NQTL comparative analysis: Background

Generally, MHPAEA and the final regulation implementing it prohibit plans from imposing stricter cost sharing requirements and treatment limitations on mental health and substance use disorder ("MH/SUD") benefits as compared to medical and surgical benefits. They apply to financial requirements (such as copayments and deductibles), quantitative treatment limitations (such as provider visit limitations), and NQTLs (such as requirements for prior authorization, concurrent review and written treatment plan requirements; network participation standards and reimbursement rates; and fail-first or step therapy requirements). MHPAEA rules generally apply separately within each of six classifications: (i) in-network inpatient, (ii) out-of-network inpatient, (iii) in-network outpatient, (iv) out-of-network outpatient, (v) emergency care, and (vi) prescription drugs.

Under the CAA, plans are required to complete a written comparative analysis demonstrating that the processes, strategies, evidentiary standards, and other factors used to apply an NQTL to MH/SUD benefits are comparable to, and applied no more stringently than, those used to apply that same NQTL to medical/surgical benefits. The analysis is broken down first by each of the six classifications, and then by each NQTL imposed on MH/SUD benefits.

NQTL comparative analysis: Consequences of noncompliance

What are the consequences for failures to complete the required comparative analysis?

First, there are tax consequences. Failure to comply with group health plan rules, including the mental health parity requirements, could result in an excise tax under Internal Revenue Code Section 4980D of $100 for each day of noncompliance. The statutes require plans to "perform and document" the comparative analysis, and to make the analysis available to the U.S. Department of Labor (DOL) upon request. The proposed rules add a 10-day deadline to submit the report after a request by the DOL.

Second, there are potential ERISA consequences. Under current rules, the DOL's enforcement of MHPAEA is limited to seeking voluntary compliance by plans when failures are discovered in an audit, and equitable relief by requiring plans to reimburse claims that were improperly denied. The DOL does not have the authority to impose civil penalties for MHPAEA violations. The proposed rules would also require plans to furnish the comparative analysis to a participant or beneficiary within 30 days upon request, under ERISA Section 104. Courts may assess a penalty, under ERISA Section 502(c)(1), of $100 per day after the 30-day deadline, if the requested plan documents are not furnished.

NQTL comparative analysis: New proposed regulations

Though the CAA comparative analysis requirement took effect on February 10, 2021, the agencies have indicated that most or all of the analyses they have examined to date have been incomplete or inadequate. The CAA itself provides bare-bones content requirements without any definitions, details, or examples. The agencies expanded on these requirements a bit in frequently asked questions guidance issued in 2021. But the proposed rules for the first time would define key terms —such as "evidentiary standards," "factors," "processes," and "strategies"—and add extensive detail about the analysis that plans would need to provide for each NQTL they used.

Here are summaries of the six key components of the proposed regulations.

1. Content requirements

Under the proposed regulations, a comparative analysis would need to list all NQTLs imposed by the plan and a general description of the information relied upon by the plan in preparing the analysis for each NQTL. For each NQTL, the analysis would have to:

• Identify the relevant NQTL,
• identify all MH/SUD and medical/surgical benefits to which it applies,
• describe which benefits are included in each classification, and
• identify the predominant NQTL that applies to "substantially all" (two-thirds) of the medical/surgical benefits in each classification.

2. Factors

A comparative analysis would next have to identify and define all the "factors" used to design or apply the NQTL. A "factor" would include all information that a plan considers or relies upon to design an NQTL or to determine how an NQTL would apply to specific benefits. Examples include clinical efficacy, treatment outcomes, severity of condition, cost variability, elasticity of demand, and licensing and accreditation of providers.

Another useful definition provided in the proposed rules is "evidentiary standards," which mean sources, evidence, or standards considered or relied upon in designing or applying a factor with respect to an NQTL. They can be statistical, clinical, or empirical in nature, and include medical literature, professional standards, payment rates, internal claims or utilization data, and clinical treatment guidelines.

Factors can be thought of as the triggers that determine when a certain treatment under the plan will be subject to a certain NQTL, and evidentiary standards are one of the sources the plan uses to determine what those triggers are, and when they are satisfied.

An example may be useful to illustrate how these factor standards would work:

Take a plan that requires concurrent review for two specific medications: semaglutide injections to treat type 2 diabetes (a medical condition), and hormone therapy to treat gender dysphoria (a mental health condition). In either case, a participant would be required to be evaluated by a provider every 30 days before the plan would approve another 30-day dose.

In developing this concurrent review NQTL, the plan – or, more accurately, its third-party administrator or pharmacy benefit manager — consulted two types of evidentiary standards: medical literature, and internal claims and utilization data.

Using these sources, the third-party administrator or pharmacy benefit manager determined that three factors warranted imposing the concurrent review requirement on these two medications but not other prescription drugs. Those factors were: (i) an increased likelihood of treatment failure, (ii) relatively long duration of treatment, and (iii) relatively high cost of treatment, when compared to other treatment options available for the condition.

Under the proposed rules, then, a comparative analysis would have to describe each of these factors and all the evidentiary standards used to derive them.

3. Use of factors in designing or applying NQTLs

A comparative analysis would be required to describe how each factor is used in designing or applying the NQTL to MH/SUD benefits and medical/surgical benefits in a classification. If more than one factor is identified, the analysis would have to explain how the factors relate to each other, the order in which they are applied, whether and how any factors are given more weight than others, the reason for the weighting or ordering of factors, and any deviation or variation from a factor.

4. Demonstration of comparability and stringency, as written

Under the proposed rules, the comparative analysis would have to demonstrate that in any classification and "under the plan terms 'as written,' any processes, strategies, evidentiary standards, or other factors used in designing and applying the NQTL to [MH/SUD] benefits in the classification are comparable to, and are applied no more stringently than," those used in designing and applying that same NQTL to medical/surgical benefits. (Emphasis added.)

This would have to include documentation of each such factor, including quantitative data, calculations, or other analyses showing whether MH/SUD benefits satisfy any applicable threshold identified in the relevant evidentiary standard. This would also include, among other things, an evaluation of relevant data to determine whether or not the NQTL would apply.

Several new definitions in the proposed rules would be helpful in complying with this requirement. First, "processes" would mean "actions, steps, or procedures that a plan uses to apply an NQTL," "provider referral requirements," and "the development and approval of a treatment plan." Processes also include procedural requirements the plan imposes on certain benefits, including prior authorization and concurrent review. Next, "strategies" would mean "practices, methods, or internal metrics that a plan considers, reviews, or uses to design an NQTL," including the information "deemed reasonably necessary" to determine medical necessity, and relying on treatment guidelines.

5. Demonstration of comparability and stringency, in operation

Until now, it seems as though many of these requirements could be satisfied on a general or book-of-business basis if a plan uniformly followed standards set by a an outside third-party administrator.

But now the proposed rules pivot. A comparative analysis would have to demonstrate that in any classification and under the plan terms in operation, any "processes, strategies, evidentiary standards, or other factors used in designing and applying the NQTL to [MH/SUD] benefits in the classification are comparable to, and are applied no more stringently than," those used in designing and applying that same NQTL to medical/surgical benefits (Emphasis added).

The analysis would need to comprehensively explain how the plan ensures that its operations in designing and applying each NQTL are comparable between MH/SUD and medical/surgical benefits; and how NQTLs are not applied more stringently to MH/SUD benefits than to medical/surgical benefits. This explanation may include the plan's methodologies with respect to designing and applying NQTLs, and data demonstrating NQTL application. If a plan includes such data, it would need to define all relevant data elements including the time period and inputs used in any calculations. The analysis would also explain any criteria used to select the MH/SUD and medical/surgical benefits to which each NQTL would apply.

6. Detailed discussion of findings and conclusions

Finally, the comparative analysis would include a detailed discussion of the findings and conclusions as to the comparability of the processes, strategies, evidentiary standards, and other factors used in designing and applying the NQTL to MH/SUD benefits and medical/surgical benefits within each classification, and the "relative stringency" of their application, both as written and in operation.

Related: Employee-centric benefit solutions: Balancing costs and employee needs

This would need to include any findings indicating that a plan might violate the requirements and actions the plan intends to take to correct the potential failures. The plan would also need to list any citations supporting the conclusions, the names, and credentials of the individuals involved in preparing the comparative analysis, and the qualifications of any experts relied upon in generating that analysis. The analysis would be dated and named fiduciaries of the plan would need to certify that the comparative analysis satisfied the content requirements.

Next steps

Before focusing on the higher NQTL comparative analysis standards contemplated by these proposed rules, employers ought to ensure that a complete and thorough analysis has been done under current regulatory standards. Employers will also want to ensure that their plans are in compliance with MHPAEA standards on quantitative treatment limitations, or QTLs, and that their plans have been reviewed for specific MHPAEA issues that are drawing ongoing interest from federal regulators.

Timothy (Tim) Stanton is a shareholder in Ogletree Deakins' Chicago office. He focuses his practice on employee benefits, specifically Affordable Care Act compliance, data privacy and security, and benefit plan administration.

Hillary Sizer is an associate in Ogletree Deakins' Chicago office. Her practice covers all types of employee benefit plans, including 401(k), defined benefit, deferred compensation, governmental, welfare, and more.