May 3, 2010 

Submitted through the Federal eRulemaking Portal: 

http://www.regulations.gov 

Office of Health Plan Standards and Compliance Assistance 

Employee Benefits Security Administration, Room N-5653 

U.S. Department of Labor 

200 Constitution Avenue, NW 

Washington, DC 20210 

Attention: RIN 1210-AB30

Ladies and Gentlemen: 

 The ERISA Industry Committee (“ERIC”) is pleased to submit these 

comments on the interim final regulations implementing the Paul 

Wellstone and Pete Domenici Mental Health Parity and Addiction Equity 

Act of 2008 (“MHPAEA”). The interim final regulations were published by 

the Departments of Labor, Health and Human Services, and the Treasury 

(collectively, the Departments) in the Federal Register on February 2, 2010. 

 MHPAEA requires employers that sponsor group health plans for 

employees and their families to ensure that there is parity between the 

medical and surgical benefits and the mental health or substance use 

disorder benefits provided under each group health plan. In particular, 

MHPAEA requires group health plans to ensure that: (1) the financial 

requirements applicable to mental health or substance use disorder 

benefits are no more restrictive than the predominant financial 

requirements applied to medical and surgical benefits under the plan; 

(2) there are no separate cost-sharing requirements that are applicable 

only to mental health or substance use disorder benefits; (3) the treatment 

limitations applicable to mental health or substance use disorder benefits 

are no more restrictive than the predominant treatment limitations 

applied to medical and surgical benefits under the plan; and (4) there are 

no separate treatment limitations that are applicable only to mental health 

or substance use disorder benefits. 

1400 L Street, N.W. 

Suite 350 

Washington, DC 20005 

T (202) 789-1400 

F (202) 789-1120 

www.eric.org

The 

ERISA 

Industry 

Committee 
The ERISA Industry Committee Page 2 of 16 

May 3, 2010 

 MHPAEA does not require any employer to offer (or to continue to provide) 

mental health or substance use disorder benefits under its group health plan. 

Instead, MHPAEA applies only to employers that elect to offer these benefits under 

their group health plans. 

ERIC’s Interest in the Interim Final Regulations 

ERIC is a nonprofit association committed to the advancement of the 

employee retirement, health, incentive, and welfare benefit plans of America’s 

largest employers. ERIC’s members provide comprehensive health benefits directly 

to some 25 million active and retired workers and their families. ERIC has a strong 

interest in proposals that affect its members’ ability to deliver high-quality, costeffective benefits. 

ERIC’s members sponsor some of the largest private group health plans in 

the country. Many of these plans currently provide generous mental health 

benefits and substance use disorder benefits. The regulations implementing the 

MHPAEA will have a substantial and lasting impact on the group health plans 

sponsored by ERIC’s members, and on the employees and their families who are 

covered by the plans. 

ERIC’s members are committed to providing high-quality, affordable health 

care to their employees. As American companies struggle to compete in a global 

economy, however, they labor under the burden of a health care system that is 

among the most expensive in the world. This burden falls much more heavily on 

private companies in the United States than it does on their competitors in other 

developed nations, where the government plays a larger role in providing health 

care and controlling medical costs. Large employers feel these competitive 

pressures acutely. Although the recent health reform legislation aspires to reduce 

health costs for all Americans in the long run, in the near term it will impose a 

number of expensive new mandates on employer group health plans. Accordingly, 

ERIC’s members have a vital interest in assuring that the regulations interpreting 

the parity requirements do not impose substantial new costs or administrative 

burdens on employers that voluntarily offer mental health and substance use 

disorder benefits to their employees. 

ERIC’s concern that MHPAEA requirements be affordable and administrable 

is consistent with a primary objective of MHPAEA: to assure that employees will 

continue to have access to mental health and substance use disorder benefits 

through employer-sponsored group health plans. ERIC recognizes that the interim 

regulations must strike a difficult balance: they must give effect to the statutory 

parity requirements without discouraging employers from offering mental health 

and substance use disorder benefits to their employees. ERIC offers these 

comments in the hope that they will assist the Departments to adjust the interim 

regulations where necessary to achieve the appropriate balance. 
The ERISA Industry Committee Page 3 of 16 

May 3, 2010 

Comments on the Regulations 

1. The regulations should not require employers to aggregate separate 

plans. 

The interim final regulations create an unprecedented new aggregation rule. 

Under this rule, if any individual is eligible to receive coverage for medical/surgical 

benefits under an “arrangement to provide medical care benefits,” and the same 

individual is simultaneously eligible to receive coverage for mental health or 

substance use disorder benefits under an entirely different “arrangement” 

maintained by the same employer, the “arrangements” are treated as a single group 

health plan, and the parity requirements apply to the aggregated benefits.1 This 

mandatory aggregation rule is contrary to the plain language of the statute and 

constitutes an unsupportable extension of the parity requirement. The 

Departments should eliminate the mandatory aggregation rule from the interim 

final regulations, and instead should rely on the anti-abuse rule proposed in 2004, 

which requires the aggregation of separate plans only to the extent necessary to 

prevent evasion of the parity requirements. 

The parity requirements apply to “a group health plan (or health 

insurance coverage offered in connection with such a plan) that provides both

medical and surgical benefits and mental health or substance use disorder 

benefits” (emphasis added).2 MHPAEA does not mandate that mental health or 

substance use disorder benefits be subject to the parity requirements when they are 

offered under a separate plan that provides no coverage for medical and surgical 

benefits. In contrast, however, the interim final regulations impose this 

requirement by ignoring the existence of separate plans, regardless of when or why 

the employer established the plans, and treating all benefits offered to the same 

individual as being provided under the same plan. 

There is no basis in the statute or in its legislative history for this 

aggregation rule. The Departments have always permitted employers to determine 

how many plans they will maintain and what benefits will be offered under each 

plan. An employer designates the benefits that constitute a plan in the written 

instruments that govern the plan. Each plan has its own identifying number and is 

required to file its own annual report on Form 5500. Employers establish separate 

plans for a variety of business reasons; and the employer’s decision to designate a 

particular benefit arrangement as a “plan” often determines what rules apply to the 

arrangement. For example, a plan that covers fewer than 100 participants is not 

 

1 26 C.F.R. § 54.9812(e)(1); 29 C.F.R. § 2590.712(e)(1); 45 C.F.R. § 146.136(e)(1). 

2 IRC § 9812; ERISA § 712; PHSA § 2705. 
The ERISA Industry Committee Page 4 of 16 

May 3, 2010 

required to be audited;3 a plan that provides only welfare benefits is not required to 

be funded;4 a plan that provides only payroll benefits such as holiday pay, vacation 

pay, and sick pay is not subject to ERISA;5 a deferred compensation plan that 

covers only management and highly-compensated employees is exempt from 

ERISA’s vesting, funding, and fiduciary requirements.6 The Department of Labor 

has never suggested that an employer must aggregate all arrangements that cover 

the same individuals for purposes of determining whether and how the basic 

requirements of ERISA apply to the arrangements. 

The Departments issued proposed regulations in 2004 that explained how an 

employer could identify its group health plans for purposes of applying a number of 

benefit mandates, including the mental health parity requirements then in effect. 

The proposed regulations respected the employer’s decision to maintain separate 

group health plans, as long as it was clear from the governing instruments that the 

benefits were provided under separate plans, and the arrangements were operated 

as separate plans pursuant to their governing instruments.7 The proposed 

regulations also established an anti-abuse rule, so that “[i]f a principal purpose of 

establishing separate plans is to evade any requirement of law, then the separate 

plans will be considered a single plan to the extent necessary to prevent the 

evasion.” The preamble of the proposed regulations explained that these rules 

provided plans sponsors with great flexibility in determining how many plans to 

maintain, while the anti-abuse rule limited that flexibility to the extent necessary 

to prevent evasion of the statutory requirements.8 

In the preamble of the interim final regulations, the Departments explain 

that an anti-abuse rule is necessary to prevent plan sponsors from avoiding the 

parity requirements by providing mental health and substance use disorder 

benefits under a separate plan that provides no medical or surgical benefits. The 

Departments note that comments on the anti-abuse rule proposed in 2004 raised 

concerns about how employers would demonstrate that they had not established 

separate plans for the principal purpose of evading the law.9 Rather than address 

these concerns by describing the criteria that the Departments would use to apply 

 

3 ERISA § 104(a); 29 C.F.R. § 2520.104-46. 

4 ERISA §§ 301, 302. 

5 29 C.F.R. § 2510.3-1(b). 

6 ERISA §§ 201(2), 301(a)(3), 401(a)(1). 

7 26 C.F.R. § 54.9831-1(a)(2) (proposed); 29 C.F.R. § 2590.732(a)(2) (proposed); 45 C.F.R. 

§ 146.145(a)(2) (proposed). 

8 69 Fed. Reg. 78800, 78807 (Dec. 30, 2004). 

9 75 Fed. Reg. 5409, 5417 (Feb. 2, 2010) 
The ERISA Industry Committee Page 5 of 16 

May 3, 2010 

the anti-abuse rule, the Departments abandoned the anti-abuse rule in favor of the 

mandatory aggregation rule. Under the aggregation rule, all employers are 

presumed to have established separate plans for the purpose of evading the parity 

requirements, even if the employer maintained separate plans long before the 

parity requirements were enacted and designed them as separate plans for 

purposes that are manifestly benign. 

The Departments have cited no evidence of abuse that would justify this 

irrebuttable presumption of guilt. To the contrary, large employers generally have 

modified their group health plans to comply with the MHPAEA parity 

requirements rather than drop mental health and substance use disorder coverage 

or move it to a separate plan.10 Moreover, there is no basis in the statute itself or in 

the legislative history of MHPAEA for a mandatory aggregation rule. Congress 

presumably was aware that the Departments had defined the term “group health 

plan” in the 2004 proposed regulation in a manner that respected the employer’s 

designation of separate plans, subject to the anti-abuse rule. Congress made no 

effort to change this standard when it expanded the parity requirements in 

MHPAEA: to the contrary, it used exactly the same language it had used in the 

Mental Health Parity Act of 1996 to describe the arrangements that were subject to 

the parity requirements. As the plain language of the statute indicates, the 

purpose of MHPAEA is to provide parity between the financial requirements and 

treatment limitations that apply to medical and surgical benefits and to mental 

health or substance use disorder benefits offered under the same group health 

plan.11

There is no evidence anywhere that Congress intended to extend the parity 

requirement to plans that had not previously been subject to this requirement; and 

yet this is precisely the effect that the aggregation rule will have. Consider an 

 

10 A recent survey of 70 Fortune 500 companies by Hewitt Associates indicates that 

employers have generally not eliminated mental health or substance use disorder coverage 

since MHPAEA was enacted in 2008. Hewitt Associates Press Release: “Most Employers 

Already Modifying Benefits to Comply with New Federal Mental Health Parity 

Regulations” (Mar. 1, 2010), http://www.hewittassociates.com/Intl/NA/enUS/AboutHewitt/ 

Newsroom/PressReleaseDetail.aspx?cid=8172. 

11 See H.R. Rep. No. 374 Part 1, 110th Cong., 1st Sess. 13 (2007) (“H.R. 1424 seeks to 

increase access to mental health treatment by prohibiting group health plans (or health 

insurance coverage offered in connection with a group health plan) from imposing financial 

requirements (including deductibles, co payments, coinsurance, out-of-pocket expenses, and 

annual lifetime limits) or treatment limitations (including limitations on the number of 

visits, days of coverage, frequency of treatment, or other similar limits on the scope and 

duration of treatment) on mental health benefits that are more restrictive than those 

restrictions applied to medical and surgical benefits.”) 
The ERISA Industry Committee Page 6 of 16 

May 3, 2010 

example that is quite common among large employers. The employer maintains a 

comprehensive group health plan that offers employees and their family members 

both medical and surgical benefits and mental health benefits, but no substance 

use disorder benefits. In recognition of the comprehensive coverage provided under 

the group health plan, the plan imposes significant cost-sharing requirements on 

participants, including a monthly contribution comparable to a premium, 

deductibles, and co-payments. The benefits under the group health plan comply 

with the MHPAEA parity requirements in all respects, including the application of 

these cost-sharing requirements. 

The same employer also offers an employee assistance program (“EAP”) that 

provides treatment for substance use disorders. All employees and their spouses 

and dependents are automatically enrolled in the EAP program, which requires no 

monthly premium or other cost-sharing. Because the employer bears the entire 

cost of providing the substance use disorder benefit, however, the EAP program 

limits substance abuse treatments to one course of treatment per covered 

individual. The employer has determined that it is not practicable to offer a benefit 

covering unlimited substance use disorder treatments at no charge to its entire 

workforce and their families. 

Under the plan aggregation rule, the one-course-of-treatment limit in the 

EAP is no longer permissible, since no similar limits apply under the group health 

plan to medical and surgical benefits in the same benefit classifications. The 

employer in this example has only three choices, any one of which will significantly 

reduce the health benefits currently available to its employees and their 

dependents. One choice is simply to eliminate the substance abuse disorder benefit 

under the EAP program. The second choice is to limit substantially all medical and 

surgical benefits offered in the same classifications under its group health plan to 

one course of treatment, a restriction that would severely diminish the value of the 

group health plan benefits. The third choice is to remove the provision in the EAP 

program limiting the substance use disorder benefit to one course of treatment, but 

at the same time to require employees to satisfy cost-sharing requirements 

comparable to those under the group health plan in order to defray the cost of the 

unlimited substance use disorder benefit. By forcing the employer to treat the EAP 

program as part of its group health plan,12 the plan aggregation rule in the interim 

 

12 We note that the interim final regulations do not apply the aggregation rule consistently. 

In paragraph (c)(4)(iii), Example 5, the proposed regulation concludes that an employer 

improperly applies a “nonquantitative treatment limitation” if it requires employees to 

complete counseling sessions under an EAP before the employees gain access to mental 

health benefits under the employer’s group health plan, but it does not apply a similar 

exhaustion requirement to medical and surgical benefits under the group health plan. If 

the EAP and the group health plan are truly considered a single plan, however, the 

counseling sessions should be considered part of a unified course of treatment under the 

(continued...) 
The ERISA Industry Committee Page 7 of 16 

May 3, 2010 

final regulation will in effect increase the cost of group health coverage for all 

employees and their families, raising their monthly contributions and associated 

COBRA premiums to the extent necessary to pay for the additional benefit. 

None of the choices we have described in the preceding paragraph advances 

the objective of the MHPAEA, which is to expand the availability of mental health 

and substance use disorder benefits. As this example illustrates, one important 

reason why employers maintain separate plans is so that they can match any 

applicable cost-sharing requirements to the scope of the benefits offered under the 

plan: benefits with fewer limits come with higher costs, and employers must pass 

some of these costs on to participants. We have used the example of a stand-alone 

substance use disorder benefit provided under an EAP because these arrangements 

are widely used;13 but the same point applies to any two group health 

arrangements that are maintained separately and that have different employee 

contribution levels or other cost-sharing requirements. The Departments should 

not assume that employers can simply absorb any additional costs that will result 

when the aggregation rule forces employers to remove treatment limits or other 

design elements that are design to contain the cost of supplemental benefit 

programs funded largely or entirely by the employer. 

2. If the Departments do not rescind the aggregation rule, they should 

publish the rule as a proposed regulation. 

If the Departments do not eliminate the mandatory aggregation rule, they 

should publish it only as a proposed regulation, and not as an interim final 

regulation. As we have explained above, the aggregation rule represents an abrupt 

departure from longstanding practice, from the language of the statute, and from 

the Departments’ prior interpretation of the mental health parity requirements. 

The Departments had confirmed in the proposed regulations issued in 2004 that 

they would respect the employer’s designation of an arrangement as a group health 

plan. When the Departments published a request for information on the expanded 

parity requirements in MHPAEA, they did not ask for information concerning the 

definition of “group health plan” or otherwise indicate that this definition might be 

radically revised.14 Accordingly, until the Departments published the interim final 

regulations in February of this year, employers had no notice that a “group health 

 

group health plan rather than as a precondition to receiving benefits under the group 

health plan. 

13 A 2008 National Study of Employers following ten years trends related to U.S. workplace 

policies and benefits shows that 65 percent of employers provided EAPs in 2008. Families 

and Work Institute, 2008 National Study of Employers (May 21, 2008) available at

http://familiesandwork.org/site/research/reports/2008nse.pdf. 

14 74 Fed. Reg. 19155 (April 28, 2009). 
The ERISA Industry Committee Page 8 of 16 

May 3, 2010 

plan” for purposes of the parity rules might be anything other than the 

arrangement they had designated as a group health plan for all other purposes 

under ERISA and the Internal Revenue Code (the “Code”). 

The Departments’ unexpected reversal of their position concerning the 

“group health plan” definition has left employers in an untenable position. They 

must either apply the parity requirements to artificially aggregated arrangements 

that have different designs and cost-sharing requirements and serve widely 

different purposes, or—if this solution proves impracticable—they must eliminate 

the mental health and substance use disorder benefits they previously provided to 

their employees under bona fide separate plans. 

The Departments noted that while the interim final regulations treat all 

medical benefits provided by the same employer as a single group health plan, the 

rule published in 2004 (which respects the employer’s designation of separate group 

health plans except in cases of abuse) “remains proposed.”15 We respectfully 

suggest that the status of the two rules is the opposite of what it should be. If the 

Departments believe that it is necessary to abandon the accepted definition of a 

“group health plan” and to adopt an unprecedented new mandatory aggregation 

rule, the Departments should publish the new rule as a proposed regulation so that 

all interested parties will have a reasonable opportunity to comment on the rule 

before it becomes effective. 

The need for public comment is especially compelling in a case such as this 

one, where the new rule overturns a longstanding position on which employers 

have relied in designing their benefit programs, and where there is no evidence 

that a change in the established standard is necessary to prevent abuse. As the 

Departments acknowledge in the preamble of the interim final regulations,16 the 

Administrative Procedure Act permits an agency to publish final regulations 

without first issuing a notice of proposed rulemaking when the agency, for good 

cause, finds that notice and public comment are impracticable, unnecessary, or 

contrary to the public interest. None of these conditions applies in the case of the 

mandatory aggregation rule: to the contrary, the Departments and the public will 

benefit from comments that identify the unintended and potentially damaging 

consequences of the aggregation rule. Until the Departments have gathered and 

considered comments on the proposed aggregation rule, the definition of “group 

health plan” that appeared in the 2004 proposed regulations should be the 

definition used in the interim final regulations. 

 

15 75 Fed. Reg. at 5417. 

16 75 Fed. Reg. at 5419. 
The ERISA Industry Committee Page 9 of 16 

May 3, 2010 

3. The regulations should make clear that the aggregation rule does 

not apply to benefits that are a condition of employment. 

As we explained in the preceding comments, the Departments should rescind 

the mandatory plan aggregation rule, or should at a minimum publish it only as a 

proposed rule for further comment. If the Departments allow the rule to take 

effect in its current form, it will disrupt many longstanding benefit programs that 

employers have historically maintained as separate plans for important reasons 

having nothing to do with a desire to escape the parity requirements. When an 

employee’s participation in a plan is a condition of employment, the aggregation 

rule is particularly inappropriate. Even if the Departments make no other change 

in the aggregation rule, we urge the Departments to exempt these plans from the 

aggregation rule. 

For example, if an employee tests positive for an illegal substance, an 

employer might require the employee to undergo a course of treatment under the 

employer’s separate program for substance use disorder benefits. An employee who 

refuses to participate in the substance use disorder treatment program is 

dismissed. The employee is also dismissed if he or she completes the treatment 

program, but later tests positive a second time for the same illegal substance. 

The requirement that the employee participate in the program, and the rule 

that an employee who tests positive a second time is dismissed, are necessary 

features of the employer’s program to maintain a drug-free workplace: these 

features have nothing to do with a desire to limit treatment under a group health 

plan. Nevertheless, under the mandatory aggregation rule, these requirements 

might be viewed as impermissible nonquantitative treatment limits, since no 

comparable requirements apply to medical and surgical benefits under the 

employer’s group health plan. The Departments should make clear that mental 

health and substance use disorder programs required as a condition of employment 

are not required to be aggregated with programs in which employees participate 

voluntarily. 

4. The regulations should make clear that the parity rules do not apply 

to group health plans that cover only retirees. 

The expanded mental health parity requirements under MHPAEA, like the 

original parity requirements enacted in 1996, apply only to group health plans that 

cover active employees. The statute states that the parity requirements “shall not 

apply to any group health plan (and group health insurance coverage offered in 

connection with a group health plan) for any plan year if, on the first day of such 

plan year, such plan has less than 2 participants who are current employees.”17 

 

17 IRC § 9831(a)(2); ERISA § 732(a); PHSA § 2721(a). 
The ERISA Industry Committee Page 10 of 16 

May 3, 2010 

Accordingly, if an employer maintains a separate group health plan for its retirees 

and their family members, the retiree plan is not subject to the parity requirements 

for mental health and substance use disorder benefits. The interim final 

regulations cite the exclusion for retiree-only plans, but only as a cross reference in 

the paragraph describing the exception for small employers.18 The Departments 

should amend the interim final regulations to state directly that a plan is not 

subject to the mental health and substance use disorder parity requirements if the 

plan covers no active employees, and that this rule applies regardless of the size of 

the employer. 

The interim final regulations should also make clear that the mandatory 

aggregation rule does not alter the statutory exemption for plans that cover no 

active employees. The definition of “group health plan” in the interim final 

regulations appears to require an employer to aggregate a retiree-only plan with 

the employer’s group health plan for active employees if the retiree plan provides 

any mental health or substance use disorder benefits. 

The interim final regulations state that plans must be aggregated if any 

“participant” simultaneously receives medical and surgical benefits and mental 

health or substance use disorder benefits under an arrangement or arrangements 

sponsored by the same employer. The regulation also states that all plans 

aggregated in this manner are considered to be a single group health plan for 

purposes of the parity requirements. Under ERISA, the term “participant” means 

“any employee or former employee of an employer . . . who is or may become eligible 

to receive a benefit” under an employee benefit plan.19 Accordingly, if a group 

health plan that covers only retirees and their families offers both medical and 

surgical benefits and mental health or substance use disorder benefits, the interim 

final regulation appears to require the employer to aggregate this plan with any 

group health plan covering active employees who receive both medical and surgical 

benefits and mental health or substance use disorder benefits. 

If a retiree-only plan is treated as if it were part of a plan covering active 

employees, the retiree-only plan will no longer be eligible for the exception that 

applies to a plan covering no active employees. This result is contrary to the plain 

language of the statute. Accordingly, we urge the Departments to make clear that 

the mandatory aggregation rule does not apply to a separate group health plan that 

covers only retirees and their families, even if the employer chooses to offer mental 

health and substance use disorder benefits under the retiree-only plan. 

 

18 26 C.F.R. § 54.9812(f)(1); 29 C.F.R. § 2590.712(f)(1); 45 C.F.R. § 146.136(f)(1). 

19 ERISA § 3(7) (emphasis added). 
The ERISA Industry Committee Page 11 of 16 

May 3, 2010 

We also urge the Departments to clarify that the exception for retiree-only 

plans continues to apply for plan years beginning on or after September 23, 2010, 

when many of the market reforms in the Patient Protection and Affordable Care 

Act (“PPACA”)20 become effective. PPACA amends ERISA and the Internal 

Revenue Code to include new sections21 stating that the provisions of Title XXVII, 

Part A of the Public Health Service Act will apply to group health plans as if 

included in Title I, subtitle A, Part 7, subpart B of ERISA and subchapter B of 

Chapter 100 of the Code. These provisions also state that if any provision in Part 7 

of ERISA or subchapter B of Chapter 100 of the Code conflicts with Part A of the 

Public Health Service Act, the provision in Part A of the Public Health Service Act 

will govern (the “conflicts rule”). PPACA eliminates the exclusion for plans that 

cover fewer than 2 current employees from Part A of the Public Health Service 

Act.22 This change has caused practitioners to question whether the “conflicts rule” 

requires that the corresponding exclusion also be eliminated from section 732(a) of 

ERISA and section 9831(a)(2) of the Code. 

The change in Part A of the Public Health Service Act probably was not 

intended to eliminate the exemption for retiree-only plans. Instead, it appears to 

have been a conforming change intended to reflect the fact that PPACA had 

amended the definition of “small employer” in the Public Health Service Act. A 

“small employer” had been defined as an employer “who employs at least 2 

employees on the first day of the plan year.”23 As amended by PPACA, however, 

the definition applied to an employer “who employs at least 1 employee on the first 

day of the plan year.”24 As a result of this change, a plan that covered only one 

current employee was no longer exempt from the mental health parity 

requirements.25 In contrast, however, a plan that covered no current employees—

that is, a retiree-only plan—remained exempt from all of the mandates in Part A of 

 

20 Pub. L. No. 111-148 (2010), § 1004. 

21 ERISA § 715 and IRC § 9815, added by PPACA § 1562[3](e) and (f). [PPACA § 1562 was 

redesignated as § 1563 by PPACA § 10107(b)]. 

22 The exclusion for plans that cover fewer than 2 current employees had appeared in 

subsection (a) of PHSA § 2721. PHSA § 2721 was redesignated as PHSA § 2735 by PPACA 

§ 1001(4), and was subsequently redesignated as PHSA § 2722 by PPACA 

§ 1562[3](c)(12)(D). Subsection (a) of PHSA § 2721/2735/2722 was deleted by PPACA 

§ 1562[3](a)(1) and by PPACA § 1562[3](c)(12)(D). 

23 PHSA § 2791(e)(4). 

24 PPACA § 1562[3](c)(16). 

25 PHSA § 2705(c)(1), redesignated as PHSA § 2726(c)(1) by PPACA § 1001(2) (“This section 

[i.e., the mental health parity requirements] shall not apply to any group health plan (and 

group health insurance coverage offered in connection with a group health plan) for any 

plan year of a small employer”). 
The ERISA Industry Committee Page 12 of 16 

May 3, 2010 

the Public Health Service Act, including the mental health and substance use 

disorder parity rules. This is so because Public Health Service Act, as amended by 

PPACA, continues to apply only to a “group health plan,” and this term is defined 

in the Public Health Service Act (as it is in Part 7 of ERISA) as “an employee 

welfare benefit plan (as defined in section 3(1) of the Employee Retirement Income 

Security Act of 1974) to the extent that the plan provides medical care . . . to

employees or their dependents.”26

Even if the amendment had removed the retiree-only exemption from the 

Public Health Service Act, however, the “conflicts rule” does not signify that the 

same change should be made in the corresponding sections of ERISA and the Code. 

PPACA amended a number of group health mandates that existed in parallel form 

in the Part A of the Public Health Service Act, Part 7 of ERISA, and Chapter 100 of 

the Code. For example, PPACA amended the provision limiting pre-existing 

condition exclusions and the provision prohibiting discrimination based on health 

status, which had been added in substantially identical form to the Public Health 

Service Act, ERISA, and the Code by the Health Insurance Portability and 

Accountability Act of 1996.27 Rather than revise the parallel provisions of the other 

two statutes, PPACA incorporated the revised provisions of the Public Health 

Service Act in ERISA and the Code, and added the “conflicts rule” in an attempt to 

ensure that the revised language of the Public Health Service Act would supersede 

the existing language of the parallel provisions. 

This attempt to amend ERISA and the Code by bootstrap was not entirely 

successful: it resulted in the unconsidered effects and outright errors that one 

might expect to find in a complex and hastily-assembled bill several thousand pages 

long. For example, the “conflicts rule” applies to all of Part 7 of ERISA, but it 

applies only to subchapter B of Chapter 100 of the Code.28 As a result, it appears 

that Chapter 100 of the Code now contains two versions of the portability, 

 

26 PHSA § 2791(a)(1); ERISA § 733(a)(1) (emphasis added). The use of the term 

“employees” in this definition is deliberate: compare ERISA § 3(1), which defines a “welfare 

benefit plan” as a plan to the extent that the plan provides medical care (among other 

things) to participants or their beneficiaries. The term “participant” is defined in ERISA 

§ 3(7) to mean an employee or former employee. 

27 PPACA § 1201, amending PHSA § 2701 [redesignated as PHSA § 2704] and PHSA 

§ 2702 [redesignated as PHSA § 2705]. Provisions parallel to the PHSA provisions appear 

in ERISA §§ 701 and 702, and in IRC §§ 9801 and 9802. 

28 Compare ERISA § 715(a)(2) (“to the extent that any provision of this part [i.e., Part 7] 

conflicts with a provision of such part A . . . , the provisions of such part A shall apply”) 

with I.R.C. § 9815(a)(2) (“to the extent that any provision of this subchapter [i.e.,

subchapter B] conflicts with a provision of such part A . . . , the provisions of such part A 

shall apply”) (emphasis added). 
The ERISA Industry Committee Page 13 of 16 

May 3, 2010 

nondiscrimination, and guaranteed renewability rules: the old version, which 

appears in subchapter A of Chapter 100 and thus is not affected by the “conflicts 

rule,” and the new version in the amended Public Health Service Act, which is 

incorporated in subchapter B of Chapter 100. The exclusion for plans that cover 

fewer than 2 current employees appears in subchapter C of Chapter 100. As a 

result, this exclusion, as it exists in the Internal Revenue Code, was not affected by 

the “conflicts rule”; and since the exclusion by its terms applies to all of the group 

health plan mandates in Chapter 100 except for the genetic nondiscrimination 

provisions,29 it continues to apply for purposes of the mental health parity rules in 

subchapter B of Chapter 100. 

Whatever the “conflicts rule” accomplishes or fails to accomplish, however, 

Congress cannot have intended to apply the “conflicts rule” to replace the 

exemptive provisions in Part 7 of ERISA and in Chapter 100 of the Code with the 

exemptive provisions in the amended and redesignated section 2722 of the Public 

Health Service Act. In order to see that this is so, one need look no farther than the 

next paragraph of the amended section 2722.30 This paragraph states that the 

requirements of subpart II of Part A (the subpart that, as amended by PPACA,31 is 

 

29 The genetic nondiscrimination provisions are carved out of the exclusion for retiree-only 

plans by I.R.C. § 9802(e). 

30 As explained above in note 22, the amended PHSA § 2721 was ultimately redesignated 

as PHSA § 2722; the former § 2721(b) became § 2722(a). 

31 PPACA changed the subpart references in PHSA § 2722 three times, inserting different 

references each time. See PPACA § 1562[3](a) (“subparts 1 and 2”); PPACA § 1562[3](c)(12) 

(“subpart 1”); PPACA § 10107 (“subparts I and II”). The reference in PPACA § 10107, 

which is the only section that uses the new post-PPACA designations of the relevant 

subparts, evidently is correct. Subpart II, which is captioned “Improving Coverage,” 

apparently is intended to include both the new coverage provisions added by PPACA as 

PHSA §§ 2711–2719A and the prior coverage provisions redesignated by PPACA as PHSA 

§§ 2725–2728. 

PPACA struck subparts 2 and 3 of PHSA Part A and redesignated subpart 4 (“Exclusion of 

Plans; Enforcement; Preemption”) as subpart 2—which, confusingly, immediately follows 

subpart II. PPACA § 1562[3](c)(2), (7), (11). PPACA § 1562[3](c)(12), (13), and (14) 

subsequently renumbered the exclusion, enforcement, and preemption provisions in PHSA 

§§ 2735–2737 as PHSA §§ 2722–2724, with the result that the mothers and newborns 

provision (§ 2725), the mental health parity provision (§ 2726), the post-mastectomy 

reconstructive surgery provision (§ 2727), and the provision mandating coverage of 

students on medical leave (§ 2728) ended up following rather than preceding subpart 2. 

This is evidently an error, since PHSA §§ 2725–2728 have nothing to do with exclusion, 

enforcement, or preemption, but instead are coverage provisions. Despite the numbering 

errors and inconsistencies in PPACA, it seems reasonably clear that the mental health 

parity provisions in the Public Health Service Act are intended to apply only to nonfederal 

governmental plans, as they did before PPACA. 
The ERISA Industry Committee Page 14 of 16 

May 3, 2010 

intended to include the mental health and substance use disorder parity provisions) 

applies only to nonfederal governmental plans and to health insurance coverage 

offered in connection with a group health plan. If this provision is deemed to be 

incorporated in Part 7 of ERISA and Chapter 100 of the Code, and if the “conflicts 

rule” requires that this applicability rule be substituted for the inconsistent 

applicability rules in sections 732 and 733 of ERISA and sections 9831 and 9832 of 

the Code, the only self-insured group health plans that will be subject to the 

general reform and coverage provisions of the Public Health Service Act, including 

the mental health parity rules, will be plans maintained by state and local 

governmental employers. 

We request that the Departments clarify that retiree-only plans continue to 

be exempt from the mental health and substance use disorder parity rules 

notwithstanding the revisions to Part A of the Public Health Service Act. This 

issue has been a source of considerable confusion to employers that are struggling 

to understand and comply with PPACA. The issue has implications broader than 

the application of the mental health parity rules: if the exemption for retiree-only 

plans no longer applies, these plans will become subject for the first time to a 

variety of other group health plan mandates, including the new mandates included 

in PPACA. As we have demonstrated, this result is not consistent with a close 

reading of the amended statutes, and it cannot have been what Congress intended. 

Because the changes in the applicability rules and exemptions in Part A are 

effective generally for plan years beginning on or after September 23, 2010, it is 

urgent that the Departments address this issue at once. Large employers 

ordinarily finalize the design of their group health plans for the next calendar year 

no later than June or July, so that the plans’ third-party administrators will have 

time to program software systems, revise administrative manuals, and train 

customer service representatives to administer the benefits properly. Employers 

also must prepare participant communications and open enrollment materials, and 

must create internet-based tools, to help participants understand the new benefit 

options and make appropriate choices concerning their family’s health coverage for 

the upcoming year. Many employers commence open enrollment for the upcoming 

year in October or earlier. It will be difficult enough for employers to make 

decisions and incorporate the changes required by PPACA for group health plans 

covering active employees and their families in time for open enrollment for the 

2011 plan year. The current confusion concerning the status of retiree-only plans 

serves as a distraction and makes it impossible for employers to finalize the design 

of these plans. 

5. The effective date should be delayed for collective bargaining 

agreements ratified before the regulations were published. 

MHPAEA became effective for most group health plans in the first plan year 

beginning after October 3, 2009, the anniversary of the statute’s enactment. 
The ERISA Industry Committee Page 15 of 16 

May 3, 2010 

However, MHPAEA includes a special effective date for group health plans 

maintained pursuant to one or more collective bargaining agreements. MHPAEA’s 

requirements do not apply to collectively bargained plans until the later of January 

1, 2010, or the date on which the last collective bargaining agreement relating to 

the plan terminates (without regard to extensions after MHPAEA was enacted).32

A delayed effective date for collectively bargained plans is a common feature 

of legislation affecting employee benefits. The purpose of the delayed effective date 

is to allow both employers and union-represented employees to receive the benefit 

of the agreement they have reached through the collective bargaining process, 

without reopening negotiations to address new statutory mandates or regulatory 

requirements announced after the agreement is reached. When the last collective 

bargaining agreement expires, the parties can bargain for changes in the 

employees’ total compensation and benefit package, taking into account the new 

requirements. 

MHPAEA required the Departments to issue regulations interpreting the 

new parity requirements no later than October 3, 2009.33 In fact, however, the 

interim final regulations were not issued until four months later, on February 2, 

2010. The interim final regulations apply for plan years beginning on or after July 

1, 2010. The preamble states that the Departments will take into account goodfaith efforts to comply with a reasonable interpretation of the statute for periods 

before the applicability date of the interim final regulations.34 

The interim final regulations interpret the statute in ways that employers 

and unions could not have predicted. The preamble explains that many of the 

statutory provisions are capable of several reasonable interpretations and that the 

Departments were required to make policy judgments concerning which 

interpretation to adopt. For example, the Departments recognized that the 

statutory language is consistent with the view that a group health plan could apply 

cumulative financial requirements and cumulative quantitative treatment 

limitations separately to mental health and substance use disorder benefits, even 

though the Departments did not adopt this interpretation in the interim final 

regulations.35

Collective bargaining agreements that were ratified after MHPAEA was 

enacted on October 3, 2008, and before the interim final rules were issued on 

 

32 MHPAEA § 512(e), as corrected by Pub. L. No. 110-460 (Dec. 23, 2008). 

33 Pub. L. No. 110-343, § 512(d). 

34 75 Fed. Reg. at 5419. 

35 75 Fed. Reg. at 5415. 
The ERISA Industry Committee Page 16 of 16 

May 3, 2010 

February 2, 2010, had to be negotiated in good faith reliance on the statutory 

language. At the time these agreements were negotiated, it was impossible for the 

parties to anticipate the detailed rules and policy decisions reflected in the interim 

final regulations. Employers and unions should not be required to reopen 

negotiations now in order to conform the benefits provided under collectivelybargained plans to the requirements of the interim final regulations. Instead, the 

Departments should issue guidance confirming that the interim final regulations do 

not apply to a group health plan maintained pursuant to one or more collective 

bargaining agreements ratified after October 3, 2008, and before February 2, 2010, 

until the later of (1) the first plan year beginning on or after July 1, 2010, and 

(2) the date on which the last of the collective bargaining agreements relating to the 

plan terminates (determined without regard to any extension agreed to after 

February 2, 2010). During the period before the interim regulations become 

applicable, the collectively-bargained plan would be required to comply with a goodfaith interpretation of the statute. 

_____________________________________ 

ERIC appreciates the opportunity to provide comments on the interim final 

regulations. If the Departments have any questions concerning our comments, or if 

we can be of further assistance, please let us know. 

Sincerely, 

Mark Ugoretz 

President