Over the last several years, employees have demanded better mental health benefits from their employers and plan sponsors. As a result, the Federal government has increased the level of scrutiny it applies to mental health parity when analyzing employee benefits compliance.
This includes increasing enforcement of the Mental Health Parity and Addiction Equity Act (MHPAEA), with particular focus on Non-Quantitative Treatment Limitations (NQTLs). Therefore, as an employer or plan sponsor, you must achieve NQTL compliance; otherwise, you may face significant financial and legal consequences.
In this article, we shall explain what NQTLs are, provide examples of NQTLs in health plans, highlight NQTL requirements for employers, address common NQTL violations, and provide a guide on how to prepare NQTL analyses.
Let’s begin!
What is NQTL?
A Non-Quantitative Treatment Limitation (NQTL) is any non-numerical qualitative restriction on benefits for mental health or substance use disorder (MH/SUD) services. These restrictions are not expressed numerically; instead, they affect the scope, duration, and accessibility to care.
Group health plans primarily use NQTLs to manage utilization and control costs.
- Under the MHPAEA, group health plans that provide both medical or surgical benefits and MH/SUD benefits must ensure that NQTLs applied to MH/SUD benefits are no more restrictive than those applied to comparable medical/surgical benefits.
- As an employer, if your health plan uses processes, strategies, evidentiary standards, or decision-making protocols to manage care, you must ensure they are applied comparably and consistently across mental and physical health services.
- NQTLs differ from Quantitative Treatment Limitations (QTLs), which are numerical, measurable restrictions on health care benefits. Examples of QTLs include limits on the number of hospital visits, the number of covered days, and specific dollar amounts, such as deductibles.
NQTL Examples in Health Plans
NQTLs are non-numerical restrictions that appear in nearly every health plan. Common examples of NQTLs include:
- Prior Authorization Requirements: These are mandatory, pre-service requirements that require care providers to obtain approval from the insurance plan before providing specific inpatient and outpatient treatments or medications.
- Concurrent Review and Continued Stay Criteria: This ongoing review of a patient’s care determines whether treatment remains necessary.
- Step Therapy or Fail-First Protocols: These policies require patients to try lower-cost or less-intensive treatments before the insurance plan covers higher-cost, more intensive treatments.
- Medical Necessity Criteria: The clinical standards a plan uses to approve or deny a claim. Such standards limit coverage based on factors such as whether a treatment is experimental, investigational, or not medically necessary.
- Network Admission Standards: The rules a care provider must follow and the requirements they must meet to join a plan’s network. These include reimbursement rate methodologies that determine a provider’s payment levels.
- Formulary Design: This is a form of prescription drug management that puts in place tiered prescription drug structures that may limit access to specific mental health medications.
- Geographic and Licensure Limitations: These are restrictions based on a provider’s location and facility type. As a result, plan participants and beneficiaries can receive care only from certain professionals or those working in specific settings.
The NQTL Comparative Analysis Framework
An NQTL comparative analysis is crucial to determining compliance with the MHPAEA. It is a structured analysis that helps you demonstrate parity in both the design and application of an NQTL.
The framework must address six key elements to be compliant:
- Identification of the NQTL: Clearly describe the NQTL and the specific MH/SUD and medical or surgical benefits it applies to.
- Factors used to Design the NQTL: Explain the criteria, data, rationale, and the source for each factor you used to apply the limitation.
- Define the Evidentiary Standards: Identify and provide the source for each evidentiary standard and any other evidence you relied on to design and apply the NQTL.
- Comparative Analysis: Evaluate whether the processes, standards, and strategies you used to develop the NQTL are comparable to and not applied more stringently than as written.
- Comparability in Operation: Conduct a data analysis to prove that the NQTL is applied in practice no more stringently to MH/SUD benefits.
- Findings and Conclusion: Provide a detailed summary of whether your plan achieved parity or not, and recommend any corrective actions.
NQTL Requirements for Employers and Health Plans
Under the MHPAEA, employer-sponsored health plans, including self-funded health insurance and fully insured plans, are required to meet specific NQTL requirements. The key requirements include:
- Ensuring Parity: The processes, strategies, evidentiary standards, and factors you use to apply NQTL to MH/SUD benefits must be comparable to those you apply to medical and surgical benefits. You should also ensure that you do not apply the NQTLs more stringently to MH/SUD benefits than to medical or surgical benefits.
- Comparative Analysis: Maintain a detailed, written comparative analysis for each material NQTL and the benefits affected. The analysis should also include definitions of the factors and standards used to design the NQTL. Additionally, the analysis should show you applying the NQTL as written in the design.
- Data Evaluation: Your plan must collect and evaluate data to assess whether the NQTLs you applied are impacting access to care for your plan participants. That includes data such as claim denial rates, network adequacy, and provider reimbursement rates.
- Monitoring Vendors: For ERISA plans, the named fiduciary must prudently oversee vendors involved in preparing or operationalizing NQTL comparative analyses and maintain documentation demonstrating active monitoring and review.
- Remediation Procedures: If data evaluations indicate that a plan’s NQTLs are causing material disparities in access to MH/SUD care, the plan’s sponsor should take steps to address them.
You should note that some plans are exempt from MHPAEA, including:
- Small Employer Funded Plans: Certain plans may be exempt from MHPAEA, including some small employer self-funded plans and plans offering only excepted benefits. Applicability depends on plan structure, funding status, and market classification, and should be evaluated carefully.
- Excepted Benefits Exemption: Group health plans and group or individual insurance coverage that offer only excepted benefits are also exempt.
- Retiree-Only Group Health Plans: Health insurance plans designed specifically for former employees who have retired, rather than for active workers.
Common NQTL Compliance Violations
The most common NQTL compliance violations are attributable to poor documentation and unequal management of MH/SUD benefits compared to medical or surgical benefits.
Here are the most common NQTL failures based on enforcement trends:
- Lack of Comparative Analysis: Many plan sponsors and employers fail to provide a comprehensive written comparative analysis for NQTLs as required by the Consolidated Appropriations Act of 2021 (CAA). Others may offer a generic analysis that does not account for the specifics of their plan.
- Failure to Analyze Applications: Some plan sponsors fail to provide sufficient evidence detailing how they applied their policies in practice. They primarily focus on the plan’s policy language. This hides the fact that policies are applied more restrictively to MH/SUD benefits than to medical or surgical benefits.
- Inconsistent Prior Authorization Requirements: Some plan sponsors impose excessively high requirements for prior authorization, concurrent review, or medical necessity reviews for MH/SUD benefits. For example, they may require prior authorization for 100% of MH/SUD services, but only for 20% of medical services.
- Network Adequacy Disparities: Some plans have network adequacy disparities without a reasonable justification. For example, having lower reimbursement rates for in-network mental health professionals compared to similar medical specialists.
- Failure to Use Outcome Data: Some plan sponsors do not analyze the impact of their NQTLs on access to care. As a result, they cannot demonstrate that their NQTLs do not cause material differences in access for plan participants and beneficiaries. Consequently, they are unable to take corrective measures to ensure parity.
- Fail-First Policies: In other cases, plan sponsors require participants or beneficiaries to have adverse reactions to lower-cost outpatient treatments before authorizing higher-quality care such as residential treatment.
- Licensure Restrictions: Some plans have stricter licensing requirements for mental health facilities and professionals than medical services providers. This limits patients’ access to care.
How to Prepare for an NQTL Analysis
Preparing a defensible NQTL analysis requires coordination among your organization’s legal, HR, and benefits departments, as well as the incorporation of vendors and other stakeholders into the process. Below is a step-by-step guide on how to prepare the analysis:
1. Identify NQTLs
Identify all NQTLs, such as prior authorization, concurrent review, and medical necessity criteria. Classify the listed NQTLs across the six benefits categories, namely inpatient in-network, inpatient out-of-network, outpatient in-network, outpatient out-of-network, emergency care, and prescription drugs. Then, gather all plan documents that clearly define each limitation.
2. Identify Factors and Evidentiary Standards
For each NQTL you listed, outline the factors you used to determine it should apply to a particular benefit, such as high cost or low provider supply. Then gather the data and records you used to support those factors. Proceed to citing sources you used to develop your NQTLs, such as national guidelines. Lastly, compare how the NQTL is written in the policy and how it is applied operationally.
3. Perform a Comparative Analysis
Compare the processes you used to develop NQTLs for MH/SUD benefits to those used to create NQTLs for medical or surgical benefits. The processes must be similar in design and application. Then provide evidence that the NQTLs are not being applied more stringently in MH/SUD benefits regardless of whether the written policy is compliant or not.
4. Document Findings
Publish a detailed report for each NQTL that follows the “Six-Step” Parity Compliance guide. In your findings, state whether the NQTL is compliant or not. Lastly, if you identify parity gaps, ensure you outline the corrective actions you intend to take to address them.
5. Engage Fiduciaries and Subject-Matter Experts
If you delegated the development and application of the NQTLs to vendors such as TPAs and Pharmacy Benefit Managers (PBMs), you should coordinate with them to gather the necessary data. You should also engage legal counsel or compliance specialists to help you frame the analysis correctly. This will help ensure compliance with evolving regulations.
Preparing a comprehensive NQTL analysis requires fiduciary benefits oversight to ensure regulatory compliance. Additionally, organizations face the challenge of coordinating efforts among stakeholders, including legal teams, HR departments, vendors, and third-party administrators.
At Ethos Benefits, we leverage our fiduciary-level expertise rooted in ERISA compliance to help you conduct a comprehensive NQTL analysis. We follow a data-driven approach that ensures your comparative analyses withstand regulatory scrutiny. Additionally, we manage the documentation process with 100% transparency, ensuring you are always aware of progress and compliance status.
Schedule a discovery call today to begin preparing for your company’s NQTL analysis.
Best Practices for Managing NQTLs Proactively
NQTL management is an ongoing governance issue. It is not something you can handle as you would a one-time project. Therefore, you should have mature compliance programs that treat it as such.
Below are some of the best data-driven approaches you can implement to ensure compliance:
- Clear Documentation Standards: Develop and maintain thorough documentation guidelines that outline your processes, strategies, and standards that inform how you design and apply NQTLs. That includes defining factors such as medical evidence and costs, as well as standards, such as the clinical guidelines you used during your design and implementation stages.
- Comparative Analysis: Conduct thorough and regular analyses of how you apply NQTLs in practice, not just reviewing how you wrote the policy. The analyses should cover all benefit classifications, including inpatient in-network, inpatient out-of-network, outpatient in-network, outpatient out-of-network, emergency care, and prescription drugs.
- Regular Data Monitoring: Collect data on NQTL applications, including claims and authorizations. This should cover in-network reimbursement rates, out-of-network usage, and denial rates, among others. This will help you establish an ongoing audit and monitoring plan to detect, assess, and mitigate potential noncompliance.
- Vendor Management: Ensure the vendors you work with, such as TPAs, understand their contractual obligations. You should require them to provide detailed and plan-specific comparative analyses. You should also maintain records of all communications with your vendor regarding their compliance with NQTL requirements.
- Training for Benefits and HR Staff: Conduct regular training sessions to ensure your staff understands all NQTL requirements. This will enable them to identify and define the NQTLs that apply to the coverage you provide. It will also help ensure higher compliance rates, helping you avoid noncompliance penalties.
- Annual NQTL Reviews: Evaluate your processes, strategies, and standards applied to ensure the benefits for MH/SUD are comparable to and not more stringent than those applied for medical or surgical benefits.
Frequently Asked Questions (FAQs)
Below are answers to common questions we receive regularly from interested parties and clients.
Are NQTL Rules Different for Self-Funded vs. Fully Insured Plans?
MHPAEA applies to both self-funded and fully insured plans. While carriers are responsible for policy design compliance in fully insured arrangements, plan sponsors retain fiduciary oversight responsibilities and must obtain and review sufficient documentation to demonstrate parity compliance.
Can Utilization Management Vendors Create NQTL Risk?
Yes, UM vendors, such as TPAs and PBMs, can create NQTL risks by handling tasks that are subject to regulatory scrutiny. For example, they design protocols for prior authorization and medical necessity. If such protocols are more restrictive for MH/SUD benefits than for medical or surgical benefits, this constitutes a parity violation.
Can Third-Party Administrators be Liable for NQTL Violations?
If a TPA acts as a fiduciary, it can face regulatory consequences for NQTL violations. However, as the plan sponsor, you cannot outsource liability for MHPAEA compliance. The responsibility of complying with MHPAEA lies with you.
What Are the Penalties for Failing to Produce an NQTL Analysis?
Failure to produce a sufficient comparative analysis upon request may expose the plan sponsor to ERISA disclosure penalties, excise taxes under the Internal Revenue Code, required corrective action, claim reprocessing, regulatory oversight, and potential litigation.
Conclusion
NQTL compliance has become a particular focus for Federal regulators as they continue to intensify MHPAEA audits. As an employer and plan sponsor, you must move away from superficial compliance that cannot withstand thorough scrutiny.
Instead, you must develop robust NQTL comparative analyses that help you find NQTLs in your health plans and ensure that they operate in practice as intended in writing. This will help your organization reduce compliance risk while also guaranteeing equitable access to mental health and substance use disorder care.
Given the legal implications of noncompliance, you should not hesitate to seek the services of professionals who understand the inner workings of NQTLs.
At Ethos Benefits, we leverage our fiduciary expertise to help you with proactive planning that keeps you ahead of evolving MHPAEA requirements. This includes administrative support, such as coordinating vendors and managing documentation, and designing employee-centered benefits that provide members with equitable access to health care.
Book a one-on-one call to discover how a sustainable NQTL compliance program helps you deliver premium benefits to your team.
