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NY DFS Proposes Strict Measures Relating to Mental Health Parity Compliance

July 17, 2020

On July 8, 2020, the New York Department of Financial Services published Proposed Insurance Regulation 218 (11 NYCRR Part 230) in the State Register. If finalized as proposed, the regulation would become amongst the most draconian mental health parity compliance regimes in the country. The proposed requirements impose significantly more stringent standards on New York fully-insured plans than the federal rules. Other provisions appear in conflict with longstanding federal standards for how regulators and plans evaluate compliance with the Mental Health Parity and Addiction Equity Act (“MHPAEA”). The following examples are among the more burdensome requirements in the proposed regulation:

  • Requiring multiple, demanding components  in a formalized “mental health parity and substance use disorder compliance program” including, inter alia
    • Designation of an “appropriately experienced” person to manage parity compliance and report to the CEO or other senior leadership and annually to the board of directors—without clarification on what constitutes “appropriate experience”;
    • Statistical sampling analysis of preauthorization, concurrent, and retrospective review denials for MH/SUD benefits to assess whether the denials are consistent with approved clinical review criteria;
    • Comparative analysis of medical/surgical (“med/surg”) and MH/SUD financial requirements, quantitative treatment limitations, and non-quantitative treatment limitations for parity compliance;
    • Comparison of the percentage of med/surg and MH/SUD services provided by out-of-network providers when no in-network provider was available—presumably as part of an overall strategy to assess out-of-network utilization, access to services, and network adequacy “to reduce disparities in out-of-network use”;
    • Review of the average length of time to negotiate provider agreements, negotiated reimbursement rates, and the methods for determining usual, customary, and reasonable charges—similar to the prior requirement, this appears focused on network adequacy and access, in addition to reimbursement rates;
    • Annual training and education for all employees, directors, agents and others who are, “engaged in functions that are subject to federal or state mental health and substance use disorder parity requirements or involved in analysis as a part of the compliance program.”
  • Prohibiting the use of prior authorization, concurrent review, or retrospective utilization review for a higher percentage of MH/SUD benefits than med/surg benefits “in the absence of defined clinical or quality triggers,” albeit without explaining what constitutes a sufficiently defined clinical or quality trigger.
  • Insurers to remediate or develop a plan to remediate any improper practices within 60 days of discovery and provide written notice to affected insureds, the Superintendent, and a conspicuous post on the insurer’s website of the insurer’s plan to remediate the improper practice; and
  • Annual certification by the insurer’s CEO or parity compliance person to the Superintendent that the insurer meets the requirements of this regulation.

The proposed regulation imposes significantly more stringent parity compliance requirements for New York fully-insured plans than those under the federal regulations. New York will require annual formal compliance analysis and reporting. In contrast, the federal regulation states that once a plan conducts parity analysis, it is not required to perform it in subsequent plan years—unless there is a change in plan benefit design, cost-sharing structure, or utilization that would affect a financial requirement or treatment ¬≠limitation. 78 Fed. Reg. 68,240, 68,243 (Nov. 13, 2013). And the federal rules do not require a parity compliance program, though many in the field have identified it as a best practice given the complexity of the parity rules.

The prohibition on the use of certain types of utilization review if they apply to “higher percentages” of MH/SUD benefits than med/surg conflicts with the longstanding federal standard that, “[d]isparate results alone do not mean that the NQTLs in use do not comply with [MHPAEA].” 78 Fed. Reg. at 68,245. Here, the proposed regulation would use overly simplistic mathematical calculations to bar the use of NQTLs for MH/SUD benefits despite federal recognition that parity compliance for NQTLs is determined based on comparable processes, not outcomes. And the proposed regulation gives no explanation for what qualifies as a “defined clinical or quality trigger.”

This prescriptive approach may take root in other states as regulators and provider advocates wield parity compliance as a mechanism to curtail utilization management and attempt to expand coverage obligations in the behavioral health and substance use disorder areas. Adoption of these exacting standards and requirements will undoubtedly spur new rounds of market conduct exams, complaint driven investigations and litigation based on non-compliance.

The proposed regulation portends a sea change in how other state regulators may evaluate MHPAEA compliance. Recently proposed changes to the U.S. Department of Labor’s MHPAEA Self-Compliance Tool include best practices for establishing an internal compliance plan for MHPAEA. There is growing interest among regulators and other stakeholders to standardize and formalize MHPAEA compliance analysis, programs, and reviews.

New York health insurance issuers and plans may submit comments in response to the proposed regulation until September 7, 2020.

Crowell & Moring represents payors and other managed care entities in mental health parity compliance matters, investigations, market conduct exams, enforcement actions, and private plaintiff litigation around the country. Please contact us if you would like to learn more about these issues and our practice in this area.

For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.

Kathy Hirata Chin
Partner – New York
Phone: +1.212.895.4304
Christopher Flynn
Partner – Washington, D.C.
Phone: +1.202.624.2864
Paul Mourning
Partner – New York
Phone: +1.212.895.4307
Brian McGovern
Retired Partner – New York
Phone: +1.516.732.0009