Td 9479

Tuesday,
February 2, 2010

Part IV

Department of the
Treasury
Internal Revenue Service
26 CFR Part 54

Department of Labor
Employee Benefits Security
Administration
29 CFR Part 2590

Department of Health
and Human Services
Centers for Medicare & Medicaid Services

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45 CFR Part 146
Interim Final Rules Under the Paul
Wellstone and Pete Domenici Mental
Health Parity and Addiction Equity Act of
2008; Final Rule

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Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations

DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 54
[TD 9479]
RIN 1545–BJ05

DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR Part 2590
RIN 1210–AB30

DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Centers for Medicare & Medicaid
Services
[CMS–4140–IFC]

45 CFR Part 146
RIN 0938–AP65

Interim Final Rules Under the Paul
Wellstone and Pete Domenici Mental
Health Parity and Addiction Equity Act
of 2008

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AGENCIES: Internal Revenue Service,
Department of the Treasury; Employee
Benefits Security Administration,
Department of Labor; Centers for
Medicare & Medicaid Services,
Department of Health and Human
Services.
ACTION: Interim final rules with request
for comments.
SUMMARY: This document contains
interim final rules implementing the
Paul Wellstone and Pete Domenici
Mental Health Parity and Addiction
Equity Act of 2008, which requires
parity between mental health or
substance use disorder benefits and
medical/surgical benefits with respect to
financial requirements and treatment
limitations under group health plans
and health insurance coverage offered in
connection with a group health plan.
DATES: Effective date. These interim
final regulations are effective on April 5,
2010.
Comment date. Comments are due on
or before May 3, 2010.
Applicability date. These interim final
regulations generally apply to group
health plans and group health insurance
issuers for plan years beginning on or
after July 1, 2010.
ADDRESSES: Written comments may be
submitted to any of the addresses
specified below. Any comment that is
submitted to any Department will be

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shared with the other Departments.
Please do not submit duplicates.
All comments will be made available
to the public. WARNING: Do not
include any personally identifiable
information (such as name, address, or
other contact information) or
confidential business information that
you do not want publicly disclosed. All
comments are posted on the Internet
exactly as received, and can be retrieved
by most Internet search engines. No
deletions, modifications, or redactions
will be made to the comments received,
as they are public records. Comments
may be submitted anonymously.
Department of Labor. Comments to
the Department of Labor, identified by
RIN 1210–AB30, by one of the following
methods:
• Federal eRulemaking Portal: http://
www.regulations.gov. Follow the
instructions for submitting comments.
• E-mail: [email protected].
• Mail or Hand Delivery: Office of
Health Plan Standards and Compliance
Assistance, Employee Benefits Security
Administration, Room N–5653, U.S.
Department of Labor, 200 Constitution
Avenue, NW., Washington, DC 20210,
Attention: RIN 1210–AB30.
Comments received by the
Department of Labor will be posted
without change to http://
www.regulations.gov and http://
www.dol.gov/ebsa, and available for
public inspection at the Public
Disclosure Room, N–1513, Employee
Benefits Security Administration, 200
Constitution Avenue, NW., Washington,
DC 20210.
Department of Health and Human
Services. In commenting, please refer to
file code CMS–4140–IFC. Because of
staff and resource limitations, we cannot
accept comments by facsimile (FAX)
transmission.
You may submit comments in one of
four ways (please choose only one of the
ways listed):
1. Electronically. You may submit
electronic comments on this regulation
to http://www.regulations.gov. Follow
the instructions under the ‘‘More Search
Options’’ tab.
2. By regular mail. You may mail
written comments to the following
address ONLY: Centers for Medicare &
Medicaid Services, Department of
Health and Human Services, Attention:
CMS–4140–IFC, P.O. Box 8016,
Baltimore, MD 21244–1850.
Please allow sufficient time for mailed
comments to be received before the
close of the comment period.
3. By express or overnight mail. You
may send written comments to the
following address ONLY: Centers for
Medicare & Medicaid Services,

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Department of Health and Human
Services, Attention: CMS–4140–IFC,
Mail Stop C4–26–05, 7500 Security
Boulevard, Baltimore, MD 21244–1850.
4. By hand or courier. If you prefer,
you may deliver (by hand or courier)
your written comments before the close
of the comment period to either of the
following addresses:
a. For delivery in Washington, DC—
Centers for Medicare & Medicaid
Services, Department of Health and
Human Services, Room 445–G, Hubert
H. Humphrey Building, 200
Independence Avenue, SW.,
Washington, DC 20201.
(Because access to the interior of the
Hubert H. Humphrey Building is not readily
available to persons without Federal
government identification, commenters are
encouraged to leave their comments in the
CMS drop slots located in the main lobby of
the building. A stamp-in clock is available for
persons wishing to retain a proof of filing by
stamping in and retaining an extra copy of
the comments being filed.)

b. For delivery in Baltimore, MD—
Centers for Medicare & Medicaid
Services, Department of Health and
Human Services, 7500 Security
Boulevard, Baltimore, MD 21244–1850.
If you intend to deliver your
comments to the Baltimore address,
please call (410) 786–7195 in advance to
schedule your arrival with one of our
staff members.
Comments mailed to the addresses
indicated as appropriate for hand or
courier delivery may be delayed and
received after the comment period.
Submission of comments on
paperwork requirements. You may
submit comments on this document’s
paperwork requirements by following
the instructions at the end of the
‘‘Collection of Information
Requirements’’ section in this document.
Inspection of Public Comments: All
comments received before the close of
the comment period are available for
viewing by the public, including any
personally identifiable or confidential
business information that is included in
a comment. We post all comments
received before the close of the
comment period on the following Web
site as soon as possible after they have
been received: http://
www.regulations.gov. Follow the search
instructions on that Web site to view
public comments.
Comments received timely will also
be available for public inspection as
they are received, generally beginning
approximately 3 weeks after publication
of a document, at the headquarters of
the Centers for Medicare & Medicaid
Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday

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Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations
through Friday of each week from 8:30
a.m. to 4 p.m. EST. To schedule an
appointment to view public comments,
phone 1–800–743–3951.
Internal Revenue Service. Comments
to the IRS, identified by REG–120692–
09, by one of the following methods:
• Federal eRulemaking Portal: http://
www.regulations.gov. Follow the
instructions for submitting comments.
• Mail: CC:PA:LPD:PR (REG–120692–
09), room 5205, Internal Revenue
Service, P.O. Box 7604, Ben Franklin
Station, Washington, DC 20044.
• Hand or courier delivery: Monday
through Friday between the hours of 8
a.m. and 4 p.m. to: CC:PA:LPD:PR
(REG–120692–09), Courier’s Desk,
Internal Revenue Service, 1111
Constitution Avenue, NW., Washington,
DC 20224.
All submissions to the IRS will be
open to public inspection and copying
in room 1621, 1111 Constitution
Avenue, NW., Washington, DC from 9
a.m. to 4 p.m.
FOR FURTHER INFORMATION CONTACT:
Amy Turner or Beth Baum, Employee
Benefits Security Administration,
Department of Labor, at (202) 693–8335;
Russ Weinheimer, Internal Revenue
Service, Department of the Treasury, at
(202) 622–6080; Adam Shaw, Centers
for Medicare & Medicaid Services,
Department of Health and Human
Services, at (877) 267–2323, extension
61091.
Customer Service Information:
Individuals interested in obtaining
information from the Department of
Labor concerning employment-based
health coverage laws, including the
mental health parity provisions, may
call the EBSA Toll-Free Hotline at
1–866–444–EBSA (3272) or visit the
Department of Labor’s Web site (http://
www.dol.gov/ebsa). In addition,
information from HHS on private health
insurance for consumers (such as
mental health and substance use
disorder parity) can be found on the
Centers for Medicare & Medicaid
Services (CMS) Web site (http://
www.cms.hhs.gov/
HealthInsReformforConsume/
01_Overview.asp).
SUPPLEMENTARY INFORMATION:

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I. Background
The Paul Wellstone and Pete
Domenici Mental Health Parity and
Addiction Equity Act of 2008
(MHPAEA) was enacted on October 3,
2008 as sections 511 and 512 of the Tax
Extenders and Alternative Minimum
Tax Relief Act of 2008 (Division C of

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Pub. L. 110–343).1 MHPAEA amends
the Employee Retirement Income
Security Act of 1974 (ERISA), the Public
Health Service Act (PHS Act), and the
Internal Revenue Code of 1986 (Code).
In 1996, Congress enacted the Mental
Health Parity Act of 1996 (MHPA 1996),
which required parity in aggregate
lifetime and annual dollar limits for
mental health benefits and medical and
surgical benefits. Those mental health
parity provisions were codified in
section 712 of ERISA, section 2705 of
the PHS Act, and section 9812 of the
Code, which apply to employmentrelated group health plans and health
insurance coverage offered in
connection with a group health plan.
The changes made by MHPAEA are
codified in these same sections and
consist of new requirements as well as
amendments to the existing mental
health parity provisions. The changes
made by MHPAEA are generally
effective for plan years beginning after
October 3, 2009.
On April 28, 2009, the Departments of
the Treasury, Labor, and HHS
(collectively, the Departments)
published in the Federal Register (74
FR 19155) a request for information
(RFI) soliciting comments on the
requirements of MHPAEA. After
consideration of the comments received
in response to the RFI, the Departments
are publishing these interim final
regulations. These regulations generally
become applicable to plans and issuers
for plan years beginning on or after July
1, 2010.
II. Overview of the Regulations
These interim final regulations
replace regulations published on
December 22, 1997 at 62 FR 66932
implementing MHPA 1996. These
regulations also make conforming
changes to reflect modifications
MHPAEA made to the original MHPA
1996 definitions and provisions
regarding parity in aggregate lifetime
and annual dollar limits, and
incorporate new parity standards.
A. Meaning of Terms (26 CFR 54.9812–
1T(a), 29 CFR 2590.712(a), and 45 CFR
146.136(a))
The paragraph with the heading
‘‘definitions’’ in the MHPA 1996
regulations has been renamed ‘‘meaning
of terms’’ under these regulations
because some of the terms added by
MHPAEA are not comprehensively
defined. The change in heading reflects
the fact that if a term is described as
1 A technical correction to the effective date for
collectively bargained plans was made by Public
Law 110–460, enacted on December 23, 2008.

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including a list of examples, the term
may have a broader meaning than the
illustrative list of examples.
1. Aggregate Lifetime and Annual Dollar
Limits
The word ‘‘dollar’’ has been added to
the terms ‘‘aggregate lifetime limit’’ and
‘‘annual limit’’ under the MHPA 1996
regulations to distinguish them from
lifetime and annual limits expressed in
terms of days or visits which are subject
to new requirements under MHPAEA.
2. Coverage Unit
Paragraph (a) in these regulations
cross-references the definition of
coverage unit in paragraph (c)(1).
Paragraph (c)(1) clarifies the term for
purposes of the new MHPAEA rules and
is discussed later in this preamble.
3. Cumulative Financial Requirements
These regulations add a definition for
the term ‘‘cumulative financial
requirements’’. Under this definition, a
cumulative financial requirement is a
financial requirement that typically
operates as a threshold amount that,
once satisfied, will determine whether,
or to what extent, benefits are provided.
A common example of a cumulative
financial requirement is a deductible
that must be satisfied before a plan will
start paying for benefits. However,
aggregate lifetime and annual dollar
limits are excluded from being
cumulative financial requirements
(because the statutory term financial
requirements excludes aggregate
lifetime and annual dollar limits).
4. Cumulative Quantitative Treatment
Limitations
These regulations add a definition for
the term ‘‘cumulative quantitative
treatment limitations’’. Similar to the
definition for cumulative financial
requirements, a cumulative quantitative
treatment limitation is defined as a
treatment limitation that will determine
whether, or to what extent, benefits are
provided based on an accumulated
amount. A common example of a
cumulative quantitative treatment
limitation is a visit limit (whether
imposed annually or on a lifetime
basis).
5. Financial Requirements
These regulations repeat the statutory
language that provides the term
‘‘financial requirements’’ includes
deductibles, copayments, coinsurance,
and out-of-pocket maximums. The
statute and these regulations exclude
aggregate lifetime and annual dollar
limits from the meaning of financial
requirements; these limits are subject to

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separate provisions originally enacted as
part of MHPA 1996 that remain in
paragraph (b).

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6. Medical/Surgical Benefits, Mental
Health Benefits, and Substance Use
Disorder Benefits
Among the changes enacted by
MHPAEA is an expansion of the parity
requirements for aggregate lifetime and
annual dollar limits to include
protections for substance use disorder
benefits. Prior law specifically excluded
substance abuse or chemical
dependency benefits 2 from those
requirements. Consequently, these
regulations amend the meanings of
medical/surgical benefits and mental
health benefits (and add a definition for
substance use disorder benefits). Under
these regulations, medical/surgical
benefits are benefits for medical or
surgical services, as defined under the
terms of the plan or health insurance
coverage, but do not include mental
health or substance use disorder
benefits. Mental health benefits and
substance use disorder benefits are
benefits with respect to services for
mental health conditions and substance
use disorders, as defined under the
terms of the plan and in accordance
with applicable Federal and State law.
These regulations further provide that
the plan terms defining whether the
benefits are mental health or substance
use disorder benefits must be consistent
with generally recognized independent
standards of current medical practice.
This requirement is included to ensure
that a plan does not misclassify a benefit
in order to avoid complying with the
parity requirements.
The word ‘‘generally’’ in the
requirement ‘‘to be consistent with
generally recognized independent
standards of current medical practice’’ is
not meant to imply that the standard
must be a national standard; it simply
means that a standard must be generally
accepted in the relevant medical
community. There are many different
sources that would meet this
requirement. For example, a plan may
follow the most current version of the
Diagnostic and Statistical Manual of
Mental Disorders (DSM), the most
current version of the International
Classification of Diseases (ICD), or a
State guideline. All of these would be
considered acceptable resources to
determine whether benefits for a
particular condition are classified as
2 The

terms ‘‘substance abuse,’’ ‘‘chemical
dependency, ’’ and ‘‘substance use disorder’’ are
variously used to refer to substance use disorders.
Although they mean essentially the same thing, the
term used in MHPAEA is ‘‘substance use disorder’’.

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medical/surgical, mental health, or
substance use disorder benefits.
7. Treatment Limitations
These regulations repeat the statutory
language with respect to the term
‘‘treatment limitation’’ and also
distinguish between a quantitative and
a nonquantitative treatment limitation.
These regulations provide that the
parity requirements in the statute apply
to both quantitative and nonquantitative
treatment limitations. A quantitative
treatment limitation is a limitation that
is expressed numerically, such as an
annual limit of 50 outpatient visits. A
nonquantitative treatment limitation is a
limitation that is not expressed
numerically, but otherwise limits the
scope or duration of benefits for
treatment. A non-exhaustive list of
nonquantitative treatment limitations is
included in these regulations in
paragraph (c)(4). This list, as well as the
application of these regulations to
nonquantitative treatment limitations, is
further discussed later in this preamble.
However, these regulations provide that
a permanent exclusion of all benefits for
a specific condition or disorder is not a
treatment limitation.
B. Conforming Amendments to Parity
Requirements With Respect to Aggregate
Lifetime and Annual Dollar Limits (26
CFR 54.9812–1T(b), 29 CFR 2590.712(b),
and 45 CFR 146.136(b))
Paragraph (b) of these regulations
addresses the parity requirements with
respect to aggregate lifetime and annual
dollar limits. The mechanics of these
requirements generally remain the same
as under the MHPA 1996 regulations,
except that MHPAEA expanded the
scope of the parity provisions to apply
also to substance use disorder benefits.
Accordingly, these regulations make
conforming changes to reflect this
expansion. Certain examples illustrating
the application of MHPA 1996 to
benefits for substance abuse and
chemical dependency were deleted (as
they are no longer accurate); other
provisions were modified to include
references to substance use disorder
benefits as within the scope of the parity
requirements for aggregate lifetime and
annual dollar limits.
C. Parity Requirements With Respect to
Financial Requirements and Treatment
Limitations (26 CFR 54.9812–1T(c), 29
CFR 2590.712(c), and 45 CFR
146.136(c))
Paragraph (c) of these regulations
implements the core of MHPAEA’s new
rules, which require parity with respect
to financial requirements and treatment
limitations.

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1. Clarification of Terms
In addition to the meaning of terms in
paragraph (a), paragraph (c)(1) of these
regulations clarifies certain terms that
have been given specific meanings for
purposes of MHPAEA.
a. Classification of benefits. Paragraph
(c)(1) cross-references the term
‘‘classification of benefits’’ in paragraph
(c)(2)(ii). Paragraph (c)(2)(ii) describes
the six benefit classifications and their
application, which are discussed later in
this preamble. These regulations
provide that the parity requirements for
financial requirements and treatment
limitations are applied on a
classification-by-classification basis.
b. Type. These regulations use the
term ‘‘type’’ to refer to financial
requirements and treatment limitations
of the same nature. Different types
include copayments, coinsurance,
annual visit limits, and episode visit
limits. Plans often apply more than one
financial requirement or treatment
limitation to benefits. These regulations
specify that a financial requirement or
treatment limitation must be compared
only to financial requirements or
treatment limitations of the same type
within a classification. For example,
copayments are compared only to other
copayments, and annual visit limits are
compared only to other annual visit
limits; copayments are not compared to
coinsurance, and annual visit limits are
not compared to episode visit limits.
c. Level. A type of financial
requirement or treatment limitation may
vary in magnitude. For example, a plan
may impose a $20 copayment or a $30
copayment depending on the medical/
surgical benefit. In these regulations, a
‘‘level’’ of a type of financial requirement
or treatment limitation refers to the
magnitude (such as the dollar,
percentage, day, or visit amount) of the
financial requirement or treatment
limitation.
d. Coverage unit. Plans typically
distinguish between coverage for a
single participant, for a participant plus
a spouse, for a family, and so forth.
Coverage unit is the term used in these
regulations to refer to how a plan groups
individuals for purposes of determining
benefits, or premiums or contributions.
These regulations provide that the
general parity requirement of MHPAEA
for financial requirements and treatment
limitations is applied separately for
each coverage unit.
2. General Parity Requirement for
Financial Requirements and Treatment
Limitations
The general parity requirement of
paragraph (c)(2) of these regulations

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prohibits a plan (or health insurance
coverage) from applying any financial
requirement or treatment limitation to
mental health or substance use disorder
benefits in any classification that is
more restrictive than the predominant
financial requirement or treatment
limitation applied to substantially all
medical/surgical benefits in the same
classification. For this purpose, the
general parity requirement of MHPAEA
applies separately for each type of
financial requirement or treatment
limitation (that is, for example,
copayments are compared to
copayments, and deductibles to
deductibles). The test is applied
somewhat differently to nonquantitative
treatment limitations, as discussed later
in this preamble.
a. Classifications of benefits. Plans
often vary the financial requirements
and treatment limitations imposed on
benefits based on whether a treatment is
provided on an inpatient, outpatient, or
emergency basis; whether a provider is
a member of the plan’s network; or
whether the benefit is specifically for a
prescription drug. Therefore,
determining the predominant financial
requirements and treatment limitations
for the entire plan without taking these
distinctions into account could
potentially lead to absurd results. For
example, if a plan generally requires a
$100 copayment on inpatient medical/
surgical benefits and a $10 copayment
on outpatient medical/surgical benefits,
and most services (as measured by plan
costs) are provided on an inpatient
basis, the plan theoretically could
charge a $100 copayment for outpatient
mental health and substance use
disorder benefits. Similarly, if most
benefits are provided on an outpatient
basis, the plan would only be able to
charge a $10 copayment for inpatient
mental health and substance use
disorder benefits. Commenters generally
agreed that the statute should be applied
within several broad classifications of
benefits.
These regulations specify, in
paragraph (c)(2)(ii), six classifications of
benefits: Inpatient, in-network;
inpatient, out-of-network; outpatient, innetwork; outpatient, out-of-network;
emergency care; and prescription drugs.
If a plan does not have a network of
providers for inpatient or outpatient
benefits, all benefits in the classification
are characterized as out-of-network.
These regulations provide that the
parity requirements for financial
requirements and treatment limitations
are generally applied on a classificationby-classification basis and these are the
only classifications used for purposes of
satisfying the parity requirements of

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MHPAEA. Moreover, these
classifications must be used for all
financial requirements and treatment
limitations to the extent that a plan (or
health insurance coverage) provides
benefits in a classification and imposes
any separate financial requirement or
treatment limitation (or separate level of
a financial requirement or treatment
limitation) for benefits in the
classification. Examples illustrate the
application of this rule.
Commenters noted that a common
plan design imposes lower copayments
for treatment from a primary care
provider (for example, an internist or a
pediatrician) as compared to higher
copayments for treatment from a
specialist (such as a cardiologist or an
orthopedist). Some of these commenters
requested that this distinction be
permitted in applying the parity
requirements by recognizing a separate
classification for specialists; others of
these commenters opposed allowing
this distinction. Some plans (or health
insurance coverage) identify a large
range of mental health and substance
use disorder providers as specialists.
Allowing plans to provide less favorable
benefits with respect to services by
these providers than for services by
providers of medical/surgical care that
are classified by the plan as primary
care providers would undercut the
protections that the statute was
intended to provide. These regulations,
therefore, do not allow the separate
classification of generalists and
specialists in determining the
predominant financial requirement that
applies to substantially all medical/
surgical benefits.
Under these regulations, if a plan
provides any benefits for a mental
health condition or substance use
disorder, benefits must be provided for
that condition or disorder in each
classification for which any medical/
surgical benefits are provided. This
follows from the statutory requirement
that any treatment limitations applied to
mental health or substance use disorder
benefits may be no more restrictive than
the predominant treatment limitations
applied to substantially all medical/
surgical benefits. Treatment limitation is
not comprehensively defined under the
statute. The statute describes the term as
including limits on the frequency of
treatment, number of visits, days of
coverage, or other similar limits on the
scope or duration of treatment, but it is
not limited to such types of limits.
Indeed, these regulations make a
distinction between quantitative
treatment limitations (such as day
limits, visit limits, frequency of
treatment limits) and non-quantitative

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5413

treatment limitations (such as medical
management, formulary design, step
therapy). If a plan provides benefits for
a mental health condition or substance
use disorder in one or more
classifications but excludes benefits for
that condition or disorder in a
classification (such as outpatient, innetwork) in which it provides medical/
surgical benefits, the exclusion of
benefits in that classification for a
mental health condition or substance
use disorder otherwise covered under
the plan is a treatment limitation. It is
a limit, at a minimum, on the type of
setting or context in which treatment is
offered.
This rule does not require an
expansion of the range of mental health
conditions or substance use disorders
covered under the plan; it merely
requires, for those conditions or
disorders covered under the plan, that
coverage also be provided for them in
each classification in which medical/
surgical coverage is provided. If a plan
does not offer, for instance, any benefits
for medical/surgical services on an
outpatient basis by an out-of-network
provider, then there is no requirement
to provide benefits for mental health
conditions or substance use disorders
on an outpatient, out-of-network basis.
Although this rule follows from the
general parity requirement added by
MHPAEA, the statute includes a specific
provision in the case of out-of-network
benefits.3 The rule for out-of-network
benefits is stated separately in these
regulations to reflect the separate
statutory provision, but the application
of the general rule requires the same
result with respect to all classifications.
These regulations do not define
inpatient, outpatient, or emergency care.
These terms are subject to plan design
and their meanings may differ from plan
to plan. Additionally, State health
insurance laws may define these terms.
A plan must apply these terms
uniformly for both medical/surgical
benefits and mental health or substance
use disorder benefits. However, the
manner in which they apply may differ
from plan to plan. For example, a plan
may treat a hospital stay of more than
12 hours as inpatient care for medical/
surgical benefits; in such case, it must
also treat a hospital stay of more than 12
hours as inpatient care for mental health
and substance use disorder benefits.
However, another plan may treat a
hospital stay that includes midnight as
inpatient care for medical/surgical
benefits; in such a case the plan must
also treat a hospital stay that includes
3 See sections 9812(a)(5) of the Code, 712(a)(5) of
ERISA, 2705(a)(5) of the PHS Act.

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midnight as inpatient care for mental
health or substance use disorder
benefits.
b. Applying the general parity
requirement to financial requirements
and quantitative treatment limitations.
Paragraph (c)(3) of these regulations
addresses the application of the general
parity requirement of MHPAEA to plan
financial requirements and quantitative
treatment limitations.
(1) Measuring plan benefits. In order
to apply the substantive rules, these
regulations first establish standards for
measuring plan benefits. These
regulations, similar to the MHPA 1996
regulations, provide that the portion of
plan payments subject to a financial
requirement or quantitative treatment
limitation is based on the dollar amount
of all plan payments for medical/
surgical benefits in the classification
expected to be paid under the plan for
the plan year. Also similar to the MHPA
1996 regulations, any reasonable
method may be used to determine the
dollar amount expected to be paid
under the plan for medical/surgical
benefits subject to a financial
requirement or quantitative treatment
limitation.
Some cumulative financial
requirements, such as deductibles and
out-of-pocket maximums, involve a
threshold amount that causes the
amount of a plan payment to change.
These regulations clarify that, for
purposes of deductibles, the dollar
amount of plan payments includes all
payments with respect to claims that
would be subject to the deductible if it
had not been satisfied. For purposes of
out-of-pocket maximums, the dollar
amount of plan payments includes all
plan payments associated with out-ofpocket payments that were taken into
account towards the out-of-pocket
maximum as well as all plan payments
associated with out-of-pocket payments
that would have been made towards the
out-of-pocket maximum if it had not
been satisfied. Other threshold
requirements are treated similarly.
(2) ‘‘Substantially all’’. The first step of
these regulations in applying the general
parity requirement of MHPAEA is to
determine whether a financial
requirement or quantitative treatment
limitation applies to substantially all
medical/surgical benefits in a
classification. Regulations issued under
MHPA 1996 interpreted the term
‘‘substantially all’’ to mean at least twothirds. Under these regulations, a
financial requirement or quantitative
treatment limitation applies to
substantially all medical/surgical
benefits in a classification if it applies
to at least two-thirds of the benefits in

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that classification. In determining
whether a financial requirement or
quantitative treatment limitation applies
to substantially all medical/surgical
benefits in a classification, benefits
expressed as subject to a zero level of a
type of financial requirement are treated
the same as benefits that are not subject
to that type of requirement, and benefits
expressed as subject to an unlimited
quantitative treatment limitation are
treated the same as benefits that are not
subject to that type of limitation. For
example, in the classification of
outpatient, in-network medical/surgical
benefits, a plan could reduce the normal
copayment amount of $15 to $0 for well
baby care or routine physical
examinations, while a copayment is not
imposed on office visits for allergy
shots. For purposes of this analysis,
both of these benefits are treated as not
subject to a copayment.
If a type of financial requirement or
quantitative treatment limitation does
not apply to at least two-thirds of the
medical surgical benefits in a
classification, that type of requirement
or limitation cannot be applied to
mental health or substance use disorder
benefits in that classification. If a single
level of a type of financial requirement
or quantitative treatment limitation
applies to at least two-thirds of medical/
surgical benefits in a classification, then
it is also the predominant level and that
is the end of the analysis. However, if
the financial requirement or quantitative
treatment limitation applies to at least
two-thirds of all medical/surgical
benefits in a classification but has
multiple levels and no single level
applies to at least two-thirds of all
medical/surgical benefits in the
classification, then additional analysis
is required. In such a case, the next step
is to determine which level of the
financial requirement or quantitative
treatment limitation is considered
predominant.
(3) ‘‘Predominant’’. MHPAEA provides
that a financial requirement or treatment
limitation is predominant if it is the
most common or frequent of a type of
limit or requirement. Under these
regulations, the predominant level of a
type of financial requirement or
quantitative treatment limitation is the
level that applies to more than one-half
of medical/surgical benefits subject to
the financial requirement or quantitative
treatment limitation in that
classification. If a single level of a type
of financial requirement or quantitative
treatment limitation applies to more
than one-half of medical/surgical
benefits subject to the financial
requirement or quantitative treatment
limitation in a classification (based on

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plan costs, as discussed earlier in this
preamble), the plan may not apply that
particular financial requirement or
quantitative treatment limitation to
mental health or substance use disorder
benefits at a level that is more restrictive
than the level that has been determined
to be predominant.
If no single level applies to more than
one-half of medical/surgical benefits
subject to a financial requirement or
quantitative treatment limitation in a
classification, plan payments for
multiple levels of the same type of
financial requirement or quantitative
treatment limitation can be combined by
the plan (or health insurance issuer)
until the portion of plan payments
subject to the financial requirement or
quantitative treatment limitation
exceeds one-half. For any combination
of levels that exceeds one-half of
medical/surgical benefits subject to the
financial requirement or quantitative
treatment limitation in a classification,
the plan may not apply that particular
financial requirement or quantitative
treatment limitation to mental health
and substance use disorder benefits at a
level that is more restrictive than the
least restrictive level within the
combination. The plan may combine
plan payments for the most restrictive
levels first, with each less restrictive
level added to the combination until the
combination applies to more than onehalf of the benefits subject to the
financial requirement or treatment
limitation. Examples in these
regulations illustrate the application of
this rule.
These regulations provide an
alternative, simpler method for
compliance when a type of financial
requirement or quantitative treatment
limitation applies to at least two-thirds
of medical surgical benefits in a
classification but no single level applies
to more than one-half of the medical/
surgical benefits subject to the financial
requirement or quantitative treatment
limitation in that classification. In such
a situation, a plan is permitted to treat
the least restrictive level of the financial
requirement or quantitative treatment
limitation applied to medical/surgical
benefits in that classification as the
predominant level.
If a plan provides benefits for more
than one coverage unit and applies
different levels of financial
requirements or quantitative treatment
limitations to these coverage units
within a classification of benefits,
determining the predominant level of a
particular financial requirement or
quantitative treatment limitation must
be done separately for each coverage
unit. Thus, for example, a plan with

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different deductibles for self-only and
family coverage units would not
determine the predominant level of a
deductible applied for benefits across
both the self-only and family coverage
units. Instead, the plan would
determine the predominant level of the
deductible for self-only coverage
independently from the predominant
level for family coverage.
c. Special rule for prescription drug
benefits with multiple levels of financial
requirements. These regulations
include, in paragraph (c)(3)(iii), a
special rule for applying the general
parity requirement of MHPAEA to
prescription drug benefits. Although
applying the general parity requirement
to a prescription drug program with a
single level of a type of financial
requirement would be relatively
uncomplicated, the analysis becomes
more difficult if different financial
requirements are imposed for different
tiers of drugs. The placement of a drug
in a tier is generally based on factors
(such as cost and efficacy) unrelated to
whether the drug is usually prescribed
for the treatment of a medical/surgical
condition or a mental health condition
or substance use disorder. To the extent
such a program does not distinguish
between drugs as medical/surgical
benefits or mental health or substance
use disorder benefits, requiring the
program to make that distinction solely
for the purpose of determining the
predominant financial requirement or
quantitative treatment limitation that
applies to substantially all medical/
surgical benefits in a classification
might impose significant burdens
without ensuring any greater parity for
mental health and substance use
disorder benefits.
Consequently, these regulations
provide that if a plan imposes different
levels of financial requirements on
different tiers of prescription drugs
based on reasonable factors (such as
cost, efficacy, generic versus brand
name, and mail order versus pharmacy
pick-up), determined in accordance
with the requirements for
nonquantitative treatment limitations,
and without regard to whether a drug is
generally prescribed with respect to
medical/surgical benefits or mental
health or substance use disorder
benefits, the plan satisfies the parity
requirements with respect to the
prescription drug classification of
benefits. The special rule for
prescription drugs, in effect, allows a
plan or issuer to subdivide the
prescription drug classification into
tiers and apply the general parity
requirement separately to each tier of
prescription drug benefits. For any tier,

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the financial requirements and
treatment limitations imposed with
respect to the drugs prescribed for
medical/surgical conditions are the
same as (and thus not more restrictive
than) the financial requirements and
treatment limitations imposed with
respect to the drugs prescribed for
mental health conditions and substance
use disorders in the tier. Moreover,
because the financial requirements and
treatment limitations apply to 100
percent of the medical/surgical drug
benefits in the tier, they are the
predominant financial requirements and
treatment limitations that apply to
substantially all of the medical/surgical
drug benefits in the tier.
d. Cumulative financial requirements
and quantitative treatment limitations,
including deductibles. While financial
requirements such as copayments and
coinsurance generally apply separately
to each covered expense, other financial
requirements (in particular, deductibles)
accumulate across covered expenses. In
the case of deductibles, generally an
amount of otherwise covered expenses
must be accumulated before the plan
pays benefits. Financial requirements
and quantitative treatment limitations
that determine whether and to what
extent benefits are provided based on
accumulated amounts are defined in
these regulations as cumulative
financial requirements and cumulative
quantitative treatment limitations.
In response to the RFI, the
Departments received a number of
comments regarding how to apply the
parity requirements to cumulative
financial requirements, in particular to
deductibles (although some also referred
to out-of-pocket maximums). The
comments reflect two opposing views.
One view is that a plan can have
deductibles that accumulate separately
for medical/surgical benefits on the one
hand, and mental health or substance
use disorder benefits on the other, as
long as the level of the two deductibles
is the same (separately accumulating
deductibles). The opposing view is that
expenses for both mental health or
substance use disorder benefits and
medical/surgical benefits must
accumulate to satisfy a single combined
deductible before the plan provides
either medical/surgical benefits or
mental health or substance use disorder
benefits (combined deductible).
The provisions of the statute imposing
parity on financial requirements and
treatment limitations do not specifically
address this issue; the language of the
statute can be interpreted to support
either position. The comments that
supported allowing separately
accumulating deductibles maintained

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5415

that it is commonplace for plans to have
such deductibles, and that the projected
cost of converting systems to permit
unified deductibles would be extremely
high for the many plans that use a
separate managed behavioral health
organization (MBHO).4
By contrast, comments that supported
requiring combined deductibles argued
that allowing separately accumulating
deductibles undermines a central goal of
parity legislation, to affirm that mental
health and substance use disorder
benefits are integral components of
comprehensive health care and
generally should not be distinguished
from medical/surgical benefits.
Distinguishing between the two requires
individuals who need both kinds of care
to satisfy a deductible that is greater
than that required for individuals
needing only medical/surgical care.
Other comments that supported
requiring combined deductibles noted
that mental health and substance use
disorder benefits typically comprise
only 2 to 5 percent of a plan’s costs, so
that even using identical levels for
separately accumulating deductibles
imposes a greater barrier to mental
health and substance use disorder
benefits.
The Departments carefully considered
the positions advanced by both groups
of comments regarding separately
accumulating and combined
deductibles. Given that the statutory
language does not preclude either
interpretation, the Departments’ view is
that prohibiting separately accumulating
financial restrictions and quantitative
treatment limitations is more consistent
with the policy goals that led to the
enactment of MHPAEA. Consequently,
these regulations provide, in paragraph
(c)(3)(v), that a plan may not apply
cumulative financial requirements or
cumulative quantitative treatment
limitations to mental health or
4 Several commenters stated that the estimated
cost to develop interfaces between MBHOs and the
entity administering medical/surgical claims would
be $420,000–$750,000 per interface, and that in
some cases multiple interfaces per MBHO (as many
as 40–50) would be necessary. In response to these
cost concerns, the Departments performed an
independent analysis, which indicated that the
initial cost per interface could be as low as $35,000.
The Departments’ lower estimated cost reflects, in
part, the use of less expensive interface systems (for
example, batch processing rather than real-time),
and the ability to model new interfaces on existing
systems used to interface with pharmacy benefit
managers and dental insurers. In addition, many
MBHOs already have developed interfaces, because
their clients requested combined deductibles. This
should result in reduced costs, because interface
development costs are incremental and should
decrease after the first interface is created. For a
further discussion of this issue, see section IV.
Economic Impact and Paperwork Burden later in
this preamble.

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substance use disorder benefits in a
classification that accumulate separately
from any such cumulative financial
requirements or cumulative quantitative
treatment limitations established for
medical/surgical benefits in the same
classification.5 Examples in these
regulations illustrate the application of
this rule.
e. Application to nonquantitative
treatment limitations. Plans impose a
variety of limits affecting the scope or
duration of benefits under the plan that
are not expressed numerically.
Nonetheless, such nonquantitative
provisions are also treatment limitations
affecting the scope or duration of
benefits under the plan. These
regulations provide an illustrative list of
nonquantitative treatment limitations,
including medical management
standards; prescription drug formulary
design; standards for provider
admission to participate in a network;
determination of usual, customary, and
reasonable amounts; requirements for
using lower-cost therapies before the
plan will cover more expensive
therapies (also known as fail-first
policies or step therapy protocols); and
conditioning benefits on completion of
a course of treatment.
Paragraph (c)(4) of these regulations
generally prohibits the imposition of
any nonquantitative treatment
limitation to mental health or substance
use disorder benefits unless certain
requirements are met. Any processes,
strategies, evidentiary standards, or
other factors used in applying the
nonquantitative treatment limitation to
mental health or substance use disorder
benefits in a classification must be
comparable to, and applied no more
stringently than, the processes,
strategies, evidentiary standards, or
other factors used in applying the
limitation with respect to medical
surgical/benefits in the classification.
However, these requirements allow
variations to the extent that recognized
clinically appropriate standards of care
may permit a difference. These
requirements apply to the terms of the
plan (or health insurance coverage) both
as written and in operation.
The phrase, ‘‘applied no more
stringently’’ was included to ensure that
5 This rule in the interim final regulations
prohibiting separately accumulating financial
requirements and quantitative treatment limitations
does not apply with respect to aggregate lifetime
and annual dollar limits. The statutory language of
MHPA 1996 specifically permitted plans to impose
aggregate lifetime or annual dollar limits that
distinguish between mental health benefits and
medical/surgical benefits. MHPAEA left the
language of this statutory provision intact,
modifying it only to expand its applicability to
include substance use disorder benefits.

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any processes, strategies, evidentiary
standards, or other factors that are
comparable on their face are applied in
the same manner to medical/surgical
benefits and to mental health or
substance use disorder benefits. Thus,
for example, assume a claims
administrator has discretion to approve
benefits for treatment based on medical
necessity. If that discretion is routinely
used to approve medical/surgical
benefits while denying mental health or
substance use disorder benefits and
recognized clinically appropriate
standards of care do not permit such a
difference, the processes used in
applying the medical necessity standard
are considered to be applied more
stringently to mental health or
substance use disorder benefits. The use
of discretion in this manner violates the
parity requirements for nonquantitative
treatment limitations.
Different types of illnesses or injuries
may require different review, as well as
different care. The acute versus chronic
nature of a condition, the complexity of
it or the treatment involved, and other
factors may affect the review. Although
the processes, strategies, evidentiary
standards, and other factors used in
applying these limitations must
generally be applied in a comparable
manner to all benefits, the mere fact of
disparate results does not mean that the
treatment limitations do not comply
with parity.
Examples in these regulations
illustrate the operation of the
requirements for nonquantitative
treatment limitations. Medical
management standards are implemented
by processes such as preauthorization,
concurrent review, retrospective review,
case management, and utilization
review; the examples feature the
application of these requirements to
some of these processes. The facts in the
examples reflect simple situations for
purposes of better illustrating the
application of the rules rather than
reflecting the realistic, complex facts
that would typically be found in a plan.
The Departments invite comments on
whether additional examples would be
helpful to illustrate the application of
the nonquantitative treatment limitation
rule to other features of medical
management or general plan design.
Commenters asked if the MHPAEA
requirements apply when eligibility for
mental health and substance use
disorder benefits under a major medical
program is conditioned on exhausting
some limited number of mental health
and substance use disorder counseling
sessions offered through an employee
assistance program (EAP). Generally, the
provision of mental health or substance

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use disorder benefits by an EAP in
addition to the benefits offered by a
major medical program that otherwise
complies with the parity rules would
not violate MHPAEA. However,
requiring participants to exhaust the
EAP benefits—making the EAP a
gatekeeper—before an individual is
eligible for the major medical program’s
mental health or substance use disorder
benefits is a nonquantitative treatment
limitation subject to the parity
requirements. Consequently, if similar
gatekeeping processes with a similar
exhaustion requirement (whether or not
through the EAP) are not applied to
medical/surgical benefits, the
requirement to exhaust mental health or
substance use disorder benefits
available under the EAP would violate
the rule that nonquantitative treatment
limitations be applied comparably and
not more stringently to mental health
and substance use disorder benefits.
The Departments received many
comments addressing an issue
characterized as ‘‘scope of services’’ or
‘‘continuum of care’’. Some commenters
requested, with respect to a mental
health condition or substance use
disorder that is otherwise covered, that
the regulations clarify that a plan is not
required to provide benefits for any
particular treatment or treatment setting
(such as counseling or non-hospital
residential treatment) if benefits for the
treatment or treatment setting are not
provided for medical/surgical
conditions. Other commenters requested
that the regulations clarify that a
participant or beneficiary with a mental
health condition or substance use
disorder have coverage for the full scope
of medically appropriate services to
treat the condition or disorder if the
plan covers the full scope of medically
appropriate services to treat medical/
surgical conditions, even if some
treatments or treatment settings are not
otherwise covered by the plan. Other
commenters requested that MHPAEA be
interpreted to require that group health
plans provide benefits for any evidencebased treatment.
The Departments recognize that not
all treatments or treatment settings for
mental health conditions or substance
use disorders correspond to those for
medical/surgical conditions. The
Departments also recognize that
MHPAEA prohibits plans and issuers
from imposing treatment limitations on
mental health and substance use
disorder benefits that are more
restrictive than those applied to
medical/surgical benefits. These
regulations do not address the scope of
services issue. The Departments invite
comments on whether and to what

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extent MHPAEA addresses the scope of
services or continuum of care provided
by a group health plan or health
insurance coverage.
D. Availability of Plan Information (26
CFR 54.9812–1T(d), 29 CFR
2590.712(d), and 45 CFR 146.136(d))
MHPAEA includes two new
disclosure provisions for group health
plans (and health insurance coverage
offered in connection with a group
health plan). First, the criteria for
medical necessity determinations made
under a plan (or health insurance
coverage) with respect to mental health
or substance use disorder benefits must
be made available by the plan
administrator (or the health insurance
issuer offering such coverage) in
accordance with regulations to any
current or potential participant,
beneficiary, or contracting provider
upon request. These regulations repeat
the statutory language without
substantive change. The Departments
invite comments on what additional
clarifications might be helpful to
facilitate compliance with this
disclosure requirement for medical
necessity criteria.
MHPAEA also provides that the
reason for any denial under a group
health plan (or health insurance
coverage) of reimbursement or payment
for services with respect to mental
health or substance use disorder
benefits in the case of any participant or
beneficiary must be made available,
upon request or as otherwise required,
by the plan administrator (or the health
insurance issuer) to the participant or
beneficiary in accordance with
regulations. These regulations clarify
that, in order for plans subject to ERISA
(and health insurance coverage offered
in connection with such plans) to satisfy
this requirement, disclosures must be
made in a form and manner consistent
with the rules for group health plans in
the ERISA claims procedure
regulations,6 which provide (among
other things) that such disclosures must
be provided automatically and free of
charge. In the case of non-Federal
governmental and church plans (which
are not subject to ERISA), and health
insurance coverage offered in
connection with such plans, these
regulations provide that compliance
with the form and manner of the ERISA
claims procedure regulations for group
health plans satisfies this disclosure
requirement. The Departments invite
comments regarding any additional
clarifications that would be helpful to
facilitate compliance with MHPAEA’s
6 29

CFR 2560.503–1.

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disclosure requirements regarding
denials of mental health or substance
use disorder benefits.
E. General Applicability Provisions (26
CFR 54.9812–1T(e), 29 CFR 2590.712(e),
and 45 CFR 146.136(e))
Paragraph (e) of these regulations
addresses the applicability of these
regulations to group health plans and
health insurance issuers and clarifies
the scope of these regulations.
1. Overview
These regulations make a number of
changes to the general applicability
provisions in the MHPA 1996
regulations (paragraphs (c) and (d) in
those regulations). Amendments made
by MHPAEA require some of these
changes. For example, the MHPA 1996
rules of construction specifically
excluded any plan provisions relating to
cost sharing, limits on the number of
visits or days of coverage, and
requirements relating to medical
necessity from the application of the
parity requirements for aggregate
lifetime and annual dollar limits.
MHPAEA replaces these exclusions
with a rule providing that the provisions
should not be construed as affecting the
terms and conditions of the plan or
coverage relating to mental health and
substance use disorder benefits except
as provided in the rules relating to
financial requirements and treatment
limitations. These regulations make
corresponding changes to the MHPA
1996 regulations.
These regulations also (1) establish a
new rule with respect to the mental
health and substance use disorder parity
requirements for the determination of
the number of plans that an employer or
employee organization maintains, (2)
combine what were in the MHPA 1996
regulations separate rules for group
health plans and benefit packages, and
(3) make additional clarifications.
a. Group health plans. In 2004, the
Departments issued proposed
regulations for a number of issues under
Chapter 100 of the Code, Part 7 of
ERISA, and Title XXVII of the PHS Act,
including rules for determining the
number of group health plans that an
employer or employee organization is
considered to maintain for purposes of
those provisions.7 Those proposed
regulations generally would have
respected the number of plans
designated in the instruments governing
the employer’s or employee
organization’s arrangements to provide
medical care benefits as long as the
arrangements were operated pursuant to
7 See

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5417

those instruments as separate plans. The
2004 proposed regulations included an
anti-abuse clause, providing that, if a
principal purpose of establishing
separate plans was to evade any
requirement of law, then the separate
plans would be considered a single plan
to the extent necessary to prevent the
evasion.
The Departments recognized that
under the 2004 proposed regulations,
absent the anti-abuse clause, plan
sponsors might attempt to provide
mental health (and now substance use
disorder) benefits under a plan that is
separate from a plan that provides only
medical/surgical benefits. Because the
mental health (and now substance use
disorder) parity requirements apply
only to plans that provide both mental
health or substance use disorder
benefits and medical/surgical benefits,
the absence of medical/surgical benefits
in a plan providing mental health or
substance use disorder benefits would
have resulted in, absent the anti-abuse
clause, the inapplicability of the parity
requirements. The 2004 proposed
regulations included the anti-abuse
clause to avoid this kind of evasion of
the parity requirements. Commenters
raised problems of proof with the
subjective intent element of the
proposed anti-abuse clause. While the
2004 rule remains proposed, these
interim final regulations include a rule
for determining the number of plans
that an employer or employee
organization maintains for the mental
health and substance use disorder parity
requirements that operates irrespective
of the intent of a plan sponsor. The rule
is that all medical care benefits
provided by an employer or employee
organization constitute a single group
health plan.
MHPAEA left unchanged the rule
from MHPA 1996 requiring that the
parity requirements be applied
separately to each benefit package
option under a group health plan. The
MHPA 1996 regulations used the term
‘‘benefit package’’ rather than ‘‘benefit
package option’’ and clarified that the
parity requirements would apply
separately to separate benefit packages
also in situations in which the
participants (or beneficiaries) had no
choice between multiple benefit
packages, such as where retirees are
provided one benefit package and active
employees a separate benefit package.
Under these regulations, the statutory
rule providing that the parity
requirements apply separately to
separate benefit package options
(reflected in paragraph (c) of the MHPA
1996 regulations), the statutory rule
providing that the parity requirements

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apply to a group health plan providing
both mental health or substance use
disorder benefits and medical/surgical
benefits (reflected in paragraph (d) of
the MHPA 1996 regulations), and the
determination of how many plans an
employer or employee organization
maintains have been combined as a
single rule in paragraph (e)(1).
The new combined rule in these
regulations does not use the term benefit
package. Instead, it provides that (1) the
parity requirements apply to a group
health plan offering both medical/
surgical benefits and mental health or
substance use disorder benefits, (2) the
parity requirements apply separately
with respect to each combination of
medical/surgical coverage and mental
health or substance use disorder
coverage that any participant (or
beneficiary) can simultaneously receive
from an employer’s or employee
organization’s arrangement or
arrangements to provide medical care
benefits, and (3) all such combinations
constitute a single group health plan for
purposes of the parity requirements.
This new combined rule clearly
prohibits what might have been
formerly viewed as a potential evasion
of the parity requirements by allocating
mental health or substance use disorder
benefits to a plan or benefit package
without medical/surgical benefits (when
medical/surgical benefits are also
otherwise available). For example, if an
employer with a single benefit package
for medical/surgical benefits also has a
separately administered benefit package
for mental health and substance use
disorder benefits, the parity
requirements apply to the combined
benefit package and the combined
benefit package is considered a single
plan for purposes of the parity
requirements.
Similarly, if an employer offered three
medical/surgical benefit packages, A, B,
and C, and a mental health and
substance use disorder benefit package,
D, that could be combined with each of
A, B, and C, then the parity
requirements must be satisfied with
respect to each of AD, BD, and CD. If the
A benefit package had a standard option
and a high option, A1 and A2, then the
parity requirements would have to be
satisfied with respect to each of A1D and
A2D.
b. Health insurance issuers. These
regulations make a change regarding
applicability with respect to health
insurance issuers. Both the MHPA 1996
regulations and these regulations apply
to an issuer offering health insurance
coverage. The MHPA 1996 regulations
provide that the health insurance
coverage must be for both medical/

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surgical and mental health benefits in
connection with a group health plan;
the rule in these regulations provides
that the health insurance coverage must
be for mental health or substance use
disorder benefits in connection with a
group health plan subject to MHPAEA
under paragraph (e)(1). Thus, under
these regulations, an issuer offering
health insurance coverage without any
medical/surgical benefits is nonetheless
subject to the parity requirements if it
offers health insurance coverage with
mental health or substance use disorder
benefits in connection with a group
health plan subject to the parity
requirements. In addition, under these
regulations, the parity requirements do
not apply to an issuer offering health
insurance coverage to a group health
plan not subject to the parity
requirements.
c. Scope. Paragraph (e)(3) of these
regulations provides that nothing in
these regulations requires a plan or
issuer to provide any mental health or
substance use disorder benefits.
Moreover, the provision of benefits for
one or more mental health conditions or
substance use disorders does not require
the provision of benefits for any other
condition or disorder.
2. Interaction With State Insurance Laws
Numerous comments requested
guidance on how MHPAEA interacts
with State insurance laws requiring
parity for, or mandating coverage of,
mental health or substance use disorder
benefits. Some commenters sought
clarification that MHPAEA does not
preempt any State insurance law
mandating a minimum level of coverage
(such as a minimum dollar, day, or visit
level) for mental health conditions or
substance use disorders. Other
commenters suggested that, while
MHPAEA does not preempt State
insurance parity and mandate laws to
the extent that they do not prevent the
application of MHPAEA, provisions in
the State laws that are more restrictive
than the requirements of MHPAEA are
preempted.
The preemption provisions of section
731 of ERISA and section 2723 of the
PHS Act (added by the Health Insurance
Portability and Accountability Act of
1996 (HIPAA) and implemented in 29
CFR 2590.731(a) and 45 CFR 146.143(a))
apply so that the MHPAEA
requirements are not to be ‘‘construed to
supersede any provision of State law
which establishes, implements, or
continues in effect any standard or
requirement solely relating to health
insurance issuers in connection with
group health insurance coverage except
to the extent that such standard or

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requirement prevents the application of
a requirement’’ of MHPAEA. The HIPAA
conference report indicates that this is
intended to be the ‘‘narrowest’’
preemption of State laws. (See House
Conf. Rep. No. 104–736, at 205,
reprinted in 1996 U.S. Code Cong. &
Admin. News 2018.)
A State law, for example, that
mandates that an issuer offer a
minimum dollar amount of mental
health or substance use disorder
benefits does not prevent the
application of MHPAEA. Nevertheless,
an issuer subject to MHPAEA may be
required to provide mental health or
substance use disorder benefits beyond
the State law minimum in order to
comply with MHPAEA.
F. Small Employer Exemption (26 CFR
54.9812–1T(f), 29 CFR 2590.712(f), and
45 CFR 146.136(f))
Paragraph (f) of these regulations
amends the MHPA 1996 regulations to
implement the exemption for a group
health plan (or health insurance issuer
offering coverage in connection with a
group health plan) for a plan year of a
small employer. For this purpose, a
small employer is generally defined, in
connection with a group health plan
with respect to a calendar year and a
plan year, as an employer who
employed an average of not more than
50 employees on business days during
the preceding calendar year.
G. Increased Cost Exemption (26 CFR
54.9812–1T(g), 29 CFR 2590.712(g), and
45 CFR 146.136(g))
Both MHPA 1996 and MHPAEA
include an increased cost exemption
under which, if certain requirements are
met, plans that incur increased costs
above a certain threshold as a result of
the application of the parity
requirements of both these laws can be
exempt from the statutory parity
requirements. MHPAEA changed the
MHPA 1996 increased cost exemption
in several ways, including (1) raising the
threshold for qualification from one
percent to two percent for the first year
for which the plan is subject to
MHPAEA; (2) requiring certification by
qualified and licensed actuaries who are
members in good standing of the
American Academy of Actuaries; and
(3) revising the notice requirements.
Under MHPAEA, plans that comply
with the parity requirements for one full
plan year and that satisfy the conditions
for the increased cost exemption are
exempt from the parity requirements for
the following plan year, and the
exemption lasts for one year. Thus, the
increased cost exemption may only be
claimed for alternating plan years.

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Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations
maintained pursuant to one or more
collective bargaining agreements ratified
before October 3, 2008, the requirements
of these regulations do not apply to the
plan (or health insurance coverage
offered in connection with the plan) for
plan years beginning before the later of
either the date on which the last of the
collective bargaining agreements
relating to the plan terminates
(determined without regard to any
extension agreed to after October 3,
2008) or July 1, 2010. MHPAEA
provides that any plan amendment
H. Sale of Nonparity Health Insurance
made pursuant to a collective bargaining
Coverage (26 CFR 54.9812–1T(h), 29
agreement solely to conform to the
CFR 2590.712(h), and 45 CFR
requirements of MHPAEA not be treated
146.136(h))
as a termination of the agreement.
These regulations make a few changes
Many commenters requested guidance
to what was paragraph (g) in the MHPA
on what percentage of employees
1996 regulations. That paragraph
covered by a plan must be union
included a paragraph (g)(2) relating to
employees for the plan to be considered
how long the increased cost exemption
a plan maintained pursuant to one or
applies once its requirements have been more collective bargaining agreements—
satisfied. It has been deleted because
some suggesting as low a percentage as
MHPAEA provides a new rule for how
25 percent while others suggested 90
long the increased cost exemption
percent. This issue arises in a number
applies. In addition, minor changes
of statutes that provide special rules for
have been made to the presentation in
plans maintained pursuant to collective
what was paragraph (g)(1) in the MHPA bargaining agreements. As such, the
1996 regulations. Both that paragraph
issue is beyond the scope of these
and paragraph (h) in these regulations
regulations implementing the MHPAEA
address the circumstances of health
amendments and is not addressed in
insurance coverage that does not
them.
comply with the parity requirements
Because the statutory MHPAEA
being sold to a group health plan. The
provisions are self-implementing and
MHPA 1996 regulations refer to an
are generally effective for plan years
issuer selling a policy; these regulations beginning after October 3, 2009, many
refer to an issuer selling a policy,
commenters asked for a good faith
certificate, or contract of insurance. The compliance period from Departmental
longer phrase in these regulations
enforcement until plans (and health
includes health insurance coverage sold insurance issuers) have time to
in a form that might not always be
implement changes consistent with
described by the term ‘‘policy’’ and is the these regulations. For purposes of
more typical formulation used
enforcement, the Departments will take
throughout the regulations under
into account good-faith efforts to
comply with a reasonable interpretation
Chapter 100 of the Code, Part 7 of
of the statutory MHPAEA requirements
ERISA, and Title XXVII of the PHS Act.
with respect to a violation that occurs
An additional change shifts the
before the applicability date of
emphasis by stating the rule in terms of
paragraph (i) of these regulations.
an issuer not being able to sell except
However, this does not prevent
in the described circumstances, rather
participants or beneficiaries from
than in terms of an issuer being able to
bringing a private action.
sell only in the described
circumstances. Finally, the crossIII. Interim Final Regulations and
reference contained in this paragraph to
Request for Comments
the parity requirements has been
Section 9833 of the Code, section 734
conformed to include the new
of ERISA, and section 2792 of the PHS
requirements of MHPAEA.
Act authorize the Secretaries of the
I. Applicability Dates (26 CFR 54.9812–
Treasury, Labor, and HHS (collectively,
1T(i), 29 CFR 2590.712(i), and 45 CFR
the Secretaries) to promulgate any
146.136(i))
interim final rules that they determine
are appropriate to carry out the
In general, the requirements of these
provisions of Chapter 100 of Subtitle K
regulations apply for plan years
beginning on or after July 1, 2010. There of the Code, Part 7 of Subtitle B of Title
I of ERISA, and Part A of Title XXVII of
is a special effective date for certain
the PHS Act, which include the
collectively-bargained plans, which
provisions of MHPAEA.
provides that, for group health plans

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These regulations withdraw the
MHPA 1996 regulatory guidance on the
increased cost exemption and reserve
paragraph (g). The Departments intend
to issue, in the near future, guidance
implementing the new requirements for
the increased cost exemption under
MHPAEA. The Departments invite
comments on implementing the new
statutory requirements for the increased
cost exemption under MHPAEA, as well
as information on how many plans
expect to use the exemption.

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5419

Under Section 553(b) of the
Administrative Procedure Act (5 U.S.C.
551 et seq.) a general notice of proposed
rulemaking is not required when an
agency, for good cause, finds that notice
and public comment thereon are
impracticable, unnecessary, or contrary
to the public interest.
These rules are being adopted on an
interim final basis because the
Secretaries have determined that
without prompt guidance some
members of the regulated community
may not know what steps to take to
comply with the requirements of
MHPAEA, which may result in an
adverse impact on participants and
beneficiaries with regard to their health
benefits under group health plans and
the protections provided under
MHPAEA. Moreover, MHPAEA’s
requirements will affect the regulated
community in the immediate future.
The requirements of MHPAEA are
generally effective for all group health
plans and for health insurance issuers
offering coverage in connection with
such plans for plan years beginning after
October 3, 2009. Plan administrators
and sponsors, issuers, and participants
and beneficiaries need guidance on how
to comply with the new statutory
provisions. As noted earlier, these
regulations take into account comments
received by the Departments in response
to the request for information on
MHPAEA published in the Federal
Register on April 28, 2009 (74 FR
19155). For the foregoing reasons, the
Departments find that the publication of
a proposed regulation, for the purpose
of notice and public comment thereon,
would be impracticable, unnecessary,
and contrary to the public interest.
IV. Economic Impact and Paperwork
Burden
A. Summary—Department of Labor and
Department of Health and Human
Services
As discussed earlier in this preamble,
MHPAEA requires group health plans
and group health insurance issuers to
ensure that financial requirements (e.g.,
copayments, deductibles) and treatment
limitations (e.g., visit limits) applicable
to mental health or substance use
disorder benefits are no more restrictive
than the predominant financial
requirements or treatment limitations
applied to substantially all medical/
surgical benefits. Under MHPAEA, a
financial requirement or treatment
limitation is considered to be
predominant if it is the most common
or frequent of such type of requirement
or limitation. Additionally, there can be
no separate cost-sharing requirements or

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Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations
712 of ERISA, section 2705 of the PHS
Act, and section 9812 of the Code.
These regulations are needed to secure
and implement MHPAEA’s provisions
and ensure that the rights provided to
participants, beneficiaries, and other
individuals under MHPAEA are fully
realized. The Departments’ assessment
of the expected economic effects of
these regulations is discussed in detail
below.

treatment limitations applicable only
with respect to mental health or
substance use disorder benefits. The
statute does not mandate coverage for
either mental health or substance use
disorder benefits. Thus, self-insured
plans are free to choose whether to
provide mental health or substance use
disorder benefits; insured plans may
have to provide these benefits under
state laws. Either type of plan that
provides mental health or substance use
disorder benefits must do so in
accordance with MHPAEA’s parity
provisions.
The Departments have crafted these
regulations to secure the protections
intended by Congress in as
economically efficient a manner as
possible. Although the Departments are
unable to quantify the regulations’
economic benefits, they have quantified
some of the costs and have provided a
qualitative discussion of some of the
benefits and costs that may stem from
these regulations.
B. Statement of Need for Regulatory
Action
Congress directed the Departments to
issue regulations implementing the
MHPAEA provisions. In response to this
Congressional directive, these interim
final regulations clarify and interpret
the MHPAEA provisions under section

C. Executive Order 12866—Department
of Labor and Department of Health and
Human Services
Under Executive Order 12866 (58 FR
51735), the Department must determine
whether a regulatory action is
‘‘significant’’ and therefore subject to
review by the Office of Management and
Budget (OMB). Section 3(f) of the
Executive Order defines a ‘‘significant
regulatory action’’ as an action that is
likely to result in a rule (1) having an
annual effect on the economy of $100
million or more, or adversely and
materially affecting a sector of the
economy, productivity, competition,
jobs, the environment, public health or
safety, or State, local or tribal
governments or communities (also
referred to as ‘‘economically
significant’’); (2) creating a serious
inconsistency or otherwise interfering
with an action taken or planned by

another agency; (3) materially altering
the budgetary impacts of entitlement
grants, user fees, or loan programs or the
rights and obligations of recipients
thereof; or (4) raising novel legal or
policy issues arising out of legal
mandates, the President’s priorities, or
the principles set forth in the Executive
Order. The Departments have
determined that this regulatory action is
economically significant within the
meaning of section 3(f)(1) of the
Executive Order, because it is likely to
have an effect on the economy of $100
million or more in any one year.
Accordingly, the Departments provide
the following assessment of its potential
costs and benefits. As elaborated below,
the Department believes that the
benefits of the rule justify its costs.
Table 1, below, summarizes the costs
associated with the rule. The estimates
are explained in the following sections.
Over the ten-year period of 2010 to
2019, the total undiscounted cost of the
rule is estimated to be $115 million in
2010 Dollars. Columns E and F display
the costs discounted at 3 percent and 7
percent, respectively. Column G shows
a transfer of $25.6 billion over the tenyear period. All other numbers included
in the text are not discounted, except
where noted.

TABLE 1—TOTAL COSTS OF RULE
[In millions of 2010 dollars]
Year

2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

General review

Medical
necessity
disclosure

Single
deductible

Total
undiscounted
costs

Total 3%
discounted
costs

Total 7%
discounted
costs

Transfer
(undiscounted)

(A)

(B)

(C)

A+B+C

(E)

(F)

(G)

...........................
...........................
...........................
...........................
...........................
...........................
...........................
...........................
...........................
...........................

$27.8
0
0
0
0
0
0
0
0
0

$1.2
1.2
1.2
1.2
1.2
1.2
1.2
1.2
1.2
1.2

$39.2
3.9
3.9
3.9
3.9
3.9
3.9
3.9
3.9
3.9

$68.2
5.2
5.2
5.2
5.2
5.2
5.2
5.2
5.2
5.2

$68.2
5.0
4.9
4.7
4.6
4.4
4.3
4.2
4.1
4.0

$68.2
4.8
4.5
4.2
3.9
3.7
3.4
3.2
3.0
2.8

$2,360.0
2,400.0
2,430.0
2,460.0
2,510.0
2,570.0
2,620.0
2,680.0
2,740.0
2,810.0

Total ....................

..........................

........................

........................

114.6

108.4

101.8

25,600.0

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Note: The displayed numbers are rounded to the nearest thousand and therefore may not add up to the totals.

The Departments performed a
comprehensive, unified analysis to
estimate the costs and, to the extent
feasible, provide a qualitative
assessment of benefits attributable to the
regulations for purposes of compliance
with Executive Order 12866, the
Regulatory Flexibility Act, and the
Paperwork Reduction Act. The

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Departments’ assessment and
underlying analysis is set forth below.
1. Regulatory Alternatives
Section 6(a)(3)(C)(iii) of Executive
Order 12866 requires an economically
significant regulation to include an
assessment of the costs and benefits of
potentially effective and reasonable
alternatives to the planned regulation,
and an explanation of why the planned

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regulatory action is preferable to the
potential alternatives. As discussed
earlier in this preamble, the
Departments considered the alternative
of whether to require the same
separately accumulating deductible for
medical/surgical benefits and mental
health or substance use disorder
benefits or a combined deductible for
such benefits.

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Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations
The language of the statute can be
interpreted to support either alternative.
The comments that supported allowing
separately accumulating deductibles
maintained that it is commonplace for
plans to have such deductibles, and that
the projected cost of converting systems
to permit unified deductibles would be
extremely high for the many plans that
use a separate managed behavioral
health organization (MBHO).8 By
contrast, comments that supported
requiring combined deductibles argued
that allowing separately accumulating
deductibles undermines a central goal of
parity legislation: To affirm that mental
health and substance use disorder
benefits are integral components of
comprehensive health care and
generally should not be distinguished
from medical/surgical benefits.
Distinguishing between the two requires
individuals who need both kinds of care
to satisfy a deductible that is greater
than that required for individuals
needing only medical/surgical care.
Other comments that supported
requiring combined deductibles noted
that mental health and substance use
disorder benefits typically comprise
only 2 to 5 percent of a plan’s costs, so
that even using identical levels for
separately accumulating deductibles
imposes a greater barrier to mental
health and substance use disorder
benefits.
The Departments carefully considered
the alternative of requiring separately
accumulating or combined deductibles.
Given that the statutory language does
not preclude either interpretation, the
Departments choose to require
combined deductibles, because this
position is more consistent with the
policy goals that led to the enactment of
MHPAEA.

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2. Affected Entities and Other
Assumptions
The Departments expect MHPAEA to
benefit the approximately 111 million
participants in 446,400 ERISA-covered
employer group health plans, and an
estimated 29 million participants in the
approximately 20,300 public, nonFederal employer group health plans
sponsored by state and local
governments.9 In addition,
8 For a full discussion of the cost considerations
involved with these alternatives, see section 4.b.,
below, Costs associated with cumulative financial
requirements and quantitative treatment
limitations, including deductibles.
9 The Departments’ estimates of the numbers of
affected participants are based on DOL estimates
using the 2008 CPS. ERISA plan counts are based
on DOL estimates using the 2008 MEP–IC and
Census Bureau statistics. The number of state and
local government employer-sponsored plans was
estimated using 2007 Census data and DOL

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approximately 460 health insurance
issuers providing mental health or
substance use disorder benefits in the
group health insurance market and at
least 120 MBHOs providing mental
health or substance use disorder
benefits to group health plans are
expected to be affected.10
3. Benefits
Congress first passed mental health
parity legislation in 1996 with the
enactment of MHPA 1996.11 As
discussed earlier in this preamble, this
law requires health insurance issuers
and group health plans that offer mental
health benefits to have aggregate annual
and lifetime dollar limits on mental
health benefits that are no more
restrictive than those for all medical/
surgical benefits.
The impact of MHPA 1996 was
limited, however, because it did not
require parity with respect to day limits
for inpatient or outpatient care,
deductibles, co-payments or
coinsurance, substance use disorder
benefits, and prescription drug
coverage.12 While a large majority of
plans complied with the MHPA 1996
parity requirement regarding annual and
lifetime dollar limits, many employersponsored group health plans contained
plan design features that were more
restrictive for mental health benefits
than for medical/surgical benefits. For
example, data on private insurance
arrangements from the pre-MHPAEA era
show that after MHPA 1996, the most
significant disparities in coverage for
mental health substance use treatment
involve limits on the number of covered
days of inpatient care and the number
of outpatient visits. Survey data from
the Kaiser/HRET national employer
survey shows that 64 percent of covered
workers had more restrictive limits on
the number of covered hospital days for
mental health care and 74 percent had
more restrictive limits on outpatient
mental health visits. In addition, 22
estimates. Please note that the estimates are based
on survey data that is not broken down by the
employer size covered by MHPAEA making it
difficult to exclude from estimates those
participants employed by employers who employed
an average of at least 2 but no more than 50
employees on the first day of the plan year.
10 The Departments’ estimate of the number of
insurers is based on industry trade association
membership. Please note that these estimates could
undercount small state regulated insurers.
11 Pub. L. 104–204, title VII, 110 Stat. 2874, 2944–
50.
12 GAO/HEHS–00–95, Implementation of the
Mental Health Parity Act. In the report, GAO found
that 87 percent of compliant plans contained at
least one more restrictive provision for mental
health benefits with the most prevalent being limits
on the number of outpatient office visits and
hospital day limits. Id. at 5.

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5421

percent of covered workers had higher
cost-sharing imposed on mental health
care benefits. Among those workers
with more restrictive limits on inpatient
days, 77 percent had limits of 30 days
or less.13 For these reasons, as discussed
more fully below, the Departments
expect that MHPAEA and these
regulations will have their greatest
impact on people needing the most
intensive treatment and financial
protection. The Departments do not
have an estimate of the number of
individuals who have exceeded the
treatment limits. However, according to
the FEHBP data used to analyze the
FEHBP parity directive in the year
before its implementation, the 90th
percentile of the mental health spending
distribution was corresponded to $2,134
in 1999 dollars. Among the people
spending at the 90th percentile or
higher, 12% had inpatient psychiatric
stays and 20% of those above the 90th
percentile had a diagnosis of
schizophrenia or bipolar disorder,
chronic conditions requiring
prescription drugs and regular contact
with mental health service providers. It
is this group that experienced especially
large declines in out of pocket payments
after FEHBP implemented parity.
Treatment for alcohol abuse disorders
showed a similar trend: Surveys
indicate that 74 percent of private
industry employees were covered by
plans that imposed more restrictive
limits for inpatient detoxification
benefits than medical and surgical
benefits, 88 imposed more restrictive
limits for inpatient rehabilitation, and
89 percent imposed more restrictive
limits for outpatient rehabilitation.14
After MHPA 1996, many states also
passed mental health parity laws.
Research focused on the impacts of
parity laws found that similar to MHPA
1996, even the most comprehensive
state laws resulted in little or no
increase in access to and utilization of
13 Barry, Colleen, et al. ‘‘Design of Mental Health
Benefits: Still Unequal After All These Years,’’
Health Affairs Vol. 22, Number 5, 2003. Please note
that the baseline data from the Kaiser HRET survey
cited in this article are weighted by region, firm size
and industry to reflect the national composition of
employers. So the data cited establishing the
baseline reflects the impact of state parity laws. It
is important to realize that state parity laws
frequently focus on a subset of diagnoses, e.g.,
biologically based disorders, and do not apply to
self-funded insurance programs. Thus, in most
states only a minority of insurance contracts is
affected by state parity laws.
14 Morton, John D. and Patricia Aleman. ‘‘Trends
in Employer-provided Mental Health and Substance
Abuse Benefits.’’ Monthly Labor Review, April 2005.

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mental health services for covered
individuals.15
To address these issues, Congress
amended MHPA 1996 by enacting
MHPAEA. One of Congress’ primary
objectives in enacting MHPAEA was to
improve access to mental health and
substance use disorder benefits by
eliminating discrimination that existed
with respect to these benefits after
MHPA 1996. Congress’ intent in
enacting MHPAEA was articulated in a
floor statement from Representative
Patrick Kennedy (D–RI), one of the chief
sponsors of the legislation, who said
‘‘[a]ccess to mental health services is one
of the most important and most
neglected civil rights issues facing the
Nation. For too long, persons living with
mental disorders have suffered
discriminatory treatment at all levels of
society.’’ 16 In a similar statement,
Representative James Ramstad (R–MN)
said, ‘‘[i]t’s time to end the
discrimination against people who need
treatment for mental illness and
addition. It’s time to prohibit health
insurers from placing discriminatory
barriers on treatment.’’ 17
The Departments expect that the
largest benefit associated with MHPAEA
and these regulations will be derived
from applying parity to cumulative
quantitative treatment limitations such
as annual or lifetime day or visit limits
(visit limitations). As discussed above, a
large percentage of plans imposed visit
limitations pre-MHPAEA, and the GAO
found that a major shortcoming of
MHPA 1996 was its failure to apply
parity to visit limitations. Applying
parity to visit limitations will help
ensure that vulnerable populations—
those accessing substantial amounts of
mental health and substance use
disorder services—have better access to
appropriate care. The Departments
cannot estimate how large this benefit
will be, because sufficient data is not
available to estimate the number of
covered individuals that had their
benefits terminated because they
reached their coverage limit. Though
difficult to estimate, the number of
beneficiaries who have a medical
necessity for substantial amount of care
are likely to be relatively small. Severe
15 Id., at 9. The state mental health parity laws
varied significantly with most of differences related
the following areas: the type of mental health
mandate, definition of mental illness, the inclusion
of substance abuse coverage, small employers’
coverage, and cost increase exceptions. Few state
laws provide as extensive coverage as MHPAEA,
particularly with regard to its prohibition of visit
limitations.
16 153 Cong. Rec. S1864–5 (daily ed., February 12,
2007).
17 154 Cong. Rec. H8619 (daily ed., September 23,
2008).

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mental health disorders account for 2–
3 percent of people in private health
insurance plans and a substantially
larger share of mental health spending.
Evidenced-based treatments for severe
and persistent mental illnesses like
schizophrenia, bipolar disorder and
chronic major depression requires
prolonged (possibly lifetime)
maintenance treatment that consists of
pharmacotherapy, supportive
counseling and often rehabilitation
services.18 The most common visit
limits under current insurance
arrangements are those for 20 visits per
year. That means assuming a minimal
approach to treatment of one visit per
week, people with severe and persistent
mental disorders will exhaust their
coverage in about five months. This
often results in people foregoing
outpatient treatment and a higher
likelihood of non-adherence to
treatment regimes that produce poor
outcomes and the potential for
increased hospitalization costs.
Increased coverage also should
provide enhanced financial protection
for this group by reducing out-of-pocket
expenses for services that previously
were needed but uncovered. This
should help prevent bankruptcy and
financial distress for these individuals
and families and reduce cost-shifting of
care to the public sector, both of which
occur when covered benefits are
exhausted. In addition, increased
coverage for those seeking substantial
amounts of care potentially could
reduce emergency room use by ensuring
that benefits for individuals with
serious conditions are not terminated.
Finally, reduced entry into disability
programs may result from having more
complete insurance coverage for mental
health and substance use disorder
treatment.
Since the early 1990s, many health
insurers and employers have made use
of specialized vendors, known as
behavioral health carve-outs to manage
their mental health and substance abuse
benefits. These vendors have
specialized expertise in the treatment of
mental and addictive disorders and
organized specialty networks of
providers. These vendors are known as
behavioral health carve-outs. They use
information technology, clinical
algorithms and selective contracts to
control spending on mental health and
substance abuse treatment. There is an
extensive literature that has examined
the cost savings and impacts on quality
18 See, Lehman AF ‘‘Quality of care in mental
health: the case of schizophrenia’’ Health Affairs
18(5): 52–65.

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of these organizations. Researchers 19
have reviewed this literature and
estimated reductions in private
insurance spending of 20 percent to 48
percent compared to fee-for-service
indemnity arrangements. Also, it
appears that the rate of utilization of
mental health care rises under
behavioral health carve out
arrangements. The number of people
receiving inpatient psychiatric care
typically declines as does the average
number of outpatient visits per episode.
The OPM encouraged its insurers to
consider carve-out arrangements when
implementing the parity directive in
2000 for the FEHBP. This is because of
the ability of behavioral health carveouts to use utilization management tools
to control utilization and spending in
the face of reductions in cost-sharing
and elimination of limits. Thus, parity
in a world dominated by behavioral
carve-outs has meant increased
utilization rates, reduced provider fees,
reduced rates of hospitalization and
fewer very long episodes of outpatient
care. Intensive treatment was more
closely aligned with higher levels of
severity.
Another potential benefit associated
with MHPAEA and these regulations is
that use of mental health and substance
use disorder benefits could improve.20
Untreated or under treated mental
health conditions and substance use
disorders are detrimental to individuals
and the entire economy. Day and visit
limits can interfere with appropriate
treatment thereby reducing the impact
of care for workers seeking treatment.
Many people with mental health
conditions and substance use disorders
are employed and these debilitating
conditions have a devastating impact on
employee attendance and productivity,
which results in lost productivity for
employers and lost earnings for
employees. For example, studies have
19 Sturm R, ‘‘Tracking changes in behavioral
health services: How carve-outs changed care?’’
Journal of Behavioral Health Services and Research
26(4): 360–371, 1999. Frank RG and Garfield RL;
‘‘Managed Behavioral Health Carve-Outs: Past
Performance and Future Prospects’’ Annual Reviews
of Public Health 2007, 28:11; 1–18. Frank RG and
Garfield RL; ‘‘Managed Behavioral Health CarveOuts: Past Performance and Future Prospects’’
Annual Reviews of Public Health 2007, 28:11; 1–18.
20 While studies have shown that state parity laws
have increased access only marginally, most state
laws still allowed disparate treatment limits for
mental health conditions and substance use
disorders, which limited access for those needing
significant amounts of treatment. As discussed
above, MHPAEA and these regulations prohibit the
imposition of such disparate limits, which could
increase access for those individuals. Nine states
have treatment limit requirements similar to
MHPAEA for mental health benefits, while 10 states
have similar requirements for substance abuse
disorder benefits.

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shown that the high prevalence of
depression and the low productivity it
causes have cost employers $31 billion
to $51 billion annually in lost
productivity in the United States.21
More days of work loss and work
impairment are caused by mental illness
than by various other chronic
conditions, including diabetes and
lower back pain.22
Moreover, studies have consistently
found that workers who report
symptoms of mental disorders have
lower earnings than other similarlysituated coworkers. For example, a
recent study funded by the National
Institutes of Health’s National Institute
of Mental Health 23 found that mental
disorders cost employees at least $193
billion annually in lost earnings alone,
a staggering number that probably is a
conservative estimate because it did not
include the costs associated with people
in hospitals and prisons, and included
very few participants with autism,
schizophrenia and other chronic
illnesses that are known to greatly affect
a person’s ability to work. The study
also noted that individuals suffering
from depression earn 40 percent less
than non-depressed individuals.
Although accurately determining
cause and effect can be difficult, studies
have attempted to estimate the
beneficial impact of treating mental
disorders. One study found that treating
individuals suffering from mental
disorders helped close the gap in
productivity between those with mental
disorders and those who did not have a
mental disorder.24 The finding that
treatment can help increase the
21 Stewart, W.F., Ricci, J.A., Chee, E., Hahn, S.R.
& Morgenstein, D. (2003, June 18). ‘‘Cost of lost
productive work time among US workers with
depression.’’ JAMA: Journal of the American
Medical Association. 289, 23, 3135–3144.
Kessler, R.C., Akiskal, H.S., Ames, M., Birnbaum,
H., Greenberg, P., Hirschfeld, H.M.A. et al. (2006).
‘‘Prevalence and effects of mood disorders on work
performance in a nationally representative sample
of U.S. workers.’’ American Journal of Psychiatry,
163, 1561–1568.
22 Stewart, W.F., Ricci, J.A., Chee, E., Hahn, S.R.
& Morgenstein, D. (2003, June 18). ‘‘Cost of lost
productive work time among US workers with
depression.’’ JAMA: Journal of the American
Medical Association. 289, 23, 3135–3144.
23 Kessler, Ronald C., Steven Heeringa, Matthew
D. Lakoma, Maria Petukhova, Agnes E. Rupp,
Michael Schoenbaum, Philip S. Wang, and Alan M.
Zaslavsky. ‘‘Individual and Societal Effects of
Mental Disorders on Earnings in the United States:
Results From the National Comorbidity Survey
Replication.’’
The American Journal of Psychiatry; June 2008;
165, 6; Research Library pg. 703.
24 Hilton, Michael F., Paul A. Schuffham, Judith
Sheridan, Catherine M. Clearly, Neria Vecchio, and
Harvey A. Whiteford. ‘‘The Association Between
Mental Disorders and Productivity in Treated and
Untreated Employees.’’ Journal of Occupational and
Environmental Medicine. Volume 51, Number 9,
September 2009.

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productivity of those suffering from
mental illness suggests that increasing
access to treatment of mental disorders
could have a beneficial impact on lost
productivity cost and lost earnings that
stem from untreated and under treated
mental health conditions and substance
use disorders. The Departments,
however, do not have sufficient data to
determine whether this result will
occur, and, if it does, the extent to
which lost productivity cost and lost
earnings could improve.
As noted above the combination of
reduced cost sharing and the
elimination of day and visit limits have
the effect of making coverage more
complete. The dominant role of
managed behavioral health care in the
market and the evidence about it
success in controlling costs means that
the moral hazard problem can be
controlled (the evidence on this is
discussed in more detail below). The
implication is that more complete
financial protection can be offered to
people without a significant increase in
social costs. This implies improved
efficiency in the insurance market since
more efficient risk spreading would
occur without much welfare loss due to
moral hazard.
In order to comply with MHPAEA
and these regulations, cost-sharing
requirements for mental health and
substance use disorder benefits cannot
be any more restrictive than the
predominant cost-sharing requirement
applied to substantially all medical/
surgical benefits. Because expenditures
on mental health and substance use
disorder benefits only comprise 3–6
percent of the total benefits covered by
a group health plan and 8 percent of
overall healthcare costs,25 the
Departments expect that group health
plans will lower cost-sharing on mental
health and substance use disorder
benefits instead of raising cost-sharing
on medical/surgical benefits.
MHPAEA and these interim final
regulations could have a positive impact
on the delivery system of mental health
services. Currently, approximately half
of mental health care is delivered solely
by primary care physicians.26 This trend
is likely due in part to the large
25 Finch R.A., Phillips K. Center for Prevention
and Health Services. ‘‘An Employer’s Guide to
Behavioral Health Services: A Roadmap and
Recommendations for Evaluating Designing, and
Implementing Behavioral Health Services.’’ National
Business Group on Health 2005.
26 Wang, P.S., Lane, M., Olfson, M., Pincus, H.A.,
Wells, K.B., and Kessler, R.C. (2005, June). ‘‘Twelve
month use of mental health services in the United
States.’’ Archives of General Psychiatry, 62, 629–
640. The study found that 40 percent of people
reporting mental health and substance use disorders
receive some treatment in a year.

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discrepancies between insurance costsharing for services delivered by mental
health professionals and primary care
physicians. Historically, the costsharing associated with primary care
physician visits is lower than costsharing for mental health professional
visits. This difference in the relative
price encouraged patients suffering from
mental illness to visit primary care
physicians for mental health-related
conditions. If MHPAEA and these
regulations result in lowering the
relative price of mental health care,
more individuals suffering from mental
illness could visit and receive care from
mental health professionals. One
study 27 found that only 12.7 percent of
individuals treated in the general
medical sector received at least
minimally adequate mental health care
compared to 48.3 percent of patients
treated in the specialty mental health
sector.28 A shift in source of treatment
from primary care physicians to mental
health professionals could lead to more
appropriate care, and thus, better health
outcomes.29 The Departments, however,
do not have sufficient data to estimate
how large this shift in treatment could
be or determine whether it will occur.
Mental health and physical health are
interrelated, and individuals with poor
mental health are more likely to have
27 Wang, P.S., Lane, M., Olfson, M., Pincus, H.A.,
Wells, K.B., and Kessler, R.C. (2005, June). ‘‘Twelve
month use of mental health services in the United
states.’’ Archives of General Psychiatry, 62, 629–
640.
28 Another analysis demonstrating poor
adherence to evidence-based treatment for mental
disorders is:
Wang PS, Berglund P, Kessler RC, Journal of
General Internal Medicine. 2000; 15:284–292.
Recent care of common mental disorders in the
United States: Prevalence and conformance with
evidence-based recommendations. This study finds
that only 57.3 percent of people with major
depression receive treatment during a year and less
than one-third of those who receive treatment
receive effective treatment.
Based on expert opinion, Normand et al. rated the
likely effectiveness of combinations of general
medical visits, specialty visits (with psychotherapy)
and drug treatment to demonstrate the correlation
between adequate treatment for depression and the
probability of remission. For patients with no antidepressant medication, the probability of remission
increased as the number of specialty visits
increased from one or less during a year to ten or
more. The probability of remission was greater for
patients with antidepressant medication and
improved with more specialty visits during the
year. Normand SLT, Frank RG, McGuire, TG. ‘‘Using
elicitation techniques to estimate the value of
ambulatory treatments for depression.’’ Medical
Decision Making, 2001; 22: 245–261.
29 The Healthcare Effectiveness Data and
Information Set report card for 2007 produced by
National Center for Quality Assurance shows that
for treatment of depression, only 20 percent of
patients get appropriate levels of provider contacts;
about 45 percent receive appropriate maintenance
level medications and 62 percent obtain adequate
medication doses and duration during the acute
phase of illness.

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physical health problems as well.
Increased access and utilization of
mental health and substance use
disorder benefits could result in a
reduction of medical/surgical costs for
individuals afflicted with mental health
conditions and substance use disorders.
The decrease in medical/surgical costs
could be significant; however, the
Departments do not have sufficient data
to estimate how large these health care
spending offsets could be or determine
whether they will occur.
There is disagreement among experts
as to whether depression is an
important antecedent risk factor for
physical illness or whether the causal
relationship acts in the opposite
direction. Regardless, there is evidence
that comorbid depression worsens the
prognosis, prolongs recovery and may
increase the risk of mortality associated
with physical illness. In addition,
comorbid depression has been shown to
increase the costs of medical care, over
and above the costs of treating the
depression itself.30
The returns on investment from
treatment of substance use disorders can
be large.31 Studies in Washington state
clinics demonstrated that each dollar
invested in inpatient and outpatient
substance abuse treatment yielded
returns of about 10 and 23 times their
initial investments, respectively.32
California and Oregon state treatment
systems demonstrated a sevenfold
return in their investments.33 Other
studies show effects ranging from a
return of one and a half times the cost
in a large study of a treatment clinic in
Chicago to a return of 5 times the initial
investment for a treatment for mentally
ill chemical abusers,34 resulting in a net
benefit of about $85,000 per client for an
investment of nearly $20,000.35
30 Conti R, Berndt ER, Frank RG. ‘‘Early retirement
and DI/SSI applications: Exploring the impact of
depression’’, in Culter DM, Wise DA. Health in
Older Ages: The causes and consequences of
declining disability among the elderly, (Chicago:
National Bureau of Economic Research, 2008).
31 The Office of National Drug Control Policy has
information on effective treatment and cost savings
at http://www.whitehousedrugpolicy.gov.
32 French, M.T., H.J. Salome, A. Krupski, J.R.
McKay, D.M. Donovan, A.T. McLellan, and J.
Durrell. (2000). ‘‘Benefit-cost analysis of residential
and outpatient addiction treatment in the State of
Washington.’’ Evaluation Review, 24(6), 609–634.
33 Ettner, S.L., D. Huang, E. Evans, D.R. Ash, M.
Hardy, M. Jourabchi, and Y. Hser. (2006). ‘‘BenefitCost in the California Treatment Outcome Project:
Does Substance Abuse Treatment ‘Pay for Itself?’’’
Health Services Research, 41(1), 192–213.
34 French, M.T., K.E. McCollister, S. Sacks, K.
McKendrick, & G. De Leon. (2002). ‘‘Benefit cost
analysis of a modified therapeutic community for
mentally ill chemical abusers.’’ Evaluation and
Program Planning, 25, 137–148.
35 The returns are the ratio of benefits to costs.
Benefits include personal as well as societal

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4. Costs
a. Cost associated with increased
utilization of mental health and
substance use disorder benefits. As
discussed in the Benefits section earlier
in this preamble, one of Congress’
primary objectives in enacting MPHAEA
was to eliminate barriers that impede
access to and utilization of mental
health and substance use disorder
benefits. This has raised concerns
among some that increased access and
utilization of mental health and
substance use disorder benefits will
result in increases in associated
payments and plan expenditures, which
could lead to large premium increases
that will make mental health and
substance use disorder benefits
unaffordable. The Departments are
uncertain regarding the level of
increased costs and premium increases
that will result from MHPAEA and these
regulations, but there is evidence that
any increases will not be large.
One theory for increased costs
resulting from parity is based on the fact
that cost-sharing for mental health and
substance use disorder benefits will
decrease. A frequent justification for
higher cost-sharing of mental health and
substance use disorder benefits is the
greater extent of moral hazard for these
benefits; individuals will utilize more
mental health and substance use
disorder benefits at a higher rate when
they are not personally required to pay
the cost. To support this assumption,
many have cited the RAND Health
Insurance Experiment, conducted in
1977–1982, which demonstrated that
individuals are more likely to increase
their mental health care usage when
their personal cost-sharing for mental
health care services fall than they are to
increase their physical health care usage
when their personal cost-sharing for
physical health care services decreases.
Because this experiment was conducted
nearly thirty years ago, researchers
recently tested to determine whether
this result held true.36 Their results
indicate that individuals’ sensitivity to
changes in cost-sharing may have
changed significantly over time. These
changes are explained at least in part
due to the expansion of managed
behavioral health care (described
earlier). The authors found that
individuals’ price responsiveness of
ambulatory mental health treatment is
benefits including increased employment and
reduced crime.
36 Meyerhoefer, Chad D. and Samuel Zuvekas,
2006. ‘‘New Estimates of the Demand for Physical
and Mental Health Treatment.’’ Agency for
Healthcare Research and Quality Working Paper
No. 06008.

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now slightly lower than physical health
treatment. These results indicate that if
plans lower the cost-sharing associated
with mental health services, costs will
not rise as much as would be expected
using the results from the RAND
Experiment.37
When the RAND Experiment was
conducted, managed care was not nearly
as prevalent as it is today. Health care
economists have studied the impact of
using cost control techniques associated
with managed care to reduce the
quantity of mental health and substance
use disorder benefits utilized so that
lowered cost sharing may result in only
a small increase in spending.38 This
research concluded that ‘‘comprehensive
parity implemented in the context of
managed care would have little impact
on total spending.’’ 39
These findings were similar to those
of a recent study published in the New
England Journal of Medicine examining
the Federal Employees Health Benefits
Program (FEHBP), which implemented
parity for mental health and substance
use disorder benefits in 2001.40 The
primary concern has been that the
existence of parity in the FEHBP would
result in large increases in the use of
mental health and substance-abuse
services and spending on these services.
However, the study concluded that
these fears were unfounded and ‘‘that
parity of coverage of mental health and
substance-abuse services, when coupled
with management of care, is feasible and
can accomplish its objectives of greater
fairness and improved insurance
protection without adverse
consequences for health care costs.’’ 41
The study found average per user
declines in out patient cost sharing of
between zero and $87 depending on the
37 Another paper showing a similar result to the
Myerhoefer paper cited above is: Lu CL, Frank, RG
and McGuire TG. ‘‘Demand Response Under
Managed Care.’’ Contemporary Economic Policy,
27(1):1–15, 2009.
38 Barry, Frank, and McGuire. ‘‘The Costs of
Mental Health Parity: Still an Impediment?’’ Health
Affairs, no. 3:623 (2006).
39 Id.
40 Goldman, et al., ‘‘Behavioral Health Insurance
Parity for Federal Employees,’’ New England Journal
of Medicine (March 30, 2006) Vol. 354, No. 13. In
1999, President Clinton directed the Office of
Personnel Management (OPM) to equalize benefits
coverage in the FEHBP, and parity was
implemented in 2001. Parity under the FEHBP is
very similar to MHPAEA. It requires benefits
coverage for plan mental health, substance abuse,
medical, surgical, and hospital providers to have
the same limitations and cost-sharing such as
deductibles, coinsurance, and co-pays. When
patients use plan providers and follow a treatment
regime approved by their plan, all diagnostic
categories of mental health and substance abuse
conditions listed in the Diagnostic and Statistical
Manual of Mental Disorders, Fourth Edition (DSM
IV) are covered.
41 Id.

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plan. The reductions were largest for
high users of mental health care. The
study also found that insurers were not
likely to drop out of the FEHBP pool
due to the implementation of parity.
The experience of states that have
enacted mental health parity laws with
appropriate managed care also suggests
that minimal increased cost results from
implementing parity. One study found
that ‘‘with the implementation of mental
health parity at the same time as
managed behavioral health care, many
states have discovered that overall
health care costs increased minimally
and in some cases even were
reduced.’’ 42 For example, at least nine
states—California, Maine, Maryland,
Minnesota, North Carolina,
Pennsylvania, Rhode Island, South
Carolina, and Vermont—have actually
documented experience that
implementing mental health parity
including cost controls through
managed care resulted in lower costs
and lowered premiums (or at most, very
modest cost increases of less than one
percent) within the first year of
implementation.43
Similarly, the Departments expect
medical management and managed care
techniques will help control any major
cost impact resulting from MHPAEA
and these regulations. As discussed
earlier in this preamble, these
regulations provide that medical
management can be applied to mental
health and substance use disorder
benefits by plans as long as any
processes, strategies, evidentiary
standards, or other factors used in
applying medical management are
comparable to, and are applied no more
stringently than, the processes,
strategies, evidentiary standards, or
other factors used in applying medical
management to medical/surgical
benefits.
Although the increase in per plan
costs associated with parity is not likely
to be substantial, there may be plans
that decide to drop coverage for mental
health and substance use disorder
benefits in response to higher costs, or
individuals may decide to drop
coverage even if it is offered. The
Departments do not have an estimate of
the number of plans that will drop
coverage or the number of individuals
that will lose benefits. Currently 98
percent of covered workers have some
form of mental health benefits.44 The
42 Melek, Steve, ‘‘The Costs of Mental Health
Parity,’’ Health Section News (March 2005).
43 Bachman, Ronald, Mental Health Parity—Just
the Facts (2000).
44 Kaiser Family Foundation and Health Research
& Educational Trust. Employer Health Benefits 2008
Annual Survey.

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lack of coverage for mental health and
substance use disorder benefits for these
people may lead to many of the typical
costs associated with uninsured
individuals: Lack of access, decreased
health, and increased financial burden.
The Departments are not able to
quantify these costs. Research on the
introduction of state parity laws
suggests few plans or individuals will
drop insurance coverage due to parity.45
b. Costs associated with cumulative
financial requirements and quantitative
treatment limitations, including
deductibles. As discussed earlier in this
preamble, paragraph (c)(3)(v) of these
regulations provide that a group health
plan may not apply cumulative
financial requirements, such as
deductibles, for mental health and
substance use disorder benefits in a
classification that accumulate separately
from any such requirements or
limitations established for medical/
surgical benefits in the same
classification. Some group health plans
and health insurance issuers ‘‘carve-out’’
the administration and management of
mental health and substance use
disorder benefits to MBHOs. These
entities obtain cost savings for plan
sponsors by providing focused case
management and directing care to a
broad network of mental and behavioral
health specialists (with whom they
negotiate lower fees) who ensure that
appropriate care for mental health
conditions and substance use disorders
is provided.46
When a group health plan or health
insurance issuer uses a carve-out
arrangement, at least two entities are
involved in separately managing and
administering medical/surgical and
mental health and substance use
disorder benefits.47 The imposition of a
single deductible requires entities
providing medical/surgical and mental
health and substance use disorder
benefits to develop and program a
communication network often referred
to as an ‘‘interface’’ or an ‘‘accumulator’’
that will allow them to exchange the
data necessary to make timely and
accurate determinations of when
45 Cseh,

Attila. ‘‘Labor Market Consequences of
State Mental Health Parity Mandates,’’ Forum for
Health Economics & Policy, Vol. 11, issue 2, 2008.
46 Research papers have indicated that carve-out
arrangements have reduced the cost of proving
mental health and substance use disorder benefits
by an estimated 25–40 percent. Frank, Richard G.
and Thomas G. McGuire, ‘‘Savings from a Carve-Out
Program for Mental Health and Substance Abuse in
Massachusetts Medicaid’’ Psychiatric Services 48(9);
1147–1152, 1997; Ma, Ching-to Albert and Thomas
G. McGuire, ‘‘Costs and Incentives in a Behavioral
Health Carve-out. Health Affairs March/April 1998.
47 This can create a coordination issue that has
cost implications that otherwise do not exist when
a single vendor is used.

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participants have incurred sufficient
combined medical/surgical and mental
health and substance use disorder
expenses to satisfy the single
deductible.
Two comments received in response
to the RFI indicate that MBHOs would
confront significant costs to develop
real-time interfaces that could range
from $420,000–$750,000 with an
additional $40,000–$70,000 required for
annual maintenance.48 The Departments
held discussions with the regulated
community which indicated that
interface development costs may not be
as high as stated in the RFI comments.
For example, the Departments have
learned that MBHOs could develop less
costly ‘‘batch process’’ interfaces that
exchange data on a daily or weekly basis
rather than real-time for as low as
approximately $35,000 per interface.49
It also appears that some plan
sponsors using carve-out arrangements
already are implementing a unified,
single deductible, and MBHOs have
created interfaces to service these
clients. For example, the Departments’
discussions found that one MBHO
already has established 10–15
accumulators, because its plan sponsor
clients requested a single deductible.
The MBHO reported that another 10–15
accumulators were being implemented
for the current benefit year, because
plan sponsors wanted to ensure that
they were compliant with MHPAEA.
This finding suggests that while costly,
putting these accumulators in place is
not cost prohibitive for the MBHOs and
plan sponsors. Moreover, plans and
issuers have created and used interfaces
with separate pharmacy benefit
managers and dental insurers for years.
Interface development costs should
decrease after the first interface is
created. The experience and lessons
learned from creating these interfaces
should reduce the cost associated with
designing and implementing interfaces
with MBHOs.
While the RFI comment letters
suggested that MBHOs would have to
create 40–50 interfaces each, this
48 RFI comments. MHPAEA RFI comments can be
viewed at http://www.dol.gov/ebsa/regs/cmtMHPAEA.html.
49 An additional undetermined expense would be
required to reconcile and make adjustments in
instances when two claims are received on the same
day satisfying the unified deductible. While this
alternative would produce a much lower cost than
real-time interfaces, the costs remain significant. A
low-end estimate of the first year cost for MBHOs
and insurers to create, on average, at least 20 new
interfaces would be $700,000 per insurer. There is
uncertainty regarding the total cost, because the
number of entities that would need to create
interfaces is unclear. The Departments are aware of
460 health insurance issuers and at least 120
MBHOs that could be affected.

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number most likely only relates to the
largest MBHOs. The smallest MBHOs
would need to create fewer interfaces.
The Departments assume that a
significant number of smaller MBHOs
exist; therefore, the Departments
estimate that, on average, seven
interfaces would have to be created per
insurer. The Departments acknowledge
that there is uncertainty in this estimate
due to incomplete information about the
MBHO industry.
For purposes of this analysis, the
Departments have used an estimated
interface development cost of $35,000
per interface, because the Departments
were not able to substantiate the higher
estimated costs provided in the RFI
comment letters, and the propensity of
the evidence leads to the conclusion
that the cost could be significantly less.
Based on the foregoing, the Departments
estimate total interface development
costs of approximately $39.2 million.50
Once the interfaces are created,
ongoing annual maintenance costs will
be incurred. One industry source
suggested that ongoing maintenance
costs could be one-tenth of the
development costs, and based on this
information, the Departments estimate
that maintenance cost of $3.9 million
will be incurred annually after the
interfaces are created.
While the total interface development
and maintenance costs are large, a
useful measure to examine is the perparticipant cost impact. While reliable
estimates of the number of participants
enrolled in plans utilizing MBHOs are
not available, based on the best
available information, the Departments
estimate that at least 70 million
participants are covered by MBHOs.
Based on this count, the per-participant
first year interface development costs
would be $0.60, and the maintenance
costs in subsequent years would be less
than one cent.
Comments from health insurance
issuers have suggested that the costs of
creating these interfaces would be
passed on to participants in the form of
higher premiums; however, no
independent information has been
found to corroborate this assertion.
c. Compliance review costs. The
Departments expect that group health
plans and health insurance issuers will
conduct a compliance review to ensure
50 Please note that using the $420,000 per
interface estimate cited in the RFI comment letters
would result in total interface development costs of
$470 million, with annual maintenance costs of $47
million. Based on this estimate, the per-participant
first year interface development costs would be $7,
and the annual maintenance costs in subsequent
years would be $.06 cents per participant per
month.

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that their plan documents, summary
plan descriptions, and any associated
policies and procedures comply with
the requirements of MHPAEA and these
regulations. While the Departments do
not know the total number of issuers
that will be affected by the regulations,
the Departments estimate that there are
approximately 460 issuers operating in
the group market. In addition, the
Departments are aware of at least 120
MBHOs.51 The Departments believe
smaller MBHOs exist but were unable to
obtain a count.
The Departments assume that insured
plans will rely on the issuers providing
coverage to ensure compliance, and that
self-insured plans will rely on thirdparty administrators to ensure
compliance. The per-plan compliance
costs are expected to be low, because
vendors and issuers will be able to
spread these costs across multiple client
plans. These regulations provide
examples illustrating the application of
the rules to specific situations, which
are intended to reduce the compliance
burden.
The Departments assume that the
average burden per plan will be one-half
hour of a legal professional’s time at an
hourly labor rate of $120 to conduct the
compliance review and make the
needed changes to the plan and related
documents. This results in a total cost
of $27.8 million in the first year. The
Departments welcome public comments
on this estimate.
d. Costs associated with MHPAEA
disclosures. MHPAEA and these
regulations contain two new disclosure
provisions for group health plans and
health insurance coverage offered in
connection with a group health plan
that are addressed in paragraph (d) of
the rules.
(1) Medical necessity disclosure. The
first disclosure requires plan
administrators to make the plan’s
medical necessity determination criteria
available upon request to potential
participants, beneficiaries, or
contracting providers. The Departments
are unable to estimate with certainty the
number of requests that will be received
by plan administrators based on this
requirement. However, the Departments
have assumed that, on average, each
plan affected by the rule will receive
one request. For purposes of this
estimate, the Departments assume that it
will take a medically trained clerical
staff member five minutes to respond to
each request at a labor rate of $26.85 per
51 There are about 460 issuers in the group
market; this is an average of 1,000 plans per issuers.
In addition, there are at least 120 MBHOs.

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hour resulting in an annual cost of
approximately $1,044,000.52
The Departments also estimated the
cost to deliver the requested criteria for
medical necessity determinations. Many
insurers already have the information
prepared in electronic form, and the
Departments assume that 38 percent 53
of requests will be delivered
electronically resulting in a de minimis
cost. The Departments estimate that the
cost associated with distributing the
approximately 290,000 requests sent by
paper will be approximately $192,000.54
(2) Claims denial disclosure.
MHPAEA and these regulations also
provide that the reason for any denial
under a group health plan (or health
insurance coverage) of reimbursement
or payment for services with respect to
mental health or substance use disorder
benefits in the case of any participant or
beneficiary must be made available
upon request or as otherwise required
by the plan administrator (or the health
insurance issuer offering such coverage)
to the participant or beneficiary. The
Department of Labor’s ERISA claims
procedure regulation (29 CFR 2560.503–
1) requires, among other things, such
disclosures to be provided automatically
to participants and beneficiaries free of
charge. Although non-ERISA covered
plans, such as plans sponsored by state
and local governments that are subject
to the PHS Act, are not required to
comply with the ERISA claims
procedure regulation, these regulations
provide that such plans (and health
insurance coverage offered in
connection with such plans) will be
deemed to satisfy the MHPAEA claims
denial disclosure requirement if they
comply with the ERISA claims
procedure regulation.
For purposes of this cost analysis, the
Departments assume that non-Federal
governmental plans will satisfy the safe
harbor, because the same third-party
administrators and insurers are hired by
ERISA- and non-ERISA-covered plans,
and these entities provide the same
claims denial notifications to
participants covered by ERISA- and
non-ERISA-covered plans. Therefore,
52 EBSA estimates of labor rates include wages,
other benefits, and overhead based on the National
Occupational Employment Survey (May 2008,
Bureau of Labor Statistics) and the Employment
Cost Index (June 2009, Bureau of Labor Statistics).
53 For purposes of this burden estimate, the
Departments assume that 38 percent of the
disclosures will be provided through electronic
means in accordance with the Department’s
standards for electronic communication of required
information provided under 29 CFR 2520.104b–
1(c).
54 This estimate is based on an average document
size of four pages, $.05 cents per page material and
printing costs, $.44 cent postage costs.

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based on the foregoing, the Departments
have not included a cost for plans to
provide the claims denial disclosures.

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5. Transfer Resulting for Premium
Increase Due to MHPAEA
The evaluation of mental health and
substance use disorder parity in the
Federal Employees Health Benefit
Program (FEHBP) estimated the overall
impact of parity on total spending for
mental health and substance use
disorder services relative to a set of
control plans that did not experience
any increase in mental health
coverage.55 That evaluation also
assessed changes in out-of-pocket
spending. The overall results on total
mental health and substance use
disorder (MH/SUD) spending (health
plan spending plus out of pocket
spending) showed essentially no
significant increase in total MH/SUD
spending. The evaluation also showed
that in general parity resulted in a
statistically significant decrease in outof-pocket spending. This means that
while there was no increase in the total
spending on MH/SUD services there
was a significant shift in the final
responsibility for paying for these
services. In other words, health plan
spending expanded due to parity. The
magnitude of the change implies an
estimated increase in total health care
premiums of 0.4 percent.56 Thus the 0.4
percent increase derived from the
FEHBP evaluation is due entirely to a
shift in final responsibility for payment.
The Congressional Budget Office 57
estimated the direct and indirect costs
to the private and public sector of
implementing MHPAEA and similarly
found that health insurance premiums
would go up by approximately 0.4
percent. The FEHBP estimate contrasts
with the CBO estimate, because the CBO
estimate appears to include some shift
in final payment along with an increase
in service utilization.
The Departments estimate that total
health care premiums will rise 0.4
percent due to MHPAEA based on data
and analysis from the FEHBP
evaluation. The premium increase is a
transfer from those not using MH/SUD
benefits to those who do, because given
the size of the estimated impacts and
the known changes in coverage from
baseline discussed earlier in this
55 Goldman, et al., ‘‘Behavioral Health Insurance
Parity for Federal Employees,’’ New England Journal
of Medicine (March 30, 2006) Vol. 354, No. 13.
56 The estimated .04 percent increase was derived
from an authors’ final calculation based on data
from the report cited in the previous footnote.
57 Congressional Budget Office Cost Estimate on
H.R. 1424—Paul Wellstone Mental Health and
Addiction Equity Act of 2007, 21 November 2007.

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Regulatory Impact Analysis, any change
in utilization must be very small again
suggesting that premium changes were
primarily due to a shift in responsibility
for final payments for MH/SUD care.
Using data on private health
insurance premiums from the National
Health Expenditure Projections 58 and
data on premiums for individual
insurance 59 from the National
Association of Insurance
Commissioners, the Departments
estimate that the dollar amount of the
0.4 percent premium increases
attributable to MHPAEA would be
approximately $25.6 billion over the
ten-year period 2010–2019. The ten-year
value using a discount rate of seven
percent is $19.0 billion, and it is $22.4
billion using a three percent discount
rate. Yearly estimates are reported in
Table 1, column G. Due to the
magnitude of this transfer, this
regulatory action is economically
significant pursuant to section 3(f)(1) of
Executive Order 12866.
D. Regulatory Flexibility Act—
Department of Labor and Department of
Health and Human Services
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to
federal rules that are subject to the
notice and comment requirements of
section 553(b) of the Administrative
Procedure Act (APA) (5 U.S.C. 551 et
seq.) and that are likely to have a
significant economic impact on a
substantial number of small entities.
Under Section 553(b) of the
Administrative Procedures Act (APA), a
general notice of proposed rulemaking
is not required when an agency, for
good cause, finds that notice and public
comment thereon are impracticable,
unnecessary, or contrary to the public
interest. These interim final regulations
are exempt from APA, because the
Departments made a good cause finding
that a general notice of proposed
rulemaking is not necessary earlier in
this preamble. Therefore, the RFA does
not apply and the Departments are not
required to either certify that the rule
would not have a significant economic
58 National Health Expenditures Projections
2008–2018, Centers for Medicare & Medicaid
Services, Office of the Actuary, http://
www.cms.hhs.gov/NationalHealthExpendData/.
59 The National Health Expenditure estimate of
total spending on private health insurance includes
premiums for purchases made in the individual
market, which is not affected by MHPAEA.
Therefore it needs to be subtracted from the total.
The NAIC data does not contain information from
California; therefore, an adjustment based on the
number of lives covered in California and average
premiums was used to impute a value for
California.

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5427

impact on a substantial number of small
entities or conduct a regulatory
flexibility analysis.
Nevertheless, the Departments
carefully considered the likely impact of
the rule on small entities in connection
with their assessment under Executive
Order 12866. The Departments expect
the rules to reduce the compliance
burden imposed on plans and insurers
by clarifying definitions and terms
contained in the statute and providing
examples of acceptable methods to
comply with specific provisions. The
Departments believe that the rule’s
impact on small entities will be
minimized by the fact that MHPAEA
does not apply to small employers who
have between two and 50 employees.
E. Special Analyses—Department of the
Treasury
Notwithstanding the determinations
of the Department of Labor and
Department of Health and Human
Services, for purposes of the Department
of the Treasury, it has been determined
that this Treasury decision is not a
significant regulatory action for
purposes of Executive Order 12866.
Therefore, a regulatory assessment is not
required. It has also been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations. For the
applicability of the RFA, refer to the
Special Analyses section in the
preamble to the cross-referencing notice
of proposed rulemaking published
elsewhere in this issue of the Federal
Register. Pursuant to section 7805(f) of
the Code, these temporary regulations
have been submitted to the Chief
Counsel for Advocacy of the Small
Business Administration for comment
on their impact on small businesses.
F. Paperwork Reduction Act
1. Departments of Labor and the
Treasury
As part of their continuing efforts to
reduce paperwork and respondent
burden, the Departments conduct a
preclearance consultation program to
provide the general public and federal
agencies with an opportunity to
comment on proposed and continuing
collections of information in accordance
with the Paperwork Reduction Act of
1995 (PRA) (44 U.S.C. 3506(c)(2)(A)).
This helps to ensure that requested data
can be provided in the desired format,
reporting burden (time and financial
resources) is minimized, collection
instruments are clearly understood, and
the impact of collection requirements on
respondents can be properly assessed.

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As discussed earlier in this preamble,
MHPAEA includes two new disclosure
provisions for group health plans and
health insurance coverage offered in
connection with a group health plan.
First, the criteria for medical necessity
determinations made under a group
health plan with respect to mental
health or substance use disorder
benefits (or health insurance coverage
offered in connection with the plan with
respect to such benefits) must be made
available in accordance with regulations
by the plan administrator (or the health
insurance issuer offering such coverage)
to any current or potential participant,
beneficiary, or contracting provider
upon request (‘‘medical necessity
disclosure’’).
MHPAEA also requires the reason for
any denial under a group health plan (or
health insurance coverage) of
reimbursement or payment for services
with respect to mental health or
substance use disorder benefits in the
case of any participant or beneficiary
must be made available upon request or
as otherwise required by the plan
administrator (or the health insurance
issuer offering such coverage) to the
participant or beneficiary in accordance
with regulations (‘‘claims denial
notice’’).
The MHPAEA disclosures are
information collection requests (ICRs)
subject to the PRA. The Departments are
not soliciting comments concerning an
ICR pertaining to the claims denial
notice, because the Department of
Labor’s ERISA claims procedure
regulation (29 CFR 2560.503–1) requires
(among other things) ERISA-covered
group health plans to provide such
disclosures automatically to participants
and beneficiaries free of charge.
Although non-ERISA covered plans,
such as certain church plan under
Treasury/IRS jurisdiction and plans
sponsored by state and local
governments that are subject to the PHS
Act and under HHS jurisdiction (these
plans are discussed under the HHS ICR
discussion below) are not required to
comply with the ERISA claims
procedure regulation, these regulations
provide that such plans (and health
insurance coverage offered in
connection with such plans) will be
deemed to satisfy the MHPAEA claims
denial disclosure requirement if they
comply with the ERISA claims
procedure regulation. For purposes of
this PRA analysis, the Departments
assume that non-ERISA plans will
satisfy the safe harbor, because the same
third-party administrators and insurers
are hired by ERISA- and non-ERISAcovered plans, and these entities
provide the same claims denial

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notifications to participants covered by
ERISA- and non-ERISA-covered plans.
Therefore, the Departments hereby
determine that the hour and cost burden
associated with the claims denial notice
already is accounted for in the ICR for
the ERISA claims procedure regulation
that is approved under OMB Control
Number 1210–0053.
Currently, the Departments are
soliciting comments concerning the
medical necessity disclosure. The
Departments have submitted a copy of
these interim final regulations to OMB
in accordance with 44 U.S.C. 3507(d) for
review of the information collections.
The Departments and OMB are
particularly interested in comments
that:
• Evaluate whether the collection of
information is necessary for the proper
performance of the functions of the
agency, including whether the
information will have practical utility;
• Evaluate the accuracy of the
agency’s estimate of the burden of the
collection of information, including the
validity of the methodology and
assumptions used;
• Enhance the quality, utility, and
clarity of the information to be
collected; and
• Minimize the burden of the
collection of information on those who
are to respond, including through the
use of appropriate automated,
electronic, mechanical, or other
technological collection techniques or
other forms of information technology,
for example, by permitting electronic
submission of responses.
Comments should be sent to the
Office of Information and Regulatory
Affairs, Attention: Desk Officer for the
Employee Benefits Security
Administration either by fax to (202)
395–7285 or by e-mail to
[email protected].
Although comments may be submitted
through April 5, 2010, OMB requests
that comments be received within 30
days of publication of these interim
final regulations to ensure their
consideration. A copy of the ICR may be
obtained by contacting the PRA
addressee: G. Christopher Cosby, Office
of Policy and Research, U.S. Department
of Labor, Employee Benefits Security
Administration, 200 Constitution
Avenue, NW., Room N–5718,
Washington, DC 20210. Telephone:
(202) 693–8410; Fax: (202) 219–4745.
These are not toll-free numbers. E-mail:
[email protected]. ICRs submitted to
OMB also are available at reginfo.gov
(http://www.reginfo.gov/public/do/
PRAMain).
The Departments are unable to
estimate with certainty the number of

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requests for medical necessity criteria
disclosures that will be received by plan
administrators; however, the
Departments have assumed that, on
average, each plan affected by the rule
will receive one request. The
Departments estimate that
approximately 93 percent of large plans
and all small plans administer claims
using service providers; therefore, 5.1
percent of the medical necessity criteria
disclosures will be done in-house. For
PRA purposes, plans using service
providers will report the costs as a cost
burden, while plans administering
claims in-house will report the burden
as an hour burden.
The Departments assume that it will
take a medically trained clerical staff
member five minutes to respond to each
request at a wage rate of $27 per hour.
This results in an annual hour burden
of nearly 1,900 hours and an associated
equivalent cost of nearly $51,000 for the
approximately 23,000 requests done inhouse by plans. The remaining 424,000
medical necessity criteria disclosures
will be provided through service
providers resulting in a cost burden of
approximately $950,000.
The Departments also calculated the
cost to deliver the requested medical
necessity criteria disclosures. Many
insurers and plans already may have the
information prepared in electronic form,
and the Departments assume that 38
percent of requests will be delivered
electronically resulting in a de minimis
cost. The Departments estimate that the
cost burden associated with distributing
the approximately 277,000 medical
necessity criteria disclosures sent by
paper will be approximately $177,000.60
The Departments note that persons are
not required to respond to, and
generally are not subject to any penalty
for failing to comply with, an ICR unless
the ICR has a valid OMB control
number.61
These paperwork burden estimates
are summarized as follows:
Type of Review: New collection.
Agencies: Employee Benefits Security
Administration, Department of Labor;
Internal Revenue Service, U.S.
Department of the Treasury.
Title: Notice of Medical Necessity
Criteria under the Mental Health Parity
and Addition Equity Act of 2008.
OMB Number: 1210–NEW; 1545–
NEW.
Affected Public: Business or other forprofit; not-for-profit institutions.
Total Respondents: 446,400.
60 This estimate is based on an average document
size of four pages, $.05 cents per page material and
printing costs, $.44 cent postage costs.
61 5 CFR 1320.1 through 1320.18.

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Total Responses: 446,400.
Frequency of Response: Occasionally.
Estimated Total Annual Burden
Hours: 950 hours (Employee Benefits
Security Administration); 950 hours
(Internal Revenue Service).
Estimated Total Annual Burden Cost:
$562,500 (Employee Benefits Security
Administration); $562,500 (Internal
Revenue Service).

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2. Department of Health and Human
Services
Under the PRA, we are required to
provide 30-days notice in the Federal
Register and solicit public comment
before a collection of information
requirement is submitted to the Office of
Management and Budget (OMB) for
review and approval. In order to fairly
evaluate whether an information
collection should be approved by OMB,
section 3506(c)(2)(A) of the PRA
requires that we solicit comment on the
following issues:
• The need for the information
collection and its usefulness in carrying
out the proper functions of our agency.
• The accuracy of our estimate of the
information collection burden.
• The quality, utility, and clarity of
the information to be collected.
• Recommendations to minimize the
information collection burden on the
affected public, including automated
collection techniques.
We are soliciting public comment on
each of these issues for the following
sections of this document that contain
information collection requirements
(ICRs):
ICRs Regarding Parity in Mental Health
and Substance Use Disorder Benefits.
(45 CFR 146.136(d))
As discussed above, MHPAEA
includes two new disclosure provisions
for group health plans and health
insurance coverage offered in
connection with a group health plan.
First, the criteria for medical necessity
determinations made under a group
health plan with respect to mental
health or substance use disorder
benefits (or health insurance coverage
offered in connection with the plan with
respect to such benefits) must be made
available in accordance with regulations
by the plan administrator (or the health
insurance issuer offering such coverage)
to any current or potential participant,
beneficiary, or contracting provider
upon request (‘‘medical necessity
disclosure’’).
MHPAEA also requires the reason for
any denial under a group health plan (or
health insurance coverage) of
reimbursement or payment for services
with respect to mental health or

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substance use disorder benefits in the
case of any participant or beneficiary
must be made available upon request or
as otherwise required by the plan
administrator (or the health insurance
issuer offering such coverage) to the
participant or beneficiary in accordance
with regulations (‘‘claims denial
disclosure’’).
Medical Necessity Disclosure
The Department estimates that there
are 29.1 million participants covered by
20,300 state and local public plans that
are subject to the MHPAEA disclosure
requirements that are employed by
employers with more than 50
employees.62
The Department is unable to estimate
with certainty the number of requests
for medical necessity criteria
disclosures that will be received by plan
administrators; however, the
Department has assumed that, on
average, each plan affected by the rule
will receive one request. CMS estimates
that approximately 93 percent of large
plans administer claims using third
party providers. Furthermore the vast
majority of all smaller employers
usually are fully insured such that
issuers will be administering their
claims. Therefore 5.1 percent of claims
are administered in-house. For plans
that use issuers or third party providers
the costs are reported as cost burden
while for plans that administer claims
in-house the burden is reported as an
hour burden. For purposes of this
estimate, the Department assumes that it
will take a medically trained clerical
staff member five minutes to respond to
each request at a wage rate of $26.85 per
hour. This results in an annual hour
burden of 86 hours and an associated
equivalent cost of about $2,300 for the
approximately 1,000 requests handled
by plans. The remaining 19,300 claims
(94.9 percent) are provided through a
third-party provider or an issuer and
results in a cost burden of
approximately $43,000.
Claims Denial Disclosure
MHPAEA requires plans to disclose to
participants and beneficiaries upon
request the reason for any denial under
the plan (or coverage) of reimbursement
or payment for services with respect to
mental health or substance use disorder
benefits. The Department of Labor’s
ERISA claims procedure regulation (29
62 Non-Federal governmental plans may opt-out
of MHPAEA and certain other requirements under
Section 2721 of the PHS Act. Since past experience
has shown that the number of non-Federal
governmental plans that opt-out is small, the impact
of the opt-out election should be immaterial on the
Department’s estimates.

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CFR 2560.503–1) requires, among other
things, such disclosures to be provided
automatically to participants and
beneficiaries free of charge. Although
non-ERISA covered plans, such as plans
sponsored by state and local
governments that are subject to the PHS
Act, are not required to comply with the
ERISA claims procedure regulation, the
interim final regulations provide that
these plans (and health insurance
coverage offered in connection with
such plans) will be deemed to satisfy
the MHPAEA claims denial disclosure
requirement if they comply with the
ERISA claims procedure regulation.
Using assumptions similar to those
used for the ERISA claims procedure
regulation, the Department estimates
that there will be approximately 29.7
million claims for mental health or
substance use disorder benefits with
approximately 4.45 million denials that
could result in a request for an
explanation of reason for denial. The
Department has no data on the percent
of denials that will result in a request
for an explanation, but assumed that ten
percent of denials will result in a
request for an explanation (445,000
requests).
The Department estimates that a
medically trained clerical staff member
may require five minutes to respond to
each request at a labor rate of $27 per
hour. This results in an annual hour
burden of nearly 1,900 hours and an
associated equivalent cost of nearly
$51,000 for the approximately 22,700
requests completed by plans. The
remaining 422,300 are provided through
an issuer or a third-party provider,
which results in a cost burden of
approximately $945,000.
In association with the explanation of
denial, participants may request a copy
of the medical necessity criteria. While
the Department does not know how
many notices of denial will result in a
request for the criteria of medical
necessity, the Department assumes that
ten percent of those requesting an
explanation of the reason for denial will
also request the criteria of medical
necessity, resulting in 44,500 requests,
2,300 of which will be completed inhouse with an hour burden of 190 hours
and equivalent cost of $5,000 and
42,000 requests handled by issuers or
third-party providers with a cost burden
of $95,000.
The Department also calculated the
cost to deliver the requested
information. Many insurers or plans
may already have the information
prepared in electronic format, and the
Department assumes that requests will
be delivered electronically resulting in a

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de minimis cost.63 The Department
estimates that the cost burden
associated with distributing the
approximately 135,000 disclosures sent
by paper will be approximately
$86,000.64 The Department notes that
persons are not required to respond to,
and generally are not subject to any
penalty for failing to comply with, an
ICR unless the ICR has a valid OMB
control number.65
These paperwork burden estimates
are summarized as follows:
Type of Review: New collection.
Agency: Department of Health and
Human Services.
Title: Required Disclosures Under the
Mental Health Parity and Addition
Equity Act of 2008.
OMB Number: 0938–NEW.
Affected Public: State, Local, or Tribal
Governments.
Respondents: 20,300.
Responses: 510,000.
Frequency of Response: Occasionally.
Estimated Total Annual Burden
Hours: 2,200 hours.
Estimated Total Annual Burden Cost:
$1,169,000.
If you comment on these information
collection and recordkeeping
requirements, please do either of the
following:
1. Submit your comments
electronically as specified in the
ADDRESSES section of this proposed rule;
or
2. Submit your comments to the
Office of Information and Regulatory
Affairs, Office of Management and
Budget,
Attention: CMS Desk Officer, 4140–
IFC
Fax: (202) 395–6974; or
E-mail:
[email protected].
G. Congressional Review Act
These regulations are subject to the
Congressional Review Act provisions of
the Small Business Regulatory
Enforcement Fairness Act of 1996 (5
U.S.C. 801 et seq.) and have been
transmitted to Congress and the
Comptroller General for review.
H. Unfunded Mandates Reform Act

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The Unfunded Mandates Reform Act
of 1995 (Pub. L. 104–4) requires
63 Following the assumption in the ERISA claims
regulation, it was assumed 75 percent of the
explanation of denials disclosures would be
delivered electronically, while it was assumed that
38 percent of non-denial related requests for the
medical necessity criteria would be delivered
electronically.
64 This estimate is based on an average document
size of four pages, $.05 cents per page material and
printing costs, $.44 cent postage costs.
65 5 CFR 1320.1 through 1320.18.

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agencies to prepare several analytic
statements before proposing any rules
that may result in annual expenditures
of $100 million (as adjusted for
inflation) by state, local and tribal
governments or the private sector. These
rules are not subject to the Unfunded
Mandates Reform Act because they are
being issued as interim final rules.
However, consistent with the policy
embodied in the Unfunded Mandates
Reform Act, the regulation has been
designed to be the least burdensome
alternative for state, local and tribal
governments, and the private sector,
while achieving the objectives of
MHPAEA.
I. Federalism Statement—Department of
Labor and Department of Health and
Human Services
Executive Order 13132 outlines
fundamental principles of federalism,
and requires the adherence to specific
criteria by federal agencies in the
process of their formulation and
implementation of policies that have
‘‘substantial direct effects’’ on the States,
the relationship between the national
government and States, or on the
distribution of power and
responsibilities among the various
levels of government. Federal agencies
promulgating regulations that have
these federalism implications must
consult with State and local officials,
and describe the extent of their
consultation and the nature of the
concerns of State and local officials in
the preamble to the regulation.
In the Departments’ view, these
regulations have federalism
implications, because they have direct
effects on the States, the relationship
between the national government and
States, or on the distribution of power
and responsibilities among various
levels of government. However, in the
Departments’ view, the federalism
implications of these regulations are
substantially mitigated because, with
respect to health insurance issuers, the
Departments expect that the majority of
States have enacted or will enact laws
or take other appropriate action
resulting in their meeting or exceeding
the federal MHPAEA standards.
In general, through section 514,
ERISA supersedes State laws to the
extent that they relate to any covered
employee benefit plan, and preserves
State laws that regulate insurance,
banking, or securities. While ERISA
prohibits States from regulating a plan
as an insurance or investment company
or bank, the preemption provisions of
section 731 of ERISA and section 2723
of the PHS Act (implemented in 29 CFR
2590.731(a) and 45 CFR 146.143(a))

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apply so that the MHPAEA
requirements are not to be ‘‘construed to
supersede any provision of State law
which establishes, implements, or
continues in effect any standard or
requirement solely relating to health
insurance issuers in connection with
group health insurance coverage except
to the extent that such standard or
requirement prevents the application of
a requirement’’ of MHPAEA. The
conference report accompanying HIPAA
indicates that this is intended to be the
‘‘narrowest’’ preemption of State laws.
(See House Conf. Rep. No. 104–736, at
205, reprinted in 1996 U.S. Code Cong.
& Admin. News 2018.)
States may continue to apply State
law requirements except to the extent
that such requirements prevent the
application of the MHPAEA
requirements that are the subject of this
rulemaking. State insurance laws that
are more stringent than the federal
requirements are unlikely to ‘‘prevent
the application of’’ MHPAEA, and be
preempted. Accordingly, States have
significant latitude to impose
requirements on health insurance
issuers that are more restrictive than the
federal law.
In compliance with the requirement
of Executive Order 13132 that agencies
examine closely any policies that may
have federalism implications or limit
the policy making discretion of the
States, the Departments have engaged in
numerous efforts to consult with and
work cooperatively with affected State
and local officials. It is expected that the
Departments will act in a similar
fashion in enforcing the MHPAEA
requirements.
Throughout the process of developing
these regulations, to the extent feasible
within the specific preemption
provisions of HIPAA as it applies to
MHPAEA, the Departments have
attempted to balance the States’
interests in regulating health insurance
issuers, and Congress’ intent to provide
uniform minimum protections to
consumers in every State. By doing so,
it is the Departments’ view that they
have complied with the requirements of
Executive Order 13132.
Pursuant to the requirements set forth
in section 8(a) of Executive Order
13132, and by the signatures affixed to
these regulations, the Departments
certify that the Employee Benefits
Security Administration and the Centers
for Medicare & Medicaid Services have
complied with the requirements of
Executive Order 13132 for the attached
regulations in a meaningful and timely
manner.

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Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations
V. Statutory Authority
The Department of the Treasury
temporary and final regulations are
adopted pursuant to the authority
contained in sections 7805 and 9833 of
the Code.
The Department of Labor interim final
regulations are adopted pursuant to the
authority contained in 29 U.S.C. 1027,
1059, 1135, 1161–1168, 1169, 1181–
1183, 1181 note, 1185, 1185a, 1185b,
1191, 1191a, 1191b, and 1191c; sec.
101(g), Public Law 104–191, 110 Stat.
1936; sec. 401(b), Public Law 105–200,
112 Stat. 645 (42 U.S.C. 651 note); sec.
512(d), Public Law 110–343, 122 Stat.
3765; Public Law 110–460, 122 Stat.
5123; Secretary of Labor’s Order 6–2009,
74 FR 21524 (May 7, 2009).
The Department of Health and Human
Services interim final regulations are
adopted pursuant to the authority
contained in sections 2701 through
2763, 2791, and 2792 of the PHS Act (42
U.S.C. 300gg through 300gg–63, 300gg–
91, and 300gg–92), as amended.
List of Subjects
26 CFR Part 54
Excise taxes, Health care, Health
insurance, Pensions, Reporting and
recordkeeping requirements.
29 CFR Part 2590
Continuation coverage, Disclosure,
Employee benefit plans, Group health
plans, Health care, Health insurance,
Medical child support, Reporting and
recordkeeping requirements.
45 CFR Part 146
Health care, Health insurance,
Reporting and recordkeeping
requirements, and State regulation of
health insurance.
Internal Revenue Service
26 CFR Chapter 1
Accordingly, 26 CFR parts 54 and 602
are amended as follows:

■

PART 54—PENSION EXCISE TAXES
Paragraph 1. The authority citation
for part 54 continues to read in part as
follows:

■

Authority: 26 U.S.C. 7805. * * *

Par. 2. Section 54.9812–1T is revised
to read as follows:

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■

§ 54.9812 Parity in mental health and
substance use disorder benefits
(temporary).

(a) Meaning of terms. For purposes of
this section, except where the context
clearly indicates otherwise, the
following terms have the meanings
indicated:

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Aggregate lifetime dollar limit means
a dollar limitation on the total amount
of specified benefits that may be paid
under a group health plan for any
coverage unit.
Annual dollar limit means a dollar
limitation on the total amount of
specified benefits that may be paid in a
12-month period under a group health
plan for any coverage unit.
Coverage unit means coverage unit as
described in paragraph (c)(1)(iv) of this
section.
Cumulative financial requirements
are financial requirements that
determine whether or to what extent
benefits are provided based on
accumulated amounts and include
deductibles and out-of-pocket
maximums. (However, cumulative
financial requirements do not include
aggregate lifetime or annual dollar limits
because these two terms are excluded
from the meaning of financial
requirements.)
Cumulative quantitative treatment
limitations are treatment limitations that
determine whether or to what extent
benefits are provided based on
accumulated amounts, such as annual
or lifetime day or visit limits.
Financial requirements include
deductibles, copayments, coinsurance,
or out-of-pocket maximums. Financial
requirements do not include aggregate
lifetime or annual dollar limits.
Medical/surgical benefits means
benefits for medical or surgical services,
as defined under the terms of the plan,
but does not include mental health or
substance use disorder benefits. Any
condition defined by the plan as being
or as not being a medical/surgical
condition must be defined to be
consistent with generally recognized
independent standards of current
medical practice (for example, the most
current version of the International
Classification of Diseases (ICD) or State
guidelines).
Mental health benefits means benefits
with respect to services for mental
health conditions, as defined under the
terms of the plan and in accordance
with applicable Federal and State law.
Any condition defined by the plan as
being or as not being a mental health
condition must be defined to be
consistent with generally recognized
independent standards of current
medical practice (for example, the most
current version of the Diagnostic and
Statistical Manual of Mental Disorders
(DSM), the most current version of the
ICD, or State guidelines).
Substance use disorder benefits
means benefits with respect to services
for substance use disorders, as defined
under the terms of the plan and in

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5431

accordance with applicable Federal and
State law. Any disorder defined by the
plan as being or as not being a substance
use disorder must be defined to be
consistent with generally recognized
independent standards of current
medical practice (for example, the most
current version of the DSM, the most
current version of the ICD, or State
guidelines).
Treatment limitations include limits
on benefits based on the frequency of
treatment, number of visits, days of
coverage, days in a waiting period, or
other similar limits on the scope or
duration of treatment. Treatment
limitations include both quantitative
treatment limitations, which are
expressed numerically (such as 50
outpatient visits per year), and
nonquantitative treatment limitations,
which otherwise limit the scope or
duration of benefits for treatment under
a plan. (See paragraph (c)(4)(ii) of this
section for an illustrative list of
nonquantitative treatment limitations.)
A permanent exclusion of all benefits
for a particular condition or disorder,
however, is not a treatment limitation.
(b) Parity requirements with respect to
aggregate lifetime and annual dollar
limits—(1)—General—(i) General parity
requirement. A group health plan that
provides both medical/surgical benefits
and mental health or substance use
disorder benefits must comply with
paragraph (b)(2), (b)(3), or (b)(6) of this
section.
(ii) Exception. The rule in paragraph
(b)(1)(i) of this section does not apply if
a plan satisfies the requirements of
paragraph (f) or (g) of this section
(relating to exemptions for small
employers and for increased cost).
(2) Plan with no limit or limits on less
than one-third of all medical/surgical
benefits. If a plan does not include an
aggregate lifetime or annual dollar limit
on any medical/surgical benefits or
includes an aggregate lifetime or annual
dollar limit that applies to less than onethird of all medical/surgical benefits, it
may not impose an aggregate lifetime or
annual dollar limit, respectively, on
mental health or substance use disorder
benefits.
(3) Plan with a limit on at least twothirds of all medical/surgical benefits. If
a plan includes an aggregate lifetime or
annual dollar limit on at least two-thirds
of all medical/surgical benefits, it must
either—
(i) Apply the aggregate lifetime or
annual dollar limit both to the medical/
surgical benefits to which the limit
would otherwise apply and to mental
health or substance use disorder
benefits in a manner that does not
distinguish between the medical/

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surgical benefits and mental health or
substance use disorder benefits; or
(ii) Not include an aggregate lifetime
or annual dollar limit on mental health
or substance use disorder benefits that
is less than the aggregate lifetime or
annual dollar limit, respectively, on
medical/surgical benefits. (For
cumulative limits other than aggregate
lifetime or annual dollar limits, see
paragraph (c)(3)(v) of this section
prohibiting separately accumulating
cumulative financial requirements or
cumulative quantitative treatment
limitations.)
(4) Examples. The rules of paragraphs
(b)(2) and (b)(3) of this section are
illustrated by the following examples:

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Example 1. (i) Facts. A group health plan
has no annual limit on medical/surgical
benefits and a $10,000 annual limit on
mental health and substance use disorder
benefits. To comply with the requirements of
this paragraph (b), the plan sponsor is
considering each of the following options:
(A) Eliminating the plan’s annual dollar
limit on mental health and substance use
disorder benefits;
(B) Replacing the plan’s annual dollar limit
on mental health and substance use disorder
benefits with a $500,000 annual limit on all
benefits (including medical/surgical and
mental health and substance use disorder
benefits); and
(C) Replacing the plan’s annual dollar limit
on mental health and substance use disorder
benefits with a $250,000 annual limit on
medical/surgical benefits and a $250,000
annual limit on mental health and substance
use disorder benefits.
(ii) Conclusion. In this Example 1, each of
the three options being considered by the
plan sponsor would comply with the
requirements of this paragraph (b).
Example 2. (i) Facts. A plan has a $100,000
annual limit on medical/surgical inpatient
benefits and a $50,000 annual limit on
medical/surgical outpatient benefits. To
comply with the parity requirements of this
paragraph (b), the plan sponsor is
considering each of the following options:
(A) Imposing a $150,000 annual limit on
mental health and substance use disorder
benefits; and
(B) Imposing a $100,000 annual limit on
mental health and substance use disorder
inpatient benefits and a $50,000 annual limit
on mental health and substance use disorder
outpatient benefits.
(ii) Conclusion. In this Example 2, each
option under consideration by the plan
sponsor would comply with the requirements
of this section.

(5) Determining one-third and twothirds of all medical/surgical benefits.
For purposes of this paragraph (b), the
determination of whether the portion of
medical/surgical benefits subject to an
aggregate lifetime or annual dollar limit
represents one-third or two-thirds of all
medical/surgical benefits is based on the
dollar amount of all plan payments for

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medical/surgical benefits expected to be
paid under the plan for the plan year (or
for the portion of the plan year after a
change in plan benefits that affects the
applicability of the aggregate lifetime or
annual dollar limits). Any reasonable
method may be used to determine
whether the dollar amount expected to
be paid under the plan will constitute
one-third or two-thirds of the dollar
amount of all plan payments for
medical/surgical benefits.
(6) Plan not described in paragraph
(b)(2) or (b)(3) of this section—(i) In
general. A group health plan that is not
described in paragraph (b)(2) or (b)(3) of
this section with respect to aggregate
lifetime or annual dollar limits on
medical/surgical benefits, must either—
(A) Impose no aggregate lifetime or
annual dollar limit, as appropriate, on
mental health or substance use disorder
benefits; or
(B) Impose an aggregate lifetime or
annual dollar limit on mental health or
substance use disorder benefits that is
no less than an average limit calculated
for medical/surgical benefits in the
following manner. The average limit is
calculated by taking into account the
weighted average of the aggregate
lifetime or annual dollar limits, as
appropriate, that are applicable to the
categories of medical/surgical benefits.
Limits based on delivery systems, such
as inpatient/outpatient treatment or
normal treatment of common, low-cost
conditions (such as treatment of normal
births), do not constitute categories for
purposes of this paragraph (b)(6)(i)(B).
In addition, for purposes of determining
weighted averages, any benefits that are
not within a category that is subject to
a separately-designated dollar limit
under the plan are taken into account as
a single separate category by using an
estimate of the upper limit on the dollar
amount that a plan may reasonably be
expected to incur with respect to such
benefits, taking into account any other
applicable restrictions under the plan.
(ii) Weighting. For purposes of this
paragraph (b)(6), the weighting
applicable to any category of medical/
surgical benefits is determined in the
manner set forth in paragraph (b)(5) of
this section for determining one-third or
two-thirds of all medical/surgical
benefits.
(iii) Example. The rules of this
paragraph (b)(6) are illustrated by the
following example:
Example. (i) Facts. A group health plan
that is subject to the requirements of this
section includes a $100,000 annual limit on
medical/surgical benefits related to cardiopulmonary diseases. The plan does not
include an annual dollar limit on any other
category of medical/surgical benefits. The

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plan determines that 40 percent of the dollar
amount of plan payments for medical/
surgical benefits are related to cardiopulmonary diseases. The plan determines
that $1,000,000 is a reasonable estimate of
the upper limit on the dollar amount that the
plan may incur with respect to the other 60
percent of payments for medical/surgical
benefits.
(ii) Conclusion. In this Example, the plan
is not described in paragraph (b)(3) of this
section because there is not one annual dollar
limit that applies to at least two-thirds of all
medical/surgical benefits. Further, the plan is
not described in paragraph (b)(2) of this
section because more than one-third of all
medical/surgical benefits are subject to an
annual dollar limit. Under this paragraph
(b)(6), the plan sponsor can choose either to
include no annual dollar limit on mental
health or substance use disorder benefits, or
to include an annual dollar limit on mental
health or substance use disorder benefits that
is not less than the weighted average of the
annual dollar limits applicable to each
category of medical/surgical benefits. In this
example, the minimum weighted average
annual dollar limit that can be applied to
mental health or substance use disorder
benefits is $640,000 (40% × $100,000 + 60%
× $1,000,000 = $640,000).

(c) Parity requirements with respect to
financial requirements and treatment
limitations—(1) Clarification of terms—
(i) Classification of benefits. When
reference is made in this paragraph (c)
to a classification of benefits, the term
‘‘classification’’ means a classification as
described in paragraph (c)(2)(ii) of this
section.
(ii) Type of financial requirement or
treatment limitation. When reference is
made in this paragraph (c) to a type of
financial requirement or treatment
limitation, the reference to type means
its nature. Different types of financial
requirements include deductibles,
copayments, coinsurance, and out-ofpocket maximums. Different types of
quantitative treatment limitations
include annual, episode, and lifetime
day and visit limits. See paragraph
(c)(4)(ii) of this section for an illustrative
list of nonquantitative treatment
limitations.
(iii) Level of a type of financial
requirement or treatment limitation.
When reference is made in this
paragraph (c) to a level of a type of
financial requirement or treatment
limitation, level refers to the magnitude
of the type of financial requirement or
treatment limitation. For example,
different levels of coinsurance include
20 percent and 30 percent; different
levels of a copayment include $15 and
$20; different levels of a deductible
include $250 and $500; and different
levels of an episode limit include 21
inpatient days per episode and 30
inpatient days per episode.

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Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations
(iv) Coverage unit. When reference is
made in this paragraph (c) to a coverage
unit, coverage unit refers to the way in
which a plan groups individuals for
purposes of determining benefits, or
premiums or contributions. For
example, different coverage units
include self-only, family, and employeeplus-spouse.
(2) General parity requirement—(i)
General rule. A group health plan that
provides both medical/surgical benefits
and mental health or substance use
disorder benefits may not apply any
financial requirement or treatment
limitation to mental health or substance
use disorder benefits in any
classification that is more restrictive
than the predominant financial
requirement or treatment limitation of
that type applied to substantially all
medical/surgical benefits in the same
classification. Whether a financial
requirement or treatment limitation is a
predominant financial requirement or
treatment limitation that applies to
substantially all medical/surgical
benefits in a classification is determined
separately for each type of financial
requirement or treatment limitation. The
application of the rules of this
paragraph (c)(2) to financial
requirements and quantitative treatment
limitations is addressed in paragraph
(c)(3) of this section; the application of
the rules of this paragraph (c)(2) to
nonquantitative treatment limitations is
addressed in paragraph (c)(4) of this
section.
(ii) Classifications of benefits used for
applying rules—(A) In general. If a plan
provides mental health or substance use
disorder benefits in any classification of
benefits described in this paragraph
(c)(2)(ii), mental health or substance use
disorder benefits must be provided in
every classification in which medical/
surgical benefits are provided. In
determining the classification in which
a particular benefit belongs, a plan must
apply the same standards to medical/
surgical benefits and to mental health or
substance use disorder benefits. To the
extent that a plan provides benefits in
a classification and imposes any
separate financial requirement or
treatment limitation (or separate level of
a financial requirement or treatment
limitation) for benefits in the
classification, the rules of this paragraph
(c) apply separately with respect to that
classification for all financial
requirements or treatment limitations.
The following classifications of benefits
are the only classifications used in
applying the rules of this paragraph (c):
(1) Inpatient, in-network. Benefits
furnished on an inpatient basis and

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within a network of providers
established or recognized under a plan.
(2) Inpatient, out-of-network. Benefits
furnished on an inpatient basis and
outside any network of providers
established or recognized under a plan.
This classification includes inpatient
benefits under a plan that has no
network of providers.
(3) Outpatient, in-network. Benefits
furnished on an outpatient basis and
within a network of providers
established or recognized under a plan.
(4) Outpatient, out-of-network.
Benefits furnished on an outpatient
basis and outside any network of
providers established or recognized
under a plan. This classification
includes outpatient benefits under a
plan that has no network of providers.
(5) Emergency care. Benefits for
emergency care.
(6) Prescription drugs. Benefits for
prescription drugs. See special rules for
multi-tiered prescription drug benefits
in paragraph (c)(3)(iii) of this section.
(B) Application to out-of-network
providers. See paragraph (c)(2)(ii)(A) of
this section, under which a plan that
provides mental health or substance use
disorder benefits in any classification of
benefits must provide mental health or
substance use disorder benefits in every
classification in which medical/surgical
benefits are provided, including out-ofnetwork classifications.
(C) Examples. The rules of this
paragraph (c)(2)(ii) are illustrated by the
following examples. In each example,
the group health plan is subject to the
requirements of this section and
provides both medical/surgical benefits
and mental health and substance use
disorder benefits.
Example 1. (i) Facts. A group health plan
offers inpatient and outpatient benefits and
does not contract with a network of
providers. The plan imposes a $500
deductible on all benefits. For inpatient
medical/surgical benefits, the plan imposes a
coinsurance requirement. For outpatient
medical/surgical benefits, the plan imposes
copayments. The plan imposes no other
financial requirements or treatment
limitations.
(ii) Conclusion. In this Example 1, because
the plan has no network of providers, all
benefits provided are out-of-network.
Because inpatient, out-of-network medical/
surgical benefits are subject to separate
financial requirements from outpatient, outof-network medical/surgical benefits, the
rules of this paragraph (c) apply separately
with respect to any financial requirements
and treatment limitations, including the
deductible, in each classification.
Example 2. (i) Facts. A plan imposes a
$500 deductible on all benefits. The plan has
no network of providers. The plan generally
imposes a 20 percent coinsurance
requirement with respect to all benefits,

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5433

without distinguishing among inpatient,
outpatient, emergency, or prescription drug
benefits. The plan imposes no other financial
requirements or treatment limitations.
(ii) Conclusion. In this Example 2, because
the plan does not impose separate financial
requirements (or treatment limitations) based
on classification, the rules of this paragraph
(c) apply with respect to the deductible and
the coinsurance across all benefits.
Example 3. (i) Facts. Same facts as
Example 2, except the plan exempts
emergency care benefits from the 20 percent
coinsurance requirement. The plan imposes
no other financial requirements or treatment
limitations.
(ii) Conclusion. In this Example 3, because
the plan imposes separate financial
requirements based on classifications, the
rules of this paragraph (c) apply with respect
to the deductible and the coinsurance
separately for—
(A) Benefits in the emergency
classification; and
(B) All other benefits.
Example 4. (i) Facts. Same facts as
Example 2, except the plan also imposes a
preauthorization requirement for all inpatient
treatment in order for benefits to be paid. No
such requirement applies to outpatient
treatment.
(ii) Conclusion. In this Example 4, because
the plan has no network of providers, all
benefits provided are out-of-network.
Because the plan imposes a separate
treatment limitation based on classifications,
the rules of this paragraph (c) apply with
respect to the deductible and coinsurance
separately for—
(A) Inpatient, out-of-network benefits; and
(B) All other benefits.

(3) Financial requirements and
quantitative treatment limitations—(i)
Determining ‘‘substantially all’’ and
‘‘predominant’’—(A) Substantially all.
For purposes of this paragraph (c), a
type of financial requirement or
quantitative treatment limitation is
considered to apply to substantially all
medical/surgical benefits in a
classification of benefits if it applies to
at least two-thirds of all medical/
surgical benefits in that classification.
(For this purpose, benefits expressed as
subject to a zero level of a type of
financial requirement are treated as
benefits not subject to that type of
financial requirement, and benefits
expressed as subject to a quantitative
treatment limitation that is unlimited
are treated as benefits not subject to that
type of quantitative treatment
limitation.) If a type of financial
requirement or quantitative treatment
limitation does not apply to at least twothirds of all medical/surgical benefits in
a classification, then that type cannot be
applied to mental health or substance
use disorder benefits in that
classification.
(B) Predominant—(1) If a type of
financial requirement or quantitative

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treatment limitation applies to at least
two-thirds of all medical/surgical
benefits in a classification as
determined under paragraph (c)(3)(i)(A)
of this section, the level of the financial
requirement or quantitative treatment
limitation that is considered the
predominant level of that type in a
classification of benefits is the level that
applies to more than one-half of
medical/surgical benefits in that
classification subject to the financial
requirement or quantitative treatment
limitation.
(2) If, with respect to a type of
financial requirement or quantitative
treatment limitation that applies to at
least two-thirds of all medical/surgical
benefits in a classification, there is no
single level that applies to more than
one-half of medical/surgical benefits in
the classification subject to the financial
requirement or quantitative treatment
limitation, the plan may combine levels
until the combination of levels applies
to more than one-half of medical/
surgical benefits subject to the financial
requirement or quantitative treatment
limitation in the classification. The least
restrictive level within the combination
is considered the predominant level of
that type in the classification. (For this
purpose, a plan may combine the most
restrictive levels first, with each less
restrictive level added to the
combination until the combination
applies to more than one-half of the
benefits subject to the financial
requirement or treatment limitation.)
(C) Portion based on plan payments.
For purposes of this paragraph (c), the
determination of the portion of medical/
surgical benefits in a classification of
benefits subject to a financial

requirement or quantitative treatment
limitation (or subject to any level of a
financial requirement or quantitative
treatment limitation) is based on the
dollar amount of all plan payments for
medical/surgical benefits in the
classification expected to be paid under
the plan for the plan year (or for the
portion of the plan year after a change
in plan benefits that affects the
applicability of the financial
requirement or quantitative treatment
limitation).
(D) Clarifications for certain threshold
requirements. For any deductible, the
dollar amount of plan payments
includes all plan payments with respect
to claims that would be subject to the
deductible if it had not been satisfied.
For any out-of-pocket maximum, the
dollar amount of plan payments
includes all plan payments associated
with out-of-pocket payments that are
taken into account towards the out-ofpocket maximum as well as all plan
payments associated with out-of-pocket
payments that would have been made
towards the out-of-pocket maximum if it
had not been satisfied. Similar rules
apply for any other thresholds at which
the rate of plan payment changes.
(E) Determining the dollar amount of
plan payments. Subject to paragraph
(c)(3)(i)(D) of this section, any
reasonable method may be used to
determine the dollar amount expected
to be paid under a plan for medical/
surgical benefits subject to a financial
requirement or quantitative treatment
limitation (or subject to any level of a
financial requirement or quantitative
treatment limitation).
(ii) Application to different coverage
units. If a plan applies different levels

Coinsurance rate ....................................................
Projected payments ................................................
Percent of total plan costs .....................................
Percent subject to coinsurance level .....................

sroberts on DSKD5P82C1PROD with RULES

The plan projects plan costs of $800x to be
subject to coinsurance ($100x + $450x +
$100x + $150x = $800x). Thus, 80 percent
($800x/$1,000x) of the benefits are projected
to be subject to coinsurance, and 56.25
percent of the benefits subject to coinsurance
are projected to be subject to the 15 percent
coinsurance level.
(ii) Conclusion. In this Example 1, the twothirds threshold of the substantially all

17:32 Feb 01, 2010

Jkt 220001

10%
$100x
10%
12.5%
(100x/800x)

15%
$450x
45%
56.25%
(450x/800x)

standard is met for coinsurance because 80
percent of all inpatient, out-of-network
medical/surgical benefits are subject to
coinsurance. Moreover, the 15 percent
coinsurance is the predominant level because
it is applicable to more than one-half of
inpatient, out-of-network medical/surgical
benefits subject to the coinsurance
requirement. The plan may not impose any
level of coinsurance with respect to

Copayment amount ................................................
Projected payments ................................................
Percent of total plan costs .....................................
Percent subject to copayments ..............................

VerDate Nov<24>2008

0%
$200x
20%
N/A

PO 00000

$0
$200x
20%
N/A

Frm 00026

$10
$200x
20%
25%
(200x/800x)

Fmt 4701

Sfmt 4700

$15
$200x
20%
25%
(200x/800x)

of a financial requirement or
quantitative treatment limitation to
different coverage units in a
classification of medical/surgical
benefits, the predominant level that
applies to substantially all medical/
surgical benefits in the classification is
determined separately for each coverage
unit.
(iii) Special rule for multi-tiered
prescription drug benefits. If a plan
applies different levels of financial
requirements to different tiers of
prescription drug benefits based on
reasonable factors determined in
accordance with the rules in paragraph
(c)(4)(i) of this section (relating to
requirements for nonquantitative
treatment limitations) and without
regard to whether a drug is generally
prescribed with respect to medical/
surgical benefits or with respect to
mental health or substance use disorder
benefits, the plan satisfies the parity
requirements of this paragraph (c) with
respect to prescription drug benefits.
Reasonable factors include cost,
efficacy, generic versus brand name, and
mail order versus pharmacy pick-up.
(iv) Examples. The rules of
paragraphs (c)(3)(i), (c)(3)(ii), and
(c)(3)(iii) of this section are illustrated
by the following examples. In each
example, the group health plan is
subject to the requirements of this
section and provides both medical/
surgical benefits and mental health and
substance use disorder benefits.
Example 1. (i) Facts. For inpatient, out-ofnetwork medical/surgical benefits, a group
health plan imposes five levels of
coinsurance. Using a reasonable method, the
plan projects its payments for the upcoming
year as follows:
20%
$100x
10%
12.5%
(100x/800x)

30%
$150x
15%
18.75%
(150x/800x)

Total
$1,000x

inpatient, out-of-network mental health or
substance use disorder benefits that is more
restrictive than the 15 percent level of
coinsurance.
Example 2. (i) Facts. For outpatient, innetwork medical/surgical benefits, a plan
imposes five different copayment levels.
Using a reasonable method, the plan projects
payments for the upcoming year as follows:
$20
$300x
30%
37.5%
(300x/800x)

E:\FR\FM\02FER3.SGM

02FER3

$50
$100x
10%
12.5%
(100x/800x)

Total
$1,000x

Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations
The plan projects plan costs of $800x to be
subject to copayments ($200x + $200x +
$300x + $100x = $800x). Thus, 80 percent
($800x/$1,000x) of the benefits are projected
to be subject to a copayment.
(ii) Conclusion. In this Example 2, the twothirds threshold of the substantially all
standard is met for copayments because 80
percent of all outpatient, in-network medical/
surgical benefits are subject to a copayment.
Moreover, there is no single level that applies
to more than one-half of medical/surgical
benefits in the classification subject to a
copayment (for the $10 copayment, 25
percent; for the $15 copayment, 25 percent;
for the $20 copayment, 37.5 percent; and for
the $50 copayment, 12.5 percent). The plan
can combine any levels of copayment,
including the highest levels, to determine the
predominant level that can be applied to
mental health or substance use disorder
benefits. If the plan combines the highest
levels of copayment, the combined projected
payments for the two highest copayment
levels, the $50 copayment and the $20
copayment, are not more than one-half of the
outpatient, in-network medical/surgical
benefits subject to a copayment because they

are exactly one-half ($300x + $100x = $400x;
$400x/$800x = 50%). The combined
projected payments for the three highest
copayment levels—the $50 copayment, the
$20 copayment, and the $15 copayment—are
more than one-half of the outpatient, innetwork medical/surgical benefits subject to
the copayments ($100x + $300x + $200x =
$600x; $600x/$800x = 75%). Thus, the plan
may not impose any copayment on
outpatient, in-network mental health or
substance use disorder benefits that is more
restrictive than the least restrictive
copayment in the combination, the $15
copayment.
Example 3. (i) Facts. A plan imposes a
$250 deductible on all medical/surgical
benefits for self-only coverage and a $500
deductible on all medical/surgical benefits
for family coverage. The plan has no network
of providers. For all medical/surgical
benefits, the plan imposes a coinsurance
requirement. The plan imposes no other
financial requirements or treatment
limitations.
(ii) Conclusion. In this Example 3, because
the plan has no network of providers, all
benefits are provided out-of-network.
Tier 1

Tier 3

Tier 4

Generic drugs

Preferred brand
name drugs

Non-preferred
brand name
drugs (which
may have Tier 1
or Tier 2
alternatives)

Specialty drugs

90%

80%

60%

50%

Percent paid by plan ........................................................................

(v) No separate cumulative financial
requirements or cumulative quantitative
treatment limitations. (A) A group
health plan may not apply any
cumulative financial requirement or
cumulative quantitative treatment
limitation for mental health or
substance use disorder benefits in a

classification that accumulates
separately from any established for
medical/surgical benefits in the same
classification.
(B) The rules of this paragraph
(c)(3)(v) are illustrated by the following
examples:
Example 1. (i) Facts. A group health plan
imposes a combined annual $500 deductible
on all medical/surgical, mental health, and
substance use disorder benefits.
(ii) Conclusion. In this Example 1, the
combined annual deductible complies with
the requirements of this paragraph (c)(3)(v).
Example 2. (i) Facts. A plan imposes an
annual $250 deductible on all medical/
surgical benefits and a separate annual $250
deductible on all mental health and
substance use disorder benefits.
(ii) Conclusion. In this Example 2, the
separate annual deductible on mental health
and substance use disorder benefits violates
the requirements of this paragraph (c)(3)(v).

sroberts on DSKD5P82C1PROD with RULES

Inpatient, in-network ........................................................................................................
Inpatient, out-of-network ..................................................................................................
Outpatient, in-network ......................................................................................................
Outpatient, out-of-network ...............................................................................................
Emergency care ...............................................................................................................

19:22 Feb 01, 2010

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PO 00000

Example 3. (i) Facts. A plan imposes an
annual $300 deductible on all medical/
surgical benefits and a separate annual $100
deductible on all mental health or substance
use disorder benefits.
(ii) Conclusion. In this Example 3, the
separate annual deductible on mental health
and substance use disorder benefits violates
the requirements of this paragraph (c)(3)(v).
Example 4. (i) Facts. A plan generally
imposes a combined annual $500 deductible
on all benefits (both medical/surgical benefits
and mental health and substance use
disorder benefits) except prescription drugs.
Certain benefits, such as preventive care, are
provided without regard to the deductible.
The imposition of other types of financial
requirements or treatment limitations varies
with each classification. Using reasonable
methods, the plan projects its payments for
medical/surgical benefits in each
classification for the upcoming year as
follows:

Benefits subject
to deductible

Classification

VerDate Nov<24>2008

Because self-only and family coverage are
subject to different deductibles, whether the
deductible applies to substantially all
medical/surgical benefits is determined
separately for self-only medical/surgical
benefits and family medical/surgical benefits.
Because the coinsurance is applied without
regard to coverage units, the predominant
coinsurance that applies to substantially all
medical/surgical benefits is determined
without regard to coverage units.
Example 4. (i) Facts. A plan applies the
following financial requirements for
prescription drug benefits. The requirements
are applied without regard to whether a drug
is generally prescribed with respect to
medical/surgical benefits or with respect to
mental health or substance use disorder
benefits. Moreover, the process for certifying
a particular drug as ‘‘generic’’, ‘‘preferred
brand name’’, ‘‘non-preferred brand name’’, or
‘‘specialty’’ complies with the rules of
paragraph (c)(4)(i) of this section (relating to
requirements for nonquantitative treatment
limitations).

Tier 2

Tier description

(ii) Conclusion. In this Example 4, the
financial requirements that apply to
prescription drug benefits are applied
without regard to whether a drug is generally
prescribed with respect to medical/surgical
benefits or with respect to mental health or
substance use disorder benefits; the process
for certifying drugs in different tiers complies
with paragraph (c)(4) of this section; and the
bases for establishing different levels or types
of financial requirements are reasonable. The
financial requirements applied to
prescription drug benefits do not violate the
parity requirements of this paragraph (c)(3).

Frm 00027

5435

Fmt 4701

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Total benefits

$1,800x
1,000x
1,400x
1,880x
300x

E:\FR\FM\02FER3.SGM

$2,000x
1,000x
2,000x
2,000x
500x

02FER3

Percent subject
to deductible
90
100
70
94
60

5436

Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations

sroberts on DSKD5P82C1PROD with RULES

(ii) Conclusion. In this Example 4, the twothirds threshold of the substantially all
standard is met with respect to each
classification except emergency care because
in each of those other classifications at least
two-thirds of medical/surgical benefits are
subject to the $500 deductible. Moreover, the
$500 deductible is the predominant level in
each of those other classifications because it
is the only level. However, emergency care
mental health and substance use disorder
benefits cannot be subject to the $500
deductible because it does not apply to
substantially all emergency care medical/
surgical benefits.

(4) Nonquantitative treatment
limitations—(i) General rule. A group
health plan may not impose a
nonquantitative treatment limitation
with respect to mental health or
substance use disorder benefits in any
classification unless, under the terms of
the plan as written and in operation,
any processes, strategies, evidentiary
standards, or other factors used in
applying the nonquantitative treatment
limitation to mental health or substance
use disorder benefits in the
classification are comparable to, and are
applied no more stringently than, the
processes, strategies, evidentiary
standards, or other factors used in
applying the limitation with respect to
medical surgical/benefits in the
classification, except to the extent that
recognized clinically appropriate
standards of care may permit a
difference.
(ii) Illustrative list of nonquantitative
treatment limitations. Nonquantitative
treatment limitations include—
(A) Medical management standards
limiting or excluding benefits based on
medical necessity or medical
appropriateness, or based on whether
the treatment is experimental or
investigative;
(B) Formulary design for prescription
drugs;
(C) Standards for provider admission
to participate in a network, including
reimbursement rates;
(D) Plan methods for determining
usual, customary, and reasonable
charges;
(E) Refusal to pay for higher-cost
therapies until it can be shown that a
lower-cost therapy is not effective (also
known as fail-first policies or step
therapy protocols); and
(F) Exclusions based on failure to
complete a course of treatment.
(iii) Examples. The rules of this
paragraph (c)(4) are illustrated by the
following examples. In each example,
the group health plan is subject to the
requirements of this section and
provides both medical/surgical benefits
and mental health and substance use
disorder benefits.

VerDate Nov<24>2008

17:32 Feb 01, 2010

Jkt 220001

Example 1. (i) Facts. A group health plan
limits benefits to treatment that is medically
necessary. The plan requires concurrent
review for inpatient, in-network mental
health and substance use disorder benefits
but does not require it for any inpatient, innetwork medical/surgical benefits. The plan
conducts retrospective review for inpatient,
in-network medical/surgical benefits.
(ii) Conclusion. In this Example 1, the plan
violates the rules of this paragraph (c)(4).
Although the same nonquantitative treatment
limitation—medical necessity—applies to
both mental health and substance use
disorder benefits and to medical/surgical
benefits for inpatient, in-network services,
the concurrent review process does not apply
to medical/surgical benefits. The concurrent
review process is not comparable to the
retrospective review process. While such a
difference might be permissible in certain
individual cases based on recognized
clinically appropriate standards of care, it is
not permissible for distinguishing between
all medical/surgical benefits and all mental
health or substance use disorder benefits.
Example 2. (i) Facts. A plan requires prior
approval that a course of treatment is
medically necessary for outpatient, innetwork medical/surgical, mental health, and
substance use disorder benefits. For mental
health and substance use disorder treatments
that do not have prior approval, no benefits
will be paid; for medical/surgical treatments
that do not have prior approval, there will
only be a 25 percent reduction in the benefits
the plan would otherwise pay.
(ii) Conclusion. In this Example 2, the plan
violates the rules of this paragraph (c)(4).
Although the same nonquantitative treatment
limitation—medical necessity—is applied
both to mental health and substance use
disorder benefits and to medical/surgical
benefits for outpatient, in-network services,
the penalty for failure to obtain prior
approval for mental health and substance use
disorder benefits is not comparable to the
penalty for failure to obtain prior approval
for medical/surgical benefits.
Example 3. (i) Facts. A plan generally
covers medically appropriate treatments. For
both medical/surgical benefits and mental
health and substance use disorder benefits,
evidentiary standards used in determining
whether a treatment is medically appropriate
(such as the number of visits or days of
coverage) are based on recommendations
made by panels of experts with appropriate
training and experience in the fields of
medicine involved. The evidentiary
standards are applied in a manner that may
differ based on clinically appropriate
standards of care for a condition.
(ii) Conclusion. In this Example 3, the plan
complies with the rules of this paragraph
(c)(4) because the nonquantitative treatment
limitation—medical appropriateness—is the
same for both medical/surgical benefits and
mental health and substance use disorder
benefits, and the processes for developing the
evidentiary standards and the application of
them to mental health and substance use
disorder benefits are comparable to and are
applied no more stringently than for medical/
surgical benefits. This is the result even if,
based on clinically appropriate standards of

PO 00000

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Fmt 4701

Sfmt 4700

care, the application of the evidentiary
standards does not result in similar numbers
of visits, days of coverage, or other benefits
utilized for mental health conditions or
substance use disorders as it does for any
particular medical/surgical condition.
Example 4. (i) Facts. A plan generally
covers medically appropriate treatments. In
determining whether prescription drugs are
medically appropriate, the plan
automatically excludes coverage for
antidepressant drugs that are given a black
box warning label by the Food and Drug
Administration (indicating the drug carries a
significant risk of serious adverse effects). For
other drugs with a black box warning
(including those prescribed for other mental
health conditions and substance use
disorders, as well as for medical/surgical
conditions), the plan will provide coverage if
the prescribing physician obtains
authorization from the plan that the drug is
medically appropriate for the individual,
based on clinically appropriate standards of
care.
(ii) Conclusion. In this Example 4, the plan
violates the rules of this paragraph (c)(4).
Although the same nonquantitative treatment
limitation—medical appropriateness—is
applied to both mental health and substance
use disorder benefits and medical/surgical
benefits, the plan’s unconditional exclusion
of antidepressant drugs given a black box
warning is not comparable to the conditional
exclusion for other drugs with a black box
warning.
Example 5. (i) Facts. An employer
maintains both a major medical program and
an employee assistance program (EAP). The
EAP provides, among other benefits, a
limited number of mental health or substance
use disorder counseling sessions.
Participants are eligible for mental health or
substance use disorder benefits under the
major medical program only after exhausting
the counseling sessions provided by the EAP.
No similar exhaustion requirement applies
with respect to medical/surgical benefits
provided under the major medical program.
(ii) Conclusion. In this Example 5, limiting
eligibility for mental health and substance
use disorder benefits only after EAP benefits
are exhausted is a nonquantitative treatment
limitation subject to the parity requirements
of this paragraph (c). Because no comparable
requirement applies to medical/surgical
benefits, the requirement may not be applied
to mental health or substance use disorder
benefits.

(5) Exemptions. The rules of this
paragraph (c) do not apply if a group
health plan satisfies the requirements of
paragraph (f) or (g) of this section
(relating to exemptions for small
employers and for increased cost).
(d) Availability of plan information—
(1) Criteria for medical necessity
determinations. The criteria for medical
necessity determinations made under a
group health plan with respect to
mental health or substance use disorder
benefits must be made available by the
plan administrator to any current or
potential participant, beneficiary, or
contracting provider upon request.

E:\FR\FM\02FER3.SGM

02FER3

5437

sroberts on DSKD5P82C1PROD with RULES

Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations
(2) Reason for denial. The reason for
any denial under a group health plan of
reimbursement or payment for services
with respect to mental health or
substance use disorder benefits in the
case of any participant or beneficiary
must be made available by the plan
administrator to the participant or
beneficiary in accordance with this
paragraph (d)(2).
(i) Plans subject to ERISA. If a plan is
subject to ERISA, it must provide the
reason for the claim denial in a form
and manner consistent with the
requirements of 29 CFR 2560.503–1 for
group health plans.
(ii) Plans not subject to ERISA. If a
plan is not subject to ERISA, upon the
request of a participant or beneficiary
the reason for the claim denial must be
provided within a reasonable time and
in a reasonable manner. For this
purpose, a plan that follows the
requirements of 29 CFR 2560.503–1 for
group health plans complies with the
requirements of this paragraph (d)(2)(ii).
(e) Applicability—(1) Group health
plans. The requirements of this section
apply to a group health plan offering
medical/surgical benefits and mental
health or substance use disorder
benefits. If, under an arrangement or
arrangements to provide health care
benefits by an employer or employee
organization (including for this purpose
a joint board of trustees of a
multiemployer trust affiliated with one
or more multiemployer plans), any
participant (or beneficiary) can
simultaneously receive coverage for
medical/surgical benefits and coverage
for mental health or substance use
disorder benefits, then the requirements
of this section (including the exemption
provisions in paragraph (g) of this
section) apply separately with respect to
each combination of medical/surgical
benefits and of mental health or
substance use disorder benefits that any
participant (or beneficiary) can
simultaneously receive from that
employer’s or employee organization’s
arrangement or arrangements to provide
health care benefits, and all such
combinations are considered for
purposes of this section to be a single
group health plan.
(2) Health insurance issuers. See 29
CFR 2590.712(e)(2) and 45 CFR
146.136(e)(2), under which a health
insurance issuer offering health
insurance coverage for mental health or
substance use disorder benefits is
subject to requirements similar to those
applicable to group health plans under
this section if the health insurance
coverage is offered in connection with a
group health plan subject to
requirements under 29 CFR 2590.712 or

VerDate Nov<24>2008

17:32 Feb 01, 2010

Jkt 220001

45 CFR 146.136 similar to those
applicable to group health plans under
this section.
(3) Scope. This section does not—
(i) Require a group health plan to
provide any mental health benefits or
substance use disorder benefits, and the
provision of benefits by a plan for one
or more mental health conditions or
substance use disorders does not require
the plan under this section to provide
benefits for any other mental health
condition or substance use disorder; or
(ii) Affect the terms and conditions
relating to the amount, duration, or
scope of mental health or substance use
disorder benefits under the plan except
as specifically provided in paragraphs
(b) and (c) of this section.
(f) Small employer exemption—(1) In
general. The requirements of this
section do not apply to a group health
plan for a plan year of a small employer.
For purposes of this paragraph (f), the
term small employer means, in
connection with a group health plan
with respect to a calendar year and a
plan year, an employer who employed
an average of at least two (or one in the
case of an employer residing in a state
that permits small groups to include a
single individual) but not more than 50
employees on business days during the
preceding calendar year. See section
9831(a)(2) and § 54.9831–1(b), which
provide that this section (and certain
other sections) does not apply to any
group health plan for any plan year if,
on the first day of the plan year, the
plan has fewer than two participants
who are current employees.
(2) Rules in determining employer
size. For purposes of paragraph (f)(1) of
this section—
(i) All persons treated as a single
employer under subsections (b), (c), (m),
and (o) of section 414 are treated as one
employer;
(ii) If an employer was not in
existence throughout the preceding
calendar year, whether it is a small
employer is determined based on the
average number of employees the
employer reasonably expects to employ
on business days during the current
calendar year; and
(iii) Any reference to an employer for
purposes of the small employer
exemption includes a reference to a
predecessor of the employer.
(g) Increased cost exemption—
[Reserved].
(h) Sale of nonparity health insurance
coverage. See 29 CFR 2590.712(h) and
45 CFR 146.136(h), under which a
health insurance issuer may not sell a
policy, certificate, or contract of
insurance that fails to comply with
requirements similar to those under

PO 00000

Frm 00029

Fmt 4701

Sfmt 4700

paragraph (b) or (c) of this section,
except to a plan for a year for which the
plan is exempt from requirements
similar to those under paragraph (b) or
(c) of this section because the plan
meets requirements under paragraph (f)
or (g) of 29 CFR 2590.712 or 45 CFR
146.136 similar to those under
paragraph (f) or (g) of this section.
(i) Effective/applicability dates—(1) In
general. Except as provided in
paragraph (i)(2) of this section, the
requirements of this section are
applicable for plan years beginning on
or after July 1, 2010.
(2) Special effective date for certain
collectively-bargained plans. For a
group health plan maintained pursuant
to one or more collective bargaining
agreements ratified before October 3,
2008, the requirements of this section
do not apply to the plan for plan years
beginning before the later of either—
(i) The date on which the last of the
collective bargaining agreements
relating to the plan terminates
(determined without regard to any
extension agreed to after October 3,
2008); or
(ii) July 1, 2010.
(j) Expiration date. This section
expires on or before January 29, 2013.
PART 602—OMB CONTROL NUMBERS
UNDER THE PAPERWORK
REDUCTION ACT
Par. 3. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.

Par. 4. In § 602.101, paragraph (b) is
amended by adding the following entry
in numerical order to the table:
§ 602.101

*

OMB Control numbers.

*
*
(b) * * *

*

*

Current
OMB control
No.

CFR part or section where
identified and described

*
*
*
*
*
54.9812–1T ...............................
1545–2165
*

E:\FR\FM\02FER3.SGM

*

02FER3

*

*

*

5438

Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations

Approved: January 27, 2010.
Steven T. Miller,
Deputy Commissioner for Services and
Enforcement, Internal Revenue Service.
Michael F. Mundaca,
Acting Assistant Secretary of the Treasury
(Tax Policy).

Employee Benefits Security
Administration
29 CFR Chapter XXV
29 CFR Part 2590 is amended as
follows:

■

PART 2590—RULES AND
REGULATIONS FOR HEALTH
INSURANCE PORTABILITY AND
RENEWABILITY FOR GROUP HEALTH
PLANS
1. The authority citation for Part 2590
is revised to read as follows:

■

Authority: Secs. 29 U.S.C. 1027, 1059,
1135, 1161–1168, 1169, 1181–1183, 1181
note, 1185, 1185a, 1185b, 1191, 1191a,
1191b, and 1191c; sec. 101(g), Public Law
104–191, 110 Stat. 1936; sec. 401(b), Public
Law 105–200, 112 Stat. 645 (42 U.S.C. 651
note); sec. 512(d), Public Law 110–343, 122
Stat. 3765; Public Law 110–460, 122 Stat.
5123; Secretary of Labor’s Order 6–2009, 74
FR 21524 (May 7, 2009).

Subpart C—Other Requirements
2. Section 2590.712 is revised to read
as follows:

■

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§ 2590.712 Parity in mental health and
substance use disorder benefits.

(a) Meaning of terms. For purposes of
this section, except where the context
clearly indicates otherwise, the
following terms have the meanings
indicated:
Aggregate lifetime dollar limit means
a dollar limitation on the total amount
of specified benefits that may be paid
under a group health plan (or health
insurance coverage offered in
connection with such a plan) for any
coverage unit.
Annual dollar limit means a dollar
limitation on the total amount of
specified benefits that may be paid in a
12-month period under a group health
plan (or health insurance coverage
offered in connection with such a plan)
for any coverage unit.
Coverage unit means coverage unit as
described in paragraph (c)(1)(iv) of this
section.
Cumulative financial requirements
are financial requirements that
determine whether or to what extent
benefits are provided based on
accumulated amounts and include
deductibles and out-of-pocket
maximums. (However, cumulative

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financial requirements do not include
aggregate lifetime or annual dollar limits
because these two terms are excluded
from the meaning of financial
requirements.)
Cumulative quantitative treatment
limitations are treatment limitations that
determine whether or to what extent
benefits are provided based on
accumulated amounts, such as annual
or lifetime day or visit limits.
Financial requirements include
deductibles, copayments, coinsurance,
or out-of-pocket maximums. Financial
requirements do not include aggregate
lifetime or annual dollar limits.
Medical/surgical benefits means
benefits for medical or surgical services,
as defined under the terms of the plan
or health insurance coverage, but does
not include mental health or substance
use disorder benefits. Any condition
defined by the plan as being or as not
being a medical/surgical condition must
be defined to be consistent with
generally recognized independent
standards of current medical practice
(for example, the most current version
of the International Classification of
Diseases (ICD) or State guidelines).
Mental health benefits means benefits
with respect to services for mental
health conditions, as defined under the
terms of the plan and in accordance
with applicable Federal and State law.
Any condition defined by the plan as
being or as not being a mental health
condition must be defined to be
consistent with generally recognized
independent standards of current
medical practice (for example, the most
current version of the Diagnostic and
Statistical Manual of Mental Disorders
(DSM), the most current version of the
ICD, or State guidelines).
Substance use disorder benefits
means benefits with respect to services
for substance use disorders, as defined
under the terms of the plan and in
accordance with applicable Federal and
State law. Any disorder defined by the
plan as being or as not being a substance
use disorder must be defined to be
consistent with generally recognized
independent standards of current
medical practice (for example, the most
current version of the DSM, the most
current version of the ICD, or State
guidelines).
Treatment limitations include limits
on benefits based on the frequency of
treatment, number of visits, days of
coverage, days in a waiting period, or
other similar limits on the scope or
duration of treatment. Treatment
limitations include both quantitative
treatment limitations, which are
expressed numerically (such as 50
outpatient visits per year), and

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nonquantitative treatment limitations,
which otherwise limit the scope or
duration of benefits for treatment under
a plan. (See paragraph (c)(4)(ii) of this
section for an illustrative list of
nonquantitative treatment limitations.)
A permanent exclusion of all benefits
for a particular condition or disorder,
however, is not a treatment limitation.
(b) Parity requirements with respect to
aggregate lifetime and annual dollar
limits—(1)—General—(i) General parity
requirement. A group health plan (or
health insurance coverage offered by an
issuer in connection with a group health
plan) that provides both medical/
surgical benefits and mental health or
substance use disorder benefits must
comply with paragraph (b)(2), (b)(3), or
(b)(6) of this section.
(ii) Exception. The rule in paragraph
(b)(1)(i) of this section does not apply if
a plan (or health insurance coverage)
satisfies the requirements of paragraph
(f) or (g) of this section (relating to
exemptions for small employers and for
increased cost).
(2) Plan with no limit or limits on less
than one-third of all medical/surgical
benefits. If a plan (or health insurance
coverage) does not include an aggregate
lifetime or annual dollar limit on any
medical/surgical benefits or includes an
aggregate lifetime or annual dollar limit
that applies to less than one-third of all
medical/surgical benefits, it may not
impose an aggregate lifetime or annual
dollar limit, respectively, on mental
health or substance use disorder
benefits.
(3) Plan with a limit on at least twothirds of all medical/surgical benefits. If
a plan (or health insurance coverage)
includes an aggregate lifetime or annual
dollar limit on at least two-thirds of all
medical/surgical benefits, it must
either—
(i) Apply the aggregate lifetime or
annual dollar limit both to the medical/
surgical benefits to which the limit
would otherwise apply and to mental
health or substance use disorder
benefits in a manner that does not
distinguish between the medical/
surgical benefits and mental health or
substance use disorder benefits; or
(ii) Not include an aggregate lifetime
or annual dollar limit on mental health
or substance use disorder benefits that
is less than the aggregate lifetime or
annual dollar limit, respectively, on
medical/surgical benefits. (For
cumulative limits other than aggregate
lifetime or annual dollar limits, see
paragraph (c)(3)(v) of this section
prohibiting separately accumulating
cumulative financial requirements or
cumulative quantitative treatment
limitations.)

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(4) Examples. The rules of paragraphs
(b)(2) and (b)(3) of this section are
illustrated by the following examples:

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Example 1. (i) Facts. A group health plan
has no annual limit on medical/surgical
benefits and a $10,000 annual limit on
mental health and substance use disorder
benefits. To comply with the requirements of
this paragraph (b), the plan sponsor is
considering each of the following options—
(A) Eliminating the plan’s annual dollar
limit on mental health and substance use
disorder benefits;
(B) Replacing the plan’s annual dollar limit
on mental health and substance use disorder
benefits with a $500,000 annual limit on all
benefits (including medical/surgical and
mental health and substance use disorder
benefits); and
(C) Replacing the plan’s annual dollar limit
on mental health and substance use disorder
benefits with a $250,000 annual limit on
medical/surgical benefits and a $250,000
annual limit on mental health and substance
use disorder benefits.
(ii) Conclusion. In this Example 1, each of
the three options being considered by the
plan sponsor would comply with the
requirements of this paragraph (b).
Example 2. (i) Facts. A plan has a $100,000
annual limit on medical/surgical inpatient
benefits and a $50,000 annual limit on
medical/surgical outpatient benefits. To
comply with the parity requirements of this
paragraph (b), the plan sponsor is
considering each of the following options—
(A) Imposing a $150,000 annual limit on
mental health and substance use disorder
benefits; and
(B) Imposing a $100,000 annual limit on
mental health and substance use disorder
inpatient benefits and a $50,000 annual limit
on mental health and substance use disorder
outpatient benefits.
(ii) Conclusion. In this Example 2, each
option under consideration by the plan
sponsor would comply with the requirements
of this section.

(5) Determining one-third and twothirds of all medical/surgical benefits.
For purposes of this paragraph (b), the
determination of whether the portion of
medical/surgical benefits subject to an
aggregate lifetime or annual dollar limit
represents one-third or two-thirds of all
medical/surgical benefits is based on the
dollar amount of all plan payments for
medical/surgical benefits expected to be
paid under the plan for the plan year (or
for the portion of the plan year after a
change in plan benefits that affects the
applicability of the aggregate lifetime or
annual dollar limits). Any reasonable
method may be used to determine
whether the dollar amount expected to
be paid under the plan will constitute
one-third or two-thirds of the dollar
amount of all plan payments for
medical/surgical benefits.
(6) Plan not described in paragraph
(b)(2) or (b)(3) of this section—(i) In
general. A group health plan (or health
insurance coverage) that is not

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described in paragraph (b)(2) or (b)(3) of
this section with respect to aggregate
lifetime or annual dollar limits on
medical/surgical benefits, must either—
(A) Impose no aggregate lifetime or
annual dollar limit, as appropriate, on
mental health or substance use disorder
benefits; or
(B) Impose an aggregate lifetime or
annual dollar limit on mental health or
substance use disorder benefits that is
no less than an average limit calculated
for medical/surgical benefits in the
following manner. The average limit is
calculated by taking into account the
weighted average of the aggregate
lifetime or annual dollar limits, as
appropriate, that are applicable to the
categories of medical/surgical benefits.
Limits based on delivery systems, such
as inpatient/outpatient treatment or
normal treatment of common, low-cost
conditions (such as treatment of normal
births), do not constitute categories for
purposes of this paragraph (b)(6)(i)(B).
In addition, for purposes of determining
weighted averages, any benefits that are
not within a category that is subject to
a separately-designated dollar limit
under the plan are taken into account as
a single separate category by using an
estimate of the upper limit on the dollar
amount that a plan may reasonably be
expected to incur with respect to such
benefits, taking into account any other
applicable restrictions under the plan.
(ii) Weighting. For purposes of this
paragraph (b)(6), the weighting
applicable to any category of medical/
surgical benefits is determined in the
manner set forth in paragraph (b)(5) of
this section for determining one-third or
two-thirds of all medical/surgical
benefits.
(iii) Example. The rules of this
paragraph (b)(6) are illustrated by the
following example:
Example. (i) Facts. A group health plan
that is subject to the requirements of this
section includes a $100,000 annual limit on
medical/surgical benefits related to cardiopulmonary diseases. The plan does not
include an annual dollar limit on any other
category of medical/surgical benefits. The
plan determines that 40% of the dollar
amount of plan payments for medical/
surgical benefits are related to cardiopulmonary diseases. The plan determines
that $1,000,000 is a reasonable estimate of
the upper limit on the dollar amount that the
plan may incur with respect to the other 60%
of payments for medical/surgical benefits.
(ii) Conclusion. In this Example, the plan
is not described in paragraph (b)(3) of this
section because there is not one annual dollar
limit that applies to at least two-thirds of all
medical/surgical benefits. Further, the plan is
not described in paragraph (b)(2) of this
section because more than one-third of all
medical/surgical benefits are subject to an
annual dollar limit. Under this paragraph

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5439

(b)(6), the plan sponsor can choose either to
include no annual dollar limit on mental
health or substance use disorder benefits, or
to include an annual dollar limit on mental
health or substance use disorder benefits that
is not less than the weighted average of the
annual dollar limits applicable to each
category of medical/surgical benefits. In this
example, the minimum weighted average
annual dollar limit that can be applied to
mental health or substance use disorder
benefits is $640,000 (40% × $100,000 + 60%
× $1,000,000 = $640,000).

(c) Parity requirements with respect to
financial requirements and treatment
limitations—(1) Clarification of terms—
(i) Classification of benefits. When
reference is made in this paragraph (c)
to a classification of benefits, the term
‘‘classification’’ means a classification as
described in paragraph (c)(2)(ii) of this
section.
(ii) Type of financial requirement or
treatment limitation. When reference is
made in this paragraph (c) to a type of
financial requirement or treatment
limitation, the reference to type means
its nature. Different types of financial
requirements include deductibles,
copayments, coinsurance, and out-ofpocket maximums. Different types of
quantitative treatment limitations
include annual, episode, and lifetime
day and visit limits. See paragraph
(c)(4)(ii) of this section for an illustrative
list of nonquantitative treatment
limitations.
(iii) Level of a type of financial
requirement or treatment limitation.
When reference is made in this
paragraph (c) to a level of a type of
financial requirement or treatment
limitation, level refers to the magnitude
of the type of financial requirement or
treatment limitation. For example,
different levels of coinsurance include
20 percent and 30 percent; different
levels of a copayment include $15 and
$20; different levels of a deductible
include $250 and $500; and different
levels of an episode limit include 21
inpatient days per episode and 30
inpatient days per episode.
(iv) Coverage unit. When reference is
made in this paragraph (c) to a coverage
unit, coverage unit refers to the way in
which a plan (or health insurance
coverage) groups individuals for
purposes of determining benefits, or
premiums or contributions. For
example, different coverage units
include self-only, family, and employeeplus-spouse.
(2) General parity requirement—(i)
General rule. A group health plan (or
health insurance coverage offered by an
issuer in connection with a group health
plan) that provides both medical/
surgical benefits and mental health or
substance use disorder benefits may not

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apply any financial requirement or
treatment limitation to mental health or
substance use disorder benefits in any
classification that is more restrictive
than the predominant financial
requirement or treatment limitation of
that type applied to substantially all
medical/surgical benefits in the same
classification. Whether a financial
requirement or treatment limitation is a
predominant financial requirement or
treatment limitation that applies to
substantially all medical/surgical
benefits in a classification is determined
separately for each type of financial
requirement or treatment limitation. The
application of the rules of this
paragraph (c)(2) to financial
requirements and quantitative treatment
limitations is addressed in paragraph
(c)(3) of this section; the application of
the rules of this paragraph (c)(2) to
nonquantitative treatment limitations is
addressed in paragraph (c)(4) of this
section.
(ii) Classifications of benefits used for
applying rules—(A) In general. If a plan
(or health insurance coverage) provides
mental health or substance use disorder
benefits in any classification of benefits
described in this paragraph (c)(2)(ii),
mental health or substance use disorder
benefits must be provided in every
classification in which medical/surgical
benefits are provided. In determining
the classification in which a particular
benefit belongs, a plan (or health
insurance issuer) must apply the same
standards to medical/surgical benefits
and to mental health or substance use
disorder benefits. To the extent that a
plan (or health insurance coverage)
provides benefits in a classification and
imposes any separate financial
requirement or treatment limitation (or
separate level of a financial requirement
or treatment limitation) for benefits in
the classification, the rules of this
paragraph (c) apply separately with
respect to that classification for all
financial requirements or treatment
limitations. The following
classifications of benefits are the only
classifications used in applying the
rules of this paragraph (c):
(1) Inpatient, in-network. Benefits
furnished on an inpatient basis and
within a network of providers
established or recognized under a plan
or health insurance coverage.
(2) Inpatient, out-of-network. Benefits
furnished on an inpatient basis and
outside any network of providers
established or recognized under a plan
or health insurance coverage. This
classification includes inpatient benefits
under a plan (or health insurance
coverage) that has no network of
providers.

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(3) Outpatient, in-network. Benefits
furnished on an outpatient basis and
within a network of providers
established or recognized under a plan
or health insurance coverage.
(4) Outpatient, out-of-network.
Benefits furnished on an outpatient
basis and outside any network of
providers established or recognized
under a plan or health insurance
coverage. This classification includes
outpatient benefits under a plan (or
health insurance coverage) that has no
network of providers.
(5) Emergency care. Benefits for
emergency care.
(6) Prescription drugs. Benefits for
prescription drugs. See special rules for
multi-tiered prescription drug benefits
in paragraph (c)(3)(iii) of this section.
(B) Application to out-of-network
providers. See paragraph (c)(2)(ii)(A) of
this section, under which a plan (or
health insurance coverage) that provides
mental health or substance use disorder
benefits in any classification of benefits
must provide mental health or
substance use disorder benefits in every
classification in which medical/surgical
benefits are provided, including out-ofnetwork classifications.
(C) Examples. The rules of this
paragraph (c)(2)(ii) are illustrated by the
following examples. In each example,
the group health plan is subject to the
requirements of this section and
provides both medical/surgical benefits
and mental health and substance use
disorder benefits.
Example 1. (i) Facts. A group health plan
offers inpatient and outpatient benefits and
does not contract with a network of
providers. The plan imposes a $500
deductible on all benefits. For inpatient
medical/surgical benefits, the plan imposes a
coinsurance requirement. For outpatient
medical/surgical benefits, the plan imposes
copayments. The plan imposes no other
financial requirements or treatment
limitations.
(ii) Conclusion. In this Example 1, because
the plan has no network of providers, all
benefits provided are out-of-network.
Because inpatient, out-of-network medical/
surgical benefits are subject to separate
financial requirements from outpatient, outof-network medical/surgical benefits, the
rules of this paragraph (c) apply separately
with respect to any financial requirements
and treatment limitations, including the
deductible, in each classification.
Example 2. (i) Facts. A plan imposes a
$500 deductible on all benefits. The plan has
no network of providers. The plan generally
imposes a 20 percent coinsurance
requirement with respect to all benefits,
without distinguishing among inpatient,
outpatient, emergency, or prescription drug
benefits. The plan imposes no other financial
requirements or treatment limitations.
(ii) Conclusion. In this Example 2, because
the plan does not impose separate financial

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requirements (or treatment limitations) based
on classification, the rules of this paragraph
(c) apply with respect to the deductible and
the coinsurance across all benefits.
Example 3. (i) Facts. Same facts as
Example 2, except the plan exempts
emergency care benefits from the 20 percent
coinsurance requirement. The plan imposes
no other financial requirements or treatment
limitations.
(ii) Conclusion. In this Example 3, because
the plan imposes separate financial
requirements based on classifications, the
rules of this paragraph (c) apply with respect
to the deductible and the coinsurance
separately for—
(A) Benefits in the emergency
classification; and
(B) All other benefits.
Example 4. (i) Facts. Same facts as
Example 2, except the plan also imposes a
preauthorization requirement for all inpatient
treatment in order for benefits to be paid. No
such requirement applies to outpatient
treatment.
(ii) Conclusion. In this Example 4, because
the plan has no network of providers, all
benefits provided are out-of-network.
Because the plan imposes a separate
treatment limitation based on classifications,
the rules of this paragraph (c) apply with
respect to the deductible and coinsurance
separately for—
(A) Inpatient, out-of-network benefits; and
(B) All other benefits.

(3) Financial requirements and
quantitative treatment limitations—(i)
Determining ‘‘substantially all’’ and
‘‘predominant’’—(A) Substantially all.
For purposes of this paragraph (c), a
type of financial requirement or
quantitative treatment limitation is
considered to apply to substantially all
medical/surgical benefits in a
classification of benefits if it applies to
at least two-thirds of all medical/
surgical benefits in that classification.
(For this purpose, benefits expressed as
subject to a zero level of a type of
financial requirement are treated as
benefits not subject to that type of
financial requirement, and benefits
expressed as subject to a quantitative
treatment limitation that is unlimited
are treated as benefits not subject to that
type of quantitative treatment
limitation.) If a type of financial
requirement or quantitative treatment
limitation does not apply to at least twothirds of all medical/surgical benefits in
a classification, then that type cannot be
applied to mental health or substance
use disorder benefits in that
classification.
(B) Predominant—(1) If a type of
financial requirement or quantitative
treatment limitation applies to at least
two-thirds of all medical/surgical
benefits in a classification as
determined under paragraph (c)(3)(i)(A)
of this section, the level of the financial
requirement or quantitative treatment

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limitation that is considered the
predominant level of that type in a
classification of benefits is the level that
applies to more than one-half of
medical/surgical benefits in that
classification subject to the financial
requirement or quantitative treatment
limitation.
(2) If, with respect to a type of
financial requirement or quantitative
treatment limitation that applies to at
least two-thirds of all medical/surgical
benefits in a classification, there is no
single level that applies to more than
one-half of medical/surgical benefits in
the classification subject to the financial
requirement or quantitative treatment
limitation, the plan (or health insurance
issuer) may combine levels until the
combination of levels applies to more
than one-half of medical/surgical
benefits subject to the financial
requirement or quantitative treatment
limitation in the classification. The least
restrictive level within the combination
is considered the predominant level of
that type in the classification. (For this
purpose, a plan may combine the most
restrictive levels first, with each less
restrictive level added to the
combination until the combination
applies to more than one-half of the
benefits subject to the financial
requirement or treatment limitation.)
(C) Portion based on plan payments.
For purposes of this paragraph (c), the
determination of the portion of medical/
surgical benefits in a classification of
benefits subject to a financial
requirement or quantitative treatment
limitation (or subject to any level of a
financial requirement or quantitative
treatment limitation) is based on the

dollar amount of all plan payments for
medical/surgical benefits in the
classification expected to be paid under
the plan for the plan year (or for the
portion of the plan year after a change
in plan benefits that affects the
applicability of the financial
requirement or quantitative treatment
limitation).
(D) Clarifications for certain threshold
requirements. For any deductible, the
dollar amount of plan payments
includes all plan payments with respect
to claims that would be subject to the
deductible if it had not been satisfied.
For any out-of-pocket maximum, the
dollar amount of plan payments
includes all plan payments associated
with out-of-pocket payments that are
taken into account towards the out-ofpocket maximum as well as all plan
payments associated with out-of-pocket
payments that would have been made
towards the out-of-pocket maximum if it
had not been satisfied. Similar rules
apply for any other thresholds at which
the rate of plan payment changes.
(E) Determining the dollar amount of
plan payments. Subject to paragraph
(c)(3)(i)(D) of this section, any
reasonable method may be used to
determine the dollar amount expected
to be paid under a plan for medical/
surgical benefits subject to a financial
requirement or quantitative treatment
limitation (or subject to any level of a
financial requirement or quantitative
treatment limitation).
(ii) Application to different coverage
units. If a plan (or health insurance
coverage) applies different levels of a
financial requirement or quantitative
treatment limitation to different
coverage units in a classification of

Coinsurance rate ....................................................
Projected payments ................................................
Percent of total plan costs .....................................
Percent subject to coinsurance level .....................

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The plan projects plan costs of $800x to be
subject to coinsurance ($100x + $450x +
$100x + $150x = $800x). Thus, 80 percent
($800x/$1,000x) of the benefits are projected
to be subject to coinsurance, and 56.25
percent of the benefits subject to coinsurance
are projected to be subject to the 15 percent
coinsurance level.
(ii) Conclusion. In this Example 1, the twothirds threshold of the substantially all

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10%
$100x
10%
12.5%
(100x/800x)

15%
$450x
45%
56.25%
(450x/800x)

standard is met for coinsurance because 80
percent of all inpatient, out-of-network
medical/surgical benefits are subject to
coinsurance. Moreover, the 15 percent
coinsurance is the predominant level because
it is applicable to more than one-half of
inpatient, out-of-network medical/surgical
benefits subject to the coinsurance
requirement. The plan may not impose any
level of coinsurance with respect to

Copayment amount ................................................
Projected payments ................................................
Percent of total plan costs .....................................
Percent subject to copayments ..............................

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0%
$200x
20%
N/A

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$0
$200x
20%
N/A

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$10
$200x
20%
25%
(200x/800x)

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$15
$200x
20%
25%
(200x/800x)

5441

medical/surgical benefits, the
predominant level that applies to
substantially all medical/surgical
benefits in the classification is
determined separately for each coverage
unit.
(iii) Special rule for multi-tiered
prescription drug benefits. If a plan (or
health insurance coverage) applies
different levels of financial
requirements to different tiers of
prescription drug benefits based on
reasonable factors determined in
accordance with the rules in paragraph
(c)(4)(i) of this section (relating to
requirements for nonquantitative
treatment limitations) and without
regard to whether a drug is generally
prescribed with respect to medical/
surgical benefits or with respect to
mental health or substance use disorder
benefits, the plan (or health insurance
coverage) satisfies the parity
requirements of this paragraph (c) with
respect to prescription drug benefits.
Reasonable factors include cost,
efficacy, generic versus brand name, and
mail order versus pharmacy pick-up.
(iv) Examples. The rules of
paragraphs (c)(3)(i), (c)(3)(ii), and
(c)(3)(iii) of this section are illustrated
by the following examples. In each
example, the group health plan is
subject to the requirements of this
section and provides both medical/
surgical benefits and mental health and
substance use disorder benefits.
Example 1. (i) Facts. For inpatient, out-ofnetwork medical/surgical benefits, a group
health plan imposes five levels of
coinsurance. Using a reasonable method, the
plan projects its payments for the upcoming
year as follows:
20%
$100x
10%
12.5%
(100x/800x)

30%
$150x
15%
18.75%
(150x/800x)

Total
$1,000x

inpatient, out-of-network mental health or
substance use disorder benefits that is more
restrictive than the 15 percent level of
coinsurance.
Example 2. (i) Facts. For outpatient, innetwork medical/surgical benefits, a plan
imposes five different copayment levels.
Using a reasonable method, the plan projects
payments for the upcoming year as follows:
$20
$300x
30%
37.5%
(300x/800x)

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02FER3

$50
$100x
10%
12.5%
(100x/800x)

Total
$1,000x

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The plan projects plan costs of $800x to be
subject to copayments ($200x + $200x
+$300x + $100x = $800x). Thus, 80 percent
($800x/$1,000x) of the benefits are projected
to be subject to a copayment.
(ii) Conclusion. In this Example 2, the twothirds threshold of the substantially all
standard is met for copayments because 80
percent of all outpatient, in-network medical/
surgical benefits are subject to a copayment.
Moreover, there is no single level that applies
to more than one-half of medical/surgical
benefits in the classification subject to a
copayment (for the $10 copayment, 25%; for
the $15 copayment, 25%; for the $20
copayment, 37.5%; and for the $50
copayment, 12.5%). The plan can combine
any levels of copayment, including the
highest levels, to determine the predominant
level that can be applied to mental health or
substance use disorder benefits. If the plan
combines the highest levels of copayment,
the combined projected payments for the two
highest copayment levels, the $50 copayment
and the $20 copayment, are not more than
one-half of the outpatient, in-network
medical/surgical benefits subject to a

copayment because they are exactly one-half
($300x + $100x = $400x; $400x/$800x =
50%). The combined projected payments for
the three highest copayment levels—the $50
copayment, the $20 copayment, and the $15
copayment—are more than one-half of the
outpatient, in-network medical/surgical
benefits subject to the copayments ($100x +
$300x + $200x = $600x; $600x/$800x =
75%). Thus, the plan may not impose any
copayment on outpatient, in-network mental
health or substance use disorder benefits that
is more restrictive than the least restrictive
copayment in the combination, the $15
copayment.
Example 3. (i) Facts. A plan imposes a
$250 deductible on all medical/surgical
benefits for self-only coverage and a $500
deductible on all medical/surgical benefits
for family coverage. The plan has no network
of providers. For all medical/surgical
benefits, the plan imposes a coinsurance
requirement. The plan imposes no other
financial requirements or treatment
limitations.
(ii) Conclusion. In this Example 3, because
the plan has no network of providers, all
Tier 1

Tier 2

Tier 3

Tier 4

Generic drugs

Preferred brand
name drugs

Non-preferred
brand name
drugs (which
may have Tier 1
or Tier 2
alternatives)

Specialty drugs

90%

80%

60%

50%

Tier description

Percent paid by plan ........................................................................

(ii) Conclusion. In this Example 4, the
financial requirements that apply to
prescription drug benefits are applied
without regard to whether a drug is generally
prescribed with respect to medical/surgical
benefits or with respect to mental health or
substance use disorder benefits; the process
for certifying drugs in different tiers complies
with paragraph (c)(4) of this section; and the
bases for establishing different levels or types
of financial requirements are reasonable. The
financial requirements applied to
prescription drug benefits do not violate the
parity requirements of this paragraph (c)(3).

(v) No separate cumulative financial
requirements or cumulative quantitative
treatment limitations—(A) A group
health plan (or health insurance
coverage offered in connection with a
group health plan) may not apply any
cumulative financial requirement or
cumulative quantitative treatment
limitation for mental health or

substance use disorder benefits in a
classification that accumulates
separately from any established for
medical/surgical benefits in the same
classification.
(B) The rules of this paragraph
(c)(3)(v) are illustrated by the following
examples:
Example 1. (i) Facts. A group health plan
imposes a combined annual $500 deductible
on all medical/surgical, mental health, and
substance use disorder benefits.
(ii) Conclusion. In this Example 1, the
combined annual deductible complies with
the requirements of this paragraph (c)(3)(v).
Example 2. (i) Facts. A plan imposes an
annual $250 deductible on all medical/
surgical benefits and a separate annual $250
deductible on all mental health and
substance use disorder benefits.
(ii) Conclusion. In this Example 2, the
separate annual deductible on mental health
and substance use disorder benefits violates
the requirements of this paragraph (c)(3)(v).

sroberts on DSKD5P82C1PROD with RULES

Inpatient, in-network ........................................................................................................
Inpatient, out-of-network ..................................................................................................
Outpatient, in-network ......................................................................................................
Outpatient, out-of-network ...............................................................................................
Emergency care ...............................................................................................................

17:32 Feb 01, 2010

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Example 3. (i) Facts. A plan imposes an
annual $300 deductible on all medical/
surgical benefits and a separate annual $100
deductible on all mental health or substance
use disorder benefits.
(ii) Conclusion. In this Example 3, the
separate annual deductible on mental health
and substance use disorder benefits violates
the requirements of this paragraph (c)(3)(v).
Example 4. (i) Facts. A plan generally
imposes a combined annual $500 deductible
on all benefits (both medical/surgical benefits
and mental health and substance use
disorder benefits) except prescription drugs.
Certain benefits, such as preventive care, are
provided without regard to the deductible.
The imposition of other types of financial
requirements or treatment limitations varies
with each classification. Using reasonable
methods, the plan projects its payments for
medical/surgical benefits in each
classification for the upcoming year as
follows:

Benefits subject
to deductible

Classification

VerDate Nov<24>2008

benefits are provided out-of-network.
Because self-only and family coverage are
subject to different deductibles, whether the
deductible applies to substantially all
medical/surgical benefits is determined
separately for self-only medical/surgical
benefits and family medical/surgical benefits.
Because the coinsurance is applied without
regard to coverage units, the predominant
coinsurance that applies to substantially all
medical/surgical benefits is determined
without regard to coverage units.
Example 4. (i) Facts. A plan applies the
following financial requirements for
prescription drug benefits. The requirements
are applied without regard to whether a drug
is generally prescribed with respect to
medical/surgical benefits or with respect to
mental health or substance use disorder
benefits. Moreover, the process for certifying
a particular drug as ‘‘generic’’, ‘‘preferred
brand name’’, ‘‘non-preferred brand name’’, or
‘‘specialty’’ complies with the rules of
paragraph (c)(4)(i) of this section (relating to
requirements for nonquantitative treatment
limitations).

Frm 00034

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Total benefits

$1,800x
1,000x
1,400x
1,880x
300x

E:\FR\FM\02FER3.SGM

$2,000x
1,000x
2,000x
2,000x
500x

02FER3

Percent subject
to deductible
90
100
70
94
60

Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations

sroberts on DSKD5P82C1PROD with RULES

(ii) Conclusion. In this Example 4, the twothirds threshold of the substantially all
standard is met with respect to each
classification except emergency care because
in each of those other classifications at least
two-thirds of medical/surgical benefits are
subject to the $500 deductible. Moreover, the
$500 deductible is the predominant level in
each of those other classifications because it
is the only level. However, emergency care
mental health and substance use disorder
benefits cannot be subject to the $500
deductible because it does not apply to
substantially all emergency care medical/
surgical benefits.

(4) Nonquantitative treatment
limitations—(i) General rule. A group
health plan (or health insurance
coverage) may not impose a
nonquantitative treatment limitation
with respect to mental health or
substance use disorder benefits in any
classification unless, under the terms of
the plan (or health insurance coverage)
as written and in operation, any
processes, strategies, evidentiary
standards, or other factors used in
applying the nonquantitative treatment
limitation to mental health or substance
use disorder benefits in the
classification are comparable to, and are
applied no more stringently than, the
processes, strategies, evidentiary
standards, or other factors used in
applying the limitation with respect to
medical surgical/benefits in the
classification, except to the extent that
recognized clinically appropriate
standards of care may permit a
difference.
(ii) Illustrative list of nonquantitative
treatment limitations. Nonquantitative
treatment limitations include—
(A) Medical management standards
limiting or excluding benefits based on
medical necessity or medical
appropriateness, or based on whether
the treatment is experimental or
investigative;
(B) Formulary design for prescription
drugs;
(C) Standards for provider admission
to participate in a network, including
reimbursement rates;
(D) Plan methods for determining
usual, customary, and reasonable
charges;
(E) Refusal to pay for higher-cost
therapies until it can be shown that a
lower-cost therapy is not effective (also
known as fail-first policies or step
therapy protocols); and
(F) Exclusions based on failure to
complete a course of treatment.
(iii) Examples. The rules of this
paragraph (c)(4) are illustrated by the
following examples. In each example,
the group health plan is subject to the
requirements of this section and
provides both medical/surgical benefits

VerDate Nov<24>2008

19:22 Feb 01, 2010

Jkt 220001

and mental health and substance use
disorder benefits.
Example 1. (i) Facts. A group health plan
limits benefits to treatment that is medically
necessary. The plan requires concurrent
review for inpatient, in-network mental
health and substance use disorder benefits
but does not require it for any inpatient, innetwork medical/surgical benefits. The plan
conducts retrospective review for inpatient,
in-network medical/surgical benefits.
(ii) Conclusion. In this Example 1, the plan
violates the rules of this paragraph (c)(4).
Although the same nonquantitative treatment
limitation—medical necessity—applies to
both mental health and substance use
disorder benefits and to medical/surgical
benefits for inpatient, in-network services,
the concurrent review process does not apply
to medical/surgical benefits. The concurrent
review process is not comparable to the
retrospective review process. While such a
difference might be permissible in certain
individual cases based on recognized
clinically appropriate standards of care, it is
not permissible for distinguishing between
all medical/surgical benefits and all mental
health or substance use disorder benefits.
Example 2. (i) Facts. A plan requires prior
approval that a course of treatment is
medically necessary for outpatient, innetwork medical/surgical, mental health, and
substance use disorder benefits. For mental
health and substance use disorder treatments
that do not have prior approval, no benefits
will be paid; for medical/surgical treatments
that do not have prior approval, there will
only be a 25 percent reduction in the benefits
the plan would otherwise pay.
(ii) Conclusion. In this Example 2, the plan
violates the rules of this paragraph (c)(4).
Although the same nonquantitative treatment
limitation—medical necessity—is applied
both to mental health and substance use
disorder benefits and to medical/surgical
benefits for outpatient, in-network services,
the penalty for failure to obtain prior
approval for mental health and substance use
disorder benefits is not comparable to the
penalty for failure to obtain prior approval
for medical/surgical benefits.
Example 3. (i) Facts. A plan generally
covers medically appropriate treatments. For
both medical/surgical benefits and mental
health and substance use disorder benefits,
evidentiary standards used in determining
whether a treatment is medically appropriate
(such as the number of visits or days of
coverage) are based on recommendations
made by panels of experts with appropriate
training and experience in the fields of
medicine involved. The evidentiary
standards are applied in a manner that may
differ based on clinically appropriate
standards of care for a condition.
(ii) Conclusion. In this Example 3, the plan
complies with the rules of this paragraph
(c)(4) because the nonquantitative treatment
limitation—medical appropriateness—is the
same for both medical/surgical benefits and
mental health and substance use disorder
benefits, and the processes for developing the
evidentiary standards and the application of
them to mental health and substance use
disorder benefits are comparable to and are
applied no more stringently than for medical/

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5443

surgical benefits. This is the result even if,
based on clinically appropriate standards of
care, the application of the evidentiary
standards does not result in similar numbers
of visits, days of coverage, or other benefits
utilized for mental health conditions or
substance use disorders as it does for any
particular medical/surgical condition.
Example 4. (i) Facts. A plan generally
covers medically appropriate treatments. In
determining whether prescription drugs are
medically appropriate, the plan
automatically excludes coverage for
antidepressant drugs that are given a black
box warning label by the Food and Drug
Administration (indicating the drug carries a
significant risk of serious adverse effects). For
other drugs with a black box warning
(including those prescribed for other mental
health conditions and substance use
disorders, as well as for medical/surgical
conditions), the plan will provide coverage if
the prescribing physician obtains
authorization from the plan that the drug is
medically appropriate for the individual,
based on clinically appropriate standards of
care.
(ii) Conclusion. In this Example 4, the plan
violates the rules of this paragraph (c)(4).
Although the same nonquantitative treatment
limitation—medical appropriateness—is
applied to both mental health and substance
use disorder benefits and medical/surgical
benefits, the plan’s unconditional exclusion
of antidepressant drugs given a black box
warning is not comparable to the conditional
exclusion for other drugs with a black box
warning.
Example 5. (i) Facts. An employer
maintains both a major medical program and
an employee assistance program (EAP). The
EAP provides, among other benefits, a
limited number of mental health or substance
use disorder counseling sessions.
Participants are eligible for mental health or
substance use disorder benefits under the
major medical program only after exhausting
the counseling sessions provided by the EAP.
No similar exhaustion requirement applies
with respect to medical/surgical benefits
provided under the major medical program.
(ii) Conclusion. In this Example 5, limiting
eligibility for mental health and substance
use disorder benefits only after EAP benefits
are exhausted is a nonquantitative treatment
limitation subject to the parity requirements
of this paragraph (c). Because no comparable
requirement applies to medical/surgical
benefits, the requirement may not be applied
to mental health or substance use disorder
benefits.

(5) Exemptions. The rules of this
paragraph (c) do not apply if a group
health plan (or health insurance
coverage) satisfies the requirements of
paragraph (f) or (g) of this section
(relating to exemptions for small
employers and for increased cost).
(d) Availability of plan information—
(1) Criteria for medical necessity
determinations. The criteria for medical

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necessity determinations made under a
group health plan with respect to
mental health or substance use disorder
benefits (or health insurance coverage
offered in connection with the plan with
respect to such benefits) must be made
available by the plan administrator (or
the health insurance issuer offering such
coverage) to any current or potential
participant, beneficiary, or contracting
provider upon request.
(2) Reason for any denial. The reason
for any denial under a group health plan
(or health insurance coverage) of
reimbursement or payment for services
with respect to mental health or
substance use disorder benefits in the
case of any participant or beneficiary
must be made available by the plan
administrator (or the health insurance
issuer offering such coverage) to the
participant or beneficiary in a form and
manner consistent with the rules in
§ 2560.503–1 of this Part for group
health plans.
(e) Applicability—(1) Group health
plans. The requirements of this section
apply to a group health plan offering
medical/surgical benefits and mental
health or substance use disorder
benefits. If, under an arrangement or
arrangements to provide medical care
benefits by an employer or employee
organization (including for this purpose
a joint board of trustees of a
multiemployer trust affiliated with one
or more multiemployer plans), any
participant (or beneficiary) can
simultaneously receive coverage for
medical/surgical benefits and coverage
for mental health or substance use
disorder benefits, then the requirements
of this section (including the exemption
provisions in paragraph (g) of this
section) apply separately with respect to
each combination of medical/surgical
benefits and of mental health or
substance use disorder benefits that any
participant (or beneficiary) can
simultaneously receive from that
employer’s or employee organization’s
arrangement or arrangements to provide
medical care benefits, and all such
combinations are considered for
purposes of this section to be a single
group health plan.
(2) Health insurance issuers. The
requirements of this section apply to a
health insurance issuer offering health
insurance coverage for mental health or
substance use disorder benefits in
connection with a group health plan
subject to paragraph (e)(1) of this
section.
(3) Scope. This section does not—
(i) Require a group health plan (or
health insurance issuer offering
coverage in connection with a group
health plan) to provide any mental

VerDate Nov<24>2008

17:32 Feb 01, 2010

Jkt 220001

health benefits or substance use
disorder benefits, and the provision of
benefits by a plan (or health insurance
coverage) for one or more mental health
conditions or substance use disorders
does not require the plan or health
insurance coverage under this section to
provide benefits for any other mental
health condition or substance use
disorder; or
(ii) Affect the terms and conditions
relating to the amount, duration, or
scope of mental health or substance use
disorder benefits under the plan (or
health insurance coverage) except as
specifically provided in paragraphs (b)
and (c) of this section.
(f) Small employer exemption—(1) In
general. The requirements of this
section do not apply to a group health
plan (or health insurance issuer offering
coverage in connection with a group
health plan) for a plan year of a small
employer. For purposes of this
paragraph (f), the term small employer
means, in connection with a group
health plan with respect to a calendar
year and a plan year, an employer who
employed an average of at least two (or
one in the case of an employer residing
in a state that permits small groups to
include a single individual) but not
more than 50 employees on business
days during the preceding calendar
year. See section 732(a) of ERISA and
§ 2590.732(b) of this Part, which provide
that this section (and certain other
sections) does not apply to any group
health plan (and health insurance issuer
offering coverage in connection with a
group health plan) for any plan year if,
on the first day of the plan year, the
plan has fewer than two participants
who are current employees.
(2) Rules in determining employer
size. For purposes of paragraph (f)(1) of
this section—
(i) All persons treated as a single
employer under subsections (b), (c), (m),
and (o) of section 414 of the Code are
treated as one employer;
(ii) If an employer was not in
existence throughout the preceding
calendar year, whether it is a small
employer is determined based on the
average number of employees the
employer reasonably expects to employ
on business days during the current
calendar year; and
(iii) Any reference to an employer for
purposes of the small employer
exemption includes a reference to a
predecessor of the employer.
(g) Increased cost exemption—
[Reserved]
(h) Sale of nonparity health insurance
coverage. A health insurance issuer may
not sell a policy, certificate, or contract
of insurance that fails to comply with

PO 00000

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paragraph (b) or (c) of this section,
except to a plan for a year for which the
plan is exempt from the requirements of
this section because the plan meets the
requirements of paragraph (f) or (g) of
this section.
(i) Applicability dates—(1) In general.
Except as provided in paragraph (i)(2) of
this section, the requirements of this
section are applicable for plan years
beginning on or after July 1, 2010.
(2) Special effective date for certain
collectively-bargained plans. For a
group health plan maintained pursuant
to one or more collective bargaining
agreements ratified before October 3,
2008, the requirements of this section
do not apply to the plan (or health
insurance coverage offered in
connection with the plan) for plan years
beginning before the later of either—
(i) The date on which the last of the
collective bargaining agreements
relating to the plan terminates
(determined without regard to any
extension agreed to after October 3,
2008); or
(ii) July 1, 2010.
Signed at Washington, DC, this 26th day of
January 2010.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits
Security Administration, U.S. Department of
Labor.

Department of Health and Human
Services
45 CFR Subtitle A
For the reasons set forth in the
preamble, the Department of Health and
Human Services is amending 45 CFR
Subtitle A, Subchapter B, Part 146,
Subpart C as follows:

■

PART 146—REQUIREMENTS FOR THE
GROUP HEALTH INSURANCE
MARKET
1. The authority citation for Part 146
continues to read as follows:

■

Authority: Secs. 2702 through 2705, 2711
through 2723, 2791, and 2792 of the PHS Act
(42 U.S.C. 300gg–1 through 300gg–5, 300gg–
11 through 300gg–23, 300gg–91, and 300gg–
92).

2. Section 146.136 is revised to read
as follows:

■

§ 146.136 Parity in mental health and
substance use disorder benefits.

(a) Meaning of terms. For purposes of
this section, except where the context
clearly indicates otherwise, the
following terms have the meanings
indicated:
Aggregate lifetime dollar limit means
a dollar limitation on the total amount
of specified benefits that may be paid
under a group health plan (or health

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Federal Register / Vol. 75, No. 21 / Tuesday, February 2, 2010 / Rules and Regulations
insurance coverage offered in
connection with such a plan) for any
coverage unit.
Annual dollar limit means a dollar
limitation on the total amount of
specified benefits that may be paid in a
12-month period under a group health
plan (or health insurance coverage
offered in connection with such a plan)
for any coverage unit.
Coverage unit means coverage unit as
described in paragraph (c)(1)(iv) of this
section.
Cumulative financial requirements
are financial requirements that
determine whether or to what extent
benefits are provided based on
accumulated amounts and include
deductibles and out-of-pocket
maximums. (However, cumulative
financial requirements do not include
aggregate lifetime or annual dollar limits
because these two terms are excluded
from the meaning of financial
requirements.)
Cumulative quantitative treatment
limitations are treatment limitations that
determine whether or to what extent
benefits are provided based on
accumulated amounts, such as annual
or lifetime day or visit limits.
Financial requirements include
deductibles, copayments, coinsurance,
or out-of-pocket maximums. Financial
requirements do not include aggregate
lifetime or annual dollar limits.
Medical/surgical benefits means
benefits for medical or surgical services,
as defined under the terms of the plan
or health insurance coverage, but does
not include mental health or substance
use disorder benefits. Any condition
defined by the plan as being or as not
being a medical/surgical condition must
be defined to be consistent with
generally recognized independent
standards of current medical practice
(for example, the most current version
of the International Classification of
Diseases (ICD) or State guidelines).
Mental health benefits means benefits
with respect to services for mental
health conditions, as defined under the
terms of the plan and in accordance
with applicable Federal and State law.
Any condition defined by the plan as
being or as not being a mental health
condition must be defined to be
consistent with generally recognized
independent standards of current
medical practice (for example, the most
current version of the Diagnostic and
Statistical Manual of Mental Disorders
(DSM), the most current version of the
ICD, or State guidelines).
Substance use disorder benefits
means benefits with respect to services
for substance use disorders, as defined
under the terms of the plan and in

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17:32 Feb 01, 2010

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accordance with applicable Federal and
State law. Any disorder defined by the
plan as being or as not being a substance
use disorder must be defined to be
consistent with generally recognized
independent standards of current
medical practice (for example, the most
current version of the DSM, the most
current version of the ICD, or State
guidelines).
Treatment limitations include limits
on benefits based on the frequency of
treatment, number of visits, days of
coverage, days in a waiting period, or
other similar limits on the scope or
duration of treatment. Treatment
limitations include both quantitative
treatment limitations, which are
expressed numerically (such as 50
outpatient visits per year), and
nonquantitative treatment limitations,
which otherwise limit the scope or
duration of benefits for treatment under
a plan. (See paragraph (c)(4)(ii) of this
section for an illustrative list of
nonquantitative treatment limitations.)
A permanent exclusion of all benefits
for a particular condition or disorder,
however, is not a treatment limitation.
(b) Parity requirements with respect to
aggregate lifetime and annual dollar
limits—(1)—General—(i) General parity
requirement. A group health plan (or
health insurance coverage offered by an
issuer in connection with a group health
plan) that provides both medical/
surgical benefits and mental health or
substance use disorder benefits must
comply with paragraph (b)(2), (b)(3), or
(b)(6) of this section.
(ii) Exception. The rule in paragraph
(b)(1)(i) of this section does not apply if
a plan (or health insurance coverage)
satisfies the requirements of paragraph
(f) or (g) of this section (relating to
exemptions for small employers and for
increased cost).
(2) Plan with no limit or limits on less
than one-third of all medical/surgical
benefits. If a plan (or health insurance
coverage) does not include an aggregate
lifetime or annual dollar limit on any
medical/surgical benefits or includes an
aggregate lifetime or annual dollar limit
that applies to less than one-third of all
medical/surgical benefits, it may not
impose an aggregate lifetime or annual
dollar limit, respectively, on mental
health or substance use disorder
benefits.
(3) Plan with a limit on at least twothirds of all medical/surgical benefits. If
a plan (or health insurance coverage)
includes an aggregate lifetime or annual
dollar limit on at least two-thirds of all
medical/surgical benefits, it must
either—
(i) Apply the aggregate lifetime or
annual dollar limit both to the medical/

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5445

surgical benefits to which the limit
would otherwise apply and to mental
health or substance use disorder
benefits in a manner that does not
distinguish between the medical/
surgical benefits and mental health or
substance use disorder benefits; or
(ii) Not include an aggregate lifetime
or annual dollar limit on mental health
or substance use disorder benefits that
is less than the aggregate lifetime or
annual dollar limit, respectively, on
medical/surgical benefits. (For
cumulative limits other than aggregate
lifetime or annual dollar limits, see
paragraph (c)(3)(v) of this section
prohibiting separately accumulating
cumulative financial requirements or
cumulative quantitative treatment
limitations.)
(4) Examples. The rules of paragraphs
(b)(2) and (b)(3) of this section are
illustrated by the following examples:
Example 1. (i) Facts. A group health plan
has no annual limit on medical/surgical
benefits and a $10,000 annual limit on
mental health and substance use disorder
benefits. To comply with the requirements of
this paragraph (b), the plan sponsor is
considering each of the following options—
(A) Eliminating the plan’s annual dollar
limit on mental health and substance use
disorder benefits;
(B) Replacing the plan’s annual dollar limit
on mental health and substance use disorder
benefits with a $500,000 annual limit on all
benefits (including medical/surgical and
mental health and substance use disorder
benefits); and
(C) Replacing the plan’s annual dollar limit
on mental health and substance use disorder
benefits with a $250,000 annual limit on
medical/surgical benefits and a $250,000
annual limit on mental health and substance
use disorder benefits.
(ii) Conclusion. In this Example 1, each of
the three options being considered by the
plan sponsor would comply with the
requirements of this paragraph (b).
Example 2. (i) Facts. A plan has a $100,000
annual limit on medical/surgical inpatient
benefits and a $50,000 annual limit on
medical/surgical outpatient benefits. To
comply with the parity requirements of this
paragraph (b), the plan sponsor is
considering each of the following options—
(A) Imposing a $150,000 annual limit on
mental health and substance use disorder
benefits; and
(B) Imposing a $100,000 annual limit on
mental health and substance use disorder
inpatient benefits and a $50,000 annual limit
on mental health and substance use disorder
outpatient benefits.
(ii) Conclusion. In this Example 2, each
option under consideration by the plan
sponsor would comply with the requirements
of this section.

(5) Determining one-third and twothirds of all medical/surgical benefits.
For purposes of this paragraph (b), the
determination of whether the portion of

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medical/surgical benefits subject to an
aggregate lifetime or annual dollar limit
represents one-third or two-thirds of all
medical/surgical benefits is based on the
dollar amount of all plan payments for
medical/surgical benefits expected to be
paid under the plan for the plan year (or
for the portion of the plan year after a
change in plan benefits that affects the
applicability of the aggregate lifetime or
annual dollar limits). Any reasonable
method may be used to determine
whether the dollar amount expected to
be paid under the plan will constitute
one-third or two-thirds of the dollar
amount of all plan payments for
medical/surgical benefits.
(6) Plan not described in paragraph
(b)(2) or (b)(3) of this section—(i) In
general. A group health plan (or health
insurance coverage) that is not
described in paragraph (b)(2) or (b)(3) of
this section with respect to aggregate
lifetime or annual dollar limits on
medical/surgical benefits, must either—
(A) Impose no aggregate lifetime or
annual dollar limit, as appropriate, on
mental health or substance use disorder
benefits; or
(B) Impose an aggregate lifetime or
annual dollar limit on mental health or
substance use disorder benefits that is
no less than an average limit calculated
for medical/surgical benefits in the
following manner. The average limit is
calculated by taking into account the
weighted average of the aggregate
lifetime or annual dollar limits, as
appropriate, that are applicable to the
categories of medical/surgical benefits.
Limits based on delivery systems, such
as inpatient/outpatient treatment or
normal treatment of common, low-cost
conditions (such as treatment of normal
births), do not constitute categories for
purposes of this paragraph (b)(6)(i)(B).
In addition, for purposes of determining
weighted averages, any benefits that are
not within a category that is subject to
a separately-designated dollar limit
under the plan are taken into account as
a single separate category by using an
estimate of the upper limit on the dollar
amount that a plan may reasonably be
expected to incur with respect to such
benefits, taking into account any other
applicable restrictions under the plan.
(ii) Weighting. For purposes of this
paragraph (b)(6), the weighting
applicable to any category of medical/
surgical benefits is determined in the
manner set forth in paragraph (b)(5) of
this section for determining one-third or
two-thirds of all medical/surgical
benefits.
(iii) Example. The rules of this
paragraph (b)(6) are illustrated by the
following example:

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Example. (i) Facts. A group health plan
that is subject to the requirements of this
section includes a $100,000 annual limit on
medical/surgical benefits related to cardiopulmonary diseases. The plan does not
include an annual dollar limit on any other
category of medical/surgical benefits. The
plan determines that 40% of the dollar
amount of plan payments for medical/
surgical benefits are related to cardiopulmonary diseases. The plan determines
that $1,000,000 is a reasonable estimate of
the upper limit on the dollar amount that the
plan may incur with respect to the other 60%
of payments for medical/surgical benefits.
(ii) Conclusion. In this Example, the plan
is not described in paragraph (b)(3) of this
section because there is not one annual dollar
limit that applies to at least two-thirds of all
medical/surgical benefits. Further, the plan is
not described in paragraph (b)(2) of this
section because more than one-third of all
medical/surgical benefits are subject to an
annual dollar limit. Under this paragraph
(b)(6), the plan sponsor can choose either to
include no annual dollar limit on mental
health or substance use disorder benefits, or
to include an annual dollar limit on mental
health or substance use disorder benefits that
is not less than the weighted average of the
annual dollar limits applicable to each
category of medical/surgical benefits. In this
example, the minimum weighted average
annual dollar limit that can be applied to
mental health or substance use disorder
benefits is $640,000 (40% × $100,000 + 60%
× $1,000,000 = $640,000).

(c) Parity requirements with respect to
financial requirements and treatment
limitations—(1) Clarification of terms—
(i) Classification of benefits. When
reference is made in this paragraph (c)
to a classification of benefits, the term
‘‘classification’’ means a classification as
described in paragraph (c)(2)(ii) of this
section.
(ii) Type of financial requirement or
treatment limitation. When reference is
made in this paragraph (c) to a type of
financial requirement or treatment
limitation, the reference to type means
its nature. Different types of financial
requirements include deductibles,
copayments, coinsurance, and out-ofpocket maximums. Different types of
quantitative treatment limitations
include annual, episode, and lifetime
day and visit limits. See paragraph
(c)(4)(ii) of this section for an illustrative
list of nonquantitative treatment
limitations.
(iii) Level of a type of financial
requirement or treatment limitation.
When reference is made in this
paragraph (c) to a level of a type of
financial requirement or treatment
limitation, level refers to the magnitude
of the type of financial requirement or
treatment limitation. For example,
different levels of coinsurance include
20 percent and 30 percent; different
levels of a copayment include $15 and

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$20; different levels of a deductible
include $250 and $500; and different
levels of an episode limit include 21
inpatient days per episode and 30
inpatient days per episode.
(iv) Coverage unit. When reference is
made in this paragraph (c) to a coverage
unit, coverage unit refers to the way in
which a plan (or health insurance
coverage) groups individuals for
purposes of determining benefits, or
premiums or contributions. For
example, different coverage units
include self-only, family, and employeeplus-spouse.
(2) General parity requirement—(i)
General rule. A group health plan (or
health insurance coverage offered by an
issuer in connection with a group health
plan) that provides both medical/
surgical benefits and mental health or
substance use disorder benefits may not
apply any financial requirement or
treatment limitation to mental health or
substance use disorder benefits in any
classification that is more restrictive
than the predominant financial
requirement or treatment limitation of
that type applied to substantially all
medical/surgical benefits in the same
classification. Whether a financial
requirement or treatment limitation is a
predominant financial requirement or
treatment limitation that applies to
substantially all medical/surgical
benefits in a classification is determined
separately for each type of financial
requirement or treatment limitation. The
application of the rules of this
paragraph (c)(2) to financial
requirements and quantitative treatment
limitations is addressed in paragraph
(c)(3) of this section; the application of
the rules of this paragraph (c)(2) to
nonquantitative treatment limitations is
addressed in paragraph (c)(4) of this
section.
(ii) Classifications of benefits used for
applying rules—(A) In general. If a plan
(or health insurance coverage) provides
mental health or substance use disorder
benefits in any classification of benefits
described in this paragraph (c)(2)(ii),
mental health or substance use disorder
benefits must be provided in every
classification in which medical/surgical
benefits are provided. In determining
the classification in which a particular
benefit belongs, a plan (or health
insurance issuer) must apply the same
standards to medical/surgical benefits
and to mental health or substance use
disorder benefits. To the extent that a
plan (or health insurance coverage)
provides benefits in a classification and
imposes any separate financial
requirement or treatment limitation (or
separate level of a financial requirement
or treatment limitation) for benefits in

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the classification, the rules of this
paragraph (c) apply separately with
respect to that classification for all
financial requirements or treatment
limitations. The following
classifications of benefits are the only
classifications used in applying the
rules of this paragraph (c):
(1) Inpatient, in-network. Benefits
furnished on an inpatient basis and
within a network of providers
established or recognized under a plan
or health insurance coverage.
(2) Inpatient, out-of-network. Benefits
furnished on an inpatient basis and
outside any network of providers
established or recognized under a plan
or health insurance coverage. This
classification includes inpatient benefits
under a plan (or health insurance
coverage) that has no network of
providers.
(3) Outpatient, in-network. Benefits
furnished on an outpatient basis and
within a network of providers
established or recognized under a plan
or health insurance coverage.
(4) Outpatient, out-of-network.
Benefits furnished on an outpatient
basis and outside any network of
providers established or recognized
under a plan or health insurance
coverage. This classification includes
outpatient benefits under a plan (or
health insurance coverage) that has no
network of providers.
(5) Emergency care. Benefits for
emergency care.
(6) Prescription drugs. Benefits for
prescription drugs. See special rules for
multi-tiered prescription drug benefits
in paragraph (c)(3)(iii) of this section.
(B) Application to out-of-network
providers. See paragraph (c)(2)(ii)(A) of
this section, under which a plan (or
health insurance coverage) that provides
mental health or substance use disorder
benefits in any classification of benefits
must provide mental health or
substance use disorder benefits in every
classification in which medical/surgical
benefits are provided, including out-ofnetwork classifications.
(C) Examples. The rules of this
paragraph (c)(2)(ii) are illustrated by the
following examples. In each example,
the group health plan is subject to the
requirements of this section and
provides both medical/surgical benefits
and mental health and substance use
disorder benefits.
Example 1. (i) Facts. A group health plan
offers inpatient and outpatient benefits and
does not contract with a network of
providers. The plan imposes a $500
deductible on all benefits. For inpatient
medical/surgical benefits, the plan imposes a
coinsurance requirement. For outpatient
medical/surgical benefits, the plan imposes

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copayments. The plan imposes no other
financial requirements or treatment
limitations.
(ii) Conclusion. In this Example 1, because
the plan has no network of providers, all
benefits provided are out-of-network.
Because inpatient, out-of-network medical/
surgical benefits are subject to separate
financial requirements from outpatient, outof-network medical/surgical benefits, the
rules of this paragraph (c) apply separately
with respect to any financial requirements
and treatment limitations, including the
deductible, in each classification.
Example 2. (i) Facts. A plan imposes a
$500 deductible on all benefits. The plan has
no network of providers. The plan generally
imposes a 20 percent coinsurance
requirement with respect to all benefits,
without distinguishing among inpatient,
outpatient, emergency, or prescription drug
benefits. The plan imposes no other financial
requirements or treatment limitations.
(ii) Conclusion. In this Example 2, because
the plan does not impose separate financial
requirements (or treatment limitations) based
on classification, the rules of this paragraph
(c) apply with respect to the deductible and
the coinsurance across all benefits.
Example 3. (i) Facts. Same facts as
Example 2, except the plan exempts
emergency care benefits from the 20 percent
coinsurance requirement. The plan imposes
no other financial requirements or treatment
limitations.
(ii) Conclusion. In this Example 3, because
the plan imposes separate financial
requirements based on classifications, the
rules of this paragraph (c) apply with respect
to the deductible and the coinsurance
separately for—
(A) Benefits in the emergency
classification; and
(B) All other benefits.
Example 4. (i) Facts. Same facts as
Example 2, except the plan also imposes a
preauthorization requirement for all inpatient
treatment in order for benefits to be paid. No
such requirement applies to outpatient
treatment.
(ii) Conclusion. In this Example 4, because
the plan has no network of providers, all
benefits provided are out-of-network.
Because the plan imposes a separate
treatment limitation based on classifications,
the rules of this paragraph (c) apply with
respect to the deductible and coinsurance
separately for—
(A) Inpatient, out-of-network benefits; and
(B) All other benefits.

(3) Financial requirements and
quantitative treatment limitations—(i)
Determining ‘‘substantially all’’ and
‘‘predominant’’—(A) Substantially all.
For purposes of this paragraph (c), a
type of financial requirement or
quantitative treatment limitation is
considered to apply to substantially all
medical/surgical benefits in a
classification of benefits if it applies to
at least two-thirds of all medical/
surgical benefits in that classification.
(For this purpose, benefits expressed as
subject to a zero level of a type of

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5447

financial requirement are treated as
benefits not subject to that type of
financial requirement, and benefits
expressed as subject to a quantitative
treatment limitation that is unlimited
are treated as benefits not subject to that
type of quantitative treatment
limitation.) If a type of financial
requirement or quantitative treatment
limitation does not apply to at least twothirds of all medical/surgical benefits in
a classification, then that type cannot be
applied to mental health or substance
use disorder benefits in that
classification.
(B) Predominant—(1) If a type of
financial requirement or quantitative
treatment limitation applies to at least
two-thirds of all medical/surgical
benefits in a classification as
determined under paragraph (c)(3)(i)(A)
of this section, the level of the financial
requirement or quantitative treatment
limitation that is considered the
predominant level of that type in a
classification of benefits is the level that
applies to more than one-half of
medical/surgical benefits in that
classification subject to the financial
requirement or quantitative treatment
limitation.
(2) If, with respect to a type of
financial requirement or quantitative
treatment limitation that applies to at
least two-thirds of all medical/surgical
benefits in a classification, there is no
single level that applies to more than
one-half of medical/surgical benefits in
the classification subject to the financial
requirement or quantitative treatment
limitation, the plan (or health insurance
issuer) may combine levels until the
combination of levels applies to more
than one-half of medical/surgical
benefits subject to the financial
requirement or quantitative treatment
limitation in the classification. The least
restrictive level within the combination
is considered the predominant level of
that type in the classification. (For this
purpose, a plan may combine the most
restrictive levels first, with each less
restrictive level added to the
combination until the combination
applies to more than one-half of the
benefits subject to the financial
requirement or treatment limitation.)
(C) Portion based on plan payments.
For purposes of this paragraph (c), the
determination of the portion of medical/
surgical benefits in a classification of
benefits subject to a financial
requirement or quantitative treatment
limitation (or subject to any level of a
financial requirement or quantitative
treatment limitation) is based on the
dollar amount of all plan payments for
medical/surgical benefits in the
classification expected to be paid under

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the plan for the plan year (or for the
portion of the plan year after a change
in plan benefits that affects the
applicability of the financial
requirement or quantitative treatment
limitation).
(D) Clarifications for certain threshold
requirements. For any deductible, the
dollar amount of plan payments
includes all plan payments with respect
to claims that would be subject to the
deductible if it had not been satisfied.
For any out-of-pocket maximum, the
dollar amount of plan payments
includes all plan payments associated
with out-of-pocket payments that are
taken into account towards the out-ofpocket maximum as well as all plan
payments associated with out-of-pocket
payments that would have been made
towards the out-of-pocket maximum if it
had not been satisfied. Similar rules
apply for any other thresholds at which
the rate of plan payment changes.
(E) Determining the dollar amount of
plan payments. Subject to paragraph
(c)(3)(i)(D) of this section, any
reasonable method may be used to

determine the dollar amount expected
to be paid under a plan for medical/
surgical benefits subject to a financial
requirement or quantitative treatment
limitation (or subject to any level of a
financial requirement or quantitative
treatment limitation).
(ii) Application to different coverage
units. If a plan (or health insurance
coverage) applies different levels of a
financial requirement or quantitative
treatment limitation to different
coverage units in a classification of
medical/surgical benefits, the
predominant level that applies to
substantially all medical/surgical
benefits in the classification is
determined separately for each coverage
unit.
(iii) Special rule for multi-tiered
prescription drug benefits. If a plan (or
health insurance coverage) applies
different levels of financial
requirements to different tiers of
prescription drug benefits based on
reasonable factors determined in
accordance with the rules in paragraph
(c)(4)(i) of this section (relating to

Coinsurance rate ....................................................
Projected payments ................................................
Percent of total plan costs .....................................
Percent subject to coinsurance level .....................

The plan projects plan costs of $800x to be
subject to coinsurance ($100x + $450x +
$100x + $150x = $800x). Thus, 80 percent
($800x/$1,000x) of the benefits are projected
to be subject to coinsurance, and 56.25
percent of the benefits subject to coinsurance
are projected to be subject to the 15 percent
coinsurance level.
(ii) Conclusion. In this Example 1, the twothirds threshold of the substantially all

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10%
$100x
10%
12.5%
(100x/800x)

15%
$450x
45%
56.25%
(450x/800x)

standard is met for coinsurance because 80
percent of all inpatient, out-of-network
medical/surgical benefits are subject to
coinsurance. Moreover, the 15 percent
coinsurance is the predominant level because
it is applicable to more than one-half of
inpatient, out-of-network medical/surgical
benefits subject to the coinsurance
requirement. The plan may not impose any
level of coinsurance with respect to

Copayment amount ................................................
Projected payments ................................................
Percent of total plan costs .....................................
Percent subject to copayments ..............................

The plan projects plan costs of $800x to be
subject to copayments ($200x + $200x +
$300x + $100x = $800x). Thus, 80 percent
($800x/$1,000x) of the benefits are projected
to be subject to a copayment.
(ii) Conclusion. In this Example 2, the twothirds threshold of the substantially all
standard is met for copayments because 80
percent of all outpatient, in-network medical/
surgical benefits are subject to a copayment.
Moreover, there is no single level that applies
to more than one-half of medical/surgical
benefits in the classification subject to a
copayment (for the $10 copayment, 25%; for
the $15 copayment, 25%; for the $20
copayment, 37.5%; and for the $50
copayment, 12.5%). The plan can combine

0%
$200x
20%
N/A

$0
$200x
20%
N/A

$10
$200x
20%
25%
(200x/800x)

$15
$200x
20%
25%
(200x/800x)

any levels of copayment, including the
highest levels, to determine the predominant
level that can be applied to mental health or
substance use disorder benefits. If the plan
combines the highest levels of copayment,
the combined projected payments for the two
highest copayment levels, the $50 copayment
and the $20 copayment, are not more than
one-half of the outpatient, in-network
medical/surgical benefits subject to a
copayment because they are exactly one-half
($300x + $100x = $400x; $400x/$800x =
50%). The combined projected payments for
the three highest copayment levels—the $50
copayment, the $20 copayment, and the $15
copayment—are more than one-half of the
outpatient, in-network medical/surgical

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requirements for nonquantitative
treatment limitations) and without
regard to whether a drug is generally
prescribed with respect to medical/
surgical benefits or with respect to
mental health or substance use disorder
benefits, the plan (or health insurance
coverage) satisfies the parity
requirements of this paragraph (c) with
respect to prescription drug benefits.
Reasonable factors include cost,
efficacy, generic versus brand name, and
mail order versus pharmacy pick-up.
(iv) Examples. The rules of
paragraphs (c)(3)(i), (c)(3)(ii), and
(c)(3)(iii) of this section are illustrated
by the following examples. In each
example, the group health plan is
subject to the requirements of this
section and provides both medical/
surgical benefits and mental health and
substance use disorder benefits.
Example 1. (i) Facts. For inpatient, out-ofnetwork medical/surgical benefits, a group
health plan imposes five levels of
coinsurance. Using a reasonable method, the
plan projects its payments for the upcoming
year as follows:
20%
$100x
10%
12.5%
(100x/800x)

30%
$150x
15%
18.75%
(150x/800x)

Total
$1,000x

inpatient, out-of-network mental health or
substance use disorder benefits that is more
restrictive than the 15 percent level of
coinsurance.
Example 2. (i) Facts. For outpatient, innetwork medical/surgical benefits, a plan
imposes five different copayment levels.
Using a reasonable method, the plan projects
payments for the upcoming year as follows:
$20
$300x
30%
37.5%
(300x/800x)

$50
$100x
10%
12.5%
(100x/800x)

Total
$1,000x

benefits subject to the copayments ($100x +
$300x + $200x = $600x; $600x/$800x =
75%). Thus, the plan may not impose any
copayment on outpatient, in-network mental
health or substance use disorder benefits that
is more restrictive than the least restrictive
copayment in the combination, the $15
copayment.
Example 3. (i) Facts. A plan imposes a
$250 deductible on all medical/surgical
benefits for self-only coverage and a $500
deductible on all medical/surgical benefits
for family coverage. The plan has no network
of providers. For all medical/surgical
benefits, the plan imposes a coinsurance
requirement. The plan imposes no other

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financial requirements or treatment
limitations.
(ii) Conclusion. In this Example 3, because
the plan has no network of providers, all
benefits are provided out-of-network.
Because self-only and family coverage are
subject to different deductibles, whether the
deductible applies to substantially all
medical/surgical benefits is determined
separately for self-only medical/surgical

benefits and family medical/surgical benefits.
Because the coinsurance is applied without
regard to coverage units, the predominant
coinsurance that applies to substantially all
medical/surgical benefits is determined
without regard to coverage units.
Example 4. (i) Facts. A plan applies the
following financial requirements for
prescription drug benefits. The requirements
are applied without regard to whether a drug
Tier 1

Tier 3

Tier 4

Generic drugs

Preferred brand
name drugs

Non-preferred
brand name
drugs (which
may have Tier 1
or Tier 2
alternatives)

Specialty drugs

90%

80%

60%

50%

Percent paid by plan ........................................................................

(v) No separate cumulative financial
requirements or cumulative quantitative
treatment limitations—(A) A group
health plan (or health insurance
coverage offered in connection with a
group health plan) may not apply any
cumulative financial requirement or
cumulative quantitative treatment
limitation for mental health or

substance use disorder benefits in a
classification that accumulates
separately from any established for
medical/surgical benefits in the same
classification.
(B) The rules of this paragraph
(c)(3)(v) are illustrated by the following
examples:
Example 1. (i) Facts. A group health plan
imposes a combined annual $500 deductible
on all medical/surgical, mental health, and
substance use disorder benefits.
(ii) Conclusion. In this Example 1, the
combined annual deductible complies with
the requirements of this paragraph (c)(3)(v).
Example 2. (i) Facts. A plan imposes an
annual $250 deductible on all medical/
surgical benefits and a separate annual $250
deductible on all mental health and
substance use disorder benefits.
(ii) Conclusion. In this Example 2, the
separate annual deductible on mental health
and substance use disorder benefits violates
the requirements of this paragraph (c)(3)(v).

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Inpatient, in-network ........................................................................................................
Inpatient, out-of-network ..................................................................................................
Outpatient, in-network ......................................................................................................
Outpatient, out-of-network ...............................................................................................
Emergency care ...............................................................................................................

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(4) Nonquantitative treatment
limitations—(i) General rule. A group
health plan (or health insurance
coverage) may not impose a
nonquantitative treatment limitation
with respect to mental health or
substance use disorder benefits in any
classification unless, under the terms of
the plan (or health insurance coverage)
as written and in operation, any
processes, strategies, evidentiary
standards, or other factors used in
applying the nonquantitative treatment
limitation to mental health or substance
use disorder benefits in the

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Example 3. (i) Facts. A plan imposes an
annual $300 deductible on all medical/
surgical benefits and a separate annual $100
deductible on all mental health or substance
use disorder benefits.
(ii) Conclusion. In this Example 3, the
separate annual deductible on mental health
and substance use disorder benefits violates
the requirements of this paragraph (c)(3)(v).
Example 4. (i) Facts. A plan generally
imposes a combined annual $500 deductible
on all benefits (both medical/surgical benefits
and mental health and substance use
disorder benefits) except prescription drugs.
Certain benefits, such as preventive care, are
provided without regard to the deductible.
The imposition of other types of financial
requirements or treatment limitations varies
with each classification. Using reasonable
methods, the plan projects its payments for
medical/surgical benefits in each
classification for the upcoming year as
follows:

Benefits subject
to deductible

Classification

(ii) Conclusion. In this Example 4, the twothirds threshold of the substantially all
standard is met with respect to each
classification except emergency care because
in each of those other classifications at least
two-thirds of medical/surgical benefits are
subject to the $500 deductible. Moreover, the
$500 deductible is the predominant level in
each of those other classifications because it
is the only level. However, emergency care
mental health and substance use disorder
benefits cannot be subject to the $500
deductible because it does not apply to
substantially all emergency care medical/
surgical benefits.

is generally prescribed with respect to
medical/surgical benefits or with respect to
mental health or substance use disorder
benefits. Moreover, the process for certifying
a particular drug as ‘‘generic’’, ‘‘preferred
brand name’’, ‘‘non-preferred brand name’’, or
‘‘specialty’’ complies with the rules of
paragraph (c)(4)(i) of this section (relating to
requirements for nonquantitative treatment
limitations).

Tier 2

Tier description

(ii) Conclusion. In this Example 4, the
financial requirements that apply to
prescription drug benefits are applied
without regard to whether a drug is generally
prescribed with respect to medical/surgical
benefits or with respect to mental health or
substance use disorder benefits; the process
for certifying drugs in different tiers complies
with paragraph (c)(4) of this section; and the
bases for establishing different levels or types
of financial requirements are reasonable. The
financial requirements applied to
prescription drug benefits do not violate the
parity requirements of this paragraph (c)(3).

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Total benefits

$1,800x
1,000x
1,400x
1,880x
300x

$2,000x
1,000x
2,000x
2,000x
500x

Percent subject
to deductible
90
100
70
94
60

classification are comparable to, and are
applied no more stringently than, the
processes, strategies, evidentiary
standards, or other factors used in
applying the limitation with respect to
medical surgical/benefits in the
classification, except to the extent that
recognized clinically appropriate
standards of care may permit a
difference.
(ii) Illustrative list of nonquantitative
treatment limitations. Nonquantitative
treatment limitations include—
(A) Medical management standards
limiting or excluding benefits based on

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medical necessity or medical
appropriateness, or based on whether
the treatment is experimental or
investigative;
(B) Formulary design for prescription
drugs;
(C) Standards for provider admission
to participate in a network, including
reimbursement rates;
(D) Plan methods for determining
usual, customary, and reasonable
charges;
(E) Refusal to pay for higher-cost
therapies until it can be shown that a
lower-cost therapy is not effective (also
known as fail-first policies or step
therapy protocols); and
(F) Exclusions based on failure to
complete a course of treatment.
(iii) Examples. The rules of this
paragraph (c)(4) are illustrated by the
following examples. In each example,
the group health plan is subject to the
requirements of this section and
provides both medical/surgical benefits
and mental health and substance use
disorder benefits.
Example 1. (i) Facts. A group health plan
limits benefits to treatment that is medically
necessary. The plan requires concurrent
review for inpatient, in-network mental
health and substance use disorder benefits
but does not require it for any inpatient, innetwork medical/surgical benefits. The plan
conducts retrospective review for inpatient,
in-network medical/surgical benefits.
(ii) Conclusion. In this Example 1, the plan
violates the rules of this paragraph (c)(4).
Although the same nonquantitative treatment
limitation—medical necessity—applies to
both mental health and substance use
disorder benefits and to medical/surgical
benefits for inpatient, in-network services,
the concurrent review process does not apply
to medical/surgical benefits. The concurrent
review process is not comparable to the
retrospective review process. While such a
difference might be permissible in certain
individual cases based on recognized
clinically appropriate standards of care, it is
not permissible for distinguishing between
all medical/surgical benefits and all mental
health or substance use disorder benefits.
Example 2. (i) Facts. A plan requires prior
approval that a course of treatment is
medically necessary for outpatient, innetwork medical/surgical, mental health, and
substance use disorder benefits. For mental
health and substance use disorder treatments
that do not have prior approval, no benefits
will be paid; for medical/surgical treatments
that do not have prior approval, there will
only be a 25 percent reduction in the benefits
the plan would otherwise pay.
(ii) Conclusion. In this Example 2, the plan
violates the rules of this paragraph (c)(4).
Although the same nonquantitative treatment
limitation—medical necessity—is applied
both to mental health and substance use
disorder benefits and to medical/surgical
benefits for outpatient, in-network services,
the penalty for failure to obtain prior
approval for mental health and substance use

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disorder benefits is not comparable to the
penalty for failure to obtain prior approval
for medical/surgical benefits.
Example 3. (i) Facts. A plan generally
covers medically appropriate treatments. For
both medical/surgical benefits and mental
health and substance use disorder benefits,
evidentiary standards used in determining
whether a treatment is medically appropriate
(such as the number of visits or days of
coverage) are based on recommendations
made by panels of experts with appropriate
training and experience in the fields of
medicine involved. The evidentiary
standards are applied in a manner that may
differ based on clinically appropriate
standards of care for a condition.
(ii) Conclusion. In this Example 3, the plan
complies with the rules of this paragraph
(c)(4) because the nonquantitative treatment
limitation—medical appropriateness—is the
same for both medical/surgical benefits and
mental health and substance use disorder
benefits, and the processes for developing the
evidentiary standards and the application of
them to mental health and substance use
disorder benefits are comparable to and are
applied no more stringently than for medical/
surgical benefits. This is the result even if,
based on clinically appropriate standards of
care, the application of the evidentiary
standards does not result in similar numbers
of visits, days of coverage, or other benefits
utilized for mental health conditions or
substance use disorders as it does for any
particular medical/surgical condition.
Example 4. (i) Facts. A plan generally
covers medically appropriate treatments. In
determining whether prescription drugs are
medically appropriate, the plan
automatically excludes coverage for
antidepressant drugs that are given a black
box warning label by the Food and Drug
Administration (indicating the drug carries a
significant risk of serious adverse effects). For
other drugs with a black box warning
(including those prescribed for other mental
health conditions and substance use
disorders, as well as for medical/surgical
conditions), the plan will provide coverage if
the prescribing physician obtains
authorization from the plan that the drug is
medically appropriate for the individual,
based on clinically appropriate standards of
care.
(ii) Conclusion. In this Example 4, the plan
violates the rules of this paragraph (c)(4).
Although the same nonquantitative treatment
limitation—medical appropriateness—is
applied to both mental health and substance
use disorder benefits and medical/surgical
benefits, the plan’s unconditional exclusion
of antidepressant drugs given a black box
warning is not comparable to the conditional
exclusion for other drugs with a black box
warning.
Example 5. (i) Facts. An employer
maintains both a major medical program and
an employee assistance program (EAP). The
EAP provides, among other benefits, a
limited number of mental health or substance
use disorder counseling sessions.
Participants are eligible for mental health or
substance use disorder benefits under the
major medical program only after exhausting
the counseling sessions provided by the EAP.

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No similar exhaustion requirement applies
with respect to medical/surgical benefits
provided under the major medical program.
(ii) Conclusion. In this Example 5, limiting
eligibility for mental health and substance
use disorder benefits only after EAP benefits
are exhausted is a nonquantitative treatment
limitation subject to the parity requirements
of this paragraph (c). Because no comparable
requirement applies to medical/surgical
benefits, the requirement may not be applied
to mental health or substance use disorder
benefits.

(5) Exemptions. The rules of this
paragraph (c) do not apply if a group
health plan (or health insurance
coverage) satisfies the requirements of
paragraph (f) or (g) of this section
(relating to exemptions for small
employers and for increased cost).
(d) Availability of plan information—
(1) Criteria for medical necessity
determinations. The criteria for medical
necessity determinations made under a
group health plan with respect to
mental health or substance use disorder
benefits (or health insurance coverage
offered in connection with the plan with
respect to such benefits) must be made
available by the plan administrator (or
the health insurance issuer offering such
coverage) to any current or potential
participant, beneficiary, or contracting
provider upon request.
(2) Reason for denial. The reason for
any denial under a non-Federal
governmental plan (or health insurance
coverage offered in connection with
such plan) of reimbursement or
payment for services with respect to
mental health or substance use disorder
benefits in the case of any participant or
beneficiary must be made available
within a reasonable time and in a
reasonable manner by the plan
administrator (or the health insurance
issuer offering such coverage) to the
participant or beneficiary upon request.
For this purpose, a non-Federal
governmental plan (or health insurance
coverage offered in connection with
such plan) that provides the reason for
the claim denial in a form and manner
consistent with the requirements of 29
CFR 2560.503–1 for group health plans
complies with the requirements of this
paragraph (d)(2).
(e) Applicability—(1) Group health
plans. The requirements of this section
apply to a group health plan offering
medical/surgical benefits and mental
health or substance use disorder
benefits. If, under an arrangement or
arrangements to provide medical care
benefits by an employer or employee
organization (including for this purpose
a joint board of trustees of a
multiemployer trust affiliated with one
or more multiemployer plans), any
participant (or beneficiary) can

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simultaneously receive coverage for
medical/surgical benefits and coverage
for mental health or substance use
disorder benefits, then the requirements
of this section (including the exemption
provisions in paragraph (g) of this
section) apply separately with respect to
each combination of medical/surgical
benefits and of mental health or
substance use disorder benefits that any
participant (or beneficiary) can
simultaneously receive from that
employer’s or employee organization’s
arrangement or arrangements to provide
medical care benefits, and all such
combinations are considered for
purposes of this section to be a single
group health plan.
(2) Health insurance issuers. The
requirements of this section apply to a
health insurance issuer offering health
insurance coverage for mental health or
substance use disorder benefits in
connection with a group health plan
subject to paragraph (e)(1) of this
section.
(3) Scope. This section does not—
(i) Require a group health plan (or
health insurance issuer offering
coverage in connection with a group
health plan) to provide any mental
health benefits or substance use
disorder benefits, and the provision of
benefits by a plan (or health insurance
coverage) for one or more mental health
conditions or substance use disorders
does not require the plan (or health
insurance coverage) under this section
to provide benefits for any other mental
health condition or substance use
disorder; or
(ii) Affect the terms and conditions
relating to the amount, duration, or
scope of mental health or substance use
disorder benefits under the plan (or
health insurance coverage) except as
specifically provided in paragraphs (b)
and (c) of this section.

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(f) Small employer exemption—(1) In
general. The requirements of this
section do not apply to a group health
plan (or health insurance issuer offering
coverage in connection with a group
health plan) for a plan year of a small
employer. For purposes of this
paragraph (f), the term small employer
means, in connection with a group
health plan with respect to a calendar
year and a plan year, an employer who
employed an average of at least two but
not more than 50 employees on business
days during the preceding calendar year
and who employs at least two
employees on the first day of the plan
year (except that for purposes of this
paragraph, a small employer shall
include an employer with one employee
in the case of an employer residing in
a State that permits small groups to
include a single individual). See also
section 2721(a) of the PHS Act and
§ 146.145(b) of this Part, which provide
that this section (and certain other
sections) does not apply to any group
health plan (and health insurance issuer
offering coverage in connection with a
group health plan) for any plan year if,
on the first day of the plan year, the
plan has fewer than two participants
who are current employees.
(2) Rules in determining employer
size. For purposes of paragraph (f)(1) of
this section—
(i) All persons treated as a single
employer under subsections (b), (c), (m),
and (o) of section 414 of the Internal
Revenue Code of 1986 (26 U.S.C. 414)
are treated as one employer;
(ii) If an employer was not in
existence throughout the preceding
calendar year, whether it is a small
employer is determined based on the
average number of employees the
employer reasonably expects to employ
on business days during the current
calendar year; and

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5451

(iii) Any reference to an employer for
purposes of the small employer
exemption includes a reference to a
predecessor of the employer.
(g) Increased cost exemption—
[Reserved]
(h) Sale of nonparity health insurance
coverage. A health insurance issuer may
not sell a policy, certificate, or contract
of insurance that fails to comply with
paragraph (b) or (c) of this section,
except to a plan for a year for which the
plan is exempt from the requirements of
this section because the plan meets the
requirements of paragraph (f) or (g) of
this section.
(i) Applicability dates—(1) In general.
Except as provided in paragraph (i)(2) of
this section, the requirements of this
section are applicable for plan years
beginning on or after July 1, 2010.
(2) Special effective date for certain
collectively-bargained plans. For a
group health plan maintained pursuant
to one or more collective bargaining
agreements ratified before October 3,
2008, the requirements of this section
do not apply to the plan (or health
insurance coverage offered in
connection with the plan) for plan years
beginning before the later of either—
(i) The date on which the last of the
collective bargaining agreements
relating to the plan terminates
(determined without regard to any
extension agreed to after October 3,
2008); or
(ii) July 1, 2010.
Approved: November 12, 2009.
Charlene Frizzera,
Acting Administrator, Centers for Medicare &
Medicaid Services.
Approved: December 2, 2009.
Kathleen Sebelius,
Secretary.
[FR Doc. 2010–2167 Filed 1–29–10; 8:45 am]
BILLING CODE 4830–01–P; 4510–29–P; 4120–01–P

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