Mental Health Parity Update: What’s New in 2024

Americans are becoming more open about mental health. For years, mental health issues were stigmatized and deprioritized in comparison to physical health—by doctors, by much of the general public, and, critically, by health insurance providers. Consequently, mental health care benefits offered by insurers generally weren’t on par with physical health care benefits—a disparity that mental health parity laws aim to address.

In this article, we’ll explore everything about the Mental Health Parity law, including key historical milestones, amendments, and the most recent update—plus its scope and impact on employers, healthcare providers, and consumers.

What Is Mental Health Parity?

Mental health parity is the idea that health insurance providers should treat mental health conditions and substance use disorder (MH/SUD) as seriously as they would treat medical and surgical (M/S) conditions. This idea was codified into law in 2008 through the Mental Health Parity and Addiction Equity Act (MPHAEA) of 2008.

Mental health parity prohibits insurers from imposing stricter limits, higher costs, or more restrictive requirements on MH/SUD benefits than on physical health benefits.

The Broader Impact of Mental Health Parity on Society

Businesses that invest in mental health benefits have happier, healthier employees, and they produce greater economic gains overall. One study even shows that every one dollar spent on treating depression and anxiety yields a $4 return through better health and productivity.

Mental health conditions often trap individuals in a cycle of poverty, limiting their ability to work and contribute to society. This negatively impacts social and economic productivity across the country: according to one estimate, reduced employment and productivity due to MH/SUD conditions account for up to 4% of GDP.

Insufficient insurance coverage is a significant barrier that prevents many Americans from seeking care. Mental health parity tackles these barriers by ensuring affordable access to licensed professionals and treatments, encouraging more people to seek help.

Examples of Mental Health Disparities

A survey conducted before the passage of the Mental Health Parity and Addiction Equity Act found that nearly three in four workers with employer-sponsored health plans faced annual limits on outpatient visits, and one in five reported higher cost-sharing for mental health benefits than for general medical care.

Similarly, a National Alliance on Mental Illness (NAMI) survey found that one in three people with private insurance had difficulty finding a mental health therapist who accepted their plan. Respondents also faced higher out-of-pocket costs for mental health services and were five times more likely to have out-of-network visits than for medical services​.

Another report based on a 2023 survey found that:

• 57% of those seeking MH/SUD care were unable to access treatment at least once compared to just 20% for physical health care. Rates were even higher in adolescents (70%).
• 39% of people with employer-sponsored health insurance used out-of-network providers for MH/SUD outpatient care, compared to 15% for physical healthcare.
• Nearly half of those finding in-network care had to contact four or more providers to secure an appointment.

What Is the Mental Health Parity and Addiction Equity Act (MHPAEA)?

The Mental Health Parity and Addiction Equity Act (MHPAEA) is a federal law enacted in 2008 that requires health insurance policies and group health plans to cover mental health and addiction-related conditions as thoroughly as they would standard medical and surgical conditions. This means that health plans cannot impose more restrictive limitations on MH/SUD benefits than those applied to M/S benefits.

The law’s main objective is to safeguard access to behavioral health conditions for those with private health insurance and ensure they don’t face greater difficulty accessing care than they do for physical conditions.

The law seeks to maintain parity by prohibiting health plans from imposing stricter limits on mental health and substance use disorder benefits than on medical/surgical benefits. These limitations include:

• Financial Requirements: Copayments, deductibles, coinsurance, and out-of-pocket maximums must be set similarly for both physical and mental healthcare coverage
• Treatment Limitations: Limits health plans impose on the scope or duration of benefits for MH/SUD coverage must be comparable to those for M/S coverage.
• Pre-Authorization Requirements: Insurance providers can’t make it harder to get approval for mental health or substance use disorder treatment.

The parity requirement applies separately to each of the following benefit classifications:

• Inpatient, in-network benefits
• Inpatient, out-of-network benefits
• Outpatient, in-network benefits
• Outpatient, out-of-network benefits
• Emergency benefits
• Prescription drug benefits

What Types of Insurance Have to Meet MHPAEA Requirements?

MHPAEA applies to the following types of insurance:

• Private employer-sponsored group health plan with more than 51 employees
• State and local government employee plans (non-federal governmental plans)
• Individual and small-group insurance plans
• Medicaid managed care organizations (MCOs)
• Children’s Health Insurance Program (CHIP)
• Medicaid alternative benefit plans (ABPs)

It does not apply to Medicare or Medicaid fee-for-service plans.

Quantitative Treatment Limitations (QTL) vs. Non-Quantitative Treatment Limitations (NQTL)

There are two types of treatment limitations that have been addressed in amendments to the MHPAEA: Quantitative Treatment Limitations (QTL) and Non-Quantitative Treatment Limitations (NQTL).

• QTL are numerical limits on the amount of treatment a person can receive, such as limits on outpatient visits or days of coverage for a specific treatment. QTLs also include financial requirements like copayments, coinsurance, and deductibles.
• NQTL are non-numerical limitations on the scope or duration of treatment. These can include stricter criteria for determining medical necessity, more exacting pre-approval requirements for mental health or substance use disorder treatment, or a general lack of mental health treatment providers in a plan’s network.

Because NQTL are harder to define than QTLs, several of the amendments to the law since 2008 have sought to address persistent lack of parity within them.

Historical Milestones & Amendments

Efforts to establish parity began in the 1990s. The issue was framed as an anti-discrimination measure, and the first major breakthrough came with the Mental Health Parity Act (MHPA) of 1996, sponsored by U.S. Senators Pete Domenici and Paul Wellstone.

This act required large employer health plans to apply the same lifetime and annual dollar limits for mental and physical health services. However, the law had loopholes: it didn’t address visit limits, higher cost-sharing, or coverage for substance use disorders. As a result, insurers restricted care by limiting hospital stays and outpatient visits, although the lifetime limit protection helped prevent patient bankruptcies.

The MHPAEA of 2008 kept the 1996 MHPA’s protections and added new ones, including extending parity requirements to SUDs.

Here are some key amendments to the MHPAEA that have been made since 2008:

• The Affordable Care Act (ACA) in 2010: This broadened MHPAEA’s reach and included individual health insurance coverage, small group markets, and certain Medicaid plans.
• The 21st Century Cures Act (2016): This required federal departments to issue guidance, improve coordination between federal and state authorities, and ensure that health plans comply with parity requirements, especially regarding non-quantitative treatment limits (NQTLs) and disclosure requirements.
• The Consolidated Appropriations Act (CAA) 2021: required group health plans and health insurance issuers to do a comparative analysis of the design and application of NQTLs, including preauthorization for services.

2024 Changes to Mental Health Parity Laws & Their Implications

Despite the enactment of the MHPAEA, the U.S. continues to face a mental health and substance use disorder crisis, partly due to insurers struggling with compliance and exploiting loopholes to deny care.

To address this, the Departments of Labor, Treasury, Health and Human Services (HHS) issued final rules for MHPAEA on September 9, 2024.

The rules aim to amend certain provisions of its current regulations and add new ones, particularly those related to the comparative analysis of NQTLs—an area where parity violations persist.

Here’s a summary of the main changes to the MHPAEA under the final rules:

1. Updated and Defined Terms: The final rule defines terms like evidentiary standards, factors, and processes to assist health plans in completing NQTL comparative analyses.
2. Standards for Classifications: Conditions, procedures, or disorders must be defined using generally recognized medical standards like the International Classification of Diseases (ICD) or the Diagnostic and Statistical Manual of Mental Disorders (DSM).
3. Clarifying “No More Restrictive” Requirements: For NQTLs to be considered “no more restrictive,” they should satisfy design and application requirements and relevant data evaluation requirements. If data analysis shows “material differences” in access to MH/SUD benefits compared to M/S benefits, plans must take corrective action.
4. Meaningful Benefits: Health plans offering MH/SUD benefits must provide at least one core treatment for a covered MH/SUD in all benefit categories where M/S benefits are provided.
5. Comparative Analysis Requirements: The final rule updates the requirements for conducting and documenting NQTL comparative analyses.
6. Fiduciaries Certification: The final rule requires all ERISA plan fiduciaries to review the NQTL analysis and certify in writing that they engaged in a prudent process to select at least one qualified service provider to perform and document the comparative analysis.
7. Response Timeframe for Comparative Analysis Requests: The final rule requires plans to respond promptly to requests for NQTL comparative analyses from the Departments with specific deadlines (i.e., 10 business days after an initial request, 30 days for participants, etc.).

NQTL Comparative Analysis: A Deeper Look

The NQTL comparative analysis is a written analysis used by health insurance plans to justify the NQTLs they impose on MH/SUD benefits. The final rule requires the analysis to show the evidentiary standards, strategies, processes, and other factors used to establish a particular treatment limit.

The MHPAEA requires that NQTLs applied to MH/SUD benefits must be no more restrictive than those for M/S benefits.

Under the final rule, a NQTL is considered “no more restrictive” if it meets two requirements:

• Design and Application Requirements: Plans must demonstrate that NQTLs for MH/SUD are comparable and no stricter than for M/S benefits in the same category. Discriminatory standards are prohibited.
• Relevant Data Evaluation Requirements: Plans and issuers should ensure that an NQTL applied to MH/SUD benefits in a classification is no more restrictive than M/S benefits in the same classification. To do so, they must collect and analyze relevant data to assess the impact that NQTLs have on access to MH/SUD benefits.

How These Changes Address Previous Gaps in Parity

The final rules provide clearer definitions and guidance on applying NQTLs, requiring plans to evaluate their NQTL processes and take corrective actions if disparities arise. This scrutiny in the NQTLs of plans closes insurer loopholes and ultimately improves access to mental healthcare.

The Departments anticipate that the final rules will:

• Improve provider networks, making it easier for individuals to access in-network care.
• Provide easier access to care by cutting red tape and simplifying medical management techniques.
• Provide clearer guidance for health plans and issuers to fulfill their obligations and for departments to better enforce their compliance.

What These Changes Mean for Health Providers & the Public

With the final rule, consumers can expect mental health coverage to better align with physical health benefits. Consumers can expect the following changes:

• Plans may reduce copays, lower visit limitations, and streamline authorization requirements, ensuring equal access to mental and physical health services.
• It may be easier for consumers to find in-network providers as plans broaden their mental health provider networks.
• Consumers can expect broader access to treatments for a wider range of conditions.
• Approvals may be quicker, and delays and denials for medically necessary care may decrease.

Meanwhile, healthcare providers may expect the following from these changes:

• As plans expand access, there may be higher demand for providers along with potentially better rates and reduced administrative burden.
• More specialists offering evidence-based therapies may be needed as health plans must provide “meaningful benefits,” including core treatments for each MH/SUD condition as defined by the DSM-5.
• Providers can request documentation of their patients’ plans to help them understand the reason for denied claims.

Business Perspective: How Mental Health Parity Affects Employers and Employees

Poor mental health imposes a significant cost on employers. Gallup reports that one-fifth of U.S. workers experience fair to poor mental health. These individuals take an estimated 12 missed workdays annually—with each day costing between $170 and $340— compared to just 2.5 days for other employees.

Additionally, employees with MH/SUD tend to have higher turnover and reduced productivity. For instance, unresolved depression leads to a 25% drop in productivity, costing the U.S. economy an estimated $210.5 billion annually.

In light of the changes, employers must ensure their health plans comply with MHPAEA regulations. Here are some things you can do to ensure compliance and promote parity:

• Collect data on employee access to mental health services and evaluate network adequacy.
• Educate employees on their mental health benefits and rights under parity laws.
• Promote integrated care for mental and physical health.
• Collaborate with benefit administrators to ensure continued compliance.

Implications for Employee Wellness & Productivity

Providing mental health benefits helps both employers and employees. One study showed that giving comprehensive employer-sponsored mental health benefits led to a 24% productivity increase and 25% fewer missed workdays. It also resulted in changes in healthcare utilization, lowering overall costs and preventing expensive interventions down the line.

Another study found that offering accessible and proactive employer-sponsored mental health benefits not only improved symptoms of depression and anxiety but also resulted in cost savings, fewer missed workdays, and better employee retention.

Future Outlook: Predictions & Challenges in Mental Health Parity

The updated MHPAEA rules are set to significantly improve access to mental health care by ensuring better alignment between mental and physical health services. Employers and plans can expect additional guidance and tools before provisions take effect to offer additional compliance support.

While the departments have set guidelines and supports, these changes come with substantial financial and operational challenges for insurers. The increased administrative burden on health plans and other regulatory obligations may also slow the smooth implementation of these reforms and even lead to some resistance.

The Road Ahead for Mental Health Parity

The 2024 MHPAEA updates aim to address remaining  disparities and significant gaps in access and coverage for MH/SUD services, strengthen the law’s enforcement, and broaden its impact.

As the health landscape evolves, further refinements to parity laws are expected, providing more clarity. Parity can also drive integrated care models for mental and physical health, with telehealth expanding access to underserved populations and reducing the strain on traditional healthcare networks.

The ongoing challenge will be ensuring that mental health parity is not just a legal requirement but a standard practice across all health insurance policies.

Work with W3 to Understand How Mental Health Parity Updates Affect Your Employee Benefit Needs

With increased scrutiny over health plans’ NQTLs, loopholes are being closed, and disparities are being addressed. However, complexity and ambiguity in certain standards are expected to present challenges in advancing the parity law.

Navigating the complexities of the final MHPAEA rules can be challenging for employers. Let us guide you through the latest requirements to ensure your employee benefits meet federal compliance standards while ensuring your employees get the care they need. Contact us today!