Employers that offer health benefits must ensure compliance with the Mental Health Parity and Addiction Equity Act (MHPAEA)—a law designed to ensure that mental health and substance use disorder (MH/SUD) benefits are covered on par with medical and surgical (M/S) benefits. With new final regulations issued in September 2024, federal agencies are strengthening enforcement, requiring employers to be more proactive in structuring and documenting their health plans.
What Changed with the 2024 Final Regulations?
The Departments of Labor (DOL), Treasury, and Health and Human Services (HHS) have issued updated rules aimed at eliminating disparities in how mental health benefits are provided compared to physical health benefits. These regulations focus heavily on Non-Quantitative Treatment Limitations (NQTLs)—a key area where disparities frequently occur.
Key Updates Employers Should Be Aware Of:
- Stricter Oversight of NQTLs
Plans must ensure that restrictions on MH/SUD benefits—such as prior authorization, step therapy, or network limitations—are comparable to those applied to M/S benefits. Failure to comply could lead to penalties or legal challenges. - Expanded Documentation Requirements
Employers must conduct comparative analyses proving their plans comply with parity rules. Regulators will actively review these reports, and increased audits are expected in 2025. - Clearer Benefit Classifications
The regulations reinforce six benefit categories that must maintain parity:- Inpatient, in-network
- Inpatient, out-of-network
- Outpatient, in-network
- Outpatient, out-of-network
- Emergency services
- Prescription drugs
Why This Matters: Lawsuits and Increased Enforcement
Employers should take these regulations seriously as federal agencies increase enforcement, and lawsuits already challenge how mental health benefits are administered.
- Employer Group Sues Over Biden’s Mental Health Parity Rules
A business coalition has filed a lawsuit, arguing that the new regulations place excessive burdens on employers and could lead to higher costs for businesses and employees. (Read more at The Wall Street Journal) - Biden Administration Cracks Down on Mental Health Benefit Gaps
Federal officials emphasize that many employer-sponsored health plans still impose hidden barriers to mental health care, violating MHPAEA. Agencies have vowed to hold insurers and employers accountable for noncompliance. (Read more at Reuters)
What Employers Should Do Now
To avoid potential compliance risks, employers should take immediate steps to ensure their health plans align with the new regulations:
✔ Conduct an Internal Parity Audit
Review prior authorization requirements, provider networks, and cost-sharing structures to confirm that MH/SUD benefits are not being treated less favorably than M/S benefits.
✔ Update Plan Documentation
The new rules require employers to maintain thorough comparative analyses demonstrating compliance. Work with legal counsel, benefits advisors, and third-party administrators to ensure proper documentation.
✔ Prepare for Federal Audits
Agencies will be actively requesting proof of compliance, and companies that fail to provide sufficient documentation could face enforcement actions.
✔ Educate HR and Benefits Teams
Ensuring internal stakeholders understand the new regulations will help prevent costly mistakes and improve employee access to mental health care.
Looking Ahead: The Future of Mental Health Parity
The MHPAEA has been evolving for over a decade, but these latest updates mark one of the most significant regulatory shifts yet. Employers that proactively adapt to these changes will not only mitigate risk but also improve access to care for employees—an increasingly important factor in workplace satisfaction and retention.
As federal enforcement ramps up and legal challenges unfold, staying informed is crucial. Companies that fail to prioritize mental health parity compliance may soon find themselves under regulatory scrutiny—or even in court.