QUESTION: We are wondering if our company’s medical plan might qualify for an exemption from the federal mental health parity requirements. What exemptions are available?
ANSWER: The federal mental health parity requirements apply to most employer-sponsored group health plans, but there are some exceptions. As a reminder, the mental health parity rules under the Mental Health Parity Act (MHPA) and the Mental Health Parity and Addiction Equity Act (MHPAEA) require parity between medical/surgical benefits and mental health or substance use disorder benefits in the application of annual and lifetime dollar limits, financial requirements (such as deductibles, copayments, coinsurance, and out-of-pocket maximums), quantitative treatment limitations (such as number of treatments, visits, or days of coverage), and nonquantitative treatment limitations (such as medical management standards). However, some exceptions apply:
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Small Employer and Small Plan Exemptions. An exception is available for small employers that employed an average of at least two (one in the case of an employer residing in a state that permits small groups to include a single individual) but no more than 50 employees (100 or fewer employees for most non-federal governmental plans) during the preceding calendar year. There is also an exception for plans with fewer than two participants who were current employees on the first day of the plan year (including retiree-only plans). Under the Affordable Care Act, however, if an employer provides coverage through a group policy purchased in the small group insurance market, that group policy will be required to include mental health coverage (an essential health benefit) in a manner that complies with the mental health parity requirements.
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Increased Cost Exemption. An increased cost exemption is available for plans that make changes to comply with the mental health parity rules and incur an increased cost of at least 2% in the first year that the MHPAEA applies to the plan (generally, the first plan year beginning on or after October 3, 2009, unless a later date applies, e.g., because the plan ceased to qualify for an exemption) or at least 1% in any subsequent plan year. Plans that comply with the parity requirements for one full plan year and satisfy the conditions for the increased cost exemption are exempt from the parity requirements for the following plan year (i.e., the exemption lasts for one plan year). After that year ends, the plan must again comply with the parity requirements for a full year before it may (potentially) qualify for the exemption again. Given the complexity of administering coverage with an every-other-year exemption, use of the increased cost exemption may be infeasible.
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Other Exemptions. Self-insured non-federal governmental plans may opt out of the federal mental health parity requirements if certain administrative steps are taken, including initial and annual notices to enrollees. In addition, the requirements do not apply to group health plans that provide only certain excepted benefits (e.g., certain limited-scope dental or vision plans).
For more information, see EBIA’s Group Health Plan Mandates manual at Section IX.A (“What Is Mental Health Parity and Who Must Comply?”). See also EBIA’s Health Care Reform manual at Section XIV.F (“Comprehensive Health Coverage Requirement (Essential Health Benefits Package)—Applicable Only in the Individual and Small Group Markets”) and EBIA’s Self-Insured Health Plans manual at Section XIII.C.2 (“MHPA and MHPAEA: Mental Health Parity”).
Contributing Editors: EBIA Staff.