan is not fully compliant with the parity law based on the regulations. 

Furthermore, any changes that are required to make the benefit plan compliant with the MHPAEA 

should not be required to be implemented in mid-year but should be deferred until the next plan 

year. Otherwise, changes to the plan would be onerous, costly, and confusing for plan participants; 

furthermore, state regulatory agencies responsible for review and approval of health insurance 

coverage do not have the capacity to rapidly re-review and approve plans in mid-year. This would 

be similar to allowances made in the effective date, implementation and enforcement of other 

federal regulations such as the privacy regulations promulgated under the Health Insurance 

Portability & Accountability Act (HIPAA). 

Guidance on Preemption of State Laws:

We would request that the regulations provide clarification with respect to the relationship between 

state and federal laws with regard to parity. There are state-specific mandates regarding the coverage 

of mental health and substance use disorder problems which contain specific numbers of days or 

visits which must be covered as well as dollar caps for expenses, and it is not clear how these 

mandates relate to the federal parity law and whether such provisions may or may not be preempted 

by the MHPAEA. We do know that the intent of the MHPAEA was to not preempt the coverage 

mandate portion of state laws, but the remaining language of these various state laws are still of 

concern. Specifically we would request: (1) further clarification and definition of the pre-emption 

language of the MHPAEA and (2) clarification on how a plan or health insurance issuer may obtain 

an advisory opinion or guidance in some other form with respect to particular state law interactions 

with the MHPAEA. 

Application of the MHPAEA to Employee Assistance Programs (EAP):

It is our understanding that the MHPAEA does not apply to Employee Assistance Programs (EAPs) 

and we request confirmation of this position. The MHPAEA applies to group health plans (or 

health insurance coverage offered in connection with such plans) that provide both medical and 

surgical benefits and mental health or substance use disorder benefits. EAPs do not provide 

medical and surgical benefits and therefore we do not believe that the law applies to them. 

Furthermore, EAPs supplement group health plans and are most often sold as separate plans to 

provide short-term mental health and substance use disorder benefits for assessment and evaluation 

leading to appropriate referrals for treatment when necessary. Moreover, EAPs by definition 

provide short-term assistance focused on enabling employees to resolve personal issues before they 

become health problems. Requiring EAPs to furnish a potentially unlimited number of sessions in 

order to match the availability of outpatient medical sessions would destroy the very nature of EAPs 

and cause employers to abandon them. 

3. What information, if any, regarding the criteria for medical necessity determinations made 

under the plan (or coverage) with respect to mental health or substance use disorder 

benefits is currently made available by the plan? 

Criteria for medical necessity determinations are currently made available to plan participants, 

beneficiaries and contracting providers upon request and, in some cases, as a matter of routine 

disclosure without the need for a request by the participant, beneficiary or contracting provider. 
12

The information disclosed may range, depending on the circumstances, from the specific criteria 

relevant to a plan participant’s particular specific request for benefits to a broad disclosure of the 

complete set of medical necessity criteria for all benefits under the plan to a contracted provider of a 

plan in order to facilitate communication and understanding of plan and health insurance carrier 

protocols with respect to utilization review and care management processes. 

This practice of disclosure is a result of market-driven demand by health care consumers and 

providers for transparency in the elements which define benefits available to plan participants, and 

contracted providers. In addition, there are existing legal and regulatory disclosure requirements 

contained in ERISA and/or state laws for plan and health issuer benefit plan information including 

medical necessity criteria information. This transparency and the prior development of federal and 

state law disclosure requirements as well as national accreditation standards have driven plans and 

health insurance issuers to make the disclosure of medical necessity criteria utilized by plans and 

health insurance coverage purchased by such plans a routine function of administering plan benefits. 

Thus, plans and issuers have routinely provided to participants and contracted providers the criteria 

utilized in making benefit determinations under the plan or insurance coverage. We fully support the 

need for such transparency and disclosures. 

To whom is this information currently made available and how is it made available? 

The MHPAEA requires that the disclosure of medical necessity criteria be made in “accordance with 

regulations.” The language of the MHPAEA does not specify which regulations, but as noted 

above, there are both federal and state disclosure requirements which are codified in existing 

regulations under ERISA and state law which are already in force and used in practice by plans and 

health insurance issuers. These existing regulations specify that medical necessity criteria must be 

disclosed to plan participants or beneficiaries as well as any party authorized to act on their behalf, 

specifically noting that providers can be authorized representatives of claimants. (See 29 CFR 

2560.503 (a) and (b)(4)). State law requirements vary with respect to whom plans and health issuers 

must provide disclosure of medical criteria. 

Are there industry standards or best practices with respect to this information and 

communication of this information? 

Yes. The industry standards and best practices are an outgrowth of the combined market-driven 

need for transparency and existing federal, state and accreditation requirements for disclosure. 

However, plans and health insurance issuers do face one constraint in the disclosure of medical 

necessity criteria. This constraint arises in the context of instances where a plan or health insurance 

issuer has licensed, from a third-party, medical necessity criteria which are not the property of the 

plan or health insurance issuer. In the ordinary course of business, a plan or health insurance issuer 

may not further disclose or distribute such criteria without potentially infringing upon the 

intellectual property rights of the third-party who owns the criteria and/or violating the terms or 

provisions of a licensing agreement for the medical necessity criteria obtained from the third-party. 

In order to comply with existing federal and state disclosure requirements, currently plans and health 

insurance issuers provide disclosure of a summary of the criteria as well as the source of the criteria 

without providing the actual medical necessity criteria so that they can comply with disclosure 

requirements but not be placed in violation of intellectual property rights or licensing agreement 

restrictions. This practice is necessary to meet disclosure requirements without violation of other 

legal requirements with respect to the content and ownership of these criteria. We believe this 

practice satisfies the MHPAEA requirement that a plan administrator or health insurance issuer 
13

“make available” the information and any regulations promulgated with respect to this requirement 

of the MHPAEA should reflect this practice as meeting the disclosure requirements for the medical 

necessity criteria under the MHPAEA language. 

4. What information, if any, regarding the reasons for any denial under the plan (or coverage) 

of reimbursement or payment for services with respect to mental health or substance use 

disorder benefits is currently made available by the plan? 

Currently, pursuant to federal and state laws as well as accreditation standards, plans and health 

insurance issuers MUST provide the specific reason for any denial of a claim for benefits under the 

plan – including a denial of reimbursement or payment for services with respect to mental health or 

substance use disorder benefits. The provisions of the MHPAEA require that: “The reason for any 

denial under the plan (or coverage) of reimbursement or payment for services with respect to mental 

health or substance use disorder benefits in the case of any participant or beneficiary shall, upon 

request or as otherwise required, be made available by the plan administrator (or the health 

insurance issuer offering such coverage) to the participant or beneficiary in accordance with 

regulations.” Plans and health insurance issuers currently comply with this and other, broader 

disclosure requirements under the existing federal ERISA claims regulations and state laws and 

accreditation standards which in many cases apply more broadly to any claim for benefits as 

opposed to simply requests for reimbursement or payment for services as specified in MHPAEA. 

To whom is this information currently made available and how is it made available? 

The information is typically made available to the individual plan participant, or their authorized 

representative, as well as the provider involved in the claim for benefits or payment, pursuant to 

applicable federal and state law as well as accreditation requirements. 

Are there industry standards or best practices with respect to this information and 

communication of this information? 

As noted above, the current industry standards and best practices are defined by federal and state 

law requirements as well as accreditation standards. The MHPAEA merely clarifies that these 

general practices and standards MUST be applied to any denial of reimbursement or payment for 

services with respect to mental health or substance use disorder benefits, although as also noted this 

already occurs right now. 

5. To gather more information on the scope of out-of-network coverage, the Departments are 

interested in finding out whether plans currently provide out-of-network coverage for mental 

health and substance use disorder benefits. If so, how is such coverage the same as or 

different than out-of-network coverage provided for medical and surgical benefits? 

Plans and health insurance issuers currently vary in the offering of out-of-network (OON) benefits 

for treatment of mental health and substance use disorders. Some plans limit coverage to innetwork providers only. Typically, when plans do cover OON benefits for mental health or 

substance use disorders, the coverage is different from the OON benefits for medical and surgical 

care. Plans and health insurance issuers classify and apply financial requirements and treatment 

limitations which are applicable to OON mental health and substance use disorder benefits in the 

same fashion as they do for in-network benefits. That is, plans vary coverage within the context of 

OON benefits based on the type of coverage in terms of inpatient vs. outpatient level of care. It is 
14

also worth noting that some state laws provide for the limitation of mental health or substance use 

disorder benefits to in-network coverage only. 

Again, in assessing compliance with MPHAEA, plans and health insurers presume that the 

requirements of the MHPAEA will focus on the “predominant” financial requirements and 

treatment limitations applicable to “substantially all medical and surgical benefits covered by the plan 

(or coverage)” with respect to similar coverage (see discussion in response to B.1 and B.2. above), 

meaning the plan or health insurance issuer will ensure that for out-of-network benefits, just as with 

in-network benefits, inpatient coverage financial requirements and treatment limitations for mental 

health and substance use disorder would be aligned with the predominant financial requirements and 

treatment limitations on inpatient treatment for medical and surgical benefits and likewise for 

outpatient coverage financial requirements and treatment limitations. 

6. Which aspects of the increased cost exemption, if any, require additional guidance? 

Would model notices be helpful to facilitate disclosure to Federal agencies, State agencies, 

and participants and beneficiaries regarding a plan's or issuer's election to implement the 

cost exemption?

In the case that a plan chooses to seek a cost exemption there needs to be additional guidance on: 

what the process is for filing an exemption; what forms and data, actuarial certification and other 

information must be documented and filed; and, what the standards are for the review and response 

to such filings. Model notices provided by the agencies would be helpful.