Td 9640

Vol. 78

Wednesday,

No. 219

November 13, 2013

Part III

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

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45 CFR Parts 146 and 147
Final Rules Under the Paul Wellstone and Pete Domenici Mental Health
Parity and Addiction Equity Act of 2008; Technical Amendment to External
Review for Multi-State Plan Program; Final Rule

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Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations

DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 54
[TD 9640]
RIN 1545–BI70

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

DEPARTMENT OF HEALTH AND
HUMAN SERVICES
[CMS–4140–F]

45 CFR Parts 146 and 147
RIN 0938–AP65

Final Rules Under the Paul Wellstone
and Pete Domenici Mental Health
Parity and Addiction Equity Act of
2008; Technical Amendment to
External Review for Multi-State Plan
Program
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: Final rules.
AGENCY:

This document contains 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 group and individual
health insurance coverage. This
document also contains a technical
amendment relating to external review
with respect to the multi-state plan
program administered by the Office of
Personnel Management.
DATES: Effective date. These final
regulations are effective on January 13,
2014, except that the technical
amendments to 29 CFR 2590.715–2719
and 45 CFR 147.136 are effective on
December 13, 2013.
Applicability date. The mental health
parity provisions of these final
regulations apply to group health plans
and health insurance issuers for plan
years (or, in the individual market,
policy years) beginning on or after July

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SUMMARY:

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1, 2014. Until the final rules become
applicable, plans and issuers must
continue to comply with the mental
health parity provisions of the interim
final regulations.
FOR FURTHER INFORMATION CONTACT:
Amy Turner or Amber Rivers, Employee
Benefits Security Administration,
Department of Labor, at (202) 693–8335;
Karen Levin, Internal Revenue Service,
Department of the Treasury, at (202)
622–6080 or (202) 317–5500; Jacob
Ackerman, Centers for Medicare &
Medicaid Services, Department of
Health and Human Services, at (410)
786–1565.
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 (www.cms.gov/
cciio) and information on health reform
can be found at www.HealthCare.gov. In
addition, information about mental
health is available at
www.mentalhealth.gov.
SUPPLEMENTARY INFORMATION:
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
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/
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, and applied to employmentrelated group health plans and health
insurance coverage offered in
connection with a group health plan.
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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The changes made by MHPAEA were
codified in these same sections and
consist of new requirements, including
parity for substance use disorder
benefits, 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.
The Patient Protection and Affordable
Care Act, Public Law 111–148, was
enacted on March 23, 2010, and the
Health Care and Education
Reconciliation Act of 2010, Public Law
111–152, was enacted on March 30,
2010 (collectively, the ‘‘Affordable Care
Act’’). The Affordable Care Act
reorganizes, amends, and adds to the
provisions of part A of title XXVII of the
PHS Act relating to group health plans
and health insurance issuers in the
group and individual markets. The
Affordable Care Act adds section
715(a)(1) to ERISA and section
9815(a)(1) to the Code to incorporate the
provisions of part A of title XXVII of the
PHS Act into ERISA and the Code, and
to make them applicable to group health
plans and health insurance issuers
providing health insurance coverage in
connection with group health plans.
The PHS Act sections incorporated by
these references are sections 2701
through 2728.
The Affordable Care Act extended
MHPAEA to apply to the individual
health insurance market and
redesignated MHPAEA in the PHS Act
as section 2726.2 Additionally, section
1311(j) of the Affordable Care Act
applies section 2726 of the PHS Act to
qualified health plans (QHPs) in the
same manner and to the same extent as
such section applies to health insurance
issuers and group health plans.
Furthermore, the Department of Health
and Human Services (HHS) final
regulation regarding essential health
benefits (EHB) requires health insurance
issuers offering non-grandfathered
health insurance coverage in the
individual and small group markets,
through an Affordable Insurance
Exchange (Exchange, also called a
Health Insurance Marketplace or
Marketplace) or outside of an Exchange,
to comply with the requirements of the
2 These final regulations apply to both
grandfathered and non-grandfathered health plans.
See section 1251 of the Affordable Care Act and its
implementing regulations at 26 CFR 54.9815–
1251T, 29 CFR 2590.715–1251, and 45 CFR
147.140. Under section 1251 of the Affordable Care
Act, grandfathered health plans are exempted only
from certain Affordable Care Act requirements
enacted in Subtitles A and C of Title I of the
Affordable Care Act. The provisions extending
MHPAEA requirements to the individual market
and requiring that qualified health plans comply
with MHPAEA were not part of these sections.

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Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations
MHPAEA regulations in order to satisfy
the requirement to cover EHB.3
On April 28, 2009, the Departments of
the Treasury, Labor, and HHS published
in the Federal Register (74 FR 19155) a
request for information (RFI) soliciting
comments on the requirements of
MHPAEA. (Subsequent references to the
‘‘Departments’’ include all three
Departments, unless the headings or
context indicate otherwise.) On
February 2, 2010, after consideration of
the comments received in response to
the RFI, the Departments published in
the Federal Register (75 FR 5410)
comprehensive interim final regulations
implementing MHPAEA (interim final
regulations). The interim final
regulations generally became applicable
to group health plans and group health
insurance issuers for plan years
beginning on or after July 1, 2010.
The interim final regulations
established six classifications of
benefits 4 and provided that the parity
requirements be applied on a
classification-by-classification basis.
The general parity requirement set forth
in paragraph (c)(2) of the interim final
regulations prohibited plans and issuers
from imposing a financial requirement
or quantitative treatment limitation on
mental health and substance use
disorder benefits in any classification
that is more restrictive than the
predominant financial requirement or
quantitative treatment limitation that
applies to substantially all medical/
surgical benefits in the same
classification. For this purpose, the
interim final regulations incorporated
the two-thirds ‘‘substantially all’’
numerical standard from the regulations
implementing MHPA 1996, and
quantified ‘‘predominant’’ to mean that
more than one-half of medical/surgical
benefits in the classification are subject
to the financial requirement or
quantitative treatment limitation in the
relevant classification. Using these
numerical standards, the Departments
established a mathematical test by
which plans and issuers could
determine what level of a financial
requirement or quantitative treatment
limitation, if any, is the most restrictive
level that could be imposed on mental
health or substance use disorder
benefits within a classification. (This
mathematical test is referred to in this
preamble as the quantitative parity
analysis.)
3 See 45 CFR 147.150 and 156.115 (78 FR 12834,
February 25, 2013).
4 The six classifications of benefits are inpatient,
in-network; inpatient, out-of-network; outpatient,
in-network; outpatient, out-of-network; emergency
care; and prescription drugs.

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The interim final regulations also
prohibited plans and issuers from
applying cumulative financial
requirements (such as deductibles or
out-of-pocket maximums) or cumulative
quantitative treatment limitations (such
as annual or lifetime day or visit limits)
to mental health or 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.
Additionally, the interim final
regulations set forth parity protections
with respect to nonquantitative
treatment limitations (NQTLs), which
are limits on the scope or duration of
treatment that are not expressed
numerically (such as medical
management techniques like prior
authorization). The interim final
regulations stated that a plan or issuer
may not impose an NQTL 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 NQTL
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 same
classification, except to the extent that
recognized clinically appropriate
standards of care may permit a
difference. The Departments also set
forth a special rule for evaluating parity
of multi-tiered prescription drug
benefits. The interim final regulations
included several examples to illustrate
each of these parity standards.
The interim final regulations also
implemented MHPAEA’s disclosure
provisions requiring that the criteria for
medical necessity determinations and
the reason for any denial of
reimbursement or payment under a
group health plan (or health insurance
coverage) with respect to mental health
or substance use disorder benefits be
made available upon request in certain
circumstances.
The interim final regulations also
specifically requested comments in
several areas, including whether
additional examples would be helpful to
illustrate the application of the NQTL
rule to other features of medical
management or general plan design;
whether and to what extent MHPAEA
addresses the ‘‘scope of services’’ or

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‘‘continuum of care’’ provided by a
group health plan or health insurance
coverage; what additional clarifications
might be helpful to facilitate compliance
with the disclosure requirement for
medical necessity criteria or denials of
mental health or substance use disorder
benefits; and 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.
In light of the comments and other
feedback received in response to the
interim final regulations, the
Departments issued clarifications in
several rounds of Frequently Asked
Questions (FAQs). In the first FAQ
about MHPAEA, the Departments set
forth an enforcement safe harbor under
which the Departments would not take
enforcement action against plans and
issuers that divide benefits furnished on
an outpatient basis into two subclassifications—(1) office visits, and (2)
all other outpatient items and services—
for purposes of applying the financial
requirement and treatment limitation
rules under MHPAEA.5
The Departments issued additional
FAQs providing further clarifications.6
The FAQs issued in December 2010
addressed the changes made to the
definition of ‘‘small employer’’ after the
enactment of the Affordable Care Act,
made clear how the disclosure
requirements under MHPAEA interact
with other ERISA disclosure
requirements (and that health care
providers are entitled to request such
information on behalf of participants),
and provided temporary information on
how to claim the increased cost
exemption.7 Additional FAQs issued in
November 2011 addressed specific
NQTLs, such as prior authorization and
concurrent review.8 The Departments
5 See FAQ About Mental Health Parity and
Addiction Equity Act, available at http://
www.dol.gov/ebsa/faqs/faq-mhpaea.html.
6 See FAQs about Affordable Care Act
Implementation (Part V) and Mental Health Parity
Implementation, available at http://www.dol.gov/
ebsa/faqs/faq-aca5.html and http://www.cms.gov/
CCIIO/Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs5.html, and FAQs about
Affordable Care Act Implementation (Part VII) and
Mental Health Parity Implementation, available at
http://www.dol.gov/ebsa/faqs/faq-aca7.html and
http://www.cms.gov/CCIIO/Resources/Fact-Sheetsand-FAQs/aca_implementation_faqs7.html#Mental
Health Parity and Addiction Equity Act of 2008.
7 See FAQs about Affordable Care Act
Implementation (Part V) and Mental Health Parity
Implementation, questions 8–11, available at
http://www.dol.gov/ebsa/faqs/faq-aca5.html and
http://www.cms.gov/CCIIO/Resources/Fact-Sheetsand-FAQs/aca_implementation_faqs5.html.
8 See FAQs about Affordable Care Act
Implementation (Part VII) and Mental Health Parity
Implementation, questions 2–6, available at http://

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also clarified that plans and issuers may
charge the specialist copayment for
mental health and substance use
disorder benefits only if it is determined
that this level of copayment is the
predominant level that applies to
substantially all medical/surgical
benefits within a classification.9
After consideration of the comments
and other feedback received from
stakeholders, the Departments are
publishing these final regulations.
II. Overview of the Regulations
In general, these final regulations
incorporate clarifications issued by the
Departments through FAQs since the
issuance of the interim final regulations,
and provide new clarifications on issues
such as NQTLs and the increased cost
exemption. The HHS final regulation
also implements the provisions of
MHPAEA for the individual health
insurance market.

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A. Meaning of Terms
Under MHPAEA and the interim final
regulations, the term ‘‘medical/surgical
benefits’’ means benefits for medical or
surgical services, as defined under the
terms of the plan or health insurance
coverage. This term does not include
mental health or substance use disorder
benefits. The terms ‘‘mental health
benefits’’ and ‘‘substance use disorder
benefits’’ mean benefits with respect to
services for mental health conditions or
substance use disorders, respectively, as
defined under the terms of the plan and
in accordance with applicable Federal
and State law. The interim final
regulations further provided that the
plan terms defining whether the benefits
are medical/surgical benefits or mental
health or substance use disorder
benefits must be consistent with
generally recognized 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 International
Classification of Diseases (ICD), or State
guidelines).
These final regulations make minor,
technical changes to the meaning of
these terms for consistency and clarity.
Specifically, the final regulations clarify
that the definitions of ‘‘medical/surgical
www.dol.gov/ebsa/faqs/faq-aca7.html and http://
www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs7.html#Mental
Health Parity and Addiction Equity Act of 2008.
9 See FAQs about Affordable Care Act
Implementation (Part VII) and Mental Health Parity
Implementation, question 7, available at http://
www.dol.gov/ebsa/faqs/faq-aca7.html and http://
www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs7.html#Mental
Health Parity and Addiction Equity Act of 2008.

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benefits,’’ ‘‘mental health benefits,’’ and
‘‘substance use disorder benefits’’
include benefits for items as well as
services. The final regulations also
clarify that medical conditions and
surgical procedures, and mental health
conditions and substance use disorders,
are defined under the terms of the plan
or coverage and in accordance with
applicable Federal and State law.
One commenter suggested that the
definitions of mental health benefits and
substance use disorder benefits should
be revised to refer only to the terms of
the plan and applicable State law. The
Departments decline to adopt this
suggestion. The statutory definitions
provided in MHPAEA specifically refer
to applicable Federal law. Moreover, the
reference to Federal law is appropriate
because State law does not apply to all
group health plans, and Federal law also
identifies EHB categories, including the
category of mental health and substance
use disorder services, that nongrandfathered health plans in the
individual and small group markets are
required to cover beginning in 2014.
B. Clarifications—Parity Requirements
1. Classification of Benefits
As described earlier in this preamble,
the interim final regulations set forth
that the parity analysis be conducted on
a classification-by-classification basis in
six specific classifications of benefits.
Subsequent to the issuance of the
interim final regulations, several plans
and issuers brought to the Departments’
attention that, with respect to outpatient
benefits, many plans and issuers require
a copayment for office visits (such as
physician or psychologist visits) and
coinsurance for all other outpatient
services (such as outpatient surgery). In
response to this information, the
Departments published an FAQ
establishing an enforcement safe harbor
under which the Departments would
not take enforcement action against
plans and issuers that divide benefits
furnished on an outpatient basis into
two sub-classifications ((1) office visits
and (2) all other outpatient items and
services) for purposes of applying the
financial requirement and treatment
limitation rules under MHPAEA.10
The Departments have incorporated
the terms of the FAQ in paragraph
(c)(3)(iii)(C) of these final regulations,
permitting sub-classifications for office
visits, separate from other outpatient
services. Other sub-classifications not
specifically permitted in these final
regulations, such as separate sub10 See FAQ About Mental Health Parity and
Addiction Equity Act, available at http://
www.dol.gov/ebsa/faqs/faq-mhpaea.html.

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classifications for generalists and
specialists, must not be used for
purposes of determining parity. After
the sub-classifications are established, a
plan or issuer may not impose any
financial requirement or quantitative
treatment limitation on mental health or
substance use disorder benefits in any
sub-classification (i.e., office visits or
non-office visits) that is more restrictive
than the predominant financial
requirement or quantitative treatment
limitation that applies to substantially
all medical/surgical benefits in the subclassification using the methodology set
forth in paragraph (c)(3)(i) of these final
regulations. Example 6 under paragraph
(c)(3)(iv) of these final regulations
illustrates the approach that plans and
issuers may employ when dividing
outpatient benefits into subclassifications in accordance with these
final regulations.
Additionally, commenters requested
that the final regulations permit plans
and issuers to create sub-classifications
to address plan designs that have two or
more network tiers of providers.
Commenters asserted that utilizing
tiered networks helps plans manage the
costs and quality of care and requested
that the final regulations allow plans to
conduct the parity analysis separately
with respect to these various network
tiers.
The Departments have considered
these comments and recognize that
tiered networks have become an
important tool for health plan efforts to
manage care and control costs.
Therefore, for purposes of applying the
financial requirement and treatment
limitation rules under MHPAEA, these
final regulations provide that if a plan
(or health insurance coverage) provides
in-network benefits through multiple
tiers of in-network providers (such as an
in-network tier of preferred providers
with more generous cost sharing to
participants than a separate in-network
tier of participating providers), the plan
may divide its benefits furnished on an
in-network basis into sub-classifications
that reflect those network tiers, if the
tiering is based on reasonable factors
and without regard to whether a
provider is a mental health or substance
use disorder provider or a medical/
surgical provider.11 After the sub11 Under PHS Act section 2719A (incorporated
into ERISA and the Code) and its implementing
regulations, non-grandfathered group health plans
and non-grandfathered group or individual health
insurance coverage are prohibited from imposing
any cost-sharing requirement expressed as a
copayment amount or coinsurance rate with respect
to a participant or beneficiary for out-of-network
emergency services that exceeds the cost-sharing
requirement imposed with respect to a participant
or beneficiary if the services were provided in-

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Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations
classifications are established, the plan
or issuer may not impose any financial
requirement or quantitative treatment
limitation on mental health or substance
use disorder benefits in any subclassification that is more restrictive
than the predominant financial
requirement or quantitative treatment
limitation that applies to substantially
all medical/surgical benefits in the subclassification using the methodology set
forth in paragraph (c)(3)(i) of these final
regulations.
The Departments are aware that some
plans may have an uneven number of
tiers between medical/surgical
providers and mental health or
substance use disorder providers (e.g., 3
tiers for medical/surgical providers and
2 tiers for mental health or substance
use disorder providers). The
Departments may provide additional
guidance if questions persist with
respect to plans with an uneven number
of tiers or if the Departments become
aware of tier structures that may be
inconsistent with the parity analysis
required under these final regulations.
Until the issuance of further guidance,
the Departments will consider a plan or
issuer to comply with the financial
requirement and quantitative treatment
limitation rules under MHPAEA if a
plan or issuer treats the least restrictive
level of the financial requirement or
quantitative treatment limitation that
applies to at least two-thirds of medical/
surgical benefits across all provider tiers
in a classification as the predominant
level that it may apply to mental health
or substance use disorder benefits in the
same classification.
Some commenters requested
clarification that all medical/surgical
benefits and mental health or substance
use disorder benefits offered by a plan
or coverage must be contained within
the six classifications of benefits and
that plans and issuers could not classify
certain benefits outside of the six
classifications in order to avoid the
parity requirements. Other commenters
suggested that specific mental health or
substance use disorder benefits be crosswalked or paired with specific medical/
surgical benefits (e.g., physical
rehabilitation with substance use
disorder rehabilitation) for purposes of
the parity analysis.
The final regulations retain the six
classifications enumerated in the
interim final regulations, specify the
permissible sub-classifications, and
provide that the parity analysis be
performed within each classification
and sub-classification. The
network. 26 CFR 54.9815–2719AT(b); 29 CFR
2590.715–2719A(b); 45 CFR 147.138(b).

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classifications and sub-classifications
are intended to be comprehensive and
cover the complete range of medical/
surgical benefits and mental health or
substance use disorder benefits offered
by health plans and issuers. Medical/
surgical benefits and mental health or
substance use disorder benefits cannot
be categorized as being offered outside
of these classifications and therefore not
subject to the parity analysis.
Cross-walking or pairing specific
mental health or substance use disorder
benefits with specific medical/surgical
benefits is a static approach that the
Departments do not believe is feasible,
given the difficulty in determining
‘‘equivalency’’ between specific
medical/surgical benefits and specific
mental health and substance use
disorder benefits and because of the
differences in the types of benefits that
may be offered by any particular plan.
2. Measuring Plan Benefits
Some commenters supported the
‘‘substantially all’’ and ‘‘predominant’’
tests as formulated in the interim final
regulations, while other commenters
were concerned that they were too
restrictive and may create an
administrative burden on plans. A few
commenters requested clarification that
the parity analysis would not need to be
performed annually absent changes in
plan design or indications that
assumptions or data were inaccurate.
The interim final regulations
incorporated the two-thirds
‘‘substantially all’’ numerical standard
from the regulations implementing
MHPA 1996, and quantified
‘‘predominant’’ to mean more than onehalf of medical/surgical benefits in the
classification are subject to the financial
requirement or quantitative treatment
limitation. The Departments believe
group health plans and issuers have
developed the familiarity and expertise
to implement these parity requirements
and therefore retain the numerical
standards as set forth in the interim
final regulations. The Departments
clarify that a plan or issuer is not
required to perform the parity analysis
each plan year unless there is a change
in plan benefit design, cost-sharing
structure, or utilization that would
affect a financial requirement or
treatment limitation within a
classification (or sub-classification).
These final regulations, like the
interim final regulations, provide that
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

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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. 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. One commenter asked
whether plan benefits are measured
based on allowed plan costs, for
purposes of the ‘‘substantially all’’ and
‘‘predominant’’ tests. The dollar amount
of plan payments is based on the
amount the plan allows (before enrollee
cost sharing) rather than the amount the
plan pays (after enrollee cost sharing)
because payment based on the allowed
amount covers the full scope of the
benefits being provided.
3. Cumulative Financial Requirements
and Cumulative Quantitative Treatment
Limitations
The interim final regulations provide
that a plan or issuer may not apply
cumulative financial requirements (such
as deductibles and out-of-pocket
maximums) or cumulative quantitative
treatment limitations (such as annual or
lifetime day or visit limits) for mental
health or substance use disorder
benefits in a classification that
accumulate separately from any
cumulative requirement or limitation
established for medical/surgical benefits
in the same classification. These final
regulations retain this standard and
continue to provide that cumulative
requirements and limitations must also
satisfy the quantitative parity analysis.
Accordingly, these final regulations
continue to prohibit plans and issuers
from applying separate cumulative
financial requirements and cumulative
quantitative treatment limitations to
medical/surgical and mental health and
substance use disorder benefits in a
classification, and continue to provide
that such cumulative requirements or
limitations are only permitted to be
applied for mental health and substance
use disorder benefits in a classification
to the extent that such unified
cumulative requirements or limitations
also apply to substantially all medical/
surgical benefits in the classification.
Several commenters argued that the
requirement in the interim final
regulations to use a single, combined
deductible in a classification was
burdensome and would require
significant resources to implement,
especially for Managed Behavioral
Health Organizations (MBHOs) that
often work with multiple plans. One
commenter asserted that this

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requirement could impact the
willingness of plan sponsors to offer
mental health or substance use disorder
benefits. A study sponsored by HHS,
however, found that nearly all plans had
eliminated the use of separate
deductibles for mental health and
substance use disorder benefits by
2011.12 According to this study, even in
2010, only a very small percentage of
plans were using separate deductibles.
This study and other research 13 have
shown that the overwhelming majority
of plans have retained mental health
and substance use disorder coverage
after issuance of the interim final
regulations and, for the very small
percent of plans that have dropped
mental health or substance use disorder
coverage, there is no clear evidence they
did so because of MHPAEA.
Accordingly, these final regulations
retain the requirement that plans and
issuers use a single, combined
deductible in a classification.

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4. Interaction With PHS Act Section
2711 (No Lifetime or Annual Limits)
MHPA 1996 and paragraph (b) of the
interim final regulations set forth the
parity requirements with respect to
aggregate lifetime and annual dollar
limits on mental health benefits or
substance use disorder benefits where a
group health plan or health insurance
coverage provides both medical/surgical
benefits and mental health benefits or
substance use disorder benefits.
PHS Act section 2711, as added by the
Affordable Care Act, prohibits lifetime
and annual limits on the dollar amount
of EHB, as defined in section 1302(b) of
the Affordable Care Act. The definition
of EHB includes ‘‘mental health and
substance use disorder services,
including behavioral health
treatment.’’ 14 Thus, notwithstanding
the provisions of MHPAEA that permit
12 Final Report: Consistency of Large Employer
and Group Health Plan Benefits with Requirements
of the Paul Wellstone and Pete Domenici Mental
Health Parity and Addiction Equity Act of 2008.
NORC at the University of Chicago for the Office of
the Assistant Secretary for Planning and Evaluation.
This study analyzed information on large group
health plan benefit designs from 2009 through 2011
in several databases maintained by benefits
consulting firms that advise plans on compliance
with MHPAEA as well as other requirements.
13 The 2010 Kaiser Family Foundation/HRET and
the 2010 Mercer survey found that fewer than 2%
of firms with over 50 employees dropped coverage
of mental health or substance use disorder benefits.
Final Report: Consistency of Large Employer and
Group Health Plan Benefits with Requirements of
the Paul Wellstone and Pete Domenici Mental
Health Parity and Addiction Equity Act of 2008.
NORC at the University of Chicago for the Office of
the Assistant Secretary for Planning and Evaluation,
pp. 43–44.
14 See section 1302(b)(1)(E) of the Affordable Care
Act.

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aggregate lifetime and annual dollar
limits with respect to mental health or
substance use disorder benefits as long
as those limits are in accordance with
the parity requirements for such limits,
such dollar limits are prohibited with
respect to mental health or substance
use disorder benefits that are covered as
EHB. While these final regulations
generally retain the provisions of the
interim final regulations regarding the
application of the parity requirements to
aggregate lifetime and annual dollar
limits on mental health or substance use
disorder benefits, language has been
added specifying that these final
regulations do not address the
requirements of PHS Act section 2711.
That is, the parity requirements
regarding annual and lifetime limits
described in these final regulations only
apply to the provision of mental health
and substance use disorder benefits that
are not EHB. Because this greatly
reduces the instances in which annual
or lifetime limits will be permissible,
the examples from the interim final
regulations that expressly demonstrated
how a plan could apply lifetime or
annual dollar limits have been
deleted.15
5. Interaction With PHS Act Section
2713 (Coverage of Preventive Health
Services)
The interim final regulations provide
that if a plan or issuer provides mental
health or substance use disorder
benefits in any classification, mental
health or substance use disorder
benefits must be provided in every
classification in which medical/surgical
benefits are provided. Under PHS Act
section 2713, as added by the Affordable
Care Act, non-grandfathered group
health plans and health insurance
issuers offering non-grandfathered
group and individual coverage are
required to provide coverage for certain
preventive services without cost
15 For self-insured group health plans, large group
market health plans, and grandfathered health
plans, to determine which benefits are EHB for
purposes of complying with PHS Act section 2711,
the Departments have stated that they will consider
the plan to have used a permissible definition of
EHB under section 1302(b) of the Affordable Care
Act if the definition is one that is authorized by the
Secretary of HHS (including any available
benchmark option, supplemented as needed to
ensure coverage of all ten statutory categories).
Furthermore, the Departments intend to use their
enforcement discretion and work with those plans
that make a good faith effort to apply an authorized
definition of EHB to ensure there are no annual or
lifetime dollar limits on EHB. See FAQ–10 of
Frequently Asked Questions on Essential Health
Benefits Bulletin (published February 17, 2012),
available at: http://www.cms.gov/CCIIO/Resources/
Files/Downloads/ehb-faq-508.pdf.

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sharing.16 These preventive services
presently include, among other things,
alcohol misuse screening and
counseling, depression counseling, and
tobacco use screening as provided for in
the guidelines issued by the United
States Preventive Services Task Force.
The Departments received several
comments asking whether or to what
extent a non-grandfathered plan that
provides mental health or substance use
disorder benefits pursuant to PHS Act
section 2713 is subject to the
requirements of MHPAEA. Many
commenters urged the Departments to
clarify that the provision of mental
health and substance use disorder
benefits in this circumstance does not
trigger a broader requirement to comply
with MHPAEA for non-grandfathered
plans that do not otherwise offer mental
health or substance use disorder
benefits.
The Departments agree that
compliance with PHS Act section 2713
should not, for that reason alone,
require that the full range of benefits for
a mental health condition or substance
user disorder be provided under
MHPAEA. Accordingly, paragraph
(e)(3)(ii) of these final regulations
provides that nothing in these
regulations requires a group health plan
(or health insurance issuer offering
coverage in connection with a group
health plan) that provides mental health
or substance use disorder benefits only
to the extent required under PHS Act
section 2713 to provide additional
mental health or substance use disorder
benefits in any classification.
C. Nonquantitative Treatment
Limitations
1. Exceptions for Clinically Appropriate
Standards of Care
The final regulations generally retain
the provision in the interim final
regulations setting forth the parity
requirements with respect to NQTLs.
Under both the interim final regulations
and these final regulations, a plan or
issuer may not impose an NQTL 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 NQTL 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
16 See 26 CFR 54.9815–2713T; 29 CFR 2590.715–
2713; 45 CFR 147.130.

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medical/surgical benefits in the same
classification.
The interim final regulations also
contained an exception to the NQTL
requirements allowing for variation ‘‘to
the extent that recognized clinically
appropriate standards of care may
permit a difference.’’ A few commenters
expressed support for the exception,
emphasizing inherent differences in
treatment for medical/surgical
conditions and mental health conditions
and substance use disorders. Many
other commenters raised concerns that
this exception could be subject to abuse
and recommended the Departments set
clear standards for what constitutes a
‘‘recognized clinically appropriate
standard of care.’’ For example,
commenters suggested a recognized
clinically appropriate standard of care
must reflect input from multiple
stakeholders and experts; be accepted
by multiple nationally recognized
provider, consumer, or accrediting
organizations; be based on independent
scientific evidence; and not be
developed solely by a plan or issuer.
Additionally, since publication of the
interim final regulations, some plans
and issuers may have attempted to
invoke the exception to justify applying
an NQTL to all mental health or
substance use disorder benefits in a
classification, while only applying the
NQTL to a limited number of medical/
surgical benefits in the same
classification. These plans and issuers
generally argue that fundamental
differences in treatment of mental
health and substance use disorders and
medical/surgical conditions, justify
applying stricter NQTLs to mental
health or substance use disorder
benefits than to medical/surgical
benefits under the exception in the
interim final regulations.
In consideration of these comments,
the Departments are removing the
specific exception for ‘‘recognized
clinically appropriate standards of
care.’’ 17 Plans and issuers will continue
to have the flexibility contained in the
NQTL requirements to take into account
clinically appropriate standards of care
when determining whether and to what
extent medical management techniques
and other NQTLs apply to medical/
surgical benefits and mental health and
17 HHS convened a technical expert panel on
March 3, 2011 to provide input on the use of
NQTLs for mental health and substance use
disorder benefits. The panel was comprised of
individuals with clinical expertise in mental health
and substance use disorder treatment as well as
general medical treatment. These experts were
unable to identify situations for which the clinically
appropriate standard of care exception was
warranted—in part because of the flexibility
inherent in the NQTL standard itself.

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substance use disorder benefits, as long
as the processes, strategies, evidentiary
standards, and other factors used in
applying an NQTL to mental health and
substance use disorder benefits are
comparable to, and applied no more
stringently than, those with respect to
medical/surgical benefits. In particular,
the regulations do not require plans and
issuers to use the same NQTLs for both
mental health and substance use
disorder benefits and medical/surgical
benefits, but rather that the processes,
strategies, evidentiary standards, and
other factors used by the plan or issuer
to determine whether and to what
extent a benefit is subject to an NQTL
are comparable to and applied no more
stringently for mental health or
substance use disorder benefits than for
medical/surgical benefits. Disparate
results alone do not mean that the
NQTLs in use do not comply with these
requirements. The final regulations
provide examples of how health plans
and issuers can comply with the NQTL
requirements absent the exception for a
recognized clinically appropriate
standard of care.
However, MHPAEA specifically
prohibits separate treatment limitations
that are applicable only with respect to
mental health or substance use disorder
benefits. Moreover, as reflected in
FAQs 18 released in November 2011, it
is unlikely that a reasonable application
of the NQTL requirement would result
in all mental health or substance use
disorder benefits being subject to an
NQTL in the same classification in
which less than all medical/surgical
benefits are subject to the NQTL.
2. Parity Standards for NQTLs Versus
Quantitative Treatment Limitations
As mentioned earlier in this
preamble, MHPAEA and the interim
final regulations prohibit plans and
issuers from imposing a financial
requirement or quantitative treatment
limitation on mental health and
substance use disorder benefits that is
more restrictive than the predominant
financial requirement or quantitative
treatment limitation that applies to
substantially all medical/surgical
benefits in the same classification. The
interim final regulations incorporated
the two-thirds ‘‘substantially all’’
numerical standard from the rules
implementing the requirements of
MHPA 1996, and quantified
‘‘predominant’’ to mean more than one18 See FAQs About Affordable Care Act
Implementation (Part VII) and Mental Health Parity
Implementation, question 5, available at: http://
www.dol.gov/ebsa/faqs/faq-aca7.html and http://
www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs7.html.

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68245

half. Using these numerical standards,
the Departments established a
mathematical test by which plans and
issuers could determine what level of a
financial requirement or quantitative
treatment limitation, if any, is the most
restrictive level that could be imposed
on mental health or substance use
disorder benefits within a classification.
The Departments recognized that
plans and issuers impose a variety of
NQTLs affecting the scope or duration
of benefits that are not expressed
numerically. Some commenters
recommended that the Departments
adopt the same quantitative parity
analysis for NQTLs. While NQTLs are
subject to the parity requirements, the
Departments understood that such
limitations cannot be evaluated
mathematically. These final regulations
continue to provide different parity
standards with respect to quantitative
treatment limitations and NQTLs,
because although both kinds of
limitations operate to limit the scope or
duration of mental health and substance
use disorder benefits, they apply to such
benefits differently.19
3. Clarification Regarding the
Application of Certain NQTLs
Under the interim final regulations,
the Departments set forth the parity
requirement with respect to NQTLs and
provided an illustrative list of NQTLs
that plans and issuers commonly use.
These NQTLs included: medical
management standards limiting or
excluding benefits based on medical
necessity or medical appropriateness, or
based on whether the treatment is
experimental or investigative; formulary
design for prescription drugs; standards
for provider admission to participate in
a network, including reimbursement
rates; plan methods for determining
usual, customary, and reasonable
charges; 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 exclusions
based on failure to complete a course of
treatment. The interim final regulations
also included examples illustrating the
operation of the requirements for
NQTLs.
After the interim final regulations
were issued, some stakeholders asked
questions regarding the application of
19 The Departments reiterated the different parity
standards with respect to quantitative treatment
limitations and nonquantitative treatment
limitations in an FAQ. See FAQs on Understanding
Implementation of the Mental Health Parity and
Addiction Equity Act of 2008, question 6, available
at http://www.dol.gov/ebsa/faqs/faqmhpaeaimplementation.html.

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the NQTL rule to other features of
medical management or general plan
design not specifically addressed in the
interim final regulations. Many
commenters requested that the
Departments address additional NQTLs,
such as prior authorization and
concurrent review, service coding,
provider network criteria, policy
coverage conditions, and both in- and
out-of-network limitations.
These final regulations make clear
that, while an illustrative list is
included in these final regulations, all
NQTLs imposed on mental health and
substance use disorder benefits by plans
and issuers subject to MHPAEA are
required to be applied in accordance
with these requirements. To the extent
that a plan standard operates to limit the
scope or duration of treatment with
respect to mental health or substance
use disorder benefits, the processes,
strategies, evidentiary standards, or
other factors used to apply the standard
must be comparable to, and applied no
more stringently than, those imposed
with respect to medical/surgical
benefits. By being comparable, the
processes, strategies, evidentiary
standards and other factors cannot be
specifically designed to restrict access to
mental health or substance use disorder
benefits. Specifically, plan standards,
such as in- and out-of-network
geographic limitations, limitations on
inpatient services for situations where
the participant is a threat to self or
others, exclusions for court-ordered and
involuntary holds, experimental
treatment limitations, service coding,
exclusions for services provided by
clinical social workers, and network
adequacy, while not specifically
enumerated in the illustrative list of
NQTLs, must be applied in a manner
that complies with these final
regulations. In response to the
comments received, in paragraph
(c)(4)(ii) of these final regulations, the
Departments added two additional
examples of NQTLs to the illustrative
list: network tier design and restrictions
based on geographic location, facility
type, provider specialty and other
criteria that limit the scope or duration
of benefits for services provided under
the plan or coverage. Furthermore, the
Departments included additional and
revised examples on how NQTLs,
enumerated in these final regulations or
otherwise, may be applied in
accordance with the requirements of
these final regulations.
The Departments are aware that some
commenters have asked how the NQTL
requirements apply to provider
reimbursement rates. Plans and issuers
may consider a wide array of factors in

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determining provider reimbursement
rates for both medical/surgical services
and mental health and substance use
disorder services, such as service type;
geographic market; demand for services;
supply of providers; provider practice
size; Medicare reimbursement rates; and
training, experience and licensure of
providers. The NQTL provisions require
that these or other factors be applied
comparably to and no more stringently
than those applied with respect to
medical/surgical services. Again,
disparate results alone do not mean that
the NQTLs in use fail to comply with
these requirements. The Departments
may provide additional guidance if
questions persist with respect to
provider reimbursement rates.
Some commenters requested that the
Departments require plans and issuers
to comply with certain guidelines,
independent national or international
standards, or State government
guidelines. While plans and issuers are
not required under these final
regulations to comply with any such
guidelines or standards with respect to
the development of their NQTLs, these
standards, such as the behavioral health
accreditation standards set forth by the
National Committee for Quality
Assurance or the standards for
implementing parity in managed care
set forth by URAC, may be used as
references and best practices in
implementing NQTLs, if they are
applied in a manner that complies with
these final regulations.
D. Scope of Services
In response to the RFI and interim
final regulations, the Departments
received many comments addressing an
issue characterized as ‘‘scope of
services’’ or ‘‘continuum of care.’’ Scope
of services generally refers to the types
of treatment and treatment settings that
are covered by a group health plan or
health insurance coverage. Some
commenters requested that, with respect
to a mental health condition or
substance use disorder that is otherwise
covered, the regulations clarify that a
plan or issuer 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 require
plans and issuers to provide benefits for
the full scope of medically appropriate
services to treat a mental health
condition or substance use disorder if
the plan or issuer covers the full scope
of medically appropriate services to
treat medical/surgical conditions, even

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if some treatments or treatment settings
are not otherwise covered by the plan or
coverage. Other commenters requested
that MHPAEA be interpreted to require
that group health plans and issuers
provide benefits for any evidence-based
treatment.
The interim final regulations
established six broad classifications that
in part define the scope of services
under MHPAEA. The interim final
regulations require that, if a plan or
issuer provides coverage for mental
health or substance use disorder
benefits in any classification, mental
health or substance use disorder
benefits must be provided in every
classification in which medical/surgical
benefits are provided. The interim final
regulations did not, however, address
the scope of services that must be
covered within those classifications.
The Departments invited comments on
whether and to what extent the final
regulations should address the scope of
services or continuum of care provided
by a group health plan or health
insurance coverage.
Many commenters requested that the
Departments clarify how MHPAEA
affects the scope of coverage for
intermediate services (such as
residential treatment, partial
hospitalization, and intensive outpatient
treatment) and how these services fit
within the six classifications set forth by
the interim final regulations. Some
commenters suggested that the final
regulations establish what intermediate
mental health and substance use
disorder services would be analogous to
various intermediate medical/surgical
services for purposes of the MHPAEA
parity analysis. Other commenters
suggested that the Departments not
address scope of services in the final
regulations.
The Departments did not intend that
plans and issuers could exclude
intermediate levels of care covered
under the plan from MHPAEA’s parity
requirements. At the same time, the
Departments did not intend to impose a
benefit mandate through the parity
requirement that could require greater
benefits for mental health conditions
and substance use disorders than for
medical/surgical conditions. In
addition, the Departments’ approach
defers to States to define the package of
insurance benefits that must be
provided in a State through EHB.20
Although the interim final regulations
did not define the scope of the six
classifications of benefits, they directed
that plans and issuers assign mental
20 See 45 CFR 147.150 and 156.115 (78 FR 12834,
February 25, 2013).

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health and substance use disorder
benefits and medical/surgical benefits to
these classifications in a consistent
manner. This general rule also applies
to intermediate services provided under
the plan or coverage. Plans and issuers
must assign covered intermediate
mental health and substance use
disorder benefits to the existing six
benefit classifications in the same way
that they assign comparable
intermediate medical/surgical benefits
to these classifications. For example, if
a plan or issuer classifies care in skilled
nursing facilities or rehabilitation
hospitals as inpatient benefits, then the
plan or issuer must likewise treat any
covered care in residential treatment
facilities for mental health or substance
user disorders as an inpatient benefit. In
addition, if a plan or issuer treats home
health care as an outpatient benefit,
then any covered intensive outpatient
mental health or substance use disorder
services and partial hospitalization must
be considered outpatient benefits as
well.
These final regulations also include
additional examples illustrating the
application of the NQTL rules to plan
exclusions affecting the scope of
services provided under the plan. The
new examples clarify that plan or
coverage restrictions based on
geographic location, facility type,
provider specialty, and other criteria
that limit the scope or duration of
benefits for services must comply with
the NQTL parity standard under these
final regulations.
E. Disclosure of Underlying Processes
and Standards
MHPAEA requires that the criteria for
plan medical necessity determinations
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) 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 in accordance with
regulations. MHPAEA also requires that
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 in the case of any participant or
beneficiary must be made available on
request or as otherwise required by the
plan administrator (or health insurance
issuer) to the participant or beneficiary
in accordance with regulations.
Several commenters expressed
concern about the lack of health plan
transparency, or made

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recommendations to improve
transparency, including a request that
plans and issuers be required to provide
sufficient information to determine
whether a plan is applying medical
necessity criteria and other factors
comparably to medical/surgical benefits
and mental health and substance use
disorder benefits. In addition, since the
issuance of the interim final regulations,
stakeholders have expressed concern
that it is difficult to understand whether
a plan complies with the NQTL
provisions without information showing
that the processes, strategies,
evidentiary standards, and other factors
used in applying an NQTL to mental
health or substance use disorder
benefits and medical/surgical benefits
are comparable, impairing plan
participants’ means of ensuring
compliance with MHPAEA.
In response to these concerns, the
Departments published several FAQs
clarifying the breadth of disclosure
requirements applicable to group health
plans and health insurance issuers
under both MHPAEA and other
applicable law, including ERISA and
the Affordable Care Act.21 The
substance of these FAQs is included in
new paragraph (d)(3) of the final
regulations, which reminds plans,
issuers, and individuals that compliance
with MHPAEA’s disclosure
requirements is not determinative of
compliance with any other provision of
applicable Federal or State law. In
particular, in addition to MHPAEA’s
disclosure requirements, provisions of
other applicable law require disclosure
of information relevant to medical/
surgical, mental health, and substance
use disorder benefits. For example,
ERISA section 104 and the Department
of Labor’s implementing regulations 22
provide that, for plans subject to ERISA,
instruments under which the plan is
established or operated must generally
be furnished by the plan administrator
to plan participants 23 within 30 days of
21 See FAQs for Employees about the Mental
Health Parity and Addiction Equity Act, available
at http://www.dol.gov/ebsa/faqs/faq-mhpaea2.html;
FAQs about Affordable Care Act Implementation
(Part V) and Mental Health Parity Implementation,
available at http://www.dol.gov/ebsa/faqs/faqaca5.html and http://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs5.html.
22 29 CFR 2520.104b 1.
23 ERISA section 3(7) defines the term
‘‘participant’’ to include any employee or former
employee who is or may become eligible to receive
a benefit of any type from an employee benefit plan
or whose beneficiaries may become eligible to
receive any such benefit. Accordingly, employees
who are not enrolled but are, for example, in a
waiting period for coverage, or who are otherwise
shopping amongst benefit package options at open
season, generally are considered plan participants
for this purpose.

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request. Instruments under which the
plan is established or operated include
documents with information on medical
necessity criteria for both medical/
surgical benefits and mental health and
substance use disorder benefits, as well
as the processes, strategies, evidentiary
standards, and other factors used to
apply an NQTL with respect to medical/
surgical benefits and mental health or
substance use disorder benefits under
the plan.
In addition, the Department of Labor’s
claims procedure regulations
(applicable to ERISA plans), as well as
the Departments’ claims and appeals
regulations under the Affordable Care
Act (applicable to all non-grandfathered
group health plans and health insurance
issuers in the group and individual
markets),24 set forth rules regarding
claims and appeals, including the right
of claimants (or their authorized
representative) upon appeal of an
adverse benefit determination (or a final
internal adverse benefit determination)
to be provided by the plan or issuer,
upon request and free of charge,
reasonable access to and copies of all
documents, records, and other
information relevant to the claimant’s
claim for benefits.25 In addition, the
plan or issuer must provide the claimant
with any new or additional evidence
considered, relied upon, or generated by
the plan or issuer (or at the direction of
the plan or issuer) in connection with a
claim. If the plan or issuer is issuing an
adverse benefit determination on review
based on a new or additional rationale,
the claimant must be provided, free of
charge, with the rationale. Such
evidence or rationale must be provided
as soon as possible and sufficiently in
advance of the date on which the notice
of adverse benefit determination on
24 29 CFR 2560.503–1. See also 26 CFR 54.9815–
2719T(b)(2)(i), 29 CFR 2590.715–2719(b)(2)(i), and
45 CFR 147.136(b)(2)(i), requiring nongrandfathered plans and issuers to incorporate the
internal claims and appeals processes set forth in
29 CFR 2560.503–1.
25 See 29 CFR 2560.503–1. The Department of
Labor’s claim procedure regulation stipulates
specific timeframes in which a plan administrator
must notify a claimant of the plan’s benefit
determination, which includes, in the case of an
adverse benefit determination, the reason for the
denial. Accordingly, a plan administrator must
notify a claimant of the plan’s benefit determination
with respect to a pre-service claim within a
reasonable time period appropriate to the medical
circumstances, but not later than 15 days after the
receipt of the claim. With respect to post-service
claims, a plan administrator must notify the
claimant within a reasonable time period, but not
later than 30 days after the receipt of the claim. In
the case of an urgent care claim, a plan
administrator must notify the claimant of the plan’s
benefit determination, as soon as possible, taking
into account the medical exigencies, but not later
than 72 hours after the receipt of the claimant’s
request.

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review is required to be provided to give
the claimant a reasonable opportunity to
respond prior to that date.26 The
information required to be provided
under these provisions includes
documents of a comparable nature with
information on medical necessity
criteria for both medical/surgical
benefits and mental health and
substance use disorder benefits, as well
as the processes, strategies, evidentiary
standards, and other factors used to
apply an NQTL with respect to medical/
surgical benefits and mental health or
substance use disorder benefits under
the plan.
Even with these important disclosure
requirements under existing law,27 the
Departments remain focused on
transparency and whether individuals
have the necessary information to
compare NQTLs of medical/surgical
benefits and mental health or substance
use disorder benefits under the plan to
effectively ensure compliance with
MHPAEA. Accordingly,
contemporaneous with the publication
of these final regulations, the
Departments of Labor and HHS are also
publishing another set of MHPAEA
FAQs, which, among other things,
solicit comments on whether and how
to ensure greater transparency and
compliance. 28
F. Small Employer Exemption

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Paragraph (f) of these final regulations
implements 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. Prior to the Affordable
Care Act, MHPAEA defined a small
employer, 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.
Section 2791 of the PHS Act was
amended by the Affordable Care Act to
26 See 26 CFR 54.9815–2719T(b)(2)(ii)(C), 29 CFR
2590.715–2719(b)(2)(ii)(C), and 45 CFR
147.136(b)(2)(ii)(C).
27 For other disclosure requirements that may be
applicable to plans and issuers under existing
Federal law, including disclosure requirements
regarding prescription drug formulary coverage, see
the summary plan description requirements for
ERISA plans under 29 CFR 2520.102–3(j)(2) and
(j)(3) and the preamble discussion at 65 FR 70226,
70237 (Nov. 11, 2000), as well as Department of
Labor Advisory Opinion 96–14A (available at
http://www.dol.gov/ebsa/programs/ori/advisory96/
96-14a.htm). See also the summary of benefits and
coverage requirements under 26 CFR 54.9815–
2715(a)(2)(i)(K), 29 CFR 2590.715–2715(a)(2)i)(K),
and 45 CFR 147.200(a)(2)(i)(K).
28 Available at http://www.dol.gov/ebsa/
healthreform/ and http://www.cms.gov/cciio/
Resources/Fact-Sheets-and-FAQs/index.html.

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define a small employer as one that has
100 or fewer employees, while also
providing States the option to use 50
employees rather than 100 for 2014 and
2015.29 This definition is incorporated
by reference in the MHPAEA provisions
contained in section 2726 of the PHS
Act. However, the MHPAEA provisions
codified in ERISA section 712 and Code
section 9812, together with section
732(a) of ERISA and section 8931(a) of
the Code, continue to define an exempt
small employer as one that has 50 or
fewer employees. The Departments
issued an FAQ 30 in December 2010
stating that, ‘‘for group health plans and
health insurance issuers subject to
ERISA and the Code, the Departments
will continue to treat group health plans
of employers with 50 or fewer
employees as exempt from the
MHPAEA requirements under the small
employer exemption, regardless of any
State insurance law definition of small
employer.’’ The FAQ also acknowledged
that, for non-Federal governmental
plans, which are not subject to ERISA or
the Code, the PHS Act was amended to
define a small employer as one that has
100 or fewer employees. Consistent with
the FAQs, the Department of Labor and
the Department of the Treasury final
regulations continue to exempt group
health plans and group health insurance
coverage of employers with 50 or fewer
employees from MHPAEA. The HHS
final regulations, which generally apply
to non-Federal governmental plans,
exempt group health plans and group
health insurance coverage of employers
with 100 or fewer employees (subject to
State law flexibility for 2014 and 2015).
Despite this difference, and certain
other differences, in the applicability of
the provisions of the Code, ERISA, and
the PHS Act, the Departments do not
find there to be a conflict in that no
entity will be put in a position in which
compliance with all of the provisions
applicable to that entity is impossible.
At the same time, plans and issuers
providing coverage in connection with
group health plans sponsored by small
employers should be aware that, on
February 25, 2013, HHS published a
final regulation on EHB 31 that requires
issuers of non-grandfathered plans in
the individual and small group markets
to ensure that such plans provide all
EHB, including mental health and
29 See

section 1304(b)(3) of the Affordable Care

Act.
30 See FAQs about Affordable Care Act
Implementation (Part V) and Mental Health Parity
Implementation, question 8, available at http://
www.dol.gov/ebsa/faqs/faq-aca5.html and http://
www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs5.html.
31 78 FR 12834.

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substance use disorder benefits. The
extent of the coverage of EHB is
determined based on benchmark plans
that are selected by the States.
Furthermore, the EHB final regulation at
45 CFR 156.115(a)(3) requires issuers
providing EHB to provide mental health
and substance use disorder benefits in
compliance with the requirements of the
MHPAEA regulations, even where those
requirements would not otherwise
apply directly. Thus, all insured, nongrandfathered, small group plans must
cover EHB in compliance with the
MHPAEA regulations, regardless of
MHPAEA’s small employer exemption.
(Also, as discussed in section H.1.
below, MHPAEA was amended to
include individual health insurance
coverage. Accordingly, both
grandfathered and non-grandfathered
coverage in the individual market must
comply with MHPAEA.)
G. Increased Cost Exemption
MHPAEA contains an increased cost
exemption that is available for plans
and health insurance issuers that make
changes to comply with the law and
incur an increased cost of at least two
percent in the first year that MHPAEA
applies to the plan or coverage or at
least one percent in any subsequent
plan or policy year. Under MHPAEA,
plans or coverage 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 or policy year, and
the exemption lasts for one plan or
policy year. Thus, the increased cost
exemption may only be claimed for
alternating plan or policy years.32
The interim final regulations reserved
paragraph (g) regarding the increased
cost exemption and solicited comments.
The Departments issued guidance
establishing an interim enforcement safe
harbor under which a plan that has
incurred an increased cost of two
percent during its first year of
compliance can obtain an exemption for
the second plan year by following the
exemption procedures described in the
Departments’ 1997 regulations
implementing MHPA 1996,33 except
that, as required under MHPAEA, for
32 An employer or issuer may elect to continue to
provide mental health and substance use disorder
benefits in compliance with this section with
respect to the plan or coverage involved regardless
of any increase in total costs. That is, mere
eligibility for the exemption does not require an
employer or issuer to use it. An exempt plan or
coverage can continue to provide mental health and
substance use disorder benefits during the
exemption period in compliance with some, all, or
none of the parity provisions.
33 62 FR 66932, December 22, 1997.

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Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations
the first year of compliance the
applicable percentage of increased cost
is two percent and the exemption lasts
only one year.34
The Departments received several
comments on the interim final
regulations that requested guidance on
attribution of cost increases to
MHPAEA. Some commenters
emphasized that the cost exemption
must be based on actual total plan costs
measured at the end of the plan year.
Other commenters stated that plans
should be permitted to estimate claims
that have not yet been reported for
purposes of calculating incurred
expenditures. Additionally, some
commenters stated that a plan’s costs for
purposes of the increased cost
exemption should include not only
claims costs, but also administrative
expenses associated with complying
with the parity requirements.
Paragraph (g) of these final regulations
generally applies standards and
procedures for claiming an increased
cost exemption under MHPAEA
consistent with MHPAEA’s statutory
standards and procedures as well as
prior procedures set forth in the
Departments’ regulations implementing
MHPA 1996. The test for an exemption
must be based on the estimated increase
in actual costs incurred by the plan or
issuer that is directly attributable to
expansion of coverage due to the
requirements of this section and not
otherwise due to occurring trends in
utilization and prices, a random change
in claims experience that is unlikely to
persist, or seasonal variation commonly
experienced in claims submission and
payment patterns.
Under the final regulations, the
increase in actual total costs attributable
to MHPAEA is described by the formula
[(E1 ¥ E0)/T0] ¥ D > k, where E
represents the level of health plan
spending with respect to mental health
and substance use disorder benefits over
the measurement period, T is a measure
of total actual costs incurred by a plan
or coverage on all benefits (medical/
surgical benefits and mental health and
substance use disorder benefits under
the plan), D is the average change in
spending over the prior five years, and
k is the applicable percentage of
increased cost for qualifying for the cost
exemption (i.e., one percent or two
percent depending on the year). k will
be expressed as a fraction for the
purposes of this formula. The subscripts
34 See FAQs about Affordable Care Act
Implementation (Part V) and Mental Health Parity
Implementation, question 11, available at: http://
www.dol.gov/ebsa/faqs/faq-aca5.html and http://
www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs5.html.

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1 and 0 refer to a base period and the
most recent benefit period preceding the
base period, respectively. Costs incurred
under E include paid claims by the plan
or coverage for services to treat mental
health conditions and substance use
disorders, and administrative costs
associated with providing mental health
or substance use disorder benefits
(amortized over time).
In estimating the costs attributable to
MHPAEA, a plan or issuer must rely on
actual claims or encounter data incurred
in the benefit period reported within 90
days of the end of the benefit period.
Although MHPAEA specifies that
determinations with regard to the cost
exemption shall be made after a plan
has complied with the law for six
months of the plan year involved, the
provision does not require that the
benefit period used to make this
calculation be limited to six months.
Data from a six month period will not
typically reflect seasonal variation in
claims experience. To estimate E1 ¥ E0,
a plan or coverage must first calculate
secular trends over five years in the
volume of services and the prices paid
for services for the major classifications
of services by applying the formula (E1
¥ E0)/T0 to mental health and substance
use disorder spending to each of the five
prior years and then calculating the
average change in spending. The
components of spending are estimated
because secular trends can occur in
prices and volume. After the average
change in spending across the five years
is calculated for each service type, the
change in mental health and substance
use disorder benefits spending
attributable to MHPAEA is calculated
net of the average annual spending
growth that is due to a secular trend.
This change in calculation is the main
difference from the previous
methodology used under prior
guidance. It is recognized that for some
smaller employers covered by
MHPAEA, year to year spending may be
somewhat unstable. In this case, an
employer or issuer may propose an
alternative estimation method. It is
important to note that the language of
the statute indicates that the base period
against which the impact of MHPAEA is
assessed moves up each year to the year
prior to the current benefit year.
Administrative costs attributable to
the implementation of MHPAEA must
be reasonable and supported with
detailed documentation from
accounting records. Software and
computing expenses associated with
implementation of the prohibition on
separate cumulative financial
requirements or other provisions of the
regulation should be based on a straight-

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68249

line depreciation over the estimated
useful life of the asset (computer
hardware five years; software three
years, according to the American
Hospital Association’s Estimated Useful
Life of depreciable Hospital Assets).
Any other fixed administrative costs
should also be amortized.
Some commenters suggested
additional clarifications regarding the
statutory provision that determinations
as to increases in actual costs must be
made and certified by a qualified and
licensed actuary who is a member in
good standing of the American
Academy of Actuaries. Some
commenters suggested that the actuary
must be qualified to perform such work
based on meeting the Qualification
Standards for Actuaries Issuing
Statements of Actuarial Opinion in the
United States. Other commenters
suggested that the actuary must be
independent and not employed by the
group health plan or health insurance
issuer claiming the exemption. The
Departments believe the statutory
language is sufficient to ensure reliable
cost increase determinations. Moreover,
this approach is consistent with the
approach applicable to EHB in that the
only qualification required for actuaries
is that they be a member in good
standing of the American Academy of
Actuaries.35 Accordingly, the
Departments decline to adopt these
suggestions. Determinations as to
increases in actual costs attributable to
implementation of the requirements of
MHPAEA must be made and certified by
a qualified and licensed actuary who is
a member in good standing of the
American Academy of Actuaries. All
such determinations must be based on
the formula specified in these final
regulations in a written report prepared
by the actuary. Additionally, the written
report, along with all supporting
documentation relied upon by the
actuary, must be maintained by the
group health plan or health insurance
issuer for a period of six years.
Several commenters expressed
concern regarding the administrative
burden that would result from
qualifying for the increased cost
exemption for one year and then having
to comply with the law the following
year. MHPAEA’s statutory language
specifies that plans and issuers may
qualify for the increased cost exemption
for only one year at a time, stating that
if the application of MHPAEA ‘‘results
in an increase for the plan year involved
of the actual total costs of coverage . . .
by an amount that exceeds the
applicable percentage . . . the
35 See

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provisions of this section shall not
apply to such plan (or coverage) during
the following plan year, and such
exemption shall apply to the plan (or
coverage) for 1 plan year.’’ 36
Before a group health plan or health
insurance issuer may claim the
increased cost exemption, it must
furnish a notice of the plan’s exemption
from the parity requirements to
participants and beneficiaries covered
under the plan, the Departments (as
described below), and appropriate State
agencies. The notification requirements
for the increased cost exemption under
these final regulations are consistent
with the requirements under the
Departments’ 1997 regulations
implementing MHPA 1996.
With respect to participants and
beneficiaries, a group health plan
subject to ERISA may satisfy this
requirement by providing a summary of
material reductions in covered services
or benefits under 29 CFR 2520.104b–
3(d), if it includes all the information
required by these final regulations.
With respect to notification to the
Departments, a plan or issuer must
furnish a notice that satisfies the
requirements of these final regulations.
A group health plan that is a church
plan (as defined in section 414(e) of the
Code) must notify the Department of the
Treasury. A group health plan subject to
Part 7 of Subtitle B of Title I of ERISA
must notify the Department of Labor. A
group health plan that is a non-Federal
governmental plan or a health insurance
issuer must notify HHS. In all cases, the
exemption is not effective until 30 days
after notice has been sent to both
participants and beneficiaries and to the
appropriate Federal agency. The
Departments will designate addresses
for delivery of these notices in future
guidance.
Finally, a plan or issuer must make
available to participants and
beneficiaries (or their representatives),
on request and at no charge, a summary
of the information on which the
exemption was based. For purposes of
this paragraph (g), an individual who is
not a participant or beneficiary and who
presents a notice described in paragraph
(g)(6) of the final regulations is
considered to be a representative. Such
a representative may request the
summary of information by providing
the plan a copy of the notice provided
to the participant or beneficiary with
any personally identifiable information
redacted. The summary of information
must include the incurred expenditures,
the base period, the dollar amount of
36 Code section 9812(c)(2), ERISA 712(c)(2), PHS
Act section 2726(c)(2).

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claims incurred during the base period
that would have been denied under the
terms of the plan absent amendments
required to comply with parity, and the
administrative expenses attributable to
complying with the parity requirements.
In no event should a summary of
information include individually
identifiable information.
The increased cost exemption
provision in paragraph (g) of these final
regulations is effective for plan or policy
years beginning on or after July 1, 2014
(see paragraph (i) of these final
regulations), which for calendar year
plans means the provisions apply on
January 1, 2015. Accordingly, plans and
issuers must use the formula specified
in paragraph (g) of these final
regulations to determine whether they
qualify for the increased cost exemption
in plan or policy years beginning on or
after July 1, 2014. For claiming the
increased cost exemption in plan or
policy years beginning before July 1,
2014, plans and issuers should follow
the interim enforcement safe harbor
outlined in previously issued FAQs.37
H. General Applicability Provisions and
Application to Certain Types of Plans
and Coverage
The interim final regulations
combined in paragraph (e)(1) what had
been separate rules under MHPA 1996
for (1) determining if a plan provides
both medical/surgical and mental health
or substance use disorder benefits; (2)
applying the parity requirements on a
benefit-package-by-benefit-package
basis; and (3) counting the number of
plans that an employer or employee
organization maintains. The combined
rule 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. Some comments
expressed concern that the new
combined rule would disrupt benefit
programs that employers have
37 See FAQs about Affordable Care Act
Implementation (Part V) and Mental Health Parity
Implementation, question 11, available at: http://
www.dol.gov/ebsa/faqs/faq-aca5.html and http://
www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs5.html.

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maintained as separate plans for
important reasons having nothing to do
with a desire to escape the parity
requirements and that the rule should
be rescinded or issued only in proposed
form. Other comments welcomed the
rule as an important protection to
prevent evasion of the parity
requirements. The final regulations do
not change the combined rule from the
interim final regulations. In the
Departments’ view, the combined rule is
necessary to prevent 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).
The preamble to the interim final
regulations illustrated how the parity
requirements would apply to various
benefit package configurations,
including multiple medical/surgical
benefit packages combined with a single
mental health and substance use
disorder benefit package. One
commenter asked for clarification in the
case of a plan with an HMO option and
a PPO option in which mental health
and substance use disorder benefits are
an integral part of each option. In such
a case, the parity requirements apply
separately to the HMO option and the
PPO option.
The Departments are aware that
employers and health insurance issuers
sometimes contract with MBHOs or
similar entities to provide or administer
mental health or substance use disorder
benefits in group health plans or in
health insurance coverage. The fact that
an employer or issuer contracts with
one or more entities to provide or
administer mental health or substance
use disorder benefits does not, however,
relieve the employer, issuer, or both of
their obligations under MHPAEA. The
coverage as a whole must still comply
with the applicable provisions of
MHPAEA, and the responsibility for
compliance rests on the group health
plan and/or the health insurance issuer,
depending on whether the coverage is
insured or self-insured. This means that
the plan or issuer will need to provide
sufficient information in terms of plan
structure and benefits to the MBHO to
ensure that the mental health and
substance use disorder benefits are
coordinated with the medical/surgical
benefits for purposes of compliance
with the requirements of MHPAEA.
Liability for any violation of MHPAEA
rests with the group health plan and/or
health insurance issuer.
Several commenters requested
clarification about whether a plan or
issuer may exclude coverage for specific

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Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations
diagnoses or conditions under
MHPAEA. These final regulations
continue to provide that nothing in
these regulations requires a plan or
issuer to provide any mental health
benefits 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. Other Federal and State laws
may prohibit the exclusion of particular
disorders from coverage where
applicable, such as the Americans with
Disabilities Act. Other Federal and State
laws may also require coverage of
mental health or substance use disorder
benefits, including the EHB
requirements under section 2707 of the
PHS Act and section 1302(a) of the
Affordable Care Act.
1. Individual Health Insurance Market
Section 1563(c)(4) of the Affordable
Care Act 38 amended section 2726 of the
PHS Act to apply MHPAEA to health
insurance issuers in the individual
health insurance market. These changes
are effective for policy years beginning
on or after January 1, 2014. The HHS
final regulation implements these
requirements in new section 147.160 of
title 45 of the Code of Federal
Regulations. Under these provisions,
unless otherwise specified, the parity
requirements outlined in 45 CFR
146.136 of these final regulations apply
to health insurance coverage offered by
a health insurance issuer in the
individual market in the same manner
and to the same extent as such
provisions apply to health insurance
coverage offered by a health insurance
issuer in connection with a group health
plan in the large group market. These
provisions apply to both grandfathered
and non-grandfathered individual
health insurance coverage for policy
years beginning on or after the
applicability dates set forth in paragraph
(i) of these final regulations.

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2. Non-Federal Governmental Plans
Prior to enactment of the Affordable
Care Act, sponsors of self-funded, nonFederal governmental plans were
permitted to elect to exempt those plans
from (‘‘opt out of’’) certain provisions of
title XXVII of the PHS Act. This election
was authorized under section 2721(b)(2)
of the PHS Act (renumbered as section
2722(a)(2) by the Affordable Care Act).
The Affordable Care Act made a number
38 There are two sections numbered 1563 in the
Affordable Care Act. The section 1563 that is the
basis for this rulemaking is the section titled
‘‘Conforming amendments.’’

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of changes, with the result that sponsors
of self-funded, non-Federal
governmental plans can no longer opt
out of as many requirements of title
XXVII of the PHS Act. However, under
the PHS Act, sponsors of self-funded,
non-Federal governmental plans may
continue to opt out of the requirements
of MHPAEA.39 If the sponsor of a selffunded, non-Federal governmental plan
wishes to exempt its plan from the
requirements of MHPAEA, it must
follow the procedures and requirements
outlined in section 2722 and
corresponding Centers for Medicare &
Medicaid Services (CMS) guidance,
which includes notifying CMS to that
effect in writing.40
3. Retiree-Only Plans
Some commenters requested
clarification regarding the applicability
of these final regulations to retiree-only
plans. ERISA section 732(a) generally
provides that part 7 of ERISA—and
Code section 9831(a) generally provides
that chapter 100 of the Code—does not
apply to group health plans with less
than two participants who are current
employees (including retiree-only plans
that, by definition, cover less than two
participants who are current
employees).41 The Departments
previously clarified in FAQs that the
exceptions of ERISA section 732 and
Code section 9831, including the
exception for retiree-only health plans,
remain in effect.42 Since the provisions
of MHPAEA contained in ERISA section
712 and Code section 9812 are
contained in part 7 of ERISA and
chapter 100 of the Code, respectively,
group health plans that do not cover at
least two employees who are current
employees (such as plans in which only
retirees participate) are exempt from the
39 See Memo on Amendments to the HIPAA OptOut Provision Made by the Affordable Care Act
(September 21, 2010). Available at: http://
www.cms.gov/CCIIO/Resources/Files/Downloads/
opt_out_memo.pdf.
40 See Self-Funded Non-Federal Governmental
Plans: Procedures and Requirements for HIPAA
Exemption Election. Available at: http://
www.cms.gov/CCIIO/Resources/Files/hipaa_
exemption_election_instructions_04072011.html.
41 Prior to the enactment of the Affordable Care
Act, the PHS Act had a parallel provision at section
2721(a); however, after the Affordable Care Act
amended, reorganized, and renumbered title XXVII
of the PHS Act, that exception no longer exists. See
75 FR 34538–34539.
42 See FAQs About the Affordable Care Act
Implementation Part III, question 1, available at
http://www.dol.gov/ebsa/faqs/faq-aca3.html and
http://www.cms.gov/CCIIO/Resources/Fact-Sheetsand-FAQs/aca_implementation_faqs3.html, which
states that ‘‘statutory provisions in effect since 1997
exempting group health plans with ‘less than two
participants who are current employees’ from
HIPAA also exempt such plans from the group
market reform requirements of the Affordable Care
Act.’’

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requirements of MHPAEA and these
final regulations.43
4. Employee Assistance Programs
Several comments also requested
clarification regarding the applicability
of the parity requirements to employee
assistance programs (EAPs). An example
in the interim final regulations clarified
that a plan or issuer that limits
eligibility for mental health and
substance use disorder benefits until
after benefits under an EAP are
exhausted has established an NQTL
subject to the parity requirements, and
stated that if no comparable requirement
applies to medical/surgical benefits,
such a requirement could not be applied
to mental health or substance use
disorder benefits.44 The final
regulations retain this example and
approach.45
The Departments have also received
questions regarding whether benefits
under an EAP are considered to be
excepted benefits. The Departments
recently published guidance
announcing their intentions to amend
the excepted benefits regulations 46 to
provide that benefits under an EAP are
considered to be excepted benefits, but
only if the program does not provide
significant benefits in the nature of
medical care or treatment.47 Under this
approach, EAPs that qualify as excepted
benefits will not be subject to MHPAEA
or these final regulations.
The guidance provides that until
rulemaking regarding EAPs is finalized,
through at least 2014, the Departments
will consider an EAP to constitute
excepted benefits only if the EAP does
not provide significant benefits in the
nature of medical care or treatment. For
43 Additionally, as provided in the interim final
regulations regarding grandfathered health plans,
HHS does not intend to use its resources to enforce
the requirements of title XXVII of the PHS Act,
including the requirements of MHPAEA and these
final regulations, with respect to non-Federal
governmental retiree-only plans and encourages
States not to apply those provisions to issuers of
retiree-only plans. HHS will not cite a State for
failing to substantially enforce the provisions of
part A of title XXVII of the PHS Act in these
situations. See 75 FR at 34538, 34540 (June 17,
2010).
44 See Example 5 in paragraph (c)(4)(iii) of the
interim final regulations.
45 See Example 6 in paragraph (c)(4)(iii) of the
final regulations.
46 26 CFR 54.9831–1(c), 29 CFR 2590.732(c), 45
CFR 146.145(c).
47 See IRS Notice 2013–54 (available at http://
www.irs.gov/pub/irs-drop/n-13-54.pdf) and DOL
Technical Release 2013–03 (available at http://
www.dol.gov/ebsa/newsroom/tr13-03.html), Q&A 9.
See also CMS Insurance Standards Bulletin—
Application of Affordable Care Act Provisions to
Certain Healthcare Arrangements (available at
http://www.cms.gov/CCIIO/Resources/Regulationsand-Guidance/Downloads/cms-hra-notice-9-162013.pdf).

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this purpose, employers may use a
reasonable, good faith interpretation of
whether an EAP provides significant
benefits in the nature of medical care or
treatment.

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5. Medicaid and CHIP Managed Care
Plans
These final regulations apply to group
health plans and health insurance
issuers. These final regulations do not
apply to Medicaid managed care
organizations (MCOs), alternative
benefit plans (ABPs), or the Children’s
Health Insurance Program (CHIP).
However, MHPAEA requirements are
incorporated by reference into statutory
provisions that do apply to those
entities. On January 16, 2013, CMS
released a State Health Official Letter
regarding the application of the
MHPAEA requirements to Medicaid
MCOs, ABPs, and CHIP.48 In this
guidance, CMS adopted the basic
framework of MHPAEA and applied the
statutory principles as appropriate
across these Medicaid and CHIP
authorities. The letter also stated that
CMS intends to issue additional
guidance that will assist States in their
efforts to implement the MHPAEA
requirements in their Medicaid
programs.
I. Interaction With State Insurance Laws
Several commenters requested that
the final regulations clearly describe
how MHPAEA interacts with State
insurance laws. Commenters sought
clarification as to how MHPAEA may or
may not preempt State laws that require
parity for mental health or substance
use disorder benefits, mandate coverage
of mental health or substance use
disorder benefits, or require a minimum
level of coverage (such as a minimum
dollar, day, or visit level) for mental
health conditions or substance use
disorders. These commenters expressed
a desire that the final regulations
articulate that existing State laws on
mental health or substance use disorder
benefits would remain in effect to the
extent they did not prevent the
application of MHPAEA.
The preemption provisions of section
731 of ERISA and section 2724 of the
PHS Act (added by the Health Insurance
Portability and Accountability Act of
1996 (HIPAA) and implemented in 29
CFR 2590.731 and 45 CFR 146.143(a))
apply so that the MHPAEA
requirements are not to be ‘‘construed to
supersede any provision of State law
48 Application

of the Mental Health Parity and
Addiction Equity Act to Medicaid MCOs, CHIP, and
Alternative Benefit (Benchmark) Plans, available at:
http://www.medicaid.gov/Federal-Policy-Guidance/
downloads/SHO-13-001.pdf.

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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 and other
applicable provisions.49 The HIPAA
conference report indicates that this is
intended to be the ‘‘narrowest’’
preemption of State laws.50
For example, a State law may
mandate that an issuer offer coverage for
a particular condition or require that an
issuer offer a minimum dollar amount of
mental health or substance use disorder
benefits. (While MHPAEA does not
require plans or issuers to offer any
mental health benefits, once benefits are
offered, for whatever reason (except as
previously described related to PHS Act
section 2713), MHPAEA applies to the
benefits.) These State law provisions do
not prevent the application of
MHPAEA, and therefore would not be
preempted. To the extent the State law
mandates that an issuer provide some
coverage for any mental health
condition or substance use disorder,
benefits for that condition or disorder
must be provided in parity with
medical/surgical benefits under
MHPAEA. This means that 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.
J. Enforcement
Comments received in response to the
interim final regulations suggested some
confusion and concern regarding the
Departments’ authority to impose
penalties and ensure compliance with
the requirements under MHPAEA. The
enforcement responsibilities of the
Federal government and the States with
respect to health insurance issuers are
set forth in the PHS Act. Pursuant to
PHS Act section 2723(a), States have
primary enforcement authority over
health insurance issuers regarding the
provisions of part A of title XXVII of the
PHS Act, including MHPAEA. HHS
(through CMS) has enforcement
authority over the issuers in a State if
the State notifies CMS that it has not
enacted legislation to enforce or is
otherwise not enforcing, or if CMS
determines that the State is not
substantially enforcing, a provision (or
49 The preemption provision of PHS Act section
2724 also applies to individual health insurance
coverage.
50 See House Conf. Rep. No. 104–736, at 205,
reprinted in 1996 U.S. Code Cong. & Admin. News
2008.

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provisions) of part A of title XXVII of
the PHS Act. Currently, CMS believes
that most States have the authority to
enforce MHPAEA and are acting in the
areas of their responsibility. In States
that lack the authority to enforce
MHPAEA, CMS is either directly
enforcing MHPAEA or collaborating
with State departments of insurance to
ensure enforcement.
The Departments of Labor and the
Treasury generally have primary
enforcement authority over private
sector employment-based group health
plans, while HHS has primary
enforcement authority over non-Federal
governmental plans, such as those
sponsored by State and local
government employers.
Some commenters suggested that
States need a stronger understanding of
MHPAEA and its implementing
regulations to better inform the public
about the protections of the law and to
ensure proper compliance by issuers.
These commenters believed that States
would benefit from additional and
continued guidance from CMS regarding
the requirements of MHPAEA and its
impact upon State law. The
Departments encourage State regulators
to familiarize themselves with the
MHPAEA requirements, in particular
the rules governing NQTLs, and any
guidance issued by the Departments, so
that the States can instruct issuers in
their jurisdictions on the correct
implementation of the statute and
regulations, and appropriately enforce
the provisions. The Departments will
continue to provide technical assistance
to State regulators either individually or
through the National Association of
Insurance Commissioners to ensure that
the States have the tools they need to
implement and enforce MHPAEA.
K. Applicability Dates
MHPAEA’s statutory provisions were
self-implementing and generally became
effective for plan years beginning after
October 3, 2009.51 The requirements of
the interim final regulations generally
became effective on the first day of the
first plan year beginning on or after July
51 There is a special effective date for group
health plans maintained pursuant to one or more
collective bargaining agreements ratified before
October 3, 2008, which states that the requirements
of the interim final 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 also provides that any plan
amendment made pursuant to a collective
bargaining agreement solely to conform to the
requirements of MHPAEA will not be treated as a
termination of the agreement.

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1, 2010. These final regulations apply to
group health plans and health insurance
issuers offering group health insurance
coverage on the first day of the first plan
year beginning on or after July 1, 2014.
Examples, cross-references, and other
clarifications have been added in some
places to facilitate compliance and
address common questions, much of
which has already been published by
the Departments.52 Each plan or issuer
subject to the interim final regulations
must continue to comply with the
applicable provisions of the interim
final regulations until the corresponding
provisions of these final regulations
become applicable to that plan or issuer.

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L. Technical Amendment Relating to
OPM Multi-State Plan Program and
External Review
This document also contains a
technical amendment relating to
external review with respect to the
Multi-State Plan Program (MSPP)
administered by the Office of Personnel
Management (OPM). Section 2719 of the
PHS Act and its implementing
regulations provide that group health
plans and health insurance issuers must
comply with either a State external
review process or the Federal external
review process. Generally, if a State has
an external review process that meets, at
a minimum, the consumer protections
set forth in the interim final regulations
on internal claims and appeals and
external review,53 then an issuer (or a
plan) subject to the State process must
comply with the State process.54 For
52 For additional examples and other
clarifications published by the Departments to
facilitate compliance under the interim final rules,
see also http://www.dol.gov/ebsa/faqs/faqmhpaea.html; FAQs about Affordable Care Act
Implementation (Part V) and Mental Health Parity
Implementation, available at http://www.dol.gov/
ebsa/faqs/faq-aca5.html and http://www.cms.gov/
CCIIO/Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs5.html; FAQs about Affordable
Care Act Implementation (Part VII) and Mental
Health Parity Implementation, available at http://
www.dol.gov/ebsa/faqs/faq-aca7.html and http://
www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs7.html; FAQs on
Understanding Implementation of the Mental
Health Parity and Addiction Equity Act of 2008,
available at http://www.dol.gov/ebsa/faqs/faqmhpaeaimplementation.html; and FAQs for
Employees about the Mental Health Parity and
Addiction Equity Act, available at http://
www.dol.gov/ebsa/faqs/faq-mhpaea2.html.
53 The interim final regulations relating to
internal claims and appeals and external review
processes are codified at 26 CFR 54.9815–2719T, 29
CFR 2590.715–2719, and 45 CFR 147.136. These
requirements do not apply to grandfathered health
plans. The interim final regulations relating to
status as a grandfathered health plan are codified
at 26 CFR 54.9815–1251T, 29 CFR 2590.715–1251,
and 45 CFR 147.140.
54 More information on the regulatory
requirements for State external review processes,
including the regulations, Uniform Health Carrier

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plans and issuers not subject to an
existing State external review process
(including self-insured plans), a Federal
external review process applies.55 The
statute requires the Departments to
establish standards, ‘‘through
guidance,’’ governing a Federal external
review process. Through guidance
issued by the Departments, HHS has
established a Federal external review
process for self-insured non-Federal
governmental health plans, as well as
for plans and issuers in States that do
not have an external review process that
meets the minimum consumer
protections in the regulations.
In proposed regulations published on
March 21, 2013 (78 FR 17313), the
Departments proposed to amend the
interim final regulations implementing
PHS Act section 2719 to specify that
MSPs will be subject to the Federal
external review process under PHS Act
section 2719(b)(2) and paragraph (d) of
the internal claims and appeals and
external review regulations. This
proposal reflects the Departments’
interpretation of section 2719(b)(2) as
applicable to all plans not subject to a
State’s external review process. OPM
has interpreted section 1334(a)(4) of the
Affordable Care Act to require OPM to
maintain authority over external review
because Congress directed that OPM
implement the MSPP in a manner
similar to the manner in which it
implements the contracting provisions
of the FEHBP, and in the FEHBP, OPM
resolves all external appeals on a
nationwide basis as a part of its contract
administration responsibilities.56 This
assures consistency in benefit
administration for those OPM plans that
are offered on a nationwide basis.
Accordingly, under OPM’s
interpretation, it would be inconsistent
with section 1334(a)(4) of the Affordable
Care Act for MSPs and MSPP issuers to
follow State-specific external review
processes under section 2719(b)(1) of
the PHS Act. OPM’s final rule on the
establishment of the multi-State plan
program nonetheless does require the
MSPP external review process to meet
the requirements of PHS Act section
External Review Model Act promulgated by the
National Association of Insurance Commissioners,
technical releases, and other guidance, is available
at http://www.dol.gov/ebsa and http://
cciio.cms.gov.
55 More information on the regulatory
requirements for the Federal external review
process, including the regulations, technical
releases, and other guidance, is available at http://
www.dol.gov/ebsa and http://cciio.cms.gov.
56 See the OPM proposed rule on establishment
of the MSPP, 77 FR 72582, 72585 (Dec. 5, 2012);
see also the final rule, 78 FR 15559, 15574 (Mar.
11, 2013) (‘‘we believe our approach to external
review is required by section 1334 of the Affordable
Care Act[.]’’.

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2719 and its implementing
regulations.57
The Departments also proposed to
amend the interim final regulations
implementing PHS Act section 2719 to
specify that the scope of the Federal
external review process, as described in
paragraph (d)(1)(ii), is the minimum
required scope of claims eligible for
external review for plans using a
Federal external review process, and
that Federal external review processes
developed in accordance with
paragraph (d) may have a scope that
exceeds the minimum requirements.
The Departments did not receive any
comments relating to these proposed
amendments and therefore retain the
amendments in this final rule without
change, except for one minor
correction.58 The Departments made a
typographical error in the March 21,
2013 proposed rule, inadvertently
omitting the word ‘‘internal’’ from
paragraph (d)(1)(i). That provision
should have stated that the Federal
external review process ‘‘applies, at a
minimum, to any adverse benefit
determination or final internal adverse
benefit determination. . . .’’ (emphasis
added). The Departments did not intend
to remove the word ‘‘internal’’ from the
interim final rule through the proposed
amendment, and we are correcting the
final amendment to include the word.
III. Economic Impact and Paperwork
Burden
Executive Orders 12866 (Regulatory
Planning and Review, September 30,
1993) and 13563 (Improving Regulation
and Regulatory Review, February 2,
2011) direct agencies to propose or
adopt a regulation only upon a reasoned
determination that its benefits justify its
costs, to assess the costs and benefits of
regulatory alternatives, and to select
regulatory approaches that maximize
net benefits (including potential
economic, environmental, public health
and safety effects, distributive impacts,
and equity).
Agencies must determine whether a
regulatory action is ‘‘significant’’ which
is defined in Executive Order 12866 as
an action that is likely to result in a rule
(1) having an annual effect on the
57 See 45 CFR 800.115(k) and 45 CFR part 800;
see also 78 FR at 15574 (‘‘the level playing field
provisions of section 1324 of the Affordable Care
Act would not be triggered because MSPs and
MSPP issuers would comply with the external
review requirements in section 2719(b) of the PHS
Act, just as other health insurance issuers in the
group and individual markets are required to do.’’).
58 Treasury is not adopting amendments to the
external review regulations in 26 CFR at this time.
Any changes to the Treasury external review
regulations will be made when the entire section of
those regulations is adopted as final regulations.

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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.
A. Summary—Department of Labor and
Department of Health and Human
Services
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 at least one year.
Accordingly, the Departments provide
the following assessment of the
potential costs and benefits of these
final regulations. As elaborated below,
the Departments believe that the
benefits of the rule justify its costs.
As described earlier in this preamble,
these final regulations expand on the
protections and parity requirements set
forth in the interim final regulations,
incorporate clarifications issued by the
Departments through sub-regulatory
guidance since the issuance of the
interim final regulations, and provide
clarifications related to NQTLs and
disclosure requirements. These final
regulations also include additional
clarifications and examples illustrating
the parity requirements and their
applicability, as well as provisions to
implement the increased cost exemption
with respect to financial requirements
and treatment limitations. The HHS
final regulation also implements the
parity requirements for individual
health insurance coverage.
A recent study on plan responses to
MHPAEA indicates that by 2011, most
plans had removed most financial
requirements and treatment limitations
that did not meet the requirements of
MHPAEA and the interim final
regulations.59 The use of higher copays
59 Final

Report: Consistency of Large Employer
and Group Health Plan Benefits with Requirements
of the Paul Wellstone and Pete Domenici Mental
Health Parity and Addiction Equity Act of 2008.
NORC at the University of Chicago for the Office of
the Assistant Secretary for Planning and Evaluation.

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and coinsurance for inpatient mental
health and substance use disorder
services declined rapidly in large
employer plans following
implementation of MHPAEA.60 In
addition, nearly all plans had
eliminated the use of separate
deductibles for mental health or
substance use disorder out-of-pocket
costs by 2011.61 (Even by 2010, only 3.2
percent of plans had used separate
deductibles.) The HHS study also found
that the number of plans that applied
unequal inpatient day limits, outpatient
visit limits or other quantitative
treatment limitations for mental health
or substance use disorder benefits had
dropped significantly by 2011.
Since this study found that the
implementation of the requirements of
MHPAEA has progressed consistent
with the interim final rules, this impact
analysis includes estimates of any
additional costs and benefits resulting
from changes made to the provisions in
the interim final regulations by these
final regulations. As background, in
section III.D of this preamble, the
Departments summarize the cost
estimates included in the interim final
regulations.

to address costs.62 Initially, MHPA 1996
was designed to eliminate more
restrictive annual and lifetime dollar
limits on mental health benefits.
However, as illustrated in a General
Accountability Office report on
implementation of MHPA 1996, the
statute had an unintended consequence:
most plans coming into compliance
instead turned to more restrictive
financial requirements and treatment
limitations.63
These final regulations provide the
specificity and clarity needed to
effectively implement the provisions of
MHPAEA and prevent the use of
prohibited limits on coverage, including
nonquantitative treatment limitations
that disproportionately limit coverage of
treatment for mental health conditions
or substance use disorders. The
requirements in these final regulations
are needed to address questions and
concerns that have been raised
regarding the implications of the interim
final regulations with regard to
intermediate level services, NQTLs, and
the increasing use of multi-tiered
provider networks. The Departments’
assessment of the expected economic
effects of these regulations is discussed
in detail below.

B. Need for Regulatory Action

C. Response to Comments on the
Economic Impact Analysis for the
Interim Final Regulations—Department
of Labor and Department of Health and
Human Services
The Departments received the
following public comments regarding
the economic impact analysis in the
interim final regulations.
One commenter urged that the
discussion on cost implications for
increased utilization of mental health
and substance use disorder services
must take into account the cost savings
that will result from the elimination of
the costs associated with ‘‘unique and
discriminatory medical management
controls’’ (or NQTLs). Although the
Departments concur that the nature and
rigor of utilization management affects

Congress directed the Departments to
issue regulations implementing the
MHPAEA provisions. In response to this
Congressional directive, these final
regulations clarify and interpret the
MHPAEA provisions under section 712
of ERISA, section 2726 of the PHS Act,
and section 9812 of the Code.
Historically, plans have offered coverage
for mental health conditions and
substance use disorders at lower levels
than coverage for other conditions.
Plans limited coverage through
restrictive benefit designs that
discouraged enrollment by individuals
perceived to be high-cost due to their
behavioral health conditions and by
imposing special limits on mental
health and substance use disorder
benefits out of concern that otherwise
utilization and costs would be
unsustainable. Parity advocates argued
that these approaches were unfair and
limited access to needed treatment for
vulnerable populations. In addition,
research demonstrated that restrictive
benefit designs were not the only way
This study analyzed information on large group
health plan benefit designs from 2009 through 2011
in several databases maintained by benefits
consulting firms that advise plans on compliance
with MHPAEA as well as other requirements.
60 Ibid.
61 Ibid.

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62 See discussion in the preamble to the interim
final rule on the effect of managed care in
controlling health plan spending on mental health
and substance use disorder treatment under state
parity laws and in the Federal Employee Health
Benefit Program, Interim Final Rules Under the
Paul Wellstone and Pete Domenici Mental Health
Parity and Addiction Equity Act of 2008, 75 Fed.
Reg. 5410, 5424–5425 (see e.g., footnote 46)
(February 2, 2010).
63 General Accountability Office, Mental Health
Parity Act: Despite New Federal Standards, Mental
Health Benefits Remain Limited, May 2000, (GAO/
HEHS–00–95), p. 5. In this 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.

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the cost of care and the administrative
expenses associated with care
management, there is scant evidence at
this time on the way that utilization
management will evolve under
MHPAEA. Existing evidence suggests
that plans and issuers can apply a range
of tools to manage care and that even
when management of care is consistent
with the principles of parity, care
management continues. (See the
discussion of Oregon state parity law
later in this preamble).
Several commenters asserted that the
Departments had underestimated the
cost and burden of complying with the
interim final regulations. However, a
study sponsored by HHS found that by
2011 most plans had removed most
financial requirements that did not meet
the requirements of MHPAEA and the
interim final regulations.64 In addition,
the number of plans that applied
unequal inpatient day limits, outpatient
visit limits, or other quantitative
treatment limitations for mental health
or substance use disorder benefits had
dropped significantly by 2011. Yet,
there is no evidence that plans’ costs
and burdens have been significantly
impacted by the requirements of the
statute and its implementing interim
final regulations. Research has shown
that only a very small percentage of
plans have dropped mental health or
substance use disorder benefits after
implementation of MHPAEA and even
for those plans that did so, there is no
clear evidence that they dropped mental
health or substance use disorder
benefits because of MHPAEA. Moreover,
no plans have applied for the increased
cost exemption under MHPAEA.
Finally, in spending reports that have
been reported in the aggregate, there is
no evidence that spending growth for
behavioral health saw a significant
upturn in 2011, the first full year in
which the interim final regulations
generally were in effect.
One commenter asserted that plans
are not set up to conduct a parity
analysis within the six classifications
and as a result the interim final
regulations impose a substantial burden,
especially on employers that offer
multiple plans. In response, the
Departments note that the alternative to
using the six classifications would
64 Final Report: Consistency of Large Employer
and Group Health Plan Benefits with Requirements
of the Paul Wellstone and Pete Domenici Mental
Health Parity and Addiction Equity Act of 2008.
NORC at the University of Chicago for the Office of
the Assistant Secretary for Planning and Evaluation.
This study analyzed information on large group
health plan benefit designs from 2009 through 2011
in several databases maintained by benefits
consulting firms that advise plans on compliance
with MHPAEA as well as other requirements.

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require conducting a parity analysis
across all types of benefits grouped
together that would have resulted in
incongruous and unintended
consequences with, for example, day
limits for inpatient care being the
standard for outpatient benefits.
Moreover, there is no evidence that
plans or issuers have found these
requirements to be overly burdensome.
One commenter stated that the
Federal Employees’ Health Benefits
Program (FEHBP) parity requirements
and State parity laws are not
comparable to the standards in the
interim final regulations and therefore
are not predictive of the possible cost
impacts of the interim final regulations,
especially regarding NQTLs. In
response, the Departments note that,
like MHPAEA, the parity requirements
for FEHBP apply to financial
requirements and treatment limitations
for both mental health conditions and
substance use disorders. Furthermore,
the FEHBP requirements are more
expansive in that ‘‘plans must cover all
categories of mental health or substance
use disorders to the extent that the
services are included in authorized
treatment plans . . . developed in
accordance with evidence-based clinical
guidelines, and meet[ing] medical
necessity criteria.’’ 65 Under the
MHPAEA statute, plans and issuers
have discretion as to which diagnoses
and conditions are covered under the
plan.
Several State parity laws are very
similar to MHPAEA. For example,
Vermont’s parity law applies to both
mental health and substance use
disorder benefits.66 The Vermont parity
law also requires that management of
care for these conditions be in
accordance with rules adopted by the
State Department of Insurance to assure
that timely and appropriate access to
care is available; that the quantity,
location and specialty distribution of
health care providers is adequate and
that administrative or clinical protocols
do not serve to reduce access to
medically necessary treatment.67 These
requirements are very similar to the
NQTL requirements under MHPAEA
which likewise seek to ensure plans and
issuers do not inequitably limit access
to mental health or substance use
disorder treatment. In addition, the
NQTLs requirements likewise require
comparable approaches to utilization
management through protocols and
other strategies in determining coverage
65 FEHB Program Carrier Letter, No. 2009–08,
April 20, 2009.
66 Vt. Stat. Ann tit. 8, § 4089b (1998).
67 Ibid.

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68255

of mental health and substance use
disorder treatment compared to
medical/surgical treatment. A study of
this State parity law also did not find
significant increases in cost.68
The Oregon State parity law is also
very similar to MHPAEA in that it
applies to mental health and substance
use disorder financial requirements and
treatment limitations and also applies to
NQTLs. According to the Oregon
Insurance Division, utilization
management tools such as ‘‘selectively
contracted panels of providers, health
policy benefit differential designs,
preadmission screening, prior
authorization, case management,
utilization review, or other mechanisms
designed to limit eligible expenses to
treatment that is medically necessary’’
may not be used for management of
mental health or substance use disorder
benefits unless they were used in the
same manner that such methods were
used for other medical conditions.69 A
study of the Oregon parity law found
that plans removed coverage limits as
required and used management
techniques to the same degree or less
under this law and the impact on
mental health and substance use
disorder spending was minimal.70
Together, the similarities between the
FEHBP, Vermont, and Oregon parity
requirements lead the Departments to
conclude that any differences in terms
of the impacts on cost would be small.
Several commenters argued that the
requirement in the interim final
regulations to use a single or shared
deductible in a classification is overly
burdensome and would require
significant resources to implement,
particularly by MBHOs since they often
work with multiple plans. One
commenter asserted that this
requirement could impact the
willingness of sponsors to offer mental
health or substance use disorder
benefits. In response, the Departments
note that a study sponsored by HHS
found that nearly all plans had
eliminated the use of separate
deductibles for mental health and
substance use disorder benefits by
68 Rosenbach M, Lake T, Young C, et al. Effects
of the Vermont Mental Health and Substance Abuse
Parity Law. DHHS Pub. No. SMA 03–3822,
Rockville, MD: Substance Abuse and Mental Health
Services Administration, 2003.
69 Q&A Oregon Mental Health Parity Law for
Providers. Oregon Insurance Division Web site.
http://www.cbs.state.or.us/ins/FAQs/mental-healthparity_provider-faqs.pdf.
70 McConnell JK, Gast SH, Ridgely SM. Behavioral
health insurance parity: Does Oregon’s experience
presage the national experience with the Mental
Health Parity and Addiction Equity Act? American
Journal of Psychiatry 2012; 169(1): 31–38.

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2011.71 According to this study, even in
2010, only a very small percentage of
plans were using separate deductibles.
This study and other research have
shown that only a very small percent of
plans have dropped mental health or
substance use disorder benefits after
implementation of MHPAEA and there
is no clear evidence they did so because
of MHPAEA.
One commenter urged that the
regulations be revised to be less
burdensome for plans that are part of a
more comprehensive network of
benefits within Medicaid healthcare
delivery systems. These final
regulations apply to group health plans
and health insurance issuers but do not,
by their own terms, apply to Medicaid.
In response, the Departments note that
CMS oversees implementation of federal
requirements for the Medicaid program.
CMS issued a state health official letter
on the application of MHPAEA to
Medicaid managed care organizations,
the Children’s Health Insurance
Program, and Alternative Benefit
(Benchmark) plans on January 16,
2013.72
Two commenters raised concerns
about the burden imposed on plans by
the requirement that provider
reimbursement rates be based on
comparable criteria particularly for
MBHOs that may as a result have to use
multiple rate schedules. The
Departments believe that the process of
establishing rate schedules is already
complex, that MBHOs that contract with
other multiple plans are likely to
already have multiple rate schedules,
and that adding a parity requirement to
ensure that rates for behavioral health
providers are based on comparable
criteria to those used for medical/
surgical providers does not add much to
this complexity.
One commenter argued that the costs
for outpatient mental health and

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71 Final Report: Consistency of Large Employer
and Group Health Plan Benefits with Requirements
of the Paul Wellstone and Pete Domenici Mental
Health Parity and Addiction Equity Act of 2008.
NORC at the University of Chicago for the Office of
the Assistant Secretary for Planning and Evaluation.
72 Application of the Mental Health Parity and
Addiction Equity Act to Medicaid MCOs, CHIP, and
Alternative Benefit (Benchmark) Plans, available at:
http://www.medicaid.gov/Federal-Policy-Guidance/
downloads/SHO-13-001.pdf.

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substance use disorder benefits will be
higher than estimated because the
NQTL parity standard would hamper
plans’ ability to manage care and control
costs. In response, the Departments note
that, as discussed above, the Oregon
State parity law also applies to NQTLs
and a study of this law found that plans
in that State removed coverage limits as
required and used management
techniques to the same degree or less
under the Oregon law and the impact on
mental health and substance use
disorder spending was minimal.73
D. Summary of the Regulatory Impact
Analysis for the Interim Final
Regulations—Department of Labor and
Department of Health and Human
Services
In the regulatory impact analysis for
the interim final regulations, the
Departments quantified the costs
associated with three aspects of that
rulemaking: The cost of implementing a
unified deductible, compliance review
costs, and costs associated with
information disclosure requirements in
MHPAEA. The Departments estimated
the cost of developing the interface
necessary to implement a single
deductible as $35,000 per affected
interface between a managed behavioral
health company and a group health plan
with a total estimated cost at $39.2
million (amounting to $0.60 per health
plan enrollee) in the first year. The
interim final regulations’ impact
analysis estimated the cost to health
plans and insurance issuers of
reviewing coverage for compliance with
MHPAEA and the interim final
regulations at $27.8 million total. This
estimate was based on findings that
there were about 460 issuers and at least
120 MBHOs and assumed that per-plan
compliance costs would be low because
third party administrators for selfinsured plans would spread the cost
across multiple client plans.
Regarding the requirement to disclose
medical necessity criteria, the
Departments assumed that each plan
would receive one such request on
73 McConnell JK, Gast SH, Ridgely SM. Behavioral
health insurance parity: does Oregon’s experience
presage the national experience with the Mental
Health Parity and Addiction Equity Act? American
Journal of Psychiatry 2012; 169(1): 31–38.

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average, that it would take a trained staff
person about five minutes to respond,
and with an average hourly rate of $27,
the total annual cost would be about $1
million. The Departments assumed only
38 percent of requests would be
delivered electronically with de
minimis cost and that the materials,
printing and postage costs of responding
to about 290,000 requests by paper
would be an additional $192,000 for a
total of about $1.2 million per year.
These costs totaled $114.6 million
undiscounted over ten years (2010–
2019). The Departments did not include
a cost for the requirement in MHPAEA
to disclose the reasons for any claims
denials because the Department of
Labor’s claims procedure regulation (at
29 CFR 2560.503–1) already required
such disclosures and the same thirdparty administrators and insurers are
hired by ERISA and non-ERISA covered
plans so both types of plans were likely
to already be in compliance with these
rules.
In terms of transfers, in the interim
final regulations impact analysis, the
Departments estimated premiums
would rise 0.4 percent due to MHPAEA,
reflecting a transfer from individuals not
using mental health and substance use
disorder benefits to those that do. This
estimated increase in premiums
amounted to a transfer of $2.36 billion
in 2010 gradually increasing each year
over a ten year period to $2.81 billion
in 2019. This estimate was based on
findings in the literature. For a more
complete discussion, see section III.I
later in this preamble.
E. Summary of the Impacts of the Final
Rule—Department of Labor and
Department of Health and Human
Services
Table 1, below, summarizes the costs
associated with the final regulations
above the costs estimated for the interim
final regulations. Over a five-year period
of 2014 to 2018, the total undiscounted
cost of the rule is estimated to be $1.16
billion in 2012 dollars. Columns D and
E display the costs discounted at 3
percent and 7 percent, respectively.
Column F shows a transfer of $3.5
billion over the five-year period. All
other numbers included in the text are
not discounted, except where noted.

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68257

TABLE 1—TOTAL COSTS OF FINAL REGULATIONS
[In millions of 2012 dollars]

Year

2014
2015
2016
2017
2018

Incremental
change in
individual
market plan
spending

Disclosure
requirements

Total
undiscounted
costs

Total 3%
discounted
costs

Total 7%
discounted
costs

Transfers
(undiscounted)

(A)

(B)

A+B

(D)

(E)

(F)

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

$189.9
208.4
226.8
245.3
263.8

$4.3
4.3
4.3
4.3
4.3

$194.2
212.7
231.1
249.6
268.1

$194.2
206.5
217.9
228.4
238.2

$194.2
198.8
201.9
203.7
204.5

$699.2
732.0
764.8
797.6
830.4

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

1,134.2

21.5

1,155.6

1085.1

1,003.1

3,824.0

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1. Estimated Number of Affected
Entities
MHPAEA has already brought about
coverage changes for approximately 103
million participants in 420,700 ERISAcovered employment-based group
health plans with more than 50
participants, and an estimated 29.5
million participants in the
approximately 23,000 public, nonFederal employer group health plans
with more than 50 participants
sponsored by State and local
governments. Plans with 50 or fewer
participants were previously exempt
from MHPAEA.74 In addition,
approximately 510 health insurance
issuers providing mental health or
substance use disorder benefits in the
group and individual health insurance
markets and at least 120 MBHOs
providing mental health or substance
use disorder benefits to group health
plans are also affected by these final
regulations.75
As discussed earlier, the Affordable
Care Act extended MHPAEA to apply to
a health insurance issuer offering
individual health insurance coverage
and the HHS final regulation regarding
EHB requires QHPs and nongrandfathered health insurance plans in
the individual and small group markets
74 The Departments’ estimates of the numbers of
affected participants are based on DOL estimates
using the 2012 CPS. ERISA plan counts are based
on DOL estimates using the 2011 MEP–IC and
Census Bureau statistics. The number of State and
local government employer-sponsored plans was
estimated using 2012 Census data and DOL
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.
75 The Departments’ estimate of the number of
insurers is based on medical loss ratio reports
submitted by issuers for 2012 reporting year and
industry trade association membership. Please note
that these estimates could undercount small Stateregulated insurers.

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to provide covered mental health and
substance use disorder services in a
manner that complies with the parity
requirements of the MHPAEA
implementing regulations in order to
satisfy the requirement to cover EHB.
According to the 2012 Medical Loss
Ratio filings, about 11 million people
are covered in the individual market;
another 7 million are expected to gain
coverage in 2014 under the Affordable
Care Act.76 There are an estimated 12.3
million participants in about 837,000
non-grandfathered ERISA-covered
employment-based group plans with 50
or fewer participants, and an estimated
800,000 participants in approximately
59,000 non-grandfathered public, nonFederal employer group health plans
with 50 or fewer participants sponsored
by State and local governments which
were previously exempt from MHPAEA.
About one-third of those who are
currently covered in the individual
market have no coverage for substance
use disorder services and nearly 20
percent have no coverage for mental
health services, including outpatient
therapy visits and inpatient crisis
intervention and stabilization.77 In
addition, even when individual market
plans provide these benefits, the federal
parity law previously did not apply to
these plans to ensure that coverage for
mental health and substance use
disorder services is generally
comparable to coverage for medical and
surgical care.
In the small group market, coverage of
mental health and substance use
disorder treatment is more common
than in the individual market. We
estimate that about 95 percent of those
76 ‘‘Effects on Health Insurance and the Federal
Budget for the Insurance Coverage Provisions in the
Affordable Care Act—May 2013 Baseline,’’
Congressional Budget Office, May 14, 2013.
77 ASPE Issue Brief, ‘‘Essential Health Benefits:
Individual Market Coverage,’’ ed. U.S. Department
of Health & Human Services (2011).

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with small group market coverage have
substance abuse and mental health
benefits.78 Again, the federal parity law
previously did not apply to small group
plans. In many States, State parity laws
offer those covered in this market some
parity protection, but most State parity
laws are narrower than the federal
parity requirement.
2. Anticipated Benefits
a. Benefits Attributable to the Statute or
Interim Final Regulations
In enacting MHPAEA, one of
Congress’ primary objectives was to
improve access to mental health and
substance use disorder benefits by
eliminating more restrictive visit limits
and inpatient days covered as well as
higher cost-sharing for mental health
and substance use disorder benefits that
were prevalent in private insurance
plans after implementation of MHPA
1996.79
A recent study funded by HHS found
that large group health plans and
insurance issuers have made significant
changes to financial requirements and
treatment limitations for mental health
and substance use disorder benefits in
the first few years following enactment
of MHPAEA.80 The statute went into
effect for plan years beginning after
October 3, 2009 (calendar year 2010 for
78 ASPE Issue Brief, ‘‘Essential Health Benefits:
Comparing Benefits in Small Group Products and
State and Federal Employee Plans,’’ ed. U.S.
Department of Health & Human Services (2011).
79 See the interim final regulations for a fuller
discussion of the legislative history.
80 Final Report: Consistency of Large Employer
and Group Health Plan Benefits with Requirements
of the Paul Wellstone and Pete Domenici Mental
Health Parity and Addiction Equity Act of 2008 at
pages vii–ix. NORC at the University of Chicago for
the Office of the Assistant Secretary for Planning
and Evaluation. This study analyzed information on
large group health plan benefit designs from 2009
through 2011 in several databases maintained by
benefits consulting firms that advise plans on
compliance with MHPAEA as well as other
requirements.

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many plans) and the interim final
regulations went into effect for plans
years beginning on or after July 10, 2010
(calendar year 2011 for many plans).
This HHS study found that by 2011,
most plans had removed most financial
requirements and treatment limitations
that did not meet the requirements of
MHPAEA and its implementing interim
final regulations.
According to this HHS study, in 2010,
ten percent of a nationally
representative sample of large
employers’ behavioral health benefits
had inpatient financial requirements
(e.g., deductibles, co-pays, or coinsurance) that needed modification to
comply with MHPAEA. Analysis of a
separate set of large employer-based
plans for 2011 found virtually all 230
large employer-based plans included
had inpatient benefits that conformed to
MHPAEA standards. A third database of
plan designs from 2009 through 2011
confirmed that the use of higher
copayments and coinsurance for
inpatient mental health and substance
use disorder services declined rapidly
in large employer plans following
implementation of MHPAEA.81
Among the representative sample of
plans for 2010 included in this study,
more than 30 percent had copayments
or coinsurance rates for outpatient
mental health and substance use
disorder benefits that were inconsistent
with MHPAEA. In a separate sample of
large employer-based plans for 2011, the
use of higher coinsurance for mental
health and substance use disorder
benefits dropped dramatically.
However, the study found that about 20
percent of the 140 plans tested
continued to utilize outpatient innetwork co-pays that failed to meet
MHPAEA standards. A third database of
plan designs for 2009 through 2011
confirmed a dramatic decline in the use
of more restrictive cost-sharing for
outpatient mental health and substance
use disorder benefits although a
minority continued to use high copays.
Nearly all plans had eliminated the
use of separate deductibles for mental
health or substance use disorder out-ofpocket costs by 2011. (Even by 2010,
only 3.2 percent of plans had used
separate deductibles.) 82
The HHS study also found that the
number of plans that applied unequal
inpatient day limits, outpatient visit
limits or other quantitative treatment
limitations for mental health or
substance use disorder benefits had
dropped significantly by 2011. In 2010,
it found that most large employer-based
at page xii.
82 Ibid at page xi.

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b. Potential Benefits of the Final
Regulations
The Departments expect that
MHPAEA and these final regulations
will have their greatest impact on
people needing the most intensive
treatment and financial protection. The
Departments cannot estimate how large
this impact will be, but the numbers of
beneficiaries who have a medical
necessity for substantial amount of care
are likely to be relatively small.
Improving coverage in the small
group and individual markets will also
expand financial protection for a
significant segment of those covered and
soon to be covered by private health
insurance. One indicator of the
consequences of unprotected financial
risk is bankruptcies. The literature on
bankruptcies identifies mental health
care as a source of high spending that
is less protected than other areas of
health care.83 One estimate is that about
83 Robertson CT, R Egelhof, M Hoke, Get Sick, Get
Out: The Medical Causes of Home Mortgage
Foreclosures, Health Matrix 18:65–105, 2008.

81 Ibid

VerDate Mar<15>2010

plans used day limits on mental health
inpatient benefits that generally
conformed to MHPAEA standards.
While almost 20 percent of these plans
imposed more restrictive day limits on
in-network, inpatient benefits for
substance use disorders than applied to
medical/surgical benefits, the separate
sample of 2011 large employer-based
plans indicated a significant decline
with only eight percent of plans using
stricter day limits for inpatient benefits
for substance use disorders. These
findings were corroborated by analysis
of an additional database of plan
designs from 2009 through 2011, which
also indicated a dramatic decline in the
proportion of plans using more
restrictive inpatient day limits on
mental health and substance use
disorder benefits (from 50 percent in
2009 to ten percent in 2010).
In 2010, more than 50 percent of large
employer-based plans in the study’s
representative sample used more
restrictive visit limits for outpatient
mental health and substance use
disorder services that did not conform
to MHPAEA standards. But, in the 2011
sample of large employer-based health
plans, less than seven percent were
using unequal visit limits. This trend
was also evident in the plan design
database comparing plans across 2009,
2010, and 2011. There too, substantial
reductions in quantitative treatment
limitations for mental health and
substance use disorder benefits in large
employer-based plans were seen after
enactment of MHPAEA.

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17 percent of bankruptcies are due to
health care bills.84 Another estimate
using the same data is that about ten
percent of medical bankruptcies are
attributable to high mental health care
costs, and an additional two to three
percent of bankruptcies are attributable
to drug and alcohol abuse.85
Improvements in coverage of mental
health and substance use disorder
services expected to result from
implementation of MHPAEA can be
expected to reduce some of the financial
risk and also yield successful treatment
for people with mental health or
substance use disorder problems.
Earlier entry into treatment may have
a salutary impact on entry into
disability programs. Of the 8.6 million
disabled workers receiving Social
Security Disability Insurance benefits,
28 percent are identified as having a
disability related to mental disorders,
not including intellectual disability.
Mental disorders are the second largest
diagnostic category among awards to
disabled workers, after conditions
associated with the musculoskeletal
system and connective tissue (29
percent) but ahead of those related to
the circulatory system (8.5 percent).86
Improving coverage of mental health
and substance use disorder treatment
could also more generally improve
productivity and improve earnings
among those with these conditions.
Studies have shown that the high
prevalence of depression causes $31
billion to $51 billion annually in lost
productivity in the United States.87
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.88 A recent metaanalysis of randomized studies that
84 Dranove D and ML Millenson, Medical
Bankruptcy: Myth Versus Fact, Health Affairs 25,
w74–w83 February 28, 2006.
85 Dranove D and ML Millenson, Medical
Bankruptcy: Myth Versus Fact, Health Affairs 25,
w74–w83 February 28, 2006.
86 Social Security Administration (SSA). (2012).
Annual Statistical Report on the Social Security
Disability Insurance Program, 2011. SSA
Publication No. 13–11826.
87 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.
88 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.

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Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations
examined the impact of treating
depression on labor market outcomes
showed that while the labor supply
effects were smaller than the impact on
clinical symptoms, there were
consistently significant and positive
effects of treatment on labor supply.89 90
Although the expected impact of
MHPAEA on labor supply is likely
modest for large employers, it is
probably considerably larger for small
group and individual plans where preMHPAEA coverage was more limited
than in the large group market.
As stated earlier, these final
regulations clarify that the general rule
regarding consistency in classification
of benefits applies to intermediate
services provided under the plan or
coverage. These final regulations are
expected to maintain or perhaps slightly
improve coverage for intermediate
levels of care. These services that fall
between inpatient care for acute
conditions and regular outpatient care
can be effective at improving outcomes
for people with mental health
conditions or substance use
disorders.91 92 93
This final rule allows for policies
such as multi-tiered provider networks.
Multi-tiered networks are spreading
rapidly among large group policies.
There is some early evidence that such
approaches can successfully attenuate
costs and improve quality of care.
3. Anticipated Costs

emcdonald on DSK67QTVN1PROD with RULES3

a. Illustrative Results From Past Policy
Interventions
Existing evidence on implementation
of parity in States and FEHBP suggests
there will not be significant increases in
plan expenditures and premiums as a
result of the increased access to mental
health and substance use disorder
services that are expected to result from
these final regulations. Since the
89 Timbie JW, M Horvitz-Lennon, RG Frank and
SLT Normand, A Meta-Analysis of Labor Supply
Interventions for Major Depressive Disorder,
Psychiatric Services 57(2) 212–219, 2006.
90 Wang PS, GE Simon, J Avorn et al, Telephone
Screening, Outreach, and Care Management for
Depressed Workers and Impact on Clinical and
Work Productivity Outcomes, JAMA 298(12) 1401–
1411, 2007.
91 Bateman A, Fonagy P: Treatment of borderline
personality disorder with psychoanalytically
oriented partial hospitalization: an 18-month
follow-up. Am J Psychiatry 2001; 158:36–42.
92 Horvitz-Lennon M, Normand SL, Gaccione P
and Frank RG. ‘‘Partial vs. Full Hospitalization for
Adults in Psychiatric Distress: A Systematic Review
of the Published Literature.’’ American Journal of
Psychiatry, 158(5), 2001.
93 Drake, Robert E., Erica L. O’Neal, and Michael
A. Wallach. ‘‘A systematic review of psychosocial
research on psychosocial interventions for people
with co-occurring severe mental and substance use
disorders.’’ Journal of substance abuse treatment
34.1 (2008): 123–138.

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effective date of the interim final
regulations, no employer has applied for
a cost exemption. A recent research
study funded by HHS shows that in
general, large employer-sponsored plans
eliminated higher financial
requirements and more limited
inpatient day limits, outpatient visit
limits and other quantitative treatment
limitations for mental health or
substance use disorder benefits fairly
quickly in the first few years following
the enactment of MHPAEA. Differences
in cost sharing for prescription
medications and emergency care also
declined, and by 2011 almost all large
employer-based plans studied appeared
to comply with MHPAEA for those
benefits.94 Over that same period, a very
small percent of employers dropped
mental health or substance use disorder
coverage. Moreover, there is no clear
evidence that the small number of plans
that did drop mental health and
substance use disorder coverage did so
because of MHPAEA.
Furthermore, evidence suggests that
plans did not exclude more mental
health or substance use disorder
diagnoses from coverage in response to
MHPAEA and there is no evidence that
plans or employers reduced medical/
surgical benefits to comply with parity
requirements.95 All of these findings
indicate that any increases in the costs
of covering mental health and substance
use disorder benefits following
implementation of MHPAEA did not
have a substantial impact on overall
plan spending.
Other recent analyses of claims data
from self-insured employer-sponsored
group health plans have suggested that
an overwhelming majority of privately
insured individuals who used mental
health or substance use disorder
services prior to MHPAEA did so at a
rate far below pre-parity limits on
benefits.96 Using econometric models to
estimate the effect of MHPAEA on highutilization beneficiaries who are most
likely to use expanded coverage,
researchers have estimated that
MHPAEA may at most increase total
health care costs by 0.6 percent.97
Furthermore, a recent study of
94 Final Report for ASPE: Consistency of Large
Employer and Group Health Plan Benefits with
Requirements of the Paul Wellstone and Pete
Domenici Mental Health Parity and Addiction
Equity Act of 2008 at page x. NORC at the
University of Chicago for the Office of the Assistant
Secretary for Planning and Evaluation.
95 Ibid at page xi.
96 Mark, TL, Vandivort-Warren, R, Miller, K,
Mental health spending by private insurance:
Implications for the Mental Health Parity and
Addiction Equity Act, Psych Services, 2012; 63(4):
313–318.
97 Ibid.

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substance use disorder spending from
2001 to 2009 by large employersponsored health plans shows that
substance use disorder spending
remained a relatively constant share of
all health spending, comprising about
0.4 percent of all health spending in
2009. This low share of overall spending
means that even large increases in
utilization of substance use disorder
treatment are unlikely to have a
significant impact on premiums.98
Although most State parity laws are
more limited than MHPAEA, some are
comparable, and studies on the impact
of these more comparable laws provide
a fair indication of the effect of
MHPAEA. For example, Oregon’s State
parity law enacted in 2007 is quite
comparable in that it applies to
treatment limits (including NQTLs) and
financial requirements for mental health
and substance use disorder benefits. A
study of the Oregon parity law found
that plans removed coverage limits and
used management techniques more
consistently but did not significantly
increase spending on mental health and
substance use disorder care.99
Vermont’s parity law also applies to
both mental health and substance use
disorder services. A study of this State
parity law also did not find significant
increases in spending.100
b. Costs (and Transfers) Attributable to
the Final Regulations
The Departments do not expect the
clarification that plans should classify
intermediate services consistently for
mental health and substance use
disorders and medical/surgical benefits
will result in a significant increase in
costs. Nor do the Departments expect
the clarification that the NQTL rules
apply to these types of services to cause
a substantial increase in plan spending.
Analyses of claims data for large group
health plans conducted by two different
contractors for HHS indicate that most
plans cover intermediate behavioral
health services, particularly partial
hospitalization and intensive outpatient
services, but intermediate services
account for less than one percent of total
health plan spending.101 Internal
98 Ibid.
99 Ibid.
100 Mark, TL, Vandivort-Warren, R, Spending
trends on substance abuse treatment under private
employer-sponsored insurance, 2001–2009, Drug
and Alcohol Dependence, 2012; 125:203–207.
101 Short-Term Analysis to Support Mental Health
and Substance Use Disorder Parity Implementation.
RAND Corporation for the Office of the Assistant
Secretary for Planning and Evaluation. February 8,
2012 (http://aspe.hhs.gov/daltcp/reports/2012/
mhsud.shtml); internal analysis of claims data for
large self-insured employers and health plans.

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research and analysis by HHS indicates
that the number of enrollees who use
intermediate services for mental health
and substance use disorders is very
small. Furthermore, those who used
intermediate services did so at modest
rates. In addition, the number of
enrollees who used intermediate
services for medical/surgical benefits
was similarly small. Available data
suggest that intermediate behavioral
health services account for between
eight percent and eleven percent of total
behavioral health spending in private
insurance. This means that since
behavioral health care accounts for
about 5.5 percent of health plan
spending, intermediate behavioral
health spending amounts to between 0.4
and 0.6 percent of total health plan
spending. In light of the small number
of enrollees that utilize this
intermediate level of care and the small
percentage of total costs that
intermediate mental health and
substance use disorder services
comprise, the Departments expect that
any increase in coverage would be very
unlikely to have any significant effect
on total health plan spending.
Moreover, the Departments
investigated the patterns of
classification of intermediate services
and found that they are generally
covered in the six classifications set out
in the interim final regulations.
Behavioral health intermediate services
are generally categorized in a similar
fashion as analogous medical services;
for example, residential treatment tends
to be categorized in the same way as
skilled nursing facility care in the
inpatient classification. Thus, the
Departments do not expect much
change in how most plans consider
intermediate behavioral health care in
terms of the six existing benefit
classifications.
Tiered provider networks are
expanding in private health insurance.
The interim final regulations made no
allowance for such insurance
innovations. The final regulations
clarify how the parity requirements
apply to multi-tiered provider networks.
The evidence on the impact of these
networks is beginning to emerge.102
There is some evidence that points to
small reductions in health spending
associated with tiered provider
networks. There are also studies
showing little to no savings associated
with these network designs. Some
102 Thomas JM, G Nalli AF Cockburn. What we
know and don’t know about tiered provider
networks, Journal of Health Care Finance 33(4), 53–
67, 2007; Sinaiko AD, Tiered provider Networks as
a Strategy to Improve Health Care Quality and
Efficiency, NICHM Foundation February 2012.

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modest impact on quality has been
observed in some cases and none in
others.103 The Departments are therefore
assuming no cost impact of this
provision.
There is limited data on spending for
mental health and substance use
disorder treatment under individual
health insurance plans. The
Departments therefore rely on some
recent tabulations from the Medical
Expenditure Panel Survey (MEPS) and a
recent report on premiums and coverage
in the individual health insurance
market along with information from
several other sources to make
projections of the likely impact of
applying MHPAEA to the individual
market.104 The Departments began by
estimating baseline spending in the
individual market. The Departments
calculate the weighted average premium
for the individual insurance market
from the paper by Whitmore and
colleagues that was reported in 2007
dollars and inflate it to 2012 dollars
using the GDP deflator. Because
premiums report more than just health
care costs, the Departments convert the
premium into plan payments for
services by applying the medical loss
ratio of 0.70 reported in the technical
appendix to the Medical Loss Ratio
interim final rule.105 The resulting
estimate is $2437 in 2012 dollars. That
figure represents total health spending
by plans per member per year. The
Departments obtain an estimate of the
behavioral health costs by assuming that
about four percent of those expenditures
are for behavioral health. That figure is
obtained by recognizing that coverage
for behavioral health in the individual
market is more limited than in the
employer sponsored insurance market
where mental health and substance use
disorder care accounts for about 5.5
percent of spending overall.106
Applying the four percent figure to the
plan spending estimates results in an
103 Ibid.
104 Whitmore H, JR Gabel, J Pickreign R McDevitt,
The Individual Insurance Market Before Reform:
Low Premiums and Low Benefits, Medical Care
Research and Review 68(5): 594–606, 2011.
105 Technical Appendix to the Regulatory Impact
Analysis for the Interim Final Rule for Health
Insurance Issuers Implementing the Medical Loss
Ratio Requirements under the Patient Protection
and Affordable Care Act, Office of Consumer
Information and Insurance Oversight, Department
of Health and Human Services, November 22, 2010,
available at http://www.cms.gov/CCIIO/Resources/
Files/Downloads/mlr_20101122_technical_
appendix.pdf.
106 Substance Abuse and Mental Health Services
Administration. National Expenditures for Mental
Health Services and Substance Abuse Treatment,
1986–2009. HHS Publication No. SMA–13–4740.
Rockville, MD: Substance Abuse and Mental Health
Services Administration, 2013.

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estimate of $98 per member per year in
plan spending for mental health and
substance use disorder benefits. The
Departments then calculate the share of
spending paid out-of-pocket by using
the MEPS data to obtain an estimate of
outpatient mental health and substance
use disorder out-of-pocket spending,
because outpatient services generally
carry higher cost sharing than inpatient
care and because overall non-inpatient
care accounts for about 65 to 70 percent
of behavioral health care. The MEPS
data indicate that out-of-pocket costs for
mental health and substance use
disorder care accounts for 47 percent of
total spending. This contrasts with an
estimate of 26 percent for medical/
surgical care. The implication of this is
a total (plan and out-of-pocket)
spending estimate for mental health and
substance use disorder benefits of $185
per member per year in 2012. It is
important to recognize that roughly 40
percent of total behavioral health
spending in private insurance is
accounted for by spending on
psychotropic drugs and drug benefits
will remain relatively unchanged, to the
extent prescription drug tiers are based
on neutral factors independent of
whether a particular drug is prescribed
to treat a medical/surgical condition, or
a mental health condition or substance
use disorder. This is because
psychotropic drugs are typically under
the same benefit design and formulary
rules as all other drugs in private health
insurance. Thus the baseline spending
that would be affected by MHPAEA is
estimated to be $111 per member per
year.
To obtain the impact of extending
MHPAEA to the individual market, the
Departments assume that a primary
impact of MHPAEA is to equalize cost
sharing arrangements between mental
health and substance use disorder
benefits and medical/surgical benefits.
The Departments therefore assume that
the out-of-pocket share for mental
health and substance use disorder
services covered in the individual
insurance market will decline from 47
percent to 26 percent. The Departments
apply an estimate of the price elasticity
of demand to the total spending level for
mental health and substance use
disorder for people covered in the
individual market. Two recent studies
have shown that the price elasticity of
demand for mental health and substance
use disorder care has declined
significantly in the era of managed
care.107 They show that the elasticity of
107 Meyerhoefer CD and Zuvekas, S, ‘‘New
Estimates of the Demand for Physical and Mental
Health Treatment’’, Health Economics 19(3): 297–

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demand for ambulatory care fell
between -0.16 and -0.26. This is relevant
because the Whitmore paper reports that
roughly 95 percent of individual
policies are either under managed care
arrangements of some form or are part
of a Health Savings Account policy
(17.5 percent). The Departments
therefore apply an elasticity of -0.21 to
the 45 percent reduction in out-ofpocket costs for people using mental
health and substance use disorder care.
That yields a projected 9.5 percent
increase in total spending for mental
health and substance use disorder care
for people in the individual market.
Applying the 9.5 percent estimate to the
$111 baseline subject to MHPAEA
provisions results in an impact estimate
of $10.55 per covered person in 2012 or
a 5.7 percent increase in total mental
health and substance use disorder
spending and a 0.04 percent change in
total plan spending. The Departments
apply the per insured person cost of
mental health and substance use
disorder care in the individual market
estimate to an estimate of the
population that would be covered under
individual coverage after January of
2014. Based on the Congressional
Budget Office estimates of the impact of
the Affordable Care Act, the
Departments expect enrollment in the
individual market to be approximately
18 million people as of 2014.108
Applying the $10.55 estimate to the 18
million people 109 suggests a total
spending increase of about $189.9
million in 2012 dollars. The
Departments project that, by 2018, the
25 million-enrollee estimate shown in
CBO’s report will capture all individual
plan coverage. Assuming a constant rate
of growth in enrollment, the five year
cost will be $1.13 billion. This estimate
reflects increased spending on mental
health and substance use disorder
services resulting from coverage
expansion that is attributable to
MHPAEA above and beyond historical
levels in the small group and individual
markets and beyond the EHB coverage
requirements for mental health and
substance use disorder coverage.
MHPAEA can be expected to affect
coverage in the small group market
315 2010;. Lu C, Frank, RG and McGuire TG.
‘‘Demand Response of Mental Health Services to
Cost Sharing Under Managed Care.’’ Journal of
Mental Health Policy and Economics 11(3):113–126
2008.
108 ‘‘Effects on Health Insurance and the Federal
Budget for the Insurance Coverage Provisions in the
Affordable Care Act—May 2013 Baseline,’’
Congressional Budget Office, May 14, 2013.
109 The figure of 11 million enrollees based on the
2012 MLR filings data discussed earlier in this
preamble is added to the CBO estimate of enrollees
in the individual market in 2014.

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through the provisions governing EHBs.
The Departments estimate that there are
currently approximately 27 million
people insured under small group
benefits. The Congressional Budget
Office (CBO) and HHS projections are in
agreement that there will be little
change in the size of this market in the
coming years. Thus for the purposes of
this analysis the Departments assume
that the market will remain stable at
27.3 million insured (including 26.1
million in ERISA plans and 1.2 million
in public plans).110 In examining
coverage in the small group market
using data from 2012, the Departments
find that plans used comparable levels
of management to large group plans in
that less than 1 percent of either small
group or large group enrollees are
covered by indemnity insurance
arrangements. HMOs account for 15
percent of small group and 16 percent
of large group enrollees. PPOs/POS
plans account for 61 percent of small
group and 67 percent of large group
enrollees. High deductible plans make
up 17 percent of small group and 24
percent of large group enrollees.111 In
addition, other recent analyses show
that the actuarial value of health
insurance benefits in large and small
group plans are largely identical.112
Data from recent studies of parity
implementation in Oregon that focused
in great part on small group coverage
shows that parity had the effect of
reducing out-of-pocket spending. Yet
because it was done in the context of
managed care arrangements (including
regulations of management practices)
there was no statistically significant
impact on total spending on mental
health and substance use disorder
services attributable to parity.113 For
this reason, the Departments assume
that virtually all the impact of MHPAEA
on the small group market involves a
shift of final responsibility for payment
from households to insurers. The
Oregon parity results (McConnell et al.,
110 Congressional Budget Office, Letter to the
Honorable Paul Ryan: Analysis of the
Administration’s Announced delay of certain
Requirements Under the Affordable Care Act, July
30, 2013; and CBO’s May 2013 Estimates of the
Effects of the Affordable Care Act on Health
Insurance Coverage, May 14, 2013.
111 Kaiser Family Foundation and Health
Research and Educational Trust, Employer Health
Benefits—2012 Annual Survey.
112 McDevitt R, J Gabel, R Lore et al, Group
Insurance: A Better Deal for Most People than
Individual Plans, Health Affairs 29(1): 156–164,
2010.
113 McConnell KJ, SHN Gast, MS Ridgely et al.
Behavioral Health Insurance Parity: Does Oregon’s
Experience Presage the National Experience with
the Mental Health Parity and Addiction Equity
Act?, American Journal of Psychiatry 2012; 169(1):
31–38.

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68261

2012) are consistent with a shift of
roughly 0.5 percent of spending. This
shift in cost constitutes a transfer (see
additional analysis in section III.D.4
below).
The final regulations retain the
disclosure provisions for group health
plans and health insurance coverage
offered in connection with a group
health plan. In addition, these
disclosure provisions are extended to
non-grandfathered insurance coverage
in the small group market through the
EHB requirements and to the individual
market as a result of the amendments to
the PHS Act under the Affordable Care
Act as discussed in section II.F and
II.H.1 of this preamble. The burden and
cost related to these disclosure
requirements are discussed in detail in
the Paperwork Reduction Act section
below and are estimated to be
approximately $4.3 million per year.
4. Transfers
The application of MHPAEA to the
individual market will also shift
responsibility for some existing
payments from individuals to health
plans by reducing cost sharing from 47
percent to 26 percent, or $336 million
in the first year increasing to $467
million by 2018 reflecting increases in
the number of individual enrollees. The
Departments estimate that this shift in
cost-sharing to plans combined with the
increase in spending due to increased
utilization discussed above could be
expected to lead to an increase of 0.8%
in premiums in the individual market.
The small group plan average premium
in 2012 was $5588. Applying the 0.5
percent estimated shift in spending
derived above in section III.E.3 to the
average premium as a proxy for plan
spending, the Departments obtain a
figure of $27.94. Multiplying that figure
by 13 million enrollees in small group
plans yields an estimated transfer
amount of $363 million per year.
Likewise, premiums in the small group
market may be expected to increase by
0.5%.
F. Regulatory Alternatives
In addition to the regulatory approach
outlined in these final regulations, the
Departments considered several
alternatives when developing policy
regarding NQTLs, disclosure
requirements, multi-tier provider
networks, and how parity applies to
intermediate services.
Multiple stakeholders requested
clarification regarding the application of
the parity requirements to NQTLs. The
Departments considered narrowing the
clinically appropriate standard of care
exception instead of eliminating it.

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However, this approach could result in
even more confusion regarding how to
apply the parity standard for NQTLs.
Moreover, a technical expert panel
comprised of individuals with clinical
expertise in mental health and
substance use disorder treatment as well
as general medical treatment, and
experience developing and using
evidence-based practice guidelines,
could not identify situations in which
the exception allowing a clinically
appropriate standard of care to justify a
different use of NQTLs would be
needed.114 Thus, the Departments
believe that clarification in paragraph
(c)(4) of the regulations will not reduce
the flexibility afforded to plans and
issuers by the underlying rule.
As stated earlier, concerns have also
been raised regarding disclosure and
transparency. The Departments
considered whether participants and
beneficiaries have adequate access to
information regarding the processes,
strategies, evidentiary standards, or
other factors used to apply the NQTL
and also comparable information
regarding medical/surgical benefits to
ensure compliance with MHPAEA.
These final regulations make clear that
plans and issuers are required to make
this information available in accordance
with MHPAEA and other applicable
law, such as ERISA and the Affordable
Care Act, more generally. The
Departments also are publishing
contemporaneously with publication of
these final regulations, another set of
FAQs.115 Among other things, these
FAQs solicit comments on whether
more should be done, and how, to
ensure transparency and compliance.
The Departments are aware of the
increasing use of multi-tier provider
networks and commenters have asked
how parity requirements should apply
to those arrangements. The Departments
considered as an alternative requiring
plans to collapse their provider tiers in
conducting an assessment of
compliance with parity. However, this
would have negated a primary reason to
have provider tiers which is to offer
incentives for providers to accept lower
reimbursement in exchange for lower
copays for their services and
presumably greater patient volume. The
Departments considered this alternative
to be interfering unreasonably with
114 Short-Term Analysis to Support Mental Health
and Substance Use Disorder Parity Implementation.
RAND Corporation for the Office of the Assistant
Secretary for Planning and Evaluation. February 8,
2012 (http://aspe.hhs.gov/daltcp/reports/2012/
mhsud.shtml).
115 Available at: http://www.dol.gov/ebsa/
healthreform/and http://www.cms.gov/cciio/
Resources/Fact-Sheets-and-FAQs/index.html.

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legitimate plan cost-management
techniques. The approach in the final
regulations strikes a reasonable balance
between allowing plans to use provider
tiers to effectively manage costs and the
policy principles of MHPAEA.
As described earlier in this preamble,
many commenters to the interim final
regulations requested that the
Departments clarify how MHPAEA
affects the scope of coverage for
intermediate services (such as
residential treatment for substance use
disorders or mental health conditions,
partial hospitalization, and intensive
outpatient treatment) and how these
services fit within the six classifications
set forth by the interim final regulations.
Some stakeholders recommended
establishing a separate classification for
this intermediate level of care. The
Departments considered this approach
but determined that whereas the
existing classifications—inpatient, innetwork; inpatient, out-of-network;
outpatient, in-network; outpatient, outof-network; emergency care, and
prescription medications—are
classifications commonly used by health
plans and issuers, a separate
classification for intermediate care is
not commonly used by plans and
issuers. The Departments believe that a
clearer, more reasonable approach is to
incorporate the principles of parity into
existing benefit designs and care
management strategies. Thus, the final
regulations provide examples of
intermediate services and clarify that
plans and issuers must assign covered
intermediate level mental health and
substance use disorder benefits to the
existing six benefit classifications in the
same way that they assign comparable
intermediate medical/surgical benefits
to these classifications.
G. Regulatory Flexibility Act—
Department of Labor and Department of
Health and Human Services
The Regulatory Flexibility Act (RFA)
requires agencies that issue a rule to
analyze options for regulatory relief of
small businesses if a rule has a
significant impact on a substantial
number of small entities. The RFA
generally defines a ‘‘small entity’’ as—
(1) a proprietary firm meeting the size
standards of the Small Business
Administration (SBA), (2) a nonprofit
organization that is not dominant in its
field, or (3) a small government
jurisdiction with a population of less
than 50,000 (States and individuals are
not included in the definition of ‘‘small
entity’’). A change in revenues of more
than 3 percent to 5 percent is often used
by the Departments of Labor and HHS
as the measure of significant economic

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impact on a substantial number of small
entities.
As discussed in the Web Portal
interim final rule with comment period
published on May 5, 2010 (75 FR
24481), HHS examined the health
insurance industry in depth in the
Regulatory Impact Analysis for the
proposed rule on establishment of the
Medicare Advantage program (69 FR
46866, August 3, 2004). In that analysis
it was determined that there were few,
if any, insurance firms underwriting
comprehensive health insurance
policies (in contrast, for example, to
travel insurance policies or dental
discount policies) that fell below the
size thresholds for ‘‘small’’ business
(currently $35.5 million in annual
receipts for health insurance issuers).116
HHS also used the data from Medical
Loss Ratio annual report submissions
for the 2012 reporting year to develop
an estimate of the number of small
entities that offer comprehensive major
medical coverage. These estimates may
overstate the actual number of small
health insurance issuers that would be
affected by these regulations, since they
do not include receipts from these
companies’ other lines of business. It is
estimated that there are 58 small entities
with less than $35.5 million each in
earned premiums that offer individual
or group health insurance coverage and
would therefore be subject to the
requirements of these regulations. Fortythree percent of these small issuers
belong to larger holding groups, and
many, if not all, of these small issuers
are likely to have other lines of business
that would result in their revenues
exceeding $35.5 million. For these
reasons, the Departments expect that
these final regulations will not
significantly affect a substantial number
of small issuers.
As noted previously, MHPAEA
provisions are extended to nongrandfathered insurance coverage in the
small group market through the EHB
requirements. Group health plans and
health insurance coverage offered by
small employers will incur costs to
comply with the provisions of these
final regulations. There are an estimated
837,000 ERISA-covered nongrandfathered employer group health
plans with 50 or fewer participants, and
an estimated 59,000 non-grandfathered
public, non-Federal employer group
health plans with 50 or fewer
participants sponsored by State and
local governments which were
116 ‘‘Table of Small Business Size Standards
Matched To North American Industry Classification
System Codes,’’ effective July 23, 2013, U.S. Small
Business Administration, available at http://
www.sba.gov.

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previously exempt from MHPAEA.
Approximately 13 million participants
of these plans will benefit from the
provisions of these regulations. As
explained earlier in this impact
analysis, virtually all the impact of
MHPAEA on the small group market
will involve a shift of final
responsibility for payment from
households to insurers, resulting in an
estimated increase of 0.5 percent in
spending. The cost related to the
disclosure requirements is estimated to
be approximately $2.4 million for nongrandfathered small group plans that
were previously exempt from MHPAEA.
The Departments expect the rules to
reduce the compliance burden imposed
on plans and insurers by the statute and
the implementing interim final
regulations by clarifying definitions and
terms contained in the statute and
providing examples of acceptable
methods to comply with specific
provisions.
H. Special Analyses—Department of the
Treasury
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, as
supplemented by Executive Order
13563. 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. It is hereby certified that the
collections of information contained in
these final regulations will not have a
significant impact on a substantial
number of small entities. Accordingly, a
regulatory flexibility analysis is not
required.
The final regulations generally apply
to employers who provide health
coverage through group health plans to
employees that include benefits for
mental health or substance use disorder
conditions. The IRS expects the final
regulations to reduce the compliance
burden imposed on plans and issuers by
clarifying definitions and terms
contained in the statute and providing
examples of acceptable methods to
comply with specific provisions.
MHPAEA and the regulations under it
do not apply to employers with 50 or
fewer employees (although, separately,
the EHB regulations adopt MHPAEA).

ERISA-Covered Employer Group Health Plans ..........................................................................
Public, Non-Federal Employer Group Health Plans ....................................................................
Individual Market Health Plans ....................................................................................................

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1. Departments of Labor and the
Treasury
In accordance with the requirements
of the Paperwork Reduction Act of 1995
(PRA) (44 U.S.C. 3506(c)(2)), the interim
final regulations solicited comments on
the information collections included
therein. The Departments submitted an
information collection request (ICR) to
OMB in accordance with 44 U.S.C.
3507(d), contemporaneously with the
publication of the interim final
regulations for OMB’s review. OMB
approved the ICR on April 27, 2010,
under OMB Control Numbers 1210–
0138 (Department of Labor) and 1545–
2165 (Department of the Treasury/IRS).
The Departments also submitted an ICR
to OMB in accordance with 44 U.S.C.
3507(d) for the ICR as revised by the
final regulations. OMB approved the
ICR under OMB control numbers 1210–
0138 and 1545–2165, which will expire
on November 30, 2016.
As discussed earlier in this preamble,
the final regulations retain the
disclosure provisions for group health
plans and health insurance coverage

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offered in connection with a group
health plan. (In addition, these
disclosure provisions are extended to
non-grandfathered insurance coverage
in the small group market through the
EHB requirements and to the individual
market as a result of the amendments to
the PHS Act under the Affordable Care
Act, as discussed in section II.F and
II.H.1 of this preamble.)
The MHPAEA disclosures are
information collection requests (ICRs)
subject to the PRA. The final regulations
(29 CFR 2590.712(d)(2)) require a
Claims Denial Disclosure to be made
available upon request or as otherwise
required by the plan administrator (or
the health insurance issuer offering such
coverage) to a participant or beneficiary
that provides 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.
The Departments did not submit an
IRC to OMB for the Claims Denial
Disclosure, because the Department of
Labor’s ERISA claims procedure

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Moreover, small employers subject to
the rule that have more than 50
employees will generally provide any
health coverage through insurance or a
third-party administrator. The issuers of
insurance or other third-party
administrators of the health plans,
rather than the small employers, will as
a practical matter, satisfy the
requirements of the regulations in order
to provide a marketable product. For
this reason, the burden imposed by the
reporting requirement of the statute and
these final regulations on small entities
is expected to be near zero. Pursuant to
section 7805(f) of the Code, the notice
of proposed rulemaking preceding these
final regulations was submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment
on its impact on small businesses.
I. Paperwork Reduction Act
The table below summarizes the hour
burden and costs related to the
disclosure requirements in these
regulations. For plans that use issuers or
third party administrators, the costs are
reported as cost burden while for plans
that administer claims in-house, the
burden is reported as hour burden.
Number of
respondents

Plan type

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68263

1,258,000
82,324
418

Labor hours
11,976
2,517
25,465

Cost burden
$2,989,000
1,375,312
51,066

regulation (29 CFR 2560.503–1) and
disclosure regulation (29 CFR
2520.104b–1) already require such
disclosure. The same third-party
administrators and insurers are hired by
ERISA and non-ERISA covered plans, so
both types of plans were likely to
already be in compliance with the
Department of Labor rules. Therefore,
the hour and cost burden associated
with the claims denial notice already is
accounted in the ICR for the ERISA
claims procedure regulation that was
approved under OMB Control Number
1210–0053.
The final regulations (29 CFR
2590.712(d)(1)) also require 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 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

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request. The Departments estimate that
there are about 1,258,000 ERISA
covered health plans affected by the
regulations. The Departments estimate
that approximately seven percent of
large plans and all small plans
administer claims using service
providers; therefore, about 11 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 $26.85 117 per
hour. This results in an annual hour
burden of nearly 12,000 hours and an
associated equivalent cost of nearly
$322,000 for the approximately 144,000
requests done in-house by plans. The
remaining 1,114,000 medical necessity
criteria disclosures will be provided
through service providers resulting in a
cost burden of approximately
$2,493,000.
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 780,000 medical
necessity criteria disclosures sent by
paper will be approximately
$496,000.118 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.119 The Departments
will provide notice of OMB approval via
a Federal Register notice.
These paperwork burden estimates
are summarized as follows:
Type of Review: Ongoing.
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.
117 EBSA

estimates based on the National
Occupational Employment Survey (June 2012,
Bureau of Labor Statistics) and the Employment
Cost Index (September 2012, Bureau of Labor
Statistics).
118 This estimate is based on an average document
size of four pages, $.05 cents per page material and
printing costs, $.44 cent postage costs.
119 5 CFR 1320.1 through 1320.18.

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OMB Number: 1210–0138; 1545–
2165.
Affected Public: Business or other forprofit; not-for-profit institutions.
Total Respondents: 1,258,000.
Total Responses: 1,258,000.
Frequency of Response: Occasionally.
Estimated Total Annual Burden
Hours: 5,988 hours (Employee Benefits
Security Administration); 5,988 hours
(Internal Revenue Service).
Estimated Total Annual Burden Cost:
$1,494,000 (Employee Benefits Security
Administration); $1,494,000 (Internal
Revenue Service).
2. Department of Health and Human
Services
As discussed earlier in this preamble,
the final regulations retain the
disclosure provisions for group health
plans and health insurance coverage
offered in connection with a group
health plan. (In addition, these
disclosure provisions are extended to
non-grandfathered insurance coverage
in the small group market through the
EHB requirements and to the individual
market as a result of the amendments to
the PHS Act under the Affordable Care
Act, as discussed in section II.F and
II.H.1 of this preamble.) The burden
estimates below have been updated to
reflect these changes.
In addition, as described earlier in
this preamble, the final regulations
reiterate that, in addition to MHPAEA’s
disclosure requirements, provisions of
other applicable law require disclosure
of information relevant to medical/
surgical, mental health, and substance
use disorder benefits. For example, the
Departments’ claims and appeals
regulations under the Affordable Care
Act (applicable to non-grandfathered
group health plans (including nonERISA plans) and non-grandfathered
health insurance issuers in the group
and individual markets),120 set forth
rules regarding claims and appeals,
including the right of claimants (or their
authorized representative) upon appeal
of an adverse benefit determination (or
a final internal adverse benefit
determination) to be provided, upon
request and free of charge, reasonable
access to and copies of all documents,
records, and other information relevant
to the claimant’s claim for benefits.121
120 29 CFR 2560.503–1. See also 26 CFR 54.9815–
2719T(b)(2)(i), 29 CFR 2590.715–2719(b)(2)(i), and
45 CFR 147.136(b)(2)(i), requiring nongrandfathered plans and issuers to incorporate the
internal claims and appeals processes set forth in
29 CFR 2560.503–1.
121 As described earlier in this preamble, this
includes documents with information on medical
necessity criteria for both medical/surgical benefits
and mental health and substance use disorder
benefits, as well as the processes, strategies,

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The burden associated with this
disclosure is accounted for in the ICR
approved under OMB control number
0938–1099.
Medical Necessity Disclosure
HHS estimates that there are about
30.2 million participants covered by
approximately 82,0004 State and local
public plans that are subject to the
MHPAEA disclosure requirements.122
HHS is unable to estimate with certainty
the number of requests for medical
necessity criteria disclosures that will
be received by plan administrators;
however, HHS has assumed that, on
average, each plan affected by the rule
will receive one request. HHS estimates
that approximately 93 percent of large
plans administer claims using third
party administrators. 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
administrators, the costs are reported as
cost burden while for plans that
administer claims in-house, the burden
is reported as hour burden. For
purposes of this estimate, HHS assumes
that it will take a medically trained
clerical staff member five minutes to
respond to each request at a wage rate
of $26.85 123 per hour. This results in an
annual hour burden of 350 hours and an
associated equivalent cost of about
$9,000 for the approximately 4,200
requests handled by plans. The
remaining 78,000 claims (94.9 percent)
are provided through a third-party
administrator or an issuer and results in
a cost burden of approximately
$175,000.
In the individual market there will be
an estimated 18 million enrollees 124
enrolled in plans offered by 418 issuers
evidentiary standards, and other factors used to
apply a nonquantitative treatment limitation with
respect to medical/surgical benefits and mental
health or substance use disorder benefits under the
plan.
122 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.
123 EBSA estimates based on the National
Occupational Employment Survey (June 2012,
Bureau of Labor Statistics) and the Employment
Cost Index (September 2012, Bureau of Labor
Statistics).
124 Estimate based on medical loss ratio reports
submitted by issuers for 2012 reporting year and
from the study ‘‘Effects on Health Insurance and the
Federal Budget for the Insurance Coverage
Provisions in the Affordable Care Act—May 2013
Baseline,’’ by Congressional Budget Office, May 14,
2013.

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offering coverage in multiple states.
Assuming that, on average, each issuer
will receive one request in each State
that it offers coverage in, there will be
a total of about 2,600 requests in each
year. The annual burden to issuers for
sending the medical necessity
disclosures is estimated to be 220 hours
with an associated equivalent cost of
approximately $6,000.

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Claims Denial Disclosure
As described earlier in this preamble,
the Department of Labor’s ERISA claims
procedure regulation (29 CFR 2560.503–
1) already requires such disclosures.
Although non-ERISA covered plans,
such as plans sponsored by State and
local governments and individual plans
that are subject to the PHS Act, are not
required to comply with the ERISA
claims procedure regulation, the 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, HHS estimates that for State
and local public plans, there will be
approximately 30.9 million claims for
mental health or substance use disorder
benefits with approximately 4.6 million
denials that could result in a request for
the reason for denial. HHS 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
(464,000 requests). HHS estimates that a
medically trained clerical staff member
may require five minutes to respond to
each request at a labor rate of $26.85 per
hour. This results in an annual burden
of nearly 2,000 hours and an associated
equivalent cost of nearly $53,000 for the
approximately 24,000 requests
completed by plans. The remaining
440,000 are provided through an issuer
or a third-party administrator, which
results in a cost burden of
approximately $984,000. In the
individual market, under similar
assumptions, HHS estimates that there
will be approximately 18.4 million
claims for mental health or substance
use disorder benefits with
approximately 2.75 million denials that
could result in a request for explanation
of denial. Assuming ten percent of
denials result in such a request, it is
estimated that there will be about
275,000 requests for an explanation of
reason for denial, which will be
completed with a burden of 23,000

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hours and equivalent cost of
approximately $616,000.
In association with the explanation of
denial, participants may request a copy
of the medical necessity criteria. While
HHS does not know how many notices
of denial will result in a request for the
criteria of medical necessity, HHS
assumes that ten percent of those
requesting an explanation of the reason
for denial will also request the criteria
of medical necessity, resulting in about
46,000 requests, 2,400 of which will be
completed in-house with a burden of
200 hours and equivalent cost of
approximately $5,000 and about 44,000
requests handled by issuers or thirdparty providers with a cost burden of
approximately $98,000. In the
individual market, under similar
assumptions, HHS estimates that there
will be about 27,500 requests for
medical necessity criteria, which will be
completed with a burden of 2,295 hours
and equivalent cost of approximately
$62,000.
HHS also calculated the cost to
deliver the requested information. Many
insurers or plans may already have the
information prepared in electronic
format, and HHS assumes that requests
will be delivered electronically resulting
in a de minimis cost.125 HHS estimates
that the cost burden associated with
distributing the approximately 256,000
disclosures sent by paper will be
approximately $169,000.126
The ICRs associated with the medical
necessity and claims denial disclosures
are currently approved under OMB
control number 0938–1080. The
Department will seek OMB approval for
revised ICRs that will include the
burden to small group health plans and
individual market plans related to the
disclosure requirements in the final
regulations. A Federal Register notice
will be published, providing the public
with an opportunity to comment on the
ICRs.
J. Unfunded Mandates Reform Act
Section 202 of the Unfunded
Mandates Reform Act (UMRA) of 1995
requires that agencies assess anticipated
costs and benefits before issuing any
final rule that includes a Federal
mandate that could result in
expenditure in any one year by State,
local or tribal governments, in the
125 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.
126 This estimate is based on an average document
size of four pages, $.05 cents per page material and
printing costs, $0.46 cent postage costs.

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68265

aggregate, or by the private sector, of
$100 million in 1995 dollars, updated
annually for inflation. In 2013, that
threshold level is approximately $141
million. These regulations are not
subject to the UMRA because they were
not preceded by a notice of proposed
rulemaking. However, consistent with
policy embodied in the UMRA, these
regulations have been designed to be a
low-burden alternative for State, local
and tribal governments, and the private
sector while achieving the objectives of
MHPAEA.
K. Federalism Statement—Department
of Labor and Department of Health and
Human Services
Executive Order 13132 establishes
certain requirements that an agency
must meet when it promulgates a final
rule that imposes substantial direct
requirement costs on State and local
governments, preempts State law, or
otherwise has Federalism implications.
In the Departments’ view, these
regulations have Federalism
implications, because they have direct
effects on the States, the relationship
between the Federal 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 2724
of the PHS Act (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
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

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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. For example, HHS
has provided training on MHPAEA for
state regulators though the National
Association Insurance Commissioners
(NAIC) and has been available to State
regulators to address any issues that
arise. HHS has also collaborated with
regulators in a number of States on
MHPAEA enforcement strategies with
the goal of maintaining state regulator
involvement in the implementation and
enforcement of MHPAEA in their States.
It is expected that the Departments will
continue to 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.

1996 (5 U.S.C. 801 et seq.), which
specifies that before a rule can take
effect, the Federal agency promulgating
the rule shall submit to each House of
the Congress and to the Comptroller
General a report containing a copy of
the rule along with other specified
information, and have been transmitted
to Congress and the Comptroller General
for review.
IV. Statutory Authority
The Department of the Treasury
regulations are adopted pursuant to the
authority contained in sections 7805
and 9833 of the Code.
The Department of Labor 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 1–2011, 77 FR 1088 (January 9,
2012).
The Department of Health and Human
Services regulations are adopted
pursuant to the authority contained in
sections 2701 through 2763, 2791, and
2792 of the PHS Act (42 USC 300gg
through 300gg–63, 300gg–91, and
300gg–92), as amended.

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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 Parts 146 and 147
Health care, Health insurance,
Reporting and recordkeeping

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Fmt 4701

John Dalrymple,
Deputy Commissioner for Services and
Enforcement, Internal Revenue Service.
Approved: November 6, 2013.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax
Policy).
Signed this 6th day of November, 2013.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits
Security Administration, Department of
Labor.
Dated: October 25, 2013.
Marilyn Tavenner,
Administrator, Centers for Medicare &
Medicaid Services.
Dated: November 5, 2013.
Kathleen Sebelius,
Secretary, Department of Health and Human
Services.

DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Chapter I
Accordingly, 26 CFR Part 54 is
amended as follows:
PART 54—PENSION EXCISE TAXES
Paragraph 1. The authority citation
for part 54 is amended by removing the
entry for § 54.9812–1T and by adding an
entry in numerical order to read as
follows:

■

Authority: 26 U.S.C. 7805 * * *
Section 54.9812–1 also issued under 26
U.S.C. 9833. * * *

List of Subjects

L. Congressional Review Act
These final regulations are subject to
the Congressional Review Act
provisions of the Small Business
Regulatory Enforcement Fairness Act of

VerDate Mar<15>2010

requirements, and State regulation of
health insurance.

Sfmt 4700

Par. 2. Section 54.9812–1T is
removed.
■ Par. 3. Section 54.9812–1 is added to
read as follows:
■

§ 54.9812–1 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.

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Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations
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 with respect to items or services
for medical conditions or surgical
procedures, as defined under the terms
of the plan or health insurance coverage
and in accordance with applicable
Federal and State law, but does not
include mental health or substance use
disorder benefits. Any condition
defined by the plan or coverage 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 items or services for
mental health conditions, as defined
under the terms of the plan or health
insurance coverage and in accordance
with applicable Federal and State law.
Any condition defined by the plan or
coverage 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 items or
services for substance use disorders, as
defined under the terms of the plan or
health insurance coverage and in
accordance with applicable Federal and
State law. Any disorder defined by the
plan as being or as not being a substance

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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 or coverage. (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 for purposes of this
definition.
(b) Parity requirements with respect to
aggregate lifetime and annual dollar
limits. This paragraph (b) details the
application of the parity requirements
with respect to aggregate lifetime and
annual dollar limits. This paragraph (b)
does not address the provisions of PHS
Act section 2711, as incorporated in
ERISA section 715 and Code section
9815, which prohibit imposing lifetime
and annual limits on the dollar value of
essential health benefits.
(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)(5) 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.

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(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.)
(4) 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.
(5) 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

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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)(5)(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)(5), the weighting
applicable to any category of medical/
surgical benefits is determined in the
manner set forth in paragraph (b)(4) of
this section for determining one-third or
two-thirds of all medical/surgical
benefits.
(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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(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
the classification, the rules of this
paragraph (c) apply separately with
respect to that classification for all
financial requirements or treatment
limitations (illustrated in examples in

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paragraph (c)(2)(ii)(C) of this section).
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. See
special rules for plans with multiple
network tiers in paragraph (c)(3)(iii) of
this section.
(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. See
special rules for office visits and plans
with multiple network tiers in
paragraph (c)(3)(iii) of this section.
(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. See special rules
for office visits in paragraph (c)(3)(iii) of
this section.
(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

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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 care, 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 care
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

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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
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

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68269

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. (See
also PHS Act section 2707(b) and
Affordable Care Act section 1302(c),
which establish limitations on annual
deductibles for non-grandfathered
health plans in the small group market
and annual limitations on out-of-pocket
maximums for all non-grandfathered
health plans.)
(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 rules—(A) 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

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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.
(B) Multiple network tiers. If a plan (or
health insurance coverage) provides
benefits through multiple tiers of innetwork providers (such as an innetwork tier of preferred providers with
more generous cost-sharing to
participants than a separate in-network
tier of participating providers), the plan
may divide its benefits furnished on an
in-network basis into sub-classifications
that reflect network tiers, if the tiering
is based on reasonable factors
determined in accordance with the rules
in paragraph (c)(4)(i) of this section
(such as quality, performance, and
market standards) and without regard to
whether a provider provides services
with respect to medical/surgical benefits
or mental health or substance use
disorder benefits. After the sub-

classifications are established, the plan
or issuer may not impose any financial
requirement or treatment limitation on
mental health or substance use disorder
benefits in any sub-classification that is
more restrictive than the predominant
financial requirement or treatment
limitation that applies to substantially
all medical/surgical benefits in the subclassification using the methodology set
forth in paragraph (c)(3)(i) of this
section.
(C) Sub-classifications permitted for
office visits, separate from other
outpatient services. For purposes of
applying the financial requirement and
treatment limitation rules of this
paragraph (c), a plan or issuer may
divide its benefits furnished on an
outpatient basis into the two subclassifications described in this
paragraph (c)(3)(iii)(C). After the subclassifications are established, the plan
or issuer may not impose any financial
requirement or quantitative treatment
limitation on mental health or substance
use disorder benefits in any subclassification that is more restrictive
than the predominant financial
requirement or quantitative treatment
limitation that applies to substantially
all medical/surgical benefits in the sub-

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

0%
$200x
20%
N/A

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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

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

$0
$200x
20%
N/A

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

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

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

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classification using the methodology set
forth in paragraph (c)(3)(i) of this
section. Sub-classifications other than
these special rules, such as separate subclassifications for generalists and
specialists, are not permitted. The two
sub-classifications permitted under this
paragraph (c)(3)(iii)(C) are:
(1) Office visits (such as physician
visits), and
(2) All other outpatient items and
services (such as outpatient surgery,
facility charges for day treatment
centers, laboratory charges, or other
medical items).
(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.

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

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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.
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.

68271

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 1

Tier 2

Tier 3

Tier 4

Tier description

Generic drugs

Preferred
brand name
drugs

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

Specialty
drugs

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

90%

80%

60%

50%

(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).
Example 5. (i) Facts. A plan has two-tiers
of network of providers: a preferred provider
tier and a participating provider tier.
Providers are placed in either the preferred
tier or participating tier based on reasonable
factors determined in accordance with the
rules in paragraph (c)(4)(i) of this section,
such as accreditation, quality and
performance measures (including customer
feedback), and relative reimbursement rates.
Furthermore, provider tier placement is
determined without regard to whether a
provider specializes in the treatment of
mental health conditions or substance use
disorders, or medical/surgical conditions.
The plan divides the in-network
classifications into two sub-classifications
(in-network/preferred and in-network/
participating). The plan does not impose any
financial requirement or treatment limitation
on mental health or substance use disorder
benefits in either of these sub-classifications
that is more restrictive than the predominant
financial requirement or treatment limitation
that applies to substantially all medical/
surgical benefits in each sub-classification.
(ii) Conclusion. In this Example 5, the
division of in-network benefits into subclassifications that reflect the preferred and
participating provider tiers does not violate
the parity requirements of this paragraph
(c)(3).
Example 6. (i) Facts. With respect to
outpatient, in-network benefits, a plan

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imposes a $25 copayment for office visits and
a 20 percent coinsurance requirement for
outpatient surgery. The plan divides the
outpatient, in-network classification into two
sub-classifications (in-network office visits
and all other outpatient, in-network items
and services). The plan or issuer does not
impose any financial requirement or
quantitative treatment limitation on mental
health or substance use disorder benefits in
either of these sub-classifications that is more
restrictive than the predominant financial
requirement or quantitative treatment
limitation that applies to substantially all
medical/surgical benefits in each subclassification.
(ii) Conclusion. In this Example 6, the
division of outpatient, in-network benefits
into sub-classifications for office visits and
all other outpatient, in-network items and
services does not violate the parity
requirements of this paragraph (c)(3).
Example 7. (i) Facts. Same facts as
Example 6, but for purposes of determining
parity, the plan divides the outpatient, innetwork classification into outpatient, innetwork generalists and outpatient, innetwork specialists.
(ii) Conclusion. In this Example 7, the
division of outpatient, in-network benefits
into any sub-classifications other than office
visits and all other outpatient items and
services violates the requirements of
paragraph (c)(3)(iii)(C) of this section.

(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

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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).
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:

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Benefits
subject to
deductible

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

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(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.
(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) For plans with multiple network
tiers (such as preferred providers and
participating providers), network tier
design;
(D) Standards for provider admission
to participate in a network, including
reimbursement rates;
(E) Plan methods for determining
usual, customary, and reasonable
charges;
(F) Refusal to pay for higher-cost
therapies until it can be shown that a

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lower-cost therapy is not effective (also
known as fail-first policies or step
therapy protocols);
(G) Exclusions based on failure to
complete a course of treatment; and
(H) Restrictions based on geographic
location, facility type, provider
specialty, and other criteria that limit
the scope or duration of benefits for
services provided under the plan or
coverage.
(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 plan requires prior
authorization from the plan’s utilization
reviewer that a treatment is medically
necessary for all inpatient medical/surgical
benefits and for all inpatient mental health
and substance use disorder benefits. In
practice, inpatient benefits for medical/
surgical conditions are routinely approved
for seven days, after which a treatment plan
must be submitted by the patient’s attending
provider and approved by the plan. On the
other hand, for inpatient mental health and
substance use disorder benefits, routine
approval is given only for one day, after
which a treatment plan must be submitted by
the patient’s attending provider and
approved by the plan.
(ii) Conclusion. In this Example 1, the plan
violates the rules of this paragraph (c)(4)
because it is applying a stricter
nonquantitative treatment limitation in
practice to mental health and substance use
disorder benefits than is applied to medical/
surgical benefits.
Example 2. (i) Facts. A plan applies
concurrent review to inpatient care where
there are high levels of variation in length of
stay (as measured by a coefficient of variation
exceeding 0.8). In practice, the application of
this standard affects 60 percent of mental
health conditions and substance use
disorders, but only 30 percent of medical/
surgical conditions.
(ii) Conclusion. In this Example 2, the plan
complies with the rules of this paragraph
(c)(4) because the evidentiary standard used
by the plan is applied no more stringently for
mental health and substance use disorder
benefits than for medical/surgical benefits,
even though it results in an overall difference
in the application of concurrent review for
mental health conditions or substance use
disorders than for medical/surgical
conditions.

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

Total benefits
$2,000x
1,000x
2,000x
2,000x
500x

Percent
subject to
deductible
90
100
70
94
60

Example 3. (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 and uses
comparable criteria in determining whether a
course of treatment is medically necessary.
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 3, 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, it
is not applied in a comparable way. 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 4. (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 is
based on clinically appropriate standards of
care for a condition.
(ii) Conclusion. In this Example 4, the plan
complies with the rules of this paragraph
(c)(4) because the processes for developing
the evidentiary standards used to determine
medical appropriateness and the application
of these standards 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 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 5. (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

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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 5, the plan
violates the rules of this paragraph (c)(4).
Although the standard for applying a
nonquantitative treatment limitation is the
same for both mental health and substance
use disorder benefits and medical/surgical
benefits—whether a drug has a black box
warning—it is not applied in a comparable
manner. 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 6. (i) Facts. An employer
maintains both a major medical plan 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
plan 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 plan.
(ii) Conclusion. In this Example 6, 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.
Example 7. (i) Facts. Training and State
licensing requirements often vary among
types of providers. A plan applies a general
standard that any provider must meet the
highest licensing requirement related to
supervised clinical experience under
applicable State law in order to participate in
the plan’s provider network. Therefore, the
plan requires master’s-level mental health
therapists to have post-degree, supervised
clinical experience but does not impose this
requirement on master’s-level general
medical providers because the scope of their
licensure under applicable State law does
require clinical experience. In addition, the
plan does not require post-degree, supervised
clinical experience for psychiatrists or Ph.D.
level psychologists since their licensing
already requires supervised training.
(ii) Conclusion. In this Example 7, the plan
complies with the rules of this paragraph
(c)(4). The requirement that master’s-level
mental health therapists must have
supervised clinical experience to join the
network is permissible, as long as the plan
consistently applies the same standard to all
providers even though it may have a
disparate impact on certain mental health
providers.
Example 8. (i) Facts. A plan considers a
wide array of factors in designing medical

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management techniques for both mental
health and substance use disorder benefits
and medical/surgical benefits, such as cost of
treatment; high cost growth; variability in
cost and quality; elasticity of demand;
provider discretion in determining diagnosis,
or type or length of treatment; clinical
efficacy of any proposed treatment or service;
licensing and accreditation of providers; and
claim types with a high percentage of fraud.
Based on application of these factors in a
comparable fashion, prior authorization is
required for some (but not all) mental health
and substance use disorder benefits, as well
as for some medical/surgical benefits, but not
for others. For example, the plan requires
prior authorization for: outpatient surgery;
speech, occupational, physical, cognitive and
behavioral therapy extending for more than
six months; durable medical equipment;
diagnostic imaging; skilled nursing visits;
home infusion therapy; coordinated home
care; pain management; high-risk prenatal
care; delivery by cesarean section;
mastectomy; prostate cancer treatment;
narcotics prescribed for more than seven
days; and all inpatient services beyond 30
days. The evidence considered in developing
its medical management techniques includes
consideration of a wide array of recognized
medical literature and professional standards
and protocols (including comparative
effectiveness studies and clinical trials). This
evidence and how it was used to develop
these medical management techniques is also
well documented by the plan.
(ii) Conclusion. In this Example 8, the plan
complies with the rules of this paragraph
(c)(4). Under the terms of the plan as written
and in operation, the processes, strategies,
evidentiary standards, and other factors
considered by the plan in implementing its
prior authorization requirement with respect
to mental health and substance use disorder
benefits are comparable to, and applied no
more stringently than, those applied with
respect to medical/surgical benefits.
Example 9. (i) Facts. A plan generally
covers medically appropriate treatments. The
plan automatically excludes coverage for
inpatient substance use disorder treatment in
any setting outside of a hospital (such as a
freestanding or residential treatment center).
For inpatient treatment outside of a hospital
for other conditions (including freestanding
or residential treatment centers prescribed for
mental health conditions, as well as for
medical/surgical conditions), the plan will
provide coverage if the prescribing physician
obtains authorization from the plan that the
inpatient treatment is medically appropriate
for the individual, based on clinically
appropriate standards of care.
(ii) Conclusion. In this Example 9, 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 substance use disorder treatment in any
setting outside of a hospital is not
comparable to the conditional exclusion of
inpatient treatment outside of a hospital for
other conditions.
Example 10. (i) Facts. A plan generally
provides coverage for medically appropriate

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medical/surgical benefits as well as mental
health and substance use disorder benefits.
The plan excludes coverage for inpatient,
out-of-network treatment of chemical
dependency when obtained outside of the
State where the policy is written. There is no
similar exclusion for medical/surgical
benefits within the same classification.
(ii) Conclusion. In this Example 10, the
plan violates the rules of this paragraph
(c)(4). The plan is imposing a nonquantitative
treatment limitation that restricts benefits
based on geographic location. Because there
is no comparable exclusion that applies to
medical/surgical benefits, this exclusion may
not be applied to mental health or substance
use disorder benefits.
Example 11. (i) Facts. A plan requires prior
authorization for all outpatient mental health
and substance use disorder services after the
ninth visit and will only approve up to five
additional visits per authorization. With
respect to outpatient medical/surgical
benefits, the plan allows an initial visit
without prior authorization. After the initial
visit, the plan pre-approves benefits based on
the individual treatment plan recommended
by the attending provider based on that
individual’s specific medical condition.
There is no explicit, predetermined cap on
the amount of additional visits approved per
authorization.
(ii) Conclusion. In this Example 11, the
plan violates the rules of this paragraph
(c)(4). Although the same nonquantitative
treatment limitation—prior authorization to
determine medical appropriateness—is
applied to both mental health and substance
use disorder benefits and medical/surgical
benefits for outpatient services, it is not
applied in a comparable way. While the plan
is more generous with respect to the number
of visits initially provided without preauthorization for mental health benefits,
treating all mental health conditions and
substance use disorders in the same manner,
while providing for individualized treatment
of medical conditions, is not a comparable
application of this nonquantitative treatment
limitation.

(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 any denial. The reason
for any denial under a group health plan

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(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 by the plan
administrator (or the health insurance
issuer offering such coverage) 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).
(3) Provisions of other law.
Compliance with the disclosure
requirements in paragraphs (d)(1) and
(d)(2) of this section is not
determinative of compliance with any
other provision of applicable Federal or
State law. In particular, in addition to
those disclosure requirements,
provisions of other applicable law
require disclosure of information
relevant to medical/surgical, mental
health, and substance use disorder
benefits. For example, ERISA section
104 and 29 CFR 2520.104b–1 provide
that, for plans subject to ERISA,
instruments under which the plan is
established or operated must generally
be furnished to plan participants within
30 days of request. Instruments under
which the plan is established or
operated include documents with
information on medical necessity
criteria for both medical/surgical
benefits and mental health and
substance use disorder benefits, as well
as the processes, strategies, evidentiary
standards, and other factors used to
apply a nonquantitative treatment
limitation with respect to medical/
surgical benefits and mental health or
substance use disorder benefits under
the plan. In addition, 29 CFR 2560.503–
1 and 29 CFR 2590.715–2719 set forth
rules regarding claims and appeals,
including the right of claimants (or their
authorized representative) upon appeal
of an adverse benefit determination (or
a final internal adverse benefit
determination) to be provided upon
request and free of charge, reasonable
access to and copies of all documents,
records, and other information relevant

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to the claimant’s claim for benefits. This
includes documents with information
on medical necessity criteria for both
medical/surgical benefits and mental
health and substance use disorder
benefits, as well as the processes,
strategies, evidentiary standards, and
other factors used to apply a
nonquantitative treatment limitation
with respect to medical/surgical benefits
and mental health or substance use
disorder benefits under the plan.
(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
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;
(ii) Require a group health plan (or
health insurance issuer offering
coverage in connection with a group

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health plan) that provides coverage for
mental health or substance use disorder
benefits only to the extent required
under PHS Act section 2713 to provide
additional mental health or substance
use disorder benefits in any
classification in accordance with this
section; or
(iii) 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.
(4) Coordination with EHB
requirements. Nothing in paragraph (f)
or (g) of this section changes the
requirements of 45 CFR 147.150 and 45
CFR 156.115, providing that a health
insurance issuer offering nongrandfathered health insurance coverage
in the individual or small group market
providing mental health and substance
use disorder services, including
behavioral health treatment services, as
part of essential health benefits required
under 45 CFR 156.110(a)(5) and
156.115(a), must comply with the
provisions of 45 CFR 146.136 to satisfy
the requirement to provide essential
health benefits.
(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 9831(a) 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

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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—(1) In
general. If the application of this section
to a group health plan (or health
insurance coverage offered in
connection with such plans) results in
an increase for the plan year involved of
the actual total cost of coverage with
respect to medical/surgical benefits and
mental health and substance use
disorder benefits as determined and
certified under paragraph (g)(3) of this
section by an amount that exceeds the
applicable percentage described in
paragraph (g)(2) of this section of the
actual total plan costs, the provisions of
this section shall not apply to such plan
(or coverage) during the following plan
year, and such exemption shall apply to
the plan (or coverage) for one plan year.
An employer or issuer may elect to
continue to provide mental health and
substance use disorder benefits in
compliance with this section with
respect to the plan or coverage involved
regardless of any increase in total costs.
(2) Applicable percentage. With
respect to a plan or coverage, the
applicable percentage described in this
paragraph (g) is—
(i) 2 percent in the case of the first
plan year in which this section is
applied to the plan or coverage; and
(ii) 1 percent in the case of each
subsequent plan year.
(3) Determinations by actuaries—(i)
Determinations as to increases in actual
costs under a plan or coverage that are
attributable to implementation of the
requirements of this section shall be
made and certified by a qualified and
licensed actuary who is a member in
good standing of the American
Academy of Actuaries. All such
determinations must be based on the
formula specified in paragraph (g)(4) of
this section and shall be in a written
report prepared by the actuary.
(ii) The written report described in
paragraph (g)(3)(i) of this section shall
be maintained by the group health plan
or health insurance issuer, along with
all supporting documentation relied
upon by the actuary, for a period of six
years following the notification made
under paragraph (g)(6) of this section.
(4) Formula. The formula to be used
to make the determination under
paragraph (g)(3)(i) of this section is
expressed mathematically as follows:
[(E1¥E0)/T0]¥D > k
(i) E1 is the actual total cost of
coverage with respect to mental health

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and substance use disorder benefits for
the base period, including claims paid
by the plan or issuer with respect to
mental health and substance use
disorder benefits and administrative
costs (amortized over time) attributable
to providing these benefits consistent
with the requirements of this section.
(ii) E0 is the actual total cost of
coverage with respect to mental health
and substance use disorder benefits for
the length of time immediately before
the base period (and that is equal in
length to the base period), including
claims paid by the plan or issuer with
respect to mental health and substance
use disorder benefits and administrative
costs (amortized over time) attributable
to providing these benefits.
(iii) T0 is the actual total cost of
coverage with respect to all benefits
during the base period.
(iv) k is the applicable percentage of
increased cost specified in paragraph
(g)(2) of this section that will be
expressed as a fraction for purposes of
this formula.
(v) D is the average change in
spending that is calculated by applying
the formula (E1¥E0)/T0 to mental health
and substance use disorder spending in
each of the five prior years and then
calculating the average change in
spending.
(5) Six month determination. If a
group health plan or health insurance
issuer seeks an exemption under this
paragraph (g), determinations under
paragraph (g)(3) of this section shall be
made after such plan or coverage has
complied with this section for at least
the first 6 months of the plan year
involved.
(6) Notification. A group health plan
or health insurance issuer that, based on
the certification described under
paragraph (g)(3) of this section, qualifies
for an exemption under this paragraph
(g), and elects to implement the
exemption, must notify participants and
beneficiaries covered under the plan,
the Secretary, and the appropriate State
agencies of such election.
(i) Participants and beneficiaries—(A)
Content of notice. The notice to
participants and beneficiaries must
include the following information:
(1) A statement that the plan or issuer
is exempt from the requirements of this
section and a description of the basis for
the exemption.
(2) The name and telephone number
of the individual to contact for further
information.
(3) The plan or issuer name and plan
number (PN).
(4) The plan administrator’s name,
address, and telephone number.

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(5) For single-employer plans, the
plan sponsor’s name, address, and
telephone number (if different from
paragraph (g)(6)(i)(A)(3) of this section)
and the plan sponsor’s employer
identification number (EIN).
(6) The effective date of such
exemption.
(7) A statement regarding the ability
of participants and beneficiaries to
contact the plan administrator or health
insurance issuer to see how benefits
may be affected as a result of the plan’s
or issuer’s election of the exemption.
(8) A statement regarding the
availability, upon request and free of
charge, of a summary of the information
on which the exemption is based (as
required under paragraph (g)(6)(i)(D) of
this section).
(B) Use of summary of material
reductions in covered services or
benefits. A plan or issuer may satisfy the
requirements of paragraph (g)(6)(i)(A) of
this section by providing participants
and beneficiaries (in accordance with
paragraph (g)(6)(i)(C) of this section)
with a summary of material reductions
in covered services or benefits
consistent with 29 CFR 2520.104b–3(d)
that also includes the information
specified in paragraph (g)(6)(i)(A) of this
section. However, in all cases, the
exemption is not effective until 30 days
after notice has been sent.
(C) Delivery. The notice described in
this paragraph (g)(6)(i) is required to be
provided to all participants and
beneficiaries. The notice may be
furnished by any method of delivery
that satisfies the requirements of section
104(b)(1) of ERISA (29 U.S.C.
1024(b)(1)) and its implementing
regulations (for example, first-class
mail). If the notice is provided to the
participant and any beneficiaries at the
participant’s last known address, then
the requirements of this paragraph
(g)(6)(i) are satisfied with respect to the
participant and all beneficiaries residing
at that address. If a beneficiary’s last
known address is different from the
participant’s last known address, a
separate notice is required to be
provided to the beneficiary at the
beneficiary’s last known address.
(D) Availability of documentation.
The plan or issuer must make available
to participants and beneficiaries (or
their representatives), on request and at
no charge, a summary of the information
on which the exemption was based. (For
purposes of this paragraph (g), an
individual who is not a participant or
beneficiary and who presents a notice
described in paragraph (g)(6)(i) of this
section is considered to be a
representative. A representative may
request the summary of information by

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providing the plan a copy of the notice
provided to the participant under
paragraph (g)(6)(i) of this section with
any personally identifiable information
redacted.) The summary of information
must include the incurred expenditures,
the base period, the dollar amount of
claims incurred during the base period
that would have been denied under the
terms of the plan or coverage absent
amendments required to comply with
paragraphs (b) and (c) of this section,
the administrative costs related to those
claims, and other administrative costs
attributable to complying with the
requirements of this section. In no event
should the summary of information
include any personally identifiable
information.
(ii) Federal agencies—(A) Content of
notice. The notice to the Secretary must
include the following information:
(1) A description of the number of
covered lives under the plan (or
coverage) involved at the time of the
notification, and as applicable, at the
time of any prior election of the cost
exemption under this paragraph (g) by
such plan (or coverage);
(2) For both the plan year upon which
a cost exemption is sought and the year
prior, a description of the actual total
costs of coverage with respect to
medical/surgical benefits and mental
health and substance use disorder
benefits; and
(3) For both the plan year upon which
a cost exemption is sought and the year
prior, the actual total costs of coverage
with respect to mental health and
substance use disorder benefits under
the plan.
(B) Reporting with respect to church
plans. A church plan (as defined in
section 414(e)) claiming the exemption
of this paragraph (g) for any benefit
package, must provide notice to the
Department of the Treasury. This
requirement is satisfied if the plan sends
a copy, to the address designated by the
Secretary in generally applicable
guidance, of the notice described in
paragraph (g)(6)(ii)(A) of this section
identifying the benefit package to which
the exemption applies.
(C) Reporting with respect to ERISA
plans. See 29 CFR 2590.712(g)(6)(ii) for
delivery with respect to ERISA plans.
(iii) Confidentiality. A notification to
the Secretary under this paragraph (g)(6)
shall be confidential. The Secretary
shall make available, upon request and
not more than on an annual basis, an
anonymous itemization of each
notification that includes—
(A) A breakdown of States by the size
and type of employers submitting such
notification; and

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(B) A summary of the data received
under paragraph (g)(6)(ii) of this section.
(iv) Audits. The Secretary may audit
the books and records of a group health
plan or a health insurance issuer
relating to an exemption, including any
actuarial reports, during the 6 year
period following notification of such
exemption under paragraph (g)(6) of this
section. A State agency receiving a
notification under paragraph (g)(6) of
this section may also conduct such an
audit with respect to an exemption
covered by such notification.
(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, this section applies to
group health plans and health insurance
issuers offering group health insurance
coverage on the first day of the first plan
year beginning on or after July 1, 2014.
(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 date on which the
last of the collective bargaining
agreements terminates (determined
without regard to any extension agreed
to after October 3, 2008).
Employee Benefits Security
Administration
29 CFR Chapter XXV
29 CFR Part 2590 is amended as
follows:
PART 2590—RULES AND
REGULATIONS FOR GROUP HEALTH
PLANS
1. The authority citation for Part 2590
is revised to read as follows:

■

Authority: 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 1–2011, 77 FR
1088 (January 9, 2012).

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2. Section 2590.712 is revised to read
as follows:

■

§ 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
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 with respect to items or services
for medical conditions or surgical
procedures, as defined under the terms
of the plan or health insurance coverage
and in accordance with applicable
Federal and State law, but does not
include mental health or substance use
disorder benefits. Any condition
defined by the plan or coverage 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).

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Mental health benefits means benefits
with respect to items or services for
mental health conditions, as defined
under the terms of the plan or health
insurance coverage and in accordance
with applicable Federal and State law.
Any condition defined by the plan or
coverage 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 items or
services for substance use disorders, as
defined under the terms of the plan or
health insurance coverage 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
nonquantitative treatment limitations,
which otherwise limit the scope or
duration of benefits for treatment under
a plan or coverage. (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 for purposes of this
definition.
(b) Parity requirements with respect to
aggregate lifetime and annual dollar
limits. This paragraph (b) details the
application of the parity requirements
with respect to aggregate lifetime and
annual dollar limits. This paragraph (b)
does not address the provisions of PHS
Act section 2711, as incorporated in
ERISA section 715 and Code section
9815, which prohibit imposing lifetime
and annual limits on the dollar value of
essential health benefits. For more
information, see 29 CFR 2590.715–2711.
(1) General—(i) General parity
requirement. A group health plan (or
health insurance coverage offered by an

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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)(5) 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.)
(4) 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

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68277

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.
(5) 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)(5)(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)(5), the weighting
applicable to any category of medical/
surgical benefits is determined in the
manner set forth in paragraph (b)(4) of
this section for determining one-third or
two-thirds of all medical/surgical
benefits.
(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

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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
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.

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(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 (illustrated in examples in
paragraph (c)(2)(ii)(C) of this section).
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. See
special rules for plans with multiple
network tiers in paragraph (c)(3)(iii) of
this section.
(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. See
special rules for office visits and plans
with multiple network tiers in
paragraph (c)(3)(iii) of this section.
(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. See special rules
for office visits in paragraph (c)(3)(iii) of
this section.
(5) Emergency care. Benefits for
emergency care.

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(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 care, 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—

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(A) Benefits in the emergency care
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
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

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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. (See
also PHS Act section 2707(b) and
Affordable Care Act section 1302(c),
which establish limitations on annual
deductibles for non-grandfathered
health plans in the small group market
and annual limitations on out-of-pocket
maximums for all non-grandfathered
health plans.)
(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

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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 rules—(A) 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.
(B) Multiple network tiers. If a plan (or
health insurance coverage) provides
benefits through multiple tiers of innetwork providers (such as an innetwork tier of preferred providers with
more generous cost-sharing to
participants than a separate in-network
tier of participating providers), the plan
may divide its benefits furnished on an
in-network basis into sub-classifications
that reflect network tiers, if the tiering
is based on reasonable factors
determined in accordance with the rules
in paragraph (c)(4)(i) of this section
(such as quality, performance, and
market standards) and without regard to
whether a provider provides services
with respect to medical/surgical benefits
or mental health or substance use
disorder benefits. After the subclassifications are established, the plan
or issuer may not impose any financial
requirement or treatment limitation on
mental health or substance use disorder
benefits in any sub-classification that is
more restrictive than the predominant
financial requirement or treatment
limitation that applies to substantially
all medical/surgical benefits in the sub-

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classification using the methodology set
forth in paragraph (c)(3)(i) of this
section.
(C) Sub-classifications permitted for
office visits, separate from other
outpatient services. For purposes of
applying the financial requirement and
treatment limitation rules of this
paragraph (c), a plan or issuer may
divide its benefits furnished on an
outpatient basis into the two subclassifications described in this
paragraph (c)(3)(iii)(C). After the subclassifications are established, the plan
or issuer may not impose any financial
requirement or quantitative treatment
limitation on mental health or substance
use disorder benefits in any sub-

classification that is more restrictive
than the predominant financial
requirement or quantitative treatment
limitation that applies to substantially
all medical/surgical benefits in the subclassification using the methodology set
forth in paragraph (c)(3)(i) of this
section. Sub-classifications other than
these special rules, such as separate subclassifications for generalists and
specialists, are not permitted. The two
sub-classifications permitted under this
paragraph (c)(3)(iii)(C) are:
(1) Office visits (such as physician
visits), and
(2) All other outpatient items and
services (such as outpatient surgery,
facility charges for day treatment

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

0%
$200x
20%
N/A

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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
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

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

$0
$200x
20%
N/A

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

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

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

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centers, laboratory charges, or other
medical items).
(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 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).

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Tier 1

Tier 2

Tier 3

Tier 4

Tier description

Generic drugs

Preferred
brand name
drugs

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

Specialty
drugs

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

90%

80%

60%

50%

(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).
Example 5. (i) Facts. A plan has two-tiers
of network of providers: a preferred provider
tier and a participating provider tier.
Providers are placed in either the preferred
tier or participating tier based on reasonable
factors determined in accordance with the
rules in paragraph (c)(4)(i) of this section,
such as accreditation, quality and
performance measures (including customer
feedback), and relative reimbursement rates.
Furthermore, provider tier placement is
determined without regard to whether a
provider specializes in the treatment of
mental health conditions or substance use
disorders, or medical/surgical conditions.
The plan divides the in-network
classifications into two sub-classifications
(in-network/preferred and in-network/
participating). The plan does not impose any
financial requirement or treatment limitation
on mental health or substance use disorder
benefits in either of these sub-classifications
that is more restrictive than the predominant
financial requirement or treatment limitation
that applies to substantially all medical/
surgical benefits in each sub-classification.
(ii) Conclusion. In this Example 5, the
division of in-network benefits into subclassifications that reflect the preferred and
participating provider tiers does not violate
the parity requirements of this paragraph
(c)(3).
Example 6. (i) Facts. With respect to
outpatient, in-network benefits, a plan

imposes a $25 copayment for office visits and
a 20 percent coinsurance requirement for
outpatient surgery. The plan divides the
outpatient, in-network classification into two
sub-classifications (in-network office visits
and all other outpatient, in-network items
and services). The plan or issuer does not
impose any financial requirement or
quantitative treatment limitation on mental
health or substance use disorder benefits in
either of these sub-classifications that is more
restrictive than the predominant financial
requirement or quantitative treatment
limitation that applies to substantially all
medical/surgical benefits in each subclassification.
(ii) Conclusion. In this Example 6, the
division of outpatient, in-network benefits
into sub-classifications for office visits and
all other outpatient, in-network items and
services does not violate the parity
requirements of this paragraph (c)(3).
Example 7. (i) Facts. Same facts as
Example 6, but for purposes of determining
parity, the plan divides the outpatient, innetwork classification into outpatient, innetwork generalists and outpatient, innetwork specialists.
(ii) Conclusion. In this Example 7, the
division of outpatient, in-network benefits
into any sub-classifications other than office
visits and all other outpatient items and
services violates the requirements of
paragraph (c)(3)(iii)(C) of this section.

(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

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

(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

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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

PO 00000

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).
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

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

Total benefits
$2,000x
1,000x
2,000x
2,000x
500x

Percent
subject to
deductible
90
100
70
94
60

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

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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.
(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) For plans with multiple network
tiers (such as preferred providers and
participating providers), network tier
design;
(D) Standards for provider admission
to participate in a network, including
reimbursement rates;
(E) Plan methods for determining
usual, customary, and reasonable
charges;
(F) 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);
(G) Exclusions based on failure to
complete a course of treatment; and
(H) Restrictions based on geographic
location, facility type, provider
specialty, and other criteria that limit
the scope or duration of benefits for
services provided under the plan or
coverage.
(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 plan requires prior
authorization from the plan’s utilization

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reviewer that a treatment is medically
necessary for all inpatient medical/surgical
benefits and for all inpatient mental health
and substance use disorder benefits. In
practice, inpatient benefits for medical/
surgical conditions are routinely approved
for seven days, after which a treatment plan
must be submitted by the patient’s attending
provider and approved by the plan. On the
other hand, for inpatient mental health and
substance use disorder benefits, routine
approval is given only for one day, after
which a treatment plan must be submitted by
the patient’s attending provider and
approved by the plan.
(ii) Conclusion. In this Example 1, the plan
violates the rules of this paragraph (c)(4)
because it is applying a stricter
nonquantitative treatment limitation in
practice to mental health and substance use
disorder benefits than is applied to medical/
surgical benefits.
Example 2. (i) Facts. A plan applies
concurrent review to inpatient care where
there are high levels of variation in length of
stay (as measured by a coefficient of variation
exceeding 0.8). In practice, the application of
this standard affects 60 percent of mental
health conditions and substance use
disorders, but only 30 percent of medical/
surgical conditions.
(ii) Conclusion. In this Example 2, the plan
complies with the rules of this paragraph
(c)(4) because the evidentiary standard used
by the plan is applied no more stringently for
mental health and substance use disorder
benefits than for medical/surgical benefits,
even though it results in an overall difference
in the application of concurrent review for
mental health conditions or substance use
disorders than for medical/surgical
conditions.
Example 3. (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 and uses
comparable criteria in determining whether a
course of treatment is medically necessary.
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 3, 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, it
is not applied in a comparable way. 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 4. (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

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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 is
based on clinically appropriate standards of
care for a condition.
(ii) Conclusion. In this Example 4, the plan
complies with the rules of this paragraph
(c)(4) because the processes for developing
the evidentiary standards used to determine
medical appropriateness and the application
of these standards 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 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 5. (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 5, the plan
violates the rules of this paragraph (c)(4).
Although the standard for applying a
nonquantitative treatment limitation is the
same for both mental health and substance
use disorder benefits and medical/surgical
benefits—whether a drug has a black box
warning—it is not applied in a comparable
manner. 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 6. (i) Facts. An employer
maintains both a major medical plan 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
plan 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 plan.
(ii) Conclusion. In this Example 6, 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.

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Example 7. (i) Facts. Training and State
licensing requirements often vary among
types of providers. A plan applies a general
standard that any provider must meet the
highest licensing requirement related to
supervised clinical experience under
applicable State law in order to participate in
the plan’s provider network. Therefore, the
plan requires master’s-level mental health
therapists to have post-degree, supervised
clinical experience but does not impose this
requirement on master’s-level general
medical providers because the scope of their
licensure under applicable State law does
require clinical experience. In addition, the
plan does not require post-degree, supervised
clinical experience for psychiatrists or Ph.D.
level psychologists since their licensing
already requires supervised training.
(ii) Conclusion. In this Example 7, the plan
complies with the rules of this paragraph
(c)(4). The requirement that master’s-level
mental health therapists must have
supervised clinical experience to join the
network is permissible, as long as the plan
consistently applies the same standard to all
providers even though it may have a
disparate impact on certain mental health
providers.
Example 8. (i) Facts. A plan considers a
wide array of factors in designing medical
management techniques for both mental
health and substance use disorder benefits
and medical/surgical benefits, such as cost of
treatment; high cost growth; variability in
cost and quality; elasticity of demand;
provider discretion in determining diagnosis,
or type or length of treatment; clinical
efficacy of any proposed treatment or service;
licensing and accreditation of providers; and
claim types with a high percentage of fraud.
Based on application of these factors in a
comparable fashion, prior authorization is
required for some (but not all) mental health
and substance use disorder benefits, as well
as for some medical/surgical benefits, but not
for others. For example, the plan requires
prior authorization for: outpatient surgery;
speech, occupational, physical, cognitive and
behavioral therapy extending for more than
six months; durable medical equipment;
diagnostic imaging; skilled nursing visits;
home infusion therapy; coordinated home
care; pain management; high-risk prenatal
care; delivery by cesarean section;
mastectomy; prostate cancer treatment;
narcotics prescribed for more than seven
days; and all inpatient services beyond 30
days. The evidence considered in developing
its medical management techniques includes
consideration of a wide array of recognized
medical literature and professional standards
and protocols (including comparative
effectiveness studies and clinical trials). This
evidence and how it was used to develop
these medical management techniques is also
well documented by the plan.
(ii) Conclusion. In this Example 8, the plan
complies with the rules of this paragraph
(c)(4). Under the terms of the plan as written
and in operation, the processes, strategies,
evidentiary standards, and other factors
considered by the plan in implementing its
prior authorization requirement with respect
to mental health and substance use disorder
benefits are comparable to, and applied no

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more stringently than, those applied with
respect to medical/surgical benefits.
Example 9. (i) Facts. A plan generally
covers medically appropriate treatments. The
plan automatically excludes coverage for
inpatient substance use disorder treatment in
any setting outside of a hospital (such as a
freestanding or residential treatment center).
For inpatient treatment outside of a hospital
for other conditions (including freestanding
or residential treatment centers prescribed for
mental health conditions, as well as for
medical/surgical conditions), the plan will
provide coverage if the prescribing physician
obtains authorization from the plan that the
inpatient treatment is medically appropriate
for the individual, based on clinically
appropriate standards of care.
(ii) Conclusion. In this Example 9, 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 substance use disorder treatment in any
setting outside of a hospital is not
comparable to the conditional exclusion of
inpatient treatment outside of a hospital for
other conditions.
Example 10. (i) Facts. A plan generally
provides coverage for medically appropriate
medical/surgical benefits as well as mental
health and substance use disorder benefits.
The plan excludes coverage for inpatient,
out-of-network treatment of chemical
dependency when obtained outside of the
State where the policy is written. There is no
similar exclusion for medical/surgical
benefits within the same classification.
(ii) Conclusion. In this Example 10, the
plan violates the rules of this paragraph
(c)(4). The plan is imposing a nonquantitative
treatment limitation that restricts benefits
based on geographic location. Because there
is no comparable exclusion that applies to
medical/surgical benefits, this exclusion may
not be applied to mental health or substance
use disorder benefits.
Example 11. (i) Facts. A plan requires prior
authorization for all outpatient mental health
and substance use disorder services after the
ninth visit and will only approve up to five
additional visits per authorization. With
respect to outpatient medical/surgical
benefits, the plan allows an initial visit
without prior authorization. After the initial
visit, the plan pre-approves benefits based on
the individual treatment plan recommended
by the attending provider based on that
individual’s specific medical condition.
There is no explicit, predetermined cap on
the amount of additional visits approved per
authorization.
(ii) Conclusion. In this Example 11, the
plan violates the rules of this paragraph
(c)(4). Although the same nonquantitative
treatment limitation—prior authorization to
determine medical appropriateness—is
applied to both mental health and substance
use disorder benefits and medical/surgical
benefits for outpatient services, it is not
applied in a comparable way. While the plan
is more generous with respect to the number
of visits initially provided without preauthorization for mental health benefits,

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treating all mental health conditions and
substance use disorders in the same manner,
while providing for individualized treatment
of medical conditions, is not a comparable
application of this nonquantitative treatment
limitation.

(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 any denial. The reason
for any denial under a group health 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 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
requirements of § 2560.503–1 of this
chapter for group health plans.
(3) Provisions of other law.
Compliance with the disclosure
requirements in paragraphs (d)(1) and
(d)(2) of this section is not
determinative of compliance with any
other provision of applicable Federal or
State law. In particular, in addition to
those disclosure requirements,
provisions of other applicable law
require disclosure of information
relevant to medical/surgical, mental
health, and substance use disorder
benefits. For example, ERISA section
104 and § 2520.104b–1 of this chapter
provide that, for plans subject to ERISA,
instruments under which the plan is
established or operated must generally
be furnished to plan participants within
30 days of request. Instruments under
which the plan is established or
operated include documents with
information on medical necessity
criteria for both medical/surgical
benefits and mental health and
substance use disorder benefits, as well
as the processes, strategies, evidentiary
standards, and other factors used to

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apply a nonquantitative treatment
limitation with respect to medical/
surgical benefits and mental health or
substance use disorder benefits under
the plan. In addition, §§ 2560.503–1 and
2590.715–2719 of this chapter set forth
rules regarding claims and appeals,
including the right of claimants (or their
authorized representative) upon appeal
of an adverse benefit determination (or
a final internal adverse benefit
determination) to be provided upon
request and free of charge, reasonable
access to and copies of all documents,
records, and other information relevant
to the claimant’s claim for benefits. This
includes documents with information
on medical necessity criteria for both
medical/surgical benefits and mental
health and substance use disorder
benefits, as well as the processes,
strategies, evidentiary standards, and
other factors used to apply a
nonquantitative treatment limitation
with respect to medical/surgical benefits
and mental health or substance use
disorder benefits under the plan.
(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

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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;
(ii) Require a group health plan (or
health insurance issuer offering
coverage in connection with a group
health plan) that provides coverage for
mental health or substance use disorder
benefits only to the extent required
under PHS Act section 2713 to provide
additional mental health or substance
use disorder benefits in any
classification in accordance with this
section; or
(iii) 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.
(4) Coordination with EHB
requirements. Nothing in paragraph (f)
or (g) of this section changes the
requirements of 45 CFR 147.150 and 45
CFR 156.115, providing that a health
insurance issuer offering nongrandfathered health insurance coverage
in the individual or small group market
providing mental health and substance
use disorder services, including
behavioral health treatment services, as
part of essential health benefits required
under 45 CFR 156.110(a)(5) and
156.115(a), must comply with the
provisions of 45 CFR 146.136 to satisfy
the requirement to provide essential
health benefits.
(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), which provide that this
section (and certain other sections) does
not apply to any group health plan (and
health insurance issuer offering

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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—(1) In
general. If the application of this section
to a group health plan (or health
insurance coverage offered in
connection with such plans) results in
an increase for the plan year involved of
the actual total cost of coverage with
respect to medical/surgical benefits and
mental health and substance use
disorder benefits as determined and
certified under paragraph (g)(3) of this
section by an amount that exceeds the
applicable percentage described in
paragraph (g)(2) of this section of the
actual total plan costs, the provisions of
this section shall not apply to such plan
(or coverage) during the following plan
year, and such exemption shall apply to
the plan (or coverage) for one plan year.
An employer or issuer may elect to
continue to provide mental health and
substance use disorder benefits in
compliance with this section with
respect to the plan or coverage involved
regardless of any increase in total costs.
(2) Applicable percentage. With
respect to a plan or coverage, the
applicable percentage described in this
paragraph (g) is—
(i) 2 percent in the case of the first
plan year in which this section is
applied to the plan or coverage; and
(ii) 1 percent in the case of each
subsequent plan year.
(3) Determinations by actuaries—(i)
Determinations as to increases in actual
costs under a plan or coverage that are
attributable to implementation of the
requirements of this section shall be
made and certified by a qualified and
licensed actuary who is a member in
good standing of the American
Academy of Actuaries. All such
determinations must be based on the
formula specified in paragraph (g)(4) of

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this section and shall be in a written
report prepared by the actuary.
(ii) The written report described in
paragraph (g)(3)(i) of this section shall
be maintained by the group health plan
or health insurance issuer, along with
all supporting documentation relied
upon by the actuary, for a period of six
years following the notification made
under paragraph (g)(6) of this section.
(4) Formula. The formula to be used
to make the determination under
paragraph (g)(3)(i) of this section is
expressed mathematically as follows:
[(E1 ¥ E0)/T0] ¥D > k
(i) E1 is the actual total cost of
coverage with respect to mental health
and substance use disorder benefits for
the base period, including claims paid
by the plan or issuer with respect to
mental health and substance use
disorder benefits and administrative
costs (amortized over time) attributable
to providing these benefits consistent
with the requirements of this section.
(ii) E0 is the actual total cost of
coverage with respect to mental health
and substance use disorder benefits for
the length of time immediately before
the base period (and that is equal in
length to the base period), including
claims paid by the plan or issuer with
respect to mental health and substance
use disorder benefits and administrative
costs (amortized over time) attributable
to providing these benefits.
(iii) T0 is the actual total cost of
coverage with respect to all benefits
during the base period.
(iv) k is the applicable percentage of
increased cost specified in paragraph
(g)(2) of this section that will be
expressed as a fraction for purposes of
this formula.
(v) D is the average change in
spending that is calculated by applying
the formula (E1 ¥ E0)/T0 to mental
health and substance use disorder
spending in each of the five prior years
and then calculating the average change
in spending.
(5) Six month determination. If a
group health plan or health insurance
issuer seeks an exemption under this
paragraph (g), determinations under
paragraph (g)(3) of this section shall be
made after such plan or coverage has
complied with this section for at least
the first 6 months of the plan year
involved.
(6) Notification. A group health plan
or health insurance issuer that, based on
the certification described under
paragraph (g)(3) of this section, qualifies
for an exemption under this paragraph
(g), and elects to implement the
exemption, must notify participants and
beneficiaries covered under the plan,

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the Secretary, and the appropriate State
agencies of such election.
(i) Participants and beneficiaries—(A)
Content of notice. The notice to
participants and beneficiaries must
include the following information:
(1) A statement that the plan or issuer
is exempt from the requirements of this
section and a description of the basis for
the exemption.
(2) The name and telephone number
of the individual to contact for further
information.
(3) The plan or issuer name and plan
number (PN).
(4) The plan administrator’s name,
address, and telephone number.
(5) For single-employer plans, the
plan sponsor’s name, address, and
telephone number (if different from
paragraph (g)(6)(i)(A)(3) of this section)
and the plan sponsor’s employer
identification number (EIN).
(6) The effective date of such
exemption.
(7) A statement regarding the ability
of participants and beneficiaries to
contact the plan administrator or health
insurance issuer to see how benefits
may be affected as a result of the plan’s
or issuer’s election of the exemption.
(8) A statement regarding the
availability, upon request and free of
charge, of a summary of the information
on which the exemption is based (as
required under paragraph (g)(6)(i)(D) of
this section).
(B) Use of summary of material
reductions in covered services or
benefits. A plan or issuer may satisfy the
requirements of paragraph (g)(6)(i)(A) of
this section by providing participants
and beneficiaries (in accordance with
paragraph (g)(6)(i)(C) of this section)
with a summary of material reductions
in covered services or benefits
consistent with § 2520.104b–3(d) of this
chapter that also includes the
information specified in paragraph
(g)(6)(i)(A) of this section. However, in
all cases, the exemption is not effective
until 30 days after notice has been sent.
(C) Delivery. The notice described in
this paragraph (g)(6)(i) is required to be
provided to all participants and
beneficiaries. The notice may be
furnished by any method of delivery
that satisfies the requirements of section
104(b)(1) of ERISA (29 U.S.C.
1024(b)(1)) and its implementing
regulations (for example, first-class
mail). If the notice is provided to the
participant and any beneficiaries at the
participant’s last known address, then
the requirements of this paragraph
(g)(6)(i) are satisfied with respect to the
participant and all beneficiaries residing
at that address. If a beneficiary’s last
known address is different from the

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68285

participant’s last known address, a
separate notice is required to be
provided to the beneficiary at the
beneficiary’s last known address.
(D) Availability of documentation.
The plan or issuer must make available
to participants and beneficiaries (or
their representatives), on request and at
no charge, a summary of the information
on which the exemption was based. (For
purposes of this paragraph (g), an
individual who is not a participant or
beneficiary and who presents a notice
described in paragraph (g)(6)(i) of this
section is considered to be a
representative. A representative may
request the summary of information by
providing the plan a copy of the notice
provided to the participant under
paragraph (g)(6)(i) of this section with
any personally identifiable information
redacted.) The summary of information
must include the incurred expenditures,
the base period, the dollar amount of
claims incurred during the base period
that would have been denied under the
terms of the plan or coverage absent
amendments required to comply with
paragraphs (b) and (c) of this section,
the administrative costs related to those
claims, and other administrative costs
attributable to complying with the
requirements of this section. In no event
should the summary of information
include any personally identifiable
information.
(ii) Federal agencies—(A) Content of
notice. The notice to the Secretary must
include the following information:
(1) A description of the number of
covered lives under the plan (or
coverage) involved at the time of the
notification, and as applicable, at the
time of any prior election of the cost
exemption under this paragraph (g) by
such plan (or coverage);
(2) For both the plan year upon which
a cost exemption is sought and the year
prior, a description of the actual total
costs of coverage with respect to
medical/surgical benefits and mental
health and substance use disorder
benefits; and
(3) For both the plan year upon which
a cost exemption is sought and the year
prior, the actual total costs of coverage
with respect to mental health and
substance use disorder benefits under
the plan.
(B) Reporting. A group health plan,
and any health insurance coverage
offered in connection with a group
health plan, must provide notice to the
Department of Labor. This requirement
is satisfied if the plan sends a copy, to
the address designated by the Secretary
in generally applicable guidance, of the
notice described in paragraph
(g)(6)(ii)(A) of this section identifying

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the benefit package to which the
exemption applies.
(iii) Confidentiality. A notification to
the Secretary under this paragraph (g)(6)
shall be confidential. The Secretary
shall make available, upon request and
not more than on an annual basis, an
anonymous itemization of each
notification that includes—
(A) A breakdown of States by the size
and type of employers submitting such
notification; and
(B) A summary of the data received
under paragraph (g)(6)(ii) of this section.
(iv) Audits. The Secretary may audit
the books and records of a group health
plan or a health insurance issuer
relating to an exemption, including any
actuarial reports, during the 6 year
period following notification of such
exemption under paragraph (g)(6) of this
section. A State agency receiving a
notification under paragraph (g)(6) of
this section may also conduct such an
audit with respect to an exemption
covered by such notification.
(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, this section applies to
group health plans and health insurance
issuers offering group health insurance
coverage on the first day of the first plan
year beginning on or after July 1, 2014.
Until the applicability date, plans and
issuers are required to continue to
comply with the corresponding sections
of 29 CFR 2590.712 contained in the 29
CFR, parts 1927 to end, edition revised
as of July 1, 2013.
(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 date on which the
last of the collective bargaining
agreements terminates (determined
without regard to any extension agreed
to after October 3, 2008).
■ 3. Section 2590.715–2719 is amended
by adding a sentence to the end of the
introductory text of paragraph (d) and
revising paragraph (d)(1)(i) to read as
follows:

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§ 2590.712 Internal claims and appeals and
external review processes.

*

*
*
*
*
(d) * * * A Multi State Plan or MSP,
as defined by 45 CFR 800.20, must
provide an effective Federal external
review process in accordance with this
paragraph (d).
(1) * * *
(i) In general. Subject to the
suspension provision in paragraph
(d)(1)(ii) of this section and except to
the extent provided otherwise by the
Secretary in guidance, the Federal
external review process established
pursuant to this paragraph (d) applies,
at a minimum, to any adverse benefit
determination or final internal adverse
benefit determination (as defined in
paragraphs (a)(2)(i) and (a)(2)(v) of this
section), except that a denial, reduction,
termination, or a failure to provide
payment for a benefit based on a
determination that a participant or
beneficiary fails to meet the
requirements for eligibility under the
terms of a group health plan is not
eligible for the Federal external review
process under this paragraph (d).
*
*
*
*
*
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 adopts as final the
interim final rule with comment period
amending 45 CFR part 146, which was
published on February 2, 2010, in the
Federal Register at 75 FR 5410, with the
following changes, and further amends
part 147 as set forth below:
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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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 with respect to items or services
for medical conditions or surgical
procedures, as defined under the terms
of the plan or health insurance coverage
and in accordance with applicable
Federal and State law, but does not
include mental health or substance use
disorder benefits. Any condition
defined by the plan or coverage 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 items or services for
mental health conditions, as defined
under the terms of the plan or health
insurance coverage and in accordance
with applicable Federal and State law.
Any condition defined by the plan or
coverage 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

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current version of the ICD, or State
guidelines).
Substance use disorder benefits
means benefits with respect to items or
services for substance use disorders, as
defined under the terms of the plan or
health insurance coverage 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
nonquantitative treatment limitations,
which otherwise limit the scope or
duration of benefits for treatment under
a plan or coverage. (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 for purposes of this
definition.
(b) Parity requirements with respect to
aggregate lifetime and annual dollar
limits. This paragraph (b) details the
application of the parity requirements
with respect to aggregate lifetime and
annual dollar limits. This paragraph (b)
does not address the provisions of PHS
Act section 2711, which prohibit
imposing lifetime and annual limits on
the dollar value of essential health
benefits. For more information, see
§ 147.126 of this subchapter.
(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)(5) 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

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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.)
(4) 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.
(5) 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—

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68287

(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)(5)(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)(5), the weighting
applicable to any category of medical/
surgical benefits is determined in the
manner set forth in paragraph (b)(4) of
this section for determining one-third or
two-thirds of all medical/surgical
benefits.
(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

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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
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

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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 (illustrated in examples in
paragraph (c)(2)(ii)(C) of this section).
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. See
special rules for plans with multiple
network tiers in paragraph (c)(3)(iii) of
this section.
(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. See
special rules for office visits and plans
with multiple network tiers in
paragraph (c)(3)(iii) of this section.
(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. See special rules
for office visits in paragraph (c)(3)(iii) of
this section.
(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.

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(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 care, 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 care
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—

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(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
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

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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. (See
also PHS Act section 2707(b) and
Affordable Care Act section 1302(c),
which establish limitations on annual
deductibles for non-grandfathered
health plans in the small group market
and annual limitations on out-of-pocket
maximums for all non-grandfathered
health plans.)
(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

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68289

benefits in the classification is
determined separately for each coverage
unit.
(iii) Special rules—(A) 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.
(B) Multiple network tiers. If a plan (or
health insurance coverage) provides
benefits through multiple tiers of innetwork providers (such as an innetwork tier of preferred providers with
more generous cost-sharing to
participants than a separate in-network
tier of participating providers), the plan
may divide its benefits furnished on an
in-network basis into sub-classifications
that reflect network tiers, if the tiering
is based on reasonable factors
determined in accordance with the rules
in paragraph (c)(4)(i) of this section
(such as quality, performance, and
market standards) and without regard to
whether a provider provides services
with respect to medical/surgical benefits
or mental health or substance use
disorder benefits. After the subclassifications are established, the plan
or issuer may not impose any financial
requirement or treatment limitation on
mental health or substance use disorder
benefits in any sub-classification that is
more restrictive than the predominant
financial requirement or treatment
limitation that applies to substantially
all medical/surgical benefits in the subclassification using the methodology set
forth in paragraph (c)(3)(i) of this
section.
(C) Sub-classifications permitted for
office visits, separate from other
outpatient services. For purposes of
applying the financial requirement and
treatment limitation rules of this
paragraph (c), a plan or issuer may
divide its benefits furnished on an
outpatient basis into the two subclassifications described in this
paragraph (c)(3)(iii)(C). After the subclassifications are established, the plan
or issuer may not impose any financial

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requirement or quantitative treatment
limitation on mental health or substance
use disorder benefits in any subclassification that is more restrictive
than the predominant financial
requirement or quantitative treatment
limitation that applies to substantially
all medical/surgical benefits in the subclassification using the methodology set
forth in paragraph (c)(3)(i) of this
section. Sub-classifications other than
these special rules, such as separate sub-

classifications for generalists and
specialists, are not permitted. The two
sub-classifications permitted under this
paragraph (c)(3)(iii)(C) are:
(1) Office visits (such as physician
visits), and
(2) All other outpatient items and
services (such as outpatient surgery,
facility charges for day treatment
centers, laboratory charges, or other
medical items).
(iv) Examples. The rules of
paragraphs (c)(3)(i), (c)(3)(ii), and

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

0%
$200x
20%
N/A

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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
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

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

$0
$200x
20%
N/A

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

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

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

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(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 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).

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Tier 1

Tier 2

Tier 3

Tier 4

Tier description

Generic drugs

Preferred
brand name
drugs

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

Specialty
drugs

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

90%

80%

60%

50%

(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).
Example 5. (i) Facts. A plan has two-tiers
of network of providers: A preferred provider
tier and a participating provider tier.
Providers are placed in either the preferred
tier or participating tier based on reasonable
factors determined in accordance with the
rules in paragraph (c)(4)(i) of this section,
such as accreditation, quality and
performance measures (including customer
feedback), and relative reimbursement rates.
Furthermore, provider tier placement is
determined without regard to whether a
provider specializes in the treatment of
mental health conditions or substance use
disorders, or medical/surgical conditions.
The plan divides the in-network
classifications into two sub-classifications
(in-network/preferred and in-network/
participating). The plan does not impose any
financial requirement or treatment limitation
on mental health or substance use disorder
benefits in either of these sub-classifications
that is more restrictive than the predominant
financial requirement or treatment limitation
that applies to substantially all medical/
surgical benefits in each sub-classification.
(ii) Conclusion. In this Example 5, the
division of in-network benefits into subclassifications that reflect the preferred and
participating provider tiers does not violate
the parity requirements of this paragraph
(c)(3).
Example 6. (i) Facts. With respect to
outpatient, in-network benefits, a plan

imposes a $25 copayment for office visits and
a 20 percent coinsurance requirement for
outpatient surgery. The plan divides the
outpatient, in-network classification into two
sub-classifications (in-network office visits
and all other outpatient, in-network items
and services). The plan or issuer does not
impose any financial requirement or
quantitative treatment limitation on mental
health or substance use disorder benefits in
either of these sub-classifications that is more
restrictive than the predominant financial
requirement or quantitative treatment
limitation that applies to substantially all
medical/surgical benefits in each subclassification.
(ii) Conclusion. In this Example 6, the
division of outpatient, in-network benefits
into sub-classifications for office visits and
all other outpatient, in-network items and
services does not violate the parity
requirements of this paragraph (c)(3).
Example 7. (i) Facts. Same facts as
Example 6, but for purposes of determining
parity, the plan divides the outpatient, innetwork classification into outpatient, innetwork generalists and outpatient, innetwork specialists.
(ii) Conclusion. In this Example 7, the
division of outpatient, in-network benefits
into any sub-classifications other than office
visits and all other outpatient items and
services violates the requirements of
paragraph (c)(3)(iii)(C) of this section.

(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

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

(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

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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

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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).
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

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

Total benefits
$2,000x
1,000x
2,000x
2,000x
500x

Percent
subject to
deductible
90
100
70
94
60

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

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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.
(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) For plans with multiple network
tiers (such as preferred providers and
participating providers), network tier
design;
(D) Standards for provider admission
to participate in a network, including
reimbursement rates;
(E) Plan methods for determining
usual, customary, and reasonable
charges;
(F) 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);
(G) Exclusions based on failure to
complete a course of treatment; and
(H) Restrictions based on geographic
location, facility type, provider
specialty, and other criteria that limit
the scope or duration of benefits for
services provided under the plan or
coverage.
(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 plan requires prior
authorization from the plan’s utilization

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reviewer that a treatment is medically
necessary for all inpatient medical/surgical
benefits and for all inpatient mental health
and substance use disorder benefits. In
practice, inpatient benefits for medical/
surgical conditions are routinely approved
for seven days, after which a treatment plan
must be submitted by the patient’s attending
provider and approved by the plan. On the
other hand, for inpatient mental health and
substance use disorder benefits, routine
approval is given only for one day, after
which a treatment plan must be submitted by
the patient’s attending provider and
approved by the plan.
(ii) Conclusion. In this Example 1, the plan
violates the rules of this paragraph (c)(4)
because it is applying a stricter
nonquantitative treatment limitation in
practice to mental health and substance use
disorder benefits than is applied to medical/
surgical benefits.
Example 2. (i) Facts. A plan applies
concurrent review to inpatient care where
there are high levels of variation in length of
stay (as measured by a coefficient of variation
exceeding 0.8). In practice, the application of
this standard affects 60 percent of mental
health conditions and substance use
disorders, but only 30 percent of medical/
surgical conditions.
(ii) Conclusion. In this Example 2, the plan
complies with the rules of this paragraph
(c)(4) because the evidentiary standard used
by the plan is applied no more stringently for
mental health and substance use disorder
benefits than for medical/surgical benefits,
even though it results in an overall difference
in the application of concurrent review for
mental health conditions or substance use
disorders than for medical/surgical
conditions.
Example 3. (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 and uses
comparable criteria in determining whether a
course of treatment is medically necessary.
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 3, 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, it
is not applied in a comparable way. 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 4. (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

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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 is
based on clinically appropriate standards of
care for a condition.
(ii) Conclusion. In this Example 4, the plan
complies with the rules of this paragraph
(c)(4) because the processes for developing
the evidentiary standards used to determine
medical appropriateness and the application
of these standards 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 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 5. (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 5, the plan
violates the rules of this paragraph (c)(4).
Although the standard for applying a
nonquantitative treatment limitation is the
same for both mental health and substance
use disorder benefits and medical/surgical
benefits—whether a drug has a black box
warning—it is not applied in a comparable
manner. 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 6. (i) Facts. An employer
maintains both a major medical plan 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
plan 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 plan.
(ii) Conclusion. In this Example 6, 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.

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Example 7. (i) Facts. Training and State
licensing requirements often vary among
types of providers. A plan applies a general
standard that any provider must meet the
highest licensing requirement related to
supervised clinical experience under
applicable State law in order to participate in
the plan’s provider network. Therefore, the
plan requires master’s-level mental health
therapists to have post-degree, supervised
clinical experience but does not impose this
requirement on master’s-level general
medical providers because the scope of their
licensure under applicable State law does
require clinical experience. In addition, the
plan does not require post-degree, supervised
clinical experience for psychiatrists or Ph.D.
level psychologists since their licensing
already requires supervised training.
(ii) Conclusion. In this Example 7, the plan
complies with the rules of this paragraph
(c)(4). The requirement that master’s-level
mental health therapists must have
supervised clinical experience to join the
network is permissible, as long as the plan
consistently applies the same standard to all
providers even though it may have a
disparate impact on certain mental health
providers.
Example 8. (i) Facts. A plan considers a
wide array of factors in designing medical
management techniques for both mental
health and substance use disorder benefits
and medical/surgical benefits, such as cost of
treatment; high cost growth; variability in
cost and quality; elasticity of demand;
provider discretion in determining diagnosis,
or type or length of treatment; clinical
efficacy of any proposed treatment or service;
licensing and accreditation of providers; and
claim types with a high percentage of fraud.
Based on application of these factors in a
comparable fashion, prior authorization is
required for some (but not all) mental health
and substance use disorder benefits, as well
as for some medical/surgical benefits, but not
for others. For example, the plan requires
prior authorization for: Outpatient surgery;
speech, occupational, physical, cognitive and
behavioral therapy extending for more than
six months; durable medical equipment;
diagnostic imaging; skilled nursing visits;
home infusion therapy; coordinated home
care; pain management; high-risk prenatal
care; delivery by cesarean section;
mastectomy; prostate cancer treatment;
narcotics prescribed for more than seven
days; and all inpatient services beyond 30
days. The evidence considered in developing
its medical management techniques includes
consideration of a wide array of recognized
medical literature and professional standards
and protocols (including comparative
effectiveness studies and clinical trials). This
evidence and how it was used to develop
these medical management techniques is also
well documented by the plan.
(ii) Conclusion. In this Example 8, the plan
complies with the rules of this paragraph
(c)(4). Under the terms of the plan as written
and in operation, the processes, strategies,
evidentiary standards, and other factors
considered by the plan in implementing its
prior authorization requirement with respect
to mental health and substance use disorder
benefits are comparable to, and applied no

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more stringently than, those applied with
respect to medical/surgical benefits.
Example 9. (i) Facts. A plan generally
covers medically appropriate treatments. The
plan automatically excludes coverage for
inpatient substance use disorder treatment in
any setting outside of a hospital (such as a
freestanding or residential treatment center).
For inpatient treatment outside of a hospital
for other conditions (including freestanding
or residential treatment centers prescribed for
mental health conditions, as well as for
medical/surgical conditions), the plan will
provide coverage if the prescribing physician
obtains authorization from the plan that the
inpatient treatment is medically appropriate
for the individual, based on clinically
appropriate standards of care.
(ii) Conclusion. In this Example 9, 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 substance use disorder treatment in any
setting outside of a hospital is not
comparable to the conditional exclusion of
inpatient treatment outside of a hospital for
other conditions.
Example 10. (i) Facts. A plan generally
provides coverage for medically appropriate
medical/surgical benefits as well as mental
health and substance use disorder benefits.
The plan excludes coverage for inpatient,
out-of-network treatment of chemical
dependency when obtained outside of the
State where the policy is written. There is no
similar exclusion for medical/surgical
benefits within the same classification.
(ii) Conclusion. In this Example 10, the
plan violates the rules of this paragraph
(c)(4). The plan is imposing a nonquantitative
treatment limitation that restricts benefits
based on geographic location. Because there
is no comparable exclusion that applies to
medical/surgical benefits, this exclusion may
not be applied to mental health or substance
use disorder benefits.
Example 11. (i) Facts. A plan requires
prior authorization for all outpatient mental
health and substance use disorder services
after the ninth visit and will only approve up
to five additional visits per authorization.
With respect to outpatient medical/surgical
benefits, the plan allows an initial visit
without prior authorization. After the initial
visit, the plan pre-approves benefits based on
the individual treatment plan recommended
by the attending provider based on that
individual’s specific medical condition.
There is no explicit, predetermined cap on
the amount of additional visits approved per
authorization.
(ii) Conclusion. In this Example 11, the
plan violates the rules of this paragraph
(c)(4). Although the same nonquantitative
treatment limitation—prior authorization to
determine medical appropriateness—is
applied to both mental health and substance
use disorder benefits and medical/surgical
benefits for outpatient services, it is not
applied in a comparable way. While the plan
is more generous with respect to the number
of visits initially provided without preauthorization for mental health benefits,

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treating all mental health conditions and
substance use disorders in the same manner,
while providing for individualized treatment
of medical conditions, is not a comparable
application of this nonquantitative treatment
limitation.

(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 any denial. The reason
for any denial under a group health 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 by the plan
administrator (or the health insurance
issuer offering such coverage) to the
participant or beneficiary. 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).
(3) Provisions of other law.
Compliance with the disclosure
requirements in paragraphs (d)(1) and
(d)(2) of this section is not
determinative of compliance with any
other provision of applicable Federal or
State law. In particular, in addition to
those disclosure requirements,
provisions of other applicable law
require disclosure of information
relevant to medical/surgical, mental
health, and substance use disorder
benefits. For example, § 147.136 of this
subchapter sets forth rules regarding
claims and appeals, including the right
of claimants (or their authorized
representative) upon appeal of an
adverse benefit determination (or a final
internal adverse benefit determination)
to be provided upon request and free of
charge, reasonable access to and copies

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of all documents, records, and other
information relevant to the claimant’s
claim for benefits. This includes
documents with information on medical
necessity criteria for both medical/
surgical benefits and mental health and
substance use disorder benefits, as well
as the processes, strategies, evidentiary
standards, and other factors used to
apply a nonquantitative treatment
limitation with respect to medical/
surgical benefits and mental health or
substance use disorder benefits under
the plan.
(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
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;

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(ii) Require a group health plan (or
health insurance issuer offering
coverage in connection with a group
health plan) that provides coverage for
mental health or substance use disorder
benefits only to the extent required
under PHS Act section 2713 to provide
additional mental health or substance
use disorder benefits in any
classification in accordance with this
section; or
(iii) 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.
(4) Coordination with EHB
requirements. Nothing in paragraph (f)
or (g) of this section changes the
requirements of §§ 147.150 and 156.115
of this subchapter, providing that a
health insurance issuer offering nongrandfathered health insurance coverage
in the individual or small group market
providing mental health and substance
use disorder services, including
behavioral health treatment services, as
part of essential health benefits required
under §§ 156.110(a)(5) and 156.115(a) of
this subchapter, must comply with the
provisions of this section to satisfy the
requirement to provide essential health
benefits.
(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 (as defined in section 2791 of
the PHS Act).
(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 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—(1) In
general. If the application of this section
to a group health plan (or health
insurance coverage offered in
connection with such plans) results in
an increase for the plan year involved of

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the actual total cost of coverage with
respect to medical/surgical benefits and
mental health and substance use
disorder benefits as determined and
certified under paragraph (g)(3) of this
section by an amount that exceeds the
applicable percentage described in
paragraph (g)(2) of this section of the
actual total plan costs, the provisions of
this section shall not apply to such plan
(or coverage) during the following plan
year, and such exemption shall apply to
the plan (or coverage) for one plan year.
An employer or issuer may elect to
continue to provide mental health and
substance use disorder benefits in
compliance with this section with
respect to the plan or coverage involved
regardless of any increase in total costs.
(2) Applicable percentage. With
respect to a plan or coverage, the
applicable percentage described in this
paragraph (g) is—
(i) 2 percent in the case of the first
plan year in which this section is
applied to the plan or coverage; and
(ii) 1 percent in the case of each
subsequent plan year.
(3) Determinations by actuaries—(i)
Determinations as to increases in actual
costs under a plan or coverage that are
attributable to implementation of the
requirements of this section shall be
made and certified by a qualified and
licensed actuary who is a member in
good standing of the American
Academy of Actuaries. All such
determinations must be based on the
formula specified in paragraph (g)(4) of
this section and shall be in a written
report prepared by the actuary.
(ii) The written report described in
paragraph (g)(3)(i) of this section shall
be maintained by the group health plan
or health insurance issuer, along with
all supporting documentation relied
upon by the actuary, for a period of six
years following the notification made
under paragraph (g)(6) of this section.
(4) Formula. The formula to be used
to make the determination under
paragraph (g)(3)(i) of this section is
expressed mathematically as follows:
[(E1¥E0)/T0] ¥D > k
(i) E1 is the actual total cost of
coverage with respect to mental health
and substance use disorder benefits for
the base period, including claims paid
by the plan or issuer with respect to
mental health and substance use
disorder benefits and administrative
costs (amortized over time) attributable
to providing these benefits consistent
with the requirements of this section.
(ii) E0 is the actual total cost of
coverage with respect to mental health
and substance use disorder benefits for
the length of time immediately before
the base period (and that is equal in

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length to the base period), including
claims paid by the plan or issuer with
respect to mental health and substance
use disorder benefits and administrative
costs (amortized over time) attributable
to providing these benefits.
(iii) T0 is the actual total cost of
coverage with respect to all benefits
during the base period.
(iv) k is the applicable percentage of
increased cost specified in paragraph
(g)(2) of this section that will be
expressed as a fraction for purposes of
this formula.
(v) D is the average change in
spending that is calculated by applying
the formula (E1¥E0)/T0 to mental health
and substance use disorder spending in
each of the five prior years and then
calculating the average change in
spending.
(5) Six month determination. If a
group health plan or health insurance
issuer seeks an exemption under this
paragraph (g), determinations under
paragraph (g)(3) of this section shall be
made after such plan or coverage has
complied with this section for at least
the first 6 months of the plan year
involved.
(6) Notification. A group health plan
or health insurance issuer that, based on
the certification described under
paragraph (g)(3) of this section, qualifies
for an exemption under this paragraph
(g), and elects to implement the
exemption, must notify participants and
beneficiaries covered under the plan,
the Secretary, and the appropriate State
agencies of such election.
(i) Participants and beneficiaries—(A)
Content of notice. The notice to
participants and beneficiaries must
include the following information:
(1) A statement that the plan or issuer
is exempt from the requirements of this
section and a description of the basis for
the exemption.
(2) The name and telephone number
of the individual to contact for further
information.
(3) The plan or issuer name and plan
number (PN).
(4) The plan administrator’s name,
address, and telephone number.
(5) For single-employer plans, the
plan sponsor’s name, address, and
telephone number (if different from
paragraph (g)(6)(i)(A)(3) of this section)
and the plan sponsor’s employer
identification number (EIN).
(6) The effective date of such
exemption.
(7) A statement regarding the ability
of participants and beneficiaries to
contact the plan administrator or health
insurance issuer to see how benefits
may be affected as a result of the plan’s
or issuer’s election of the exemption.

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(8) A statement regarding the
availability, upon request and free of
charge, of a summary of the information
on which the exemption is based (as
required under paragraph (g)(6)(i)(D) of
this section).
(B) Use of summary of material
reductions in covered services or
benefits. A plan or issuer may satisfy the
requirements of paragraph (g)(6)(i)(A) of
this section by providing participants
and beneficiaries (in accordance with
paragraph (g)(6)(i)(C) of this section)
with a summary of material reductions
in covered services or benefits
consistent with 29 CFR 2520.104b–3(d)
that also includes the information
specified in paragraph (g)(6)(i)(A) of this
section. However, in all cases, the
exemption is not effective until 30 days
after notice has been sent.
(C) Delivery. The notice described in
this paragraph (g)(6)(i) is required to be
provided to all participants and
beneficiaries. The notice may be
furnished by any method of delivery
that satisfies the requirements of section
104(b)(1) of ERISA (29 U.S.C.
1024(b)(1)) and its implementing
regulations (for example, first-class
mail). If the notice is provided to the
participant and any beneficiaries at the
participant’s last known address, then
the requirements of this paragraph
(g)(6)(i) are satisfied with respect to the
participant and all beneficiaries residing
at that address. If a beneficiary’s last
known address is different from the
participant’s last known address, a
separate notice is required to be
provided to the beneficiary at the
beneficiary’s last known address.
(D) Availability of documentation.
The plan or issuer must make available
to participants and beneficiaries (or
their representatives), on request and at
no charge, a summary of the information
on which the exemption was based. (For
purposes of this paragraph (g), an
individual who is not a participant or
beneficiary and who presents a notice
described in paragraph (g)(6)(i) of this
section is considered to be a
representative. A representative may
request the summary of information by
providing the plan a copy of the notice
provided to the participant under
paragraph (g)(6)(i) of this section with
any personally identifiable information
redacted.) The summary of information
must include the incurred expenditures,
the base period, the dollar amount of
claims incurred during the base period
that would have been denied under the
terms of the plan or coverage absent
amendments required to comply with
paragraphs (b) and (c) of this section,
the administrative costs related to those
claims, and other administrative costs

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68295

attributable to complying with the
requirements of this section. In no event
should the summary of information
include any personally identifiable
information.
(ii) Federal agencies—(A) Content of
notice. The notice to the Secretary must
include the following information:
(1) A description of the number of
covered lives under the plan (or
coverage) involved at the time of the
notification, and as applicable, at the
time of any prior election of the cost
exemption under this paragraph (g) by
such plan (or coverage);
(2) For both the plan year upon which
a cost exemption is sought and the year
prior, a description of the actual total
costs of coverage with respect to
medical/surgical benefits and mental
health and substance use disorder
benefits; and
(3) For both the plan year upon which
a cost exemption is sought and the year
prior, the actual total costs of coverage
with respect to mental health and
substance use disorder benefits under
the plan.
(B) Reporting by health insurance
coverage offered in connection with a
church plan. See 26 CFR
54.9812(g)(6)(ii)(B) for delivery with
respect to church plans.
(C) Reporting by health insurance
coverage offered in connection with a
group health plans subject to Part 7 of
Subtitle B of Title I of ERISA. See 29
CFR 2590.712(g)(6)(ii) for delivery with
respect to group health plans subject to
ERISA.
(D) Reporting with respect to nonFederal governmental plans and health
insurance issuers in the individual
market. A group health plan that is a
non-Federal governmental plan, or a
health insurance issuer offering health
insurance coverage in the individual
market, claiming the exemption of this
paragraph (g) for any benefit package
must provide notice to the Department
of Health and Human Services. This
requirement is satisfied if the plan or
issuer sends a copy, to the address
designated by the Secretary in generally
applicable guidance, of the notice
described in paragraph (g)(6)(ii)(A) of
this section identifying the benefit
package to which the exemption
applies.
(iii) Confidentiality. A notification to
the Secretary under this paragraph (g)(6)
shall be confidential. The Secretary
shall make available, upon request and
not more than on an annual basis, an
anonymous itemization of each
notification that includes—
(A) A breakdown of States by the size
and type of employers submitting such
notification; and

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Federal Register / Vol. 78, No. 219 / Wednesday, November 13, 2013 / Rules and Regulations

emcdonald on DSK67QTVN1PROD with RULES3

(B) A summary of the data received
under paragraph (g)(6)(ii) of this section.
(iv) Audits. The Secretary may audit
the books and records of a group health
plan or a health insurance issuer
relating to an exemption, including any
actuarial reports, during the 6 year
period following notification of such
exemption under paragraph (g)(6) of this
section. A State agency receiving a
notification under paragraph (g)(6) of
this section may also conduct such an
audit with respect to an exemption
covered by such notification.
(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, this section applies to
group health plans and health insurance
issuers offering group health insurance
coverage on the first day of the first plan
year beginning on or after July 1, 2014.
Until the applicability date, plans and
issuers are required to continue to
comply with the corresponding sections
of § 146.136 contained in the 45 CFR,
parts 1 to 199, edition revised as of
October 1, 2013.
(2) Special effective date for certain
collectively-bargained plans. For a
group health plan maintained pursuant
to one or more collective bargaining

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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 date on which the
last of the collective bargaining
agreements terminates (determined
without regard to any extension agreed
to after October 3, 2008).
PART 147—HEALTH INSURANCE
REFORM REQUIREMENTS FOR THE
GROUP HEALTH INSURANCE
MARKETS

external review process established
pursuant to this paragraph (d) applies,
at a minimum, to any adverse benefit
determination or final internal adverse
benefit determination (as defined in
paragraphs (a)(2)(i) and (a)(2)(v) of this
section), except that a denial, reduction,
termination, or a failure to provide
payment for a benefit based on a
determination that a participant or
beneficiary fails to meet the
requirements for eligibility under the
terms of a group health plan is not
eligible for the Federal external review
process under this paragraph (d).
*
*
*
*
*

3. The authority citation for part 147
continues to read as follows:

■

Authority: Secs. 2701 through 2763, 2791,
and 2792 of the Public Health Service Act (42
U.S.C. 300gg through 300gg–63, 300gg–91,
and 300gg–92), as amended.

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

■

4. Section 147.136 is amended by
adding a sentence to the end of the
introductory text of paragraph (d) and
revising paragraph (d)(1)(i) to read as
follows:

■

§ 147.136 Internal claims and appeals and
external review processes.

*

*
*
*
*
(d) * * * A Multi State Plan or MSP,
as defined by 45 CFR 800.20, must
provide an effective Federal external
review process in accordance with this
paragraph (d).
(1) * * *
(i) In general. Subject to the
suspension provision in paragraph
(d)(1)(ii) of this section and except to
the extent provided otherwise by the
Secretary in guidance, the Federal

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5. Section 147.160 is added to read as
follows:

(a) In general. The provisions of
§ 146.136 of this subchapter apply to
health insurance coverage offered by
health insurance issuer in the
individual market in the same manner
and to the same extent as such
provisions apply to health insurance
coverage offered by a health insurance
issuer in connection with a group health
plan in the large group market.
(b) Applicability date. The provisions
of this section apply for policy years
beginning on or after the applicability
dates set forth in § 146.136(i) of this
subchapter. This section applies to nongrandfathered and grandfathered health
plans as defined in § 147.140.
[FR Doc. 2013–27086 Filed 11–8–13; 11:15 am]
BILLING CODE 4830–01; 4510–29; 4120–01–P

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