Mental Health Benefits: 2023 Year-End Update

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In the August issue, we delved into the proposed regulations under the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA”), as amended by the Affordable Care Act. By way of reminder, MHPAEA was signed into law to prohibit group health plans or health insurance issuers from imposing more restrictive quantitative treatment limitations (“QTLs”) and nonquantitative treatment limitations (“NQTLs”), as written and in operation, on mental health or substance abuse disorder (“MH/SUD”) benefits as compared to medical/surgical (“M/S”) benefits in the same classification(s). This article seeks to provide an overview and explore a few of the recent developments in the mental health parity domain and how such changes might shape the future of mental health care.

Finalization of the Proposed Regulations

The Consolidated Appropriations Act, 2021 added a requirement that plans and issuers perform and document comparative analyses of QTLs and NQTLS in relation to MH/SUD and M/S benefits. The proposed regulations under MHAPEA were issued earlier this year by the U.S. Department of Labor, the Health and Human Services, and the U.S. Department of Treasury and focus on the regulation of the QTL and NQTL comparative analyses. Given the end of the NPRM comment period on October 2, 2023, the proposed regulations have been moved to the final rule stage.

Mental Health Care and Medicare

In a blogpost dated July 14, 2023, the Deputy Administrator Meena Seshamani and CMS Chief Transformation Officer Douglas Jacobs emphasized the importance of mental health care and stated that “it is abundantly clear that our nation must improve access to effective mental health and substance use disorder . . . treatment and care.” As such, effective January 1, 2024, Medicare will expand its coverage to include marriage and family therapists and mental health counselors. In addition to counseling, Medicare coverage will also be expanded to cover intensive outpatient program services provided by hospitals, community mental health centers, and other locations in order to increase support for severe mental illness. This expansion was previously announced in July and will be critical to Medicare recipients, especially in rural areas. The Medicare & You 2024 handbook also laid out multiple other updates, such as prescription drugs, telehealth coverage, insulin and vaccines, etc. The full handbook can be found here:

https://www.medicare.gov/publications/10050-Medicare-and-You.pdf

MHPAEA Claims in the Tenth Circuit

On November 21, 2023, the U.S. Court of Appeals for the Tenth Circuit published an opinion in the case of E.W. v. Health Net Life Insurance Company. This case is significant as it is the first U.S. Court of Appeals to establish the elements required to state a claim under the current 2013 MHPAEA final regulations. In sum, the case involves a claim against Health Net Insurance Company and Health Net of Arizona, Inc. (collectively, “Health Net”) by the parents of a minor whose stay at an adolescent mental health residential treatment center, which is a subacute facility, was cut short as her treatment was deemed as no longer medically necessary based on the application of the McKesson InterQual Behavioral Health 2016.3 Child and Adolescent Psychiatry Criteria (the “InterQual Criteria”).

As such, the plaintiffs alleged that Health Net violated MHPAEA by imposing more stringent NQTLs on MH/SUD benefits as compared to the NQTLs imposed on M/S benefits. The district court found in favor of Health Net; however, the Tenth Circuit disagreed. On appeal, the Tenth Circuit reversed the district court’s decision in part and held that the medical necessity criteria imposed on the M/S benefits in subacute setting was less stringent that such criteria imposed on analogous subacute facilities concerning MH/SUD benefits.

The Tenth Circuit took it a step further and set forth a four-prong test to state a claim under MHPAEA:

• Plausibly allege that a relevant group health plan is subject to MHPAEA;

• Identify a specific treatment limitation on MH/SUD benefits covered by the plan

• Identify M/S care covered by the plan that is analogous to the MH/SUD care for which the plaintiffs seek benefits; and

• Plausibly allege a disparity between the treatment limitations on MH/SUD benefits as compared to the limitations on analogous M/S benefits.

Neither party disputed the first prong, and the court concluded that the plaintiffs’ allegations satisfied the pleading standards with respect to the other three prongs. Specifically, the court confirmed that the InterQual Criteria are specific to acute care, which Health Net did not dispute on appeal. As such, the plaintiffs plausibly alleged that Health Net applied acute-care medical necessity criteria to benefits for care in a residential treatment center, which is a subacute care setting. Thus, the court reversed the district court’s judgment finding that the plaintiffs failed to state a claim under MHPAEA. Regardless of the court’s opinion on the merits of the case under MHPAEA, the court upheld the district court’s decision granting summary judgment to Health Net on the plaintiffs’ ERISA claim and remanded the case to the district court for proceedings consistent with its opinion.

Notably, overcoming a motion to dismiss is not the same as winning the lawsuit. The plaintiffs have a long road ahead to securing a judgment. While it remains to be seen whether the plaintiffs will prevail on the merits of the case, the Tenth Circuit’s opinion is nevertheless significant as it sets forth the test to state a claim under MHPAEA. In addition, we must consider whether the outcome would be different if the NQTL were to be judged under the proposed regulations. As further detailed in our August issue, although the proposed regulations seem to be more demanding than the current 2013 MHPAEA regulations in the case at hand, an exception housed within the proposed regulations relating to generally recognized independent professional medical and clinical standards related to fraud, waste, and abuse may have saved the day for Health Net.

Conclusion

Mental health parity is a long-running fight, and the advocates and stakeholders have focused on expansion of equitable coverage year after year. For individuals seeking MH/SUD treatment, the proposed regulations and the inclusion of certain mental health services under Medicare offer promise by potentially reducing barriers to access. However, the actual impact on individuals and employers will depend on the implementation and enforcement of the aforementioned changes. While the proposed regulations aim at enhancing parity in MH/SUD coverage and addressing the existing gaps in treatment for individuals seeking those services, insurers may face challenges in adjusting their practices and ensuring compliance in light of the additional administrative burdens. Further, the four-prong test set forth by the Tenth Circuit, if widely accepted, is expected to have only moderate impact as the test was applied at the stage of a motion to dismiss. Nevertheless, the case is notable and will serve as instructional guidance for plaintiffs, their attorneys, and trial courts in prospective litigation.