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Summary: On June 7, 2023, the Centers for Medicare & Medicaid Services (CMS) issued guidance on the end of the Mental Health Parity and Addiction Equity Act (MHPAEA) optional exemption (“opt-out”) for self-funded, non-federal governmental group health plans (those sponsored by states, counties, school districts, and municipalities). This CMS guidance clarified the elimination of the MHPAEA opt-out for these plans, under the Consolidated Appropriations Act, 2023, and detailed a special rule for plans subject to multiple collective bargaining agreements (CBAs). Read on for more information.
Self-funded, non-federal governmental group health plans (those sponsored by states, counties, school districts, and municipalities) are permitted, under HIPAA and the Affordable Care Act (ACA), an exemption election (or “opt-out”) from the following Public Health Service Act (PHSA) requirements:
Note: Opt-out elections from the PHSA requirements outlined above are only available for self-funded, non-federal governmental group health plans, and not for fully insured non-federal governmental group health plans.
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:
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:
Small fully insured employer plans are generally required to comply with the MHPAEA by satisfying the essential health benefit requirements of the ACA.
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.
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.
To extend the MHPAEA opt-out election under this special rule for plans with multiple CBAs, the CMS guidance outlines the process steps:
Click here for a CMS webpage with detailed procedures and other resources for PHSA exemption elections for self-funded, non-federal governmental plans.
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.
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 The Health Insurance Portability and Accountability Act.
 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.
 45 C.F.R. § 146.136(g).
 PHS Act section 2722(a)(2)(F)(ii).