i

 

 

May 28, 2009 

Attention: MHPAEA Request for Information Comments 

Alan D. Lebowitz 

Deputy Assistant Secretary for Program Operations 

Employee Benefits Security Administration 

U.S Department of Labor 

200 Constitution Avenue, NW, Ste N-5653 

Washington, DC 20210 

Re: Request for Information Regarding the Paul Wellstone and Pete Domenici 

Mental Health Parity and Addiction Equity Act of 2008 

Dear Mr. Lebowitz: 

The Parity Implementation Coalition, which includes the American Society of Addiction 

Medicine, Betty Ford Center, Bradford Health Services, Faces and Voices of Recovery, 

Hazelden Foundation, Mental Health America, National Alliance on Mental Illness, 

National Council for Community Behavioral Healthcare, The Watershed Addiction 

Treatment Programs and Wellstone Action, is pleased to comment on the Request for 

Information on the Paul Wellstone and Pete Domenici Mental Health Parity and 

Addiction Equity Act of 2008 (MHPAEA or “the Act”). Our organizations advanced this 

legislation for over twelve years in an effort to end discrimination against individuals and 

families who seek services for mental health and substance use disorders (MH/SUD). 

We remain committed to its implementation according to congressional intent. 

The Parity Implementation Coalition looks forward to the timely implementation of the 

parity regulations and appreciates the efforts of the Departments of Labor, Health and 

Human Services and Treasury to promulgate regulations. 
ii

TABLE OF CONTENTS 

EXECUTIVE SUMMARY.............................................................................. iii 

PREVALENCE OF MH/SUD......................................................................... 1 

INDIVIDUALS WITH MH/SUD ACCESS MORE CARE IN THE PUBLIC SECTOR 2 

LEGISLATIVE HISTORY............................................................................. 3 

COMMENTS REGARDING ECONOMIC ANALYSIS, PAPERWORK REDUCTION 

ACT AND REGULATORY FLEXIBILITY ACT 

3 

COMMENTS REGARDING REGULATORY GUIDANCE.................................... 

Other Limitations on Benefits..................................................................

Scope of Services and Treatment Limitations................................................ 

Medical Management: Survey Data...........................................................

Coverage of Specialized Services...............................................................

Medications.......................................................................................

Parity in Continuum of Services................................................................

Evidence-Based Treatment......................................................................

Coverage of Provider Types....................................................................

Fee Schedules.....................................................................................

Varying Plans.....................................................................................

4 

4 

5 

8 

9 

10 

13 

13 

15 

17 

21

SPECIFIC CLARIFICATIONS....................................................................... 

Medical Management Techniques.............................................................

Medical Necessity & Treatment Limitations.................................................

23 

23 

25 

MEDICAL NECESSITY DETERMINATIONS & AVAILABILITY......................... 27 

REASONS FOR DENIALS............................................................................. 27 

OUT-OF-NETWORK COVERAGE.................................................................. 29 

COST EXEMPTION..................................................................................... 30 

OTHER ISSUES.......................................................................................... 

 Medicaid Managed Care..........................................................................

Notice to Beneficiaries...........................................................................

Establishment of a Consumer Advocate Office...............................................

30 

30 

38 

38 

CONCLUSIONS.......................................................................................... 38 
iii

EXECUTIVE SUMMARY 

The Parity Implementation Coalition (“the Coalition”) is pleased to comment on the 

Request for Information on the Paul Wellstone and Pete Domenici Mental Health Parity 

and Addiction Equity Act of 2008 (MHPAEA or “the Act”). Coalition members include: 

American Society of Addiction Medicine, Betty Ford Center, Bradford Health Services, 

Faces and Voices of Recovery, Hazelden Foundation, Mental Health America, National 

Alliance on Mental Illness, National Council for Community Behavioral Healthcare, The 

Watershed Addiction Treatment Programs and Wellstone Action. 

Historically, there has been a disparity in both benefit design and utilization management 

between mental health and substance use disorders (MH/SUD) and medical/surgical 

conditions. The Coalition believes the discrimination in access to services for those with 

MH/SUD as compared with access to care for other medical conditions will not be 

improved unless MHPAEA regulations are implemented according to Congressional 

intent. 

During the RFI comment period, we surveyed Coalition members to better understand 

provider and consumer experiences with medical management techniques used by plans. 

Our respondents confirmed what was reported at parity field and Congressional hearings 

– medical management techniques in addition to treatment limitations and/or financial 

requirements have allowed plans to circumvent the improvements intended by existing 

state or federal parity laws. The MHPAEA regulations must ensure that medical 

management techniques are no more restrictive for MH/SUD services as compared to 

medical/surgical services. 

To help clarify Congressional intent, the Coalition retained legal counsel to assist with 

analyzing key questions regarding statutory interpretation and a benefits consulting firm 

to compare reimbursement, out-of-pocket spending and in and out-of-network differences 

between behavioral health and medical/surgical claims data. 

As such, key findings from the Coalition survey and other analyses include: 

o Scope of Services and Treatment Limitations Mental health and substance use 

disorder benefits under the Act explicitly assume some level of treatment services. 

Although plans can limit treatment services, the statute imposes restrictions on 

such limitations. Specifically, these limits must be no more restrictive than the 

predominant treatment limitations applied to substantially all medical/surgical 

benefits covered by the plan. A plan that refuses to cover a MH/SUD service that 

has no analog in medical/surgical will violate this section of the Act as well as the 

requirement that there can be no “separate treatment limitations that are 

applicable only with respect to mental health or substance use disorder benefits.” 

If a plan covers every level and type of medical/surgical care for substantially all 

medical/surgical benefits, but only provides for certain levels or types of care for 

MH/SUD, the plan has violated the Act’s “no more restrictive” standard. 
iv

o Medical Management MHPAEA does not allow the use of more stringent 

medical management criteria for MH/SUD benefits than for medical/surgical 

benefits. Similarly, the text, purpose and history of the statute demonstrate that 

Congress did not intend to allow medical necessity criteria for MH/SUD benefits 

to be more stringent than those used for medical/surgical services. The purpose 

and context of the Act demonstrate that similar criteria that result in a reduction in 

access to services may violate the Act. Interpreting the statute otherwise would 

misconstrue the intent of Congress. 

o Medications Plans that provide both medical/surgical and MH/SUD benefits are 

required to cover medications that treat MH/SUD conditions in a manner that is 

no more restrictive than the coverage for medication for medical/surgical 

conditions. Allowing requirements for medications to be more restrictive for 

MH/SUD benefits than for medical/surgical benefits contradicts the language and 

purpose of the statute and is, therefore, not permitted. The Act requires no more 

restrictive management of drug formularies as between MH/SUD benefits and 

medical/surgical benefits, but it would require coverage of only one drug for each 

FDA clinical indication in the MH/SUD benefit if only one drug for each clinical 

indication is provided in the medical/surgical benefit. 

o Coverage of Provider Types Coverage of treatment by only certain types of 

providers falls within the treatment limitations section of the law and is, therefore, 

subject to the Act’s “no more restrictive” standard. Whether exclusion of a 

certain provider type violates this standard is a fact-specific inquiry that is 

dependent upon the exclusion of provider types in the medical/surgical benefit. 

o Fee Schedules MHPAEA requires that, if a plan covers both medical/surgical 

benefits and MH/SUD benefits, the out-of-network requirements for MH/SUD 

can be no more restrictive than the out-of-network requirements for 

medical/surgical. Moreover, permitting fee schedules to be so low that access is 

reduced is inconsistent with a broad reading of the statutory text and purpose of 

the Act. 

o Varying Plans Insurers or employers that provide a number of health plans with 

multiple and very different cost benefits, cost-sharing, deductibles, and co-pays 

will not violate the Act, because the statute applies only to a specific plan, not to a 

range of separate products; however, individual plans that provide benefits with 

multiple and different financial requirements for MH/SUD services do not meet 

the Act’s provisions unless the requirements are no more restrictive than the 

predominant financial requirements applied to substantially all medical/surgical 

benefits. 

o Out-of-Network Coverage Because network requirements should qualify as a 

treatment limitation under the Act, to be “consistent” with the requirements of the 

section, the network requirements in a plan for the MH/SUD category must be 

“no more restrictive” than the network requirements for the medical/surgical 

category. To the degree to which the regulations can provide a methodology for 

comparing the characteristics of the MH/SUD network and those used for other 

medical specialties, the implementation of the law would be enhanced. 
v

o Medicaid Managed Care Plans The Medicaid statute requires that Medicaid 

managed care plans that have both medical/surgical and MH/SUD benefits must 

comply with the parity provisions of the Act. This conclusion is supported by 

both the legislative history of the Act and the regulatory history of previous 

mental health laws. The text of the Act and legislative intent behind the statute 

demonstrate that these Medicaid Managed Care Plans should ensure parity 

between medical/surgical and MH/SUD benefits even in states where the 

Medicaid Managed Care Organization carves out the management of the 

MH/SUD benefits in their managed Medicaid plans. 

o Notice to Beneficiaries Plans should provide beneficiaries with at least 60 days 

notice in advance of changing their benefits, since individuals with MH/SUD 

conditions often have difficulty finding providers. 

o Establishment of a Consumer Advocate Office More than 160 million Americans 

covered under ERISA and Medicaid managed care plans are covered under 

MHPAEA. To assist consumers with questions concerning their new rights and 

benefits under the law, a consumer advocate office should be established at the 

Department of Labor and Department of Health and Human Services. 
1

May 28, 2009 

Attention: MHPAEA Request for Information Comments 

Alan D. Lebowitz 

Deputy Assistant Secretary for Program Operations 

Employee Benefits Security Administration 

U.S Department of Labor 

200 Constitution Avenue, NW, Ste N-5653 

Washington, DC 20210 

Re: Request for Information Regarding the Paul Wellstone and Pete Domenici 

Mental Health Parity and Addiction Equity Act of 2008 

Dear Mr. Lebowitz: 

The members of the Parity Implementation Coalition (“the Coalition”) are pleased to 

comment on the Request for Information regarding the Paul Wellstone and Pete 

Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA or “the 

Act). The Coalition includes the American Society of Addiction Medicine, Betty Ford 

Center, Bradford Health Services, Faces and Voices of Recovery Hazelden Foundation, 

Mental Health America, National Alliance on Mental Illness, National Council for 

Community Behavioral Healthcare, The Watershed Addiction Treatment Programs and 

Wellstone Action. Our organizations advanced this legislation for over twelve years in 

an effort to end discrimination against individuals and families who seek services for 

mental health and substance use disorders (MH/SUD). We remain committed to its 

implementation according to congressional intent. 

BACKGROUND 

PREVALENCE OF MENTAL HEALTH AND SUBSTANCE USE DISORDERS

Almost half (46.4 percent) of all Americans will experience a mental illness or substance 

use disorder during their lifetime. One in four Americans experience mental illness each 

year. MH/SUD conditions cause more burden of disease than any other health condition 

– twice as much as cardiac disease. Nine percent of the population ages 12 and older, 

more than 22 million Americans, were classified with substance use or dependence in 

2007, but only 10 percent of them received treatment. The economic impact of addiction 

alone is staggering, at an estimated $250 billion a year. Persons with severe mental 

illnesses accounted for $193 billion dollars in lost earnings in 2002 – more than the gross 

revenue of every Fortune 500 company except Wal-Mart. The faces and voices of 

MH/SUD span all facets of the population: rich, poor, young, aging, working and unable 

to find work. 
2

INDIVIDUALS WITH MH/SUD ACCESS MORE OF THEIR CARE IN THE PUBLIC SECTOR

In principle, our Coalition believes that it is important that patients seeking MH/SUD 

services can identify quality caregivers, access quality care, and avail themselves of thirdparty payment for quality MH/SUD care just as they could care for any medical/surgical 

condition. All payers should provide equity in the way they pay for medical/surgical and 

MH/SUD care. Currently, MH/SUD treatment services are delivered by an 

uncoordinated patchwork of payers – Medicaid, Medicare, state programs and private 

insurance, as well as philanthropic and charitable organizations. Medicaid is the largest 

payer of mental health services and the second largest substance use disorder treatment 

payer. Private insurance is the second largest payer of MH/SUD services, but accounts 

for only 24 percent of mental health expenditures and only 10 percent of substance use 

disorder expenditures. The proportion of private insurance spending on substance use 

disorders has significantly declined over the last decade as public expenditures have risen 

and private insurance spending for mental health has grown very little. One recent 

survey found that while 88 percent of insured workers had some coverage for substance 

use disorders, their benefits were characterized by higher cost sharing and annual and 

lifetime limits on inpatient and outpatient care.1

 The rate of out-of-pocket spending on 

MH/SUD is higher than for other medical conditions. For example, among employees 

with substance use disorder coverage, only 19 percent were enrolled in a plan that did not 

limit the number of hospital stays or office visits. In contrast, nearly all workers covered 

by medical insurance had unlimited hospital stays and office visits. Mental health 

treatment, while included in most health plans, is limited in the scope and duration of 

treatment and often involves higher co-pays and treatment frequency limits than general 

health services. 

A 2005 reported that 90 percent of privately insured employed workers were in plans 

with special limits on outpatient mental health coverage.2

 By contrast, special limits on 

other types of medical treatment are rare; more often plans impose an annual or lifetime 

cap on plan expenditures only for an individual.3

Research shows that while health care costs in general have been increasing, the share 

going to mental health has remained steady with spending on health care growing twice 

as fast as spending on mental health care over a thirty year period through 2002. There 

have also been reports of low rates of spending on mental health services in health 

maintenance organizations relative to overall health spending. In addition, as referenced 

above, private insurance spending on substance use treatment has declined over the last 

decade. Moreover, a recent study reported that about two-thirds of primary care 

physicians could not get outpatient mental health services for their patients - a rate that 

was at least twice as high as that for other services - due in part to health plan barriers and 

inadequate coverage.4

                                          1 Gabel, J., et al. (2007) Substance abuse benefits: still limited after all these years. Health Affairs 26(4) 

pp w474-w482 

2 US Bureau of Labor Statistics. (2007). National compensation survey: Employee benefits in private 

industry in the United States, 2005. Bulletin, 2589. 

3 Hodgkin D, Horgan CM, Garnick DW, Merrick EL (2009). Benefit limits for behavioral health care 

in private US health plans. Administration and Policy in Mental Health and Mental Health Services Research

36(1): 15-23. 

4 Cunningham, P. (2009) Physicians’ perspectives on access to mental health care. Health Affairs 28(3) 

pp w490-w501. 
3

Given the disparity in the benefit design between mental health and addictive disorders 

and medical/surgical conditions, the Coalition believes it is imperative that MHPAEA is 

implemented to end the discrimination in access to services for individuals with these 

disorders and to provide equity with the coverage for other medical and surgical 

conditions. 

LEGISLATIVE HISTORY

MHPAEA was signed into law on October 3, 2008. The law aims to ensure parity 

between coverage for MH/SUD and medical/surgical benefits in insurance plans that 

offer coverage for both benefits. Enactment of the legislation followed over a decade of 

congressional consideration of similar bills. During the 110th Congress, the legislation 

was introduced in the Senate as S. 558 and in the House as H.R. 1424. MHPAEA was 

passed as part of the financial rescue legislation, the Emergency Economic Stabilization 

Act of 2008. Enactment followed fourteen field hearings around the country, 

consideration by five congressional committees and floor deliberation in both 

congressional chambers. 

Despite in-depth congressional consideration of the meaning and importance of the 

MHPAEA, portions of the law may raise questions of statutory interpretation. Because 

of potential ambiguities, the Coalition asked attorneys at Patton Boggs to analyze the 

purpose, legislative history and various canons to help provide clarity on the Act. Their 

analysis contains a review of the bill to determine the scope and meaning of the Act’s key 

provisions, in addition to the intrinsic evidence surrounding the legislation to help clarify 

many of these issues. We included much of their rationale in our responses. 

A. COMMENTS REGARDING ECONOMIC ANALYSIS, PAPERWORK 

REDUCTION ACT AND REGULATORY FLEXIBILITY ACT 

MHPAEA covers 150 million individuals under ERISA, over 27 million individuals 

under Medicaid managed care plans, 2.6 million individuals under SCHIP managed care 

plans and 26 million individuals under Taft-Hartley plans. MHPAEA also covers fully 

insured plans, many of whom were subject to state parity laws. 

The Congressional Budget Office (CBO) provided cost estimates of the separate House 

and Senate parity bills in March and September of 2007. CBO did not provide a detailed 

cost estimate of the parity legislation as enacted in the financial rescue package. 

In its scoring of the stand-alone House and Senate parity bills, CBO stated that the new 

law would result in higher premiums for employer-sponsored health benefits. CBO 

estimated premiums would rise by 0.4 percent. In CBO’s view, higher premiums would 

result in more of an employee’s compensation being received in the form of non-taxable 

employer-paid premiums and less in the form of taxable wages. As part of CBO’s 

estimate of S. 558, it concluded the law would reduce federal tax revenue by $1 billion 

over the 2009–2012 period and by $3 billion over the 2009–2017 period. CBO estimated 

that enactment would increase direct federal spending for the Medicaid program by $280 

million over the 2009–2012 period and by $790 million over the 2009–2017 period. 

CBO estimated that the bill would cause an increase in private sector spending by 

prohibiting insurers and plans from imposing different treatment limitations and/or 

financial requirements for MH/SUD than for medical/surgical benefits. Further, CBO 

stated that the direct costs on the private sector would total about $2.5 billion in 2010 and 

would grow in later years. 
4

CBO made important assumptions – including that behavioral health changes among 

plans – changes in the types of health plans that are offered and reductions in the scope or 

generosity of health insurance benefits – would offset 60 percent of the potential impact 

of the bill on total plan costs. CBO stated that the remaining 40 percent of the potential 

increase in costs – less than 0.2 percent of the group health insurance premiums – would 

occur in the form of higher spending for health insurance. These costs would be passed 

on to the workers both through their taxable compensation and other fringe benefits. 

CBO estimated that Medicaid payments to managed care plans would only increase by 

0.2 percent. This is less than the projected premium increase for employer-sponsored 

insurance because Medicaid programs currently offer a broader scope of mental health 

benefits than most private sector insurance programs. 

While CBO does not score savings in “out years,” the Coalition believes the savings that 

will accrue to plan sponsors – reductions in collateral health care costs, emergency room 

visits and absenteeism alone – will at least offset the premium increases projected by 

CBO. 

B. COMMENTS REGARDING REGULATORY GUIDANCE 

1A. DO PLANS IMPOSE OTHER TYPES OF FINANCIAL REQUIREMENTS OR TREATMENT 

LIMITATIONS ON BENEFITS? HOW DO PLANS APPLY FINANCIAL AND TREATMENT 

LIMITATIONS TO MENTAL HEALTH AND SUBSTANCE USE DISORDER BENEFITS?

Group health plans and insurers manage mental health and addictive disorder benefits in 

numerous ways. Given the 1996 Mental Health Parity Act (MHPA), some limits may 

uniquely apply to substance use conditions. Limitations on MH/SUD benefits include 

but may not be limited to: 

o Annual and lifetime caps 

o Deductibles 

o Co-pays 

o Coinsurance 

o Excessive mandatory out-of-pocket spending 

o Limits on the frequency of treatment, number of outpatient visits, and days of 

inpatient coverage 

o Exclusion of certain levels of care such as residential treatment or partial 

hospitalization (in or out-of-network) 

o Utilization review, especially prior-authorization practices 

o Utilization review being conducted by professionals with no training in MH/SUD 

o Unclear, unpublished or arbitrary medical necessity and appropriateness criteria, 

including ever-changing criteria lacking clear definitions for specific levels of 

care such as “inpatient,” “residential,” “detox,” or “rehab” 

o Coverage requirements based on the patient completing an entire course of 

treatment—refusal to pay for any care unless an entire prescribed package of care 

is “completed” 

o Coverage predicated upon completion of utilization review with exceedingly short 

time frames (as little as an hour after completion of the clinical assessment) or 

upon a requirement that face to face assessments take place only in the state of the 

plan’s corporate headquarters 
5

o “Fail first” policies, such as requirements that the patient must participate in but 

“fail” 1 – 2 times at outpatient treatment within the last year in order to be eligible 

to use inpatient, rehabilitation or residential benefits or that they must fail on a 

less expensive medication prior to having access to a more expensive medication 

for addiction detox or rehab care 

o Review of the evidence base for particular treatment service requests to determine 

whether or not services are evidence-based - often MH/SUD treatments are 

reviewed and then denied on a more restrictive standard than medical/surgical 

treatments 

o Review of treatment service requests to determine whether or not services are 

cost-effective 

o Use of restrictive fee schedules 

o Limits on specific providers, such as approving services only if offered by 

providers who meet geographic licensure requirements (e.g., they hold a license in 

the state of the plan’s corporate headquarters) 

o Onerous rules on participation in preferred provider networks that are more 

restrictive for MH/SUD providers (including elimination of providers from 

network if they allow a plan participant to self pay for care deemed “not 

medically necessary” by plan) 

o Many MH/SUD treatments with scientific evidence are denied because there are 

not clear medical/surgical analogs 

o Prohibiting plan coverage for specific diagnostic categories, e.g., eating disorders 

and/or other specific diagnoses 

o Prohibiting plan coverage for MH/SUD services that are mandated by third 

parties such as court orders, even if such services are medically necessary 

o Limitation of adequate expertise in provider networks 

Scope of Services and Treatment Limitations

A key issue under the implementation of MHPAEA is whether the definitions of “mental 

health benefit” and “substance use disorder benefit” include services as part of what a 

benefit is. If so, regulations will need to clarify whether plans have complete flexibility 

to include or not include “services” when they offer “benefits,” and if they can only offer 

a few or no services specific to MH/SUD conditions and still meet the Congressional 

intent of the MHPAEA. 

The first step in determining which particular services may or may not be covered under 

the Act is to determine whether “services” are covered under the statute generally. If the 

Act does not require plans to provide services at all, the question of which precise 

services are covered becomes moot. 

The text of the Act speaks most often to the concept of “benefits,” rather than services. 

The Act states that the financial requirements and treatment limitations applicable to 

“mental health or substance use disorder benefits” can be no more restrictive than the 

treatment limitations applied to medical/surgical benefits.5

 The issue, then, is whether 

services are included within the definition of benefits. 

                                          5 Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act, 29 U.S.C.A. § 

1185a(a)(3)(A). 
6

Mental health benefits are defined in the Act as “benefits with respect to services for 

mental health conditions.”6 (Emphasis added) In like manner, the Act defines substance 

use disorder benefits as “benefits with respect to services for substance use disorders.”7

(Emphasis added) The plain language of the Act, with its explicit reference to services in 

the definition of mental health benefits, is strong evidence that Congress intended to 

include services within the definition of MH/SUD benefit. Under the 1996 mental health 

parity law, a similar definition was used for both MH/SUD and medical/surgical benefits. 

Interpreting the Act otherwise would lead to an illogical result that should not be ascribed 

to Congress. If health plans were allowed to qualify as providing “benefits” while not 

providing any services, it would severely undermine the statute passed by Congress. The 

logical extension of this analysis, then, is how few included services would suffice 

without violating the treatment limitations section of the Act, either as to its intent or its 

explicit language. 

Some have argued, for example, that an employer can choose to provide benefits for a 

mental health condition and then choose to not cover any treatment services specific to 

that condition (e.g., depression is covered but antidepressant drugs are not covered nor is 

psychotherapy covered). Therefore, would a plan’s decision not to provide treatment for a 

mental health condition (once a plan has chosen to offer benefits for a mental health 

condition) violate the treatment limitations section of the Act (i.e., no treatment limitation 

can be more restrictive for a MH/SUD condition than for medical/surgical conditions)? 

Again, the Coalition believes that MH/SUD benefits under the Act encompass some level 

of treatment services and the extensive legal analysis provided by outside legal counsel 

clearly and unambiguously supports this determination. The question then becomes, can 

treatment services be limited under the definition of the mental health and substance 

disorder benefits? The answer to this question seems to be yes. 

The statutory language does not appear to preclude limits on treatment services. The 

applicable language states only that MH/SUD treatment limitations must be “no more 

restrictive” than the treatment limitations for medical/surgical benefits.8

 This language 

implicitly recognizes that there may be limits in the coverage of medical/surgical 

benefits. Indeed, the practical reality of insurance coverage demonstrates that these limits 

exist. The Act does not say that no similar limits can be applied to mental health and 

substance use disorder coverage. Instead, it simply says that the limitations can be no 

more restrictive. By implication, some limits on mental health and substance use 

disorder services are authorized. 

Proponents of limiting services have pointed to the definition of the MH/SUD benefit to 

argue that they do not have to cover every service and, accordingly, do not have to cover 

specialized services. The definition of mental health benefits means “benefits with 

respect to services for mental health conditions” as defined under the terms of the plan 

                                          6 § 1185a(e)(4). 

7 Id. 

8 Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act, 29 U.S.C. § 

1185a(a)(3)(A)(i). 
7

and in accordance with applicable Federal and State law.9 The argument would be that 

plans maintain the flexibility to determine which services to provide because the Act 

specifically allows them to be “defined under the terms of the plan.” However, this 

argument omits the critical words “for mental health conditions.”10 

A natural reading of the sentence shows that it is the mental health conditions that are 

defined under the terms of the plan, not the mental health services. That is, under this 

language, the plan appears to have flexibility as to what mental health conditions it 

covers. The Coalition believes Congress was concerned over the possibility that plans 

would use this discretion to discriminate by diagnosis. The statutory requirement that the 

Government Accountability Office (GAO) report determine whether MH/SUD conditions 

were dropped is a critical consumer protection component of this law. However, it is 

important to note that once a plan decides to cover a MH/SUD condition, it is subject to 

the requirement with respect to services discussed above. 

In addition, the Act states that treatment limitations and financial requirements can be no 

more restrictive than the predominate treatment limitations and financial requirements 

applied to substantially all medical/surgical benefits covered by plans. The Act defines 

“predominant” as most common or frequent, but fails to set a bright-line standard 

regarding when a financial requirement or treatment limitation will be considered the 

most common or frequent.11 

Imagine, for example, that a plan desires to limit the frequency of treatment. To be in 

compliance with the Act, the proposed frequency limit must be the most common 

type of frequency limit, not the most common treatment limitation generally. To use 

another example, with respect to financial requirements, a co-pay would be predominant 

if it is the most common or frequent co-pay charged by the plan. It does not matter 

whether a co-pay is the most common or frequent financial requirement generally. If a 

plan imposes a co-pay for MH/SUD benefits that is rarely used for medical/surgical 

benefits, the Coalition believes it would be in violation of the Act.

Thus, a financial requirement or treatment limitation is predominant if it is the most 

common or frequent limit. Unfortunately, exactly how common or frequent a limitation 

must be to be predominant is not addressed in the Act. 

We understand that “substantially all” was defined in the 1996 MHPA as being 2/3 of 

medical/surgical benefits covered under the plan, but specific clarifications in the 

regulations of how common or frequent a limitation or requirement must be to be 

“predominate” or “substantially all” would be helpful. It should be noted that this same 

analysis specifically applies to low income persons – eligible for Medicaid through 

TANF or other income related eligibility categories – served in managed care plans. 

                                          9 Id. at § 1185a (e)(4). The definition of substance use disorder benefits is substantially similar. 

10 Id. 

11 § 1185a(a)(3)(B)(ii). 
8

Medical management: Survey data 

Clearly, under MHPAEA Congress intended for plans to medically manage benefits. At 

issue is how restrictive can these practices be before MHPAEA is violated? 

For the purpose of these comments, medical management is defined as synonymous with 

utilization management.12 Medical management includes, but is not limited to, all of the 

management techniques described above. 

To help our understanding of current marketplace medical management practices, we 

polled Coalition members and asked them to provide the most commonly used medical 

management practices on mental health and substance use disorder benefits. The list on 

pages 4 and 5 includes the most commonly reported medical management practices – 

these include both treatment limitations and financial requirements on providers, 

networks and specific services. 

In general, our survey finds that restrictions are somewhat greater on substance use 

disorder benefits than on mental health benefits, and are particularly restrictive on 

residential, inpatient or “rehab” benefits. While this is not a surprising result given that 

stricter utilization of these types of more costly benefits tend to be common on both 

behavioral and other medical benefits, what is surprising from our survey is how common 

the restrictions are, 2/3 of large plans have these kinds of restrictions on MH/SUD 

benefits and how the definitions of the benefit vary from plan to plan. The criteria for 

utilizing these benefits would change, even in the same year, allowing plans to deny 

coverage even when the plan document specifies that coverage is provided for a specific 

level of care. 

Providers reported to us, although less frequently, instances where outpatient mental 

health services have not been covered, or the in-network rate for outpatient care has been 

so low ($20 per session) as to make it unfeasible for a provider to offer such services and 

maintain the financial viability of their practice or the agency where they practice. 

Coalition members also frequently reported that intensive outpatient treatment for 

substance use disorders has either not been covered, or the day and visit limits have been 

extremely restrictive. 

Both providers and consumers have reported to us that payment is often refused because 

the plan only covers certain types of providers. The non-covered providers fall under a 

wide range including physicians, physician assistants, any provider that is not located at a 

hospital, licensed mental health counselors, and licensed clinical social workers. Some 

plans exclude all practitioners except in-house practitioners; others exclude all services 

other than those provided through state-certified agencies or through agencies operating 

in the public sector. 

We heard from consumers whose coverage – even when the particular category was 

covered in their plan benefits summary – was denied because they had a co-occurring 

                                          12 For example, the term “medical management” can refer to the management and treatment of a 

specific disease to reduce complications and improve outcomes (i.e., the management of diabetes). These 

comments do not use the term “medical management” in this way. 
9

mental health or substance use disorder, or had co-occurring chronic pain. Many 

consumers reported their plan simply had no MH/SUD out-of-network benefits at all, 

even if their plan provided out-of-network coverage for their medical/surgical benefits. 

The survey confirmed what was widely reported by witnesses at parity field and 

Congressional hearings – MH/SUD benefits are managed more restrictively and children 

and adolescents face significant obstacles in accessing mental health and substance use 

disorder treatment. One study suggests that half of the children experiencing depression 

are not receiving care.13 Most often reported was that there were either no providers or 

facilities specializing in child or adolescent services in the plan’s network, or that plans 

would only pay for care delivered by specialists trained in child or adolescent issues and 

none were available in the network. 

We know that concerns with access to behavioral health care are an issue for individuals 

and families seeking care for their mental health and addictive disorders. In a 2004 

survey done in Massachusetts, the study found that behavioral health coverage denials 

accounted for half of all appeals in 2002.14 The denial rates for MH/SUD services are 

reported to be much higher than medical/surgical services. This represents a dramatically 

disproportionate statistic, with behavioral health claims comprising less than 5 percent of 

all healthcare claims paid, yet comprising 50 percent of appeals from denied care. 

The regulations need to take into account that in some states and federal plans with 

parity, medical management techniques other than treatment limitations or financial 

requirements have allowed plans to circumvent the benefit design improvements that 

parity attempts to achieve.15 In a study of states with parity, large increases in health care 

utilization have not occurred; a result some attribute to medical management techniques 

rather than benefit design. While the regulations should provide for the use of medical 

management criteria, its use as applied should not result in discriminatory access to 

mental health and substance use disorder services. Therefore, the Coalition believes all 

medical management techniques (including, but not limited to, utilization review,

prior-authorization, preferred provider network criteria, use of fee schedules, use of 

evidence-based review criteria, and reviews of the experimental vs. non 

experimental nature of proposed care) are all types of “treatment limitations” 

applied to the management of benefits and may not be more restrictive for MH/SUD

services as compared to medical/surgical services.

Coverage of specialized services such as residential psychosocial rehabilitation services 

for addiction, which have no clear analog in medical/surgical benefits 

The question remains whether a plan is required to cover specialized services that do not 

have direct analogs in medical/surgical treatments. Again, the Act says very little about 

whether individual services are required to be covered in all cases. 

                                         

13 Glied, S., & Neufeld, A. (2001). Service system finance: Implications for children with depression and 

manic depression. Biological Psychiatry, 49, 1128–1135. 

14 Balser, R. & Tolman, S. (2006) Joint Committee on Mental Health and Substance Abuse 2005 – 

2006 biennial report. Retrieved May 11, 2009 from: 

archives.lib.state.ma.us:8080/dspace/bitstream/2452/37738/1/ocn312129952-2005-2006.pdf

15 Frank, R. G., & McGuire, T. G. (1998). Parity for mental health and substance abuse care under 

managed care. Journal of Mental Health Policy and Economics, 1(4), 153–159. 
10

However, the statutory language contains broad language prohibiting separate treatment 

limitations on MH/SUD services. The treatment limitations section of the Act states that 

health plans must ensure that “there are no separate treatment limitations that are 

applicable only with respect to mental health or substance use disorders.”16 Under a strict 

reading of the Act, a plan that refuses to cover a mental health service that has no analog 

in medical/surgical may violate this section of the Act. If a plan refuses to cover a 

particular MH/SUD service that does not exist outside of mental health, it is clear that the 

treatment limitation applies only to mental health or substance use disorders. Although 

some may argue that this is a wooden application of the Act, it is a reasonable argument 

to make. The language also may indicate the desire of Congress to have the protection 

apply broadly. If Congress had meant to limit this language and the protection against 

treatment limitations it supplies, it could have done so. 

With regard to specific services, the Coalition believes that a major component of the 

appropriate continuum of mental health and substance use disorder care, day treatment or 

partial hospitalization services, do have a medical/surgical analog. Inpatient 

rehabilitation benefits for stroke and spinal cord injury patients on the medical/surgical 

side are often continued in partial hospitalization or ‘day rehab’ programs. Provision of 

intensive chemotherapy for various cancers in physicians’ offices is intensive, costly and 

often requires recurring visits. Coverage for outpatient surgery in either physicians’ 

offices or in specialized non-hospital outpatient surgery centers are common today and 

are an important part of the continuum of care – this is also true for intensive outpatient 

programs for MH/SUD. The Coalition believes that any plan that covers ‘day rehab’ 

or intensive outpatient services for patients with such medical/surgical conditions 

would need to cover ‘day treatment’ or intensive outpatient services for mental 

health and substance use disorders in order to be compliant under MHPAEA.

Medications 

While the Act is silent on medications or any other specific treatments, plan utilization 

trends demonstrate that pharmacotherapies are an ever-growing part of MH/SUD 

benefits. The Coalition believes if a plan provides both medical/surgical and 

MH/SUD benefits, the Act requires the plan to cover medications that treat mental 

health and substance use disorders in a manner that is no more restrictive than the 

coverage for medications for medical/surgical conditions. 

As a starting point, it is important to note that the Act does not impose a requirement on 

plans to provide mental health and substance use disorder benefits.17 Rather, the Act 

applies only to a plan that “provide[s] both medical and surgical benefits and mental 

health or substance use disorder benefits.”18 Thus, a plan is under no independent 

obligation to provide MH/SUD benefits. By extension, if a plan does not offer a 

MH/SUD benefit, it clearly is not required to cover medications for the treatment of 

MH/SUD, even if the plan offers coverage for medical/surgical medications. Assuming 

                                          16 Id. 

17 As stated by the House Education and Labor Committee in its Report on the legislation, “The bill 

does not mandate group health plans to provide any mental health coverage.” H.R. REP. NO. 110-374, pt. 1

(2007). 

18 Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, 29 

U.S.C.A. 1185a(a)(3)(A). 
11

that the plan offers both medical/surgical and MH/SUD benefits, the question is whether 

the Act applies to medications at all. By the plain language of the Act, treatment 

limitations and financial requirements applicable to MH/SUD benefits can be “no more 

restrictive” than those applied to medical/surgical benefits.19

In light of current clinical and treatment practices in both the MH/SUD and 

medical/surgical areas, it seems clear that medications can be equated with services. 

Both the medications themselves and the prescription of these medications by 

appropriately licensed practitioners are considered to be treatment services within the 

health care field. In practice, medications are one of the most common treatment services 

provided for both MH/SUD and medical/surgical conditions. 

The statutory text also gives support for including medications as “services” under the 

Act. MHPAEA defines benefits as “benefits with respect to services” for mental health 

and substance use disorders.20 It would be reasonable to interpret the phrase “with 

respect to” to mean “relating to.” So understood, the Act defines benefits as practices 

relating to services. Clearly, in the course of mental health treatment, the services 

provided by certain mental health professionals (e.g., psychiatrists) often involve 

treatment with medications. In such a case, the medication “relates to” the services being 

provided by the practitioner. Interpreted in this manner, medications fall within the 

definition of “benefits” and are thus included within the treatment limitations and 

financial requirements sections of the Act.21 A prominent illustration is requiring plan 

beneficiaries to “fail first” on older, cheaper medications before being given access to 

more modern medicines. 

Several specific examples of disparate treatment of MH/SUD medications were raised in 

the Coalition survey. For example, coverage was refused for an injectable MH/SUD 

pharmacotherapy in several plans surveyed. The reason for the denial was that the plan 

only covers injectable drugs if they are used for chemotherapy or surgeries. This is a 

clear example of a far more arbitrary denial of coverage for MH/SUD treatments than is 

allowed for medical/surgical conditions. A second plan denied coverage for a SUD 

medicine because it alleged “there was a lack of evidence,” or use of the drug was not 

evidence-based. The regulations should clearly state that MH/SUD services cannot be 

reviewed by scientific criteria that are more restrictive than those used for 

medical/surgical services. 

Our analysis assumes that plans are allowed to utilize requirements for determining 

which medications are covered under the plan. This assumption seems warranted given 

the flexibility plans have to impose restrictions such as limits on services covered and 

medical necessity criteria. This does not mean, however, that plans are able to use 

evidence-based criteria for medications that are more restrictive for MH/SUD 

benefits than for medical/surgical benefits. First, the Act does not contain specific 

authorization that requirements for medications may be more restrictive for one benefit 

                                          19 Id. at § 1185a(e)(4). 

20 H.R. REP. NO. 110-374, pt. 1 (2007) (Educ. & Labor Comm.); H.R. REP. NO. 110-374, pt. 2 (2007)

(Ways & Means Comm.); H.R. REP. NO. 110-374, pt. 3 (2007) (Energy & Commerce Comm.); S. REP. NO. 110-

53, at 3 (2007) (Sen. Comm. on Health, Educ. & Labor, 2007). 

21 In many ways, the analysis of this question is similar to the analysis of whether “medical necessity” 

requirements can be more stringent for MH/SUD benefits than for medical/surgical benefits. 
12

category than the other. Thus, specific textual authorization is lacking.22 More 

importantly, as evidence-based requirements can be used as treatment limitations, the Act 

provides quite the opposite. If requirements for medications fit within the Act, they can 

be no more restrictive under the MH/SUD benefit than under the medical/surgical 

benefit. More generally, the text of the Act aims for equity in plan benefits and 

requirements rather than enhanced restrictions in one area as opposed to another. The 

Act states that treatment limitations imposed upon MH/SUD benefits must be no more 

restrictive than those imposed on medical/surgical benefits. 

The Coalition believes the Act also requires no more restrictive management of drug 

formularies for MH/SUD than for medical/surgical benefits. Thus, the Act would 

only require coverage of one drug for each FDA clinical indication under the MH/SUD 

benefit if only one drug for each FDA clinical indication is provided under the 

medical/surgical benefit. 

The treatment limitation section of the Act includes “limits on the frequency of treatment, 

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

treatment.”23 Since the Act does not specifically mention drug formulary management, 

the regulations must determine whether it falls within the treatment limitations section of 

the Act. Drug formulary management will only be subject to the Act’s parity 

requirements if it falls within the treatment limitations section. Based on the language, 

history and intent of the Act, we believe that it does. 

The non-exclusive nature of the treatment limitations list, combined with the similarity of 

formulary management to the other listed limitations, demonstrates that formulary 

management is included within the treatment limitations section. The treatment 

limitations section includes a specific list of treatment limitations. However, the text of 

the Act demonstrates that the list does not cover all the possible treatment limitations. 

The Act precedes the list with the word “including,” demonstrating that the list is not 

intended to be exhaustive. In addition, the phrase “other similar limits” demonstrates that 

other limitations can come within the definition.24 Drug formulary management is 

similar to all of the listed limitations. Frequency of treatment, number of visits, and days 

of coverage all have to do with managing or limiting a benefit in some way, presumably 

to keep costs down. Similarly, formulary management is concerned with restricting 

access to medications for the same purpose. Certainly the “scope” of treatment is limited 

by a formulary that does not cover certain medications. Thus, formulary management 

appears to fall within the treatment limitation definition. 

If formulary management fits within the definition of treatment limitation, what 

restrictions does the Act impose? The Act states that plans must ensure that “treatment 

limitations applicable to such mental health or substance use disorder benefits are no 

more restrictive than the predominant treatment limitations applied to substantially all 

medical and surgical benefits covered by the plan (or coverage).”25 

                                          22 Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, 29 

U.S.C.A § 1185a (2009). 

23 § 1185a(a)(3)(B)(iii). 

24 Id. 

25 § 1185a(a)(3)(A)(ii). 
13

As described above, it seems clear that if a plan offers medications for medical/surgical 

conditions, its coverage of MH/SUD medications must be no more restrictive. However, 

this is not the same as a blanket requirement as to which drugs must be covered. The fact 

that a plan offers some medications within the medical/surgical benefit does not mean 

that it has to cover at least one drug for each FDA clinical indication within the MH/SUD 

benefit. Rather, this requirement would only materialize if a plan offered one drug for 

each FDA clinical indication within the medical/surgical benefit category. If a plan 

offered one drug for each FDA clinical indication within the medical/surgical benefit 

and did not do so in the MH/SUD benefit, the Coalition believes it would be in 

violation of the Act. Accordingly, the analysis must be performed based on the 

coverage contained in each plan. 

Parity in continuum of services 

Closely related to the variety in the types of plans issue, is whether a plan must provide 

parity in the continuum of care of medical/surgical and MH/SUD benefits. From our 

survey, we learned that plans offer a full continuum of care in the medical/surgical 

benefit but may only cover detoxification and outpatient services in the SUD benefit. We 

believe this type of coverage would violate the Act’s “no more restrictive” standard. 

Because the Act requires parity in coverage, but does not mandate that a plan provide 

MH/SUD benefits, group health plans are not required to provide a MH/SUD benefit. If a 

plan does not provide a MH/SUD benefit, the plan is likewise not required to provide 

coverage for specific services or a full continuum of services under such benefit. If, 

however, a plan provides MH/SUD benefits, as well as medical/surgical benefits, the plan 

may not impose limitations on the scope or duration of treatment under the MH/SUD 

benefit that are more restrictive than those imposed under the medical/surgical benefit. 

Additionally, the Act provides that there be “no separate treatment limitations that are 

applicable only with respect to mental health or substance use disorder benefits.”26 Thus, 

the analysis of this question must focus on the scope and duration of treatment covered 

under the medical/surgical benefit. If a plan offers a full continuum of services under its 

medical/surgical benefit, and only two levels of services, such as detoxification and 

outpatient levels of care for alcohol or drug use disorders under its MH/SUD benefit, the 

plan will not be in compliance with the parity requirements under the Act. 

Evidence-Based Treatment 

MH/SUD conditions are treatable by evidence-based therapies and the knowledge of 

what constitutes appropriate care has grown markedly. For example, a useful description 

of the full continuum of SUD services that should be made available to insured persons in 

various circumstances appears in the National Quality Forum’s (NQF) “Consensus 

Standards for the Treatment of Substance Use Conditions: Evidence-Based Treatment 

Practices.” NQF endorsed only those practices for which the evidence is strongest, most 

accepted and expected to have the greatest impact on improving care. The report 

concluded that “the treatment of substance use conditions must involve a continuum of 

care and a longitudinal perspective including employment of chronic care model for those 

with more severe substance use disorders.”27 The patient placement criteria published by 

                                          26 Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, 29 

U.S.C.A § 1185a(A)(3)(i), (ii)(2009). 

27 National Quality Forum (2007) National voluntary consensus standards for the treatment of 

substance use conditions: Evidence-based treatment practices. 
14

the American Society of Addiction Medicine, “Patient Placement Criteria for the 

Treatment of Substance-Related Disorders (Second Edition – Revised” or “ASAM PPC2R”), also clearly describes the full continuum of care for addiction treatment. 

In our Coalition survey, respondents noted an increasing use of “lack of evidence-based 

treatment” as a reason for denials of care. The evidence base for treatments for 

medical/surgical conditions may not be more rigorous than those used for MH/SUD. In a 

recent JAMA article, researchers reported that recommendations issued recently by the 

American College of Cardiology are largely developed from lower levels of evidence in 

our opinion.28

To illustrate these points, an insured obtaining substance use disorder treatment may be 

admitted for detoxification, followed by an inpatient rehabilitation level of care, often 

followed by residential treatment, and/or outpatient treatment and therapy. To analogize, 

an insured obtaining medical/surgical care typically may be admitted for surgery, 

followed by intensive care in a monitoring unit, followed by continued hospitalization in 

a regular patient room, or sometimes transferred to a less intensive rehabilitation facility, 

followed by outpatient therapy. If a plan covers every such level and type of 

medical/surgical care for substantially all medical and surgical benefits, but only 

provides for certain levels or types of care for a substance use or mental health 

disorder, such as detoxification and outpatient treatment services only, there likely 

exists a limitation on the duration and scope of treatment under the MH/SUD 

benefit that is more restrictive than that under the medical/surgical benefit. The 

Coalition believes that such a limitation would be in violation of the Act’s “no more 

restrictive” standard.

If treatment services can be limited under the definition of MH/SUD benefits, how 

limited can those treatment services be? The Act sets forth a two part test for 

determining if a treatment limitation is prohibited: a treatment limitation is prohibited if it 

is more restrictive than the predominant treatment limitations applied to substantially all 

medical and surgical benefits covered by the plan. Accordingly, the Act seems to 

envision a plan-specific inquiry regarding what treatment limitations are permitted. If a 

plan chose to severely limit these services, it would have to show the limitation is the 

most common or frequent type of limit under the plan. The plan would also have to show 

that it applies a similar type of limit to substantially all medical and surgical benefits 

under the plan. While the law appears to provide plans’ flexibility as to what mental 

health conditions and substance use disorders it covers, once it decides to cover the 

condition or disorder, it is subject to the “no more restrictive” standard. 

Opponents of this view may argue that the treatment limitations section does not apply to 

treatment services in the first place. The Act states that “[t]he term ‘treatment limitation’ 

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

other similar limits on the scope and duration of treatment.”29 Proponents of greater plan 

flexibility will argue that this section addresses how services are covered, not which 

services are covered. In other words, the Act discusses limits on the frequency, number, 

and days of treatments, not limits on which treatments may be offered. The statutory 

                                          28 Tricoci, P. et al (2009). Scientific evidence underlying the ACC/AHA clinical practice guidelines. 

JAMA, 301(8), p. 831-841. 

29 § 1185a(a)(3)(B)(iii). 
15

interpretation canon of ejusdem generis expresses a presumption that when several items 

in a statutory list are followed by a general term, the general term is to be construed to be 

“of the same class” as the items in the list. Here, the list discusses frequency of 

treatment, number of visits, days of coverage, and the more general “other similar limits 

on the scope and duration of treatment.”30 Under ejusdem generis, the “other similar 

limits” will be construed to be of the same class of the limits expressed immediately 

prior. The other limits referred to how services are to be covered (i.e., in what frequency, 

for how long, etc.), not which services are to be covered. 

This argument appears to the Coalition to be rebutted by the Act’s plain language. The 

list in question states that the term “treatment limitation” “include[s]” limits on 

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

duration of treatment. The word “includes” shows that the list is demonstrative rather 

than comprehensive. In other words, choice of the word “includes” means that the listed 

treatment limitations are simply examples, not an exhaustive list of the possible treatment 

limitation subject to parity.31 If Congress had wanted the treatment limitations section to 

only apply to the listed limits, it could have used stronger, more limiting language. 

Accordingly, the Coalition believes limitations on services should be included within the 

treatment limitations definition. If so, limitations on services are subject to the Act’s “no 

more restrictive standard.”32 

Coverage of provider types 

From our survey, the Coalition learned that plans often deny coverage for licensed mental 

health counselors, licensed clinical social workers or certified addiction counselors. We 

believe coverage of treatment by certain providers falls within the treatment 

limitations section of the Act and is therefore subject to the Act’s “no more 

restrictive” standard. It is also important to note that in the current environment, some 

plans restrict access to physicians as providers of mental health and substance use 

disorders care. Physicians may be excluded from coverage or ‘medical necessity’ 

determinations when they propose to offer individual psychotherapy to patients with 

mental health conditions or group therapy to persons with addiction. Some plans have 

included physicians as providers of medication management services for medical/surgical 

or psychiatric conditions, but not for substance use disorders. 

Whether an exclusion of a certain provider violates this standard is a fact-specific inquiry 

that is dependent upon the exclusion of providers in the medical/surgical benefit. 

As discussed above, the Act addresses benefits and the services that flow from that 

benefit. The question remains, however, as to the scope of providers that a plan must 

cover under the benefit. Specifically, can a plan exclude coverage of treatment delivered 

by certain types of providers? This question must be analyzed in two parts. The first 

question is whether the Act actually applies to the issue of providers. If the Act does not 

address coverage by certain providers, the plan likely may exclude treatment by certain 

providers. If the Act addresses coverage by certain types of provider, the second question 

                                          30 Paul Wellstone and Pete Domenici Mental Health parity and Addiction Equity Act of 2008, 29 

U.S.C. § 1185a(a)(3)(B)(iii). 

31 Id. 

32 Id. at § 1185a(a)(3)(ii). 
16

is whether excluding coverage for treatment delivered by certain types of providers is a 

violation of the Act. 

Again, the Act requires parity in two areas, financial requirements and treatment 

limitations.33 The Act also prohibits “separate treatment limitations that are applicable 

only with respect to mental health or substance use disorder benefits.”34 The question is 

whether the exclusion of a type of provider falls within the treatment limitations section 

of the Act. The definition of treatment limitation states that such limitations “include[s] 

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

limits on the scope of duration and treatment.”35 Those who wish to ensure that provider 

arrangements are not subject to the parity section of the Act may argue that because 

provider limitations are not included in the “treatment limitation” definition, the decision 

to exclude a provider is outside the scope of the Act and thus left to the discretion of the 

plan. 

We believe this argument falls short under a careful reading of the statutory language. 

The list in question states that treatment limitation “includes” limits on frequency, 

number of visits, and days of coverage. The word “includes” shows that the list is 

demonstrative rather than comprehensive. In other words, choice of the word “includes” 

means that the listed treatment limitations are simply examples, not an exhaustive list of 

the possible treatment limitations subject to parity.36 If Congress had wanted the 

treatment limitations section to only apply to the listed limits, it could have use stronger, 

more limiting language. Accordingly, provider exclusions can reasonably be construed 

to be part of the treatment limitations definition. 

As parity between benefits is key, the operative issue is whether the plan also excludes 

coverage of treatment delivered by certain providers in the medical/surgical benefit. If 

so, the plan may exclude coverage for certain providers within the MH/SUD benefit. 

However, the plan’s abilities are not unlimited. As noted, a plan’s provider exclusions in 

the MH/SUD benefit must be “no more restrictive” than in medical/surgical.37 For 

example, consider a group plan with a medical/surgical benefit requiring that facilities 

and/or clinicians be appropriately licensed by the state in which they are located and 

accordingly, in which the services are rendered. The MH/SUD benefit, on the other 

hand, requires that facilities and/or clinicians are appropriately licensed in the state from 

which the plan is issued. Thus, an insured under such a plan may seek medical/surgical 

treatment from out-of-state healthcare providers, including facilities that have mutually 

recognized excellent treatment programs. However, under the MH/SUD benefit, the 

insured cannot leave the state in which the plan is issued in order to receive covered 

treatment. The licensure limitation under the MH/SUD benefit would constitute a 

treatment limitation that is more restrictive in the MH/SUD benefit than in the 

medical/surgical benefit. 

In another illustration, a group plan providing both medical/surgical and MH/SUD 

benefits may allow benefits for services rendered by hospitals or other types of inpatient 

                                          33 Id. 

34 Id. 

35 § 1185a(a)(3)(B)(iii). 

36 Id. 

37 Id. 
17

or residential programs or facilities, as defined by the plan for medical/surgical 

conditions. Yet, that same plan might refuse coverage for free-standing substance use 

disorder treatment inpatient or residential facilities in the MH/SUD benefit, which are 

properly licensed for each level of care they provide and are equivalent to properly 

licensed hospitals in the medical/surgical benefit. If a plan provides for coverage of 

services offered in specialty medical/surgical facilities such as orthopedic hospitals, 

gynecological hospitals, or outpatient surgical centers such as ophthalmological or 

interventional pain management surgery-centers, then care would be required by 

MHPAEA to be covered in specialty mental health or substance use disorder treatment 

facilities. If a treatment limitation would prevent an insured from obtaining covered 

treatment on the MH/SUD side from those healthcare providers that specialize in, 

and are specifically licensed to render the services that the insured requires, the 

Coalition believes a plan with this type of treatment limitation would be in violation 

of the Act. 

Similarly, imagine a plan that provides coverage for medical services rendered by 

substantially all types of licensed professional clinicians such as physicians, nurses, and 

physical rehabilitation therapists in the medical/surgical benefit. This plan would be 

required to provide coverage for substance use disorder services rendered by 

substantially all types of licensed professional MH/SUD providers such as 

psychiatrists, psychologists, and mental health counselors/social workers in the 

MH/SUD benefit.

While there is no precise formula for when the “more restrictive” threshold is met, when 

a plan term or condition operates to impose a treatment limitation on the MH/SUD side 

that does not exist on the medical/surgical side, the Coalition believes the plan is in 

violation of the Act. This analysis will depend on the coverage offered by each plan. 

Fee schedules 

The treatment limitation section addresses limits that the plan can put on the services it 

covers. While fee schedule amounts are not listed as one of the cited policies in the 

treatment limitation section of the Act, disproportionately low fee schedules are 

commonplace for MH/SUD providers and account for much of the lack of access for 

children, adolescents and seniors. To help the Coalition assess whether lower fee 

schedules are more commonplace for MH/SUD providers than for medical/surgical 

providers, we asked the actuarial and benefits consulting firm Milliman to analyze major 

medical and behavioral health conditions in 2007 MedStat MarketScan claims; this data 

represents 24.2 million commercially insured members. Milliman examined the 

differences in average allowed cost per visit relative to Medicare allowable levels and the 

percentage of visits provided in network.38 Below, Table 1A documents that behavioral 

health providers are reimbursed on average over 10 percent less than providers of 

medical/surgical services (103 percent of Medicare rates vs. 113 percent of Medicare 

rates). Table 1B documents that behavioral health consumers are nearly twice as likely to 

receive care out-of-network (22.3 percent of the time vs. 9.1 percent of the time), thereby 

driving up their out pocket expenses. These high out-of-pocket expenses are comparable 

to the out-of-pocket expenditures found by Levitt et al in their 2008 forecast of private 

and public MH/SUD expenditures. In their study, they found that consumers’ out-of-

                                          38 These were visits provided by a behavioral health specialist (physician, psychiatrist, psychologist, et 

al) who are using specific CPT codes. 
18

pocket expenditures totaled 14 percent of total MH/SUD spending and an additional 4 

percent of total spending came from consumer self pay.39

Table 1A - Summary of Outpatient Visit Results 

Diagnostic 

Category Unique Users Users 

Per 1,000 

Average # 

Office Visits 

Average Allowed 

as % of MCR40

% Visits 

In-Network

Substance Abuse 51,122 2.114 11.44 135.4% 83.6% 

Adjustment Reaction 360,628 14.913 6.37 93.3% 75.0% 

Neurotic Disorders 136,305 5.637 6.16 100.1% 70.6% 

Depression 735,253 30.405 5.99 105.2% 83.4% 

Anxiety 446,342 18.458 4.22 103.6% 75.9% 

Behavioral - Other 561,478 23.219 3.25 109.8% 81.2% 

Behavioral Subtotal 5.17 103.4% 79.3% 

 

Cancer 677,049 27.998 3.00 122.4% 90.4% 

Diabetes 902,427 37.318 2.47 111.9% 91.7% 

Ischemic Heart Disease 314,365 13.000 1.87 110.1% 90.3% 

CHF 39,941 1.652 1.86 112.4% 90.3% 

Arthritis 1,689,088 69.849 1.82 114.8% 91.1% 

Hypertension 2,105,702 87.078 1.80 108.7% 91.6% 

Asthma 620,680 25.667 1.63 111.0% 93.9% 

Stroke 30,978 1.281 1.57 117.5% 89.0% 

COPD 374,618 15.492 1.37 110.4% 91.6% 

Gastritis 109,409 4.524 1.14 106.7% 92.8% 

Medical Subtotal 1.97 113.2% 91.4% 

Table 1B - Outpatient Results Split Between Behavioral and Evaluation & Management (administrative office codes) Visits 

Diagnostic Ave. Allowed as % of MCR - INN Ave. Allowed as % of MCR - OON % Visits In-Network 

Category BHV Visits E&M Visits BHV Visits E&M Visits BHV Visits E&M Visits

Substance Abuse 136.7% 128.9% 134.5% 117.7% 83.8% 80.7% 

Adjustment Reaction 86.7% 120.6% 111.7% 109.9% 74.7% 90.9% 

Neurotic Disorders 90.1% 118.6% 118.6% 112.7% 68.8% 91.8% 

Depression 100.3% 120.2% 120.0% 114.1% 82.6% 91.5% 

Anxiety 94.3% 115.6% 121.0% 109.2% 72.6% 91.7% 

Behavioral - Other 103.9% 113.9% 120.3% 110.2% 76.3% 90.6% 

Behavioral Subtotal 96.8% 116.6% 118.2% 111.4% 77.7% 90.9% 

As noted previously, the list of treatment limitations that the plan can place on the 

services it covers is not exhaustive. Rather, the list includes “other similar limits on 

the scope and duration of treatment.”41 There are several arguments that could be 

made to argue that fee schedules should fall within the Act’s authority and thus be subject 

to parity between MH/SUD and medical/surgical benefits. Out-of-network providers 

receive reimbursement based on fee schedules that are unilaterally imposed by the 

insurer, and are free to balance bill the beneficiary for the differences between the 

charges and the out-of-network fee allowed by the insurer. Thus, the setting of a low fee 

schedule by insurers often leads to additional financial requirements on the insured in the 

                                          39 Levitt, K. et al. (2007). Future funding for mental health and substance abuse: increasing burdens 

for the public sector. Health Affairs, 27(6), w513-522. 

40 MCR is an abbreviation for Medicare 

41 41 Paul Wellstone and Pete Domenici Mental Health parity and Addiction Equity Act of 2008, 29 

U.S.C. Id. at § 1185a(a)(3)(B)(iii). 
19

form of higher co-payments and out-of-pocket expenses. If the insured must pay 

higher out-of-pocket expenses because of the low fee schedule, and these expenses 

are not borne by an insured under the medical/surgical benefit, the Coalition 

believes that this is a more restrictive financial requirement. Arguing from a broad 

understanding of “treatment limitation,” as opposed to a strict reading of the text, 

the Coalition believes that a fee schedule that results in reduced access is clearly a 

“treatment limitation” in word and effect.42 Indeed, a fee schedule that is so low 

that few providers can afford to offer associated services is arguably a greater 

treatment limitation than a limit on the frequency of treatment. 

To underscore the disparity in payment amounts between MH/SUD, we asked Milliman 

to compare the average allowed charges and in-network use between medical/surgical 

and MH/SUD for inpatient care. Milliman found that the average allowed cost/day was 

$975.00 per inpatient day for MH/SUD and $6,122.00 per day for medical/surgical. The 

average billed cost per day using Milliman data was $1,787.00 for behavioral health and 

$13,701 for medical/surgical. The disparity in payment rates was nearly 6 times greater 

for medical/surgical than behavioral health on some of the most commonly treated 

ailments on both the medical and behavioral side. 

In addition, the purpose of the Act would be clearly circumvented by reading “treatment 

limitations” to exclude fee schedule amounts. The purpose of the Act, generally, is to 

ensure parity and equity between MH/SUD and medical/surgical benefits and to end “the 

discrimination that exists under many group health plans with respect to mental health 

and substance-related disorder benefits.”43 If fee schedules are not included within the 

treatment limitations section, the parity requirements do not apply, and plans could 

presumably discriminate at will with respect to payment amounts. Congress was 

trying to end “discrimination” with respect to mental health and substance use 

disorder benefits. Permitting plans to implement low fee schedules for MH/SUD 

benefits would undermine this goal. 

Assuming that fee schedules are included in the treatment limitations section of the Act, 

what are the restrictions on plans in setting fee schedule amounts? In other words, does 

the treatment limitations section of the Act prohibit plans from setting fee schedule 

amounts that are so low that access is more restrictive for MH/SUD benefits than for 

medical/surgical benefits? 

As in other areas of this analysis, the key question is whether the treatment limitation in 

the MH/SUD benefit (in this case, the fee schedule amount) is more restrictive than the 

predominant treatment limitation applied to substantially all medical/surgical benefits 

covered by the plan.44 If the low fee schedule results in decreased access to MH/SUD 

benefits, a strong argument can be made that it is “more restrictive” than the 

medical/surgical fee schedule and thus in violation of the Act. 

                                          42 Id. 

43 H.R. REP. NO. 110-374, pt. 2, at 12 (2007) (Ways & Means Comm.). 

44 Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, 29 

U.S.C.A § 1185a(a)(3)(A)(ii) (2009). 
20

1B. HOW DO PLANS APPLY LIMITS TO MEDICAL/SURGICAL BENEFITS? ARE THESE 

REQUIREMENTS APPLIED DIFFERENTLY TO BOTH CLASSES OF BENEFITS? DO PLANS VARY 

COVERAGE LEVELS WITHIN EACH CLASS?

As noted in previous sections, private insurance coverage has traditionally been less 

generous for MH/SUD than for medical care. Many private health plans limit the number 

of day visits or dollars available for MH/SUD benefits even when they do not similarly 

limit medical coverage. Moreover, Zuvekas and Meyerhoefer found in 2006 that 

patients’ share of MH/SUD spending increased with the number of visits whereas their 

share of medical spending decreased with the number of visits – a finding that validates 

the imposition of discriminatory limits on MH/SUD.45 In a 2009 survey of private health 

plans, Hodgkin et al found that 90 percent of covered services had special annual limits 

for outpatient MH/SUD, whereas other surveys have showed that general medical 

conditions are rarely subject to special limits.46,47 The only limits widely used for general 

medical care are limits on lifetime spending, which one survey reported as applying to 

only half of covered workers in 2004 and being mostly in the $1 to 2 million range.48

To get a fuller picture of how requirements are applied differently on both classes of 

benefits, we asked Milliman to analyze differences in utilization management between 

MH/SUD and medical/surgical benefits. Milliman measured inpatient hospital use for 9 

major medical/surgical DRGs and 9 behavioral health conditions (outlined in Table 2 

below for comparison). Milliman compared average length of stay (ALOS) and 

benchmarked these ALOS within the Milliman published guidelines for “loosely 

managed” (LM) and “well-managed” (WM) delivery, separately for in-network admits 

and also all admits combined. The higher the percentage “towards well managed," the 

tighter the utilization management of the inpatient stays and the more restrictive is the 

management of the benefit and thus the higher the barriers to accessing care. Table 2 

demonstrates that an average of 57 percent of behavioral health claims were managed 

more restrictively while an average of 43.5 percent of medical claims were managed 

restrictively. This is a significant difference and highlights the fact that management of 

behavioral benefits is more restrictive today even though those benefits themselves are 

more limited than medical-surgical benefits. The regulations must address this issue. 

                                          45 Zuvekas, S., and Meyerhoefer, C. (2006). Coverage for mental health treatment: do the gaps still 

persist? Journal of Mental Health Policy and Economics 9(3): 155-163. 

46 Hodgkin D, Horgan CM, Garnick DW, Merrick EL (2009). Benefit limits for behavioral health 

care in private US health plans. Administration and Policy in Mental Health and Mental Health Services Research 36(1): 

15-23. 

47 US Bureau of Labor Statistics. (2007). National compensation survey: Employee benefits in private 

industry in the United States, 2005. Bulletin, 2589. 

48 Kaiser Family Foundation. (2004). Employer health benefits: 2004 annual survey. California: Menlo 

Park. 
21

Table 2 - Comparison of Average Lengths-of-Stay 

Milliman Benchmarks

DRG Admits-All Admits-INN Days-All Days-INN Actual ALOS 

- All 

Actual 

ALOS - INN LM 

ALOS

WM 

ALOS

885 47,368 40,346 317,304 265,321 6.70 6.58 8.55 5.50 

897 16,735 14,178 80,318 67,444 4.80 4.76 7.05 2.87 

881 5,341 4,435 25,741 20,909 4.82 4.71 4.10 3.90 

895 2,799 2,426 22,025 18,808 7.87 7.75 12.78 3.62 

882 1,764 1,447 10,197 7,792 5.78 5.38 4.74 4.00 

880 1,538 1,323 5,545 4,310 3.61 3.26 3.28 3.12 

886 1,256 1,024 12,957 9,773 10.32 9.54 13.80 11.47 

894 654 581 2,044 1,753 3.13 3.02 4.09 3.27 

896 637 547 3,935 3,237 6.18 5.92 9.16 5.49 

Behavioral Subtotal 78,092 66,307 480,066 399,349 6.15 6.02 7.94 4.76 

 Percent towards Well Managed: 56.3% 60.3% 

 

470 36,806 32,074 117,240 102,626 3.19 3.20 3.64 2.47 

249 14,188 12,714 29,486 26,405 2.08 2.08 2.36 1.56 

203 8,080 7,198 18,918 16,861 2.34 2.34 2.77 1.83 

639 6,674 5,843 15,721 13,641 2.36 2.33 2.77 1.92 

65 3,975 3,458 18,669 16,027 4.70 4.63 5.79 4.13 

305 3,479 3,056 7,818 6,773 2.25 2.22 2.57 1.90 

192 3,344 2,901 11,072 9,527 3.31 3.28 4.07 2.36 

292 3,049 2,632 12,133 10,581 3.98 4.02 4.96 3.35 

392 2,886 2,535 7,818 6,792 2.71 2.68 3.02 1.88 

 82,481 72,411 238,875 209,235 2.90 2.89 3.37 2.27 

Medical Subtotal Percent towards Well Managed: 42.9% 43.5% 

Varying plans 

The Coalition believes insurer and employer sponsored plans that provide a number of 

health plans options with multiple and very different cost benefits, cost-sharing, 

deductibles, and co-pays will not violate the Act, because the Act applies only to a 

specific plan, not to a range of separate products. However, individual plans that 

provide benefits with multiple and different financial requirements for MH/SUD 

services will not be in compliance with the Act’s provisions unless the requirements 

are no more restrictive than the predominant financial requirements applied to 

substantially all medical/surgical benefits. 

The Act is clear that it addresses individual health plans and not the range of plans 

offered by a health insurer. The first paragraph that the Act adds to the Employee 

Retirement Income Security Act (ERISA) states that, “in the case of a group health 

plan...that provides both medical and surgical benefits or substance use disorder benefits, 

such plan...shall ensure” that certain requirements are met.49 (Emphasis added) The rest 

of the Act speaks repeatedly about “a plan”50 or “the plan.”51 Furthermore, the Act never 

prohibits insurance companies from offering different products, or requires them to 

                                          49 Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, 29 

U.S.C.A. § 1185a(a)(3)(A). 

50 Id. 

51 § 1185(a)(3)(A)(i). 
22

employ the same financial requirements across insurance plans. Thus, the financial 

requirement limitations in the Act are applicable with respect to each individual plan, not 

to the spectrum of an insurer’s products. 

By contrast, individual plans that provide benefits with multiple and different financial 

requirements for MH/SUD benefits are not likely to meet the Act’s command unless the 

requirements are no more restrictive than the predominant financial requirements applied 

to substantially all medical/surgical benefits. 

The Act’s use of “no more restrictive” invites a comparison between two things. Here, 

the comparison is between medical/surgical benefits and MH/SUD benefits. The Act 

states that financial requirements applied to MH/SUD benefits cannot be “more 

restrictive than” those applied to medical/surgical benefits. The Act is clearly addressing 

restrictions between MH/SUD and medical/surgical benefits. Thus, financial 

requirements must be compared across benefit categories (i.e., between MH/SUD and 

medical/surgical benefits), not within one of the benefit categories.52 

This being the case, we believe that plans can offer multiple and very different financial 

requirements within each benefit as long as these requirements are not more restrictive in 

one benefit as compared to the other. In other words, a plan can offer multiple and very 

different financial requirements for different parts of a MH/SUD benefit (i.e., different 

co-pays for different services or categories of services). However a plan will violate the 

Act if the multiple and very different financial requirements in the MH/SUD benefit are 

more restrictive than those in the medical/surgical benefit. Thus, the Act envisions a factspecific analysis in which the restrictiveness of the financial requirements in one benefit 

is compared with the restrictiveness of the financial requirements in the other benefit. 

In addition to the “no more restrictive” analysis, the Act imposes two additional 

requirements. First, the financial requirement must be predominant. A financial 

requirement is considered to be predominant if it is the most common or frequent of that 

particular type of requirement. Thus, a financial requirement must be no more restrictive 

than the most common or frequent of such type of limit. For example, if the limit in 

question is related to out-of-pocket expenses, any out-of-pocket requirements for 

MH/SUD treatment must be no more restrictive than the most common out-of-pocket 

requirement imposed under the medical/surgical benefit.53 

The Act imposes a further condition on treatment limitations. In addition to being the 

most common financial requirement, the requirement in question must also be applied to 

substantially all medical and surgical benefits under the plan. Thus, if the requirement in 

question is a co-payment amount, this requirement can be no more restrictive than the 

requirement applied to substantially all medical/surgical benefits under the plan.54

Putting these three subparts together, the Act states that no MH/SUD financial 

requirement can be more restrictive than the most common requirement of that 

type that is applied to substantially all medical/surgical benefits. 

                                          52 Id. 

53 Id. 

54 Id. 
23

2. WHAT TERMS OR PROVISIONS REQUIRE ADDITIONAL CLARIFICATION TO FACILITATE 

COMPLIANCE? WHAT SPECIFIC CLARIFICATIONS WOULD BE HELPFUL? 

Medical management techniques for MH/SUD may not be more restrictive than 

medical management techniques applied to medical/surgical benefits 

The Coalition believes that while Congress intended plans to use medical management 

techniques, it did not intend them to apply these techniques in a more restrictive way on 

MH/SUD than on medical/surgical benefits. 

Thus, the text and history of MHPAEA demonstrate that Congress likely did not 

intend to allow the use of more stringent medical management criteria for MH/SUD 

benefits than for medical/surgical benefits. 

Because there are numerous types of techniques to control access to benefits in addition 

to the treatment limitations or financial requirements most commonly seen in benefit 

design, we described many medical management techniques in our response to question 

1a under Section B. A critical issue, given the Act’s silence on medical management, is 

determining Congressional intent as to the extent of medical management. 

When considered in the context of the Act’s legislative history, the absence of specific 

medical management language suggests that Congress did not mean to allow medical 

management that is more stringent for MH/SUD services than for medical/surgical 

services. Where a statute is ambiguous or silent on an issue, the legislative history can be 

an important and instructive tool to determine the meaning of the statute. Here, changes 

between the bill as introduced and the bill as passed indicate that Congress did not intend 

to allow more stringent medical management criteria for MH/SUD benefits than 

medical/surgical benefits, but that it did intend for some form of medical management. 

Specific medical management language that was included in S. 558 was dropped in the 

final Act.55 This deletion is meaningful. Where, as here, a non-technical provision is 

dropped from the bill prior to final passage, there is a strong inference that its deletion 

was purposeful. Since the provision’s purpose was to make very clear that medical 

management is authorized under the statute, the deletion of the provision indicates a 

desire on the part of the drafters to weaken the bill’s medical management provisions. At 

its most basic, the deletion of the medical management provision indicates that Congress 

was not intending for medical management to be applied more stringently. 

If Congress had wanted to strengthen a plan’s ability to use stringent medical 

management techniques, it could have written such an authorization into the Act. At the 

very least, Congress could have kept in the final version of the MHPAEA the existing 

authorization regarding medical management found in S. 558. Instead, Congress went in 

the opposite direction, and deleted the medical management provision entirely in the final 

version of the MHPAEA. 

                                          55 Paul Wellstone and Pete Domenici Mental Health parity and Addiction Equity Act of 2008, 29 

U.S.C. § 1185a. 
24

Proponents of more stringent medical management requirements may argue that the 

reason the provision was deleted from the legislation was simply because it was 

understood that medical management would be allowed under the bill. The argument that 

medical management of some sort is authorized by the Act is clear. However, stating that 

medical management is authorized is not the same as stating that more stringent medical 

management is authorized. Given the lack of explicit language and the deletion of the 

strongest medical management language before passage of the final bill, there is no 

evidence that the Act authorizes more stringent medical management. Clarification on 

these issues may be one of the more important issues regulators will have to contend with 

because it can mean the difference between individuals with mental health and substance 

use disorders having access to care or not. We believe that the regulations should 

clarify that plans with medical management interventions that are more restrictive 

for MH/SUD as compared to medical/surgical are not in compliance with the Act. 

The regulations should clarify that even if plans use the same medical necessity criteria 

for MH/SUD and medical/surgical coverage, a violation of the treatment limitations 

section of the Act can occur if the end result is a reduction in access to services. To be 

subject to the parity requirements, medical management and medical necessity criteria 

must be found to come within the financial requirements or treatment limitations sections 

of the Act. We believe they do. 

More restrictive medical management determinations for MH/SUD may also violate 

the financial requirements section of the Act since the denial of access to planreimbursed mental health and substance use disorder services would mean that 

consumers would have to pay higher out-of-pocket expenses as compared to out-ofpocket expenses for medical/surgical services.

Although there has been a widely held view that plans would have less of a need for 

benefit limits given access to other cost containment strategies such as utilization 

management and provider profiling, a 2008 survey of managed care plans found that 

these plans had not chosen to abandon benefit limits, perhaps because they perceive risks 

in doing so and no gains.56 Moreover, Barry and colleagues suggested plans may retain 

limits as a way to discourage enrollment of individuals likely to use MH/SUD benefits.57

Supply side rationing through plan medical management techniques is inherently less 

transparent than cost control through benefit limits. Regulations must ensure that these 

are applied no more stringently on MH/SUD than on other medical/surgical conditions. 

Based on a survey of Coalition members, network incentives appear to exert powerful 

control over the quality of services rendered. Network incentives arise from the 

cooperation that a plan can demand from providers who value being in-network; rigorous 

utilization review practices, network design and physician incentives all were reported by 

Coalition members as common methods to discourage enrollment by people with 

MH/SUD; thereby effectively curtailing access to services for individuals with MH/SUD. 

                                          56 Hodgkin D, Horgan CM, Garnick DW, Merrick EL (2009). Benefit limits for behavioral health 

care in private US health plans. Administration and Policy in Mental Health and Mental Health Services Research 36(1): 

15-23. 

57 Barry, C. et al. (2003). Design of mental health benefits: still unequal after all these years. Health 

Affairs, 22(5), 127–137. 
25

Medical necessity criteria 

Related to the overall medical management issue are questions surrounding medical 

necessity criteria. While the Act clearly contemplated and concedes the use of medical 

necessity criteria, the legislation does not contain authorization for medical necessity 

criteria that are more stringent for one category of benefits than the other. Indeed, the 

legislation states that any treatment limitations for MH/SUD benefits must be no more 

restrictive than those imposed on substantially all medical/surgical benefits. Imposing 

more restrictive medical necessity criteria on one category of benefits would run counter 

to the purpose of parity: “the state of being equal or equivalent.” Interpreting the Act to 

allow more stringent medical necessity criteria for MH/SUD services than for 

medical/surgical services would undermine the solution that Congress put in place to 

remedy “the discrimination that exists under many group health plans with respect to 

mental health and substance use disorder benefits.” Medical necessity is a mechanism 

for limiting access to coverage. Therefore, it fits within the treatment limitation 

definition and is thereby subject to the treatment limitation parity requirement. In 

light of the purpose of the Act, similar criteria that result in a reduction in access to 

services would constitute a violation of the Act.

The lack of application of uniform medical necessity criteria for MH/SUD across the 

many health plans in the current marketplace has exacerbated the access issue for those 

with mental health and/or substance use disorders. While there are different medical 

necessity criteria for medical/surgical conditions, the Milliman analysis demonstrates that 

managed care companies have in fact used more restrictive management techniques when 

reviewing MH/SUD inpatient care as compared to medical/surgical hospital care. There 

is a greater impact on MH/SUD access as a result of this discriminatory application of 

medical management techniques which again points to the need for the regulations to 

address this issue. In fact, there are detailed utilization management criteria for SUD 

care, the Patient Placement Criteria for Psychoactive Substance Use Disorders published 

by the American Society of Addiction Medicine. If these consensus-developed criteria 

(the use of which are mandated in many jurisdictions) were more widely disseminated 

and implemented by plans and insurers and uniformly used, there would be much more 

consistency in medical management processes, at least for SUD managed care entities on 

the MH/SUD side. 

2a. Medical Necessity & Treatment Limitations 

The broad language of the treatment limitations section allows medical necessity to fit 

within its definition. The definition provides a non-exhaustive list of limits on treatment 

and indicates that “other similar limits on the scope and duration of treatment” come 

within the definition.58 Medical necessity, like the other procedures and policies 

mentioned in the statutory list, is a mechanism for limiting coverage. Thus, it fits within 

the treatment limitations definition and is subject to the treatment limitations parity 

requirements. To comply with the Act, a plan must ensure that “the treatment limitations 

applicable to such mental health or substance use disorder benefits are no more restrictive 

than the predominant treatment limitations applied to substantially all medical and 

surgical benefits covered by the plan.”59 

                                          58 Id. at § 1185a(a)(3)(B)(iii). 

59 Id. at § 1185a(a)(3)(A)(ii). 
26

A very strong argument can be made that, in light of the purpose of the Act, it should be 

construed broadly to prohibit criteria that are the same in form but restrictive in practice. 

The House Education and Labor and Energy and Commerce Committees’ Reports state 

that the purpose of the legislation is to ensure “fairness” and “equity” for mental health 

and substance use disorder services.60 Equity and fairness are not achieved when the end 

result of medical necessity criteria is reduced access to treatment. The Ways and Means 

Committee stated that the legislation was necessary to “end the discrimination that exists 

under many group health plans with respect to mental health and substance-related 

disorder benefits.”61 To end discrimination in form, but not in effect, would be a hollow 

protection against discrimination. 

In addition, the context of the Act demonstrates a desire by Congress to ensure 

meaningful parity coverage. The Act builds upon existing mental health parity law. In 

1996, Congress passed and the President signed the Mental Health Parity Act (MHPA). 

The MHPA equates aggregate lifetime and annual limits for MH benefits with aggregate 

lifetime and annual limits for medical/surgical benefits. Thus, the statute gave a measure 

of protection from the costs of MH services. Legislation to expand mental health parity 

was introduced in the House in every subsequent Congress until passage of the Paul 

Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act in the 

110th. From January to March 2007, the authors of the Act held field hearings around 

the country to learn about the impact of insurance and equity policies on access to 

MH/SUD care. In a report issued in May 2007, they found numerous barriers to 

accessing treatment, including “aggressive” benefit management.62 It was in this context 

that the Act was passed. Congress was expanding a previous law. The context shows 

that Congress was attempting to address the problems, including barriers to treatment 

services, which existed despite the 1996 law. In this context, allowing an insurer to limit 

coverage through medical management criteria that reduces access would be 

counterintuitive. 

Finally, interpreting the Act to allow medical necessity requirements in the MH/SUD 

benefits that restrict access to services would lead to an illogical result that should not be 

ascribed to Congress. Congress wanted MH/SUD benefits to be no more restrictive than 

medical/surgical benefits. Permitting MH/SUD medical necessity requirements that 

make MH/SUD benefits unavailable, when medical/surgical benefits are available, 

seems overly restrictive. Plans should not be able to accomplish through medical 

necessity requirements what they cannot accomplish through other treatment 

limitations or financial requirements. 

                                          60 H.R. REP. NO. 110-374, pt. 1 (2007) (Educ. & Labor Comm.); H.R. REP. NO. 110-374, pt. 3 (2007)

(Energy & Commerce Comm.). 

61 H.R. REP. NO. 110-374, pt. 2, at 12 (2007) (Ways & Means Comm.).

62 REPRESENTATIVE PATRICK KENNEDY & REPRESENTATIVE JIM RAMSTAD, 

ENDING INSURANCE DISCRIMINATION 15 (2007). In the same report, Dr. Steven Sharfstein of 

Sheppard Pratt Health System in Baltimore stated, “I am certain that we suffer more from varying 

interpretations of medical necessity and capricious and arbitrary denials than other specialties in medicine.” 
27

3. WHAT INFORMATION, IF ANY, REGARDING THE CRITERIA FOR MEDICAL NECESSITY 

DETERMINATIONS OF A PLAN OR COVERAGE WITH RESPECT TO MH/SUD IS CURRENTLY 

MADE AVAILABLE UNDER THE PLAN? TO WHOM IS IT MADE AVAILABLE AND HOW IS IT 

MADE AVAILABLE?

ERISA does not define medical necessity or provide a right to external administrative 

review of medical necessity determinations. However, when an ERISA plan denies a 

claim based on medical necessity, ERISA rules require the plan to either explain the 

clinical judgment used in applying the plan’s terms or to include a statement of medical 

necessity criteria free of charge to the insured if requested. This explanation is required 

to be “written in a manner calculated to be understood by the participant.”63 Based on 

Coalition survey data, fully insured plans appear to have varying policies on their 

dissemination of medical necessity criteria – from disclosure on a company’s website to 

policies not to make “proprietary” medical necessity criteria available to individuals with 

MH/SUD conditions at all. Even some ERISA plan participants expressed difficulty at 

getting their plan’s medical necessity criteria. Other individuals reported that the plan 

would send the medical necessity criteria and reason for benefit denials to their provider 

only. In general, because of the limited reach of current federal law governing medical 

necessity definitions and availability, medical necessity is still largely included in the 

terms of a contract negotiated between buyers and sellers. As a result, the Coalition 

believes that the regulations need to clarify timeframes upon which medical 

necessity criteria must be made available once requested and should specify

enforcement mechanisms for failure to comply. We also believe that regulations that 

specify criteria for evaluating the equivalence of medical necessity criteria across 

MH/SUD and general medical conditions could greatly facilitate the process of ending 

discrimination. Finally, the Coalition believes that the regulations should require 

plans to not only make public the rationale for the MH/SUD denial, but do so within 

a specific time frame. 

4. WHAT INFORMATION, IF ANY, REGARDING THE REASONS FOR ANY DENIAL UNDER THE 

PLAN (OR COVERAGE) MUST BE DISCLOSED BASED ON REQUIREMENTS OF THIS ACT? TO 

WHOM IS SUCH INFORMATION CURRENTLY MADE AVAILABLE, AND HOW IS IT MADE 

AVAILABLE? ARE THERE INDUSTRY STANDARDS OR BEST PRACTICES WITH RESPECT TO 

THIS INFORMATION AND COMMUNICATION OF THIS INFORMATION?

Four types of plans are covered by this Act. These include self-insured plans regulated 

under ERISA; fully insured plans; Medicaid managed care plans (which are subject to 

both state and federal laws); and Taft-Hartley plans (where benefits were secured by 

workers via collective bargaining; such plans are regulated under ERISA). Each type 

may have separate rules governing the release of the reason for benefit denials to its plan 

participants. 

Self-insured plans – Under ERISA, self-insured plans are required to explain a 

reason for denying benefits under the plan. Under existing ERISA regulations, 

these denials must provide an explanation of the denial and, in cases of medical 

necessity determinations, consumers may request copies of the documentation 

that plans used in making the determination. All of the information must be made 

available to consumers free of charge. The regulations also outline the process for 

appealing benefit determinations, the timelines for the appeals process, the steps 

included in the disclosure requirements and the fairness of the process. The 

                                          63 29 U.S.C. § 1133 (2001). 
28

Coalition is confident that the intent of Congress was that nothing in the 

MHPAEA would weaken any of these requirements under ERISA. 

Fully-insured plans – Fully insured plans are subject to state and federal laws, 

thus, for individuals insured under these plans, the ERISA benefit determination 

rules establish a floor for consumer protections with regard to plan benefit 

demonstrations since states may promulgate more stringent requirements for these 

plans. States can and do impose their own appeals standards on these plans. 

Medicaid Managed Care Plans- The Balanced Budget Act of 1997 included a 

provision (section 4704(a)) explicitly applying the 1996 parity law to 

Medicaid managed care plans. Since the MHPAEA amends the 1996 parity 

law, the new parity law and implementing regulations apply to Medicaid 

managed care plans as well (Medicaid Managed Care issues are discussed in 

detail on page 30). Millions of individuals with behavioral health conditions rely 

on Medicaid for their health care coverage. Medicaid is the largest single source 

of financing for mental health care in this country, comprising over half of state 

and local spending on mental health services. The regulations implementing 

MHPAEA should make clear that Medicaid managed care plans must fully 

comply with the new Act. 

State Medicaid managed care plans have the latitude to impose different 

requirements on how reasons for denials are communicated to insureds. In 

general, most Medicaid managed care plans are required to disseminate the reason 

for a denial in writing. A specific reason must be included in the letter and in 

some states it is required that the reason may not change at an appeals hearing. 

Timelines are also specified in many Medicaid managed care plans so that plan 

participants are informed of their rights in terms of grievance or appeals of the 

denial. 

Although managed care plans in the public and private sectors report that their plans 

often make reasons for denials available to insureds, during the parity field hearings and 

from our survey of individuals with mental health and addictive disorders, consumers 

often reported having difficulty obtaining the reason for benefit denials. Sometimes the 

appeal of the benefit determination was made on their behalf by their provider, and 

insureds never received a copy. Other times insureds requested a copy and never 

received a response, or the response was too complicated and insufficiently clear in its 

explanation. For example, at two of the parity hearings, witnesses testified that their plan 

said a particular treatment was experimental even though the consumer provided the plan 

with numerous studies on the efficacy of the service. 

The Coalition believes the timelines under ERISA for providing individual 

responses to claims-related information are worthy of consideration and could 

logically be extended to all consumers covered under MHPAEA as well as to the

transparent provision of medical necessity criteria and an open explanation of 

reasons for benefit denials. The Coalition also believes the ERISA regulations 

appropriately include expedited timelines for urgent and pending care. 
29

5. OUT-OF-NETWORK COVERAGE

The parity law does not require the identical scope and duration of network benefits in 

the MH/SUD benefit and the medical/surgical benefit. Instead, the law requires that if a 

plan covers both medical/surgical benefits and MH/SUD benefits, the out-of-network 

requirements can be no more restrictive for one benefit than the other. The only statutory 

text addressing plan networks states: 

In the case of a plan or coverage that provides both medical and surgical 

benefits and mental health or substance use disorder benefits, if the plan or 

coverage provides coverage for medical or surgical benefits provided by 

out-of-network providers, the plan or coverage shall provide coverage for 

mental health or substance use disorder benefits provided by out-ofnetwork providers in a manner that is consistent with the requirements of 

this section.

64 [Emphasis added] 

What, then, are the “requirements of [the] section?” The section requires that “treatment 

limitations applicable to...mental health or substance use disorder benefits” be “no more 

restrictive” than the treatment limitations applied to medical/surgical benefits, and that 

there be “no separate treatment limitations that are applicable only with respect to mental 

health or substance use disorder benefits.”65 Accordingly, the question is whether 

network requirements can be considered “treatment limitations.”66 If so, the network 

requirements for one benefit category must be “no more restrictive” than the 

requirements for the other benefit category or the plan violates the Act. 

As defined by the Act, treatment limitations “include[s] limits on the frequency of 

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

duration of treatment.”67 This language does not specifically list network requirements in 

its list of treatment limitations. However, the Act uses the word “including” prior to 

starting its list. This word choice indicates that the list is not exhaustive, but rather 

illustrative. If network requirements are “similar” to the items on the list, they are 

properly considered treatment limitations. The statute lists a number of items that are 

designed to limit treatment. Network requirements are a well-known tool for placing 

limitations on access to treatment in a health insurance plan. It is similar to the other 

treatment limitations in the list, and thus should qualify as a treatment limitation. 

Because network requirements should qualify as a treatment limitation under the 

Act, to be “consistent” with the requirements of the section, the network 

requirements in a plan for the MH/SUD category must be “no more restrictive” 

than the network requirements for the medical/surgical category. To the degree to 

which the regulations can provide a methodology for comparing the characteristics 

of the MH/SUD network and those used for other medical specialties, the 

implementation of the law would be enhanced. 

                                          64 Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, 29 

U.S.C.A § 1185a(a)(3)(A)(ii) (2009). 

65 Id.

66 A judge or agency might find that network requirements resulting in a higher out-of-pocket burden 

on the beneficiary come under the financial requirements section of the Act as well. 

67 Id. at § 1185a(a)(3)(B)(iii). 
30

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? 

MHPAEA’s legislative history is clear that Congress intended to protect strong statebased requirements and consumer protections. The law establishes a federal floor of 

protections, generally allowing more consumer protective state-based requirements to 

continue to apply to state regulated health insurance products and areas not preempted by 

ERISA. Today, many states now require insurance companies to cover mental health 

and/or addiction even though the federal law only applies when plans include mental 

health and substance use disorder benefits in their benefits package. Moreover, many 

states do not allow a cost exemption even though MHPAEA outlines specific cost 

exemptions. The Coalition believes because there are varying state laws on both cost 

exemption and other critical issues, issuing model notices or guidance to states would be 

extremely important. The regulations should provide a methodology that could be 

applied to determine if cost increases are specifically related to the implementation 

of insurance parity and not some other secular or contextual variable. 

OTHER ISSUES RELEVANT TO REGULATIONS DEVELOPMENT 

Medicaid Managed Care Issues 

Background 

Since the 1990s, the Medicaid program has increasingly relied on managed care to 

deliver services to its Medicaid population. Today, more than 65 percent of the total 

Medicaid population is served through managed care.68 All states except Alaska, 

Wyoming, and New Hampshire have at least a portion of their Medicaid population 

enrolled in managed care.69 

Under Medicaid managed care, the Medicaid agency contracts with a managed care 

entity to provide care for beneficiaries in return for a fixed periodic payment per enrollee 

(i.e., capitated payment). Under the most common scenario, the managed care entity 

manages a patient’s care through a primary care physician or case manager.70 

Federal requirements guarantee Medicaid beneficiaries free choice of providers. 

However, many states have obtained waivers under § 1915(b) of the Social Security Act 

(42 U.S.C. § 1396n(b)), which permits the Centers for Medicare and Medicaid Services 

(CMS) to waive the freedom of choice requirement or under § 1115 (42 U.S.C. § 1315), 

which gives CMS broad authority to waive statutory requirements for approved research 

and demonstration projects. These waivers allow states to provide Medicaid benefits 

through managed care plans. Additionally, the 1997 Balanced Budget Act (BBA) 

permits states to require Medicaid recipients to enroll in Medicaid managed care (MMC) 

plans without waivers.71 States that have implemented mandatory managed care in 

                                         

68 CENTERS FOR MEDICARE AND MEDICAID SERVICES, 2005 MEDICAID MANAGED CARE ENROLLMENT 

REPORT: SUMMARY OF STATISTICS AS OF JUNE 30, 2006 (2006),

http://www.cms.hhs.gov/MedicaidDataSourcesGenInfo/04_MdManCrEnrllRep.asp. 

69 Id. 

70 42 C.F.R. § 438.2 (2007). 

71 42 U.S.C. § 1396u-2 (2000). BBA contains several exceptions to this policy: states are not permitted to 

require dual-eligible Medicare beneficiaries, special needs children, or Native Americans to enroll in managed 

care plans without federal permission. 
31

Medicaid have generally taken two approaches to the delivery of mental health services. 

In the first approach, the managed care organization (MCO) that provides medical care 

also provides mental health services, either through its own provider network or by 

subcontracting with a behavioral health organization.72 In the second approach, mental 

health is “carved out” from physical health but is still under the control of the Medicaid 

MCO, and individuals receive mental health services either on a fee-for-service basis or 

through a separate MCO that specializes in behavioral health. 

MHPAEA applies to Medicaid managed care plans 

Since passage of MHPAEA, questions have arisen as to the applicability of the Act to 

MMC plans. First, must MMC plans comply with the Act? Relatedly, would a specialty 

MH/SUD managed care plan be considered a MMC plan? If a MMC plan has a member 

enrolled for total health coverage and then provides partial or no MH/SUD benefits 

because these benefits are provided elsewhere (e.g., through Medicaid fee-for-service 

funds, a specialty MMC plan, or a combination) what are the obligations for compliance 

with the Act? Finally, if a MMC plan provides for the coverage of a full range of 

inpatient care for medical/surgical conditions (including specialty medical/surgical 

hospitals), would that Medicaid plan be in compliance with the Act if it excludes care in 

institutions for mental diseases (IMDs)? 

These are difficult questions to answer and there appears to be a great deal of confusion 

among state Medicaid and CMS officials regarding the correct interpretation of this set of 

issues. In an effort to provide clarification for further discussion of these important 

public policy questions that will soon affect enrollees in MMC plans, below is a legal 

analysis of the Act, Medicaid statute, federal regulations, and agency guidance to analyze 

the questions. 

1. Must Medicaid managed care plans comply with the Act? 

The Medicaid statute requires that MMC plans comply with the parity provisions of 

the Act. This conclusion is supported by both the legislative history of the Act, and the 

regulatory history of previous mental health laws. 

 

The Act modified the Public Health Service Act (PHSA) to require that if a group health 

plan offers both medical/surgical benefits and MH/SUD benefits, the financial 

requirements and treatment limitations for MH/SUD benefits must be no more restrictive 

than those imposed in the medical/surgical benefit.73 The Medicaid managed care statute 

refers to this section and mandates that managed care plans “comply” with its provisions. 

Specifically, the Social Security Act Section 1932(b)(8) specifies that “Each Medicaid 

managed care organization shall comply with the requirements of subpart 2 of Part A of 

title XXVII of the Public Health Service Act [42 U.S.C.A. 300gg-5 et seq.] insofar as 

such requirements apply and are effective with respect to a health insurance issuer that 

offers group health insurance coverage.”74 The statutory reference in the quote refers to 

the mental health parity provisions as passed in the 1996 Mental Health Parity Act 

(MHPA) and as modified by the 2008 Act. Thus, the Medicaid managed care statute 

                                         

72 Cynthia Shirk, Medicaid and Mental Health Services, NATIONAL HEALTH POLICY FORUM BACKGROUND PAPER 

NO. 65, October 2008, at 13. See also Kristian W. Hanson & Haiden A. Huskamp, Behavioral Health Services 

Under Medicaid Managed Care: The Uncertain Implications of State Variation, 52 PSYCHIATRIC SERV. 447, 447 (2001). 

73 42. U.S.C. 300gg-5(a)(3) (2000). 

74 42 U.S.C. 1396u-2(b)(8) (2000). 
32

requires that MMC plans comply with both the 1996 and the 2008 parity 

requirements. 

This interpretation is consistent with Congressional views on the meaning and application 

of the Act. The Senate Committee on Health, Education, Labor, and Pensions (HELP) 

reported its version of the Act out of Committee on April 11, 2007. In the Committee 

Report accompanying the bill, the Committee stated that “[t]he bill's requirements for 

issuers of group health insurance would apply to managed care plans in the Medicaid 

program.”75 Similar language is included in the Congressional Budget Office (CBO) cost 

estimate included in the Committee Reports from the House Education & Labor, Energy 

& Commerce, and Ways & Means Committees.76 Although the final legislation was not 

identical to the bill enacted into law, no changes were made to the bill that would alter 

this analysis. 

The view that MMC plans must comply with the parity provisions of the Act is also 

consistent with past agency interpretation of MHPA. The 1997 Balanced Budget Act 

(BBA) made a number of changes involving managed care to the Medicaid statute, 

including adding Section 1932(b)(8), the requirement discussed above that MMC plans 

comply with mental health parity requirements.77 The Health Care Financing 

Administration (HCFA), the predecessor agency to CMS, subsequently released a 

number of letters to State Medicaid Directors explaining the effect of the BBA on 

Medicaid managed care. In a letter dated January 20, 1998, Sally Richardson, the 

director of the Center for Medicaid and State Operations, stated that the parity 

requirements of the 1996 Mental Health Parity Act (MHPA) “apply to Medicaid managed 

care organizations without exemptions.”78 This is so because Section 1932(b)(8) 

“specifically requires Medicaid managed care organizations to comply with MHPA by 

treating them, for that purpose, like health insurance issuers offering group health 

insurance coverage.”79 Although this letter was written during implementation of the 

1996 Act, its reasoning continues to apply with respect to the 2008 Act. The 2008 Act 

simply added a section to the original 1996 parity law. This new section falls within the 

scope of Section 1932(b)(8)’s requirement that managed care organizations must comply 

with the parity requirements. Accordingly, Section 1932(b)(8) applies equally to the 

parity requirements in the 2008 Act. This means that MMC plans are subject to the 

2008 Act’s requirements. 

 

                                         

75 S. REP. NO. 110-53, at 5 (2007) (Sen. Comm. on Health, Educ. & Labor, 2007). 

76 H.R. REP. NO. 110-374, pt. 1 (2007) (Educ. & Labor Comm.); H.R. REP. NO. 110-374, pt. 2 (2007) (Ways & 

Means Comm.); H.R. REP. NO. 110-374, pt. 3 (2007) (Energy & Commerce Comm.). 

77 42 U.S.C. 1396u-2(b)(8) (2000). 

78 Letter from Sally Richardson, Director of the Health Care Financing Administration, to State Medicaid 

Directors (January 20, 1998), available at: http://www.cms.hhs.gov/smdl/downloads/SMD012098d.pdf. 

79 This is not to say that MMC plans necessarily meet the requirements of a “group health plan” under the 1996 

or 2008 parity acts. However, the statutory language of 42 U.S.C. 1396u-2(b)(8), and the analysis by HCFA 

demonstrate that MMC plans are treated like group health plans with respect to the parity requirements. 
33

2. Would a specialty MH/SUD managed care plan be considered a Medicaid 

managed care plan? 

Whether a specialty MH/SUD managed care plan is to be considered a MMC plan is a 

fact-specific inquiry that depends upon whether the plan is offered by an organization 

that meets the definition of a Medicaid managed care entity set out in statute. However, 

since the Act applies only to plans offering both medical/surgical and MH/SUD benefits, 

a specialty plan by definition cannot ensure parity. Rather, the larger question of how 

parity is to be attained when a state carves out its mental health benefits must be 

addressed. 

Under Medicaid managed care, the Medicaid agency contracts with a managed care 

entity to provide care for beneficiaries in return for a fixed periodic payment per enrollee 

(i.e. a capitated payment).80 Several states have also implemented specialty managed 

care programs. Such programs serve a particular condition such as mental health. 

Commonly, these programs are run as “carve-outs” in which medical/surgical care is 

coordinated by primary care physicians, while MH/SUD care is managed by another 

managed care organization.81 Whether a plan under these circumstances qualifies as a 

Medicaid managed care plan depends upon whether it is offered by an entity that meets 

the statutory definition of a Medicaid managed care organization. 

States are permitted to enroll Medicaid beneficiaries with “managed care entities.”82 A 

managed care entity is defined in statute as either a managed care organization (MCO) or 

a primary care case manager (PCCM).83 

An MCO may be a health maintenance organization (HMO), a Medicare Advantage 

organization, a provider sponsored organization, or any other public or private 

organization which meets the requirements of the law and regulations.84 

A PCCM is a physician, a physician group practice, or an entity employing or having 

other arrangements with physicians to provide case management services. States also 

may permit certified nurse midwives, nurse practitioners and physician assistants to serve 

as PCCMs.85

These definitions set forth the permitted entities that can provide managed care to 

Medicaid beneficiaries. States then contract with an entity that meets the definitions 

above and that is willing to abide by a number of other requirements set forth in statute.86 

                                         

80 42 C.F.R. § 438.2 (2007). 

81 Kristian W. Hanson & Haiden A. Huskamp, Behavioral Health Services Under Medicaid Managed Care: The 

Uncertain Implications of State Variation, 52 PSYCHIATRIC SERV. 447, 447 (2001). 

82 42 U.S.C. § 1396u-2(a)(1)(A)(i) (2000). 

83 42 U.S.C. § 1396u-2(a)(1)(B) (2000). 

84 42 U.S.C. 1396b(m)(1)(A) (2000); 42 C.F.R. § 438.2 (2007). 

85 42 U.S.C. 1396d(t)(2) (2000). 

86 For example, MCOs must offer their members all of the services available under the state plan. 42 C.F.R. § 

438.206(a) (2007). They must also provide the state with adequate assurances that they have the capacity to 

serve the expected enrollment in the service area and must make detailed disclosures to enrollees on the 

provider network and terms of the plan. Soc. Sec. Act § 1932. MCOs are also required to make adequate 

provisions against the risk of insolvency. Soc. Sec. Act § 1903(m)(1)(A)(ii). 
34

A specialty plan that meets one of the definitions above, is willing to abide by the law’s 

requirements, and contract with the state to provide care for beneficiaries in return for a 

capitated payment is, by definition, a managed care plan. 

However, specialty MH/SUD plans are by their nature focused only upon MH/SUD 

services. As noted, the Act applies only to plans that offer both MH/SUD and 

medical/surgical benefits. Accordingly, specialty managed care plans do not fit 

comfortably under the requirements of the Act. Indeed, the structure of these plans 

makes it impossible for them to fulfill the requirements of the plan without transforming 

into comprehensive medical/surgical plans. 

If a state decides to offer mental health benefits to its beneficiaries through a specialty 

MH/SUD plan rather than through a comprehensive MMC plan, what entity is 

responsible for compliance with the Act? In other words, if Medicaid managed care 

organizations are subject to the requirements of the Act, but the state has carved out 

mental health benefits (in such a way that there are not MH/SUD benefits in the medical 

MMC organization) and provided them through a different entity than the 

medical/surgical benefits, which entity would be required to comply with the Act? This 

question will be addressed below. 

3. If a Medicaid managed care plan has a member enrolled for total health coverage 

and then provides no MH/SUD benefits because these benefits are provided 

elsewhere (e.g., through Medicaid fee-for-service funds, a specialty Medicaid 

managed care plan, or a combination) what are the obligations for compliance with 

the Act? In other words, which entity is subject to the Act—the Medicaid MCO, the 

state Medicaid Agency, the specialty MH/SUD plan or no one? 

The policy and legislative intent behind the statute demonstrate that states should ensure 

parity between medical/surgical and MH/SUD benefits even in states that carve out 

MH/SUD benefits. 

States that have implemented managed care in Medicaid have generally taken three 

approaches to providing mental health services to Medicaid beneficiaries.87 In the first 

and most common approach, the MCO that provides medical care also provides mental 

health services, either through its own provider network or by subcontracting with a 

behavioral health organization. In the second approach, mental health is “carved out” 

from physical health. Under this approach, the state or county contracts directly with a 

specialty health care entity for the delivery of MH/SUD services. Under a carve-out 

approach, an individual receives mental health services either on a fee-for-service basis 

or through a separate MCO that specializes in behavioral health. Finally, some states 

provide limited mental health services under the same MCO that provides 

medical/surgical care and then pay for other mental health care using state general 

funds.88

                                         

87 Cynthia Shirk, Medicaid and Mental Health Services, NATIONAL HEALTH POLICY FORUM BACKGROUND PAPER 

NO. 65, October 2008, at 13. 

88 Id. 
35

If MMC plans are subject to the requirements of the Act, what entity in the varied 

situations above must comply with the Act? In the case of a state that offers 

medical/surgical and MH/SUD benefits through the same MCO, the answer is clear. As 

outlined above, in such a case the MCO would be subject to the provisions of the 

Act. However, the question becomes complex in states that use a carve-out approach. 

An example is useful to clarify the difficult issues raised by carve-out approaches. A 

state may provide Medicaid medical/surgical benefits through a MCO, but contract with a 

separate specialty MCO or has a contract with another state agency for the management 

of the MH/SUD benefits. In such a case, what MCO would be responsible for complying 

with the Act: the MCO that has contracted with the state only to provide medical/surgical 

benefits, or the MCO that has contracted with the state only to provide MH/SUD 

benefits? Or, would the state have a requirement to ensure that there is parity between 

the coverage offered by the separate MCOs? Similar concerns are raised if the state 

carves out mental health benefits and pays for them under traditional fee-for-service 

arrangements. Would the medical/surgical MCO have to comply with the Act? Would 

the state? 

The issues depend partially on whether the implementing agencies engage in a narrow or 

broad reading of the Act, relevant statutes, and policy objectives. This analysis will 

consider narrow and broad readings of the Act in turn. 

Under the narrow analysis, the state is not required to ensure parity between the benefits 

offered by the plans, and is not required to ensure that the benefits it provides under a feefor-service carve out approach provide parity with those offered under the 

medical/surgical MCO. As noted, the Act only applies to group health plans.89 The state 

is clearly not a group health plan and, accordingly, has no duty under the Act. 

Furthermore, the statute mandating that managed care plans follow the parity 

requirements applies specifically to MCOs, not states.90 Accordingly, the state has no 

obligation to ensure parity. 

A broader reading of the Act would impose an obligation to comply. A very strict 

reading of the Medicaid managed care statute would impose a duty on each MCO to 

comply with the Act since the managed care statute says that “each Medicaid managed 

care organization” must comply with the parity law [emphasis added]. However, 

requiring a medical/surgical MCO to cover MH/SUD benefits, when the state has 

removed all MH/SUD benefits from the medical MCO and has expressly contracted with 

a specialty MCO to perform that function, would run counter to the flexibility built into 

the Medicaid statue and would undermine the state plan. Accordingly, the issue of parity 

is more properly addressed at the state level. 

Denying the Act’s protections to Medicaid beneficiaries simply because a state has 

decided to carve out its MH/SUD services is inconsistent with the intent of Congress, and 

produces an illogical result that Congress did not intend. It is clear that Congress wanted 

the parity requirements to apply to Medicaid MCOs, and that it understood that, through 

these entities, Medicaid beneficiaries would receive parity between medical/surgical and 

MH/SUD benefits. When Congress enacts a statute, it is assumed that it knows the 

statutory context in which it legislates. Here, the Act was enacted in the context of an 

                                         

89 Id. 

90 42 U.S.C. § 1396u-2(b)(8) (2000). 
36

existing statute mandating that MCOs comply with the parity requirements. Congress did 

not repeal or modify this statute, deciding instead to apply the new parity requirements to 

managed care plans. It is clear that Congress knew of, and was supportive of, Medicaid 

recipients enrolled in MCOs receiving mental health coverage on par with that provided 

in the medical/surgical area. Permitting a state and its MCOs to avoid the requirements 

simply by moving Medicaid beneficiaries to a carve-out approach would be inconsistent 

with the broad reach of the Act envisioned by Congress. It could also incentivize MCOs 

that provide comprehensive care to attempt to avoid providing parity coverage by 

encouraging their states to carve out mental health populations. 

Failing to apply the Act’s requirements in states with a carve-out approach would also 

produce an illogical result not envisioned by Congress. If the parity statute is not 

applicable in states that carve out their MH/SUD benefits, the statute would guarantee 

parity for a beneficiary in one state while denying it for a beneficiary in another state. 

Although the Medicaid is a program designed to create various benefits amongst different 

states, in the managed care statute, Congress implemented a sweeping requirement: each 

managed care plan must comply. A construction of the statute in which carve out states 

are not subject to parity would also leave a large and growing number of Medicaid 

beneficiaries across the country without the protections of the Act. Medicaid is the 

largest payer of mental health services in the United States.91 As of 2006, eighteen states 

had carved out their Medicaid mental health benefits. Refusing to extend the Act’s 

protections to states that have carved out their mental health benefits would mean that 

millions of Medicaid beneficiaries in over one-third of the states would not benefit from 

the Act’s provisions. Such a result should not be ascribed to a Congress that broadened 

existing parity provisions. 

The above analysis demonstrates that which entity should be subject to the Act when a 

state carves out mental health benefits in its Medicaid managed care plan is a complex 

issue. However, construing the statute to provide no parity in carve out states may 

be inconsistent with the intent of Congress and would present an absurd result that 

should not be ascribed to Congress.

4. If a Medicaid Managed Care plan provides for the coverage of a full range of 

inpatient care for medical/surgical conditions (including specialty medical/surgical 

hospitals) would that Medicaid plan be in compliance with the Act if it excludes care 

in institutions for mental diseases (IMDs)? 

A Medicaid managed care plan that excludes care in institutions for mental diseases 

(IMDs) will only violate the parity statute if such exclusion is “more restrictive” 

than the treatment limitations applied in the medical/surgical benefit. Whether this 

exclusion is more restrictive is a plan-specific and fact-intensive inquiry that will vary 

from plan to plan. 

An IMD is a hospital, nursing facility, or other inpatient institution of more than 16 beds 

that is primarily engaged in providing diagnosis, treatment, or care to people with mental 

diseases.92 The status of an institution is determined by its general character as 

                                         

91 Cynthia Shirk, Medicaid and Mental Health Services, NATIONAL HEALTH POLICY FORUM BACKGROUND PAPER 

NO. 65, October 2008, at 13. 

92 42 U.S.C. 1396d(i) (2000); 42 C.F.R. § 431.620 (1979); 42 C.F.R. § 440.140 (2006); State Medicaid Manual, Pub. 

45, § 4390. 
37

demonstrated by its patient population. If more than 50 percent of the patients have 

severe mental illness, this is strong evidence that the institution is an IMD. Thus, the 

criteria of most importance in classifying an institution as an IMD are the services it 

provides and the prevalence of patients with mental disease. Determination of when a 

facility qualifies as an IMD is fact-intensive, and a facility can change to an IMD as its 

patient population changes. Classification of an IMD is important because no federal 

funding is available for inpatient services in an IMD for anyone between the ages of 21 

and 65 years.93 

The Act states that for plans that offer both medical/surgical and MH/SUD benefits, 

treatment limitations and financial requirements in the MH/SUD benefit must be no more 

restrictive than those imposed under the medical/surgical benefit. For purposes of this 

question, this analysis assumes that the MMC plan in question covers both 

medical/surgical benefits and MH/SUD benefits. Thus, the first question to consider is 

whether a limitation on access to IMDs qualifies as a treatment limitation or a financial 

requirement. 

Although an argument could be made that refusing access to necessary treatment in an 

IMD falls under the financial requirements section of the law,94 the stronger argument is 

that such a limitation falls under the treatment limitation section of the Act. The Act 

states that a treatment limitation “includes limits on the frequency of treatment, number 

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

treatment."95 These limitations center on how much or how often treatment is given or 

allowed. A limitation stating that treatment is never to be given in an IMD seems to be a 

“similar limit on the scope and duration of treatment” under the Act. Even if exclusions 

of coverage are not specifically listed in the treatment limitation list, the phrasing of the 

statute suggests that the list is demonstrative rather than comprehensive. That is, the list 

does not include every treatment limitation that will qualify under the statute. Use of the 

word “includes” and “other similar limits” demonstrate that the listed treatment 

limitations are simply examples, not an exhaustive list of the possible treatment limitation 

subject to parity.96 Accordingly, exclusions of services provided in IMDs should be 

included within the treatment limitations definition.

It is important to note, however, that the central question in deciding whether the parity 

statute is violated is whether the treatment limitations in the MH/SUD benefit are more 

restrictive than in the medical/surgical benefit, not how a particular facility is treated. If 

the medical/surgical benefit provides coverage for a full range of inpatient care, then to 

be compliant with the Act any treatment limitations in the MH/SUD benefit must be no 

more restrictive. This does not necessarily mean, however, that the full range of inpatient 

MH/SUD care must be provided in an IMD. If a Medicaid beneficiary can obtain a full 

range of inpatient care in settings other than an IMD (such as in an inpatient behavioral 

health entity with 16 beds or less or a specialty ward in a general hospital), then the plan 

                                         

93 42 U.S.C. 1396d(a)(16) (2000). 

94 If a plan refuses to cover IMD services, the beneficiary will have to pay out-of-pocket for the services. If a 

similar limit is not imposed in the medical/surgical benefit, it could be argued that the plan has violated the 

financial requirements section of the law because this is an out-of-pocket expense that someone in the 

medical/surgical benefit would not be required to pay. 

95 42 U.S.C. § 300gg-5(a)(3)(b)(iii) (2000). 

96 Id. 
38

may be in compliance with the Act even if it excludes IMDs. If an IMD is the only 

place that can provide a full range of inpatient care, and the plan excludes IMD 

coverage while providing the full range of inpatient care in the medical/surgical 

benefit, then the plan will be in violation of the Act. 

Notice to Beneficiaries 

Individuals with mental health and addictive disorders often have difficulty finding innetwork providers. As such, the Coalition believes plans should provide beneficiaries 

with a 60-day notice in advance of a change in their benefits so that individuals with 

MH/SUD conditions can make necessary arrangements to find new providers. 

Establishment of a Consumer Advocate Office 

Given that 150 million individuals are covered under ERISA and 27 million individuals 

are covered by Medicaid managed care plans, a single individual at the Department of 

Labor and the Department of Health and Human Services to assist consumers with 

questions regarding new benefits and rights under MHPAEA is unworkable. A new 

Consumer Advocate Office at each Agency should be directed to assist with information 

about MHPAEA’s new consumer rights and benefits; and to assist with appeals of 

adverse benefit determinations, including pre-authorization decisions and partial denials. 

CONCLUSIONS 

The Coalition believes mental health and substance use disorder benefits under the Act 

encompass some level of treatment services. Although plans can limit treatment services, 

the statute imposes restrictions on such limitations. Specifically, these limits must be no 

more restrictive than the predominant treatment limitations applied to substantially all 

medical/surgical benefits covered by the plan. In addition, a plan must ensure that “there 

are no separate treatment limitations that are applicable only with respect to mental health 

or substance use disorders.” A plan that refuses to cover a mental health or substance use 

disorder service that has no analog in medical/surgical may violate this section of the Act. 

The text and history of this statute demonstrate that Congress did not intend to allow the 

use of more stringent medical management criteria for MH/SUD benefits than for 

medical/surgical benefits. Similarly, the text, purpose, and history of the statute 

demonstrate that Congress did not intend to allow medical necessity criteria for mental 

health and substance use disorder benefits to be more stringent than those used for 

medical/surgical services. The purpose and context of the Act demonstrate that similar 

criteria that result in a reduction in access to services violates the Act. Interpreting the 

statute otherwise would misconstrue the intent of Congress. 

Regarding medications, if an insurance plan provides both medical/surgical and 

MH/SUD benefits, the Act requires the plan to cover medications that treat MH/SUD 

conditions in a manner that is no more restrictive than the coverage for medication for 

medical/surgical conditions. Allowing requirements for medications to be more 

restrictive for MH/SUD benefits than for medical/surgical benefits goes against the 

language and purpose of the statute, and is, therefore, not permitted. The Act requires no 

more restrictive management of drug formularies as between MH/SUD benefits and 

medical/surgical benefits, but it would require coverage of only one drug for each FDA 

clinical indication in the MH/SUD benefit if only one drug for each clinical indication is 
39

provided in the medical/surgical benefit. 

As noted, the law requires that treatment limitations and financial requirements for 

MH/SUD benefits be no more restrictive than the predominant financial requirements or 

treatment limitations applied to substantially all medical/surgical benefits. The Act 

defines “predominant” as most common or frequent, but fails to set a bright-line rule 

regarding when a financial requirement or treatment limitation will be considered the 

most common or frequent. 

Insurance companies that provide a number of health plans with multiple and very 

different cost benefits, cost-sharing, deductibles, and co-pays will not violate the Act 

because the statute applies only to a specific plan, not to a range of separate products. 

However, individual plans that provide benefits with multiple and different financial 

requirements for MH/SUD services will not meet the Act’s provisions unless the 

requirements are no more restrictive than the predominant financial requirements applied 

to substantially all medical/surgical benefits. 

If a plan covers every level and type of medical/surgical care for substantially all 

medical/surgical benefits, but only provides for certain levels or types of care for mental 

health or substance use disorders, the Coalition believes that the plan has violated the 

Act’s “no more restrictive” standard. 

Coverage of treatment by only certain types of providers falls within the treatment 

limitations section of the law and is, therefore, subject to the Act’s no more restrictive 

standard. Whether exclusion of a certain provider type violates this standard is a factspecific inquiry that is dependent upon the exclusion of provider types in the 

medical/surgical benefit. 

MHPAEA requires that if a plan covers both medical/surgical benefits and MH/SUD 

benefits, the out-of-network requirements for MH/SUD can be no more restrictive than 

the out-of-network requirements for medical/surgical. Moreover, permitting fee 

schedules to be so low that access is reduced is inconsistent with a broad reading of the 

statutory text and the purpose of Congress. 

The Medicaid statute requires that Medicaid managed care plans must comply with the 

parity provisions of the Act. This conclusion is supported by both the legislative history 

of the Act, and the regulatory history of previous mental health laws. The policy and 

legislative intent behind the statute demonstrate that states should ensure parity between 

medical/surgical and MH/SUD benefits even in states that carve out MH/SUD benefits. 

Finally, consumers should be given a 60 day notice before changes can be made to their 

benefit and there ought to be a Consumer Advocate Office at the Department of Health 

and Human Services and Department of Labor to help consumers understand and access 

their new benefits. 

The Parity Implementation Coalition looks forward to the timely implementation of the 

parity regulations and appreciates the efforts of the Departments of Labor, Health and 

Human Services and Treasury to promulgate regulations.