Executive Summary: Mental Health in the Level Funded Workforce: Parity on Paper, Gaps in Practice
LFP-06.06 — The Populations#
MHPAEA applies to self-funded plans, including level funded plans. The requirement is not optional. What is absent in most small self-funded plans is not the legal obligation but the documentation and analysis that would demonstrate compliance — and the DOL’s own Reports to Congress have established that none of the NQTL comparative analyses initially submitted by plans and insurers were sufficient to do so.
The Mental Health Parity and Addiction Equity Act was enacted in 2008. The Consolidated Appropriations Act of 2021 added a nonquantitative treatment limitation comparative analysis requirement effective February 10, 2021. The 2024 final rule published at 89 Fed. Reg. 77577 on September 25, 2024, strengthened NQTL documentation requirements for plan years beginning on or after January 1, 2025. Parity is required across financial requirements and both quantitative and nonquantitative treatment limitations. For NQTLs, plans must demonstrate through documented comparative analysis that each limitation is applied no more stringently to mental health and substance use disorder benefits than to comparable medical and surgical benefits in the same classification.
The compliance gap is documented in federal reporting. The DOL’s 2022 Report to Congress stated explicitly that none of the NQTL comparative analyses initially submitted to EBSA were sufficient to demonstrate compliance. The 2023 Report confirmed the same pattern through the second year of CAA implementation. Between February 2021 and July 2022, EBSA issued 138 insufficiency letters covering over 290 NQTLs reviewed. Most small self-funded plans are technically noncompliant — not because they consciously restricted mental health benefits, but because they have not performed the analysis that would reveal whether restrictions exist.
The mechanisms of parity violation are identifiable. Prior authorization requirements applied more stringently to mental health services than to comparable medical services are the most common documented violation category in DOL FY 2023 enforcement reporting. Network adequacy is a persistent structural failure: Milliman’s 2019 research found patients 5.7 times more likely to use out-of-network providers for behavioral health office visits than for medical visits, because in-network reimbursement rates for mental health providers are low enough that providers decline to participate. Network inadequacy functions as a treatment limitation even when the plan document imposes no visit restrictions. Quantitative visit limits and fail-first requirements applied to mental health without comparable application to analogous medical conditions are additional documented violation patterns.
Enforcement is increasing. EBSA has allocated nearly 25% of its enforcement program to MHPAEA NQTL work. DOL and CMS FY 2023 enforcement reporting found 33 total violations in 56 plans reviewed. Class action settlements against large self-funded plans have exceeded $100 million. EBSA targets large TPAs specifically because corrections cascade across the TPA’s entire book of business — the architecture the 2023 Report explicitly recommended for systemic improvement in the small group market. Plans without a completed NQTL comparative analysis are not in an undefined compliance posture. They are noncompliant.