On March 15, 2021, the United States District Court Northern District of California (District Court) issued a decision in a case regarding Applied Behavior Analysis (ABA) and Intensive Behavioral Therapies (IBT) that assists children with Autism Spectrum Disorder (Autism or ASD). According to the District Court’s ruling, the claims administrator for a group health plan (GHP) violated the Mental Health Parity and Addiction Equity Act (MHPAEA) requirements when it denied claims for ABA therapy as prescribed in the plan documents.
The Mental Health Parity Rule requires equity in a GHP’s coverage for certain benefits.
The MHPAEA sets minimum standards for group health plans regarding parity requirements. The provisions of the MHPAEA apply to applicable large employers (ALE) with a group health plan (GHP) providing mental health and substance abuse (MH/SUD) benefits in addition to medical and surgical (M/S) benefits. If a GHP covers MH/SUD benefits and other essential health benefits, the MH/SUD benefits coverage cannot be more restrictive than the M/S benefits. This is commonly referred to as providing MH/SUD benefits in parity with M/S benefits or the Mental Health Parity Rule. A GHP’s MH/SUD coverages cannot be given financial requirements, quantitative treatment limitations (QTLs), or nonquantitative treatment limitations (NQTLs) that are more restrictive than those for M/S benefits in the same classification. Financial requirements include coinsurance, copays, deductibles and out-of-pocket maximums. QTLs are limits that may be expressed numerically, such as limits on the frequency of visits or the maximum number of visits in a plan year. QTLs are any non-numerical factors (processes, strategies, evidentiary standards, etc.) used to determine eligibility for benefits. The Mental Health Parity Rule does not prohibit plans from using any of the aforementioned limits on MH/SUD benefits. However, it does require that if limits are employed, similar limitations must exist on M/S benefits in the same category. The six classifications of benefits requiring parity under the MHPAEA regulations are:
- Inpatient, in-network benefits;
- Inpatient, out-of-network benefits;
- Outpatient, in-network benefits;
- Outpatient, out-of-network benefits;
- Emergency care benefits; and
- Prescription drug benefits.
The MHPAEA requirements apply to the GHPs provided by ALEs.
ALEs are employers with greater than 50 full-time employees. Certain GHPs are exempted from the Mental Health Parity Rule. The following types of GHPs are excepted from MHPAEA compliance:
- Retiree-only group health plans;
- Plans that obtained an increased cost exemption;
- Plans only offering coverage for excepted benefits; and
- Small employer plans are generally not subject to the MH/SUD parity provisions.
At issue in Jane Doe v. United Behavioral Health was whether the TPA/claims administrator violated the MHPAEA by denying ABA and IBT therapy claims per the plan documents.
United Behavioral Health (UHB), the defendant in the case, is the third-party administrator (TPA) and claims administrator of a self-insured GHP. The GHP’s plan document explicitly excluded coverage for ABA and IBT therapies to assist children with ASD. The employer was an ALE serving as the plan sponsor and plan administrator of an Employee Retirement Income Security Act (ERISA)-governed, self-insured GHP. Accordingly, the employer was responsible for deciding the plan terms and funding the GHP and its benefits. Under the plan documents’ terms, the employer retained the right to modify, change, revise, amend, or terminate its GHP at any time, for any reason and without prior notice. The mother of a child with ASD anonymously sued United Behavioral Health for denying claims for her child’s ABA treatment. While the child was covered, the plan documents specifically excluded both treatments, although the plan dropped the exclusion soon after the child’s coverage ended. The parent claimed that the administrator’s enforcement of the exclusion was a breach of fiduciary duty and a violation of the MHPAEA. UHB argued that as TPA and based on the plan document’s language, it was not a fiduciary as to the exclusion’s enforcement. UHB also asserted that the exclusion of ASD treatment was not an impermissible treatment limitation under the MHPAEA.
The District Court ruled that the TPA was a plan fiduciary. The lawsuit against UHB could proceed; denying coverage for ASD treatment claims for ABA therapy violates the Mental Health Parity Rule.
U.S. District Judge Yvonne Gonzalez Rogers concluded that UHB was a plan fiduciary under ERISA, and thus the claim against the TPA could move forward in the case. Further, the District Court held that the plan’s exclusion of ABA therapy violated the Mental Health Parity Rule. Judge Gonzalez Rogers rejected the TPA’s contention that it had no discretion and was required to enforce the plan’s plain written terms. The District Court’s ruling stated that ERISA imposes specific and independent duties on plan fiduciaries to otherwise comply with the provisions of ERISA. Consequently, since the District Court found that UHB was a fiduciary with undisputed authority to make benefit determinations, such as when it denied the claims, the lawsuit against UHB could proceed according to Judge Gonzalez Rogers’s ruling.
The District Court also ruled in favor of Jane Doe and her child on the violation of the MHPAEA parity claim.
The District Court held that the plan’s exclusion of ABA and IBT treatments created a separate treatment limitation applicable only to services for a mental health condition. Judge Gonzalez Rogers stated that the language of the MHPAEA forbids the exclusion of ABA for a mental health condition. The District Court’s ruling explained that a GHP could choose whether it will cover ASD. However, once a GHP decides to cover ASD, it cannot draft an exclusion that specifically carves out and rejects coverage for a core treatment of ASD, such as ABA therapy. These types of exclusions attempt to unsuccessfully circumvent the requirements of the MHPAEA, prohibiting more restrictive limitations than the predominant treatment limitations that applied to substantially all M/S benefits.
Recent legislative measures may require an additional interest in examining a plan’s compliance with the requirements of the MHPAEA.
The Consolidated Appropriations Act (CAA) requires plans to “perform and document comparative analysis of the design and application of NQTLs.” The Department of Labor (DOL) describes five areas of NQTLs: (1) preauthorization or pre-approval requirements, (2) fail-first protocols, (3) medical necessity review authority, (4) likelihood of improvement limitations, and (5) other similar limitations to treatment. A GHP’s analysis must document that the processes, strategies, evidentiary standards, and other factors used to apply NQTLs to MH/SUD benefits are no more stringent than those involved in M/S benefits. The CAA requires the DOL, Department of Health and Human Services (HHS), and the Treasury Department (Treasury) (collectively, the “Agencies”) to produce a new guidance document on the new comparative analysis requirement within 18 months of the CAA’s enactment (June 2022). The Agencies must update the guidance document bi-annually. On April 2, 2021, the Agencies released a new set of FAQs about Mental Health Parity Implementation and the CAA. The Agencies developed and issued these Frequently Asked Questions (FAQs) to help stakeholders understand the CAA mental health parity requirements. GHPs must be prepared to disclose their comparative analysis on request from the DOL after the CAA’s enactment and the DOL must request this information from at least 20 different plans annually.
Plan sponsors, claims administrators, and other GHP plan fiduciaries should review their plan documents to ensure that the plan complies with all of the requirements of the MHPAEA. Before making any plan document revisions or implementing any plan changes, plan sponsors should consult with their ERISA attorney.
EPIC offers this material for general information only. EPIC does not intend this material to be, nor may any person receiving this information construe or rely on this material as, tax or legal advice. The matters addressed in this document and any related discussions or correspondence should be reviewed and discussed with legal counsel prior to acting or relying on these materials.
Compliance Manager – Atlanta, GA