Professional News
Managed Care Firms Sue to Stop Federal Parity Law
Psychiatric News
Volume 45 Number 9 page 1-27

Some managed behavioral health care organizations (MBHOs) are suing the federal government to halt implementation of the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008.

The MBHOs—which include Magellan Health Services Inc., Beacon Health Strategies Inc., and Value Options—have filed suit as the Coalition for Parity Inc., claiming that regulatory rules issued by the federal government in February violate the original congressional intent of the parity legislation. The legislation was signed into law by President Bush in October 2008.

The suit was filed in the United States District Court for the District of Columbia on March 31. A motion for a restraining order filed by the group in April to delay implementation of parity regulations, currently scheduled for July 1, was denied.

At press time, Irvin "Sam" Muszynski, J.D., director of APA's Office of Healthcare Systems and Financing, said APA—along with some 15 other groups organized as the Parity Implementation Coalition—was preparing detailed responses to the suit in the form of an affidavit and legal brief in support of the government's rulemaking to implement the parity law.

The government will issue its brief this month, and a decision is expected before the July 1 effective date of the parity regulations, Muszynski told Psychiatric News.

In response to a "request for information" issued last summer by the Department of Health and Human Services, APA argued for a stringent interpretation of the parity bill—one that views parity as "not just about equality of coverage, but equality of access to care and equality in how providers are treated relative to other providers," as Muszynski told Psychiatric News at the time (Psychiatric News, June 19, 2009).

The government's final interim rule, issued on February 2, was largely in line with APA's interpretation, and it is essentially that interpretation that is at the heart of the dispute: can MBHOs impose certain kinds of management strategies not imposed on medical-surgical services and still comply with the parity law?

The MBHOs state in their suit that they can—indeed, that those strategies are essential to providing coverage that is comparable to medical-surgical services. But APA and other groups in the Coalition for Parity Implementation are urging the court to uphold the government's rule and to proceed with the July 1 implementation of parity.

"APA has had a long-term commitment to parity, and it took many years and many battles to make sure it happened," said Robert Cabaj, M.D., chair of APA's Council on Advocacy and Government Relations. "I believe it would be to the detriment of patients if there were further delays in implementing parity."


The suit revolves around substantive issues regarding the management of mental health benefits under parity and one procedural complaint about the process the government used in issuing its final interim rule (see MBHOs Claim Government Bypassed Right to Comment; a report on the rule appeared in the March 5 Psychiatric News).

The substantive issues relate to two items spelled out in the government's interim final rule—one that requires a single deductible for both mental health and other medical conditions and one that prohibits "nonquantitative" treatment limitations.

Nonquantitative treatment limitations (NQTLs) are distinct from quantitative treatment limitations that can be measured numerically—such as annual and lifetime dollar limits and limits on office visits per year—and refer to a range of practices that MBHOs have used to manage behavioral health care costs.

These include medical management standards, prescription drug formulary design, standards for provider admission to networks, fail-first policies or step-therapy protocols, and conditioning benefits on completion of a course of treatment.

Such practices are prohibited under the government's interpretation if they are not applied comparably to medical-surgical services.

"It's clear enough what the law is referring to when it speaks of quantitative treatment limits," Muszynski said. "The debate centers around what Congress meant about 'other similar' limitations. Our legal analysis of what was intended by 'other similar treatment limitations' included such things as medication management, step therapy, or other practices that were not equivalent to the medical-surgical side.

"The regulations don't say—and we are not saying—that they can't manage the benefit," he continued. "But we say you can't manage the benefit in a way that is not comparable to medical-surgical services."

In its suit, the MBHOs insist that the nonquantitative treatment limitations are essential to managing behavioral health care costs and maintaining equality of coverage.

"For example, precertification [and] preauthorization for outpatient care are critical tools to ensure that plan members are receiving the behavioral health care services they need from the most appropriate level of provider and in the most appropriate setting," the MBHOs state in their suit. "[T]he nonquantitative treatment limitation requirements could result in these tools being stripped away merely because there is oftentimes no need for preauthorization in the medical-surgical context."

The second contention by MBHOs concerns the government's rule requiring one deductible for both "physical and mental health" conditions. APA, in its comments to the government last summer, argued for the single deductible.

In the interim final rule, the government conceded that the statutory language around whether plans should have a single or two separate deductibles is not clear and could support either interpretation, and that cost implications for MBHOs of a unified deductible were unclear. But the interim final rule states that the government chose to require the single deductible "because this position is more consistent with the policy goals that led to the enactment" of the parity bill.

APA Medical Director James H. Scully Jr., M.D., argues that no plan imposes two separate deductibles for, say, diabetes and cancer care. "Why should there be separate deductibles for psychiatric care and other medical care?" he remarked to Psychiatric News. "In the interest of the patient, general medical and psychiatric care should be better integrated."

But the MBHOs claim in their suit that the unified deductible will result in cost increases and serve as a barrier to care for lower-income individuals. "[T]he single deductible inevitably will be higher than the stand-alone behavioral health deductible, which in many group health plans is lower than the medical deductible."


Colleen Barry, Ph.D., a health policy researcher at Yale University who has studied the effects of parity, said that the government's rule presents an unprecedented challenge to the behavioral carveout industry—and with regard to the rules around NQTLs, one that was not expected.

"It's fair to say that the plans and employers were not expecting this broad an interpretation of the law," Barry told Psychiatric News. "The carveouts are facing a substantial burden given that the requirements are far reaching and that the carveouts are not well set up to mirror how plan management occurs on the medical-surgical side. It's clearly not without cost for the industry to comply with these regulations. It's also important to keep in mind that this is the first real regulation that the carveout industry has had to contend with other than HIPAA."

She noted as well that in studies showing that parity did not add significantly to overall costs for health plans under the Federal Employees Health Benefits Program, the health plans were allowed broad leeway in managing mental health benefits.

With regard to the unified deductible, Barry suggested that the government's ruling was somewhat less surprising than the ruling on NQTLs. She noted that since mental health comprises just 2 percent to 5 percent of total health plan costs, establishing a separate deductible could result in a disproportionately high cost burden on individuals seeking care for mental health conditions.

Are MBHOs overreacting or do the new rules truly threaten their business?

"I don't think the regulations threaten the survival of the industry, but I do think it will take some work for them to figure out how to comply," Barry said. "The industry hasn't had to contend with this type of regulation before, and so this is a big change. It could also put some pressure on employers to not carve out and to provide an integrated benefit." blacksquare

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