August 19, 2021
The Consolidated Appropriations Act, 2021 (the “CAA”), which was signed into law on December 27, 2020, included several provisions impacting group health plans and health insurance issuers. Below is a summary of the provisions focused on mental health parity and health plan transparency (specifically, broker/consultant commissions and pharmacy benefits and drug costs).
Mental Health Parity
The Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA), prohibits a group health plan from applying financial requirements (e.g., deductibles, co-payments, coinsurance, and out-of-pocket maximums), quantitative treatment limitations (e.g., number of treatments, visits, or days of coverage), or non-quantitative treatment limitations (such as restrictions based on facility type) to its mental health and substance use disorder benefits that are more restrictive than those applied to the plan’s medical and surgical benefits.
MHPAEA compliance has been a focus in DOL audits in recent years. As part of the action plan for enhanced enforcement in 2018, the DOL, HHS and IRS released a self-compliance tool plans and issuers can use to evaluate their plan. However, Section 203 of the CAA took this a step further, requiring more active engagement by group health plans.
Beginning on February 10, 2021, group health plans were required to perform and document comparative analyses of the design and application of non-quantitative treatment limitations (NQTLs). Specifically, the NQTL analyses must include certain information specified in the CAA, such as, among other things, specific plan terms or other relevant terms regarding NQTLs and the specific substance abuse, mental health, medical and surgical benefits to which they apply, and the factors used to determine that NQTLs will apply to mental health or substance use disorder benefits and medical or surgical benefits.
Per the CAA, the DOL, IRS (Treasury) and HHS are required to request no fewer than 20 group health plan analyses per year, and group health plans must provide them to the agencies upon such request. In the last several months, the DOL began requesting the NQTL comparative analyses from plans that are currently undergoing DOL audits for other reasons, as well as from plans not currently under investigation. In addition, plan participants and authorized representatives such as out-of-network providers may request these analyses. Therefore, all plans should be prepared to provide their NQTL comparative analyses at any time.
If the agencies determine the group health plan is not in compliance, then the plan must respond to the agencies within 45 days by specifying any actions it will take to come into compliance and providing further comparative analyses demonstrating the plan’s compliance. If still not in compliance, the agencies will notify all individuals enrolled in the plan of the plan’s noncompliance. This could lead to significant exposure for non-compliant plans, as it basically opens a clear pathway to litigation.
On April 2 2021, the DOL released FAQs regarding these CAA provisions. The FAQs clarify the following:
This means plans should take the necessary time to ensure thoughtful, thorough analyses are conducted now and at any time applicable provisions of the plan change.
However, the DOL expects that even when comparative analysis is requested in a discrete area or areas, the plan or issuer must provide a list of all other NQTLs for which they have completed a comparative analysis and a general description of any supporting documentation. The DOL’s initial request can broaden at any time, so having all comparative analyses completed, rather than only completing those listed above is essential for plans and issuers. Additionally, while insurance companies have fiduciary responsibility and must prepare the analysis for fully insured plans, third party administrators (TPAs) for self-insured plans typically do not have the same fiduciary responsibility that would require them to prepare the analysis. Sponsors of self-insured plans (including level-funded plans) should inquire with their TPA whether they have completed an analysis specific to their plan or the TPA’s products in general, and whether they are prepared to assist in the event of a request. They may want to introduce language into the administrative services agreement upon renewal to clarify the extent to which the TPA will assist. In most cases, the TPA will be in the best position to perform the analysis – i.e., they will have established the NQTLs and will be able to identify them; they will have all the data and other information necessary for the analysis.
Broker and Consultant Transparency
Section 202 of the CAA amends §408(b)(2) of ERISA and creates new transparency requirements that impact group health plans and their brokers or consultants. Specifically, group health plans must receive the following disclosures from brokers or consultants (or their affiliates or subcontractors) who reasonably expect to receive $1,000 or more (indexed for inflation) in direct or indirect compensation in connection with providing certain designated insurance-related services for the group health plan:
Failure to comply puts the arrangement with the broker or consultant at risk of being considered not “reasonable.” Timeframes for providing the information to the group health plan and updating the plan of any changes to information previously provided pursuant to these requirements, as well as good faith compliance and other considerations for non-compliance are discussed in more detail in the CAA. These requirements are effective for contracts for covered services executed or renewed on or after December 27, 2021 (one year from enactment of the CAA). We expect more guidance from the DOL prior to the deadline.
Pharmacy Benefits and Drug Costs
Section 204 of the CAA requires group health plans or issuers to begin reporting the following information regarding health plan coverage to the IRS, HHS, and DOL:
The information reported pertains to the health plan or coverage offered during the previous plan year. The first report is due on December 27, 2021 (one year after enactment of the CAA), while each subsequent annual report is due by June 1st. In June 2021, the agencies released a request for information regarding the impact of the legislation on impacted health plans. Thus, they are in the early stages of implementing regulations, and have not yet indicated how the information will be reported to/received by the agencies.
What’s Next for Employers?
While we expect more guidance on the transparency requirements for brokers and consultants, in the meantime, they should review their existing contracts and disclosures in light of these requirements and begin implementing any necessary changes. Further, group health plans are encouraged to review their coverage of mental health and substance use disorder benefits and carefully follow the DOL’s most recently updated (2020) MHPAEA Self-Compliance Tool when developing their MHPAEA comparative analyses. Finally, later in the year, group health plan sponsors should prepare to comply with pharmacy benefit and drug cost disclosure requirements.
Have questions? Lets Talk!
About the Authors. This alert was prepared for The Fedeli Group by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act. Contact Stacy Barrow or Nicole Quinn-Gato at email@example.com or firstname.lastname@example.org.
The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers or our clients. This is not legal advice. No client-lawyer relationship between you and our lawyers is or may be created by your use of this information. Rather, the content is intended as a general overview of the subject matter covered. This agency and Marathas Barrow Weatherhead Lent LLP are not obligated to provide updates on the information presented herein. Those reading this alert are encouraged to seek direct counsel on legal questions.
September 8, 2023
Tenth Circuit Court of Appeals Hands Down a Big Win for ERISA Preemption After several failed attempts by pharmacy benefit managers (“PBM”) to challenge state laws regulating PBMs, the 10th Circuit Court of Appeals (in Pharmaceutical Care Management Association v. Mulready) handed down a big win for PBMs and, by extension, self-funded ERISA plans, when […]
August 28, 2023
IRS Issues Affordability Percentage Adjustment for 2024 The Internal Revenue Service (IRS) has released Rev. Proc. 2023-29, which contains the inflation adjusted amounts for 2024 used to determine whether employer-sponsored coverage is “affordable” for purposes of the Affordable Care Act’s (ACA) employer shared responsibility provisions and premium tax credit program. As shown in the table […]