Background

Historically, plan coverage of mental health benefits was significantly more restrictive than coverage for medical or surgical conditions. Over the last few decades, state and federal lawmakers have sought to address these challenges through various legislative and policy actions.

A significant reform—the Mental Health Parity and Addiction Equity Act (MHPAEA) of 2008 – required commercial health plans to provide benefits covering mental health/substance use disorder (MH/SUD) treatment in a manner that is “no more restrictive” than that used for all other medical/surgical services. Despite this legislation, access gaps have persisted due to health plan noncompliance and insufficient enforcement. The MHPAEA is enforced by the Employee Benefits Security Administration within the Department of Labor, the Centers for Medicare & Medicaid Services, and state governments.

Patient advocates have highlighted that the COVID-19 pandemic exacerbated challenges in mental health treatment. In response, the US Departments of Labor, Health and Human Services, and Treasury proposed stricter regulations in 2023. The rule was finalized in September 2024 and strengthening parity requirements, ensuring that mental health care coverage is no more restrictive than coverage for physical health services, and aiming to create a more equitable system for all.

Stakeholder-Specific Impacts

The final rule emphasizes enhancing MH/SUD parity through more robust comparative analyses of non-quantitative treatment limitations (NQTLs). It mandates that MH/SUD treatment limits not be more restrictive than medical or surgical benefits. Health plans must comply with these rules by early 2025 or face consequences such as financial penalties, civil penalties, and claim reprocessing to correct coverage disparities.

Payers: Many health plan trade associations, including the National Association of Benefits and Insurance Professionals (NABIP), have expressed concerns that the final rule’s ambiguous language could complicate compliance, particularly around the level of data required for NQTL analyses, with potential differences between fully insured and self-funded plans.

These increased data analysis and reporting requirements may result in heavier administrative burdens for plans, with greater investment needed in data collection and analysis to meet enhanced requirements. Both NABIP and the Alliance of Community Health Plans (ACHP) have noted that the additional regulatory obligations could divert resources away from patient care and increase operational costs. AHIP has argued that the rule does not address underlying access issues, such as mental health provider shortages, and may instead reduce the quality of services due to the reallocation of resources toward compliance. Furthermore, ACHP’s comments suggest that without clearer guidelines on NQTLs, plans may struggle to ensure parity while balancing their operational and regulatory responsibilities. These concerns create uncertainties for plans navigating the new rule’s compliance demands.

Patients: While the rule aims to benefit patients, patient advocacy groups argue that greater attention could have been paid toward telehealth adoption. The rule does not address telehealth use, which has become a significant component in advancing access for mental health services, particularly for underserved populations. According to AHIP, telehealth could be a viable solution to improving access to mental health care

Stakeholders such as the ERISA Industry Committee (ERIC) believe the rule fails to recognize telehealth’s potential to enhance access to care, especially in underserved areas. This concern highlights a broader consensus that the rule does not sufficiently address critical barriers to MH/SUD treatment access, such as workforce expansion and the integration of telehealth services.

Providers: The rule does not directly address workforce shortages, which could widen the existing gap between the demand for mental health services and the available supply of providers, especially psychiatrists’. ERIC’s comments highlight that the rule may unintentionally drive patients to seek higher-level care for mild symptoms, increasing costs and placing additional strain on an already overburdened mental health system.

According to ERIC, MHPAEA incentivizes patients to seek a higher-level mental health provider for mild symptoms that could be treated by a primary care provider. This could lead to increased costs for the patient and could lead to primary care providers losing patients that they could efficiently treat.

Manufacturers: Manufacturers may face new market access challenges as health plans increase scrutiny of MH/SUD treatments. This could result in tighter utilization management strategies such as prior authorizations or step therapies, creating potential delays in product access. The rule’s emphasis on parity means manufacturers will need to produce stronger evidence on the value and effectiveness of their therapies to maintain favorable coverage.

Manufacturers of high-cost or specialty drugs may experience increased pressure as rising compliance costs for health plans drive more stringent coverage criteria. This could result in more restrictive formularies, limiting drug access. Additionally, the rule’s lack of focus on telehealth may hinder manufacturers of digital therapies, which play a crucial role in expanding mental health care access, particularly in underserved regions.

Common Themes Across Stakeholder Groups

The rule offers opportunities for broader discussions around advancing key policy agendas. Many industry stakeholders believe the 2024 rule will increase healthcare costs, expand administrative burdens, and may unintentionally lower care quality as resources are diverted to meet compliance demands. The complexity and vagueness of the rule make compliance difficult, potentially leading to inefficiencies. Employers may face heightened administrative costs that could pull resources away from direct patient care, limiting access to MH/SUD services. Moreover, concerns around workforce shortages and lack of telehealth expansion persist, affecting care accessibility.

Key Takeaways

Implementing the final rule on MH/SUD parity presents several challenges and opportunities for health plans and other stakeholders. Stakeholders should reassess NQTL analyses to ensure they are effective without overburdening health plans and streamlining compliance processes to reduce administrative costs. Addressing workforce shortages and expanding telehealth access—especially in underserved areas—are also central to improving access to mental health care.

Concerns remain about the rule’s vagueness, which could lead to increased compliance costs and administrative burdens, potentially diverting resources away from patient care. This complexity raises the risk of employers scaling back or eliminating mental health coverage to manage rising costs. Moreover, the rule carries significant implications, as it directly impacts compliance, operational costs, and the ability to maintain equitable access to MH/SUD services. Preparing for increased regulatory demands while balancing patient care will be essential to ensuring the rule’s successful implementation.

Next Steps

Avalere can partner with health plans, patient advocacy groups, provider associations, and manufacturers in navigating this intricate policy landscape at both the state and federal levels. We offer insights on compliance strategies, cost management, and leveraging the rule for broader systemic improvements in mental health care. By fostering dialogue around telehealth, workforce development, and compliance, Avalere supports stakeholders in staying ahead of regulatory challenges while ensuring that policy changes translate into real-world care improvements. To learn more, connect with us.