A Survival Guide to DOL Group Health Plan Mental Health Parity Audits

October 21, 2021

The Consolidated Appropriations Act of 2021 mandates that employers offering medical/surgical and mental health/substance use disorder coverage provide comparative analyses and any supporting documentation demonstrating compliance with parity requirements to the Employee Benefits Security Administration of the Department of Labor upon request. The Consolidated Appropriations Act also directs the Department of Labor to request specific non-quantitative treatment limitation information from at least 20 plans each year and to report its findings to Congress. This LawFlash provides plan sponsors with insight into what to expect from this new enforcement initiative, and how to ensure compliance with the high fiduciary standards when administering non-quantitative treatment limitations.

Congress passed the Consolidated Appropriations Act of 2021 (CAA), in part, to address rising levels of mental health and substance use disorders aggravated by COVID-19. The CAA puts in place new Department of Labor (DOL) enforcement mechanisms to ensure that employer-sponsored group health plans satisfy certain parity requirements under the Mental Health Parity and Addiction Equity Act (MHPAEA). These requirements prohibit a self-insured plan from imposing non-quantitative treatment limitations (NQTLs) on mental health/substance use disorder (MH/SUD) benefits unless the processes, strategies, evidentiary standards, or other factors the plan uses in applying NQTL are comparable to, and applied no more stringently than, those used in applying the NQTL to medical/surgical (M/S) benefits.

In a previous blog post, Mental Health Parity Transparency: Consolidated Appropriations Act, 2021, we explained some of the CAA’s changes to the MHPAEA. The DOL is now implementing these changes—issuing guidance under the CAA, and making a slew of NQTL “comparative analyses” audit requests.

For background, an NQTL is any process, strategy, evidentiary standard, or other criteria that limits the scope or duration of benefits under a self-insured group health plan. Typical NQTLs include utilization reviews, prior authorization, provider licensing standards, and plan provisions and exclusions (including definitions such as “medically necessary” and “experimental or investigational”).

The Employee Retirement Income Security Act of 1974 (ERISA) incorporates the MHPAEA, placing on plan fiduciaries the responsibility to ensure that a plan’s NQTLs are administered in a way that does not unduly limit MH/SUD benefits. As part of this responsibility, the MHPAEA requires the preparation of an annual comparative analysis to ensure that NQTLs are applied to MH/SUD and M/S benefits in a comparable (and no more restrictive) manner. Prior to the CAA, the DOL rarely—if ever—requested the comparative analysis on audit. The CAA now makes it mandatory that fiduciaries provide this information upon request. Those who are unprepared or unresponsive may be subject to serious DOL penalties for fiduciary breach.

The DOL required any self-insured group health plan with an open DOL audit on February 10, 2021 to produce its NQTL comparative analyses, and it is likely that the DOL will now regularly request NQTL comparative analyses on audit. The DOL provides little turnaround time to respond to the request for the NQTL comparative analyses (only two weeks from the date of the letter, which a plan fiduciary may not receive until well after that date), and the DOL has been reluctant to issue any extensions.

NQTL comparative analyses are complex and administratively burdensome. Though the MHPAEA and CAA neither define “comparative analysis” nor provide instructions on how to document a comparative analysis, the DOL indicated in a set of April 2, 2021 Frequently Asked Questions (FAQs Part 45), that so long as plan fiduciaries carefully apply the 2020 MHPAEA Self-Compliance Tool, the plan will be in a “strong position” of compliance with the CAA. The FAQs Part 45 also list several types of productions by plans that could result in an insufficiency notice—and potential findings of fiduciary breach.

To comply with the CAA and avoid breaching ERISA’s fiduciary obligations, employers sponsoring self-insured group health and/or multiemployer plans will need to educate themselves on the mental health parity requirement, work with counsel to identify treatment limitations that constitute NQTLs, reach out to multiple providers to request information necessary to complete the NQTL comparative analyses, and develop controls to ensure ongoing readiness and responsiveness for any DOL request.

What Is the Mental Health Parity Requirement?

Under the MHPAEA, self-insured group health plans must ensure “parity”—that is, the financial requirements and treatment limitations on their MH/SUD benefits in a classification[1] are no more restrictive than the treatment limitations on their M/S benefits. There are two categories of treatment limitations: numerical, or quantitative treatment limitations (QTLs) (such as higher copays or visit limits); or NQTLs, which are non-numerical treatment limitations.

The mental health parity requirements prohibit a plan from requiring an NQTL on MH/SUD benefits unless, in applying the NQTL, the plan terms and plan operation only use processes, strategies, evidentiary standards or other factors that are comparable to, and applied no more stringently than, those used with respect to M/S benefits in the same classification. Relatedly, a plan cannot apply a NQTL to MH/SUD benefits that it does not apply to M/S benefits.

Morgan Lewis Insight: While MHPAEA itself was enacted in 2008, mental health parity has become a topic of increased state and federal interest, as demonstrated by the recent CAA changes and requirement for increased DOL scrutiny and enforcement. Prior to the CAA, the DOL had already identified MHPAEA as a national enforcement priority, with more than 1,700 targeted investigations after 2010.

What Types of Treatment Limitations Have the DOL Identified as NQTLs?

MHPAEA regulations contain the following illustrative, non-exhaustive, list of NQTLs (quoted directly from 29 CFR 2590.712(c)(4)(ii)):

  • Medical management standards limiting or excluding benefits based on medical necessity or medical appropriateness, or based on whether the treatment is experimental or investigative [including standards for concurrent review];
  • Formulary design for prescription drugs;
  • For plans with multiple network tiers (such as preferred providers and participating providers), network tier design;
  • Standards for provider admission to participate in a network, including reimbursement rates;
  • Plan methods for determining usual, customary, and reasonable charges;
  • Refusal to pay for higher-cost therapies until it can be shown that a lower-cost therapy is not effective (also known as fail-first policies or step therapy protocols);
  • Exclusions based on failure to complete a course of treatment; and
  • Restrictions based on geographic location, facility type, provider specialty, and other criteria that limit the scope or duration of benefits for services provided under a group health plan or coverage.

The DOL has also identified certain plan provisions that it views as “red flags” for ERISA-governed plans. Including a red flag provision is not an automatic MHPAEA violation, but the DOL would require the plan to provide evidence to substantiate how this provision does not violate the parity requirements. In addition to red flags, in the FAQs Part 45, the DOL identified four NQTLs on which it intends to focus (but not limit) enforcement efforts in the short term: “[1] Prior authorization requirements for in-network and out-of-network inpatient services; [2] Concurrent review for in-network and out-of-network inpatient and outpatient services; [3] Standards for provider admission to participate in a network, including reimbursement rates; and [4] Out-of-network reimbursement rates (plan methods for determining usual, customary, and reasonable charges).”

Morgan Lewis Insight: As part of the comparative analysis, plan fiduciaries that have not already done so may want to work with counsel to review the plan document terms and summary plan description to identify any NQTLs that could potentially create a MH/SUD parity compliance issue and/or raise a “red flag” if the plan is selected for DOL audit. These could include items such as provisions related to utilization review, fail-first measures, geographic limitations, specific exclusions which could potentially have a disproportionate impact on MH/SUD benefits offered, and identification of insufficient documentation.

What Documents and Information Should the Group Health Plan Gather to Perform the Comparative Analysis?

The 2020 MHPAEA Self-Compliance Tool and the FAQs Part 45 provide a list of documents and relevant information that a plan should have when drafting a comparative analysis:

  • Records documenting NQTL processes and detailing how the NQTLs are being applied to both M/S and MH/SUD benefits to ensure that the plan demonstrates compliance with the MHPAEA parity rules.
  • Any documentation, including any “guidelines, claims processing policies and procedures, or other standards” that the plan has relied upon in its conclusion that the application of the NQTLs does not violate MHPAEA. This should include any available details regarding the application of the standards and any supporting internal testing, review, or analysis.
  • Samples of covered and denied MH/SUD benefits and M/S benefit claims.

A plan that delegates MH/SUD and M/S administration to outside service providers will need documentation from them to substantiate that any NQTLs under the plan satisfy parity.

Morgan Lewis Insight: As part of the comparative analysis, in addition to the plan document, summary plan description, and policies, the plan must identify any operational NQTLs that could potentially create a MH/SUD parity compliance issue and/or raise a “red flag” if the DOL selects the plan for audit. These could include policies related to the providers’ application of the plan’s NQTLs in operation.

Please note that in addition to the DOL, a plan must provide this information to participants, beneficiaries, and, if applicable, state regulators on request.

What Must Group Health Plans Do in Response to a DOL Inquiry under the CAA?

Under the 2020 MHPAEA Self-Compliance Tool and FAQs Part 45, plans must provide the DOL with the following information upon request:

  • NQTL Terms – For each classification, specific plan terms regarding NQTLs and a description of all MH/SUD benefits and M/S benefits to which each NQTL applies.
  • NQTL Factors – The precisely-defined factors (and supporting sources) the plan uses to decide to apply NQTLs to particular benefits. The 2020 MHPAEA Self-Compliance Tool include a non-exhaustive list of examples of factors. If a factor(s) was given more weight than others, the plan should explain why and provide an evaluation of any specific data used to make the determination.
  • NQTL Sources – The evidentiary standards (e.g., published standards from medical groups, internal plan standards, etc.) and other sources or pieces of evidence used to determine the factors considered in deciding to apply NQTLs. The 2020 MHPAEA Self-Compliance Tool includes a non-exhaustive list of examples of sources. If a plan defines any of the evidentiary factors in a quantitative manner, it must include the precise definitions used and any supporting source. The 2020 MHPAEA Self-Compliance Tool indicates that if the sources include expert reports, the plan must assess the qualifications of the expert.
  • Comparative Analysis – A written analysis for each NQTL demonstrating that the processes, strategies, evidentiary standards and other factors applying the NQTLs to MH/SUD benefits are “comparable to and applied no more stringently than” those applying the NQTL to M/S benefits.
    • A description of any variation in the application of a guideline or standard between MH/SUD benefits and M/S benefits and an explanation of the process and factors used to decide to apply that variation.
    • If applicable, an identification of the nature of any specific decisions in administration of benefits that determine whether the NQTL applies, an identification of the decisionmaker(s) and their qualifications, and the timing of the decisions.
    • If applicable, an explanation of how the plan ultimately relied upon each expert evaluation to set recommendations regarding MH/SUD and M/S benefits.
    • If the analyses reference studies, testing, claims data, reports, or other considerations in defining or applying factors (such as meeting minutes or reports showing how those considerations were applied), then the plan should be prepared to provide copies of all those items.
  • Findings and Conclusions – The results of the written analyses stating whether the NQTLs comply or violate the MHPAEA requirements, citing specific evidence as appropriate. The analysis should also state the name, title, and position of anyone who performed or participated in the analysis.

Morgan Lewis Insight: The DOL’s production requirements are specific, extensive, and require analysis of the plan document provisions and the history of the application of the document provisions, policies, and procedures. These items may take considerable time and effort to compile and produce. Plans should bear these items in mind when preparing the comparative analysis required by the CAA in order to be prepared to respond to a DOL audit request.

As noted above, plans with an open DOL audit after the passage of the CAA received NQTL comparative analyses document requests from the DOL in early 2021. Based on the information and documents requested, it appears that the DOL is carefully scrutinizing plans’ NQTL comparative analyses and issuing insufficiency notices requesting additional supporting materials where the analyses fall short. The level of detail, description, and standards the DOL is looking for to ensure that the NQTL comparative analyses were conducted properly is extensive. We strongly encourage plan sponsors to engage their third-party administrators and/or ERISA counsel knowledgeable in DOL audits and the information that the DOL will be requesting to assist in the process—at least as an initial matter.

What Types of Response Strategies Has the DOL Identified as Insufficient?

The FAQs Part 45 state that a general statement that the plan complies with the requirements and a conclusory reference to general processes, strategies, standards, or other factors is insufficient. The use of any of the following (quoted directly from the FAQs Part 45) in responding to the DOL’s request for a comparative analysis will receive an insufficiency notice:

  • Production of a large volume of documents without a clear explanation of how and why each document is relevant to the comparative analysis
  • Conclusory or generalized statements, including mere recitations of the legal standard, without specific supporting evidence and detailed explanations
  • Identification of processes, strategies, sources, and factors without the required detailed comparative analysis
  • Identification of factors, evidentiary standards, and strategies without a clear explanation of how these were defined and applied in practice
  • Reference to factors and evidentiary standards that were defined or applied in a quantitative manner, without the precise definitions, data, and information necessary to assess their development or application
  • Analysis that is outdated due to the passage of time, a change in plan structure, or for any other reason

Morgan Lewis Insight: The DOL is looking for a complete, specific, and up-to-date comparative analysis. It is not enough to produce the source materials by themselves; the DOL is expecting to see all the dots properly connected, presented in a manner that the DOL can follow and evaluate.

What if DOL Determines That Materials Submitted Are Insufficient or the Group Health Plan Is Not Complying with MHPAEA?

If the DOL determines that the information provided by the plan is insufficient, it will indicate the additional materials or information needed.

If the DOL determines that a plan does not comply with MHPAEA, the plan must provide new comparative analyses showing compliance within 45 days after the DOL’s determination. If, after review of the new analyses, the DOL determines that the plan is still noncompliant, the plan will be required to notify all enrolled participants of this determination, and the DOL will notify the state where the plan is located.

In addition, the Build Back Better Act, which is begin considered under the budget reconciliation rules, includes the imposition of civil monetary penalties under Section 502(c)(10) of ERISA (penalties that currently apply to failure to comply with prohibition on use of genetic information). The penalty under this section is currently $110 per affected participant per day with higher penalties for failure to correct following notification by the Secretary of Labor and for violations that are more than "de minimis." While this has not yet become law, it demonstrates the interest of Congress as well as the DOL in the enforcement of MHPAEA.

What Should Group Health Plans Do Now?

Plans that have not already done so will wish to prepare (or hire a service provider to assist with the preparation of) or update, as necessary, the extensive and detailed comparative analysis required by the CAA and carefully consider the 2020 MHPAEA Self-Compliance Tool and the list of materials that the DOL can request at any time. Preparing the comparative analysis will likely require reaching out to the plan’s various service providers to ask for sufficient information to make this evaluation.

Morgan Lewis Insight: Gathering and reviewing the various documents and following up with plan service providers is a large undertaking, as is preparing the comparative analysis with the level of detail required. Plan fiduciaries may want to ask service providers for assistance with collection and review. Morgan Lewis can help with this as well.


If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Lisa Barton

Sage Fattahian
Lindsay Goodman

New York
Craig Bitman

Robert Abramowitz
Amy Pocino Kelly
Emily Rickard

John Ferreira
R. Randall Tracht
Claire Bouffard

San Francisco
Claire Rowland

Washington, DC
Althea Day
Gregory Needles
Jonathan Zimmerman

[1]      There are six classifications: inpatient, in-network; inpatient, out-of-network; outpatient, in-network; outpatient, out-of-network; emergency care; and prescription drugs. Subclassifications may be permitted in some instances.