By: HUB’s EB Compliance Team

Under the Mental Health Parity and Addiction Equity Act (“MHPAEA”), self-funded, nonfederal governmental plans could choose not to have MHPAEA apply to them. However, the Consolidated Appropriations Act, 2023 has eliminated that election.

Background

Recognizing that self-funded, nonfederal governmental plans (governmental plans sponsored by state and local governments) may have unique concerns (and perhaps with a nod to federalism), the MHPAEA was among a list of statutes where Congress allowed an opt-out election for nongovernmental plans.

The Affordable Care Act (“ACA”) limited the scope of the opt-out election. This meant that, after the ACA, nonfederal governmental plans could no longer opt out of some federal coverage mandates and HIPAA’s portability rules. However, the opt-out option for MHPAEA remained in effect.

MHPAEA Opt-Out Eliminated for Nonfederal Governmental Plans

Congress has now eliminated the MHPAEA opt-out. The elimination has three parts to it:

  1. No new opt-out elections may be made. Therefore, any self-funded state or local governmental plan that does not already have an opt-out election on file with CMS may not file for one.
  2. Existing opt-out elections that are expiring on or after June 29, 2023 (i.e., 180 days after the bill became law) cannot be renewed. This means opt-out elections expiring before that date could renew their election for another year, but after that, all opt-outs will end and self-funded nonfederal governmental plans must comply with MHPAEA.
  3. However, any plan that is subject to multiple collective bargaining agreements of varying lengths may extend its election until the last such agreement expires. This exception has several conditions:
    1. The current opt-out election must expire on or after June 29. Therefore, plans with opt-outs expiring sooner do not appear to be eligible.
    2. Plans that are only subject to a single collective bargaining agreement do not appear to be eligible either.

Additional clarification on the above points from CMS would be helpful.

Conclusion

Self-funded nonfederal governmental plans should take note of the elimination of the opt-out provision. As a result, they will need to prepare (if they have not already) to come into compliance with MHPAEA by their applicable deadline.

If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.

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Neither Hub International Limited nor any of its affiliated companies is a law or accounting firm, and therefore they cannot provide legal or tax advice. The information herein is provided for general information only and is not intended to constitute legal or tax advice as to an organization’s specific circumstances. It is based on Hub International's understanding of the law as it exists on the date of this publication. Subsequent developments may result in this information becoming outdated or incorrect and Hub International does not have an obligation to update this information. You should consult an attorney, accountant, or other legal or tax professional regarding the application of the general information provided here to your organization’s specific situation in light of your organization’s particular needs.