Reed Smith Client Alerts

There has been scant legislation involving mental health parity since 2008’s passage of the Mental Health Parity and Addiction Equity Act (MHPAEA). It appears that is about to change, as lawmakers are reportedly considering the introduction of new mental health parity legislation as soon as this summer. The potential new legislation may target increasing Medicare and Medicaid payments for mental health services. This could have a tremendous impact on commercial payors, many of which reimburse mental health care at a percentage of government payor rates. This alert addresses potential legislative changes as well as related considerations in parity litigation and regulatory examinations.

This announcement comes on the heels of a report by the Department of Labor (DOL) concluding that all 30 payors audited in 2021 were not complying with current parity laws. Commercial payors already face increased scrutiny due to the new enforcement tools provided by the Consolidated Appropriations Act of 2021, which requires payors to conduct comparative analyses of their coverage of and reimbursement for mental health services versus medical/surgical services. MHPAEA currently imposes no civil monetary penalties for non-compliance. While there has been no reporting that the new legislation would include penalties, providers have lobbied for penalties, and it is possible the lawmakers may propose them.

Concerns over whether mental health services are reimbursed on a comparable basis to similar medical/surgical services have led to extensive litigation since the passage of MHPAEA. For example, in Doe v. Intermountain Healthcare, Inc., Case No. 2:18-cv-00807-RJS-JCB (D. Utah Jan. 20, 2022), the plaintiff alleges that the defendants violated MHPAEA with respect to a class of insured members by reimbursing acute inpatient mental health claims at the intermediate rate paid to skilled nursing facilities rather than the acute medical/surgical rate. The plaintiff also asserts that the defendants paid for residential mental health treatment, which is allegedly an intermediate level-of-care service, at the same rates as lower levels of medical/surgical care. However, a payor’s process for developing rates can be applied comparably to mental health and medical/surgical services and still result in different rates on either side of the line. In order to effectively defend against parity-based attacks on reimbursement rates, it is critical that payors develop and maintain documentation of the processes used to develop reimbursement rates and take care to note the reasons for any variations in rates.