5410 Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 54 

[TD 9479] 

RIN 1545–BJ05 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Part 2590 

RIN 1210–AB30 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

[CMS–4140–IFC] 

45 CFR Part 146 

RIN 0938–AP65 

Interim Final Rules Under the Paul 

Wellstone and Pete Domenici Mental 

Health Parity and Addiction Equity Act 

of 2008 

AGENCIES: Internal Revenue Service, 

Department of the Treasury; Employee 

Benefits Security Administration, 

Department of Labor; Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services. 

ACTION: Interim final rules with request 

for comments. 

SUMMARY: This document contains 

interim final rules implementing the 

Paul Wellstone and Pete Domenici 

Mental Health Parity and Addiction 

Equity Act of 2008, which requires 

parity between mental health or 

substance use disorder benefits and 

medical/surgical benefits with respect to 

financial requirements and treatment 

limitations under group health plans 

and health insurance coverage offered in 

connection with a group health plan. 

DATES: Effective date. These interim 

final regulations are effective on April 5, 

2010. 

Comment date. Comments are due on 

or before May 3, 2010. 

Applicability date. These interim final 

regulations generally apply to group 

health plans and group health insurance 

issuers for plan years beginning on or 

after July 1, 2010. 

ADDRESSES: Written comments may be 

submitted to any of the addresses 

specified below. Any comment that is 

submitted to any Department will be 

shared with the other Departments. 

Please do not submit duplicates. 

All comments will be made available 

to the public. WARNING: Do not 

include any personally identifiable 

information (such as name, address, or 

other contact information) or 

confidential business information that 

you do not want publicly disclosed. All 

comments are posted on the Internet 

exactly as received, and can be retrieved 

by most Internet search engines. No 

deletions, modifications, or redactions 

will be made to the comments received, 

as they are public records. Comments 

may be submitted anonymously. 

Department of Labor. Comments to 

the Department of Labor, identified by 

RIN 1210–AB30, by one of the following 

methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail: E-OHPSCA.EBSA@dol.gov. 

• Mail or Hand Delivery: Office of 

Health Plan Standards and Compliance 

Assistance, Employee Benefits Security 

Administration, Room N–5653, U.S. 

Department of Labor, 200 Constitution 

Avenue, NW., Washington, DC 20210, 

Attention: RIN 1210–AB30. 

Comments received by the 

Department of Labor will be posted 

without change to http:// 

www.regulations.gov and http:// 

www.dol.gov/ebsa, and available for 

public inspection at the Public 

Disclosure Room, N–1513, Employee 

Benefits Security Administration, 200 

Constitution Avenue, NW., Washington, 

DC 20210. 

Department of Health and Human 

Services. In commenting, please refer to 

file code CMS–4140–IFC. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the instructions under the ‘‘More Search 

Options’’ tab. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–4140–IFC, P.O. Box 8016, 

Baltimore, MD 21244–1850. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address ONLY: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–4140–IFC, 

Mail Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments before the close 

of the comment period to either of the 

following addresses: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue, SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not readily 

available to persons without Federal 

government identification, commenters are 

encouraged to leave their comments in the 

CMS drop slots located in the main lobby of 

the building. A stamp-in clock is available for 

persons wishing to retain a proof of filing by 

stamping in and retaining an extra copy of 

the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, 

please call (410) 786–7195 in advance to 

schedule your arrival with one of our 

staff members. 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

Submission of comments on 

paperwork requirements. You may 

submit comments on this document’s 

paperwork requirements by following 

the instructions at the end of the 

‘‘Collection of Information 

Requirements’’ section in this document. 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http:// 

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 


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Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations 5411 

1A technical correction to the effective date for 

collectively bargained plans was made by Public 

Law 110–460, enacted on December 23, 2008. 

through Friday of each week from 8:30 

a.m. to 4 p.m. EST. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 

Internal Revenue Service. Comments 

to the IRS, identified by REG–120692– 

09, by one of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail: CC:PA:LPD:PR (REG–120692– 

09), room 5205, Internal Revenue 

Service, P.O. Box 7604, Ben Franklin 

Station, Washington, DC 20044. 

• Hand or courier delivery: Monday 

through Friday between the hours of 8 

a.m. and 4 p.m. to: CC:PA:LPD:PR 

(REG–120692–09), Courier’s Desk, 

Internal Revenue Service, 1111 

Constitution Avenue, NW., Washington, 

DC 20224. 

All submissions to the IRS will be 

open to public inspection and copying 

in room 1621, 1111 Constitution 

Avenue, NW., Washington, DC from 9 

a.m. to 4 p.m. 

FOR FURTHER INFORMATION CONTACT: 

Amy Turner or Beth Baum, Employee 

Benefits Security Administration, 

Department of Labor, at (202) 693–8335; 

Russ Weinheimer, Internal Revenue 

Service, Department of the Treasury, at 

(202) 622–6080; Adam Shaw, Centers 

for Medicare & Medicaid Services, 

Department of Health and Human 

Services, at (877) 267–2323, extension 

61091. 

Customer Service Information: 

Individuals interested in obtaining 

information from the Department of 

Labor concerning employment-based 

health coverage laws, including the 

mental health parity provisions, may 

call the EBSA Toll-Free Hotline at 

1–866–444–EBSA (3272) or visit the 

Department of Labor’s Web site (http:// 

www.dol.gov/ebsa). In addition, 

information from HHS on private health 

insurance for consumers (such as 

mental health and substance use 

disorder parity) can be found on the 

Centers for Medicare & Medicaid 

Services (CMS) Web site (http:// 

www.cms.hhs.gov/ 

HealthInsReformforConsume/ 

01_Overview.asp). 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Paul Wellstone and Pete 

Domenici Mental Health Parity and 

Addiction Equity Act of 2008 

(MHPAEA) was enacted on October 3, 

2008 as sections 511 and 512 of the Tax 

Extenders and Alternative Minimum 

Tax Relief Act of 2008 (Division C of 

Pub. L. 110–343).1 MHPAEA amends 

the Employee Retirement Income 

Security Act of 1974 (ERISA), the Public 

Health Service Act (PHS Act), and the 

Internal Revenue Code of 1986 (Code). 

In 1996, Congress enacted the Mental 

Health Parity Act of 1996 (MHPA 1996), 

which required parity in aggregate 

lifetime and annual dollar limits for 

mental health benefits and medical and 

surgical benefits. Those mental health 

parity provisions were codified in 

section 712 of ERISA, section 2705 of 

the PHS Act, and section 9812 of the 

Code, which apply to employmentrelated group health plans and health 

insurance coverage offered in 

connection with a group health plan. 

The changes made by MHPAEA are 

codified in these same sections and 

consist of new requirements as well as 

amendments to the existing mental 

health parity provisions. The changes 

made by MHPAEA are generally 

effective for plan years beginning after 

October 3, 2009. 

On April 28, 2009, the Departments of 

the Treasury, Labor, and HHS 

(collectively, the Departments) 

published in the Federal Register (74 

FR 19155) a request for information 

(RFI) soliciting comments on the 

requirements of MHPAEA. After 

consideration of the comments received 

in response to the RFI, the Departments 

are publishing these interim final 

regulations. These regulations generally 

become applicable to plans and issuers 

for plan years beginning on or after July 

1, 2010. 

II. Overview of the Regulations 

These interim final regulations 

replace regulations published on 

December 22, 1997 at 62 FR 66932 

implementing MHPA 1996. These 

regulations also make conforming 

changes to reflect modifications 

MHPAEA made to the original MHPA 

1996 definitions and provisions 

regarding parity in aggregate lifetime 

and annual dollar limits, and 

incorporate new parity standards. 

A. Meaning of Terms (26 CFR 54.9812– 

1T(a), 29 CFR 2590.712(a), and 45 CFR 

146.136(a)) 

The paragraph with the heading 

‘‘definitions’’ in the MHPA 1996 

regulations has been renamed ‘‘meaning 

of terms’’ under these regulations 

because some of the terms added by 

MHPAEA are not comprehensively 

defined. The change in heading reflects 

the fact that if a term is described as 

including a list of examples, the term 

may have a broader meaning than the 

illustrative list of examples. 

1. Aggregate Lifetime and Annual Dollar 

Limits 

The word ‘‘dollar’’ has been added to 

the terms ‘‘aggregate lifetime limit’’ and 

‘‘annual limit’’ under the MHPA 1996 

regulations to distinguish them from 

lifetime and annual limits expressed in 

terms of days or visits which are subject 

to new requirements under MHPAEA. 

2. Coverage Unit 

Paragraph (a) in these regulations 

cross-references the definition of 

coverage unit in paragraph (c)(1). 

Paragraph (c)(1) clarifies the term for 

purposes of the new MHPAEA rules and 

is discussed later in this preamble. 

3. Cumulative Financial Requirements 

These regulations add a definition for 

the term ‘‘cumulative financial 

requirements’’. Under this definition, a 

cumulative financial requirement is a 

financial requirement that typically 

operates as a threshold amount that, 

once satisfied, will determine whether, 

or to what extent, benefits are provided. 

A common example of a cumulative 

financial requirement is a deductible 

that must be satisfied before a plan will 

start paying for benefits. However, 

aggregate lifetime and annual dollar 

limits are excluded from being 

cumulative financial requirements 

(because the statutory term financial 

requirements excludes aggregate 

lifetime and annual dollar limits). 

4. Cumulative Quantitative Treatment 

Limitations 

These regulations add a definition for 

the term ‘‘cumulative quantitative 

treatment limitations’’. Similar to the 

definition for cumulative financial 

requirements, a cumulative quantitative 

treatment limitation is defined as a 

treatment limitation that will determine 

whether, or to what extent, benefits are 

provided based on an accumulated 

amount. A common example of a 

cumulative quantitative treatment 

limitation is a visit limit (whether 

imposed annually or on a lifetime 

basis). 

5. Financial Requirements 

These regulations repeat the statutory 

language that provides the term 

‘‘financial requirements’’ includes 

deductibles, copayments, coinsurance, 

and out-of-pocket maximums. The 

statute and these regulations exclude 

aggregate lifetime and annual dollar 

limits from the meaning of financial 

requirements; these limits are subject to 


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2The terms ‘‘substance abuse,’’ ‘‘chemical 

dependency, ’’ and ‘‘substance use disorder’’ are 

variously used to refer to substance use disorders. 

Although they mean essentially the same thing, the 

term used in MHPAEA is ‘‘substance use disorder’’. 

separate provisions originally enacted as 

part of MHPA 1996 that remain in 

paragraph (b). 

6. Medical/Surgical Benefits, Mental 

Health Benefits, and Substance Use 

Disorder Benefits 

Among the changes enacted by 

MHPAEA is an expansion of the parity 

requirements for aggregate lifetime and 

annual dollar limits to include 

protections for substance use disorder 

benefits. Prior law specifically excluded 

substance abuse or chemical 

dependency benefits 2 from those 

requirements. Consequently, these 

regulations amend the meanings of 

medical/surgical benefits and mental 

health benefits (and add a definition for 

substance use disorder benefits). Under 

these regulations, medical/surgical 

benefits are benefits for medical or 

surgical services, as defined under the 

terms of the plan or health insurance 

coverage, but do not include mental 

health or substance use disorder 

benefits. Mental health benefits and 

substance use disorder benefits are 

benefits with respect to services for 

mental health conditions and substance 

use disorders, as defined under the 

terms of the plan and in accordance 

with applicable Federal and State law. 

These regulations further provide that 

the plan terms defining whether the 

benefits are mental health or substance 

use disorder benefits must be consistent 

with generally recognized independent 

standards of current medical practice. 

This requirement is included to ensure 

that a plan does not misclassify a benefit 

in order to avoid complying with the 

parity requirements. 

The word ‘‘generally’’ in the 

requirement ‘‘to be consistent with 

generally recognized independent 

standards of current medical practice’’ is 

not meant to imply that the standard 

must be a national standard; it simply 

means that a standard must be generally 

accepted in the relevant medical 

community. There are many different 

sources that would meet this 

requirement. For example, a plan may 

follow the most current version of the 

Diagnostic and Statistical Manual of 

Mental Disorders (DSM), the most 

current version of the International 

Classification of Diseases (ICD), or a 

State guideline. All of these would be 

considered acceptable resources to 

determine whether benefits for a 

particular condition are classified as 

medical/surgical, mental health, or 

substance use disorder benefits. 

7. Treatment Limitations 

These regulations repeat the statutory 

language with respect to the term 

‘‘treatment limitation’’ and also 

distinguish between a quantitative and 

a nonquantitative treatment limitation. 

These regulations provide that the 

parity requirements in the statute apply 

to both quantitative and nonquantitative 

treatment limitations. A quantitative 

treatment limitation is a limitation that 

is expressed numerically, such as an 

annual limit of 50 outpatient visits. A 

nonquantitative treatment limitation is a 

limitation that is not expressed 

numerically, but otherwise limits the 

scope or duration of benefits for 

treatment. A non-exhaustive list of 

nonquantitative treatment limitations is 

included in these regulations in 

paragraph (c)(4). This list, as well as the 

application of these regulations to 

nonquantitative treatment limitations, is 

further discussed later in this preamble. 

However, these regulations provide that 

a permanent exclusion of all benefits for 

a specific condition or disorder is not a 

treatment limitation. 

B. Conforming Amendments to Parity 

Requirements With Respect to Aggregate 

Lifetime and Annual Dollar Limits (26 

CFR 54.9812–1T(b), 29 CFR 2590.712(b), 

and 45 CFR 146.136(b)) 

Paragraph (b) of these regulations 

addresses the parity requirements with 

respect to aggregate lifetime and annual 

dollar limits. The mechanics of these 

requirements generally remain the same 

as under the MHPA 1996 regulations, 

except that MHPAEA expanded the 

scope of the parity provisions to apply 

also to substance use disorder benefits. 

Accordingly, these regulations make 

conforming changes to reflect this 

expansion. Certain examples illustrating 

the application of MHPA 1996 to 

benefits for substance abuse and 

chemical dependency were deleted (as 

they are no longer accurate); other 

provisions were modified to include 

references to substance use disorder 

benefits as within the scope of the parity 

requirements for aggregate lifetime and 

annual dollar limits. 

C. Parity Requirements With Respect to 

Financial Requirements and Treatment 

Limitations (26 CFR 54.9812–1T(c), 29 

CFR 2590.712(c), and 45 CFR 

146.136(c)) 

Paragraph (c) of these regulations 

implements the core of MHPAEA’s new 

rules, which require parity with respect 

to financial requirements and treatment 

limitations. 

1. Clarification of Terms 

In addition to the meaning of terms in 

paragraph (a), paragraph (c)(1) of these 

regulations clarifies certain terms that 

have been given specific meanings for 

purposes of MHPAEA. 

a. Classification of benefits. Paragraph 

(c)(1) cross-references the term 

‘‘classification of benefits’’ in paragraph 

(c)(2)(ii). Paragraph (c)(2)(ii) describes 

the six benefit classifications and their 

application, which are discussed later in 

this preamble. These regulations 

provide that the parity requirements for 

financial requirements and treatment 

limitations are applied on a 

classification-by-classification basis. 

b. Type. These regulations use the 

term ‘‘type’’ to refer to financial 

requirements and treatment limitations 

of the same nature. Different types 

include copayments, coinsurance, 

annual visit limits, and episode visit 

limits. Plans often apply more than one 

financial requirement or treatment 

limitation to benefits. These regulations 

specify that a financial requirement or 

treatment limitation must be compared 

only to financial requirements or 

treatment limitations of the same type 

within a classification. For example, 

copayments are compared only to other 

copayments, and annual visit limits are 

compared only to other annual visit 

limits; copayments are not compared to 

coinsurance, and annual visit limits are 

not compared to episode visit limits. 

c. Level. A type of financial 

requirement or treatment limitation may 

vary in magnitude. For example, a plan 

may impose a $20 copayment or a $30 

copayment depending on the medical/ 

surgical benefit. In these regulations, a 

‘‘level’’ of a type of financial requirement 

or treatment limitation refers to the 

magnitude (such as the dollar, 

percentage, day, or visit amount) of the 

financial requirement or treatment 

limitation. 

d. Coverage unit. Plans typically 

distinguish between coverage for a 

single participant, for a participant plus 

a spouse, for a family, and so forth. 

Coverage unit is the term used in these 

regulations to refer to how a plan groups 

individuals for purposes of determining 

benefits, or premiums or contributions. 

These regulations provide that the 

general parity requirement of MHPAEA 

for financial requirements and treatment 

limitations is applied separately for 

each coverage unit. 

2. General Parity Requirement for 

Financial Requirements and Treatment 

Limitations 

The general parity requirement of 

paragraph (c)(2) of these regulations 


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Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations 5413 

3See sections 9812(a)(5) of the Code, 712(a)(5) of 

ERISA, 2705(a)(5) of the PHS Act. 

prohibits a plan (or health insurance 

coverage) from applying any financial 

requirement or treatment limitation to 

mental health or substance use disorder 

benefits in any classification that is 

more restrictive than the predominant 

financial requirement or treatment 

limitation applied to substantially all 

medical/surgical benefits in the same 

classification. For this purpose, the 

general parity requirement of MHPAEA 

applies separately for each type of 

financial requirement or treatment 

limitation (that is, for example, 

copayments are compared to 

copayments, and deductibles to 

deductibles). The test is applied 

somewhat differently to nonquantitative 

treatment limitations, as discussed later 

in this preamble. 

a. Classifications of benefits. Plans 

often vary the financial requirements 

and treatment limitations imposed on 

benefits based on whether a treatment is 

provided on an inpatient, outpatient, or 

emergency basis; whether a provider is 

a member of the plan’s network; or 

whether the benefit is specifically for a 

prescription drug. Therefore, 

determining the predominant financial 

requirements and treatment limitations 

for the entire plan without taking these 

distinctions into account could 

potentially lead to absurd results. For 

example, if a plan generally requires a 

$100 copayment on inpatient medical/ 

surgical benefits and a $10 copayment 

on outpatient medical/surgical benefits, 

and most services (as measured by plan 

costs) are provided on an inpatient 

basis, the plan theoretically could 

charge a $100 copayment for outpatient 

mental health and substance use 

disorder benefits. Similarly, if most 

benefits are provided on an outpatient 

basis, the plan would only be able to 

charge a $10 copayment for inpatient 

mental health and substance use 

disorder benefits. Commenters generally 

agreed that the statute should be applied 

within several broad classifications of 

benefits. 

These regulations specify, in 

paragraph (c)(2)(ii), six classifications of 

benefits: Inpatient, in-network; 

inpatient, out-of-network; outpatient, innetwork; outpatient, out-of-network; 

emergency care; and prescription drugs. 

If a plan does not have a network of 

providers for inpatient or outpatient 

benefits, all benefits in the classification 

are characterized as out-of-network. 

These regulations provide that the 

parity requirements for financial 

requirements and treatment limitations 

are generally applied on a classificationby-classification basis and these are the 

only classifications used for purposes of 

satisfying the parity requirements of 

MHPAEA. Moreover, these 

classifications must be used for all 

financial requirements and treatment 

limitations to the extent that a plan (or 

health insurance coverage) provides 

benefits in a classification and imposes 

any separate financial requirement or 

treatment limitation (or separate level of 

a financial requirement or treatment 

limitation) for benefits in the 

classification. Examples illustrate the 

application of this rule. 

Commenters noted that a common 

plan design imposes lower copayments 

for treatment from a primary care 

provider (for example, an internist or a 

pediatrician) as compared to higher 

copayments for treatment from a 

specialist (such as a cardiologist or an 

orthopedist). Some of these commenters 

requested that this distinction be 

permitted in applying the parity 

requirements by recognizing a separate 

classification for specialists; others of 

these commenters opposed allowing 

this distinction. Some plans (or health 

insurance coverage) identify a large 

range of mental health and substance 

use disorder providers as specialists. 

Allowing plans to provide less favorable 

benefits with respect to services by 

these providers than for services by 

providers of medical/surgical care that 

are classified by the plan as primary 

care providers would undercut the 

protections that the statute was 

intended to provide. These regulations, 

therefore, do not allow the separate 

classification of generalists and 

specialists in determining the 

predominant financial requirement that 

applies to substantially all medical/ 

surgical benefits. 

Under these regulations, if a plan 

provides any benefits for a mental 

health condition or substance use 

disorder, benefits must be provided for 

that condition or disorder in each 

classification for which any medical/ 

surgical benefits are provided. This 

follows from the statutory requirement 

that any treatment limitations applied to 

mental health or substance use disorder 

benefits may be no more restrictive than 

the predominant treatment limitations 

applied to substantially all medical/ 

surgical benefits. Treatment limitation is 

not comprehensively defined under the 

statute. The statute describes the term as 

including limits on the frequency of 

treatment, number of visits, days of 

coverage, or other similar limits on the 

scope or duration of treatment, but it is 

not limited to such types of limits. 

Indeed, these regulations make a 

distinction between quantitative 

treatment limitations (such as day 

limits, visit limits, frequency of 

treatment limits) and non-quantitative 

treatment limitations (such as medical 

management, formulary design, step 

therapy). If a plan provides benefits for 

a mental health condition or substance 

use disorder in one or more 

classifications but excludes benefits for 

that condition or disorder in a 

classification (such as outpatient, innetwork) in which it provides medical/ 

surgical benefits, the exclusion of 

benefits in that classification for a 

mental health condition or substance 

use disorder otherwise covered under 

the plan is a treatment limitation. It is 

a limit, at a minimum, on the type of 

setting or context in which treatment is 

offered. 

This rule does not require an 

expansion of the range of mental health 

conditions or substance use disorders 

covered under the plan; it merely 

requires, for those conditions or 

disorders covered under the plan, that 

coverage also be provided for them in 

each classification in which medical/ 

surgical coverage is provided. If a plan 

does not offer, for instance, any benefits 

for medical/surgical services on an 

outpatient basis by an out-of-network 

provider, then there is no requirement 

to provide benefits for mental health 

conditions or substance use disorders 

on an outpatient, out-of-network basis. 

Although this rule follows from the 

general parity requirement added by 

MHPAEA, the statute includes a specific 

provision in the case of out-of-network 

benefits.3 The rule for out-of-network 

benefits is stated separately in these 

regulations to reflect the separate 

statutory provision, but the application 

of the general rule requires the same 

result with respect to all classifications. 

These regulations do not define 

inpatient, outpatient, or emergency care. 

These terms are subject to plan design 

and their meanings may differ from plan 

to plan. Additionally, State health 

insurance laws may define these terms. 

A plan must apply these terms 

uniformly for both medical/surgical 

benefits and mental health or substance 

use disorder benefits. However, the 

manner in which they apply may differ 

from plan to plan. For example, a plan 

may treat a hospital stay of more than 

12 hours as inpatient care for medical/ 

surgical benefits; in such case, it must 

also treat a hospital stay of more than 12 

hours as inpatient care for mental health 

and substance use disorder benefits. 

However, another plan may treat a 

hospital stay that includes midnight as 

inpatient care for medical/surgical 

benefits; in such a case the plan must 

also treat a hospital stay that includes 


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5414 Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations 

midnight as inpatient care for mental 

health or substance use disorder 

benefits. 

b. Applying the general parity 

requirement to financial requirements 

and quantitative treatment limitations. 

Paragraph (c)(3) of these regulations 

addresses the application of the general 

parity requirement of MHPAEA to plan 

financial requirements and quantitative 

treatment limitations. 

(1) Measuring plan benefits. In order 

to apply the substantive rules, these 

regulations first establish standards for 

measuring plan benefits. These 

regulations, similar to the MHPA 1996 

regulations, provide that the portion of 

plan payments subject to a financial 

requirement or quantitative treatment 

limitation is based on the dollar amount 

of all plan payments for medical/ 

surgical benefits in the classification 

expected to be paid under the plan for 

the plan year. Also similar to the MHPA 

1996 regulations, any reasonable 

method may be used to determine the 

dollar amount expected to be paid 

under the plan for medical/surgical 

benefits subject to a financial 

requirement or quantitative treatment 

limitation. 

Some cumulative financial 

requirements, such as deductibles and 

out-of-pocket maximums, involve a 

threshold amount that causes the 

amount of a plan payment to change. 

These regulations clarify that, for 

purposes of deductibles, the dollar 

amount of plan payments includes all 

payments with respect to claims that 

would be subject to the deductible if it 

had not been satisfied. For purposes of 

out-of-pocket maximums, the dollar 

amount of plan payments includes all 

plan payments associated with out-ofpocket payments that were taken into 

account towards the out-of-pocket 

maximum as well as all plan payments 

associated with out-of-pocket payments 

that would have been made towards the 

out-of-pocket maximum if it had not 

been satisfied. Other threshold 

requirements are treated similarly. 

(2) ‘‘Substantially all’’. The first step of 

these regulations in applying the general 

parity requirement of MHPAEA is to 

determine whether a financial 

requirement or quantitative treatment 

limitation applies to substantially all 

medical/surgical benefits in a 

classification. Regulations issued under 

MHPA 1996 interpreted the term 

‘‘substantially all’’ to mean at least twothirds. Under these regulations, a 

financial requirement or quantitative 

treatment limitation applies to 

substantially all medical/surgical 

benefits in a classification if it applies 

to at least two-thirds of the benefits in 

that classification. In determining 

whether a financial requirement or 

quantitative treatment limitation applies 

to substantially all medical/surgical 

benefits in a classification, benefits 

expressed as subject to a zero level of a 

type of financial requirement are treated 

the same as benefits that are not subject 

to that type of requirement, and benefits 

expressed as subject to an unlimited 

quantitative treatment limitation are 

treated the same as benefits that are not 

subject to that type of limitation. For 

example, in the classification of 

outpatient, in-network medical/surgical 

benefits, a plan could reduce the normal 

copayment amount of $15 to $0 for well 

baby care or routine physical 

examinations, while a copayment is not 

imposed on office visits for allergy 

shots. For purposes of this analysis, 

both of these benefits are treated as not 

subject to a copayment. 

If a type of financial requirement or 

quantitative treatment limitation does 

not apply to at least two-thirds of the 

medical surgical benefits in a 

classification, that type of requirement 

or limitation cannot be applied to 

mental health or substance use disorder 

benefits in that classification. If a single 

level of a type of financial requirement 

or quantitative treatment limitation 

applies to at least two-thirds of medical/ 

surgical benefits in a classification, then 

it is also the predominant level and that 

is the end of the analysis. However, if 

the financial requirement or quantitative 

treatment limitation applies to at least 

two-thirds of all medical/surgical 

benefits in a classification but has 

multiple levels and no single level 

applies to at least two-thirds of all 

medical/surgical benefits in the 

classification, then additional analysis 

is required. In such a case, the next step 

is to determine which level of the 

financial requirement or quantitative 

treatment limitation is considered 

predominant. 

(3) ‘‘Predominant’’. MHPAEA provides 

that a financial requirement or treatment 

limitation is predominant if it is the 

most common or frequent of a type of 

limit or requirement. Under these 

regulations, the predominant level of a 

type of financial requirement or 

quantitative treatment limitation is the 

level that applies to more than one-half 

of medical/surgical benefits subject to 

the financial requirement or quantitative 

treatment limitation in that 

classification. If a single level of a type 

of financial requirement or quantitative 

treatment limitation applies to more 

than one-half of medical/surgical 

benefits subject to the financial 

requirement or quantitative treatment 

limitation in a classification (based on 

plan costs, as discussed earlier in this 

preamble), the plan may not apply that 

particular financial requirement or 

quantitative treatment limitation to 

mental health or substance use disorder 

benefits at a level that is more restrictive 

than the level that has been determined 

to be predominant. 

If no single level applies to more than 

one-half of medical/surgical benefits 

subject to a financial requirement or 

quantitative treatment limitation in a 

classification, plan payments for 

multiple levels of the same type of 

financial requirement or quantitative 

treatment limitation can be combined by 

the plan (or health insurance issuer) 

until the portion of plan payments 

subject to the financial requirement or 

quantitative treatment limitation 

exceeds one-half. For any combination 

of levels that exceeds one-half of 

medical/surgical benefits subject to the 

financial requirement or quantitative 

treatment limitation in a classification, 

the plan may not apply that particular 

financial requirement or quantitative 

treatment limitation to mental health 

and substance use disorder benefits at a 

level that is more restrictive than the 

least restrictive level within the 

combination. The plan may combine 

plan payments for the most restrictive 

levels first, with each less restrictive 

level added to the combination until the 

combination applies to more than onehalf of the benefits subject to the 

financial requirement or treatment 

limitation. Examples in these 

regulations illustrate the application of 

this rule. 

These regulations provide an 

alternative, simpler method for 

compliance when a type of financial 

requirement or quantitative treatment 

limitation applies to at least two-thirds 

of medical surgical benefits in a 

classification but no single level applies 

to more than one-half of the medical/ 

surgical benefits subject to the financial 

requirement or quantitative treatment 

limitation in that classification. In such 

a situation, a plan is permitted to treat 

the least restrictive level of the financial 

requirement or quantitative treatment 

limitation applied to medical/surgical 

benefits in that classification as the 

predominant level. 

If a plan provides benefits for more 

than one coverage unit and applies 

different levels of financial 

requirements or quantitative treatment 

limitations to these coverage units 

within a classification of benefits, 

determining the predominant level of a 

particular financial requirement or 

quantitative treatment limitation must 

be done separately for each coverage 

unit. Thus, for example, a plan with 


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Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations 5415 

4Several commenters stated that the estimated 

cost to develop interfaces between MBHOs and the 

entity administering medical/surgical claims would 

be $420,000–$750,000 per interface, and that in 

some cases multiple interfaces per MBHO (as many 

as 40–50) would be necessary. In response to these 

cost concerns, the Departments performed an 

independent analysis, which indicated that the 

initial cost per interface could be as low as $35,000. 

The Departments’ lower estimated cost reflects, in 

part, the use of less expensive interface systems (for 

example, batch processing rather than real-time), 

and the ability to model new interfaces on existing 

systems used to interface with pharmacy benefit 

managers and dental insurers. In addition, many 

MBHOs already have developed interfaces, because 

their clients requested combined deductibles. This 

should result in reduced costs, because interface 

development costs are incremental and should 

decrease after the first interface is created. For a 

further discussion of this issue, see section IV. 

Economic Impact and Paperwork Burden later in 

this preamble. 

different deductibles for self-only and 

family coverage units would not 

determine the predominant level of a 

deductible applied for benefits across 

both the self-only and family coverage 

units. Instead, the plan would 

determine the predominant level of the 

deductible for self-only coverage 

independently from the predominant 

level for family coverage. 

c. Special rule for prescription drug 

benefits with multiple levels of financial 

requirements. These regulations 

include, in paragraph (c)(3)(iii), a 

special rule for applying the general 

parity requirement of MHPAEA to 

prescription drug benefits. Although 

applying the general parity requirement 

to a prescription drug program with a 

single level of a type of financial 

requirement would be relatively 

uncomplicated, the analysis becomes 

more difficult if different financial 

requirements are imposed for different 

tiers of drugs. The placement of a drug 

in a tier is generally based on factors 

(such as cost and efficacy) unrelated to 

whether the drug is usually prescribed 

for the treatment of a medical/surgical 

condition or a mental health condition 

or substance use disorder. To the extent 

such a program does not distinguish 

between drugs as medical/surgical 

benefits or mental health or substance 

use disorder benefits, requiring the 

program to make that distinction solely 

for the purpose of determining the 

predominant financial requirement or 

quantitative treatment limitation that 

applies to substantially all medical/ 

surgical benefits in a classification 

might impose significant burdens 

without ensuring any greater parity for 

mental health and substance use 

disorder benefits. 

Consequently, these regulations 

provide that if a plan imposes different 

levels of financial requirements on 

different tiers of prescription drugs 

based on reasonable factors (such as 

cost, efficacy, generic versus brand 

name, and mail order versus pharmacy 

pick-up), determined in accordance 

with the requirements for 

nonquantitative treatment limitations, 

and without regard to whether a drug is 

generally prescribed with respect to 

medical/surgical benefits or mental 

health or substance use disorder 

benefits, the plan satisfies the parity 

requirements with respect to the 

prescription drug classification of 

benefits. The special rule for 

prescription drugs, in effect, allows a 

plan or issuer to subdivide the 

prescription drug classification into 

tiers and apply the general parity 

requirement separately to each tier of 

prescription drug benefits. For any tier, 

the financial requirements and 

treatment limitations imposed with 

respect to the drugs prescribed for 

medical/surgical conditions are the 

same as (and thus not more restrictive 

than) the financial requirements and 

treatment limitations imposed with 

respect to the drugs prescribed for 

mental health conditions and substance 

use disorders in the tier. Moreover, 

because the financial requirements and 

treatment limitations apply to 100 

percent of the medical/surgical drug 

benefits in the tier, they are the 

predominant financial requirements and 

treatment limitations that apply to 

substantially all of the medical/surgical 

drug benefits in the tier. 

d. Cumulative financial requirements 

and quantitative treatment limitations, 

including deductibles. While financial 

requirements such as copayments and 

coinsurance generally apply separately 

to each covered expense, other financial 

requirements (in particular, deductibles) 

accumulate across covered expenses. In 

the case of deductibles, generally an 

amount of otherwise covered expenses 

must be accumulated before the plan 

pays benefits. Financial requirements 

and quantitative treatment limitations 

that determine whether and to what 

extent benefits are provided based on 

accumulated amounts are defined in 

these regulations as cumulative 

financial requirements and cumulative 

quantitative treatment limitations. 

In response to the RFI, the 

Departments received a number of 

comments regarding how to apply the 

parity requirements to cumulative 

financial requirements, in particular to 

deductibles (although some also referred 

to out-of-pocket maximums). The 

comments reflect two opposing views. 

One view is that a plan can have 

deductibles that accumulate separately 

for medical/surgical benefits on the one 

hand, and mental health or substance 

use disorder benefits on the other, as 

long as the level of the two deductibles 

is the same (separately accumulating 

deductibles). The opposing view is that 

expenses for both mental health or 

substance use disorder benefits and 

medical/surgical benefits must 

accumulate to satisfy a single combined 

deductible before the plan provides 

either medical/surgical benefits or 

mental health or substance use disorder 

benefits (combined deductible). 

The provisions of the statute imposing 

parity on financial requirements and 

treatment limitations do not specifically 

address this issue; the language of the 

statute can be interpreted to support 

either position. The comments that 

supported allowing separately 

accumulating deductibles maintained 

that it is commonplace for plans to have 

such deductibles, and that the projected 

cost of converting systems to permit 

unified deductibles would be extremely 

high for the many plans that use a 

separate managed behavioral health 

organization (MBHO).4

By contrast, comments that supported 

requiring combined deductibles argued 

that allowing separately accumulating 

deductibles undermines a central goal of 

parity legislation, to affirm that mental 

health and substance use disorder 

benefits are integral components of 

comprehensive health care and 

generally should not be distinguished 

from medical/surgical benefits. 

Distinguishing between the two requires 

individuals who need both kinds of care 

to satisfy a deductible that is greater 

than that required for individuals 

needing only medical/surgical care. 

Other comments that supported 

requiring combined deductibles noted 

that mental health and substance use 

disorder benefits typically comprise 

only 2 to 5 percent of a plan’s costs, so 

that even using identical levels for 

separately accumulating deductibles 

imposes a greater barrier to mental 

health and substance use disorder 

benefits. 

The Departments carefully considered 

the positions advanced by both groups 

of comments regarding separately 

accumulating and combined 

deductibles. Given that the statutory 

language does not preclude either 

interpretation, the Departments’ view is 

that prohibiting separately accumulating 

financial restrictions and quantitative 

treatment limitations is more consistent 

with the policy goals that led to the 

enactment of MHPAEA. Consequently, 

these regulations provide, in paragraph 

(c)(3)(v), that a plan may not apply 

cumulative financial requirements or 

cumulative quantitative treatment 

limitations to mental health or 


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5This rule in the interim final regulations 

prohibiting separately accumulating financial 

requirements and quantitative treatment limitations 

does not apply with respect to aggregate lifetime 

and annual dollar limits. The statutory language of 

MHPA 1996 specifically permitted plans to impose 

aggregate lifetime or annual dollar limits that 

distinguish between mental health benefits and 

medical/surgical benefits. MHPAEA left the 

language of this statutory provision intact, 

modifying it only to expand its applicability to 

include substance use disorder benefits. 

substance use disorder benefits in a 

classification that accumulate separately 

from any such cumulative financial 

requirements or cumulative quantitative 

treatment limitations established for 

medical/surgical benefits in the same 

classification.5 Examples in these 

regulations illustrate the application of 

this rule. 

e. Application to nonquantitative 

treatment limitations. Plans impose a 

variety of limits affecting the scope or 

duration of benefits under the plan that 

are not expressed numerically. 

Nonetheless, such nonquantitative 

provisions are also treatment limitations 

affecting the scope or duration of 

benefits under the plan. These 

regulations provide an illustrative list of 

nonquantitative treatment limitations, 

including medical management 

standards; prescription drug formulary 

design; standards for provider 

admission to participate in a network; 

determination of usual, customary, and 

reasonable amounts; requirements for 

using lower-cost therapies before the 

plan will cover more expensive 

therapies (also known as fail-first 

policies or step therapy protocols); and 

conditioning benefits on completion of 

a course of treatment. 

Paragraph (c)(4) of these regulations 

generally prohibits the imposition of 

any nonquantitative treatment 

limitation to mental health or substance 

use disorder benefits unless certain 

requirements are met. Any processes, 

strategies, evidentiary standards, or 

other factors used in applying the 

nonquantitative treatment limitation to 

mental health or substance use disorder 

benefits in a classification must be 

comparable to, and applied no more 

stringently than, the processes, 

strategies, evidentiary standards, or 

other factors used in applying the 

limitation with respect to medical 

surgical/benefits in the classification. 

However, these requirements allow 

variations to the extent that recognized 

clinically appropriate standards of care 

may permit a difference. These 

requirements apply to the terms of the 

plan (or health insurance coverage) both 

as written and in operation. 

The phrase, ‘‘applied no more 

stringently’’ was included to ensure that 

any processes, strategies, evidentiary 

standards, or other factors that are 

comparable on their face are applied in 

the same manner to medical/surgical 

benefits and to mental health or 

substance use disorder benefits. Thus, 

for example, assume a claims 

administrator has discretion to approve 

benefits for treatment based on medical 

necessity. If that discretion is routinely 

used to approve medical/surgical 

benefits while denying mental health or 

substance use disorder benefits and 

recognized clinically appropriate 

standards of care do not permit such a 

difference, the processes used in 

applying the medical necessity standard 

are considered to be applied more 

stringently to mental health or 

substance use disorder benefits. The use 

of discretion in this manner violates the 

parity requirements for nonquantitative 

treatment limitations. 

Different types of illnesses or injuries 

may require different review, as well as 

different care. The acute versus chronic 

nature of a condition, the complexity of 

it or the treatment involved, and other 

factors may affect the review. Although 

the processes, strategies, evidentiary 

standards, and other factors used in 

applying these limitations must 

generally be applied in a comparable 

manner to all benefits, the mere fact of 

disparate results does not mean that the 

treatment limitations do not comply 

with parity. 

Examples in these regulations 

illustrate the operation of the 

requirements for nonquantitative 

treatment limitations. Medical 

management standards are implemented 

by processes such as preauthorization, 

concurrent review, retrospective review, 

case management, and utilization 

review; the examples feature the 

application of these requirements to 

some of these processes. The facts in the 

examples reflect simple situations for 

purposes of better illustrating the 

application of the rules rather than 

reflecting the realistic, complex facts 

that would typically be found in a plan. 

The Departments invite comments on 

whether additional examples would be 

helpful to illustrate the application of 

the nonquantitative treatment limitation 

rule to other features of medical 

management or general plan design. 

Commenters asked if the MHPAEA 

requirements apply when eligibility for 

mental health and substance use 

disorder benefits under a major medical 

program is conditioned on exhausting 

some limited number of mental health 

and substance use disorder counseling 

sessions offered through an employee 

assistance program (EAP). Generally, the 

provision of mental health or substance 

use disorder benefits by an EAP in 

addition to the benefits offered by a 

major medical program that otherwise 

complies with the parity rules would 

not violate MHPAEA. However, 

requiring participants to exhaust the 

EAP benefits—making the EAP a 

gatekeeper—before an individual is 

eligible for the major medical program’s 

mental health or substance use disorder 

benefits is a nonquantitative treatment 

limitation subject to the parity 

requirements. Consequently, if similar 

gatekeeping processes with a similar 

exhaustion requirement (whether or not 

through the EAP) are not applied to 

medical/surgical benefits, the 

requirement to exhaust mental health or 

substance use disorder benefits 

available under the EAP would violate 

the rule that nonquantitative treatment 

limitations be applied comparably and 

not more stringently to mental health 

and substance use disorder benefits. 

The Departments received many 

comments addressing an issue 

characterized as ‘‘scope of services’’ or 

‘‘continuum of care’’. Some commenters 

requested, with respect to a mental 

health condition or substance use 

disorder that is otherwise covered, that 

the regulations clarify that a plan is not 

required to provide benefits for any 

particular treatment or treatment setting 

(such as counseling or non-hospital 

residential treatment) if benefits for the 

treatment or treatment setting are not 

provided for medical/surgical 

conditions. Other commenters requested 

that the regulations clarify that a 

participant or beneficiary with a mental 

health condition or substance use 

disorder have coverage for the full scope 

of medically appropriate services to 

treat the condition or disorder if the 

plan covers the full scope of medically 

appropriate services to treat medical/ 

surgical conditions, even if some 

treatments or treatment settings are not 

otherwise covered by the plan. Other 

commenters requested that MHPAEA be 

interpreted to require that group health 

plans provide benefits for any evidencebased treatment. 

The Departments recognize that not 

all treatments or treatment settings for 

mental health conditions or substance 

use disorders correspond to those for 

medical/surgical conditions. The 

Departments also recognize that 

MHPAEA prohibits plans and issuers 

from imposing treatment limitations on 

mental health and substance use 

disorder benefits that are more 

restrictive than those applied to 

medical/surgical benefits. These 

regulations do not address the scope of 

services issue. The Departments invite 

comments on whether and to what 


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6 29 CFR 2560.503–1. 7See 69 FR 78800 (December 30, 2004). 

extent MHPAEA addresses the scope of 

services or continuum of care provided 

by a group health plan or health 

insurance coverage. 

D. Availability of Plan Information (26 

CFR 54.9812–1T(d), 29 CFR 

2590.712(d), and 45 CFR 146.136(d)) 

MHPAEA includes two new 

disclosure provisions for group health 

plans (and health insurance coverage 

offered in connection with a group 

health plan). First, the criteria for 

medical necessity determinations made 

under a plan (or health insurance 

coverage) with respect to mental health 

or substance use disorder benefits must 

be made available by the plan 

administrator (or the health insurance 

issuer offering such coverage) in 

accordance with regulations to any 

current or potential participant, 

beneficiary, or contracting provider 

upon request. These regulations repeat 

the statutory language without 

substantive change. The Departments 

invite comments on what additional 

clarifications might be helpful to 

facilitate compliance with this 

disclosure requirement for medical 

necessity criteria. 

MHPAEA also provides that the 

reason for any denial under a group 

health plan (or health insurance 

coverage) of reimbursement or payment 

for services with respect to mental 

health or substance use disorder 

benefits in the case of any participant or 

beneficiary must be made available, 

upon request or as otherwise required, 

by the plan administrator (or the health 

insurance issuer) to the participant or 

beneficiary in accordance with 

regulations. These regulations clarify 

that, in order for plans subject to ERISA 

(and health insurance coverage offered 

in connection with such plans) to satisfy 

this requirement, disclosures must be 

made in a form and manner consistent 

with the rules for group health plans in 

the ERISA claims procedure 

regulations,6 which provide (among 

other things) that such disclosures must 

be provided automatically and free of 

charge. In the case of non-Federal 

governmental and church plans (which 

are not subject to ERISA), and health 

insurance coverage offered in 

connection with such plans, these 

regulations provide that compliance 

with the form and manner of the ERISA 

claims procedure regulations for group 

health plans satisfies this disclosure 

requirement. The Departments invite 

comments regarding any additional 

clarifications that would be helpful to 

facilitate compliance with MHPAEA’s 

disclosure requirements regarding 

denials of mental health or substance 

use disorder benefits. 

E. General Applicability Provisions (26 

CFR 54.9812–1T(e), 29 CFR 2590.712(e), 

and 45 CFR 146.136(e)) 

Paragraph (e) of these regulations 

addresses the applicability of these 

regulations to group health plans and 

health insurance issuers and clarifies 

the scope of these regulations. 

1. Overview 

These regulations make a number of 

changes to the general applicability 

provisions in the MHPA 1996 

regulations (paragraphs (c) and (d) in 

those regulations). Amendments made 

by MHPAEA require some of these 

changes. For example, the MHPA 1996 

rules of construction specifically 

excluded any plan provisions relating to 

cost sharing, limits on the number of 

visits or days of coverage, and 

requirements relating to medical 

necessity from the application of the 

parity requirements for aggregate 

lifetime and annual dollar limits. 

MHPAEA replaces these exclusions 

with a rule providing that the provisions 

should not be construed as affecting the 

terms and conditions of the plan or 

coverage relating to mental health and 

substance use disorder benefits except 

as provided in the rules relating to 

financial requirements and treatment 

limitations. These regulations make 

corresponding changes to the MHPA 

1996 regulations. 

These regulations also (1) establish a 

new rule with respect to the mental 

health and substance use disorder parity 

requirements for the determination of 

the number of plans that an employer or 

employee organization maintains, (2) 

combine what were in the MHPA 1996 

regulations separate rules for group 

health plans and benefit packages, and 

(3) make additional clarifications. 

a. Group health plans. In 2004, the 

Departments issued proposed 

regulations for a number of issues under 

Chapter 100 of the Code, Part 7 of 

ERISA, and Title XXVII of the PHS Act, 

including rules for determining the 

number of group health plans that an 

employer or employee organization is 

considered to maintain for purposes of 

those provisions.7 Those proposed 

regulations generally would have 

respected the number of plans 

designated in the instruments governing 

the employer’s or employee 

organization’s arrangements to provide 

medical care benefits as long as the 

arrangements were operated pursuant to 

those instruments as separate plans. The 

2004 proposed regulations included an 

anti-abuse clause, providing that, if a 

principal purpose of establishing 

separate plans was to evade any 

requirement of law, then the separate 

plans would be considered a single plan 

to the extent necessary to prevent the 

evasion. 

The Departments recognized that 

under the 2004 proposed regulations, 

absent the anti-abuse clause, plan 

sponsors might attempt to provide 

mental health (and now substance use 

disorder) benefits under a plan that is 

separate from a plan that provides only 

medical/surgical benefits. Because the 

mental health (and now substance use 

disorder) parity requirements apply 

only to plans that provide both mental 

health or substance use disorder 

benefits and medical/surgical benefits, 

the absence of medical/surgical benefits 

in a plan providing mental health or 

substance use disorder benefits would 

have resulted in, absent the anti-abuse 

clause, the inapplicability of the parity 

requirements. The 2004 proposed 

regulations included the anti-abuse 

clause to avoid this kind of evasion of 

the parity requirements. Commenters 

raised problems of proof with the 

subjective intent element of the 

proposed anti-abuse clause. While the 

2004 rule remains proposed, these 

interim final regulations include a rule 

for determining the number of plans 

that an employer or employee 

organization maintains for the mental 

health and substance use disorder parity 

requirements that operates irrespective 

of the intent of a plan sponsor. The rule 

is that all medical care benefits 

provided by an employer or employee 

organization constitute a single group 

health plan. 

MHPAEA left unchanged the rule 

from MHPA 1996 requiring that the 

parity requirements be applied 

separately to each benefit package 

option under a group health plan. The 

MHPA 1996 regulations used the term 

‘‘benefit package’’ rather than ‘‘benefit 

package option’’ and clarified that the 

parity requirements would apply 

separately to separate benefit packages 

also in situations in which the 

participants (or beneficiaries) had no 

choice between multiple benefit 

packages, such as where retirees are 

provided one benefit package and active 

employees a separate benefit package. 

Under these regulations, the statutory 

rule providing that the parity 

requirements apply separately to 

separate benefit package options 

(reflected in paragraph (c) of the MHPA 

1996 regulations), the statutory rule 

providing that the parity requirements 


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5418 Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations 

apply to a group health plan providing 

both mental health or substance use 

disorder benefits and medical/surgical 

benefits (reflected in paragraph (d) of 

the MHPA 1996 regulations), and the 

determination of how many plans an 

employer or employee organization 

maintains have been combined as a 

single rule in paragraph (e)(1). 

The new combined rule in these 

regulations does not use the term benefit 

package. Instead, it provides that (1) the 

parity requirements apply to a group 

health plan offering both medical/ 

surgical benefits and mental health or 

substance use disorder benefits, (2) the 

parity requirements apply separately 

with respect to each combination of 

medical/surgical coverage and mental 

health or substance use disorder 

coverage that any participant (or 

beneficiary) can simultaneously receive 

from an employer’s or employee 

organization’s arrangement or 

arrangements to provide medical care 

benefits, and (3) all such combinations 

constitute a single group health plan for 

purposes of the parity requirements. 

This new combined rule clearly 

prohibits what might have been 

formerly viewed as a potential evasion 

of the parity requirements by allocating 

mental health or substance use disorder 

benefits to a plan or benefit package 

without medical/surgical benefits (when 

medical/surgical benefits are also 

otherwise available). For example, if an 

employer with a single benefit package 

for medical/surgical benefits also has a 

separately administered benefit package 

for mental health and substance use 

disorder benefits, the parity 

requirements apply to the combined 

benefit package and the combined 

benefit package is considered a single 

plan for purposes of the parity 

requirements. 

Similarly, if an employer offered three 

medical/surgical benefit packages, A, B, 

and C, and a mental health and 

substance use disorder benefit package, 

D, that could be combined with each of 

A, B, and C, then the parity 

requirements must be satisfied with 

respect to each of AD, BD, and CD. If the 

A benefit package had a standard option 

and a high option, A1 and A2, then the 

parity requirements would have to be 

satisfied with respect to each of A1D and 

A2D. 

b. Health insurance issuers. These 

regulations make a change regarding 

applicability with respect to health 

insurance issuers. Both the MHPA 1996 

regulations and these regulations apply 

to an issuer offering health insurance 

coverage. The MHPA 1996 regulations 

provide that the health insurance 

coverage must be for both medical/ 

surgical and mental health benefits in 

connection with a group health plan; 

the rule in these regulations provides 

that the health insurance coverage must 

be for mental health or substance use 

disorder benefits in connection with a 

group health plan subject to MHPAEA 

under paragraph (e)(1). Thus, under 

these regulations, an issuer offering 

health insurance coverage without any 

medical/surgical benefits is nonetheless 

subject to the parity requirements if it 

offers health insurance coverage with 

mental health or substance use disorder 

benefits in connection with a group 

health plan subject to the parity 

requirements. In addition, under these 

regulations, the parity requirements do 

not apply to an issuer offering health 

insurance coverage to a group health 

plan not subject to the parity 

requirements. 

c. Scope. Paragraph (e)(3) of these 

regulations provides that nothing in 

these regulations requires a plan or 

issuer to provide any mental health or 

substance use disorder benefits. 

Moreover, the provision of benefits for 

one or more mental health conditions or 

substance use disorders does not require 

the provision of benefits for any other 

condition or disorder. 

2. Interaction With State Insurance Laws 

Numerous comments requested 

guidance on how MHPAEA interacts 

with State insurance laws requiring 

parity for, or mandating coverage of, 

mental health or substance use disorder 

benefits. Some commenters sought 

clarification that MHPAEA does not 

preempt any State insurance law 

mandating a minimum level of coverage 

(such as a minimum dollar, day, or visit 

level) for mental health conditions or 

substance use disorders. Other 

commenters suggested that, while 

MHPAEA does not preempt State 

insurance parity and mandate laws to 

the extent that they do not prevent the 

application of MHPAEA, provisions in 

the State laws that are more restrictive 

than the requirements of MHPAEA are 

preempted. 

The preemption provisions of section 

731 of ERISA and section 2723 of the 

PHS Act (added by the Health Insurance 

Portability and Accountability Act of 

1996 (HIPAA) and implemented in 29 

CFR 2590.731(a) and 45 CFR 146.143(a)) 

apply so that the MHPAEA 

requirements are not to be ‘‘construed to 

supersede any provision of State law 

which establishes, implements, or 

continues in effect any standard or 

requirement solely relating to health 

insurance issuers in connection with 

group health insurance coverage except 

to the extent that such standard or 

requirement prevents the application of 

a requirement’’ of MHPAEA. The HIPAA 

conference report indicates that this is 

intended to be the ‘‘narrowest’’ 

preemption of State laws. (See House 

Conf. Rep. No. 104–736, at 205, 

reprinted in 1996 U.S. Code Cong. & 

Admin. News 2018.) 

A State law, for example, that 

mandates that an issuer offer a 

minimum dollar amount of mental 

health or substance use disorder 

benefits does not prevent the 

application of MHPAEA. Nevertheless, 

an issuer subject to MHPAEA may be 

required to provide mental health or 

substance use disorder benefits beyond 

the State law minimum in order to 

comply with MHPAEA. 

F. Small Employer Exemption (26 CFR 

54.9812–1T(f), 29 CFR 2590.712(f), and 

45 CFR 146.136(f)) 

Paragraph (f) of these regulations 

amends the MHPA 1996 regulations to 

implement the exemption for a group 

health plan (or health insurance issuer 

offering coverage in connection with a 

group health plan) for a plan year of a 

small employer. For this purpose, a 

small employer is generally defined, in 

connection with a group health plan 

with respect to a calendar year and a 

plan year, as an employer who 

employed an average of not more than 

50 employees on business days during 

the preceding calendar year. 

G. Increased Cost Exemption (26 CFR 

54.9812–1T(g), 29 CFR 2590.712(g), and 

45 CFR 146.136(g)) 

Both MHPA 1996 and MHPAEA 

include an increased cost exemption 

under which, if certain requirements are 

met, plans that incur increased costs 

above a certain threshold as a result of 

the application of the parity 

requirements of both these laws can be 

exempt from the statutory parity 

requirements. MHPAEA changed the 

MHPA 1996 increased cost exemption 

in several ways, including (1) raising the 

threshold for qualification from one 

percent to two percent for the first year 

for which the plan is subject to 

MHPAEA; (2) requiring certification by 

qualified and licensed actuaries who are 

members in good standing of the 

American Academy of Actuaries; and 

(3) revising the notice requirements. 

Under MHPAEA, plans that comply 

with the parity requirements for one full 

plan year and that satisfy the conditions 

for the increased cost exemption are 

exempt from the parity requirements for 

the following plan year, and the 

exemption lasts for one year. Thus, the 

increased cost exemption may only be 

claimed for alternating plan years. 


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Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations 5419 

These regulations withdraw the 

MHPA 1996 regulatory guidance on the 

increased cost exemption and reserve 

paragraph (g). The Departments intend 

to issue, in the near future, guidance 

implementing the new requirements for 

the increased cost exemption under 

MHPAEA. The Departments invite 

comments on implementing the new 

statutory requirements for the increased 

cost exemption under MHPAEA, as well 

as information on how many plans 

expect to use the exemption. 

H. Sale of Nonparity Health Insurance 

Coverage (26 CFR 54.9812–1T(h), 29 

CFR 2590.712(h), and 45 CFR 

146.136(h)) 

These regulations make a few changes 

to what was paragraph (g) in the MHPA 

1996 regulations. That paragraph 

included a paragraph (g)(2) relating to 

how long the increased cost exemption 

applies once its requirements have been 

satisfied. It has been deleted because 

MHPAEA provides a new rule for how 

long the increased cost exemption 

applies. In addition, minor changes 

have been made to the presentation in 

what was paragraph (g)(1) in the MHPA 

1996 regulations. Both that paragraph 

and paragraph (h) in these regulations 

address the circumstances of health 

insurance coverage that does not 

comply with the parity requirements 

being sold to a group health plan. The 

MHPA 1996 regulations refer to an 

issuer selling a policy; these regulations 

refer to an issuer selling a policy, 

certificate, or contract of insurance. The 

longer phrase in these regulations 

includes health insurance coverage sold 

in a form that might not always be 

described by the term ‘‘policy’’ and is the 

more typical formulation used 

throughout the regulations under 

Chapter 100 of the Code, Part 7 of 

ERISA, and Title XXVII of the PHS Act. 

An additional change shifts the 

emphasis by stating the rule in terms of 

an issuer not being able to sell except 

in the described circumstances, rather 

than in terms of an issuer being able to 

sell only in the described 

circumstances. Finally, the crossreference contained in this paragraph to 

the parity requirements has been 

conformed to include the new 

requirements of MHPAEA. 

I. Applicability Dates (26 CFR 54.9812– 

1T(i), 29 CFR 2590.712(i), and 45 CFR 

146.136(i)) 

In general, the requirements of these 

regulations apply for plan years 

beginning on or after July 1, 2010. There 

is a special effective date for certain 

collectively-bargained plans, which 

provides that, for group health plans 

maintained pursuant to one or more 

collective bargaining agreements ratified 

before October 3, 2008, the requirements 

of these regulations do not apply to the 

plan (or health insurance coverage 

offered in connection with the plan) for 

plan years beginning before the later of 

either the date on which the last of the 

collective bargaining agreements 

relating to the plan terminates 

(determined without regard to any 

extension agreed to after October 3, 

2008) or July 1, 2010. MHPAEA 

provides that any plan amendment 

made pursuant to a collective bargaining 

agreement solely to conform to the 

requirements of MHPAEA not be treated 

as a termination of the agreement. 

Many commenters requested guidance 

on what percentage of employees 

covered by a plan must be union 

employees for the plan to be considered 

a plan maintained pursuant to one or 

more collective bargaining agreements— 

some suggesting as low a percentage as 

25 percent while others suggested 90 

percent. This issue arises in a number 

of statutes that provide special rules for 

plans maintained pursuant to collective 

bargaining agreements. As such, the 

issue is beyond the scope of these 

regulations implementing the MHPAEA 

amendments and is not addressed in 

them. 

Because the statutory MHPAEA 

provisions are self-implementing and 

are generally effective for plan years 

beginning after October 3, 2009, many 

commenters asked for a good faith 

compliance period from Departmental 

enforcement until plans (and health 

insurance issuers) have time to 

implement changes consistent with 

these regulations. For purposes of 

enforcement, the Departments will take 

into account good-faith efforts to 

comply with a reasonable interpretation 

of the statutory MHPAEA requirements 

with respect to a violation that occurs 

before the applicability date of 

paragraph (i) of these regulations. 

However, this does not prevent 

participants or beneficiaries from 

bringing a private action. 

III. Interim Final Regulations and 

Request for Comments 

Section 9833 of the Code, section 734 

of ERISA, and section 2792 of the PHS 

Act authorize the Secretaries of the 

Treasury, Labor, and HHS (collectively, 

the Secretaries) to promulgate any 

interim final rules that they determine 

are appropriate to carry out the 

provisions of Chapter 100 of Subtitle K 

of the Code, Part 7 of Subtitle B of Title 

I of ERISA, and Part A of Title XXVII of 

the PHS Act, which include the 

provisions of MHPAEA. 

Under Section 553(b) of the 

Administrative Procedure Act (5 U.S.C. 

551 et seq.) a general notice of proposed 

rulemaking is not required when an 

agency, for good cause, finds that notice 

and public comment thereon are 

impracticable, unnecessary, or contrary 

to the public interest. 

These rules are being adopted on an 

interim final basis because the 

Secretaries have determined that 

without prompt guidance some 

members of the regulated community 

may not know what steps to take to 

comply with the requirements of 

MHPAEA, which may result in an 

adverse impact on participants and 

beneficiaries with regard to their health 

benefits under group health plans and 

the protections provided under 

MHPAEA. Moreover, MHPAEA’s 

requirements will affect the regulated 

community in the immediate future. 

The requirements of MHPAEA are 

generally effective for all group health 

plans and for health insurance issuers 

offering coverage in connection with 

such plans for plan years beginning after 

October 3, 2009. Plan administrators 

and sponsors, issuers, and participants 

and beneficiaries need guidance on how 

to comply with the new statutory 

provisions. As noted earlier, these 

regulations take into account comments 

received by the Departments in response 

to the request for information on 

MHPAEA published in the Federal 

Register on April 28, 2009 (74 FR 

19155). For the foregoing reasons, the 

Departments find that the publication of 

a proposed regulation, for the purpose 

of notice and public comment thereon, 

would be impracticable, unnecessary, 

and contrary to the public interest. 

IV. Economic Impact and Paperwork 

Burden 

A. Summary—Department of Labor and 

Department of Health and Human 

Services 

As discussed earlier in this preamble, 

MHPAEA requires group health plans 

and group health insurance issuers to 

ensure that financial requirements (e.g., 

copayments, deductibles) and treatment 

limitations (e.g., visit limits) applicable 

to mental health or substance use 

disorder benefits are no more restrictive 

than the predominant financial 

requirements or treatment limitations 

applied to substantially all medical/ 

surgical benefits. Under MHPAEA, a 

financial requirement or treatment 

limitation is considered to be 

predominant if it is the most common 

or frequent of such type of requirement 

or limitation. Additionally, there can be 

no separate cost-sharing requirements or 


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5420 Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations 

treatment limitations applicable only 

with respect to mental health or 

substance use disorder benefits. The 

statute does not mandate coverage for 

either mental health or substance use 

disorder benefits. Thus, self-insured 

plans are free to choose whether to 

provide mental health or substance use 

disorder benefits; insured plans may 

have to provide these benefits under 

state laws. Either type of plan that 

provides mental health or substance use 

disorder benefits must do so in 

accordance with MHPAEA’s parity 

provisions. 

The Departments have crafted these 

regulations to secure the protections 

intended by Congress in as 

economically efficient a manner as 

possible. Although the Departments are 

unable to quantify the regulations’ 

economic benefits, they have quantified 

some of the costs and have provided a 

qualitative discussion of some of the 

benefits and costs that may stem from 

these regulations. 

B. Statement of Need for Regulatory 

Action 

Congress directed the Departments to 

issue regulations implementing the 

MHPAEA provisions. In response to this 

Congressional directive, these interim 

final regulations clarify and interpret 

the MHPAEA provisions under section 

712 of ERISA, section 2705 of the PHS 

Act, and section 9812 of the Code. 

These regulations are needed to secure 

and implement MHPAEA’s provisions 

and ensure that the rights provided to 

participants, beneficiaries, and other 

individuals under MHPAEA are fully 

realized. The Departments’ assessment 

of the expected economic effects of 

these regulations is discussed in detail 

below. 

C. Executive Order 12866—Department 

of Labor and Department of Health and 

Human Services 

Under Executive Order 12866 (58 FR 

51735), the Department must determine 

whether a regulatory action is 

‘‘significant’’ and therefore subject to 

review by the Office of Management and 

Budget (OMB). Section 3(f) of the 

Executive Order defines a ‘‘significant 

regulatory action’’ as an action that is 

likely to result in a rule (1) having an 

annual effect on the economy of $100 

million or more, or adversely and 

materially affecting a sector of the 

economy, productivity, competition, 

jobs, the environment, public health or 

safety, or State, local or tribal 

governments or communities (also 

referred to as ‘‘economically 

significant’’); (2) creating a serious 

inconsistency or otherwise interfering 

with an action taken or planned by 

another agency; (3) materially altering 

the budgetary impacts of entitlement 

grants, user fees, or loan programs or the 

rights and obligations of recipients 

thereof; or (4) raising novel legal or 

policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

Order. The Departments have 

determined that this regulatory action is 

economically significant within the 

meaning of section 3(f)(1) of the 

Executive Order, because it is likely to 

have an effect on the economy of $100 

million or more in any one year. 

Accordingly, the Departments provide 

the following assessment of its potential 

costs and benefits. As elaborated below, 

the Department believes that the 

benefits of the rule justify its costs. 

Table 1, below, summarizes the costs 

associated with the rule. The estimates 

are explained in the following sections. 

Over the ten-year period of 2010 to 

2019, the total undiscounted cost of the 

rule is estimated to be $115 million in 

2010 Dollars. Columns E and F display 

the costs discounted at 3 percent and 7 

percent, respectively. Column G shows 

a transfer of $25.6 billion over the tenyear period. All other numbers included 

in the text are not discounted, except 

where noted. 

TABLE 1—TOTAL COSTS OF RULE

[In millions of 2010 dollars] 

Year General review 

Medical 

necessity 

disclosure 

Single 

deductible 

Total 

undiscounted 

costs 

Total 3% 

discounted 

costs 

Total 7% 

discounted 

costs 

Transfer 

(undiscounted) 

(A) (B) (C) A+B+C (E) (F) (G) 

2010 ........................... $27 .8 $1.2 $39.2 $68.2 $68.2 $68.2 $2,360.0 

2011 ........................... 0 1.2 3.9 5.2 5.0 4.8 2,400.0 

2012 ........................... 0 1.2 3.9 5.2 4.9 4.5 2,430.0 

2013 ........................... 0 1.2 3.9 5.2 4.7 4.2 2,460.0 

2014 ........................... 0 1.2 3.9 5.2 4.6 3.9 2,510.0 

2015 ........................... 0 1.2 3.9 5.2 4.4 3.7 2,570.0 

2016 ........................... 0 1.2 3.9 5.2 4.3 3.4 2,620.0 

2017 ........................... 0 1.2 3.9 5.2 4.2 3.2 2,680.0 

2018 ........................... 0 1.2 3.9 5.2 4.1 3.0 2,740.0 

2019 ........................... 0 1.2 3.9 5.2 4.0 2.8 2,810.0 

Total .................... .......................... ........................ ........................ 114.6 108.4 101.8 25,600.0 

Note: The displayed numbers are rounded to the nearest thousand and therefore may not add up to the totals. 

The Departments performed a 

comprehensive, unified analysis to 

estimate the costs and, to the extent 

feasible, provide a qualitative 

assessment of benefits attributable to the 

regulations for purposes of compliance 

with Executive Order 12866, the 

Regulatory Flexibility Act, and the 

Paperwork Reduction Act. The 

Departments’ assessment and 

underlying analysis is set forth below. 

1. Regulatory Alternatives 

Section 6(a)(3)(C)(iii) of Executive 

Order 12866 requires an economically 

significant regulation to include an 

assessment of the costs and benefits of 

potentially effective and reasonable 

alternatives to the planned regulation, 

and an explanation of why the planned 

regulatory action is preferable to the 

potential alternatives. As discussed 

earlier in this preamble, the 

Departments considered the alternative 

of whether to require the same 

separately accumulating deductible for 

medical/surgical benefits and mental 

health or substance use disorder 

benefits or a combined deductible for 

such benefits. 


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Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations 5421 

8For a full discussion of the cost considerations 

involved with these alternatives, see section 4.b., 

below, Costs associated with cumulative financial 

requirements and quantitative treatment 

limitations, including deductibles. 

9The Departments’ estimates of the numbers of 

affected participants are based on DOL estimates 

using the 2008 CPS. ERISA plan counts are based 

on DOL estimates using the 2008 MEP–IC and 

Census Bureau statistics. The number of state and 

local government employer-sponsored plans was 

estimated using 2007 Census data and DOL 

estimates. Please note that the estimates are based 

on survey data that is not broken down by the 

employer size covered by MHPAEA making it 

difficult to exclude from estimates those 

participants employed by employers who employed 

an average of at least 2 but no more than 50 

employees on the first day of the plan year. 

10The Departments’ estimate of the number of 

insurers is based on industry trade association 

membership. Please note that these estimates could 

undercount small state regulated insurers. 

11Pub. L. 104–204, title VII, 110 Stat. 2874, 2944– 

50. 

12 GAO/HEHS–00–95, Implementation of the 

Mental Health Parity Act. In the report, GAO found 

that 87 percent of compliant plans contained at 

least one more restrictive provision for mental 

health benefits with the most prevalent being limits 

on the number of outpatient office visits and 

hospital day limits. Id. at 5. 

13Barry, Colleen, et al. ‘‘Design of Mental Health 

Benefits: Still Unequal After All These Years,’’ 

Health Affairs Vol. 22, Number 5, 2003. Please note 

that the baseline data from the Kaiser HRET survey 

cited in this article are weighted by region, firm size 

and industry to reflect the national composition of 

employers. So the data cited establishing the 

baseline reflects the impact of state parity laws. It 

is important to realize that state parity laws 

frequently focus on a subset of diagnoses, e.g., 

biologically based disorders, and do not apply to 

self-funded insurance programs. Thus, in most 

states only a minority of insurance contracts is 

affected by state parity laws. 

14Morton, John D. and Patricia Aleman. ‘‘Trends 

in Employer-provided Mental Health and Substance 

Abuse Benefits.’’ Monthly Labor Review, April 2005. 

The language of the statute can be 

interpreted to support either alternative. 

The comments that supported allowing 

separately accumulating deductibles 

maintained that it is commonplace for 

plans to have such deductibles, and that 

the projected cost of converting systems 

to permit unified deductibles would be 

extremely high for the many plans that 

use a separate managed behavioral 

health organization (MBHO).8 By 

contrast, comments that supported 

requiring combined deductibles argued 

that allowing separately accumulating 

deductibles undermines a central goal of 

parity legislation: To affirm that mental 

health and substance use disorder 

benefits are integral components of 

comprehensive health care and 

generally should not be distinguished 

from medical/surgical benefits. 

Distinguishing between the two requires 

individuals who need both kinds of care 

to satisfy a deductible that is greater 

than that required for individuals 

needing only medical/surgical care. 

Other comments that supported 

requiring combined deductibles noted 

that mental health and substance use 

disorder benefits typically comprise 

only 2 to 5 percent of a plan’s costs, so 

that even using identical levels for 

separately accumulating deductibles 

imposes a greater barrier to mental 

health and substance use disorder 

benefits. 

The Departments carefully considered 

the alternative of requiring separately 

accumulating or combined deductibles. 

Given that the statutory language does 

not preclude either interpretation, the 

Departments choose to require 

combined deductibles, because this 

position is more consistent with the 

policy goals that led to the enactment of 

MHPAEA. 

2. Affected Entities and Other 

Assumptions 

The Departments expect MHPAEA to 

benefit the approximately 111 million 

participants in 446,400 ERISA-covered 

employer group health plans, and an 

estimated 29 million participants in the 

approximately 20,300 public, nonFederal employer group health plans 

sponsored by state and local 

governments.9 In addition, 

approximately 460 health insurance 

issuers providing mental health or 

substance use disorder benefits in the 

group health insurance market and at 

least 120 MBHOs providing mental 

health or substance use disorder 

benefits to group health plans are 

expected to be affected.10

3. Benefits 

Congress first passed mental health 

parity legislation in 1996 with the 

enactment of MHPA 1996.11 As 

discussed earlier in this preamble, this 

law requires health insurance issuers 

and group health plans that offer mental 

health benefits to have aggregate annual 

and lifetime dollar limits on mental 

health benefits that are no more 

restrictive than those for all medical/ 

surgical benefits. 

The impact of MHPA 1996 was 

limited, however, because it did not 

require parity with respect to day limits 

for inpatient or outpatient care, 

deductibles, co-payments or 

coinsurance, substance use disorder 

benefits, and prescription drug 

coverage.12 While a large majority of 

plans complied with the MHPA 1996 

parity requirement regarding annual and 

lifetime dollar limits, many employersponsored group health plans contained 

plan design features that were more 

restrictive for mental health benefits 

than for medical/surgical benefits. For 

example, data on private insurance 

arrangements from the pre-MHPAEA era 

show that after MHPA 1996, the most 

significant disparities in coverage for 

mental health substance use treatment 

involve limits on the number of covered 

days of inpatient care and the number 

of outpatient visits. Survey data from 

the Kaiser/HRET national employer 

survey shows that 64 percent of covered 

workers had more restrictive limits on 

the number of covered hospital days for 

mental health care and 74 percent had 

more restrictive limits on outpatient 

mental health visits. In addition, 22 

percent of covered workers had higher 

cost-sharing imposed on mental health 

care benefits. Among those workers 

with more restrictive limits on inpatient 

days, 77 percent had limits of 30 days 

or less.13 For these reasons, as discussed 

more fully below, the Departments 

expect that MHPAEA and these 

regulations will have their greatest 

impact on people needing the most 

intensive treatment and financial 

protection. The Departments do not 

have an estimate of the number of 

individuals who have exceeded the 

treatment limits. However, according to 

the FEHBP data used to analyze the 

FEHBP parity directive in the year 

before its implementation, the 90th 

percentile of the mental health spending 

distribution was corresponded to $2,134 

in 1999 dollars. Among the people 

spending at the 90th percentile or 

higher, 12% had inpatient psychiatric 

stays and 20% of those above the 90th 

percentile had a diagnosis of 

schizophrenia or bipolar disorder, 

chronic conditions requiring 

prescription drugs and regular contact 

with mental health service providers. It 

is this group that experienced especially 

large declines in out of pocket payments 

after FEHBP implemented parity. 

Treatment for alcohol abuse disorders 

showed a similar trend: Surveys 

indicate that 74 percent of private 

industry employees were covered by 

plans that imposed more restrictive 

limits for inpatient detoxification 

benefits than medical and surgical 

benefits, 88 imposed more restrictive 

limits for inpatient rehabilitation, and 

89 percent imposed more restrictive 

limits for outpatient rehabilitation.14

After MHPA 1996, many states also 

passed mental health parity laws. 

Research focused on the impacts of 

parity laws found that similar to MHPA 

1996, even the most comprehensive 

state laws resulted in little or no 

increase in access to and utilization of 


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5422 Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations 

15 Id., at 9. The state mental health parity laws 

varied significantly with most of differences related 

the following areas: the type of mental health 

mandate, definition of mental illness, the inclusion 

of substance abuse coverage, small employers’ 

coverage, and cost increase exceptions. Few state 

laws provide as extensive coverage as MHPAEA, 

particularly with regard to its prohibition of visit 

limitations. 

16 153 Cong. Rec. S1864–5 (daily ed., February 12, 

2007). 

17 154 Cong. Rec. H8619 (daily ed., September 23, 

2008). 

18See, Lehman AF ‘‘Quality of care in mental 

health: the case of schizophrenia’’ Health Affairs 

18(5): 52–65. 

19Sturm R, ‘‘Tracking changes in behavioral 

health services: How carve-outs changed care?’’ 

Journal of Behavioral Health Services and Research 

26(4): 360–371, 1999. Frank RG and Garfield RL; 

‘‘Managed Behavioral Health Carve-Outs: Past 

Performance and Future Prospects’’ Annual Reviews 

of Public Health 2007, 28:11; 1–18. Frank RG and 

Garfield RL; ‘‘Managed Behavioral Health CarveOuts: Past Performance and Future Prospects’’ 

Annual Reviews of Public Health 2007, 28:11; 1–18. 

20While studies have shown that state parity laws 

have increased access only marginally, most state 

laws still allowed disparate treatment limits for 

mental health conditions and substance use 

disorders, which limited access for those needing 

significant amounts of treatment. As discussed 

above, MHPAEA and these regulations prohibit the 

imposition of such disparate limits, which could 

increase access for those individuals. Nine states 

have treatment limit requirements similar to 

MHPAEA for mental health benefits, while 10 states 

have similar requirements for substance abuse 

disorder benefits. 

mental health services for covered 

individuals.15

To address these issues, Congress 

amended MHPA 1996 by enacting 

MHPAEA. One of Congress’ primary 

objectives in enacting MHPAEA was to 

improve access to mental health and 

substance use disorder benefits by 

eliminating discrimination that existed 

with respect to these benefits after 

MHPA 1996. Congress’ intent in 

enacting MHPAEA was articulated in a 

floor statement from Representative 

Patrick Kennedy (D–RI), one of the chief 

sponsors of the legislation, who said 

‘‘[a]ccess to mental health services is one 

of the most important and most 

neglected civil rights issues facing the 

Nation. For too long, persons living with 

mental disorders have suffered 

discriminatory treatment at all levels of 

society.’’ 16 In a similar statement, 

Representative James Ramstad (R–MN) 

said, ‘‘[i]t’s time to end the 

discrimination against people who need 

treatment for mental illness and 

addition. It’s time to prohibit health 

insurers from placing discriminatory 

barriers on treatment.’’ 17

The Departments expect that the 

largest benefit associated with MHPAEA 

and these regulations will be derived 

from applying parity to cumulative 

quantitative treatment limitations such 

as annual or lifetime day or visit limits 

(visit limitations). As discussed above, a 

large percentage of plans imposed visit 

limitations pre-MHPAEA, and the GAO 

found that a major shortcoming of 

MHPA 1996 was its failure to apply 

parity to visit limitations. Applying 

parity to visit limitations will help 

ensure that vulnerable populations— 

those accessing substantial amounts of 

mental health and substance use 

disorder services—have better access to 

appropriate care. The Departments 

cannot estimate how large this benefit 

will be, because sufficient data is not 

available to estimate the number of 

covered individuals that had their 

benefits terminated because they 

reached their coverage limit. Though 

difficult to estimate, the number of 

beneficiaries who have a medical 

necessity for substantial amount of care 

are likely to be relatively small. Severe 

mental health disorders account for 2– 

3 percent of people in private health 

insurance plans and a substantially 

larger share of mental health spending. 

Evidenced-based treatments for severe 

and persistent mental illnesses like 

schizophrenia, bipolar disorder and 

chronic major depression requires 

prolonged (possibly lifetime) 

maintenance treatment that consists of 

pharmacotherapy, supportive 

counseling and often rehabilitation 

services.18 The most common visit 

limits under current insurance 

arrangements are those for 20 visits per 

year. That means assuming a minimal 

approach to treatment of one visit per 

week, people with severe and persistent 

mental disorders will exhaust their 

coverage in about five months. This 

often results in people foregoing 

outpatient treatment and a higher 

likelihood of non-adherence to 

treatment regimes that produce poor 

outcomes and the potential for 

increased hospitalization costs. 

Increased coverage also should 

provide enhanced financial protection 

for this group by reducing out-of-pocket 

expenses for services that previously 

were needed but uncovered. This 

should help prevent bankruptcy and 

financial distress for these individuals 

and families and reduce cost-shifting of 

care to the public sector, both of which 

occur when covered benefits are 

exhausted. In addition, increased 

coverage for those seeking substantial 

amounts of care potentially could 

reduce emergency room use by ensuring 

that benefits for individuals with 

serious conditions are not terminated. 

Finally, reduced entry into disability 

programs may result from having more 

complete insurance coverage for mental 

health and substance use disorder 

treatment. 

Since the early 1990s, many health 

insurers and employers have made use 

of specialized vendors, known as 

behavioral health carve-outs to manage 

their mental health and substance abuse 

benefits. These vendors have 

specialized expertise in the treatment of 

mental and addictive disorders and 

organized specialty networks of 

providers. These vendors are known as 

behavioral health carve-outs. They use 

information technology, clinical 

algorithms and selective contracts to 

control spending on mental health and 

substance abuse treatment. There is an 

extensive literature that has examined 

the cost savings and impacts on quality 

of these organizations. Researchers 19

have reviewed this literature and 

estimated reductions in private 

insurance spending of 20 percent to 48 

percent compared to fee-for-service 

indemnity arrangements. Also, it 

appears that the rate of utilization of 

mental health care rises under 

behavioral health carve out 

arrangements. The number of people 

receiving inpatient psychiatric care 

typically declines as does the average 

number of outpatient visits per episode. 

The OPM encouraged its insurers to 

consider carve-out arrangements when 

implementing the parity directive in 

2000 for the FEHBP. This is because of 

the ability of behavioral health carveouts to use utilization management tools 

to control utilization and spending in 

the face of reductions in cost-sharing 

and elimination of limits. Thus, parity 

in a world dominated by behavioral 

carve-outs has meant increased 

utilization rates, reduced provider fees, 

reduced rates of hospitalization and 

fewer very long episodes of outpatient 

care. Intensive treatment was more 

closely aligned with higher levels of 

severity. 

Another potential benefit associated 

with MHPAEA and these regulations is 

that use of mental health and substance 

use disorder benefits could improve.20

Untreated or under treated mental 

health conditions and substance use 

disorders are detrimental to individuals 

and the entire economy. Day and visit 

limits can interfere with appropriate 

treatment thereby reducing the impact 

of care for workers seeking treatment. 

Many people with mental health 

conditions and substance use disorders 

are employed and these debilitating 

conditions have a devastating impact on 

employee attendance and productivity, 

which results in lost productivity for 

employers and lost earnings for 

employees. For example, studies have 


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21Stewart, W.F., Ricci, J.A., Chee, E., Hahn, S.R. 

& Morgenstein, D. (2003, June 18). ‘‘Cost of lost 

productive work time among US workers with 

depression.’’ JAMA: Journal of the American 

Medical Association. 289, 23, 3135–3144. 

Kessler, R.C., Akiskal, H.S., Ames, M., Birnbaum, 

H., Greenberg, P., Hirschfeld, H.M.A. et al. (2006). 

‘‘Prevalence and effects of mood disorders on work 

performance in a nationally representative sample 

of U.S. workers.’’ American Journal of Psychiatry, 

163, 1561–1568. 22Stewart, W.F., Ricci, J.A., Chee, E., Hahn, S.R. 

& Morgenstein, D. (2003, June 18). ‘‘Cost of lost 

productive work time among US workers with 

depression.’’ JAMA: Journal of the American 

Medical Association. 289, 23, 3135–3144. 23 Kessler, Ronald C., Steven Heeringa, Matthew 

D. Lakoma, Maria Petukhova, Agnes E. Rupp, 

Michael Schoenbaum, Philip S. Wang, and Alan M. 

Zaslavsky. ‘‘Individual and Societal Effects of 

Mental Disorders on Earnings in the United States: 

Results From the National Comorbidity Survey 

Replication.’’ 

The American Journal of Psychiatry; June 2008; 

165, 6; Research Library pg. 703. 

24Hilton, Michael F., Paul A. Schuffham, Judith 

Sheridan, Catherine M. Clearly, Neria Vecchio, and 

Harvey A. Whiteford. ‘‘The Association Between 

Mental Disorders and Productivity in Treated and 

Untreated Employees.’’ Journal of Occupational and 

Environmental Medicine. Volume 51, Number 9, 

September 2009. 

25Finch R.A., Phillips K. Center for Prevention 

and Health Services. ‘‘An Employer’s Guide to 

Behavioral Health Services: A Roadmap and 

Recommendations for Evaluating Designing, and 

Implementing Behavioral Health Services.’’ National 

Business Group on Health 2005. 

26Wang, P.S., Lane, M., Olfson, M., Pincus, H.A., 

Wells, K.B., and Kessler, R.C. (2005, June). ‘‘Twelve 

month use of mental health services in the United 

States.’’ Archives of General Psychiatry, 62, 629– 

640. The study found that 40 percent of people 

reporting mental health and substance use disorders 

receive some treatment in a year. 

27Wang, P.S., Lane, M., Olfson, M., Pincus, H.A., 

Wells, K.B., and Kessler, R.C. (2005, June). ‘‘Twelve 

month use of mental health services in the United 

states.’’ Archives of General Psychiatry, 62, 629– 

640. 28Another analysis demonstrating poor 

adherence to evidence-based treatment for mental 

disorders is: 

Wang PS, Berglund P, Kessler RC, Journal of 

General Internal Medicine. 2000; 15:284–292. 

Recent care of common mental disorders in the 

United States: Prevalence and conformance with 

evidence-based recommendations. This study finds 

that only 57.3 percent of people with major 

depression receive treatment during a year and less 

than one-third of those who receive treatment 

receive effective treatment. 

Based on expert opinion, Normand et al. rated the 

likely effectiveness of combinations of general 

medical visits, specialty visits (with psychotherapy) 

and drug treatment to demonstrate the correlation 

between adequate treatment for depression and the 

probability of remission. For patients with no antidepressant medication, the probability of remission 

increased as the number of specialty visits 

increased from one or less during a year to ten or 

more. The probability of remission was greater for 

patients with antidepressant medication and 

improved with more specialty visits during the 

year. Normand SLT, Frank RG, McGuire, TG. ‘‘Using 

elicitation techniques to estimate the value of 

ambulatory treatments for depression.’’ Medical 

Decision Making, 2001; 22: 245–261. 

29The Healthcare Effectiveness Data and 

Information Set report card for 2007 produced by 

National Center for Quality Assurance shows that 

for treatment of depression, only 20 percent of 

patients get appropriate levels of provider contacts; 

about 45 percent receive appropriate maintenance 

level medications and 62 percent obtain adequate 

medication doses and duration during the acute 

phase of illness. 

shown that the high prevalence of 

depression and the low productivity it 

causes have cost employers $31 billion 

to $51 billion annually in lost 

productivity in the United States.21

More days of work loss and work 

impairment are caused by mental illness 

than by various other chronic 

conditions, including diabetes and 

lower back pain.22

Moreover, studies have consistently 

found that workers who report 

symptoms of mental disorders have 

lower earnings than other similarlysituated coworkers. For example, a 

recent study funded by the National 

Institutes of Health’s National Institute 

of Mental Health 23 found that mental 

disorders cost employees at least $193 

billion annually in lost earnings alone, 

a staggering number that probably is a 

conservative estimate because it did not 

include the costs associated with people 

in hospitals and prisons, and included 

very few participants with autism, 

schizophrenia and other chronic 

illnesses that are known to greatly affect 

a person’s ability to work. The study 

also noted that individuals suffering 

from depression earn 40 percent less 

than non-depressed individuals. 

Although accurately determining 

cause and effect can be difficult, studies 

have attempted to estimate the 

beneficial impact of treating mental 

disorders. One study found that treating 

individuals suffering from mental 

disorders helped close the gap in 

productivity between those with mental 

disorders and those who did not have a 

mental disorder.24 The finding that 

treatment can help increase the 

productivity of those suffering from 

mental illness suggests that increasing 

access to treatment of mental disorders 

could have a beneficial impact on lost 

productivity cost and lost earnings that 

stem from untreated and under treated 

mental health conditions and substance 

use disorders. The Departments, 

however, do not have sufficient data to 

determine whether this result will 

occur, and, if it does, the extent to 

which lost productivity cost and lost 

earnings could improve. 

As noted above the combination of 

reduced cost sharing and the 

elimination of day and visit limits have 

the effect of making coverage more 

complete. The dominant role of 

managed behavioral health care in the 

market and the evidence about it 

success in controlling costs means that 

the moral hazard problem can be 

controlled (the evidence on this is 

discussed in more detail below). The 

implication is that more complete 

financial protection can be offered to 

people without a significant increase in 

social costs. This implies improved 

efficiency in the insurance market since 

more efficient risk spreading would 

occur without much welfare loss due to 

moral hazard. 

In order to comply with MHPAEA 

and these regulations, cost-sharing 

requirements for mental health and 

substance use disorder benefits cannot 

be any more restrictive than the 

predominant cost-sharing requirement 

applied to substantially all medical/ 

surgical benefits. Because expenditures 

on mental health and substance use 

disorder benefits only comprise 3–6 

percent of the total benefits covered by 

a group health plan and 8 percent of 

overall healthcare costs,25 the 

Departments expect that group health 

plans will lower cost-sharing on mental 

health and substance use disorder 

benefits instead of raising cost-sharing 

on medical/surgical benefits. 

MHPAEA and these interim final 

regulations could have a positive impact 

on the delivery system of mental health 

services. Currently, approximately half 

of mental health care is delivered solely 

by primary care physicians.26 This trend 

is likely due in part to the large 

discrepancies between insurance costsharing for services delivered by mental 

health professionals and primary care 

physicians. Historically, the costsharing associated with primary care 

physician visits is lower than costsharing for mental health professional 

visits. This difference in the relative 

price encouraged patients suffering from 

mental illness to visit primary care 

physicians for mental health-related 

conditions. If MHPAEA and these 

regulations result in lowering the 

relative price of mental health care, 

more individuals suffering from mental 

illness could visit and receive care from 

mental health professionals. One 

study 27 found that only 12.7 percent of 

individuals treated in the general 

medical sector received at least 

minimally adequate mental health care 

compared to 48.3 percent of patients 

treated in the specialty mental health 

sector.28 A shift in source of treatment 

from primary care physicians to mental 

health professionals could lead to more 

appropriate care, and thus, better health 

outcomes.29 The Departments, however, 

do not have sufficient data to estimate 

how large this shift in treatment could 

be or determine whether it will occur. 

Mental health and physical health are 

interrelated, and individuals with poor 

mental health are more likely to have 


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5424 Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations 

30Conti R, Berndt ER, Frank RG. ‘‘Early retirement 

and DI/SSI applications: Exploring the impact of 

depression’’, in Culter DM, Wise DA. Health in 

Older Ages: The causes and consequences of 

declining disability among the elderly, (Chicago: 

National Bureau of Economic Research, 2008). 

31The Office of National Drug Control Policy has 

information on effective treatment and cost savings 

at http://www.whitehousedrugpolicy.gov. 

32French, M.T., H.J. Salome, A. Krupski, J.R. 

McKay, D.M. Donovan, A.T. McLellan, and J. 

Durrell. (2000). ‘‘Benefit-cost analysis of residential 

and outpatient addiction treatment in the State of 

Washington.’’ Evaluation Review, 24(6), 609–634. 

33Ettner, S.L., D. Huang, E. Evans, D.R. Ash, M. 

Hardy, M. Jourabchi, and Y. Hser. (2006). ‘‘BenefitCost in the California Treatment Outcome Project: 

Does Substance Abuse Treatment ‘Pay for Itself?’’’ 

Health Services Research, 41(1), 192–213. 

34French, M.T., K.E. McCollister, S. Sacks, K. 

McKendrick, & G. De Leon. (2002). ‘‘Benefit cost 

analysis of a modified therapeutic community for 

mentally ill chemical abusers.’’ Evaluation and 

Program Planning, 25, 137–148. 

35The returns are the ratio of benefits to costs. 

Benefits include personal as well as societal 

benefits including increased employment and 

reduced crime. 

36Meyerhoefer, Chad D. and Samuel Zuvekas, 

2006. ‘‘New Estimates of the Demand for Physical 

and Mental Health Treatment.’’ Agency for 

Healthcare Research and Quality Working Paper 

No. 06008. 

37Another paper showing a similar result to the 

Myerhoefer paper cited above is: Lu CL, Frank, RG 

and McGuire TG. ‘‘Demand Response Under 

Managed Care.’’ Contemporary Economic Policy, 

27(1):1–15, 2009. 

38Barry, Frank, and McGuire. ‘‘The Costs of 

Mental Health Parity: Still an Impediment?’’ Health 

Affairs, no. 3:623 (2006). 

39 Id. 

40 Goldman, et al., ‘‘Behavioral Health Insurance 

Parity for Federal Employees,’’ New England Journal 

of Medicine (March 30, 2006) Vol. 354, No. 13. In 

1999, President Clinton directed the Office of 

Personnel Management (OPM) to equalize benefits 

coverage in the FEHBP, and parity was 

implemented in 2001. Parity under the FEHBP is 

very similar to MHPAEA. It requires benefits 

coverage for plan mental health, substance abuse, 

medical, surgical, and hospital providers to have 

the same limitations and cost-sharing such as 

deductibles, coinsurance, and co-pays. When 

patients use plan providers and follow a treatment 

regime approved by their plan, all diagnostic 

categories of mental health and substance abuse 

conditions listed in the Diagnostic and Statistical 

Manual of Mental Disorders, Fourth Edition (DSM 

IV) are covered. 

41 Id. 

physical health problems as well. 

Increased access and utilization of 

mental health and substance use 

disorder benefits could result in a 

reduction of medical/surgical costs for 

individuals afflicted with mental health 

conditions and substance use disorders. 

The decrease in medical/surgical costs 

could be significant; however, the 

Departments do not have sufficient data 

to estimate how large these health care 

spending offsets could be or determine 

whether they will occur. 

There is disagreement among experts 

as to whether depression is an 

important antecedent risk factor for 

physical illness or whether the causal 

relationship acts in the opposite 

direction. Regardless, there is evidence 

that comorbid depression worsens the 

prognosis, prolongs recovery and may 

increase the risk of mortality associated 

with physical illness. In addition, 

comorbid depression has been shown to 

increase the costs of medical care, over 

and above the costs of treating the 

depression itself.30

The returns on investment from 

treatment of substance use disorders can 

be large.31 Studies in Washington state 

clinics demonstrated that each dollar 

invested in inpatient and outpatient 

substance abuse treatment yielded 

returns of about 10 and 23 times their 

initial investments, respectively.32

California and Oregon state treatment 

systems demonstrated a sevenfold 

return in their investments.33 Other 

studies show effects ranging from a 

return of one and a half times the cost 

in a large study of a treatment clinic in 

Chicago to a return of 5 times the initial 

investment for a treatment for mentally 

ill chemical abusers,34 resulting in a net 

benefit of about $85,000 per client for an 

investment of nearly $20,000.35

4. Costs 

a. Cost associated with increased 

utilization of mental health and 

substance use disorder benefits. As 

discussed in the Benefits section earlier 

in this preamble, one of Congress’ 

primary objectives in enacting MPHAEA 

was to eliminate barriers that impede 

access to and utilization of mental 

health and substance use disorder 

benefits. This has raised concerns 

among some that increased access and 

utilization of mental health and 

substance use disorder benefits will 

result in increases in associated 

payments and plan expenditures, which 

could lead to large premium increases 

that will make mental health and 

substance use disorder benefits 

unaffordable. The Departments are 

uncertain regarding the level of 

increased costs and premium increases 

that will result from MHPAEA and these 

regulations, but there is evidence that 

any increases will not be large. 

One theory for increased costs 

resulting from parity is based on the fact 

that cost-sharing for mental health and 

substance use disorder benefits will 

decrease. A frequent justification for 

higher cost-sharing of mental health and 

substance use disorder benefits is the 

greater extent of moral hazard for these 

benefits; individuals will utilize more 

mental health and substance use 

disorder benefits at a higher rate when 

they are not personally required to pay 

the cost. To support this assumption, 

many have cited the RAND Health 

Insurance Experiment, conducted in 

1977–1982, which demonstrated that 

individuals are more likely to increase 

their mental health care usage when 

their personal cost-sharing for mental 

health care services fall than they are to 

increase their physical health care usage 

when their personal cost-sharing for 

physical health care services decreases. 

Because this experiment was conducted 

nearly thirty years ago, researchers 

recently tested to determine whether 

this result held true.36 Their results 

indicate that individuals’ sensitivity to 

changes in cost-sharing may have 

changed significantly over time. These 

changes are explained at least in part 

due to the expansion of managed 

behavioral health care (described 

earlier). The authors found that 

individuals’ price responsiveness of 

ambulatory mental health treatment is 

now slightly lower than physical health 

treatment. These results indicate that if 

plans lower the cost-sharing associated 

with mental health services, costs will 

not rise as much as would be expected 

using the results from the RAND 

Experiment.37

When the RAND Experiment was 

conducted, managed care was not nearly 

as prevalent as it is today. Health care 

economists have studied the impact of 

using cost control techniques associated 

with managed care to reduce the 

quantity of mental health and substance 

use disorder benefits utilized so that 

lowered cost sharing may result in only 

a small increase in spending.38 This 

research concluded that ‘‘comprehensive 

parity implemented in the context of 

managed care would have little impact 

on total spending.’’ 39

These findings were similar to those 

of a recent study published in the New 

England Journal of Medicine examining 

the Federal Employees Health Benefits 

Program (FEHBP), which implemented 

parity for mental health and substance 

use disorder benefits in 2001.40 The 

primary concern has been that the 

existence of parity in the FEHBP would 

result in large increases in the use of 

mental health and substance-abuse 

services and spending on these services. 

However, the study concluded that 

these fears were unfounded and ‘‘that 

parity of coverage of mental health and 

substance-abuse services, when coupled 

with management of care, is feasible and 

can accomplish its objectives of greater 

fairness and improved insurance 

protection without adverse 

consequences for health care costs.’’ 41

The study found average per user 

declines in out patient cost sharing of 

between zero and $87 depending on the 


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Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations 5425 

42Melek, Steve, ‘‘The Costs of Mental Health 

Parity,’’ Health Section News (March 2005). 

43Bachman, Ronald, Mental Health Parity—Just 

the Facts (2000). 

44 Kaiser Family Foundation and Health Research 

& Educational Trust. Employer Health Benefits 2008 

Annual Survey. 

45Cseh, Attila. ‘‘Labor Market Consequences of 

State Mental Health Parity Mandates,’’ Forum for 

Health Economics & Policy, Vol. 11, issue 2, 2008. 46Research papers have indicated that carve-out 

arrangements have reduced the cost of proving 

mental health and substance use disorder benefits 

by an estimated 25–40 percent. Frank, Richard G. 

and Thomas G. McGuire, ‘‘Savings from a Carve-Out 

Program for Mental Health and Substance Abuse in 

Massachusetts Medicaid’’ Psychiatric Services 48(9); 

1147–1152, 1997; Ma, Ching-to Albert and Thomas 

G. McGuire, ‘‘Costs and Incentives in a Behavioral 

Health Carve-out. Health Affairs March/April 1998. 

47This can create a coordination issue that has 

cost implications that otherwise do not exist when 

a single vendor is used. 

48RFI comments. MHPAEA RFI comments can be 

viewed at http://www.dol.gov/ebsa/regs/cmtMHPAEA.html. 

49An additional undetermined expense would be 

required to reconcile and make adjustments in 

instances when two claims are received on the same 

day satisfying the unified deductible. While this 

alternative would produce a much lower cost than 

real-time interfaces, the costs remain significant. A 

low-end estimate of the first year cost for MBHOs 

and insurers to create, on average, at least 20 new 

interfaces would be $700,000 per insurer. There is 

uncertainty regarding the total cost, because the 

number of entities that would need to create 

interfaces is unclear. The Departments are aware of 

460 health insurance issuers and at least 120 

MBHOs that could be affected. 

plan. The reductions were largest for 

high users of mental health care. The 

study also found that insurers were not 

likely to drop out of the FEHBP pool 

due to the implementation of parity. 

The experience of states that have 

enacted mental health parity laws with 

appropriate managed care also suggests 

that minimal increased cost results from 

implementing parity. One study found 

that ‘‘with the implementation of mental 

health parity at the same time as 

managed behavioral health care, many 

states have discovered that overall 

health care costs increased minimally 

and in some cases even were 

reduced.’’ 42 For example, at least nine 

states—California, Maine, Maryland, 

Minnesota, North Carolina, 

Pennsylvania, Rhode Island, South 

Carolina, and Vermont—have actually 

documented experience that 

implementing mental health parity 

including cost controls through 

managed care resulted in lower costs 

and lowered premiums (or at most, very 

modest cost increases of less than one 

percent) within the first year of 

implementation.43

Similarly, the Departments expect 

medical management and managed care 

techniques will help control any major 

cost impact resulting from MHPAEA 

and these regulations. As discussed 

earlier in this preamble, these 

regulations provide that medical 

management can be applied to mental 

health and substance use disorder 

benefits by plans as long as any 

processes, strategies, evidentiary 

standards, or other factors used in 

applying medical management are 

comparable to, and are applied no more 

stringently than, the processes, 

strategies, evidentiary standards, or 

other factors used in applying medical 

management to medical/surgical 

benefits. 

Although the increase in per plan 

costs associated with parity is not likely 

to be substantial, there may be plans 

that decide to drop coverage for mental 

health and substance use disorder 

benefits in response to higher costs, or 

individuals may decide to drop 

coverage even if it is offered. The 

Departments do not have an estimate of 

the number of plans that will drop 

coverage or the number of individuals 

that will lose benefits. Currently 98 

percent of covered workers have some 

form of mental health benefits.44 The 

lack of coverage for mental health and 

substance use disorder benefits for these 

people may lead to many of the typical 

costs associated with uninsured 

individuals: Lack of access, decreased 

health, and increased financial burden. 

The Departments are not able to 

quantify these costs. Research on the 

introduction of state parity laws 

suggests few plans or individuals will 

drop insurance coverage due to parity.45

b. Costs associated with cumulative 

financial requirements and quantitative 

treatment limitations, including 

deductibles. As discussed earlier in this 

preamble, paragraph (c)(3)(v) of these 

regulations provide that a group health 

plan may not apply cumulative 

financial requirements, such as 

deductibles, for mental health and 

substance use disorder benefits in a 

classification that accumulate separately 

from any such requirements or 

limitations established for medical/ 

surgical benefits in the same 

classification. Some group health plans 

and health insurance issuers ‘‘carve-out’’ 

the administration and management of 

mental health and substance use 

disorder benefits to MBHOs. These 

entities obtain cost savings for plan 

sponsors by providing focused case 

management and directing care to a 

broad network of mental and behavioral 

health specialists (with whom they 

negotiate lower fees) who ensure that 

appropriate care for mental health 

conditions and substance use disorders 

is provided.46

When a group health plan or health 

insurance issuer uses a carve-out 

arrangement, at least two entities are 

involved in separately managing and 

administering medical/surgical and 

mental health and substance use 

disorder benefits.47 The imposition of a 

single deductible requires entities 

providing medical/surgical and mental 

health and substance use disorder 

benefits to develop and program a 

communication network often referred 

to as an ‘‘interface’’ or an ‘‘accumulator’’ 

that will allow them to exchange the 

data necessary to make timely and 

accurate determinations of when 

participants have incurred sufficient 

combined medical/surgical and mental 

health and substance use disorder 

expenses to satisfy the single 

deductible. 

Two comments received in response 

to the RFI indicate that MBHOs would 

confront significant costs to develop 

real-time interfaces that could range 

from $420,000–$750,000 with an 

additional $40,000–$70,000 required for 

annual maintenance.48 The Departments 

held discussions with the regulated 

community which indicated that 

interface development costs may not be 

as high as stated in the RFI comments. 

For example, the Departments have 

learned that MBHOs could develop less 

costly ‘‘batch process’’ interfaces that 

exchange data on a daily or weekly basis 

rather than real-time for as low as 

approximately $35,000 per interface.49

It also appears that some plan 

sponsors using carve-out arrangements 

already are implementing a unified, 

single deductible, and MBHOs have 

created interfaces to service these 

clients. For example, the Departments’ 

discussions found that one MBHO 

already has established 10–15 

accumulators, because its plan sponsor 

clients requested a single deductible. 

The MBHO reported that another 10–15 

accumulators were being implemented 

for the current benefit year, because 

plan sponsors wanted to ensure that 

they were compliant with MHPAEA. 

This finding suggests that while costly, 

putting these accumulators in place is 

not cost prohibitive for the MBHOs and 

plan sponsors. Moreover, plans and 

issuers have created and used interfaces 

with separate pharmacy benefit 

managers and dental insurers for years. 

Interface development costs should 

decrease after the first interface is 

created. The experience and lessons 

learned from creating these interfaces 

should reduce the cost associated with 

designing and implementing interfaces 

with MBHOs. 

While the RFI comment letters 

suggested that MBHOs would have to 

create 40–50 interfaces each, this 


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5426 Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations 

50Please note that using the $420,000 per 

interface estimate cited in the RFI comment letters 

would result in total interface development costs of 

$470 million, with annual maintenance costs of $47 

million. Based on this estimate, the per-participant 

first year interface development costs would be $7, 

and the annual maintenance costs in subsequent 

years would be $.06 cents per participant per 

month. 

51There are about 460 issuers in the group 

market; this is an average of 1,000 plans per issuers. 

In addition, there are at least 120 MBHOs. 

52EBSA estimates of labor rates include wages, 

other benefits, and overhead based on the National 

Occupational Employment Survey (May 2008, 

Bureau of Labor Statistics) and the Employment 

Cost Index (June 2009, Bureau of Labor Statistics). 

53For purposes of this burden estimate, the 

Departments assume that 38 percent of the 

disclosures will be provided through electronic 

means in accordance with the Department’s 

standards for electronic communication of required 

information provided under 29 CFR 2520.104b– 

1(c). 

54This estimate is based on an average document 

size of four pages, $.05 cents per page material and 

printing costs, $.44 cent postage costs. 

number most likely only relates to the 

largest MBHOs. The smallest MBHOs 

would need to create fewer interfaces. 

The Departments assume that a 

significant number of smaller MBHOs 

exist; therefore, the Departments 

estimate that, on average, seven 

interfaces would have to be created per 

insurer. The Departments acknowledge 

that there is uncertainty in this estimate 

due to incomplete information about the 

MBHO industry. 

For purposes of this analysis, the 

Departments have used an estimated 

interface development cost of $35,000 

per interface, because the Departments 

were not able to substantiate the higher 

estimated costs provided in the RFI 

comment letters, and the propensity of 

the evidence leads to the conclusion 

that the cost could be significantly less. 

Based on the foregoing, the Departments 

estimate total interface development 

costs of approximately $39.2 million.50

Once the interfaces are created, 

ongoing annual maintenance costs will 

be incurred. One industry source 

suggested that ongoing maintenance 

costs could be one-tenth of the 

development costs, and based on this 

information, the Departments estimate 

that maintenance cost of $3.9 million 

will be incurred annually after the 

interfaces are created. 

While the total interface development 

and maintenance costs are large, a 

useful measure to examine is the perparticipant cost impact. While reliable 

estimates of the number of participants 

enrolled in plans utilizing MBHOs are 

not available, based on the best 

available information, the Departments 

estimate that at least 70 million 

participants are covered by MBHOs. 

Based on this count, the per-participant 

first year interface development costs 

would be $0.60, and the maintenance 

costs in subsequent years would be less 

than one cent. 

Comments from health insurance 

issuers have suggested that the costs of 

creating these interfaces would be 

passed on to participants in the form of 

higher premiums; however, no 

independent information has been 

found to corroborate this assertion. 

c. Compliance review costs. The 

Departments expect that group health 

plans and health insurance issuers will 

conduct a compliance review to ensure 

that their plan documents, summary 

plan descriptions, and any associated 

policies and procedures comply with 

the requirements of MHPAEA and these 

regulations. While the Departments do 

not know the total number of issuers 

that will be affected by the regulations, 

the Departments estimate that there are 

approximately 460 issuers operating in 

the group market. In addition, the 

Departments are aware of at least 120 

MBHOs.51 The Departments believe 

smaller MBHOs exist but were unable to 

obtain a count. 

The Departments assume that insured 

plans will rely on the issuers providing 

coverage to ensure compliance, and that 

self-insured plans will rely on thirdparty administrators to ensure 

compliance. The per-plan compliance 

costs are expected to be low, because 

vendors and issuers will be able to 

spread these costs across multiple client 

plans. These regulations provide 

examples illustrating the application of 

the rules to specific situations, which 

are intended to reduce the compliance 

burden. 

The Departments assume that the 

average burden per plan will be one-half 

hour of a legal professional’s time at an 

hourly labor rate of $120 to conduct the 

compliance review and make the 

needed changes to the plan and related 

documents. This results in a total cost 

of $27.8 million in the first year. The 

Departments welcome public comments 

on this estimate. 

d. Costs associated with MHPAEA 

disclosures. MHPAEA and these 

regulations contain two new disclosure 

provisions for group health plans and 

health insurance coverage offered in 

connection with a group health plan 

that are addressed in paragraph (d) of 

the rules. 

(1) Medical necessity disclosure. The 

first disclosure requires plan 

administrators to make the plan’s 

medical necessity determination criteria 

available upon request to potential 

participants, beneficiaries, or 

contracting providers. The Departments 

are unable to estimate with certainty the 

number of requests that will be received 

by plan administrators based on this 

requirement. However, the Departments 

have assumed that, on average, each 

plan affected by the rule will receive 

one request. For purposes of this 

estimate, the Departments assume that it 

will take a medically trained clerical 

staff member five minutes to respond to 

each request at a labor rate of $26.85 per 

hour resulting in an annual cost of 

approximately $1,044,000.52

The Departments also estimated the 

cost to deliver the requested criteria for 

medical necessity determinations. Many 

insurers already have the information 

prepared in electronic form, and the 

Departments assume that 38 percent 53

of requests will be delivered 

electronically resulting in a de minimis 

cost. The Departments estimate that the 

cost associated with distributing the 

approximately 290,000 requests sent by 

paper will be approximately $192,000.54

(2) Claims denial disclosure. 

MHPAEA and these regulations also 

provide that the reason for any denial 

under a group health plan (or health 

insurance coverage) of reimbursement 

or payment for services with respect to 

mental health or substance use disorder 

benefits in the case of any participant or 

beneficiary must be made available 

upon request or as otherwise required 

by the plan administrator (or the health 

insurance issuer offering such coverage) 

to the participant or beneficiary. The 

Department of Labor’s ERISA claims 

procedure regulation (29 CFR 2560.503– 

1) requires, among other things, such 

disclosures to be provided automatically 

to participants and beneficiaries free of 

charge. Although non-ERISA covered 

plans, such as plans sponsored by state 

and local governments that are subject 

to the PHS Act, are not required to 

comply with the ERISA claims 

procedure regulation, these regulations 

provide that such plans (and health 

insurance coverage offered in 

connection with such plans) will be 

deemed to satisfy the MHPAEA claims 

denial disclosure requirement if they 

comply with the ERISA claims 

procedure regulation. 

For purposes of this cost analysis, the 

Departments assume that non-Federal 

governmental plans will satisfy the safe 

harbor, because the same third-party 

administrators and insurers are hired by 

ERISA- and non-ERISA-covered plans, 

and these entities provide the same 

claims denial notifications to 

participants covered by ERISA- and 

non-ERISA-covered plans. Therefore, 


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Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations 5427 

55 Goldman, et al., ‘‘Behavioral Health Insurance 

Parity for Federal Employees,’’ New England Journal 

of Medicine (March 30, 2006) Vol. 354, No. 13. 

56The estimated .04 percent increase was derived 

from an authors’ final calculation based on data 

from the report cited in the previous footnote. 

57Congressional Budget Office Cost Estimate on 

H.R. 1424—Paul Wellstone Mental Health and 

Addiction Equity Act of 2007, 21 November 2007. 

58National Health Expenditures Projections 

2008–2018, Centers for Medicare & Medicaid 

Services, Office of the Actuary, http:// 

www.cms.hhs.gov/NationalHealthExpendData/. 

59The National Health Expenditure estimate of 

total spending on private health insurance includes 

premiums for purchases made in the individual 

market, which is not affected by MHPAEA. 

Therefore it needs to be subtracted from the total. 

The NAIC data does not contain information from 

California; therefore, an adjustment based on the 

number of lives covered in California and average 

premiums was used to impute a value for 

California. 

based on the foregoing, the Departments 

have not included a cost for plans to 

provide the claims denial disclosures. 

5. Transfer Resulting for Premium 

Increase Due to MHPAEA 

The evaluation of mental health and 

substance use disorder parity in the 

Federal Employees Health Benefit 

Program (FEHBP) estimated the overall 

impact of parity on total spending for 

mental health and substance use 

disorder services relative to a set of 

control plans that did not experience 

any increase in mental health 

coverage.55 That evaluation also 

assessed changes in out-of-pocket 

spending. The overall results on total 

mental health and substance use 

disorder (MH/SUD) spending (health 

plan spending plus out of pocket 

spending) showed essentially no 

significant increase in total MH/SUD 

spending. The evaluation also showed 

that in general parity resulted in a 

statistically significant decrease in outof-pocket spending. This means that 

while there was no increase in the total 

spending on MH/SUD services there 

was a significant shift in the final 

responsibility for paying for these 

services. In other words, health plan 

spending expanded due to parity. The 

magnitude of the change implies an 

estimated increase in total health care 

premiums of 0.4 percent.56 Thus the 0.4 

percent increase derived from the 

FEHBP evaluation is due entirely to a 

shift in final responsibility for payment. 

The Congressional Budget Office 57

estimated the direct and indirect costs 

to the private and public sector of 

implementing MHPAEA and similarly 

found that health insurance premiums 

would go up by approximately 0.4 

percent. The FEHBP estimate contrasts 

with the CBO estimate, because the CBO 

estimate appears to include some shift 

in final payment along with an increase 

in service utilization. 

The Departments estimate that total 

health care premiums will rise 0.4 

percent due to MHPAEA based on data 

and analysis from the FEHBP 

evaluation. The premium increase is a 

transfer from those not using MH/SUD 

benefits to those who do, because given 

the size of the estimated impacts and 

the known changes in coverage from 

baseline discussed earlier in this 

Regulatory Impact Analysis, any change 

in utilization must be very small again 

suggesting that premium changes were 

primarily due to a shift in responsibility 

for final payments for MH/SUD care. 

Using data on private health 

insurance premiums from the National 

Health Expenditure Projections 58 and 

data on premiums for individual 

insurance 59 from the National 

Association of Insurance 

Commissioners, the Departments 

estimate that the dollar amount of the 

0.4 percent premium increases 

attributable to MHPAEA would be 

approximately $25.6 billion over the 

ten-year period 2010–2019. The ten-year 

value using a discount rate of seven 

percent is $19.0 billion, and it is $22.4 

billion using a three percent discount 

rate. Yearly estimates are reported in 

Table 1, column G. Due to the 

magnitude of this transfer, this 

regulatory action is economically 

significant pursuant to section 3(f)(1) of 

Executive Order 12866. 

D. Regulatory Flexibility Act— 

Department of Labor and Department of 

Health and Human Services 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) (RFA) imposes 

certain requirements with respect to 

federal rules that are subject to the 

notice and comment requirements of 

section 553(b) of the Administrative 

Procedure Act (APA) (5 U.S.C. 551 et 

seq.) and that are likely to have a 

significant economic impact on a 

substantial number of small entities. 

Under Section 553(b) of the 

Administrative Procedures Act (APA), a 

general notice of proposed rulemaking 

is not required when an agency, for 

good cause, finds that notice and public 

comment thereon are impracticable, 

unnecessary, or contrary to the public 

interest. These interim final regulations 

are exempt from APA, because the 

Departments made a good cause finding 

that a general notice of proposed 

rulemaking is not necessary earlier in 

this preamble. Therefore, the RFA does 

not apply and the Departments are not 

required to either certify that the rule 

would not have a significant economic 

impact on a substantial number of small 

entities or conduct a regulatory 

flexibility analysis. 

Nevertheless, the Departments 

carefully considered the likely impact of 

the rule on small entities in connection 

with their assessment under Executive 

Order 12866. The Departments expect 

the rules to reduce the compliance 

burden imposed on plans and insurers 

by clarifying definitions and terms 

contained in the statute and providing 

examples of acceptable methods to 

comply with specific provisions. The 

Departments believe that the rule’s 

impact on small entities will be 

minimized by the fact that MHPAEA 

does not apply to small employers who 

have between two and 50 employees. 

E. Special Analyses—Department of the 

Treasury 

Notwithstanding the determinations 

of the Department of Labor and 

Department of Health and Human 

Services, for purposes of the Department 

of the Treasury, it has been determined 

that this Treasury decision is not a 

significant regulatory action for 

purposes of Executive Order 12866. 

Therefore, a regulatory assessment is not 

required. It has also been determined 

that section 553(b) of the Administrative 

Procedure Act (5 U.S.C. chapter 5) does 

not apply to these regulations. For the 

applicability of the RFA, refer to the 

Special Analyses section in the 

preamble to the cross-referencing notice 

of proposed rulemaking published 

elsewhere in this issue of the Federal 

Register. Pursuant to section 7805(f) of 

the Code, these temporary regulations 

have been submitted to the Chief 

Counsel for Advocacy of the Small 

Business Administration for comment 

on their impact on small businesses. 

F. Paperwork Reduction Act 

1. Departments of Labor and the 

Treasury 

As part of their continuing efforts to 

reduce paperwork and respondent 

burden, the Departments conduct a 

preclearance consultation program to 

provide the general public and federal 

agencies with an opportunity to 

comment on proposed and continuing 

collections of information in accordance 

with the Paperwork Reduction Act of 

1995 (PRA) (44 U.S.C. 3506(c)(2)(A)). 

This helps to ensure that requested data 

can be provided in the desired format, 

reporting burden (time and financial 

resources) is minimized, collection 

instruments are clearly understood, and 

the impact of collection requirements on 

respondents can be properly assessed. 


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60This estimate is based on an average document 

size of four pages, $.05 cents per page material and 

printing costs, $.44 cent postage costs. 

61 5 CFR 1320.1 through 1320.18. 

As discussed earlier in this preamble, 

MHPAEA includes two new disclosure 

provisions for group health plans and 

health insurance coverage offered in 

connection with a group health plan. 

First, the criteria for medical necessity 

determinations made under a group 

health plan with respect to mental 

health or substance use disorder 

benefits (or health insurance coverage 

offered in connection with the plan with 

respect to such benefits) must be made 

available in accordance with regulations 

by the plan administrator (or the health 

insurance issuer offering such coverage) 

to any current or potential participant, 

beneficiary, or contracting provider 

upon request (‘‘medical necessity 

disclosure’’). 

MHPAEA also requires the reason for 

any denial under a group health plan (or 

health insurance coverage) of 

reimbursement or payment for services 

with respect to mental health or 

substance use disorder benefits in the 

case of any participant or beneficiary 

must be made available upon request or 

as otherwise required by the plan 

administrator (or the health insurance 

issuer offering such coverage) to the 

participant or beneficiary in accordance 

with regulations (‘‘claims denial 

notice’’). 

The MHPAEA disclosures are 

information collection requests (ICRs) 

subject to the PRA. The Departments are 

not soliciting comments concerning an 

ICR pertaining to the claims denial 

notice, because the Department of 

Labor’s ERISA claims procedure 

regulation (29 CFR 2560.503–1) requires 

(among other things) ERISA-covered 

group health plans to provide such 

disclosures automatically to participants 

and beneficiaries free of charge. 

Although non-ERISA covered plans, 

such as certain church plan under 

Treasury/IRS jurisdiction and plans 

sponsored by state and local 

governments that are subject to the PHS 

Act and under HHS jurisdiction (these 

plans are discussed under the HHS ICR 

discussion below) are not required to 

comply with the ERISA claims 

procedure regulation, these regulations 

provide that such plans (and health 

insurance coverage offered in 

connection with such plans) will be 

deemed to satisfy the MHPAEA claims 

denial disclosure requirement if they 

comply with the ERISA claims 

procedure regulation. For purposes of 

this PRA analysis, the Departments 

assume that non-ERISA plans will 

satisfy the safe harbor, because the same 

third-party administrators and insurers 

are hired by ERISA- and non-ERISAcovered plans, and these entities 

provide the same claims denial 

notifications to participants covered by 

ERISA- and non-ERISA-covered plans. 

Therefore, the Departments hereby 

determine that the hour and cost burden 

associated with the claims denial notice 

already is accounted for in the ICR for 

the ERISA claims procedure regulation 

that is approved under OMB Control 

Number 1210–0053. 

Currently, the Departments are 

soliciting comments concerning the 

medical necessity disclosure. The 

Departments have submitted a copy of 

these interim final regulations to OMB 

in accordance with 44 U.S.C. 3507(d) for 

review of the information collections. 

The Departments and OMB are 

particularly interested in comments 

that: 

• Evaluate whether the collection of 

information is necessary for the proper 

performance of the functions of the 

agency, including whether the 

information will have practical utility; 

• Evaluate the accuracy of the 

agency’s estimate of the burden of the 

collection of information, including the 

validity of the methodology and 

assumptions used; 

• Enhance the quality, utility, and 

clarity of the information to be 

collected; and 

• Minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriate automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology, 

for example, by permitting electronic 

submission of responses. 

Comments should be sent to the 

Office of Information and Regulatory 

Affairs, Attention: Desk Officer for the 

Employee Benefits Security 

Administration either by fax to (202) 

395–7285 or by e-mail to 

oira_submission@omb.eop.gov. 

Although comments may be submitted 

through April 5, 2010, OMB requests 

that comments be received within 30 

days of publication of these interim 

final regulations to ensure their 

consideration. A copy of the ICR may be 

obtained by contacting the PRA 

addressee: G. Christopher Cosby, Office 

of Policy and Research, U.S. Department 

of Labor, Employee Benefits Security 

Administration, 200 Constitution 

Avenue, NW., Room N–5718, 

Washington, DC 20210. Telephone: 

(202) 693–8410; Fax: (202) 219–4745. 

These are not toll-free numbers. E-mail: 

ebsa.opr@dol.gov. ICRs submitted to 

OMB also are available at reginfo.gov 

(http://www.reginfo.gov/public/do/ 

PRAMain). 

The Departments are unable to 

estimate with certainty the number of 

requests for medical necessity criteria 

disclosures that will be received by plan 

administrators; however, the 

Departments have assumed that, on 

average, each plan affected by the rule 

will receive one request. The 

Departments estimate that 

approximately 93 percent of large plans 

and all small plans administer claims 

using service providers; therefore, 5.1 

percent of the medical necessity criteria 

disclosures will be done in-house. For 

PRA purposes, plans using service 

providers will report the costs as a cost 

burden, while plans administering 

claims in-house will report the burden 

as an hour burden. 

The Departments assume that it will 

take a medically trained clerical staff 

member five minutes to respond to each 

request at a wage rate of $27 per hour. 

This results in an annual hour burden 

of nearly 1,900 hours and an associated 

equivalent cost of nearly $51,000 for the 

approximately 23,000 requests done inhouse by plans. The remaining 424,000 

medical necessity criteria disclosures 

will be provided through service 

providers resulting in a cost burden of 

approximately $950,000. 

The Departments also calculated the 

cost to deliver the requested medical 

necessity criteria disclosures. Many 

insurers and plans already may have the 

information prepared in electronic form, 

and the Departments assume that 38 

percent of requests will be delivered 

electronically resulting in a de minimis 

cost. The Departments estimate that the 

cost burden associated with distributing 

the approximately 277,000 medical 

necessity criteria disclosures sent by 

paper will be approximately $177,000.60

The Departments note that persons are 

not required to respond to, and 

generally are not subject to any penalty 

for failing to comply with, an ICR unless 

the ICR has a valid OMB control 

number.61

These paperwork burden estimates 

are summarized as follows: 

Type of Review: New collection. 

Agencies: Employee Benefits Security 

Administration, Department of Labor; 

Internal Revenue Service, U.S. 

Department of the Treasury. 

Title: Notice of Medical Necessity 

Criteria under the Mental Health Parity 

and Addition Equity Act of 2008. 

OMB Number: 1210–NEW; 1545– 

NEW. 

Affected Public: Business or other forprofit; not-for-profit institutions. 

Total Respondents: 446,400. 


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Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations 5429 

62Non-Federal governmental plans may opt-out 

of MHPAEA and certain other requirements under 

Section 2721 of the PHS Act. Since past experience 

has shown that the number of non-Federal 

governmental plans that opt-out is small, the impact 

of the opt-out election should be immaterial on the 

Department’s estimates. 

Total Responses: 446,400. 

Frequency of Response: Occasionally. 

Estimated Total Annual Burden 

Hours: 950 hours (Employee Benefits 

Security Administration); 950 hours 

(Internal Revenue Service). 

Estimated Total Annual Burden Cost: 

$562,500 (Employee Benefits Security 

Administration); $562,500 (Internal 

Revenue Service). 

2. Department of Health and Human 

Services 

Under the PRA, we are required to 

provide 30-days notice in the Federal 

Register and solicit public comment 

before a collection of information 

requirement is submitted to the Office of 

Management and Budget (OMB) for 

review and approval. In order to fairly 

evaluate whether an information 

collection should be approved by OMB, 

section 3506(c)(2)(A) of the PRA 

requires that we solicit comment on the 

following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

each of these issues for the following 

sections of this document that contain 

information collection requirements 

(ICRs): 

ICRs Regarding Parity in Mental Health 

and Substance Use Disorder Benefits. 

(45 CFR 146.136(d)) 

As discussed above, MHPAEA 

includes two new disclosure provisions 

for group health plans and health 

insurance coverage offered in 

connection with a group health plan. 

First, the criteria for medical necessity 

determinations made under a group 

health plan with respect to mental 

health or substance use disorder 

benefits (or health insurance coverage 

offered in connection with the plan with 

respect to such benefits) must be made 

available in accordance with regulations 

by the plan administrator (or the health 

insurance issuer offering such coverage) 

to any current or potential participant, 

beneficiary, or contracting provider 

upon request (‘‘medical necessity 

disclosure’’). 

MHPAEA also requires the reason for 

any denial under a group health plan (or 

health insurance coverage) of 

reimbursement or payment for services 

with respect to mental health or 

substance use disorder benefits in the 

case of any participant or beneficiary 

must be made available upon request or 

as otherwise required by the plan 

administrator (or the health insurance 

issuer offering such coverage) to the 

participant or beneficiary in accordance 

with regulations (‘‘claims denial 

disclosure’’). 

Medical Necessity Disclosure 

The Department estimates that there 

are 29.1 million participants covered by 

20,300 state and local public plans that 

are subject to the MHPAEA disclosure 

requirements that are employed by 

employers with more than 50 

employees.62

The Department is unable to estimate 

with certainty the number of requests 

for medical necessity criteria 

disclosures that will be received by plan 

administrators; however, the 

Department has assumed that, on 

average, each plan affected by the rule 

will receive one request. CMS estimates 

that approximately 93 percent of large 

plans administer claims using third 

party providers. Furthermore the vast 

majority of all smaller employers 

usually are fully insured such that 

issuers will be administering their 

claims. Therefore 5.1 percent of claims 

are administered in-house. For plans 

that use issuers or third party providers 

the costs are reported as cost burden 

while for plans that administer claims 

in-house the burden is reported as an 

hour burden. For purposes of this 

estimate, the Department assumes that it 

will take a medically trained clerical 

staff member five minutes to respond to 

each request at a wage rate of $26.85 per 

hour. This results in an annual hour 

burden of 86 hours and an associated 

equivalent cost of about $2,300 for the 

approximately 1,000 requests handled 

by plans. The remaining 19,300 claims 

(94.9 percent) are provided through a 

third-party provider or an issuer and 

results in a cost burden of 

approximately $43,000. 

Claims Denial Disclosure 

MHPAEA requires plans to disclose to 

participants and beneficiaries upon 

request the reason for any denial under 

the plan (or coverage) of reimbursement 

or payment for services with respect to 

mental health or substance use disorder 

benefits. The Department of Labor’s 

ERISA claims procedure regulation (29 

CFR 2560.503–1) requires, among other 

things, such disclosures to be provided 

automatically to participants and 

beneficiaries free of charge. Although 

non-ERISA covered plans, such as plans 

sponsored by state and local 

governments that are subject to the PHS 

Act, are not required to comply with the 

ERISA claims procedure regulation, the 

interim final regulations provide that 

these plans (and health insurance 

coverage offered in connection with 

such plans) will be deemed to satisfy 

the MHPAEA claims denial disclosure 

requirement if they comply with the 

ERISA claims procedure regulation. 

Using assumptions similar to those 

used for the ERISA claims procedure 

regulation, the Department estimates 

that there will be approximately 29.7 

million claims for mental health or 

substance use disorder benefits with 

approximately 4.45 million denials that 

could result in a request for an 

explanation of reason for denial. The 

Department has no data on the percent 

of denials that will result in a request 

for an explanation, but assumed that ten 

percent of denials will result in a 

request for an explanation (445,000 

requests). 

The Department estimates that a 

medically trained clerical staff member 

may require five minutes to respond to 

each request at a labor rate of $27 per 

hour. This results in an annual hour 

burden of nearly 1,900 hours and an 

associated equivalent cost of nearly 

$51,000 for the approximately 22,700 

requests completed by plans. The 

remaining 422,300 are provided through 

an issuer or a third-party provider, 

which results in a cost burden of 

approximately $945,000. 

In association with the explanation of 

denial, participants may request a copy 

of the medical necessity criteria. While 

the Department does not know how 

many notices of denial will result in a 

request for the criteria of medical 

necessity, the Department assumes that 

ten percent of those requesting an 

explanation of the reason for denial will 

also request the criteria of medical 

necessity, resulting in 44,500 requests, 

2,300 of which will be completed inhouse with an hour burden of 190 hours 

and equivalent cost of $5,000 and 

42,000 requests handled by issuers or 

third-party providers with a cost burden 

of $95,000. 

The Department also calculated the 

cost to deliver the requested 

information. Many insurers or plans 

may already have the information 

prepared in electronic format, and the 

Department assumes that requests will 

be delivered electronically resulting in a 


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5430 Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations 

63Following the assumption in the ERISA claims 

regulation, it was assumed 75 percent of the 

explanation of denials disclosures would be 

delivered electronically, while it was assumed that 

38 percent of non-denial related requests for the 

medical necessity criteria would be delivered 

electronically. 

64This estimate is based on an average document 

size of four pages, $.05 cents per page material and 

printing costs, $.44 cent postage costs. 

65 5 CFR 1320.1 through 1320.18. 

de minimis cost.63 The Department 

estimates that the cost burden 

associated with distributing the 

approximately 135,000 disclosures sent 

by paper will be approximately 

$86,000.64 The Department notes that 

persons are not required to respond to, 

and generally are not subject to any 

penalty for failing to comply with, an 

ICR unless the ICR has a valid OMB 

control number.65

These paperwork burden estimates 

are summarized as follows: 

Type of Review: New collection. 

Agency: Department of Health and 

Human Services. 

Title: Required Disclosures Under the 

Mental Health Parity and Addition 

Equity Act of 2008. 

OMB Number: 0938–NEW. 

Affected Public: State, Local, or Tribal 

Governments. 

Respondents: 20,300. 

Responses: 510,000. 

Frequency of Response: Occasionally. 

Estimated Total Annual Burden 

Hours: 2,200 hours. 

Estimated Total Annual Burden Cost: 

$1,169,000. 

If you comment on these information 

collection and recordkeeping 

requirements, please do either of the 

following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, 

Attention: CMS Desk Officer, 4140– 

IFC 

Fax: (202) 395–6974; or 

E-mail: 

OIRA_submission@omb.eop.gov. 

G. Congressional Review Act 

These regulations are subject to the 

Congressional Review Act provisions of 

the Small Business Regulatory 

Enforcement Fairness Act of 1996 (5 

U.S.C. 801 et seq.) and have been 

transmitted to Congress and the 

Comptroller General for review. 

H. Unfunded Mandates Reform Act 

The Unfunded Mandates Reform Act 

of 1995 (Pub. L. 104–4) requires 

agencies to prepare several analytic 

statements before proposing any rules 

that may result in annual expenditures 

of $100 million (as adjusted for 

inflation) by state, local and tribal 

governments or the private sector. These 

rules are not subject to the Unfunded 

Mandates Reform Act because they are 

being issued as interim final rules. 

However, consistent with the policy 

embodied in the Unfunded Mandates 

Reform Act, the regulation has been 

designed to be the least burdensome 

alternative for state, local and tribal 

governments, and the private sector, 

while achieving the objectives of 

MHPAEA. 

I. Federalism Statement—Department of 

Labor and Department of Health and 

Human Services 

Executive Order 13132 outlines 

fundamental principles of federalism, 

and requires the adherence to specific 

criteria by federal agencies in the 

process of their formulation and 

implementation of policies that have 

‘‘substantial direct effects’’ on the States, 

the relationship between the national 

government and States, or on the 

distribution of power and 

responsibilities among the various 

levels of government. Federal agencies 

promulgating regulations that have 

these federalism implications must 

consult with State and local officials, 

and describe the extent of their 

consultation and the nature of the 

concerns of State and local officials in 

the preamble to the regulation. 

In the Departments’ view, these 

regulations have federalism 

implications, because they have direct 

effects on the States, the relationship 

between the national government and 

States, or on the distribution of power 

and responsibilities among various 

levels of government. However, in the 

Departments’ view, the federalism 

implications of these regulations are 

substantially mitigated because, with 

respect to health insurance issuers, the 

Departments expect that the majority of 

States have enacted or will enact laws 

or take other appropriate action 

resulting in their meeting or exceeding 

the federal MHPAEA standards. 

In general, through section 514, 

ERISA supersedes State laws to the 

extent that they relate to any covered 

employee benefit plan, and preserves 

State laws that regulate insurance, 

banking, or securities. While ERISA 

prohibits States from regulating a plan 

as an insurance or investment company 

or bank, the preemption provisions of 

section 731 of ERISA and section 2723 

of the PHS Act (implemented in 29 CFR 

2590.731(a) and 45 CFR 146.143(a)) 

apply so that the MHPAEA 

requirements are not to be ‘‘construed to 

supersede any provision of State law 

which establishes, implements, or 

continues in effect any standard or 

requirement solely relating to health 

insurance issuers in connection with 

group health insurance coverage except 

to the extent that such standard or 

requirement prevents the application of 

a requirement’’ of MHPAEA. The 

conference report accompanying HIPAA 

indicates that this is intended to be the 

‘‘narrowest’’ preemption of State laws. 

(See House Conf. Rep. No. 104–736, at 

205, reprinted in 1996 U.S. Code Cong. 

& Admin. News 2018.) 

States may continue to apply State 

law requirements except to the extent 

that such requirements prevent the 

application of the MHPAEA 

requirements that are the subject of this 

rulemaking. State insurance laws that 

are more stringent than the federal 

requirements are unlikely to ‘‘prevent 

the application of’’ MHPAEA, and be 

preempted. Accordingly, States have 

significant latitude to impose 

requirements on health insurance 

issuers that are more restrictive than the 

federal law. 

In compliance with the requirement 

of Executive Order 13132 that agencies 

examine closely any policies that may 

have federalism implications or limit 

the policy making discretion of the 

States, the Departments have engaged in 

numerous efforts to consult with and 

work cooperatively with affected State 

and local officials. It is expected that the 

Departments will act in a similar 

fashion in enforcing the MHPAEA 

requirements. 

Throughout the process of developing 

these regulations, to the extent feasible 

within the specific preemption 

provisions of HIPAA as it applies to 

MHPAEA, the Departments have 

attempted to balance the States’ 

interests in regulating health insurance 

issuers, and Congress’ intent to provide 

uniform minimum protections to 

consumers in every State. By doing so, 

it is the Departments’ view that they 

have complied with the requirements of 

Executive Order 13132. 

Pursuant to the requirements set forth 

in section 8(a) of Executive Order 

13132, and by the signatures affixed to 

these regulations, the Departments 

certify that the Employee Benefits 

Security Administration and the Centers 

for Medicare & Medicaid Services have 

complied with the requirements of 

Executive Order 13132 for the attached 

regulations in a meaningful and timely 

manner. 


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V. Statutory Authority 

The Department of the Treasury 

temporary and final regulations are 

adopted pursuant to the authority 

contained in sections 7805 and 9833 of 

the Code. 

The Department of Labor interim final 

regulations are adopted pursuant to the 

authority contained in 29 U.S.C. 1027, 

1059, 1135, 1161–1168, 1169, 1181– 

1183, 1181 note, 1185, 1185a, 1185b, 

1191, 1191a, 1191b, and 1191c; sec. 

101(g), Public Law 104–191, 110 Stat. 

1936; sec. 401(b), Public Law 105–200, 

112 Stat. 645 (42 U.S.C. 651 note); sec. 

512(d), Public Law 110–343, 122 Stat. 

3765; Public Law 110–460, 122 Stat. 

5123; Secretary of Labor’s Order 6–2009, 

74 FR 21524 (May 7, 2009). 

The Department of Health and Human 

Services interim final regulations are 

adopted pursuant to the authority 

contained in sections 2701 through 

2763, 2791, and 2792 of the PHS Act (42 

U.S.C. 300gg through 300gg–63, 300gg– 

91, and 300gg–92), as amended. 

List of Subjects 

26 CFR Part 54 

Excise taxes, Health care, Health 

insurance, Pensions, Reporting and 

recordkeeping requirements. 

29 CFR Part 2590 

Continuation coverage, Disclosure, 

Employee benefit plans, Group health 

plans, Health care, Health insurance, 

Medical child support, Reporting and 

recordkeeping requirements. 

45 CFR Part 146 

Health care, Health insurance, 

Reporting and recordkeeping 

requirements, and State regulation of 

health insurance. 

Internal Revenue Service 

26 CFR Chapter 1 

■ Accordingly, 26 CFR parts 54 and 602 

are amended as follows: 

PART 54—PENSION EXCISE TAXES 

■ Paragraph 1. The authority citation 

for part 54 continues to read in part as 

follows: 

Authority: 26 U.S.C. 7805. * * * 

■ Par. 2. Section 54.9812–1T is revised 

to read as follows: 

§ 54.9812 Parity in mental health and 

substance use disorder benefits 

(temporary). 

(a) Meaning of terms. For purposes of 

this section, except where the context 

clearly indicates otherwise, the 

following terms have the meanings 

indicated: 

Aggregate lifetime dollar limit means 

a dollar limitation on the total amount 

of specified benefits that may be paid 

under a group health plan for any 

coverage unit. 

Annual dollar limit means a dollar 

limitation on the total amount of 

specified benefits that may be paid in a 

12-month period under a group health 

plan for any coverage unit. 

Coverage unit means coverage unit as 

described in paragraph (c)(1)(iv) of this 

section. 

Cumulative financial requirements 

are financial requirements that 

determine whether or to what extent 

benefits are provided based on 

accumulated amounts and include 

deductibles and out-of-pocket 

maximums. (However, cumulative 

financial requirements do not include 

aggregate lifetime or annual dollar limits 

because these two terms are excluded 

from the meaning of financial 

requirements.) 

Cumulative quantitative treatment 

limitations are treatment limitations that 

determine whether or to what extent 

benefits are provided based on 

accumulated amounts, such as annual 

or lifetime day or visit limits. 

Financial requirements include 

deductibles, copayments, coinsurance, 

or out-of-pocket maximums. Financial 

requirements do not include aggregate 

lifetime or annual dollar limits. 

Medical/surgical benefits means 

benefits for medical or surgical services, 

as defined under the terms of the plan, 

but does not include mental health or 

substance use disorder benefits. Any 

condition defined by the plan as being 

or as not being a medical/surgical 

condition must be defined to be 

consistent with generally recognized 

independent standards of current 

medical practice (for example, the most 

current version of the International 

Classification of Diseases (ICD) or State 

guidelines). 

Mental health benefits means benefits 

with respect to services for mental 

health conditions, as defined under the 

terms of the plan and in accordance 

with applicable Federal and State law. 

Any condition defined by the plan as 

being or as not being a mental health 

condition must be defined to be 

consistent with generally recognized 

independent standards of current 

medical practice (for example, the most 

current version of the Diagnostic and 

Statistical Manual of Mental Disorders 

(DSM), the most current version of the 

ICD, or State guidelines). 

Substance use disorder benefits 

means benefits with respect to services 

for substance use disorders, as defined 

under the terms of the plan and in 

accordance with applicable Federal and 

State law. Any disorder defined by the 

plan as being or as not being a substance 

use disorder must be defined to be 

consistent with generally recognized 

independent standards of current 

medical practice (for example, the most 

current version of the DSM, the most 

current version of the ICD, or State 

guidelines). 

Treatment limitations include limits 

on benefits based on the frequency of 

treatment, number of visits, days of 

coverage, days in a waiting period, or 

other similar limits on the scope or 

duration of treatment. Treatment 

limitations include both quantitative 

treatment limitations, which are 

expressed numerically (such as 50 

outpatient visits per year), and 

nonquantitative treatment limitations, 

which otherwise limit the scope or 

duration of benefits for treatment under 

a plan. (See paragraph (c)(4)(ii) of this 

section for an illustrative list of 

nonquantitative treatment limitations.) 

A permanent exclusion of all benefits 

for a particular condition or disorder, 

however, is not a treatment limitation. 

(b) Parity requirements with respect to 

aggregate lifetime and annual dollar 

limits—(1)—General—(i) General parity 

requirement. A group health plan that 

provides both medical/surgical benefits 

and mental health or substance use 

disorder benefits must comply with 

paragraph (b)(2), (b)(3), or (b)(6) of this 

section. 

(ii) Exception. The rule in paragraph 

(b)(1)(i) of this section does not apply if 

a plan satisfies the requirements of 

paragraph (f) or (g) of this section 

(relating to exemptions for small 

employers and for increased cost). 

(2) Plan with no limit or limits on less 

than one-third of all medical/surgical 

benefits. If a plan does not include an 

aggregate lifetime or annual dollar limit 

on any medical/surgical benefits or 

includes an aggregate lifetime or annual 

dollar limit that applies to less than onethird of all medical/surgical benefits, it 

may not impose an aggregate lifetime or 

annual dollar limit, respectively, on 

mental health or substance use disorder 

benefits. 

(3) Plan with a limit on at least twothirds of all medical/surgical benefits. If 

a plan includes an aggregate lifetime or 

annual dollar limit on at least two-thirds 

of all medical/surgical benefits, it must 

either— 

(i) Apply the aggregate lifetime or 

annual dollar limit both to the medical/ 

surgical benefits to which the limit 

would otherwise apply and to mental 

health or substance use disorder 

benefits in a manner that does not 

distinguish between the medical/ 


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surgical benefits and mental health or 

substance use disorder benefits; or 

(ii) Not include an aggregate lifetime 

or annual dollar limit on mental health 

or substance use disorder benefits that 

is less than the aggregate lifetime or 

annual dollar limit, respectively, on 

medical/surgical benefits. (For 

cumulative limits other than aggregate 

lifetime or annual dollar limits, see 

paragraph (c)(3)(v) of this section 

prohibiting separately accumulating 

cumulative financial requirements or 

cumulative quantitative treatment 

limitations.) 

(4) Examples. The rules of paragraphs 

(b)(2) and (b)(3) of this section are 

illustrated by the following examples: 

Example 1. (i) Facts. A group health plan 

has no annual limit on medical/surgical 

benefits and a $10,000 annual limit on 

mental health and substance use disorder 

benefits. To comply with the requirements of 

this paragraph (b), the plan sponsor is 

considering each of the following options: 

(A) Eliminating the plan’s annual dollar 

limit on mental health and substance use 

disorder benefits; 

(B) Replacing the plan’s annual dollar limit 

on mental health and substance use disorder 

benefits with a $500,000 annual limit on all 

benefits (including medical/surgical and 

mental health and substance use disorder 

benefits); and 

(C) Replacing the plan’s annual dollar limit 

on mental health and substance use disorder 

benefits with a $250,000 annual limit on 

medical/surgical benefits and a $250,000 

annual limit on mental health and substance 

use disorder benefits. 

(ii) Conclusion. In this Example 1, each of 

the three options being considered by the 

plan sponsor would comply with the 

requirements of this paragraph (b). 

Example 2. (i) Facts. A plan has a $100,000 

annual limit on medical/surgical inpatient 

benefits and a $50,000 annual limit on 

medical/surgical outpatient benefits. To 

comply with the parity requirements of this 

paragraph (b), the plan sponsor is 

considering each of the following options: 

(A) Imposing a $150,000 annual limit on 

mental health and substance use disorder 

benefits; and 

(B) Imposing a $100,000 annual limit on 

mental health and substance use disorder 

inpatient benefits and a $50,000 annual limit 

on mental health and substance use disorder 

outpatient benefits. 

(ii) Conclusion. In this Example 2, each 

option under consideration by the plan 

sponsor would comply with the requirements 

of this section. 

(5) Determining one-third and twothirds of all medical/surgical benefits. 

For purposes of this paragraph (b), the 

determination of whether the portion of 

medical/surgical benefits subject to an 

aggregate lifetime or annual dollar limit 

represents one-third or two-thirds of all 

medical/surgical benefits is based on the 

dollar amount of all plan payments for 

medical/surgical benefits expected to be 

paid under the plan for the plan year (or 

for the portion of the plan year after a 

change in plan benefits that affects the 

applicability of the aggregate lifetime or 

annual dollar limits). Any reasonable 

method may be used to determine 

whether the dollar amount expected to 

be paid under the plan will constitute 

one-third or two-thirds of the dollar 

amount of all plan payments for 

medical/surgical benefits. 

(6) Plan not described in paragraph 

(b)(2) or (b)(3) of this section—(i) In 

general. A group health plan that is not 

described in paragraph (b)(2) or (b)(3) of 

this section with respect to aggregate 

lifetime or annual dollar limits on 

medical/surgical benefits, must either— 

(A) Impose no aggregate lifetime or 

annual dollar limit, as appropriate, on 

mental health or substance use disorder 

benefits; or 

(B) Impose an aggregate lifetime or 

annual dollar limit on mental health or 

substance use disorder benefits that is 

no less than an average limit calculated 

for medical/surgical benefits in the 

following manner. The average limit is 

calculated by taking into account the 

weighted average of the aggregate 

lifetime or annual dollar limits, as 

appropriate, that are applicable to the 

categories of medical/surgical benefits. 

Limits based on delivery systems, such 

as inpatient/outpatient treatment or 

normal treatment of common, low-cost 

conditions (such as treatment of normal 

births), do not constitute categories for 

purposes of this paragraph (b)(6)(i)(B). 

In addition, for purposes of determining 

weighted averages, any benefits that are 

not within a category that is subject to 

a separately-designated dollar limit 

under the plan are taken into account as 

a single separate category by using an 

estimate of the upper limit on the dollar 

amount that a plan may reasonably be 

expected to incur with respect to such 

benefits, taking into account any other 

applicable restrictions under the plan. 

(ii) Weighting. For purposes of this 

paragraph (b)(6), the weighting 

applicable to any category of medical/ 

surgical benefits is determined in the 

manner set forth in paragraph (b)(5) of 

this section for determining one-third or 

two-thirds of all medical/surgical 

benefits. 

(iii) Example. The rules of this 

paragraph (b)(6) are illustrated by the 

following example: 

Example. (i) Facts. A group health plan 

that is subject to the requirements of this 

section includes a $100,000 annual limit on 

medical/surgical benefits related to cardiopulmonary diseases. The plan does not 

include an annual dollar limit on any other 

category of medical/surgical benefits. The 

plan determines that 40 percent of the dollar 

amount of plan payments for medical/ 

surgical benefits are related to cardiopulmonary diseases. The plan determines 

that $1,000,000 is a reasonable estimate of 

the upper limit on the dollar amount that the 

plan may incur with respect to the other 60 

percent of payments for medical/surgical 

benefits. 

(ii) Conclusion. In this Example, the plan 

is not described in paragraph (b)(3) of this 

section because there is not one annual dollar 

limit that applies to at least two-thirds of all 

medical/surgical benefits. Further, the plan is 

not described in paragraph (b)(2) of this 

section because more than one-third of all 

medical/surgical benefits are subject to an 

annual dollar limit. Under this paragraph 

(b)(6), the plan sponsor can choose either to 

include no annual dollar limit on mental 

health or substance use disorder benefits, or 

to include an annual dollar limit on mental 

health or substance use disorder benefits that 

is not less than the weighted average of the 

annual dollar limits applicable to each 

category of medical/surgical benefits. In this 

example, the minimum weighted average 

annual dollar limit that can be applied to 

mental health or substance use disorder 

benefits is $640,000 (40% × $100,000 + 60% 

× $1,000,000 = $640,000). 

(c) Parity requirements with respect to 

financial requirements and treatment 

limitations—(1) Clarification of terms— 

(i) Classification of benefits. When 

reference is made in this paragraph (c) 

to a classification of benefits, the term 

‘‘classification’’ means a classification as 

described in paragraph (c)(2)(ii) of this 

section. 

(ii) Type of financial requirement or 

treatment limitation. When reference is 

made in this paragraph (c) to a type of 

financial requirement or treatment 

limitation, the reference to type means 

its nature. Different types of financial 

requirements include deductibles, 

copayments, coinsurance, and out-ofpocket maximums. Different types of 

quantitative treatment limitations 

include annual, episode, and lifetime 

day and visit limits. See paragraph 

(c)(4)(ii) of this section for an illustrative 

list of nonquantitative treatment 

limitations. 

(iii) Level of a type of financial 

requirement or treatment limitation. 

When reference is made in this 

paragraph (c) to a level of a type of 

financial requirement or treatment 

limitation, level refers to the magnitude 

of the type of financial requirement or 

treatment limitation. For example, 

different levels of coinsurance include 

20 percent and 30 percent; different 

levels of a copayment include $15 and 

$20; different levels of a deductible 

include $250 and $500; and different 

levels of an episode limit include 21 

inpatient days per episode and 30 

inpatient days per episode. 


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(iv) Coverage unit. When reference is 

made in this paragraph (c) to a coverage 

unit, coverage unit refers to the way in 

which a plan groups individuals for 

purposes of determining benefits, or 

premiums or contributions. For 

example, different coverage units 

include self-only, family, and employeeplus-spouse. 

(2) General parity requirement—(i) 

General rule. A group health plan that 

provides both medical/surgical benefits 

and mental health or substance use 

disorder benefits may not apply any 

financial requirement or treatment 

limitation to mental health or substance 

use disorder benefits in any 

classification that is more restrictive 

than the predominant financial 

requirement or treatment limitation of 

that type applied to substantially all 

medical/surgical benefits in the same 

classification. Whether a financial 

requirement or treatment limitation is a 

predominant financial requirement or 

treatment limitation that applies to 

substantially all medical/surgical 

benefits in a classification is determined 

separately for each type of financial 

requirement or treatment limitation. The 

application of the rules of this 

paragraph (c)(2) to financial 

requirements and quantitative treatment 

limitations is addressed in paragraph 

(c)(3) of this section; the application of 

the rules of this paragraph (c)(2) to 

nonquantitative treatment limitations is 

addressed in paragraph (c)(4) of this 

section. 

(ii) Classifications of benefits used for 

applying rules—(A) In general. If a plan 

provides mental health or substance use 

disorder benefits in any classification of 

benefits described in this paragraph 

(c)(2)(ii), mental health or substance use 

disorder benefits must be provided in 

every classification in which medical/ 

surgical benefits are provided. In 

determining the classification in which 

a particular benefit belongs, a plan must 

apply the same standards to medical/ 

surgical benefits and to mental health or 

substance use disorder benefits. To the 

extent that a plan provides benefits in 

a classification and imposes any 

separate financial requirement or 

treatment limitation (or separate level of 

a financial requirement or treatment 

limitation) for benefits in the 

classification, the rules of this paragraph 

(c) apply separately with respect to that 

classification for all financial 

requirements or treatment limitations. 

The following classifications of benefits 

are the only classifications used in 

applying the rules of this paragraph (c): 

(1) Inpatient, in-network. Benefits 

furnished on an inpatient basis and 

within a network of providers 

established or recognized under a plan. 

(2) Inpatient, out-of-network. Benefits 

furnished on an inpatient basis and 

outside any network of providers 

established or recognized under a plan. 

This classification includes inpatient 

benefits under a plan that has no 

network of providers. 

(3) Outpatient, in-network. Benefits 

furnished on an outpatient basis and 

within a network of providers 

established or recognized under a plan. 

(4) Outpatient, out-of-network. 

Benefits furnished on an outpatient 

basis and outside any network of 

providers established or recognized 

under a plan. This classification 

includes outpatient benefits under a 

plan that has no network of providers. 

(5) Emergency care. Benefits for 

emergency care. 

(6) Prescription drugs. Benefits for 

prescription drugs. See special rules for 

multi-tiered prescription drug benefits 

in paragraph (c)(3)(iii) of this section. 

(B) Application to out-of-network 

providers. See paragraph (c)(2)(ii)(A) of 

this section, under which a plan that 

provides mental health or substance use 

disorder benefits in any classification of 

benefits must provide mental health or 

substance use disorder benefits in every 

classification in which medical/surgical 

benefits are provided, including out-ofnetwork classifications. 

(C) Examples. The rules of this 

paragraph (c)(2)(ii) are illustrated by the 

following examples. In each example, 

the group health plan is subject to the 

requirements of this section and 

provides both medical/surgical benefits 

and mental health and substance use 

disorder benefits. 

Example 1. (i) Facts. A group health plan 

offers inpatient and outpatient benefits and 

does not contract with a network of 

providers. The plan imposes a $500 

deductible on all benefits. For inpatient 

medical/surgical benefits, the plan imposes a 

coinsurance requirement. For outpatient 

medical/surgical benefits, the plan imposes 

copayments. The plan imposes no other 

financial requirements or treatment 

limitations. 

(ii) Conclusion. In this Example 1, because 

the plan has no network of providers, all 

benefits provided are out-of-network. 

Because inpatient, out-of-network medical/ 

surgical benefits are subject to separate 

financial requirements from outpatient, outof-network medical/surgical benefits, the 

rules of this paragraph (c) apply separately 

with respect to any financial requirements 

and treatment limitations, including the 

deductible, in each classification. 

Example 2. (i) Facts. A plan imposes a 

$500 deductible on all benefits. The plan has 

no network of providers. The plan generally 

imposes a 20 percent coinsurance 

requirement with respect to all benefits, 

without distinguishing among inpatient, 

outpatient, emergency, or prescription drug 

benefits. The plan imposes no other financial 

requirements or treatment limitations. 

(ii) Conclusion. In this Example 2, because 

the plan does not impose separate financial 

requirements (or treatment limitations) based 

on classification, the rules of this paragraph 

(c) apply with respect to the deductible and 

the coinsurance across all benefits. 

Example 3. (i) Facts. Same facts as 

Example 2, except the plan exempts 

emergency care benefits from the 20 percent 

coinsurance requirement. The plan imposes 

no other financial requirements or treatment 

limitations. 

(ii) Conclusion. In this Example 3, because 

the plan imposes separate financial 

requirements based on classifications, the 

rules of this paragraph (c) apply with respect 

to the deductible and the coinsurance 

separately for— 

(A) Benefits in the emergency 

classification; and 

(B) All other benefits. 

Example 4. (i) Facts. Same facts as 

Example 2, except the plan also imposes a 

preauthorization requirement for all inpatient 

treatment in order for benefits to be paid. No 

such requirement applies to outpatient 

treatment. 

(ii) Conclusion. In this Example 4, because 

the plan has no network of providers, all 

benefits provided are out-of-network. 

Because the plan imposes a separate 

treatment limitation based on classifications, 

the rules of this paragraph (c) apply with 

respect to the deductible and coinsurance 

separately for— 

(A) Inpatient, out-of-network benefits; and 

(B) All other benefits. 

(3) Financial requirements and 

quantitative treatment limitations—(i) 

Determining ‘‘substantially all’’ and 

‘‘predominant’’—(A) Substantially all. 

For purposes of this paragraph (c), a 

type of financial requirement or 

quantitative treatment limitation is 

considered to apply to substantially all 

medical/surgical benefits in a 

classification of benefits if it applies to 

at least two-thirds of all medical/ 

surgical benefits in that classification. 

(For this purpose, benefits expressed as 

subject to a zero level of a type of 

financial requirement are treated as 

benefits not subject to that type of 

financial requirement, and benefits 

expressed as subject to a quantitative 

treatment limitation that is unlimited 

are treated as benefits not subject to that 

type of quantitative treatment 

limitation.) If a type of financial 

requirement or quantitative treatment 

limitation does not apply to at least twothirds of all medical/surgical benefits in 

a classification, then that type cannot be 

applied to mental health or substance 

use disorder benefits in that 

classification. 

(B) Predominant—(1) If a type of 

financial requirement or quantitative 


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5434 Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations 

treatment limitation applies to at least 

two-thirds of all medical/surgical 

benefits in a classification as 

determined under paragraph (c)(3)(i)(A) 

of this section, the level of the financial 

requirement or quantitative treatment 

limitation that is considered the 

predominant level of that type in a 

classification of benefits is the level that 

applies to more than one-half of 

medical/surgical benefits in that 

classification subject to the financial 

requirement or quantitative treatment 

limitation. 

(2) If, with respect to a type of 

financial requirement or quantitative 

treatment limitation that applies to at 

least two-thirds of all medical/surgical 

benefits in a classification, there is no 

single level that applies to more than 

one-half of medical/surgical benefits in 

the classification subject to the financial 

requirement or quantitative treatment 

limitation, the plan may combine levels 

until the combination of levels applies 

to more than one-half of medical/ 

surgical benefits subject to the financial 

requirement or quantitative treatment 

limitation in the classification. The least 

restrictive level within the combination 

is considered the predominant level of 

that type in the classification. (For this 

purpose, a plan may combine the most 

restrictive levels first, with each less 

restrictive level added to the 

combination until the combination 

applies to more than one-half of the 

benefits subject to the financial 

requirement or treatment limitation.) 

(C) Portion based on plan payments. 

For purposes of this paragraph (c), the 

determination of the portion of medical/ 

surgical benefits in a classification of 

benefits subject to a financial 

requirement or quantitative treatment 

limitation (or subject to any level of a 

financial requirement or quantitative 

treatment limitation) is based on the 

dollar amount of all plan payments for 

medical/surgical benefits in the 

classification expected to be paid under 

the plan for the plan year (or for the 

portion of the plan year after a change 

in plan benefits that affects the 

applicability of the financial 

requirement or quantitative treatment 

limitation). 

(D) Clarifications for certain threshold 

requirements. For any deductible, the 

dollar amount of plan payments 

includes all plan payments with respect 

to claims that would be subject to the 

deductible if it had not been satisfied. 

For any out-of-pocket maximum, the 

dollar amount of plan payments 

includes all plan payments associated 

with out-of-pocket payments that are 

taken into account towards the out-ofpocket maximum as well as all plan 

payments associated with out-of-pocket 

payments that would have been made 

towards the out-of-pocket maximum if it 

had not been satisfied. Similar rules 

apply for any other thresholds at which 

the rate of plan payment changes. 

(E) Determining the dollar amount of 

plan payments. Subject to paragraph 

(c)(3)(i)(D) of this section, any 

reasonable method may be used to 

determine the dollar amount expected 

to be paid under a plan for medical/ 

surgical benefits subject to a financial 

requirement or quantitative treatment 

limitation (or subject to any level of a 

financial requirement or quantitative 

treatment limitation). 

(ii) Application to different coverage 

units. If a plan applies different levels 

of a financial requirement or 

quantitative treatment limitation to 

different coverage units in a 

classification of medical/surgical 

benefits, the predominant level that 

applies to substantially all medical/ 

surgical benefits in the classification is 

determined separately for each coverage 

unit. 

(iii) Special rule for multi-tiered 

prescription drug benefits. If a plan 

applies different levels of financial 

requirements to different tiers of 

prescription drug benefits based on 

reasonable factors determined in 

accordance with the rules in paragraph 

(c)(4)(i) of this section (relating to 

requirements for nonquantitative 

treatment limitations) and without 

regard to whether a drug is generally 

prescribed with respect to medical/ 

surgical benefits or with respect to 

mental health or substance use disorder 

benefits, the plan satisfies the parity 

requirements of this paragraph (c) with 

respect to prescription drug benefits. 

Reasonable factors include cost, 

efficacy, generic versus brand name, and 

mail order versus pharmacy pick-up. 

(iv) Examples. The rules of 

paragraphs (c)(3)(i), (c)(3)(ii), and 

(c)(3)(iii) of this section are illustrated 

by the following examples. In each 

example, the group health plan is 

subject to the requirements of this 

section and provides both medical/ 

surgical benefits and mental health and 

substance use disorder benefits. 

Example 1. (i) Facts. For inpatient, out-ofnetwork medical/surgical benefits, a group 

health plan imposes five levels of 

coinsurance. Using a reasonable method, the 

plan projects its payments for the upcoming 

year as follows: 

Coinsurance rate .................................................... 0% 10% 15% 20% 30% Total 

Projected payments ................................................ $200x $100x $450x $100x $150x $1,000x 

Percent of total plan costs ..................................... 20% 10% 45% 10% 15% 

Percent subject to coinsurance level ..................... N/A 12.5% 

(100x/800x) 

56.25% 

(450x/800x) 

12.5% 

(100x/800x) 

18.75% 

(150x/800x) 

The plan projects plan costs of $800x to be 

subject to coinsurance ($100x + $450x + 

$100x + $150x = $800x). Thus, 80 percent 

($800x/$1,000x) of the benefits are projected 

to be subject to coinsurance, and 56.25 

percent of the benefits subject to coinsurance 

are projected to be subject to the 15 percent 

coinsurance level. 

(ii) Conclusion. In this Example 1, the twothirds threshold of the substantially all 

standard is met for coinsurance because 80 

percent of all inpatient, out-of-network 

medical/surgical benefits are subject to 

coinsurance. Moreover, the 15 percent 

coinsurance is the predominant level because 

it is applicable to more than one-half of 

inpatient, out-of-network medical/surgical 

benefits subject to the coinsurance 

requirement. The plan may not impose any 

level of coinsurance with respect to 

inpatient, out-of-network mental health or 

substance use disorder benefits that is more 

restrictive than the 15 percent level of 

coinsurance. 

Example 2. (i) Facts. For outpatient, innetwork medical/surgical benefits, a plan 

imposes five different copayment levels. 

Using a reasonable method, the plan projects 

payments for the upcoming year as follows: 

Copayment amount ................................................ $0 $10 $15 $20 $50 Total 

Projected payments ................................................ $200x $200x $200x $300x $100x $1,000x 

Percent of total plan costs ..................................... 20% 20% 20% 30% 10% 

Percent subject to copayments .............................. N/A 25% 

(200x/800x) 

25% 

(200x/800x) 

37.5% 

(300x/800x) 

12.5% 

(100x/800x) 


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The plan projects plan costs of $800x to be 

subject to copayments ($200x + $200x + 

$300x + $100x = $800x). Thus, 80 percent 

($800x/$1,000x) of the benefits are projected 

to be subject to a copayment. 

(ii) Conclusion. In this Example 2, the twothirds threshold of the substantially all 

standard is met for copayments because 80 

percent of all outpatient, in-network medical/ 

surgical benefits are subject to a copayment. 

Moreover, there is no single level that applies 

to more than one-half of medical/surgical 

benefits in the classification subject to a 

copayment (for the $10 copayment, 25 

percent; for the $15 copayment, 25 percent; 

for the $20 copayment, 37.5 percent; and for 

the $50 copayment, 12.5 percent). The plan 

can combine any levels of copayment, 

including the highest levels, to determine the 

predominant level that can be applied to 

mental health or substance use disorder 

benefits. If the plan combines the highest 

levels of copayment, the combined projected 

payments for the two highest copayment 

levels, the $50 copayment and the $20 

copayment, are not more than one-half of the 

outpatient, in-network medical/surgical 

benefits subject to a copayment because they 

are exactly one-half ($300x + $100x = $400x; 

$400x/$800x = 50%). The combined 

projected payments for the three highest 

copayment levels—the $50 copayment, the 

$20 copayment, and the $15 copayment—are 

more than one-half of the outpatient, innetwork medical/surgical benefits subject to 

the copayments ($100x + $300x + $200x = 

$600x; $600x/$800x = 75%). Thus, the plan 

may not impose any copayment on 

outpatient, in-network mental health or 

substance use disorder benefits that is more 

restrictive than the least restrictive 

copayment in the combination, the $15 

copayment. 

Example 3. (i) Facts. A plan imposes a 

$250 deductible on all medical/surgical 

benefits for self-only coverage and a $500 

deductible on all medical/surgical benefits 

for family coverage. The plan has no network 

of providers. For all medical/surgical 

benefits, the plan imposes a coinsurance 

requirement. The plan imposes no other 

financial requirements or treatment 

limitations. 

(ii) Conclusion. In this Example 3, because 

the plan has no network of providers, all 

benefits are provided out-of-network. 

Because self-only and family coverage are 

subject to different deductibles, whether the 

deductible applies to substantially all 

medical/surgical benefits is determined 

separately for self-only medical/surgical 

benefits and family medical/surgical benefits. 

Because the coinsurance is applied without 

regard to coverage units, the predominant 

coinsurance that applies to substantially all 

medical/surgical benefits is determined 

without regard to coverage units. 

Example 4. (i) Facts. A plan applies the 

following financial requirements for 

prescription drug benefits. The requirements 

are applied without regard to whether a drug 

is generally prescribed with respect to 

medical/surgical benefits or with respect to 

mental health or substance use disorder 

benefits. Moreover, the process for certifying 

a particular drug as ‘‘generic’’, ‘‘preferred 

brand name’’, ‘‘non-preferred brand name’’, or 

‘‘specialty’’ complies with the rules of 

paragraph (c)(4)(i) of this section (relating to 

requirements for nonquantitative treatment 

limitations). 

Tier description 

Tier 1 Tier 2 Tier 3 Tier 4 

Generic drugs Preferred brand 

name drugs 

Non-preferred 

brand name 

drugs (which 

may have Tier 1 

or Tier 2 

alternatives) 

Specialty drugs 

Percent paid by plan ........................................................................ 90% 80% 60% 50% 

(ii) Conclusion. In this Example 4, the 

financial requirements that apply to 

prescription drug benefits are applied 

without regard to whether a drug is generally 

prescribed with respect to medical/surgical 

benefits or with respect to mental health or 

substance use disorder benefits; the process 

for certifying drugs in different tiers complies 

with paragraph (c)(4) of this section; and the 

bases for establishing different levels or types 

of financial requirements are reasonable. The 

financial requirements applied to 

prescription drug benefits do not violate the 

parity requirements of this paragraph (c)(3). 

(v) No separate cumulative financial 

requirements or cumulative quantitative 

treatment limitations. (A) A group 

health plan may not apply any 

cumulative financial requirement or 

cumulative quantitative treatment 

limitation for mental health or 

substance use disorder benefits in a 

classification that accumulates 

separately from any established for 

medical/surgical benefits in the same 

classification. 

(B) The rules of this paragraph 

(c)(3)(v) are illustrated by the following 

examples: 

Example 1. (i) Facts. A group health plan 

imposes a combined annual $500 deductible 

on all medical/surgical, mental health, and 

substance use disorder benefits. 

(ii) Conclusion. In this Example 1, the 

combined annual deductible complies with 

the requirements of this paragraph (c)(3)(v). 

Example 2. (i) Facts. A plan imposes an 

annual $250 deductible on all medical/ 

surgical benefits and a separate annual $250 

deductible on all mental health and 

substance use disorder benefits. 

(ii) Conclusion. In this Example 2, the 

separate annual deductible on mental health 

and substance use disorder benefits violates 

the requirements of this paragraph (c)(3)(v). 

Example 3. (i) Facts. A plan imposes an 

annual $300 deductible on all medical/ 

surgical benefits and a separate annual $100 

deductible on all mental health or substance 

use disorder benefits. 

(ii) Conclusion. In this Example 3, the 

separate annual deductible on mental health 

and substance use disorder benefits violates 

the requirements of this paragraph (c)(3)(v). 

Example 4. (i) Facts. A plan generally 

imposes a combined annual $500 deductible 

on all benefits (both medical/surgical benefits 

and mental health and substance use 

disorder benefits) except prescription drugs. 

Certain benefits, such as preventive care, are 

provided without regard to the deductible. 

The imposition of other types of financial 

requirements or treatment limitations varies 

with each classification. Using reasonable 

methods, the plan projects its payments for 

medical/surgical benefits in each 

classification for the upcoming year as 

follows: 

Classification Benefits subject 

to deductible Total benefits Percent subject to deductible 

Inpatient, in-network ........................................................................................................ $1,800x $2,000x 90 

Inpatient, out-of-network .................................................................................................. 1,000x 1,000x 100 

Outpatient, in-network ...................................................................................................... 1,400x 2,000x 70 

Outpatient, out-of-network ............................................................................................... 1,880x 2,000x 94 

Emergency care ............................................................................................................... 300x 500x 60 


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(ii) Conclusion. In this Example 4, the twothirds threshold of the substantially all 

standard is met with respect to each 

classification except emergency care because 

in each of those other classifications at least 

two-thirds of medical/surgical benefits are 

subject to the $500 deductible. Moreover, the 

$500 deductible is the predominant level in 

each of those other classifications because it 

is the only level. However, emergency care 

mental health and substance use disorder 

benefits cannot be subject to the $500 

deductible because it does not apply to 

substantially all emergency care medical/ 

surgical benefits. 

(4) Nonquantitative treatment 

limitations—(i) General rule. A group 

health plan may not impose a 

nonquantitative treatment limitation 

with respect to mental health or 

substance use disorder benefits in any 

classification unless, under the terms of 

the plan as written and in operation, 

any processes, strategies, evidentiary 

standards, or other factors used in 

applying the nonquantitative treatment 

limitation to mental health or substance 

use disorder benefits in the 

classification are comparable to, and are 

applied no more stringently than, the 

processes, strategies, evidentiary 

standards, or other factors used in 

applying the limitation with respect to 

medical surgical/benefits in the 

classification, except to the extent that 

recognized clinically appropriate 

standards of care may permit a 

difference. 

(ii) Illustrative list of nonquantitative 

treatment limitations. Nonquantitative 

treatment limitations include— 

(A) Medical management standards 

limiting or excluding benefits based on 

medical necessity or medical 

appropriateness, or based on whether 

the treatment is experimental or 

investigative; 

(B) Formulary design for prescription 

drugs; 

(C) Standards for provider admission 

to participate in a network, including 

reimbursement rates; 

(D) Plan methods for determining 

usual, customary, and reasonable 

charges; 

(E) Refusal to pay for higher-cost 

therapies until it can be shown that a 

lower-cost therapy is not effective (also 

known as fail-first policies or step 

therapy protocols); and 

(F) Exclusions based on failure to 

complete a course of treatment. 

(iii) Examples. The rules of this 

paragraph (c)(4) are illustrated by the 

following examples. In each example, 

the group health plan is subject to the 

requirements of this section and 

provides both medical/surgical benefits 

and mental health and substance use 

disorder benefits. 

Example 1. (i) Facts. A group health plan 

limits benefits to treatment that is medically 

necessary. The plan requires concurrent 

review for inpatient, in-network mental 

health and substance use disorder benefits 

but does not require it for any inpatient, innetwork medical/surgical benefits. The plan 

conducts retrospective review for inpatient, 

in-network medical/surgical benefits. 

(ii) Conclusion. In this Example 1, the plan 

violates the rules of this paragraph (c)(4). 

Although the same nonquantitative treatment 

limitation—medical necessity—applies to 

both mental health and substance use 

disorder benefits and to medical/surgical 

benefits for inpatient, in-network services, 

the concurrent review process does not apply 

to medical/surgical benefits. The concurrent 

review process is not comparable to the 

retrospective review process. While such a 

difference might be permissible in certain 

individual cases based on recognized 

clinically appropriate standards of care, it is 

not permissible for distinguishing between 

all medical/surgical benefits and all mental 

health or substance use disorder benefits. 

Example 2. (i) Facts. A plan requires prior 

approval that a course of treatment is 

medically necessary for outpatient, innetwork medical/surgical, mental health, and 

substance use disorder benefits. For mental 

health and substance use disorder treatments 

that do not have prior approval, no benefits 

will be paid; for medical/surgical treatments 

that do not have prior approval, there will 

only be a 25 percent reduction in the benefits 

the plan would otherwise pay. 

(ii) Conclusion. In this Example 2, the plan 

violates the rules of this paragraph (c)(4). 

Although the same nonquantitative treatment 

limitation—medical necessity—is applied 

both to mental health and substance use 

disorder benefits and to medical/surgical 

benefits for outpatient, in-network services, 

the penalty for failure to obtain prior 

approval for mental health and substance use 

disorder benefits is not comparable to the 

penalty for failure to obtain prior approval 

for medical/surgical benefits. 

Example 3. (i) Facts. A plan generally 

covers medically appropriate treatments. For 

both medical/surgical benefits and mental 

health and substance use disorder benefits, 

evidentiary standards used in determining 

whether a treatment is medically appropriate 

(such as the number of visits or days of 

coverage) are based on recommendations 

made by panels of experts with appropriate 

training and experience in the fields of 

medicine involved. The evidentiary 

standards are applied in a manner that may 

differ based on clinically appropriate 

standards of care for a condition. 

(ii) Conclusion. In this Example 3, the plan 

complies with the rules of this paragraph 

(c)(4) because the nonquantitative treatment 

limitation—medical appropriateness—is the 

same for both medical/surgical benefits and 

mental health and substance use disorder 

benefits, and the processes for developing the 

evidentiary standards and the application of 

them to mental health and substance use 

disorder benefits are comparable to and are 

applied no more stringently than for medical/ 

surgical benefits. This is the result even if, 

based on clinically appropriate standards of 

care, the application of the evidentiary 

standards does not result in similar numbers 

of visits, days of coverage, or other benefits 

utilized for mental health conditions or 

substance use disorders as it does for any 

particular medical/surgical condition. 

Example 4. (i) Facts. A plan generally 

covers medically appropriate treatments. In 

determining whether prescription drugs are 

medically appropriate, the plan 

automatically excludes coverage for 

antidepressant drugs that are given a black 

box warning label by the Food and Drug 

Administration (indicating the drug carries a 

significant risk of serious adverse effects). For 

other drugs with a black box warning 

(including those prescribed for other mental 

health conditions and substance use 

disorders, as well as for medical/surgical 

conditions), the plan will provide coverage if 

the prescribing physician obtains 

authorization from the plan that the drug is 

medically appropriate for the individual, 

based on clinically appropriate standards of 

care. 

(ii) Conclusion. In this Example 4, the plan 

violates the rules of this paragraph (c)(4). 

Although the same nonquantitative treatment 

limitation—medical appropriateness—is 

applied to both mental health and substance 

use disorder benefits and medical/surgical 

benefits, the plan’s unconditional exclusion 

of antidepressant drugs given a black box 

warning is not comparable to the conditional 

exclusion for other drugs with a black box 

warning. 

Example 5. (i) Facts. An employer 

maintains both a major medical program and 

an employee assistance program (EAP). The 

EAP provides, among other benefits, a 

limited number of mental health or substance 

use disorder counseling sessions. 

Participants are eligible for mental health or 

substance use disorder benefits under the 

major medical program only after exhausting 

the counseling sessions provided by the EAP. 

No similar exhaustion requirement applies 

with respect to medical/surgical benefits 

provided under the major medical program. 

(ii) Conclusion. In this Example 5, limiting 

eligibility for mental health and substance 

use disorder benefits only after EAP benefits 

are exhausted is a nonquantitative treatment 

limitation subject to the parity requirements 

of this paragraph (c). Because no comparable 

requirement applies to medical/surgical 

benefits, the requirement may not be applied 

to mental health or substance use disorder 

benefits. 

(5) Exemptions. The rules of this 

paragraph (c) do not apply if a group 

health plan satisfies the requirements of 

paragraph (f) or (g) of this section 

(relating to exemptions for small 

employers and for increased cost). 

(d) Availability of plan information— 

(1) Criteria for medical necessity 

determinations. The criteria for medical 

necessity determinations made under a 

group health plan with respect to 

mental health or substance use disorder 

benefits must be made available by the 

plan administrator to any current or 

potential participant, beneficiary, or 

contracting provider upon request. 


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Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations 5437 

(2) Reason for denial. The reason for 

any denial under a group health plan of 

reimbursement or payment for services 

with respect to mental health or 

substance use disorder benefits in the 

case of any participant or beneficiary 

must be made available by the plan 

administrator to the participant or 

beneficiary in accordance with this 

paragraph (d)(2). 

(i) Plans subject to ERISA. If a plan is 

subject to ERISA, it must provide the 

reason for the claim denial in a form 

and manner consistent with the 

requirements of 29 CFR 2560.503–1 for 

group health plans. 

(ii) Plans not subject to ERISA. If a 

plan is not subject to ERISA, upon the 

request of a participant or beneficiary 

the reason for the claim denial must be 

provided within a reasonable time and 

in a reasonable manner. For this 

purpose, a plan that follows the 

requirements of 29 CFR 2560.503–1 for 

group health plans complies with the 

requirements of this paragraph (d)(2)(ii). 

(e) Applicability—(1) Group health 

plans. The requirements of this section 

apply to a group health plan offering 

medical/surgical benefits and mental 

health or substance use disorder 

benefits. If, under an arrangement or 

arrangements to provide health care 

benefits by an employer or employee 

organization (including for this purpose 

a joint board of trustees of a 

multiemployer trust affiliated with one 

or more multiemployer plans), any 

participant (or beneficiary) can 

simultaneously receive coverage for 

medical/surgical benefits and coverage 

for mental health or substance use 

disorder benefits, then the requirements 

of this section (including the exemption 

provisions in paragraph (g) of this 

section) apply separately with respect to 

each combination of medical/surgical 

benefits and of mental health or 

substance use disorder benefits that any 

participant (or beneficiary) can 

simultaneously receive from that 

employer’s or employee organization’s 

arrangement or arrangements to provide 

health care benefits, and all such 

combinations are considered for 

purposes of this section to be a single 

group health plan. 

(2) Health insurance issuers. See 29 

CFR 2590.712(e)(2) and 45 CFR 

146.136(e)(2), under which a health 

insurance issuer offering health 

insurance coverage for mental health or 

substance use disorder benefits is 

subject to requirements similar to those 

applicable to group health plans under 

this section if the health insurance 

coverage is offered in connection with a 

group health plan subject to 

requirements under 29 CFR 2590.712 or 

45 CFR 146.136 similar to those 

applicable to group health plans under 

this section. 

(3) Scope. This section does not— 

(i) Require a group health plan to 

provide any mental health benefits or 

substance use disorder benefits, and the 

provision of benefits by a plan for one 

or more mental health conditions or 

substance use disorders does not require 

the plan under this section to provide 

benefits for any other mental health 

condition or substance use disorder; or 

(ii) Affect the terms and conditions 

relating to the amount, duration, or 

scope of mental health or substance use 

disorder benefits under the plan except 

as specifically provided in paragraphs 

(b) and (c) of this section. 

(f) Small employer exemption—(1) In 

general. The requirements of this 

section do not apply to a group health 

plan for a plan year of a small employer. 

For purposes of this paragraph (f), the 

term small employer means, in 

connection with a group health plan 

with respect to a calendar year and a 

plan year, an employer who employed 

an average of at least two (or one in the 

case of an employer residing in a state 

that permits small groups to include a 

single individual) but not more than 50 

employees on business days during the 

preceding calendar year. See section 

9831(a)(2) and § 54.9831–1(b), which 

provide that this section (and certain 

other sections) does not apply to any 

group health plan for any plan year if, 

on the first day of the plan year, the 

plan has fewer than two participants 

who are current employees. 

(2) Rules in determining employer 

size. For purposes of paragraph (f)(1) of 

this section— 

(i) All persons treated as a single 

employer under subsections (b), (c), (m), 

and (o) of section 414 are treated as one 

employer; 

(ii) If an employer was not in 

existence throughout the preceding 

calendar year, whether it is a small 

employer is determined based on the 

average number of employees the 

employer reasonably expects to employ 

on business days during the current 

calendar year; and 

(iii) Any reference to an employer for 

purposes of the small employer 

exemption includes a reference to a 

predecessor of the employer. 

(g) Increased cost exemption— 

[Reserved]. 

(h) Sale of nonparity health insurance 

coverage. See 29 CFR 2590.712(h) and 

45 CFR 146.136(h), under which a 

health insurance issuer may not sell a 

policy, certificate, or contract of 

insurance that fails to comply with 

requirements similar to those under 

paragraph (b) or (c) of this section, 

except to a plan for a year for which the 

plan is exempt from requirements 

similar to those under paragraph (b) or 

(c) of this section because the plan 

meets requirements under paragraph (f) 

or (g) of 29 CFR 2590.712 or 45 CFR 

146.136 similar to those under 

paragraph (f) or (g) of this section. 

(i) Effective/applicability dates—(1) In 

general. Except as provided in 

paragraph (i)(2) of this section, the 

requirements of this section are 

applicable for plan years beginning on 

or after July 1, 2010. 

(2) Special effective date for certain 

collectively-bargained plans. For a 

group health plan maintained pursuant 

to one or more collective bargaining 

agreements ratified before October 3, 

2008, the requirements of this section 

do not apply to the plan for plan years 

beginning before the later of either— 

(i) The date on which the last of the 

collective bargaining agreements 

relating to the plan terminates 

(determined without regard to any 

extension agreed to after October 3, 

2008); or 

(ii) July 1, 2010. 

(j) Expiration date. This section 

expires on or before January 29, 2013. 

PART 602—OMB CONTROL NUMBERS 

UNDER THE PAPERWORK 

REDUCTION ACT 

Par. 3. The authority citation for part 

602 continues to read as follows: 

Authority: 26 U.S.C. 7805. 

Par. 4. In § 602.101, paragraph (b) is 

amended by adding the following entry 

in numerical order to the table: 

§ 602.101 OMB Control numbers. 

* * * * * 

(b) * * * 

CFR part or section where 

identified and described 

Current 

OMB control 

No. 

* * * * * 

54.9812–1T ............................... 1545–2165 

* * * * * 


sroberts on DSKD5P82C1PROD with RULES
5438 Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations 

Approved: January 27, 2010. 

Steven T. Miller, 

Deputy Commissioner for Services and 

Enforcement, Internal Revenue Service. 

Michael F. Mundaca, 

Acting Assistant Secretary of the Treasury 

(Tax Policy). 

Employee Benefits Security 

Administration 

29 CFR Chapter XXV 

■ 29 CFR Part 2590 is amended as 

follows: 

PART 2590—RULES AND 

REGULATIONS FOR HEALTH 

INSURANCE PORTABILITY AND 

RENEWABILITY FOR GROUP HEALTH 

PLANS 

■ 1. The authority citation for Part 2590 

is revised to read as follows: 

Authority: Secs. 29 U.S.C. 1027, 1059, 

1135, 1161–1168, 1169, 1181–1183, 1181 

note, 1185, 1185a, 1185b, 1191, 1191a, 

1191b, and 1191c; sec. 101(g), Public Law 

104–191, 110 Stat. 1936; sec. 401(b), Public 

Law 105–200, 112 Stat. 645 (42 U.S.C. 651 

note); sec. 512(d), Public Law 110–343, 122 

Stat. 3765; Public Law 110–460, 122 Stat. 

5123; Secretary of Labor’s Order 6–2009, 74 

FR 21524 (May 7, 2009). 

Subpart C—Other Requirements 

■ 2. Section 2590.712 is revised to read 

as follows: 

§ 2590.712 Parity in mental health and 

substance use disorder benefits. 

(a) Meaning of terms. For purposes of 

this section, except where the context 

clearly indicates otherwise, the 

following terms have the meanings 

indicated: 

Aggregate lifetime dollar limit means 

a dollar limitation on the total amount 

of specified benefits that may be paid 

under a group health plan (or health 

insurance coverage offered in 

connection with such a plan) for any 

coverage unit. 

Annual dollar limit means a dollar 

limitation on the total amount of 

specified benefits that may be paid in a 

12-month period under a group health 

plan (or health insurance coverage 

offered in connection with such a plan) 

for any coverage unit. 

Coverage unit means coverage unit as 

described in paragraph (c)(1)(iv) of this 

section. 

Cumulative financial requirements 

are financial requirements that 

determine whether or to what extent 

benefits are provided based on 

accumulated amounts and include 

deductibles and out-of-pocket 

maximums. (However, cumulative 

financial requirements do not include 

aggregate lifetime or annual dollar limits 

because these two terms are excluded 

from the meaning of financial 

requirements.) 

Cumulative quantitative treatment 

limitations are treatment limitations that 

determine whether or to what extent 

benefits are provided based on 

accumulated amounts, such as annual 

or lifetime day or visit limits. 

Financial requirements include 

deductibles, copayments, coinsurance, 

or out-of-pocket maximums. Financial 

requirements do not include aggregate 

lifetime or annual dollar limits. 

Medical/surgical benefits means 

benefits for medical or surgical services, 

as defined under the terms of the plan 

or health insurance coverage, but does 

not include mental health or substance 

use disorder benefits. Any condition 

defined by the plan as being or as not 

being a medical/surgical condition must 

be defined to be consistent with 

generally recognized independent 

standards of current medical practice 

(for example, the most current version 

of the International Classification of 

Diseases (ICD) or State guidelines). 

Mental health benefits means benefits 

with respect to services for mental 

health conditions, as defined under the 

terms of the plan and in accordance 

with applicable Federal and State law. 

Any condition defined by the plan as 

being or as not being a mental health 

condition must be defined to be 

consistent with generally recognized 

independent standards of current 

medical practice (for example, the most 

current version of the Diagnostic and 

Statistical Manual of Mental Disorders 

(DSM), the most current version of the 

ICD, or State guidelines). 

Substance use disorder benefits 

means benefits with respect to services 

for substance use disorders, as defined 

under the terms of the plan and in 

accordance with applicable Federal and 

State law. Any disorder defined by the 

plan as being or as not being a substance 

use disorder must be defined to be 

consistent with generally recognized 

independent standards of current 

medical practice (for example, the most 

current version of the DSM, the most 

current version of the ICD, or State 

guidelines). 

Treatment limitations include limits 

on benefits based on the frequency of 

treatment, number of visits, days of 

coverage, days in a waiting period, or 

other similar limits on the scope or 

duration of treatment. Treatment 

limitations include both quantitative 

treatment limitations, which are 

expressed numerically (such as 50 

outpatient visits per year), and 

nonquantitative treatment limitations, 

which otherwise limit the scope or 

duration of benefits for treatment under 

a plan. (See paragraph (c)(4)(ii) of this 

section for an illustrative list of 

nonquantitative treatment limitations.) 

A permanent exclusion of all benefits 

for a particular condition or disorder, 

however, is not a treatment limitation. 

(b) Parity requirements with respect to 

aggregate lifetime and annual dollar 

limits—(1)—General—(i) General parity 

requirement. A group health plan (or 

health insurance coverage offered by an 

issuer in connection with a group health 

plan) that provides both medical/ 

surgical benefits and mental health or 

substance use disorder benefits must 

comply with paragraph (b)(2), (b)(3), or 

(b)(6) of this section. 

(ii) Exception. The rule in paragraph 

(b)(1)(i) of this section does not apply if 

a plan (or health insurance coverage) 

satisfies the requirements of paragraph 

(f) or (g) of this section (relating to 

exemptions for small employers and for 

increased cost). 

(2) Plan with no limit or limits on less 

than one-third of all medical/surgical 

benefits. If a plan (or health insurance 

coverage) does not include an aggregate 

lifetime or annual dollar limit on any 

medical/surgical benefits or includes an 

aggregate lifetime or annual dollar limit 

that applies to less than one-third of all 

medical/surgical benefits, it may not 

impose an aggregate lifetime or annual 

dollar limit, respectively, on mental 

health or substance use disorder 

benefits. 

(3) Plan with a limit on at least twothirds of all medical/surgical benefits. If 

a plan (or health insurance coverage) 

includes an aggregate lifetime or annual 

dollar limit on at least two-thirds of all 

medical/surgical benefits, it must 

either— 

(i) Apply the aggregate lifetime or 

annual dollar limit both to the medical/ 

surgical benefits to which the limit 

would otherwise apply and to mental 

health or substance use disorder 

benefits in a manner that does not 

distinguish between the medical/ 

surgical benefits and mental health or 

substance use disorder benefits; or 

(ii) Not include an aggregate lifetime 

or annual dollar limit on mental health 

or substance use disorder benefits that 

is less than the aggregate lifetime or 

annual dollar limit, respectively, on 

medical/surgical benefits. (For 

cumulative limits other than aggregate 

lifetime or annual dollar limits, see 

paragraph (c)(3)(v) of this section 

prohibiting separately accumulating 

cumulative financial requirements or 

cumulative quantitative treatment 

limitations.) 


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Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations 5439 

(4) Examples. The rules of paragraphs 

(b)(2) and (b)(3) of this section are 

illustrated by the following examples: 

Example 1. (i) Facts. A group health plan 

has no annual limit on medical/surgical 

benefits and a $10,000 annual limit on 

mental health and substance use disorder 

benefits. To comply with the requirements of 

this paragraph (b), the plan sponsor is 

considering each of the following options— 

(A) Eliminating the plan’s annual dollar 

limit on mental health and substance use 

disorder benefits; 

(B) Replacing the plan’s annual dollar limit 

on mental health and substance use disorder 

benefits with a $500,000 annual limit on all 

benefits (including medical/surgical and 

mental health and substance use disorder 

benefits); and 

(C) Replacing the plan’s annual dollar limit 

on mental health and substance use disorder 

benefits with a $250,000 annual limit on 

medical/surgical benefits and a $250,000 

annual limit on mental health and substance 

use disorder benefits. 

(ii) Conclusion. In this Example 1, each of 

the three options being considered by the 

plan sponsor would comply with the 

requirements of this paragraph (b). 

Example 2. (i) Facts. A plan has a $100,000 

annual limit on medical/surgical inpatient 

benefits and a $50,000 annual limit on 

medical/surgical outpatient benefits. To 

comply with the parity requirements of this 

paragraph (b), the plan sponsor is 

considering each of the following options— 

(A) Imposing a $150,000 annual limit on 

mental health and substance use disorder 

benefits; and 

(B) Imposing a $100,000 annual limit on 

mental health and substance use disorder 

inpatient benefits and a $50,000 annual limit 

on mental health and substance use disorder 

outpatient benefits. 

(ii) Conclusion. In this Example 2, each 

option under consideration by the plan 

sponsor would comply with the requirements 

of this section. 

(5) Determining one-third and twothirds of all medical/surgical benefits. 

For purposes of this paragraph (b), the 

determination of whether the portion of 

medical/surgical benefits subject to an 

aggregate lifetime or annual dollar limit 

represents one-third or two-thirds of all 

medical/surgical benefits is based on the 

dollar amount of all plan payments for 

medical/surgical benefits expected to be 

paid under the plan for the plan year (or 

for the portion of the plan year after a 

change in plan benefits that affects the 

applicability of the aggregate lifetime or 

annual dollar limits). Any reasonable 

method may be used to determine 

whether the dollar amount expected to 

be paid under the plan will constitute 

one-third or two-thirds of the dollar 

amount of all plan payments for 

medical/surgical benefits. 

(6) Plan not described in paragraph 

(b)(2) or (b)(3) of this section—(i) In 

general. A group health plan (or health 

insurance coverage) that is not 

described in paragraph (b)(2) or (b)(3) of 

this section with respect to aggregate 

lifetime or annual dollar limits on 

medical/surgical benefits, must either— 

(A) Impose no aggregate lifetime or 

annual dollar limit, as appropriate, on 

mental health or substance use disorder 

benefits; or 

(B) Impose an aggregate lifetime or 

annual dollar limit on mental health or 

substance use disorder benefits that is 

no less than an average limit calculated 

for medical/surgical benefits in the 

following manner. The average limit is 

calculated by taking into account the 

weighted average of the aggregate 

lifetime or annual dollar limits, as 

appropriate, that are applicable to the 

categories of medical/surgical benefits. 

Limits based on delivery systems, such 

as inpatient/outpatient treatment or 

normal treatment of common, low-cost 

conditions (such as treatment of normal 

births), do not constitute categories for 

purposes of this paragraph (b)(6)(i)(B). 

In addition, for purposes of determining 

weighted averages, any benefits that are 

not within a category that is subject to 

a separately-designated dollar limit 

under the plan are taken into account as 

a single separate category by using an 

estimate of the upper limit on the dollar 

amount that a plan may reasonably be 

expected to incur with respect to such 

benefits, taking into account any other 

applicable restrictions under the plan. 

(ii) Weighting. For purposes of this 

paragraph (b)(6), the weighting 

applicable to any category of medical/ 

surgical benefits is determined in the 

manner set forth in paragraph (b)(5) of 

this section for determining one-third or 

two-thirds of all medical/surgical 

benefits. 

(iii) Example. The rules of this 

paragraph (b)(6) are illustrated by the 

following example: 

Example. (i) Facts. A group health plan 

that is subject to the requirements of this 

section includes a $100,000 annual limit on 

medical/surgical benefits related to cardiopulmonary diseases. The plan does not 

include an annual dollar limit on any other 

category of medical/surgical benefits. The 

plan determines that 40% of the dollar 

amount of plan payments for medical/ 

surgical benefits are related to cardiopulmonary diseases. The plan determines 

that $1,000,000 is a reasonable estimate of 

the upper limit on the dollar amount that the 

plan may incur with respect to the other 60% 

of payments for medical/surgical benefits. 

(ii) Conclusion. In this Example, the plan 

is not described in paragraph (b)(3) of this 

section because there is not one annual dollar 

limit that applies to at least two-thirds of all 

medical/surgical benefits. Further, the plan is 

not described in paragraph (b)(2) of this 

section because more than one-third of all 

medical/surgical benefits are subject to an 

annual dollar limit. Under this paragraph 

(b)(6), the plan sponsor can choose either to 

include no annual dollar limit on mental 

health or substance use disorder benefits, or 

to include an annual dollar limit on mental 

health or substance use disorder benefits that 

is not less than the weighted average of the 

annual dollar limits applicable to each 

category of medical/surgical benefits. In this 

example, the minimum weighted average 

annual dollar limit that can be applied to 

mental health or substance use disorder 

benefits is $640,000 (40% × $100,000 + 60% 

× $1,000,000 = $640,000). 

(c) Parity requirements with respect to 

financial requirements and treatment 

limitations—(1) Clarification of terms— 

(i) Classification of benefits. When 

reference is made in this paragraph (c) 

to a classification of benefits, the term 

‘‘classification’’ means a classification as 

described in paragraph (c)(2)(ii) of this 

section. 

(ii) Type of financial requirement or 

treatment limitation. When reference is 

made in this paragraph (c) to a type of 

financial requirement or treatment 

limitation, the reference to type means 

its nature. Different types of financial 

requirements include deductibles, 

copayments, coinsurance, and out-ofpocket maximums. Different types of 

quantitative treatment limitations 

include annual, episode, and lifetime 

day and visit limits. See paragraph 

(c)(4)(ii) of this section for an illustrative 

list of nonquantitative treatment 

limitations. 

(iii) Level of a type of financial 

requirement or treatment limitation. 

When reference is made in this 

paragraph (c) to a level of a type of 

financial requirement or treatment 

limitation, level refers to the magnitude 

of the type of financial requirement or 

treatment limitation. For example, 

different levels of coinsurance include 

20 percent and 30 percent; different 

levels of a copayment include $15 and 

$20; different levels of a deductible 

include $250 and $500; and different 

levels of an episode limit include 21 

inpatient days per episode and 30 

inpatient days per episode. 

(iv) Coverage unit. When reference is 

made in this paragraph (c) to a coverage 

unit, coverage unit refers to the way in 

which a plan (or health insurance 

coverage) groups individuals for 

purposes of determining benefits, or 

premiums or contributions. For 

example, different coverage units 

include self-only, family, and employeeplus-spouse. 

(2) General parity requirement—(i) 

General rule. A group health plan (or 

health insurance coverage offered by an 

issuer in connection with a group health 

plan) that provides both medical/ 

surgical benefits and mental health or 

substance use disorder benefits may not 


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5440 Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations 

apply any financial requirement or 

treatment limitation to mental health or 

substance use disorder benefits in any 

classification that is more restrictive 

than the predominant financial 

requirement or treatment limitation of 

that type applied to substantially all 

medical/surgical benefits in the same 

classification. Whether a financial 

requirement or treatment limitation is a 

predominant financial requirement or 

treatment limitation that applies to 

substantially all medical/surgical 

benefits in a classification is determined 

separately for each type of financial 

requirement or treatment limitation. The 

application of the rules of this 

paragraph (c)(2) to financial 

requirements and quantitative treatment 

limitations is addressed in paragraph 

(c)(3) of this section; the application of 

the rules of this paragraph (c)(2) to 

nonquantitative treatment limitations is 

addressed in paragraph (c)(4) of this 

section. 

(ii) Classifications of benefits used for 

applying rules—(A) In general. If a plan 

(or health insurance coverage) provides 

mental health or substance use disorder 

benefits in any classification of benefits 

described in this paragraph (c)(2)(ii), 

mental health or substance use disorder 

benefits must be provided in every 

classification in which medical/surgical 

benefits are provided. In determining 

the classification in which a particular 

benefit belongs, a plan (or health 

insurance issuer) must apply the same 

standards to medical/surgical benefits 

and to mental health or substance use 

disorder benefits. To the extent that a 

plan (or health insurance coverage) 

provides benefits in a classification and 

imposes any separate financial 

requirement or treatment limitation (or 

separate level of a financial requirement 

or treatment limitation) for benefits in 

the classification, the rules of this 

paragraph (c) apply separately with 

respect to that classification for all 

financial requirements or treatment 

limitations. The following 

classifications of benefits are the only 

classifications used in applying the 

rules of this paragraph (c): 

(1) Inpatient, in-network. Benefits 

furnished on an inpatient basis and 

within a network of providers 

established or recognized under a plan 

or health insurance coverage. 

(2) Inpatient, out-of-network. Benefits 

furnished on an inpatient basis and 

outside any network of providers 

established or recognized under a plan 

or health insurance coverage. This 

classification includes inpatient benefits 

under a plan (or health insurance 

coverage) that has no network of 

providers. 

(3) Outpatient, in-network. Benefits 

furnished on an outpatient basis and 

within a network of providers 

established or recognized under a plan 

or health insurance coverage. 

(4) Outpatient, out-of-network. 

Benefits furnished on an outpatient 

basis and outside any network of 

providers established or recognized 

under a plan or health insurance 

coverage. This classification includes 

outpatient benefits under a plan (or 

health insurance coverage) that has no 

network of providers. 

(5) Emergency care. Benefits for 

emergency care. 

(6) Prescription drugs. Benefits for 

prescription drugs. See special rules for 

multi-tiered prescription drug benefits 

in paragraph (c)(3)(iii) of this section. 

(B) Application to out-of-network 

providers. See paragraph (c)(2)(ii)(A) of 

this section, under which a plan (or 

health insurance coverage) that provides 

mental health or substance use disorder 

benefits in any classification of benefits 

must provide mental health or 

substance use disorder benefits in every 

classification in which medical/surgical 

benefits are provided, including out-ofnetwork classifications. 

(C) Examples. The rules of this 

paragraph (c)(2)(ii) are illustrated by the 

following examples. In each example, 

the group health plan is subject to the 

requirements of this section and 

provides both medical/surgical benefits 

and mental health and substance use 

disorder benefits. 

Example 1. (i) Facts. A group health plan 

offers inpatient and outpatient benefits and 

does not contract with a network of 

providers. The plan imposes a $500 

deductible on all benefits. For inpatient 

medical/surgical benefits, the plan imposes a 

coinsurance requirement. For outpatient 

medical/surgical benefits, the plan imposes 

copayments. The plan imposes no other 

financial requirements or treatment 

limitations. 

(ii) Conclusion. In this Example 1, because 

the plan has no network of providers, all 

benefits provided are out-of-network. 

Because inpatient, out-of-network medical/ 

surgical benefits are subject to separate 

financial requirements from outpatient, outof-network medical/surgical benefits, the 

rules of this paragraph (c) apply separately 

with respect to any financial requirements 

and treatment limitations, including the 

deductible, in each classification. 

Example 2. (i) Facts. A plan imposes a 

$500 deductible on all benefits. The plan has 

no network of providers. The plan generally 

imposes a 20 percent coinsurance 

requirement with respect to all benefits, 

without distinguishing among inpatient, 

outpatient, emergency, or prescription drug 

benefits. The plan imposes no other financial 

requirements or treatment limitations. 

(ii) Conclusion. In this Example 2, because 

the plan does not impose separate financial 

requirements (or treatment limitations) based 

on classification, the rules of this paragraph 

(c) apply with respect to the deductible and 

the coinsurance across all benefits. 

Example 3. (i) Facts. Same facts as 

Example 2, except the plan exempts 

emergency care benefits from the 20 percent 

coinsurance requirement. The plan imposes 

no other financial requirements or treatment 

limitations. 

(ii) Conclusion. In this Example 3, because 

the plan imposes separate financial 

requirements based on classifications, the 

rules of this paragraph (c) apply with respect 

to the deductible and the coinsurance 

separately for— 

(A) Benefits in the emergency 

classification; and 

(B) All other benefits. 

Example 4. (i) Facts. Same facts as 

Example 2, except the plan also imposes a 

preauthorization requirement for all inpatient 

treatment in order for benefits to be paid. No 

such requirement applies to outpatient 

treatment. 

(ii) Conclusion. In this Example 4, because 

the plan has no network of providers, all 

benefits provided are out-of-network. 

Because the plan imposes a separate 

treatment limitation based on classifications, 

the rules of this paragraph (c) apply with 

respect to the deductible and coinsurance 

separately for— 

(A) Inpatient, out-of-network benefits; and 

(B) All other benefits. 

(3) Financial requirements and 

quantitative treatment limitations—(i) 

Determining ‘‘substantially all’’ and 

‘‘predominant’’—(A) Substantially all. 

For purposes of this paragraph (c), a 

type of financial requirement or 

quantitative treatment limitation is 

considered to apply to substantially all 

medical/surgical benefits in a 

classification of benefits if it applies to 

at least two-thirds of all medical/ 

surgical benefits in that classification. 

(For this purpose, benefits expressed as 

subject to a zero level of a type of 

financial requirement are treated as 

benefits not subject to that type of 

financial requirement, and benefits 

expressed as subject to a quantitative 

treatment limitation that is unlimited 

are treated as benefits not subject to that 

type of quantitative treatment 

limitation.) If a type of financial 

requirement or quantitative treatment 

limitation does not apply to at least twothirds of all medical/surgical benefits in 

a classification, then that type cannot be 

applied to mental health or substance 

use disorder benefits in that 

classification. 

(B) Predominant—(1) If a type of 

financial requirement or quantitative 

treatment limitation applies to at least 

two-thirds of all medical/surgical 

benefits in a classification as 

determined under paragraph (c)(3)(i)(A) 

of this section, the level of the financial 

requirement or quantitative treatment 


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limitation that is considered the 

predominant level of that type in a 

classification of benefits is the level that 

applies to more than one-half of 

medical/surgical benefits in that 

classification subject to the financial 

requirement or quantitative treatment 

limitation. 

(2) If, with respect to a type of 

financial requirement or quantitative 

treatment limitation that applies to at 

least two-thirds of all medical/surgical 

benefits in a classification, there is no 

single level that applies to more than 

one-half of medical/surgical benefits in 

the classification subject to the financial 

requirement or quantitative treatment 

limitation, the plan (or health insurance 

issuer) may combine levels until the 

combination of levels applies to more 

than one-half of medical/surgical 

benefits subject to the financial 

requirement or quantitative treatment 

limitation in the classification. The least 

restrictive level within the combination 

is considered the predominant level of 

that type in the classification. (For this 

purpose, a plan may combine the most 

restrictive levels first, with each less 

restrictive level added to the 

combination until the combination 

applies to more than one-half of the 

benefits subject to the financial 

requirement or treatment limitation.) 

(C) Portion based on plan payments. 

For purposes of this paragraph (c), the 

determination of the portion of medical/ 

surgical benefits in a classification of 

benefits subject to a financial 

requirement or quantitative treatment 

limitation (or subject to any level of a 

financial requirement or quantitative 

treatment limitation) is based on the 

dollar amount of all plan payments for 

medical/surgical benefits in the 

classification expected to be paid under 

the plan for the plan year (or for the 

portion of the plan year after a change 

in plan benefits that affects the 

applicability of the financial 

requirement or quantitative treatment 

limitation). 

(D) Clarifications for certain threshold 

requirements. For any deductible, the 

dollar amount of plan payments 

includes all plan payments with respect 

to claims that would be subject to the 

deductible if it had not been satisfied. 

For any out-of-pocket maximum, the 

dollar amount of plan payments 

includes all plan payments associated 

with out-of-pocket payments that are 

taken into account towards the out-ofpocket maximum as well as all plan 

payments associated with out-of-pocket 

payments that would have been made 

towards the out-of-pocket maximum if it 

had not been satisfied. Similar rules 

apply for any other thresholds at which 

the rate of plan payment changes. 

(E) Determining the dollar amount of 

plan payments. Subject to paragraph 

(c)(3)(i)(D) of this section, any 

reasonable method may be used to 

determine the dollar amount expected 

to be paid under a plan for medical/ 

surgical benefits subject to a financial 

requirement or quantitative treatment 

limitation (or subject to any level of a 

financial requirement or quantitative 

treatment limitation). 

(ii) Application to different coverage 

units. If a plan (or health insurance 

coverage) applies different levels of a 

financial requirement or quantitative 

treatment limitation to different 

coverage units in a classification of 

medical/surgical benefits, the 

predominant level that applies to 

substantially all medical/surgical 

benefits in the classification is 

determined separately for each coverage 

unit. 

(iii) Special rule for multi-tiered 

prescription drug benefits. If a plan (or 

health insurance coverage) applies 

different levels of financial 

requirements to different tiers of 

prescription drug benefits based on 

reasonable factors determined in 

accordance with the rules in paragraph 

(c)(4)(i) of this section (relating to 

requirements for nonquantitative 

treatment limitations) and without 

regard to whether a drug is generally 

prescribed with respect to medical/ 

surgical benefits or with respect to 

mental health or substance use disorder 

benefits, the plan (or health insurance 

coverage) satisfies the parity 

requirements of this paragraph (c) with 

respect to prescription drug benefits. 

Reasonable factors include cost, 

efficacy, generic versus brand name, and 

mail order versus pharmacy pick-up. 

(iv) Examples. The rules of 

paragraphs (c)(3)(i), (c)(3)(ii), and 

(c)(3)(iii) of this section are illustrated 

by the following examples. In each 

example, the group health plan is 

subject to the requirements of this 

section and provides both medical/ 

surgical benefits and mental health and 

substance use disorder benefits. 

Example 1. (i) Facts. For inpatient, out-ofnetwork medical/surgical benefits, a group 

health plan imposes five levels of 

coinsurance. Using a reasonable method, the 

plan projects its payments for the upcoming 

year as follows: 

Coinsurance rate .................................................... 0% 10% 15% 20% 30% Total 

Projected payments ................................................ $200x $100x $450x $100x $150x $1,000x 

Percent of total plan costs ..................................... 20% 10% 45% 10% 15% 

Percent subject to coinsurance level ..................... N/A 12.5% 

(100x/800x) 

56.25% 

(450x/800x) 

12.5% 

(100x/800x) 

18.75% 

(150x/800x) 

The plan projects plan costs of $800x to be 

subject to coinsurance ($100x + $450x + 

$100x + $150x = $800x). Thus, 80 percent 

($800x/$1,000x) of the benefits are projected 

to be subject to coinsurance, and 56.25 

percent of the benefits subject to coinsurance 

are projected to be subject to the 15 percent 

coinsurance level. 

(ii) Conclusion. In this Example 1, the twothirds threshold of the substantially all 

standard is met for coinsurance because 80 

percent of all inpatient, out-of-network 

medical/surgical benefits are subject to 

coinsurance. Moreover, the 15 percent 

coinsurance is the predominant level because 

it is applicable to more than one-half of 

inpatient, out-of-network medical/surgical 

benefits subject to the coinsurance 

requirement. The plan may not impose any 

level of coinsurance with respect to 

inpatient, out-of-network mental health or 

substance use disorder benefits that is more 

restrictive than the 15 percent level of 

coinsurance. 

Example 2. (i) Facts. For outpatient, innetwork medical/surgical benefits, a plan 

imposes five different copayment levels. 

Using a reasonable method, the plan projects 

payments for the upcoming year as follows: 

Copayment amount ................................................ $0 $10 $15 $20 $50 Total 

Projected payments ................................................ $200x $200x $200x $300x $100x $1,000x 

Percent of total plan costs ..................................... 20% 20% 20% 30% 10% 

Percent subject to copayments .............................. N/A 25% 

(200x/800x) 

25% 

(200x/800x) 

37.5% 

(300x/800x) 

12.5% 

(100x/800x) 


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The plan projects plan costs of $800x to be 

subject to copayments ($200x + $200x 

+$300x + $100x = $800x). Thus, 80 percent 

($800x/$1,000x) of the benefits are projected 

to be subject to a copayment. 

(ii) Conclusion. In this Example 2, the twothirds threshold of the substantially all 

standard is met for copayments because 80 

percent of all outpatient, in-network medical/ 

surgical benefits are subject to a copayment. 

Moreover, there is no single level that applies 

to more than one-half of medical/surgical 

benefits in the classification subject to a 

copayment (for the $10 copayment, 25%; for 

the $15 copayment, 25%; for the $20 

copayment, 37.5%; and for the $50 

copayment, 12.5%). The plan can combine 

any levels of copayment, including the 

highest levels, to determine the predominant 

level that can be applied to mental health or 

substance use disorder benefits. If the plan 

combines the highest levels of copayment, 

the combined projected payments for the two 

highest copayment levels, the $50 copayment 

and the $20 copayment, are not more than 

one-half of the outpatient, in-network 

medical/surgical benefits subject to a 

copayment because they are exactly one-half 

($300x + $100x = $400x; $400x/$800x = 

50%). The combined projected payments for 

the three highest copayment levels—the $50 

copayment, the $20 copayment, and the $15 

copayment—are more than one-half of the 

outpatient, in-network medical/surgical 

benefits subject to the copayments ($100x + 

$300x + $200x = $600x; $600x/$800x = 

75%). Thus, the plan may not impose any 

copayment on outpatient, in-network mental 

health or substance use disorder benefits that 

is more restrictive than the least restrictive 

copayment in the combination, the $15 

copayment. 

Example 3. (i) Facts. A plan imposes a 

$250 deductible on all medical/surgical 

benefits for self-only coverage and a $500 

deductible on all medical/surgical benefits 

for family coverage. The plan has no network 

of providers. For all medical/surgical 

benefits, the plan imposes a coinsurance 

requirement. The plan imposes no other 

financial requirements or treatment 

limitations. 

(ii) Conclusion. In this Example 3, because 

the plan has no network of providers, all 

benefits are provided out-of-network. 

Because self-only and family coverage are 

subject to different deductibles, whether the 

deductible applies to substantially all 

medical/surgical benefits is determined 

separately for self-only medical/surgical 

benefits and family medical/surgical benefits. 

Because the coinsurance is applied without 

regard to coverage units, the predominant 

coinsurance that applies to substantially all 

medical/surgical benefits is determined 

without regard to coverage units. 

Example 4. (i) Facts. A plan applies the 

following financial requirements for 

prescription drug benefits. The requirements 

are applied without regard to whether a drug 

is generally prescribed with respect to 

medical/surgical benefits or with respect to 

mental health or substance use disorder 

benefits. Moreover, the process for certifying 

a particular drug as ‘‘generic’’, ‘‘preferred 

brand name’’, ‘‘non-preferred brand name’’, or 

‘‘specialty’’ complies with the rules of 

paragraph (c)(4)(i) of this section (relating to 

requirements for nonquantitative treatment 

limitations). 

Tier description 

Tier 1 Tier 2 Tier 3 Tier 4 

Generic drugs Preferred brand 

name drugs 

Non-preferred 

brand name 

drugs (which 

may have Tier 1 

or Tier 2 

alternatives) 

Specialty drugs 

Percent paid by plan ........................................................................ 90% 80% 60% 50% 

(ii) Conclusion. In this Example 4, the 

financial requirements that apply to 

prescription drug benefits are applied 

without regard to whether a drug is generally 

prescribed with respect to medical/surgical 

benefits or with respect to mental health or 

substance use disorder benefits; the process 

for certifying drugs in different tiers complies 

with paragraph (c)(4) of this section; and the 

bases for establishing different levels or types 

of financial requirements are reasonable. The 

financial requirements applied to 

prescription drug benefits do not violate the 

parity requirements of this paragraph (c)(3). 

(v) No separate cumulative financial 

requirements or cumulative quantitative 

treatment limitations—(A) A group 

health plan (or health insurance 

coverage offered in connection with a 

group health plan) may not apply any 

cumulative financial requirement or 

cumulative quantitative treatment 

limitation for mental health or 

substance use disorder benefits in a 

classification that accumulates 

separately from any established for 

medical/surgical benefits in the same 

classification. 

(B) The rules of this paragraph 

(c)(3)(v) are illustrated by the following 

examples: 

Example 1. (i) Facts. A group health plan 

imposes a combined annual $500 deductible 

on all medical/surgical, mental health, and 

substance use disorder benefits. 

(ii) Conclusion. In this Example 1, the 

combined annual deductible complies with 

the requirements of this paragraph (c)(3)(v). 

Example 2. (i) Facts. A plan imposes an 

annual $250 deductible on all medical/ 

surgical benefits and a separate annual $250 

deductible on all mental health and 

substance use disorder benefits. 

(ii) Conclusion. In this Example 2, the 

separate annual deductible on mental health 

and substance use disorder benefits violates 

the requirements of this paragraph (c)(3)(v). 

Example 3. (i) Facts. A plan imposes an 

annual $300 deductible on all medical/ 

surgical benefits and a separate annual $100 

deductible on all mental health or substance 

use disorder benefits. 

(ii) Conclusion. In this Example 3, the 

separate annual deductible on mental health 

and substance use disorder benefits violates 

the requirements of this paragraph (c)(3)(v). 

Example 4. (i) Facts. A plan generally 

imposes a combined annual $500 deductible 

on all benefits (both medical/surgical benefits 

and mental health and substance use 

disorder benefits) except prescription drugs. 

Certain benefits, such as preventive care, are 

provided without regard to the deductible. 

The imposition of other types of financial 

requirements or treatment limitations varies 

with each classification. Using reasonable 

methods, the plan projects its payments for 

medical/surgical benefits in each 

classification for the upcoming year as 

follows: 

Classification Benefits subject 

to deductible Total benefits Percent subject to deductible 

Inpatient, in-network ........................................................................................................ $1,800x $2,000x 90 

Inpatient, out-of-network .................................................................................................. 1,000x 1,000x 100 

Outpatient, in-network ...................................................................................................... 1,400x 2,000x 70 

Outpatient, out-of-network ............................................................................................... 1,880x 2,000x 94 

Emergency care ............................................................................................................... 300x 500x 60 


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(ii) Conclusion. In this Example 4, the twothirds threshold of the substantially all 

standard is met with respect to each 

classification except emergency care because 

in each of those other classifications at least 

two-thirds of medical/surgical benefits are 

subject to the $500 deductible. Moreover, the 

$500 deductible is the predominant level in 

each of those other classifications because it 

is the only level. However, emergency care 

mental health and substance use disorder 

benefits cannot be subject to the $500 

deductible because it does not apply to 

substantially all emergency care medical/ 

surgical benefits. 

(4) Nonquantitative treatment 

limitations—(i) General rule. A group 

health plan (or health insurance 

coverage) may not impose a 

nonquantitative treatment limitation 

with respect to mental health or 

substance use disorder benefits in any 

classification unless, under the terms of 

the plan (or health insurance coverage) 

as written and in operation, any 

processes, strategies, evidentiary 

standards, or other factors used in 

applying the nonquantitative treatment 

limitation to mental health or substance 

use disorder benefits in the 

classification are comparable to, and are 

applied no more stringently than, the 

processes, strategies, evidentiary 

standards, or other factors used in 

applying the limitation with respect to 

medical surgical/benefits in the 

classification, except to the extent that 

recognized clinically appropriate 

standards of care may permit a 

difference. 

(ii) Illustrative list of nonquantitative 

treatment limitations. Nonquantitative 

treatment limitations include— 

(A) Medical management standards 

limiting or excluding benefits based on 

medical necessity or medical 

appropriateness, or based on whether 

the treatment is experimental or 

investigative; 

(B) Formulary design for prescription 

drugs; 

(C) Standards for provider admission 

to participate in a network, including 

reimbursement rates; 

(D) Plan methods for determining 

usual, customary, and reasonable 

charges; 

(E) Refusal to pay for higher-cost 

therapies until it can be shown that a 

lower-cost therapy is not effective (also 

known as fail-first policies or step 

therapy protocols); and 

(F) Exclusions based on failure to 

complete a course of treatment. 

(iii) Examples. The rules of this 

paragraph (c)(4) are illustrated by the 

following examples. In each example, 

the group health plan is subject to the 

requirements of this section and 

provides both medical/surgical benefits 

and mental health and substance use 

disorder benefits. 

Example 1. (i) Facts. A group health plan 

limits benefits to treatment that is medically 

necessary. The plan requires concurrent 

review for inpatient, in-network mental 

health and substance use disorder benefits 

but does not require it for any inpatient, innetwork medical/surgical benefits. The plan 

conducts retrospective review for inpatient, 

in-network medical/surgical benefits. 

(ii) Conclusion. In this Example 1, the plan 

violates the rules of this paragraph (c)(4). 

Although the same nonquantitative treatment 

limitation—medical necessity—applies to 

both mental health and substance use 

disorder benefits and to medical/surgical 

benefits for inpatient, in-network services, 

the concurrent review process does not apply 

to medical/surgical benefits. The concurrent 

review process is not comparable to the 

retrospective review process. While such a 

difference might be permissible in certain 

individual cases based on recognized 

clinically appropriate standards of care, it is 

not permissible for distinguishing between 

all medical/surgical benefits and all mental 

health or substance use disorder benefits. 

Example 2. (i) Facts. A plan requires prior 

approval that a course of treatment is 

medically necessary for outpatient, innetwork medical/surgical, mental health, and 

substance use disorder benefits. For mental 

health and substance use disorder treatments 

that do not have prior approval, no benefits 

will be paid; for medical/surgical treatments 

that do not have prior approval, there will 

only be a 25 percent reduction in the benefits 

the plan would otherwise pay. 

(ii) Conclusion. In this Example 2, the plan 

violates the rules of this paragraph (c)(4). 

Although the same nonquantitative treatment 

limitation—medical necessity—is applied 

both to mental health and substance use 

disorder benefits and to medical/surgical 

benefits for outpatient, in-network services, 

the penalty for failure to obtain prior 

approval for mental health and substance use 

disorder benefits is not comparable to the 

penalty for failure to obtain prior approval 

for medical/surgical benefits. 

Example 3. (i) Facts. A plan generally 

covers medically appropriate treatments. For 

both medical/surgical benefits and mental 

health and substance use disorder benefits, 

evidentiary standards used in determining 

whether a treatment is medically appropriate 

(such as the number of visits or days of 

coverage) are based on recommendations 

made by panels of experts with appropriate 

training and experience in the fields of 

medicine involved. The evidentiary 

standards are applied in a manner that may 

differ based on clinically appropriate 

standards of care for a condition. 

(ii) Conclusion. In this Example 3, the plan 

complies with the rules of this paragraph 

(c)(4) because the nonquantitative treatment 

limitation—medical appropriateness—is the 

same for both medical/surgical benefits and 

mental health and substance use disorder 

benefits, and the processes for developing the 

evidentiary standards and the application of 

them to mental health and substance use 

disorder benefits are comparable to and are 

applied no more stringently than for medical/ 

surgical benefits. This is the result even if, 

based on clinically appropriate standards of 

care, the application of the evidentiary 

standards does not result in similar numbers 

of visits, days of coverage, or other benefits 

utilized for mental health conditions or 

substance use disorders as it does for any 

particular medical/surgical condition. 

Example 4. (i) Facts. A plan generally 

covers medically appropriate treatments. In 

determining whether prescription drugs are 

medically appropriate, the plan 

automatically excludes coverage for 

antidepressant drugs that are given a black 

box warning label by the Food and Drug 

Administration (indicating the drug carries a 

significant risk of serious adverse effects). For 

other drugs with a black box warning 

(including those prescribed for other mental 

health conditions and substance use 

disorders, as well as for medical/surgical 

conditions), the plan will provide coverage if 

the prescribing physician obtains 

authorization from the plan that the drug is 

medically appropriate for the individual, 

based on clinically appropriate standards of 

care. 

(ii) Conclusion. In this Example 4, the plan 

violates the rules of this paragraph (c)(4). 

Although the same nonquantitative treatment 

limitation—medical appropriateness—is 

applied to both mental health and substance 

use disorder benefits and medical/surgical 

benefits, the plan’s unconditional exclusion 

of antidepressant drugs given a black box 

warning is not comparable to the conditional 

exclusion for other drugs with a black box 

warning. 

Example 5. (i) Facts. An employer 

maintains both a major medical program and 

an employee assistance program (EAP). The 

EAP provides, among other benefits, a 

limited number of mental health or substance 

use disorder counseling sessions. 

Participants are eligible for mental health or 

substance use disorder benefits under the 

major medical program only after exhausting 

the counseling sessions provided by the EAP. 

No similar exhaustion requirement applies 

with respect to medical/surgical benefits 

provided under the major medical program. 

(ii) Conclusion. In this Example 5, limiting 

eligibility for mental health and substance 

use disorder benefits only after EAP benefits 

are exhausted is a nonquantitative treatment 

limitation subject to the parity requirements 

of this paragraph (c). Because no comparable 

requirement applies to medical/surgical 

benefits, the requirement may not be applied 

to mental health or substance use disorder 

benefits. 

(5) Exemptions. The rules of this 

paragraph (c) do not apply if a group 

health plan (or health insurance 

coverage) satisfies the requirements of 

paragraph (f) or (g) of this section 

(relating to exemptions for small 

employers and for increased cost). 

(d) Availability of plan information— 

(1) Criteria for medical necessity 

determinations. The criteria for medical 


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necessity determinations made under a 

group health plan with respect to 

mental health or substance use disorder 

benefits (or health insurance coverage 

offered in connection with the plan with 

respect to such benefits) must be made 

available by the plan administrator (or 

the health insurance issuer offering such 

coverage) to any current or potential 

participant, beneficiary, or contracting 

provider upon request. 

(2) Reason for any denial. The reason 

for any denial under a group health plan 

(or health insurance coverage) of 

reimbursement or payment for services 

with respect to mental health or 

substance use disorder benefits in the 

case of any participant or beneficiary 

must be made available by the plan 

administrator (or the health insurance 

issuer offering such coverage) to the 

participant or beneficiary in a form and 

manner consistent with the rules in 

§ 2560.503–1 of this Part for group 

health plans. 

(e) Applicability—(1) Group health 

plans. The requirements of this section 

apply to a group health plan offering 

medical/surgical benefits and mental 

health or substance use disorder 

benefits. If, under an arrangement or 

arrangements to provide medical care 

benefits by an employer or employee 

organization (including for this purpose 

a joint board of trustees of a 

multiemployer trust affiliated with one 

or more multiemployer plans), any 

participant (or beneficiary) can 

simultaneously receive coverage for 

medical/surgical benefits and coverage 

for mental health or substance use 

disorder benefits, then the requirements 

of this section (including the exemption 

provisions in paragraph (g) of this 

section) apply separately with respect to 

each combination of medical/surgical 

benefits and of mental health or 

substance use disorder benefits that any 

participant (or beneficiary) can 

simultaneously receive from that 

employer’s or employee organization’s 

arrangement or arrangements to provide 

medical care benefits, and all such 

combinations are considered for 

purposes of this section to be a single 

group health plan. 

(2) Health insurance issuers. The 

requirements of this section apply to a 

health insurance issuer offering health 

insurance coverage for mental health or 

substance use disorder benefits in 

connection with a group health plan 

subject to paragraph (e)(1) of this 

section. 

(3) Scope. This section does not— 

(i) Require a group health plan (or 

health insurance issuer offering 

coverage in connection with a group 

health plan) to provide any mental 

health benefits or substance use 

disorder benefits, and the provision of 

benefits by a plan (or health insurance 

coverage) for one or more mental health 

conditions or substance use disorders 

does not require the plan or health 

insurance coverage under this section to 

provide benefits for any other mental 

health condition or substance use 

disorder; or 

(ii) Affect the terms and conditions 

relating to the amount, duration, or 

scope of mental health or substance use 

disorder benefits under the plan (or 

health insurance coverage) except as 

specifically provided in paragraphs (b) 

and (c) of this section. 

(f) Small employer exemption—(1) In 

general. The requirements of this 

section do not apply to a group health 

plan (or health insurance issuer offering 

coverage in connection with a group 

health plan) for a plan year of a small 

employer. For purposes of this 

paragraph (f), the term small employer 

means, in connection with a group 

health plan with respect to a calendar 

year and a plan year, an employer who 

employed an average of at least two (or 

one in the case of an employer residing 

in a state that permits small groups to 

include a single individual) but not 

more than 50 employees on business 

days during the preceding calendar 

year. See section 732(a) of ERISA and 

§ 2590.732(b) of this Part, which provide 

that this section (and certain other 

sections) does not apply to any group 

health plan (and health insurance issuer 

offering coverage in connection with a 

group health plan) for any plan year if, 

on the first day of the plan year, the 

plan has fewer than two participants 

who are current employees. 

(2) Rules in determining employer 

size. For purposes of paragraph (f)(1) of 

this section— 

(i) All persons treated as a single 

employer under subsections (b), (c), (m), 

and (o) of section 414 of the Code are 

treated as one employer; 

(ii) If an employer was not in 

existence throughout the preceding 

calendar year, whether it is a small 

employer is determined based on the 

average number of employees the 

employer reasonably expects to employ 

on business days during the current 

calendar year; and 

(iii) Any reference to an employer for 

purposes of the small employer 

exemption includes a reference to a 

predecessor of the employer. 

(g) Increased cost exemption— 

[Reserved] 

(h) Sale of nonparity health insurance 

coverage. A health insurance issuer may 

not sell a policy, certificate, or contract 

of insurance that fails to comply with 

paragraph (b) or (c) of this section, 

except to a plan for a year for which the 

plan is exempt from the requirements of 

this section because the plan meets the 

requirements of paragraph (f) or (g) of 

this section. 

(i) Applicability dates—(1) In general. 

Except as provided in paragraph (i)(2) of 

this section, the requirements of this 

section are applicable for plan years 

beginning on or after July 1, 2010. 

(2) Special effective date for certain 

collectively-bargained plans. For a 

group health plan maintained pursuant 

to one or more collective bargaining 

agreements ratified before October 3, 

2008, the requirements of this section 

do not apply to the plan (or health 

insurance coverage offered in 

connection with the plan) for plan years 

beginning before the later of either— 

(i) The date on which the last of the 

collective bargaining agreements 

relating to the plan terminates 

(determined without regard to any 

extension agreed to after October 3, 

2008); or 

(ii) July 1, 2010. 

Signed at Washington, DC, this 26th day of 

January 2010. 

Phyllis C. Borzi, 

Assistant Secretary, Employee Benefits 

Security Administration, U.S. Department of 

Labor. 

Department of Health and Human 

Services 

45 CFR Subtitle A 

■ For the reasons set forth in the 

preamble, the Department of Health and 

Human Services is amending 45 CFR 

Subtitle A, Subchapter B, Part 146, 

Subpart C as follows: 

PART 146—REQUIREMENTS FOR THE 

GROUP HEALTH INSURANCE 

MARKET 

■ 1. The authority citation for Part 146 

continues to read as follows: 

Authority: Secs. 2702 through 2705, 2711 

through 2723, 2791, and 2792 of the PHS Act 

(42 U.S.C. 300gg–1 through 300gg–5, 300gg– 

11 through 300gg–23, 300gg–91, and 300gg– 

92). 

■ 2. Section 146.136 is revised to read 

as follows: 

§ 146.136 Parity in mental health and 

substance use disorder benefits. 

(a) Meaning of terms. For purposes of 

this section, except where the context 

clearly indicates otherwise, the 

following terms have the meanings 

indicated: 

Aggregate lifetime dollar limit means 

a dollar limitation on the total amount 

of specified benefits that may be paid 

under a group health plan (or health 


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insurance coverage offered in 

connection with such a plan) for any 

coverage unit. 

Annual dollar limit means a dollar 

limitation on the total amount of 

specified benefits that may be paid in a 

12-month period under a group health 

plan (or health insurance coverage 

offered in connection with such a plan) 

for any coverage unit. 

Coverage unit means coverage unit as 

described in paragraph (c)(1)(iv) of this 

section. 

Cumulative financial requirements 

are financial requirements that 

determine whether or to what extent 

benefits are provided based on 

accumulated amounts and include 

deductibles and out-of-pocket 

maximums. (However, cumulative 

financial requirements do not include 

aggregate lifetime or annual dollar limits 

because these two terms are excluded 

from the meaning of financial 

requirements.) 

Cumulative quantitative treatment 

limitations are treatment limitations that 

determine whether or to what extent 

benefits are provided based on 

accumulated amounts, such as annual 

or lifetime day or visit limits. 

Financial requirements include 

deductibles, copayments, coinsurance, 

or out-of-pocket maximums. Financial 

requirements do not include aggregate 

lifetime or annual dollar limits. 

Medical/surgical benefits means 

benefits for medical or surgical services, 

as defined under the terms of the plan 

or health insurance coverage, but does 

not include mental health or substance 

use disorder benefits. Any condition 

defined by the plan as being or as not 

being a medical/surgical condition must 

be defined to be consistent with 

generally recognized independent 

standards of current medical practice 

(for example, the most current version 

of the International Classification of 

Diseases (ICD) or State guidelines). 

Mental health benefits means benefits 

with respect to services for mental 

health conditions, as defined under the 

terms of the plan and in accordance 

with applicable Federal and State law. 

Any condition defined by the plan as 

being or as not being a mental health 

condition must be defined to be 

consistent with generally recognized 

independent standards of current 

medical practice (for example, the most 

current version of the Diagnostic and 

Statistical Manual of Mental Disorders 

(DSM), the most current version of the 

ICD, or State guidelines). 

Substance use disorder benefits 

means benefits with respect to services 

for substance use disorders, as defined 

under the terms of the plan and in 

accordance with applicable Federal and 

State law. Any disorder defined by the 

plan as being or as not being a substance 

use disorder must be defined to be 

consistent with generally recognized 

independent standards of current 

medical practice (for example, the most 

current version of the DSM, the most 

current version of the ICD, or State 

guidelines). 

Treatment limitations include limits 

on benefits based on the frequency of 

treatment, number of visits, days of 

coverage, days in a waiting period, or 

other similar limits on the scope or 

duration of treatment. Treatment 

limitations include both quantitative 

treatment limitations, which are 

expressed numerically (such as 50 

outpatient visits per year), and 

nonquantitative treatment limitations, 

which otherwise limit the scope or 

duration of benefits for treatment under 

a plan. (See paragraph (c)(4)(ii) of this 

section for an illustrative list of 

nonquantitative treatment limitations.) 

A permanent exclusion of all benefits 

for a particular condition or disorder, 

however, is not a treatment limitation. 

(b) Parity requirements with respect to 

aggregate lifetime and annual dollar 

limits—(1)—General—(i) General parity 

requirement. A group health plan (or 

health insurance coverage offered by an 

issuer in connection with a group health 

plan) that provides both medical/ 

surgical benefits and mental health or 

substance use disorder benefits must 

comply with paragraph (b)(2), (b)(3), or 

(b)(6) of this section. 

(ii) Exception. The rule in paragraph 

(b)(1)(i) of this section does not apply if 

a plan (or health insurance coverage) 

satisfies the requirements of paragraph 

(f) or (g) of this section (relating to 

exemptions for small employers and for 

increased cost). 

(2) Plan with no limit or limits on less 

than one-third of all medical/surgical 

benefits. If a plan (or health insurance 

coverage) does not include an aggregate 

lifetime or annual dollar limit on any 

medical/surgical benefits or includes an 

aggregate lifetime or annual dollar limit 

that applies to less than one-third of all 

medical/surgical benefits, it may not 

impose an aggregate lifetime or annual 

dollar limit, respectively, on mental 

health or substance use disorder 

benefits. 

(3) Plan with a limit on at least twothirds of all medical/surgical benefits. If 

a plan (or health insurance coverage) 

includes an aggregate lifetime or annual 

dollar limit on at least two-thirds of all 

medical/surgical benefits, it must 

either— 

(i) Apply the aggregate lifetime or 

annual dollar limit both to the medical/ 

surgical benefits to which the limit 

would otherwise apply and to mental 

health or substance use disorder 

benefits in a manner that does not 

distinguish between the medical/ 

surgical benefits and mental health or 

substance use disorder benefits; or 

(ii) Not include an aggregate lifetime 

or annual dollar limit on mental health 

or substance use disorder benefits that 

is less than the aggregate lifetime or 

annual dollar limit, respectively, on 

medical/surgical benefits. (For 

cumulative limits other than aggregate 

lifetime or annual dollar limits, see 

paragraph (c)(3)(v) of this section 

prohibiting separately accumulating 

cumulative financial requirements or 

cumulative quantitative treatment 

limitations.) 

(4) Examples. The rules of paragraphs 

(b)(2) and (b)(3) of this section are 

illustrated by the following examples: 

Example 1. (i) Facts. A group health plan 

has no annual limit on medical/surgical 

benefits and a $10,000 annual limit on 

mental health and substance use disorder 

benefits. To comply with the requirements of 

this paragraph (b), the plan sponsor is 

considering each of the following options— 

(A) Eliminating the plan’s annual dollar 

limit on mental health and substance use 

disorder benefits; 

(B) Replacing the plan’s annual dollar limit 

on mental health and substance use disorder 

benefits with a $500,000 annual limit on all 

benefits (including medical/surgical and 

mental health and substance use disorder 

benefits); and 

(C) Replacing the plan’s annual dollar limit 

on mental health and substance use disorder 

benefits with a $250,000 annual limit on 

medical/surgical benefits and a $250,000 

annual limit on mental health and substance 

use disorder benefits. 

(ii) Conclusion. In this Example 1, each of 

the three options being considered by the 

plan sponsor would comply with the 

requirements of this paragraph (b). 

Example 2. (i) Facts. A plan has a $100,000 

annual limit on medical/surgical inpatient 

benefits and a $50,000 annual limit on 

medical/surgical outpatient benefits. To 

comply with the parity requirements of this 

paragraph (b), the plan sponsor is 

considering each of the following options— 

(A) Imposing a $150,000 annual limit on 

mental health and substance use disorder 

benefits; and 

(B) Imposing a $100,000 annual limit on 

mental health and substance use disorder 

inpatient benefits and a $50,000 annual limit 

on mental health and substance use disorder 

outpatient benefits. 

(ii) Conclusion. In this Example 2, each 

option under consideration by the plan 

sponsor would comply with the requirements 

of this section. 

(5) Determining one-third and twothirds of all medical/surgical benefits. 

For purposes of this paragraph (b), the 

determination of whether the portion of 


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medical/surgical benefits subject to an 

aggregate lifetime or annual dollar limit 

represents one-third or two-thirds of all 

medical/surgical benefits is based on the 

dollar amount of all plan payments for 

medical/surgical benefits expected to be 

paid under the plan for the plan year (or 

for the portion of the plan year after a 

change in plan benefits that affects the 

applicability of the aggregate lifetime or 

annual dollar limits). Any reasonable 

method may be used to determine 

whether the dollar amount expected to 

be paid under the plan will constitute 

one-third or two-thirds of the dollar 

amount of all plan payments for 

medical/surgical benefits. 

(6) Plan not described in paragraph 

(b)(2) or (b)(3) of this section—(i) In 

general. A group health plan (or health 

insurance coverage) that is not 

described in paragraph (b)(2) or (b)(3) of 

this section with respect to aggregate 

lifetime or annual dollar limits on 

medical/surgical benefits, must either— 

(A) Impose no aggregate lifetime or 

annual dollar limit, as appropriate, on 

mental health or substance use disorder 

benefits; or 

(B) Impose an aggregate lifetime or 

annual dollar limit on mental health or 

substance use disorder benefits that is 

no less than an average limit calculated 

for medical/surgical benefits in the 

following manner. The average limit is 

calculated by taking into account the 

weighted average of the aggregate 

lifetime or annual dollar limits, as 

appropriate, that are applicable to the 

categories of medical/surgical benefits. 

Limits based on delivery systems, such 

as inpatient/outpatient treatment or 

normal treatment of common, low-cost 

conditions (such as treatment of normal 

births), do not constitute categories for 

purposes of this paragraph (b)(6)(i)(B). 

In addition, for purposes of determining 

weighted averages, any benefits that are 

not within a category that is subject to 

a separately-designated dollar limit 

under the plan are taken into account as 

a single separate category by using an 

estimate of the upper limit on the dollar 

amount that a plan may reasonably be 

expected to incur with respect to such 

benefits, taking into account any other 

applicable restrictions under the plan. 

(ii) Weighting. For purposes of this 

paragraph (b)(6), the weighting 

applicable to any category of medical/ 

surgical benefits is determined in the 

manner set forth in paragraph (b)(5) of 

this section for determining one-third or 

two-thirds of all medical/surgical 

benefits. 

(iii) Example. The rules of this 

paragraph (b)(6) are illustrated by the 

following example: 

Example. (i) Facts. A group health plan 

that is subject to the requirements of this 

section includes a $100,000 annual limit on 

medical/surgical benefits related to cardiopulmonary diseases. The plan does not 

include an annual dollar limit on any other 

category of medical/surgical benefits. The 

plan determines that 40% of the dollar 

amount of plan payments for medical/ 

surgical benefits are related to cardiopulmonary diseases. The plan determines 

that $1,000,000 is a reasonable estimate of 

the upper limit on the dollar amount that the 

plan may incur with respect to the other 60% 

of payments for medical/surgical benefits. 

(ii) Conclusion. In this Example, the plan 

is not described in paragraph (b)(3) of this 

section because there is not one annual dollar 

limit that applies to at least two-thirds of all 

medical/surgical benefits. Further, the plan is 

not described in paragraph (b)(2) of this 

section because more than one-third of all 

medical/surgical benefits are subject to an 

annual dollar limit. Under this paragraph 

(b)(6), the plan sponsor can choose either to 

include no annual dollar limit on mental 

health or substance use disorder benefits, or 

to include an annual dollar limit on mental 

health or substance use disorder benefits that 

is not less than the weighted average of the 

annual dollar limits applicable to each 

category of medical/surgical benefits. In this 

example, the minimum weighted average 

annual dollar limit that can be applied to 

mental health or substance use disorder 

benefits is $640,000 (40% × $100,000 + 60% 

× $1,000,000 = $640,000). 

(c) Parity requirements with respect to 

financial requirements and treatment 

limitations—(1) Clarification of terms— 

(i) Classification of benefits. When 

reference is made in this paragraph (c) 

to a classification of benefits, the term 

‘‘classification’’ means a classification as 

described in paragraph (c)(2)(ii) of this 

section. 

(ii) Type of financial requirement or 

treatment limitation. When reference is 

made in this paragraph (c) to a type of 

financial requirement or treatment 

limitation, the reference to type means 

its nature. Different types of financial 

requirements include deductibles, 

copayments, coinsurance, and out-ofpocket maximums. Different types of 

quantitative treatment limitations 

include annual, episode, and lifetime 

day and visit limits. See paragraph 

(c)(4)(ii) of this section for an illustrative 

list of nonquantitative treatment 

limitations. 

(iii) Level of a type of financial 

requirement or treatment limitation. 

When reference is made in this 

paragraph (c) to a level of a type of 

financial requirement or treatment 

limitation, level refers to the magnitude 

of the type of financial requirement or 

treatment limitation. For example, 

different levels of coinsurance include 

20 percent and 30 percent; different 

levels of a copayment include $15 and 

$20; different levels of a deductible 

include $250 and $500; and different 

levels of an episode limit include 21 

inpatient days per episode and 30 

inpatient days per episode. 

(iv) Coverage unit. When reference is 

made in this paragraph (c) to a coverage 

unit, coverage unit refers to the way in 

which a plan (or health insurance 

coverage) groups individuals for 

purposes of determining benefits, or 

premiums or contributions. For 

example, different coverage units 

include self-only, family, and employeeplus-spouse. 

(2) General parity requirement—(i) 

General rule. A group health plan (or 

health insurance coverage offered by an 

issuer in connection with a group health 

plan) that provides both medical/ 

surgical benefits and mental health or 

substance use disorder benefits may not 

apply any financial requirement or 

treatment limitation to mental health or 

substance use disorder benefits in any 

classification that is more restrictive 

than the predominant financial 

requirement or treatment limitation of 

that type applied to substantially all 

medical/surgical benefits in the same 

classification. Whether a financial 

requirement or treatment limitation is a 

predominant financial requirement or 

treatment limitation that applies to 

substantially all medical/surgical 

benefits in a classification is determined 

separately for each type of financial 

requirement or treatment limitation. The 

application of the rules of this 

paragraph (c)(2) to financial 

requirements and quantitative treatment 

limitations is addressed in paragraph 

(c)(3) of this section; the application of 

the rules of this paragraph (c)(2) to 

nonquantitative treatment limitations is 

addressed in paragraph (c)(4) of this 

section. 

(ii) Classifications of benefits used for 

applying rules—(A) In general. If a plan 

(or health insurance coverage) provides 

mental health or substance use disorder 

benefits in any classification of benefits 

described in this paragraph (c)(2)(ii), 

mental health or substance use disorder 

benefits must be provided in every 

classification in which medical/surgical 

benefits are provided. In determining 

the classification in which a particular 

benefit belongs, a plan (or health 

insurance issuer) must apply the same 

standards to medical/surgical benefits 

and to mental health or substance use 

disorder benefits. To the extent that a 

plan (or health insurance coverage) 

provides benefits in a classification and 

imposes any separate financial 

requirement or treatment limitation (or 

separate level of a financial requirement 

or treatment limitation) for benefits in 


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the classification, the rules of this 

paragraph (c) apply separately with 

respect to that classification for all 

financial requirements or treatment 

limitations. The following 

classifications of benefits are the only 

classifications used in applying the 

rules of this paragraph (c): 

(1) Inpatient, in-network. Benefits 

furnished on an inpatient basis and 

within a network of providers 

established or recognized under a plan 

or health insurance coverage. 

(2) Inpatient, out-of-network. Benefits 

furnished on an inpatient basis and 

outside any network of providers 

established or recognized under a plan 

or health insurance coverage. This 

classification includes inpatient benefits 

under a plan (or health insurance 

coverage) that has no network of 

providers. 

(3) Outpatient, in-network. Benefits 

furnished on an outpatient basis and 

within a network of providers 

established or recognized under a plan 

or health insurance coverage. 

(4) Outpatient, out-of-network. 

Benefits furnished on an outpatient 

basis and outside any network of 

providers established or recognized 

under a plan or health insurance 

coverage. This classification includes 

outpatient benefits under a plan (or 

health insurance coverage) that has no 

network of providers. 

(5) Emergency care. Benefits for 

emergency care. 

(6) Prescription drugs. Benefits for 

prescription drugs. See special rules for 

multi-tiered prescription drug benefits 

in paragraph (c)(3)(iii) of this section. 

(B) Application to out-of-network 

providers. See paragraph (c)(2)(ii)(A) of 

this section, under which a plan (or 

health insurance coverage) that provides 

mental health or substance use disorder 

benefits in any classification of benefits 

must provide mental health or 

substance use disorder benefits in every 

classification in which medical/surgical 

benefits are provided, including out-ofnetwork classifications. 

(C) Examples. The rules of this 

paragraph (c)(2)(ii) are illustrated by the 

following examples. In each example, 

the group health plan is subject to the 

requirements of this section and 

provides both medical/surgical benefits 

and mental health and substance use 

disorder benefits. 

Example 1. (i) Facts. A group health plan 

offers inpatient and outpatient benefits and 

does not contract with a network of 

providers. The plan imposes a $500 

deductible on all benefits. For inpatient 

medical/surgical benefits, the plan imposes a 

coinsurance requirement. For outpatient 

medical/surgical benefits, the plan imposes 

copayments. The plan imposes no other 

financial requirements or treatment 

limitations. 

(ii) Conclusion. In this Example 1, because 

the plan has no network of providers, all 

benefits provided are out-of-network. 

Because inpatient, out-of-network medical/ 

surgical benefits are subject to separate 

financial requirements from outpatient, outof-network medical/surgical benefits, the 

rules of this paragraph (c) apply separately 

with respect to any financial requirements 

and treatment limitations, including the 

deductible, in each classification. 

Example 2. (i) Facts. A plan imposes a 

$500 deductible on all benefits. The plan has 

no network of providers. The plan generally 

imposes a 20 percent coinsurance 

requirement with respect to all benefits, 

without distinguishing among inpatient, 

outpatient, emergency, or prescription drug 

benefits. The plan imposes no other financial 

requirements or treatment limitations. 

(ii) Conclusion. In this Example 2, because 

the plan does not impose separate financial 

requirements (or treatment limitations) based 

on classification, the rules of this paragraph 

(c) apply with respect to the deductible and 

the coinsurance across all benefits. 

Example 3. (i) Facts. Same facts as 

Example 2, except the plan exempts 

emergency care benefits from the 20 percent 

coinsurance requirement. The plan imposes 

no other financial requirements or treatment 

limitations. 

(ii) Conclusion. In this Example 3, because 

the plan imposes separate financial 

requirements based on classifications, the 

rules of this paragraph (c) apply with respect 

to the deductible and the coinsurance 

separately for— 

(A) Benefits in the emergency 

classification; and 

(B) All other benefits. 

Example 4. (i) Facts. Same facts as 

Example 2, except the plan also imposes a 

preauthorization requirement for all inpatient 

treatment in order for benefits to be paid. No 

such requirement applies to outpatient 

treatment. 

(ii) Conclusion. In this Example 4, because 

the plan has no network of providers, all 

benefits provided are out-of-network. 

Because the plan imposes a separate 

treatment limitation based on classifications, 

the rules of this paragraph (c) apply with 

respect to the deductible and coinsurance 

separately for— 

(A) Inpatient, out-of-network benefits; and 

(B) All other benefits. 

(3) Financial requirements and 

quantitative treatment limitations—(i) 

Determining ‘‘substantially all’’ and 

‘‘predominant’’—(A) Substantially all. 

For purposes of this paragraph (c), a 

type of financial requirement or 

quantitative treatment limitation is 

considered to apply to substantially all 

medical/surgical benefits in a 

classification of benefits if it applies to 

at least two-thirds of all medical/ 

surgical benefits in that classification. 

(For this purpose, benefits expressed as 

subject to a zero level of a type of 

financial requirement are treated as 

benefits not subject to that type of 

financial requirement, and benefits 

expressed as subject to a quantitative 

treatment limitation that is unlimited 

are treated as benefits not subject to that 

type of quantitative treatment 

limitation.) If a type of financial 

requirement or quantitative treatment 

limitation does not apply to at least twothirds of all medical/surgical benefits in 

a classification, then that type cannot be 

applied to mental health or substance 

use disorder benefits in that 

classification. 

(B) Predominant—(1) If a type of 

financial requirement or quantitative 

treatment limitation applies to at least 

two-thirds of all medical/surgical 

benefits in a classification as 

determined under paragraph (c)(3)(i)(A) 

of this section, the level of the financial 

requirement or quantitative treatment 

limitation that is considered the 

predominant level of that type in a 

classification of benefits is the level that 

applies to more than one-half of 

medical/surgical benefits in that 

classification subject to the financial 

requirement or quantitative treatment 

limitation. 

(2) If, with respect to a type of 

financial requirement or quantitative 

treatment limitation that applies to at 

least two-thirds of all medical/surgical 

benefits in a classification, there is no 

single level that applies to more than 

one-half of medical/surgical benefits in 

the classification subject to the financial 

requirement or quantitative treatment 

limitation, the plan (or health insurance 

issuer) may combine levels until the 

combination of levels applies to more 

than one-half of medical/surgical 

benefits subject to the financial 

requirement or quantitative treatment 

limitation in the classification. The least 

restrictive level within the combination 

is considered the predominant level of 

that type in the classification. (For this 

purpose, a plan may combine the most 

restrictive levels first, with each less 

restrictive level added to the 

combination until the combination 

applies to more than one-half of the 

benefits subject to the financial 

requirement or treatment limitation.) 

(C) Portion based on plan payments. 

For purposes of this paragraph (c), the 

determination of the portion of medical/ 

surgical benefits in a classification of 

benefits subject to a financial 

requirement or quantitative treatment 

limitation (or subject to any level of a 

financial requirement or quantitative 

treatment limitation) is based on the 

dollar amount of all plan payments for 

medical/surgical benefits in the 

classification expected to be paid under 


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the plan for the plan year (or for the 

portion of the plan year after a change 

in plan benefits that affects the 

applicability of the financial 

requirement or quantitative treatment 

limitation). 

(D) Clarifications for certain threshold 

requirements. For any deductible, the 

dollar amount of plan payments 

includes all plan payments with respect 

to claims that would be subject to the 

deductible if it had not been satisfied. 

For any out-of-pocket maximum, the 

dollar amount of plan payments 

includes all plan payments associated 

with out-of-pocket payments that are 

taken into account towards the out-ofpocket maximum as well as all plan 

payments associated with out-of-pocket 

payments that would have been made 

towards the out-of-pocket maximum if it 

had not been satisfied. Similar rules 

apply for any other thresholds at which 

the rate of plan payment changes. 

(E) Determining the dollar amount of 

plan payments. Subject to paragraph 

(c)(3)(i)(D) of this section, any 

reasonable method may be used to 

determine the dollar amount expected 

to be paid under a plan for medical/ 

surgical benefits subject to a financial 

requirement or quantitative treatment 

limitation (or subject to any level of a 

financial requirement or quantitative 

treatment limitation). 

(ii) Application to different coverage 

units. If a plan (or health insurance 

coverage) applies different levels of a 

financial requirement or quantitative 

treatment limitation to different 

coverage units in a classification of 

medical/surgical benefits, the 

predominant level that applies to 

substantially all medical/surgical 

benefits in the classification is 

determined separately for each coverage 

unit. 

(iii) Special rule for multi-tiered 

prescription drug benefits. If a plan (or 

health insurance coverage) applies 

different levels of financial 

requirements to different tiers of 

prescription drug benefits based on 

reasonable factors determined in 

accordance with the rules in paragraph 

(c)(4)(i) of this section (relating to 

requirements for nonquantitative 

treatment limitations) and without 

regard to whether a drug is generally 

prescribed with respect to medical/ 

surgical benefits or with respect to 

mental health or substance use disorder 

benefits, the plan (or health insurance 

coverage) satisfies the parity 

requirements of this paragraph (c) with 

respect to prescription drug benefits. 

Reasonable factors include cost, 

efficacy, generic versus brand name, and 

mail order versus pharmacy pick-up. 

(iv) Examples. The rules of 

paragraphs (c)(3)(i), (c)(3)(ii), and 

(c)(3)(iii) of this section are illustrated 

by the following examples. In each 

example, the group health plan is 

subject to the requirements of this 

section and provides both medical/ 

surgical benefits and mental health and 

substance use disorder benefits. 

Example 1. (i) Facts. For inpatient, out-ofnetwork medical/surgical benefits, a group 

health plan imposes five levels of 

coinsurance. Using a reasonable method, the 

plan projects its payments for the upcoming 

year as follows: 

Coinsurance rate .................................................... 0% 10% 15% 20% 30% Total 

Projected payments ................................................ $200x $100x $450x $100x $150x $1,000x 

Percent of total plan costs ..................................... 20% 10% 45% 10% 15% 

Percent subject to coinsurance level ..................... N/A 12.5% 

(100x/800x) 

56.25% 

(450x/800x) 

12.5% 

(100x/800x) 

18.75% 

(150x/800x) 

The plan projects plan costs of $800x to be 

subject to coinsurance ($100x + $450x + 

$100x + $150x = $800x). Thus, 80 percent 

($800x/$1,000x) of the benefits are projected 

to be subject to coinsurance, and 56.25 

percent of the benefits subject to coinsurance 

are projected to be subject to the 15 percent 

coinsurance level. 

(ii) Conclusion. In this Example 1, the twothirds threshold of the substantially all 

standard is met for coinsurance because 80 

percent of all inpatient, out-of-network 

medical/surgical benefits are subject to 

coinsurance. Moreover, the 15 percent 

coinsurance is the predominant level because 

it is applicable to more than one-half of 

inpatient, out-of-network medical/surgical 

benefits subject to the coinsurance 

requirement. The plan may not impose any 

level of coinsurance with respect to 

inpatient, out-of-network mental health or 

substance use disorder benefits that is more 

restrictive than the 15 percent level of 

coinsurance. 

Example 2. (i) Facts. For outpatient, innetwork medical/surgical benefits, a plan 

imposes five different copayment levels. 

Using a reasonable method, the plan projects 

payments for the upcoming year as follows: 

Copayment amount ................................................ $0 $10 $15 $20 $50 Total 

Projected payments ................................................ $200x $200x $200x $300x $100x $1,000x 

Percent of total plan costs ..................................... 20% 20% 20% 30% 10% 

Percent subject to copayments .............................. N/A 25% 

(200x/800x) 

25% 

(200x/800x) 

37.5% 

(300x/800x) 

12.5% 

(100x/800x) 

The plan projects plan costs of $800x to be 

subject to copayments ($200x + $200x + 

$300x + $100x = $800x). Thus, 80 percent 

($800x/$1,000x) of the benefits are projected 

to be subject to a copayment. 

(ii) Conclusion. In this Example 2, the twothirds threshold of the substantially all 

standard is met for copayments because 80 

percent of all outpatient, in-network medical/ 

surgical benefits are subject to a copayment. 

Moreover, there is no single level that applies 

to more than one-half of medical/surgical 

benefits in the classification subject to a 

copayment (for the $10 copayment, 25%; for 

the $15 copayment, 25%; for the $20 

copayment, 37.5%; and for the $50 

copayment, 12.5%). The plan can combine 

any levels of copayment, including the 

highest levels, to determine the predominant 

level that can be applied to mental health or 

substance use disorder benefits. If the plan 

combines the highest levels of copayment, 

the combined projected payments for the two 

highest copayment levels, the $50 copayment 

and the $20 copayment, are not more than 

one-half of the outpatient, in-network 

medical/surgical benefits subject to a 

copayment because they are exactly one-half 

($300x + $100x = $400x; $400x/$800x = 

50%). The combined projected payments for 

the three highest copayment levels—the $50 

copayment, the $20 copayment, and the $15 

copayment—are more than one-half of the 

outpatient, in-network medical/surgical 

benefits subject to the copayments ($100x + 

$300x + $200x = $600x; $600x/$800x = 

75%). Thus, the plan may not impose any 

copayment on outpatient, in-network mental 

health or substance use disorder benefits that 

is more restrictive than the least restrictive 

copayment in the combination, the $15 

copayment. 

Example 3. (i) Facts. A plan imposes a 

$250 deductible on all medical/surgical 

benefits for self-only coverage and a $500 

deductible on all medical/surgical benefits 

for family coverage. The plan has no network 

of providers. For all medical/surgical 

benefits, the plan imposes a coinsurance 

requirement. The plan imposes no other 


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financial requirements or treatment 

limitations. 

(ii) Conclusion. In this Example 3, because 

the plan has no network of providers, all 

benefits are provided out-of-network. 

Because self-only and family coverage are 

subject to different deductibles, whether the 

deductible applies to substantially all 

medical/surgical benefits is determined 

separately for self-only medical/surgical 

benefits and family medical/surgical benefits. 

Because the coinsurance is applied without 

regard to coverage units, the predominant 

coinsurance that applies to substantially all 

medical/surgical benefits is determined 

without regard to coverage units. 

Example 4. (i) Facts. A plan applies the 

following financial requirements for 

prescription drug benefits. The requirements 

are applied without regard to whether a drug 

is generally prescribed with respect to 

medical/surgical benefits or with respect to 

mental health or substance use disorder 

benefits. Moreover, the process for certifying 

a particular drug as ‘‘generic’’, ‘‘preferred 

brand name’’, ‘‘non-preferred brand name’’, or 

‘‘specialty’’ complies with the rules of 

paragraph (c)(4)(i) of this section (relating to 

requirements for nonquantitative treatment 

limitations). 

Tier description 

Tier 1 Tier 2 Tier 3 Tier 4 

Generic drugs Preferred brand 

name drugs 

Non-preferred 

brand name 

drugs (which 

may have Tier 1 

or Tier 2 

alternatives) 

Specialty drugs 

Percent paid by plan ........................................................................ 90% 80% 60% 50% 

(ii) Conclusion. In this Example 4, the 

financial requirements that apply to 

prescription drug benefits are applied 

without regard to whether a drug is generally 

prescribed with respect to medical/surgical 

benefits or with respect to mental health or 

substance use disorder benefits; the process 

for certifying drugs in different tiers complies 

with paragraph (c)(4) of this section; and the 

bases for establishing different levels or types 

of financial requirements are reasonable. The 

financial requirements applied to 

prescription drug benefits do not violate the 

parity requirements of this paragraph (c)(3). 

(v) No separate cumulative financial 

requirements or cumulative quantitative 

treatment limitations—(A) A group 

health plan (or health insurance 

coverage offered in connection with a 

group health plan) may not apply any 

cumulative financial requirement or 

cumulative quantitative treatment 

limitation for mental health or 

substance use disorder benefits in a 

classification that accumulates 

separately from any established for 

medical/surgical benefits in the same 

classification. 

(B) The rules of this paragraph 

(c)(3)(v) are illustrated by the following 

examples: 

Example 1. (i) Facts. A group health plan 

imposes a combined annual $500 deductible 

on all medical/surgical, mental health, and 

substance use disorder benefits. 

(ii) Conclusion. In this Example 1, the 

combined annual deductible complies with 

the requirements of this paragraph (c)(3)(v). 

Example 2. (i) Facts. A plan imposes an 

annual $250 deductible on all medical/ 

surgical benefits and a separate annual $250 

deductible on all mental health and 

substance use disorder benefits. 

(ii) Conclusion. In this Example 2, the 

separate annual deductible on mental health 

and substance use disorder benefits violates 

the requirements of this paragraph (c)(3)(v). 

Example 3. (i) Facts. A plan imposes an 

annual $300 deductible on all medical/ 

surgical benefits and a separate annual $100 

deductible on all mental health or substance 

use disorder benefits. 

(ii) Conclusion. In this Example 3, the 

separate annual deductible on mental health 

and substance use disorder benefits violates 

the requirements of this paragraph (c)(3)(v). 

Example 4. (i) Facts. A plan generally 

imposes a combined annual $500 deductible 

on all benefits (both medical/surgical benefits 

and mental health and substance use 

disorder benefits) except prescription drugs. 

Certain benefits, such as preventive care, are 

provided without regard to the deductible. 

The imposition of other types of financial 

requirements or treatment limitations varies 

with each classification. Using reasonable 

methods, the plan projects its payments for 

medical/surgical benefits in each 

classification for the upcoming year as 

follows: 

Classification Benefits subject 

to deductible Total benefits Percent subject to deductible 

Inpatient, in-network ........................................................................................................ $1,800x $2,000x 90 

Inpatient, out-of-network .................................................................................................. 1,000x 1,000x 100 

Outpatient, in-network ...................................................................................................... 1,400x 2,000x 70 

Outpatient, out-of-network ............................................................................................... 1,880x 2,000x 94 

Emergency care ............................................................................................................... 300x 500x 60 

(ii) Conclusion. In this Example 4, the twothirds threshold of the substantially all 

standard is met with respect to each 

classification except emergency care because 

in each of those other classifications at least 

two-thirds of medical/surgical benefits are 

subject to the $500 deductible. Moreover, the 

$500 deductible is the predominant level in 

each of those other classifications because it 

is the only level. However, emergency care 

mental health and substance use disorder 

benefits cannot be subject to the $500 

deductible because it does not apply to 

substantially all emergency care medical/ 

surgical benefits. 

(4) Nonquantitative treatment 

limitations—(i) General rule. A group 

health plan (or health insurance 

coverage) may not impose a 

nonquantitative treatment limitation 

with respect to mental health or 

substance use disorder benefits in any 

classification unless, under the terms of 

the plan (or health insurance coverage) 

as written and in operation, any 

processes, strategies, evidentiary 

standards, or other factors used in 

applying the nonquantitative treatment 

limitation to mental health or substance 

use disorder benefits in the 

classification are comparable to, and are 

applied no more stringently than, the 

processes, strategies, evidentiary 

standards, or other factors used in 

applying the limitation with respect to 

medical surgical/benefits in the 

classification, except to the extent that 

recognized clinically appropriate 

standards of care may permit a 

difference. 

(ii) Illustrative list of nonquantitative 

treatment limitations. Nonquantitative 

treatment limitations include— 

(A) Medical management standards 

limiting or excluding benefits based on 


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5450 Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations 

medical necessity or medical 

appropriateness, or based on whether 

the treatment is experimental or 

investigative; 

(B) Formulary design for prescription 

drugs; 

(C) Standards for provider admission 

to participate in a network, including 

reimbursement rates; 

(D) Plan methods for determining 

usual, customary, and reasonable 

charges; 

(E) Refusal to pay for higher-cost 

therapies until it can be shown that a 

lower-cost therapy is not effective (also 

known as fail-first policies or step 

therapy protocols); and 

(F) Exclusions based on failure to 

complete a course of treatment. 

(iii) Examples. The rules of this 

paragraph (c)(4) are illustrated by the 

following examples. In each example, 

the group health plan is subject to the 

requirements of this section and 

provides both medical/surgical benefits 

and mental health and substance use 

disorder benefits. 

Example 1. (i) Facts. A group health plan 

limits benefits to treatment that is medically 

necessary. The plan requires concurrent 

review for inpatient, in-network mental 

health and substance use disorder benefits 

but does not require it for any inpatient, innetwork medical/surgical benefits. The plan 

conducts retrospective review for inpatient, 

in-network medical/surgical benefits. 

(ii) Conclusion. In this Example 1, the plan 

violates the rules of this paragraph (c)(4). 

Although the same nonquantitative treatment 

limitation—medical necessity—applies to 

both mental health and substance use 

disorder benefits and to medical/surgical 

benefits for inpatient, in-network services, 

the concurrent review process does not apply 

to medical/surgical benefits. The concurrent 

review process is not comparable to the 

retrospective review process. While such a 

difference might be permissible in certain 

individual cases based on recognized 

clinically appropriate standards of care, it is 

not permissible for distinguishing between 

all medical/surgical benefits and all mental 

health or substance use disorder benefits. 

Example 2. (i) Facts. A plan requires prior 

approval that a course of treatment is 

medically necessary for outpatient, innetwork medical/surgical, mental health, and 

substance use disorder benefits. For mental 

health and substance use disorder treatments 

that do not have prior approval, no benefits 

will be paid; for medical/surgical treatments 

that do not have prior approval, there will 

only be a 25 percent reduction in the benefits 

the plan would otherwise pay. 

(ii) Conclusion. In this Example 2, the plan 

violates the rules of this paragraph (c)(4). 

Although the same nonquantitative treatment 

limitation—medical necessity—is applied 

both to mental health and substance use 

disorder benefits and to medical/surgical 

benefits for outpatient, in-network services, 

the penalty for failure to obtain prior 

approval for mental health and substance use 

disorder benefits is not comparable to the 

penalty for failure to obtain prior approval 

for medical/surgical benefits. 

Example 3. (i) Facts. A plan generally 

covers medically appropriate treatments. For 

both medical/surgical benefits and mental 

health and substance use disorder benefits, 

evidentiary standards used in determining 

whether a treatment is medically appropriate 

(such as the number of visits or days of 

coverage) are based on recommendations 

made by panels of experts with appropriate 

training and experience in the fields of 

medicine involved. The evidentiary 

standards are applied in a manner that may 

differ based on clinically appropriate 

standards of care for a condition. 

(ii) Conclusion. In this Example 3, the plan 

complies with the rules of this paragraph 

(c)(4) because the nonquantitative treatment 

limitation—medical appropriateness—is the 

same for both medical/surgical benefits and 

mental health and substance use disorder 

benefits, and the processes for developing the 

evidentiary standards and the application of 

them to mental health and substance use 

disorder benefits are comparable to and are 

applied no more stringently than for medical/ 

surgical benefits. This is the result even if, 

based on clinically appropriate standards of 

care, the application of the evidentiary 

standards does not result in similar numbers 

of visits, days of coverage, or other benefits 

utilized for mental health conditions or 

substance use disorders as it does for any 

particular medical/surgical condition. 

Example 4. (i) Facts. A plan generally 

covers medically appropriate treatments. In 

determining whether prescription drugs are 

medically appropriate, the plan 

automatically excludes coverage for 

antidepressant drugs that are given a black 

box warning label by the Food and Drug 

Administration (indicating the drug carries a 

significant risk of serious adverse effects). For 

other drugs with a black box warning 

(including those prescribed for other mental 

health conditions and substance use 

disorders, as well as for medical/surgical 

conditions), the plan will provide coverage if 

the prescribing physician obtains 

authorization from the plan that the drug is 

medically appropriate for the individual, 

based on clinically appropriate standards of 

care. 

(ii) Conclusion. In this Example 4, the plan 

violates the rules of this paragraph (c)(4). 

Although the same nonquantitative treatment 

limitation—medical appropriateness—is 

applied to both mental health and substance 

use disorder benefits and medical/surgical 

benefits, the plan’s unconditional exclusion 

of antidepressant drugs given a black box 

warning is not comparable to the conditional 

exclusion for other drugs with a black box 

warning. 

Example 5. (i) Facts. An employer 

maintains both a major medical program and 

an employee assistance program (EAP). The 

EAP provides, among other benefits, a 

limited number of mental health or substance 

use disorder counseling sessions. 

Participants are eligible for mental health or 

substance use disorder benefits under the 

major medical program only after exhausting 

the counseling sessions provided by the EAP. 

No similar exhaustion requirement applies 

with respect to medical/surgical benefits 

provided under the major medical program. 

(ii) Conclusion. In this Example 5, limiting 

eligibility for mental health and substance 

use disorder benefits only after EAP benefits 

are exhausted is a nonquantitative treatment 

limitation subject to the parity requirements 

of this paragraph (c). Because no comparable 

requirement applies to medical/surgical 

benefits, the requirement may not be applied 

to mental health or substance use disorder 

benefits. 

(5) Exemptions. The rules of this 

paragraph (c) do not apply if a group 

health plan (or health insurance 

coverage) satisfies the requirements of 

paragraph (f) or (g) of this section 

(relating to exemptions for small 

employers and for increased cost). 

(d) Availability of plan information— 

(1) Criteria for medical necessity 

determinations. The criteria for medical 

necessity determinations made under a 

group health plan with respect to 

mental health or substance use disorder 

benefits (or health insurance coverage 

offered in connection with the plan with 

respect to such benefits) must be made 

available by the plan administrator (or 

the health insurance issuer offering such 

coverage) to any current or potential 

participant, beneficiary, or contracting 

provider upon request. 

(2) Reason for denial. The reason for 

any denial under a non-Federal 

governmental plan (or health insurance 

coverage offered in connection with 

such plan) of reimbursement or 

payment for services with respect to 

mental health or substance use disorder 

benefits in the case of any participant or 

beneficiary must be made available 

within a reasonable time and in a 

reasonable manner by the plan 

administrator (or the health insurance 

issuer offering such coverage) to the 

participant or beneficiary upon request. 

For this purpose, a non-Federal 

governmental plan (or health insurance 

coverage offered in connection with 

such plan) that provides the reason for 

the claim denial in a form and manner 

consistent with the requirements of 29 

CFR 2560.503–1 for group health plans 

complies with the requirements of this 

paragraph (d)(2). 

(e) Applicability—(1) Group health 

plans. The requirements of this section 

apply to a group health plan offering 

medical/surgical benefits and mental 

health or substance use disorder 

benefits. If, under an arrangement or 

arrangements to provide medical care 

benefits by an employer or employee 

organization (including for this purpose 

a joint board of trustees of a 

multiemployer trust affiliated with one 

or more multiemployer plans), any 

participant (or beneficiary) can 


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simultaneously receive coverage for 

medical/surgical benefits and coverage 

for mental health or substance use 

disorder benefits, then the requirements 

of this section (including the exemption 

provisions in paragraph (g) of this 

section) apply separately with respect to 

each combination of medical/surgical 

benefits and of mental health or 

substance use disorder benefits that any 

participant (or beneficiary) can 

simultaneously receive from that 

employer’s or employee organization’s 

arrangement or arrangements to provide 

medical care benefits, and all such 

combinations are considered for 

purposes of this section to be a single 

group health plan. 

(2) Health insurance issuers. The 

requirements of this section apply to a 

health insurance issuer offering health 

insurance coverage for mental health or 

substance use disorder benefits in 

connection with a group health plan 

subject to paragraph (e)(1) of this 

section. 

(3) Scope. This section does not— 

(i) Require a group health plan (or 

health insurance issuer offering 

coverage in connection with a group 

health plan) to provide any mental 

health benefits or substance use 

disorder benefits, and the provision of 

benefits by a plan (or health insurance 

coverage) for one or more mental health 

conditions or substance use disorders 

does not require the plan (or health 

insurance coverage) under this section 

to provide benefits for any other mental 

health condition or substance use 

disorder; or 

(ii) Affect the terms and conditions 

relating to the amount, duration, or 

scope of mental health or substance use 

disorder benefits under the plan (or 

health insurance coverage) except as 

specifically provided in paragraphs (b) 

and (c) of this section. 

(f) Small employer exemption—(1) In 

general. The requirements of this 

section do not apply to a group health 

plan (or health insurance issuer offering 

coverage in connection with a group 

health plan) for a plan year of a small 

employer. For purposes of this 

paragraph (f), the term small employer 

means, in connection with a group 

health plan with respect to a calendar 

year and a plan year, an employer who 

employed an average of at least two but 

not more than 50 employees on business 

days during the preceding calendar year 

and who employs at least two 

employees on the first day of the plan 

year (except that for purposes of this 

paragraph, a small employer shall 

include an employer with one employee 

in the case of an employer residing in 

a State that permits small groups to 

include a single individual). See also 

section 2721(a) of the PHS Act and 

§ 146.145(b) of this Part, which provide 

that this section (and certain other 

sections) does not apply to any group 

health plan (and health insurance issuer 

offering coverage in connection with a 

group health plan) for any plan year if, 

on the first day of the plan year, the 

plan has fewer than two participants 

who are current employees. 

(2) Rules in determining employer 

size. For purposes of paragraph (f)(1) of 

this section— 

(i) All persons treated as a single 

employer under subsections (b), (c), (m), 

and (o) of section 414 of the Internal 

Revenue Code of 1986 (26 U.S.C. 414) 

are treated as one employer; 

(ii) If an employer was not in 

existence throughout the preceding 

calendar year, whether it is a small 

employer is determined based on the 

average number of employees the 

employer reasonably expects to employ 

on business days during the current 

calendar year; and 

(iii) Any reference to an employer for 

purposes of the small employer 

exemption includes a reference to a 

predecessor of the employer. 

(g) Increased cost exemption— 

[Reserved] 

(h) Sale of nonparity health insurance 

coverage. A health insurance issuer may 

not sell a policy, certificate, or contract 

of insurance that fails to comply with 

paragraph (b) or (c) of this section, 

except to a plan for a year for which the 

plan is exempt from the requirements of 

this section because the plan meets the 

requirements of paragraph (f) or (g) of 

this section. 

(i) Applicability dates—(1) In general. 

Except as provided in paragraph (i)(2) of 

this section, the requirements of this 

section are applicable for plan years 

beginning on or after July 1, 2010. 

(2) Special effective date for certain 

collectively-bargained plans. For a 

group health plan maintained pursuant 

to one or more collective bargaining 

agreements ratified before October 3, 

2008, the requirements of this section 

do not apply to the plan (or health 

insurance coverage offered in 

connection with the plan) for plan years 

beginning before the later of either— 

(i) The date on which the last of the 

collective bargaining agreements 

relating to the plan terminates 

(determined without regard to any 

extension agreed to after October 3, 

2008); or 

(ii) July 1, 2010. 

Approved: November 12, 2009. 

Charlene Frizzera, 

Acting Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: December 2, 2009. 

Kathleen Sebelius, 

Secretary. 

[FR Doc. 2010–2167 Filed 1–29–10; 8:45 am] 

BILLING CODE 4830–01–P; 4510–29–P; 4120–01–P 


sroberts on DSKD5P82C1PROD with RULES