On April 6, the Centers for Medicare & Medicaid Services (“CMS”) released a proposed rule to implement the 2008 Mental Health Parity and Addiction Equity Act (“MHPAEA”) for coverage offered by Medicaid Managed Care Organizations (“MCOs”), Medicaid Alternative Benefit Plans (“ABPs”) and the Children’s Health Insurance Program (“CHIP”).  MHPAEA requires group health plans and health insurance issuers to ensure that financial requirements or treatment limitations applicable to mental health and substance-use disorder (“MH/SUD”) benefits are comparable to, and are applied no more stringently than, the same financial requirements or treatment limitations applied to medical and surgical (“M/S”) benefits.  Interim final regulations implementing MHPAEA for commercial plans were jointly issued by the Departments of Health and Human Services, Labor and the Treasury (collectively, the “Departments”) in February 2010, and final regulations were jointly issued by the Departments in November 2013 (hereinafter, the “Joint Regulations”).

Since the passage of the Mental Health Parity Act of 1996, parity mandates have been enacted that reach most types of health care coverage, although what is required by “parity” laws can vary greatly.  In 2001, the Federal Employees Health Benefits Program implemented parity for in-network mental health and substance use disorder benefits. MHPAEA was enacted in 2008 to extend the reach and scope of parity (to include, among other factors, substance-use disorder benefits) in large group coverage.  The Affordable Care Act’s Essential Health Benefits requirements now require most individual and small group coverage to include mental health and substance use disorder benefits, and these benefit must be provided in compliance with MHPAEA.  If finalized, this CMS proposed rule would further clarify the application of mental health parity requirements, in this case to Medicaid programs.

Under existing statutory provisions within the Public Health Services Act, MHPAEA currently applies to Medicaid managed care and CHIP plans.  However, the Joint Regulations issued by the Departments are, by their terms, inapplicable to Medicaid managed care plans and CHIP plans.  Prior to the issuance of these new proposed regulations (hereinafter, the “Medicaid Regulations”), the only guidance for Medicaid plans was a short State Health Official letter that CMS issued in 2013 (which primarily advised states and MCOs to review their plans to ensure compliance with MHPAEA, while providing little guidance as to what that compliance entailed).  Hence, MHPAEA compliance in the Medicaid managed care and CHIP arena has been an uncertain endeavor.

The Medicaid Regulations largely (although not entirely) mirror the Joint Regulations and extend those rules to MCOs, ABPs, and CHIP programs, but not to Medicaid beneficiaries that are provided services only on a fee for service (FFS) basis.  (A full description of the operation of the Joint Regulations, which serve as a baseline for these proposed Medicaid rules, is beyond the scope of this article.  For a detailed description of the Joint Regulations, please see here.)  However, the Medicaid Regulations contain some important differences from the Joint Regulations, including as follows:

• Classification of Benefits Reduced from Six Categories to Four:  Whereas the Joint Regulations apply MHPAEA across six classifications of benefits (inpatient in-network; inpatient out-of-network; outpatient in-network; outpatient out-of-network; emergency care; and prescription drugs), the Medicaid Regulations propose only four classifications for Medicaid and CHIP (inpatient; outpatient; emergency care; and prescription drugs).  CMS justifies this reduction in the number of categories by noting that all Medicaid services are effectively in-network, and hence there is no need in the Medicaid context to distinguish between in-network and out-of-network services.  (See below for details on how CMS proposes to address the limited instances in which the out-of-network concept would apply in the Medicaid and CHIP context.)  According to CMS, all Medicaid benefits should fall into one of these categories, with the exception of long term care services.
• States Define the Meaning of Terms:  Under the Joint Regulations, the terms “medical/surgical benefits,” “mental health benefit” and “substance use disorder benefits,” for purposes of MHPAEA, are defined under the terms of a group health plan or health insurance coverage (to the extent consistent with generally recognized independent standards of current medical practice) and in accordance with applicable federal or state law.

Under the Medicaid Regulations, the state defines these terms in the Medicaid and CHIP context, in accordance with applicable federal and state law.   Notably, CMS is also proposing that the definition of “medical/surgical services” clearly exclude long-term care services in the Medicaid and CHIP context.

• Expansion of the Illustrative List of NQTLs:  The Medicaid Regulations add, to the existing illustrative list of nonquantitative treatment limitations (“NQTLs”) in the Joint Regulations, access to out-of-network providers.  (The regulatory preamble notes that, under Medicaid managed care regulations, if a managed care plan’s provider network is unable to provide necessary services covered under the contract to a particular enrollee, the MCO, Prepaid Inpatient Health Plan (“PIHP”) or Prepaid Ambulatory Health Plan (“PAHP”) must adequately (and on a timely basis) cover these services out-of-network for the enrollee for as long as the MCO, PIHP or PAHP is unable to provide them in network.)  Specifically, CMS is proposing that any MCO, PIHP or PAHP providing access to out-of-network providers for M/S benefits within a classification must use the same processes, strategies, evidentiary standards, or other factors in determining access to out-of-network providers for MH/SUD benefits.  In addition, the Medicaid Regulations use some (but not all) of the NQTL examples contained in the Joint Regulations, deleting some of the examples and adding other, more Medicaid-centric, examples.
• Multiple Network Tiers Not Allowed:  Whereas the Joint Regulations allowed plans to divide benefits provided on an in-network basis into sub-classifications that reflect network tiers (if the tiers are done without regard to whether a provider is a MH/SUD provider or a M/S provider), the Medicaid Regulations do not allow such sub-classification.  CMS states that they do not believe that the use of network tiers is needed in the Medicaid context because, among other factors, Medicaid cost-sharing rules apply regardless of network status.
• Cumulative Financial Requirements and Quantitative Treatment Limitations:  Under the Joint Regulations, a group health plan or health insurance issuer may not apply cumulative financial requirements or cumulative quantitative treatment limitations to MH/SUD benefits in a classification that accumulate separately from the same limits for M/S benefits in the same classification.  In the Medicaid Regulations, CMS proposed that any separate cumulative financial requirement will not be permitted for MCOs, PIHPs and PAHPs (in connection with coverage provided to MCO enrollees), and in ABP and CHIP.  CMS also proposes that any separate cumulative quantitative treatment limitation (i.e., numerical limits on the scope or duration of treatment) will be permitted, so long as they comply with general parity requirements.
• No Cost Exemption:  Whereas the Joint Regulations allow group health plans and health insurance issuers in the commercial market to apply for an exemption from the application of parity if certain thresholds (relating to the cost impact of these changes on the plan) are met, the Medicaid Regulations contain no such cost exemption.  CMS states in the regulatory preamble that they do not believe such as an exemption is necessary, because they do not believe that Medicaid managed care entities will incur any net increase in costs (because CMS is also proposing actuarial changes in payment methodology that they believe will result in the Medicaid program, rather than the plan, bearing the costs of these changes).

Of particular note in these Medicaid Regulations is how CMS allocates parity compliance responsibilities. Unlike in the commercial space, where compliance responsibilities tend to be relatively clear, the Medicaid managed care space can involve multiple commercial and governmental entities, each with a share of overall compliance responsibilities.  Hence, the CMS proposed rules contain a detailed allocation of responsibility for parity implementation:

• MCOs providing all services (M/S and MH/SUD):  MCOs that offer all M/S and MH/SUD services are responsible for ensuring compliance with MHPAEA requirements.  MCOs must conduct the parity analysis and inform the state of any additional changes that would be required to bring the MCO contract into compliance with MHPAEA.
• MCOs providing M/S services, and MH/SUD provided (partially or completely) by other entities:  Where MCOs provide the M/S services and some or all of the MH/SUD services are provided through some combination of MCOs, PIHPs, PAHPs or FFS, the state is responsible for undertaking the parity analysis across these delivery systems.  Furthermore, it is the state that is responsible for making any changes necessary to ensure MHPAEA compliance for MCO enrollees.  (Note that contracts with PIHPs and PAHPs would be required to provide that the PIHPs and PAHPs take the steps necessary to ensure MHPAEA compliance).
• FFS Only:  For beneficiaries who are not enrolled in either an MCO or an ABP, the Medicaid Regulations would not apply (although CMS encourages states to provide state plan benefits in a way that comports with MHPAEA requirements).
• ABP Offered Through FFS:  For ABP benefits offered only through FFS, financial requirements and treatment limitations are the only MHPAEA provisions that apply.  States must ensure that financial requirements and treatment limitations for M/S and MH/SUD benefits comply with MHPAEA in the same manner as such requirements apply to a group health plan.
• ABP Offered by an MCO:  ABPs offered by MCOs are covered by the MCO provisions detailed above.  Note, however, that states using ABPs must provide sufficient information in the ABP state plan amendment requests to assure compliance with parity requirements.
• CHIP:  MHPAEA applies to all CHIP state plan delivery systems, including FFS and managed care, in the same manner as it applies to group health plans and health insurance issuers in the commercial space.  Hence, state CHIP plans that provide both M/S and MH/SUD benefits must ensure compliance with parity requirements.

CMS is accepting comments on the Medicaid Regulations until June 9, 2015. The full text of the proposed rule is available here.