As you may be aware, the MHPA's provisions provide for "parity" in the application of aggregate lifetime dollar limits and annual dollar limits between mental health benefits and medical/surgical benefits. The temporary regulations clarify that the MHPA requirements apply regardless of whether mental health benefits are administered together with medical/ surgical benefits or separately under one plan.
The temporary regulations clarify how a group health plan may comply with the parity requirements.
A plan may comply by:
(b) imposing a single aggregate lifetime or annual dollar limit on both medical/surgical benefits and mental health benefits,
(c) imposing an aggregate lifetime dollar limit or annual dollar limit on mental health benefits that is not less than those imposed on medical/surgical benefits, or
(d) calculating a weighted average aggregate lifetime dollar limit or weighted average annual dollar limit for mental health benefits with respect to a plan that imposes different aggregate lifetime dollar limits or annual dollar limits for different categories of medical/surgical benefits.
If your health plan provides different annual or lifetime limits for categories of medical/surgical benefits, you should examine the cost of continuing such an approach in light of the burdens associated with calculating weighted averages to comply with parity provisions.
Exemptions
MHPA does not apply to small employers (employers with between 2 and 50 employees) nor to plans where the application of the parity requirement would result in an increase in cost of at least one percent. The temporary regulations provide that in order for a plan to determine if it has experienced a cost increase of one percent or greater, the plan must comply with the parity rules for a "base period." The base period is a consecutive six-month period beginning on the first day of a plan year (commencing after September 26, 1996) that a plan complies with the parity requirements.
The temporary regulations provide a complex formula for determining a plan's eligibility for the one percent exemption which takes into consideration costs incurred solely to comply with the parity requirements such as the cost of providing additional mental health benefits and administrative expenses. At least 30 days prior to a plan's claiming the one percent exemption, the plan sponsor must notify the DOL and the plan participants and beneficiaries of the plan's exemption from the parity requirement.
Finally, the regulations prohibit enforcement actions by the DOL, IRS or HHS against a plan that has sought to comply in good faith with the requirements of the parity rules for a violation that occurs before the earlier of (a) the first day of the first plan year beginning on or after April 1, 1998, and (b) January 1, 1999. Nevertheless, we encourage each of you to review your health and welfare plans and especially each plan's summary plan descriptions to ensure compliance with the MHPA.