ERIC Warns Mental Health Parity Aggregation Rule Will Force Coverage Retreat

May 4, 2010

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ERIC News Release
For Immediate Release: May 4, 2010

Washington, D.C. -- The ERISA Industry Committee (ERIC), a Washington, D.C.-based trade association representing America's major employers, yesterday submitted comments on interim final regulations implementing the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA).

The Departments of Labor, Health and Human Services, and Treasury published the interim final regulations in the Federal Register on February 2, 2010.

ERIC's letter warns that the interim final regulations' unprecedented new aggregation rule requiring employers to aggregate separate plans for the purpose of complying with the regulation will cause many employers to eliminate their mental health benefits and that there are many valid reasons, particularly among large complex companies, to have separate plans.

"This mandatory aggregation rule is contrary to the plain language of the statute and constitutes an unwarranted extension of the parity requirement. The Departments should eliminate the mandatory aggregation rule from the interim final regulations, and instead should rely on the anti-abuse rule proposed in 2004, which requires the aggregation of separate plans only to the extent necessary to prevent evasion of the parity requirements," said ERIC President Mark Ugoretz.

ERIC's letter contends that MHPAEA does not mandate that all mental health or substance use disorder benefits provided by an employer be subject to the parity requirements, even if they are offered under a separate plan that provides no coverage for medical and surgical benefits. ERIC's letter points out that in contrast, however, the interim final regulations impose this requirement by ignoring the existence of separate plans, regardless of when or why the employer established the plans, and treating all benefits offered to the same individual as being provided under the same plan.

"Employers establish separate plans for a variety of business reasons; and the employer's decision to designate a particular benefit arrangement as a 'plan' often determines what rules apply to the arrangement," the letter explains. Moreover, the Department of Labor has never suggested that an employer must aggregate all arrangements that cover the same individuals for purposes of determining whether and how the basic requirements of ERISA apply to the arrangements, ERIC's letter contends.

ERIC further charges that, while the Departments, in the preamble of the interim final regulations, took the position that an anti-abuse rule is necessary to prevent plan sponsors from avoiding the parity requirements; however, rather than address these concerns, the Departments abandoned the anti-abuse rule in favor of the mandatory aggregation rule.

"The Departments have cited no evidence of abuse that would justify this irrebuttable presumption of guilt. To the contrary, large employers generally have modified their group health plans to comply with the MHPAEA parity requirements rather than drop mental health and substance use disorder coverage or move it to a separate plan," Ugoretz said.

ERIC's letter further advises that the Departments' unexpected reversal of their position concerning the "group health plan" definition has left employers in an untenable position. They must either apply the parity requirements to artificially aggregated arrangements that have different designs and cost-sharing requirements and serve widely different purposes, or -- if this solution proves impracticable -- they must eliminate the mental health and substance use disorder benefits they previously provided to their employees under bona fide separate plans, the letter explains.

ERIC recommends that, if the Departments believe it is necessary to abandon the accepted definition of a "group health plan" and adopt an unprecedented new mandatory aggregation rule, the Departments should publish the new rule as a proposed -- not interim final -- regulation so that all interested parties will have an adequate opportunity to comment on the rule before it becomes effective.

ERIC also recommends that the regulations should make clear that the parity rules do not apply to group health plans that cover only retirees, and that the effective date should be delayed for collective bargaining agreements ratified before the regulations were published.

A link to ERIC's comment letter appears below.

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For more information:
Ted Godbout
Director, Communications
The ERISA Industry Committee
1400 L Street, NW, Suite 350
Washington, DC 20005
Phone: (202) 789-1400
Fax: (202) 789-1120
tgodbout@eric.org
www.eric.org

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The ERISA Industry Committee (ERIC) is a non-profit association committed to representing the advancement of the employee retirement, health, and compensation plans of America's largest employers. ERIC's members provide benchmark retirement, health care coverage, compensation, and other economic security benefits directly to tens of millions of active and retired workers and their families. ERIC has a strong interest in proposals affecting its members' ability to deliver those benefits, their cost and their effectiveness, as well as the role of those benefits in the American economy.