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Do the Mental Health Parity Rules Apply to Small Employers With Insured Major Medical Plans That Cover Mental Health Benefits?

EBIA  

EBIA  

QUESTION: We are a very small company with an insured major medical plan that provides for mental health benefits as well as medical/surgical benefits. Do the mental health parity rules apply to us?

ANSWER: Although there are exemptions available under the Mental Health Parity and Addiction Equity Act (MHPAEA), the federal mental health parity rules likely apply to your insured major medical plan either directly or indirectly. A small employer exception is available if your company employed an average of at least two employees (one if your company resides in a state that permits small groups to include a single individual) but no more than 50 employees during the preceding calendar year. Certain related employers, including members of a controlled group or an affiliated service group, are treated as one employer, and a special rule applies for non-federal governmental plans. A small plan exception is available if, on the first day of the plan year, the plan covered fewer than two participants who were current employees. Another exception is potentially available if your company’s plan can demonstrate that compliance would increase costs beyond certain thresholds and if the plan satisfies other requirements, including notice to participants, beneficiaries, and the DOL. And group health plans that provide only “excepted benefits” need not comply. (Major medical plans are not excepted benefits.)

However, even if an exception from the MHPAEA applies, your plan is likely still subject to the federal mental health parity requirements through application of the Affordable Care Act’s requirement that coverage offered in the individual and small group markets must provide essential health benefits, including certain mandated mental health and substance use disorder services. To satisfy this requirement, mental health and substance use disorder services must be provided in a manner that complies with the parity standards under the MHPAEA. Thus, small employers will be indirectly subject to the federal mental health parity requirements if they purchase a small group insured policy subject to the essential health benefits requirements. (Grandfathered and self-insured group health plans that are not subject to the essential health benefit requirements may avoid the federal mental health party requirements through the MHPAEA small employer exemption.) Keep in mind that state mental health parity requirements may also apply. Parity rules are complicated and require detailed analysis of plan provisions—professional advice should be sought to ensure compliance.

For more information, see EBIA’s Group Health Plan Mandates manual at Sections IX.A (“What Is Mental Health Parity and Who Must Comply?”) and IX.I (“Mental Health Parity: Preemption and Other State-Law Issues”). See also EBIA’s Health Care Reform manual at Section XIV.F (“Comprehensive Health Coverage Requirement (Essential Health Benefits Package)—Applicable Only in the Individual and Small Group Markets”).

Contributing Editors: EBIA Staff.

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