MAYER* DROWN 

Mayer Brown LLP 

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April 30,201 0 

Ol'lice of Health Plan Standards and Compliance 

Assistancc 

Employee Renefits Security Administrat ion 

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U . S . Department ul' Labor 

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Washington, D.C. 2021 0 

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wuvw.mayehr~ corn 

Robert E. Bloch 

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Ccnlrrs for Medicare 22 Mcdicaid Services 

Department uf Health and Human Scrvices 

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Washington, D.C. 2020 1 

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Internal Revenue Service 

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Washington, D.C. 20224 

Attn: Cr:P A:LPU:PR (REG- 120692-09) 

Re: CarnmellJstInterlme Paul U'ellstonc and Pete Domenici 

MentalwdiAddi F,q~rity Act oS 2008 

Dear S i r/Md am: 

The fcrl lowing commenls and recommendations art. being submitted on bchalf ol' Blue 

Shield of Calil'ornia ("Blue ShieId") rcgarding the Interim Final Rules (the "Interim Rules") 

implementing the Paul Wcllstone and Pete Domenici Mental I Iealth Parity nnd Addiction Equity 

Act of 2008 (the "MIIPAEA" or the "Act")), Pub. L. 1 10-343, Uiv. C, Title V, Subtitle B (Clct. 

3, 2008). In particular, Blue Shield is col~cerncd that the Interim Rules' dcijnition of u~hat 

ccrnstitutc "nonquantitative treatment lirni tations," in Section 2590.7 12(c)(4 j(ii)(B)-(TI), is 

ox crbroad in that it requires parit! with respect to matters that are not necessary to achievillg the 

Act's purpose of elimina~ing discriminatioii hetwecn medical and mental hen l twsubstance abuse 

benefits. Morcuver, compliance with tlic Act's parity requirenients rcgarding the items in 

subparagraphs JD )-(Dl wi l l require competing health plms to engage in exchanges of 

inSvrmation, and reach agreements, regarding co r~~petitivcl y sensitive matters that may rcducc 

Mayer Brown LLP opefates in combinat~on with our associated English lirn~ted liability pertnership 

and Hong Kong partnersliip {and its associated entities in Asia) and is associaled with Tauil & Chequer Advogados, a Braz~l~an l3w partne:sh~p. 
Mayer Brown LLP 

April 30,201 0 

Pagc 2 

competition and expose those health plans to patcntial antitrust liability. Blue Shield therefore 

recommends that subparagraphs (B)-(D) uf Section 2590.7 12(c)(4)(ii j not be included in the 

Final Rules. 

Background 

A. Provision of Mental Hc;althlSubsta~~ce Abuse Benefits to Blue Shield Custurners 

Rlue Shield of California is an independent member of the Blue Cross Blue Shield 

Association. Blue Shield is a not-for-profi t health plan with 3.4 nill lion members, 4,800 

en~ployees, and some of the largest provider networks in California. Blue Shield offers a \vide 

range of commercial and government health insurance products (underwritten and self-funded) 

th t*oughout C'alil'urni a, including medical/surgical and mental hcalih/subsunce abuse be~lcfits. 

Blue Shield's customers typically purchase medicallsurgical and mental healtl~/substn~~cc 

abuse benefits in one of three ways. First, the customer can contract wid1 Bluc Shield to provide 

both medical!surgical and mental hca!th/substance abuse coverage through Blue Shield. Second, 

Lhe customer can corltracl with Blue Shield for both coverages and Hlue Shicld can, in turn, subcontract wilh a third-party licensed mental health plan to yrovidc mental heal th/suhstnnce abu st: 

benefits on behalf of Blue Shield. Blue Shield might do so, for exa~nple, where it can achieve 

administralive efficiencies by contracling with a third-party plan or where a third-party plat1 can 

provide a more cornprchensive provider network to a particular custotner. Bluc Shield delivers 

rnental health coverage for a substantial portion of its e~uollmenl in underwritten plans using this 

approach. Third, the customer itself snmetimes chuuses to buy medicallsurgical benefits through 

onc company (e.g., Blue Shield), and to "carve out" and purchase mental health/substance abuse 

benefits though another insurer. This latter approach is more comlnon with large, self-funded 

cnlployers who contract with Blue Shield to administer only the medical portion of thcir health 

plan, but also is used by so~~e employers in underwritten plans. 

R. 'fhc MHP AEA and "Nonquantitative Treatment Limitatirsns" 

I3roadly stated, thc h4HPAEA was enacted to mandate parity between ~ncdical/surgical 

benefits imd mental healthlsubstancc abuse benefits. lt achievcs Ihis by requiring that the 

ilnancial requirements for mental healthlsubstance abuse benefits (e.g., co-pays, dcductibIes), be 

"'no Inore reslrictive" thml the "prcdominmt financial requirements applied to substai) tinllg all" 

medicallsurgical bcnc.Gts. Like wise, treatment limitations for melltal health/substanc;e abuse 

bencfits may not be "more restrictj vc" than the treatment limitations placed on medical!surgical 

benefits. "Treatment limitations," are defined by the Act to include "limits on the frequency of 

treatment, number of visits. days of coverage, or other si~ni la1 limits un the scope or duration of 

Ireatment." Section 5 12 (a)(l )(B)(iii). By enacting the MHPAEA, Congress's nin~ was to 

"equalize mental hcalth and addiction benefits w it11 other health bet~efits" and "to end insurance 

coveragr: discrimination for those seeking lo access mental l~ealth and substance use disorder 

bcnelits through their health insurance provider." See T ,etter from Representative Patrick J. 
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April 30, 2010 

Page 3 

Kennedy, et a[., rcgading Request for Infbmation Regarding thc Paul Wellstone and Pctc 

Domenici Mental Health Parity and Addictinn Equity Act of 2008 (June 1,2009). 

Among other things, tllc Interim Rules defi t~e what ctlnstitute "treatment litnitations," In 

addition to mandating parity in qua~~titativc treairnent limitations (e.g., number of visits), the 

Intcrim Rules require tlmt "nonquantitative treatment limitations" be in parity bctween 

medical/sur~gicd and mental health/substancc abuse benefits. See Section 2590.7 12(c)(4). The 

Intcrim Rules go oil to provi Jc an illustrative list of no~~quanlibati ve limitations. These include: 

(B) Formulary design for prescription drugs; 

(C) Standards for provider admission to participate in a network. including 

rcimbursement rates; 

(D) Plan methods for determining usual, customary, and rcasonable charges; 

Section 2590.7 12(c)(4)(ii)(B)-(D). 

Analysis 

It is difficult to scc how requiring parity with respcct lo the items described in 

subparagraphs (B )-( D) advanceq the purposcs uS the MHPAEA to end discrimination with 

respect to "financial requircmenls" or "treatment limitations," bok~ of u-hich relate directly to 

the terms of member health plan beuefits. In particular, the rates at which Ilealth plans reimburse 

providers and the criteria for health care provider participalion in plan networks are not financial 

or treatment benefit terms and have no dircct relationship to such terms. Kccluiring parity with 

respect to these "nonquantilalive treatment limits" thcrcforc appears to be heyond the scopc of 

the Act as well as beyond any reasonable authority granted to promulgate rcgulalions to achieve 

the purposes of the Act. 

Moreover, inclusion of subparagraphs (B)-(TI) it1 the Final Rules may have an adverse 

effect on competition, and expose health plans allempting to comply with these provisions to 

potential antitrust liability. by requiring coordination and agrccmcnt on terms of competition 

between competing plans. In the situations described above in which either Blue Shield 

subcontracts with a third-part y mental healthlsuhsta~~ce abusc provider or its customer contracts 

separately with a Ihird-party mental health/substancc abuse provider, Blue Shield may be a dircct 

compctitvr of the third-party health plan in the provision of mental Ileal tldsubstanct. abwe 

coverage. Further, ~r~ost of tl~cst. mental htaltklsubstance abuse pravidcrs art: owned by health 

plans that compctc wiih Blue Shield in the pros~isian of mcdical/surgical coverage. In these 

situations, the Interim Final Rules. as currcnll! uritten. require heal t11 platis to erchangc 

information on terns ji .e., thc tcrms covered by subparagraphs H)-(D)) tha~ insurance 
Mayer Brown LLP 

April 30,20 10 

Page 4 

companies consi Jer con~petitively scnsi tive in order (1) lo determine whether (he medical 

benclils a plan is providing and the third-party mental heal.lth/substmce abuse benefits arc in 

parity, and (2) if parity does not exis\: to reach agreement on these ten~~s to bring ihe two plans 

into ~ompliance. At thc sane time, a health plan often will be exchanging sensitive competitive 

infom~ntjun regarding its n~edicalls urgical plans with the mental healthlsubstand: abuse affiliate 

ol' a health insurer with which it competes on medical/surgicd coverage. Under the proposed 

rules as ciralied, many U.S. medical insurance plans will find themselves it1 this situation if the 

requirements of subp~aragraphs (l3)-(n) arc adopted in the Find Kuks. 

There is no question that the matters covered by suhpmngaphs (B)-(D) are the subject ui' 

cortlpetition between mental hcalth/substmce abuse and medical/surgicd plans. For instance, 

health plans competc on their formulary dcsigns. both in terms of thc drugs that are covered and 

payment terms mi th pharmaceutical companies. Moreover, a particular health plan's Lormulay 

design is influenccd by the outcome of its direct contracts with pbmzt;eutical manufacturers. 

Requiring health plans to exchange information and/or reach agreements on thcsc terms may 

result in r-educcd competition an formulary design and coulcl rcduce the ability to contract 

compe\i~ively with the phmaceutical industry. Also, these actions mny rcsul t in the amounts 

competing hcalth plans pay pliani~aceutical companies king reduced below the levels that would 

prcvail in a competitive market, which could adversely affect the provision of pharmaceutical 

colmpany producls. Similai-1 y , health plans compete on the con~pensatj on they pay contracting 

md non-contracting hcalth care providers, including physicians and hospitals, and requiring 

plans to exchange infunnation and agree on such terms rnay result in provider compcnsaliun 

being reduced below ccompcti tive levels, u~l~icll could adversely affect thc provision of health 

care services. 

in addition to these competitive cfikcls, these actions also mag expose health plans 

attcn~pling to comply with subparagraphs (B)-(TI) to thc risk of antitrust liability. Agreements 

between colrlpcting purchasers on the amounis they will pay for produc~s or services can he per 

sc illegal under Section 1 of the Shertnan Act, and exchanges hetween competitors of 

competitively sensitive infnrn~ation regarding such matters can violate Section 1 if such 

exchanges result in anricompetitive effects. Such exchanges also can be uscd as evidence of 

alleged price fixing. See, e.g., Bellt>vur Drug. Co. v. Advanre PUS, 2004-Trade Cas. (CUH) 1 

74,32 9 (E. D. Pa. 2004) (plaintiff pharmacies adequalel!: alleged per se price fixing claiin against 

pharmacy bcnefit manager and plat1 sponsors regarding conspiracy nut to bid up pl-ices); Totid v. 

EXTU~I Corp.. 275 F,33 191 (2d Cir. 200 1 ) (exchanges between competing employrs of salary 

information can furm the basis of a vivla~ion of $ 1 of the Sher111zu1 Act); Stoles u United 

Slufes Gypsum Cu., 438 U.S. 472, 443 (1 978) {"Exchmges of currerlt pricc inrumation, of 

course, have the greatest potential fbr generating anticompetitivc ei'lects and although not per sc 

unla\vl'ul have col~sistently bccn held to violate the Sherman Acl."). 

Also problematic is the proposed requirement of parity on standards f'ur admission to 

provider nctwurks, which will require competing health plans to share informalion and perhaps 

reach agreements hit11 respect tu the manner in which they compete to develop and offer their 

provider netxvorks. Such exchanges and agreernerits may reduce the degree to which health 
Mayer Brown LLP 

April 30,21 I 0 

Page 5 

pla~ls compete regarding who they choose to include in their networks and how they difkrentiate 

their networks in marketing then\ to employers and hcdalth plan membcrs, Moreover, if tl~c 

standards agreed to by competing plans rcsult in certain providers being excluded from both of 

those plans' networks, the excluded providers could Iry to challenge this exclusion under thc 

antitrust laws, including by alleging they arc the victims of a group boycott. See. ~g,, FVelchlin 

v. Tenet fi~ullhcare Corp., 366 F. Supp.2d 338 (D.S.C. 2005) (denying summary judgmcnl 

against antitrust claim that hospital and doctors violated 9 1 01' the Sherman Act by excluding 

osteopathic physicians frotn medical staff); Notivnul Gerime(ficrrl Husp. and Geror~tolo~ 

Cenrer v. Blue C'russ of Kc~nsas City, 452 U.S. 378 (1 98 1 ) (Blue Cross of Kansas Cily's refusal 

to enter inlo a participation agreement with hospital Surrned basis of claims under $8 1 and 2 of 

lhe Shemall Act against Blue Cross of Kansas City and the national Blue Cross ~ssociation). ' 

As this discussion illustrates, compliance ~vi thsubparagraphs (l3)-(D) of Section 

2590.7 1 2(c)(4#ii) may requirc health plans to engage in activities with serious competitive 

impIicatjnns and could expose tl-)em to potential anti trust liability , Alternatively, to avoid lhese 

risks, medical insurance companies may stop subcontracting with third-party mental 

healthlsubsttmcc abuse providers even when it may be more efficient for them to clo so, and also 

may ref'use to participate in "can~e out" situations where the custonler prefers to contract with .a 

third-party mcntal healthlsubstance abuse plm. Ultimately, this would result in consumers being 

deprived of choices whcn receiving their mental healthisubstarlce abuse benefits -- a result 

directly cnntrary lo the goals of the MHPAEA. Blue Shield, therefore, urges you not tu include 

subparagraphs (R)-(D) in the Final Rule?;. 

' In response to ihc potential antitrust cIainls dcscrihed above, health plans may he able to assert that, to tht. cxtent 

the MHPAEA, us implernent~d by the Interim Rules, requires them to act in a manner directly contrar) to ihc 

antitrust laws, the Aci constitutes an implied repeal of the antitrust laws. See Credit Suwe S'cc1rritit.s (USA) LLC v. 

Billing, 5 1 U.S. 264 (2007) (impl~eci repeal of thc antitrust laws is warranted when 1) there exists regula~ory 

authority under the relevan1 law to superv~se the activity in question, 2) there is evidcilce that the responsible 

regulartry entity has exercised thal authority, and 3) there is a resulling risk that the law at issue and "antitrust laws, 

if both applicable, would produce conflicting guidance, requirements, dutics, privileges, or standards of conduct .") 

Horvevel; an implicd repeal is not a bar to an nnlilrust cla~m, but rather is a defensc on which a health plan nlay 11ul 

prevail imtil it bas expendcd considerable resources in litigation. I'hu~, the ability to asverl this defense is not an 

dcquate sr~ bstitute for elir~lirlating the risk of antitrust liabilit) by not lnclrlding subparag1 dphs (B)-(D) in the Prnal 

Rules. 
Mayer Brown LLP 

April 30* 2010 

Page 6 

Please let us know if you wmould likc to discuss hese curruncnts further. Also, please note 

that given the concerns expressed in this letter, Blue Shicld is providing a cupy of the lener both 

to the Antitrust Division of thc Department of Justice and the Fedcral Trade Commission so they 

can provide you with any camrnents thoy have regarding these issues. 

Sincerely, /I