End of MHPAEA Opt-Out For Self-Funded Non-Federal Governmental Plans

PHSA Requirements Exemption Background

Self-funded, non-federal governmental group health plans (those sponsored by states, counties, school districts, and municipalities) are permitted, under HIPAA^[1] and the Affordable Care Act (ACA), an exemption election (or “opt-out”) from the following Public Health Service Act (PHSA) requirements:

1. Standards relating to benefits for newborns and mothers under the Newborns and Mothers Health Protection Act (NMHPA)
2. Required coverage for reconstructive surgery following mastectomies under the Women’s Health and Cancer Rights Act (WHCRA)
3. Coverage of dependent students on a medically necessary leave of absence (Michelle's Law^[2])
4. Mental health parity (MHPAEA)

MHPAEA Background

MHPAEA requires group health plans offering mental health and substance use disorder benefits to provide the same level of benefits for mental health and/or substance use treatment and services that they do for medical/surgical care. MHPAEA then prevents group health plans providing mental health or substance use disorder benefits from imposing limits on those benefits that are more stringent than limits on medical/surgical benefits.

This means any of the following requirements imposed on a plan’s mental health and substance use disorder benefits cannot be more restrictive than those applied to the plan’s medical and surgical benefits:

• Financial requirements (such as deductibles, co-payments, coinsurance, and out-of-pocket maximums),
• Quantitative treatment limitations (such as number of treatments, visits, or days of coverage), or
• Non-quantitative treatment limitations (such as restrictions based on facility type). 

MHPAEA requirements generally apply to both self-funded, fully insured, grandfathered, and non-grandfathered plans that offer medical/surgical benefits and mental health/substance use disorder benefits. Besides self-funded, non-federal governmental plans (as outlined above), the following group health plans are exempt from MHPAEA requirements:

• Self-funded plans sponsored by employers with 50 or fewer employees
• Plans offering only excepted benefits (e.g., vision or dental coverage)
• Retiree-only plans
• Plans that are exempt due to an increased cost (generally the increased cost incurred due to complying with the MHPAEA is at least 2% in the first plan year or at least 1% in any subsequent plan year)^[3]

Small fully insured employer plans are generally required to comply with the MHPAEA by satisfying the essential health benefit requirements of the ACA.

CAA Sunset Provision for MHPAEA Exemptions

The Consolidated Appropriations Act, 2023 (CAA), a bipartisan bill enacted on December 29, 2022, includes a sunset provision eliminating the ability of self-funded, non-federal governmental group health plans to elect exemption from MHPAEA requirements.

This means, effective December 29, 2022, no new MHPAEA opt-out elections may be made by self-funded, non-federal governmental group health plans, and elections expiring on or after June 27, 2023 (180 days or more after December 29, 2022), may not be renewed.

Upon these expiration dates, self-funded, non-federal governmental group health plans must comply with MHPAEA requirements.

Special Rule for Multiple CBAs

The CAA includes a special rule for self-funded, non-federal governmental group health plans subject to multiple CBAs with a MHPAEA exemption election in effect on December 29, 2022, that expires on or after June 27, 2023. In these instances, the plan may extend the MHPAEA opt-out election until the date on which the term of the last CBA expires.^[4]

To extend the MHPAEA opt-out election under this special rule for plans with multiple CBAs, the CMS guidance outlines the process steps:

1. Plan sponsors should first send an email to the HIPAA opt-out email box (HIPAAOptOut@cms.hhs.gov) with the following information:
   • Provide documentation of the existing CBA(s) effective and termination date
   • Demonstrate that the CBA(s) include the self-funded, non-federal governmental group health plan for which the extension is being sought.
2. Once CMS has reviewed the documents and concluded the plan is eligible for an extension under the special rule, CMS will notify the plan sponsor.
3. Then the plan sponsor must submit a renewal opt-out for MHPAEA in HIOS, CMS’s Health Insurance Oversight System, to extend the plan’s existing opt-out. This renewal must be filed with CMS in HIOS before the first day of the plan year governed by the CBA, or by the 45th day after the latest applicable term date of the CBA, if the 45th day falls on or after the first day of the plan year. The end date of this renewal is the same as the end date of the last associated CBA.
4. Plan sponsors are still required to comply with all other exemption requirements including providing plan enrollees with a notice of the opt-out election. Click here for the CMS model notice.

Click here for a CMS webpage with detailed procedures and other resources for PHSA exemption elections for self-funded, non-federal governmental plans.

Plan Sponsor Next Steps

Plan sponsors of self-funded, non-federal governmental group health plans that previously elected the MHPAEA opt-out are advised to determine the exemption expiration date and work with their third-party administrator to ensure compliance with MHPAEA requirements by that date. MHPAEA requirements could result in plan design as well as cost changes for these plans that will now be required to comply.

Plan sponsors subject to multiple CBAs are advised to consult with their employment and labor counsel to assess whether they can apply for a temporary MHPAEA exemption election under the special rule.

As a reminder, the exemption election for the three other PHSA group health plan mandates outlined above (NMHPA, WHRA, and Michelle's Law) still remains available for these self-funded, non-federal governmental health plans.

Reach out to your Risk Strategies representative with any questions or contact us directly at benefits@risk-strategies.com.

[1] The Health Insurance Portability and Accountability Act.

[2] Under the ACA, employer-sponsored group health plans that provide dependent coverage for the children of its participants are required to continue to make that coverage available until a child has attained age 26, regardless of the child’s status as a student. As a result, the impact of Michelle’s Law is limited primarily to plans that choose to make coverage available for children who are age 26 or older if the adult child is a student, but which do not otherwise provide coverage for adult children who are that same age.

[3] 45 C.F.R. § 146.136(g).

[4] PHS Act section 2722(a)(2)(F)(ii).