Friends, we know that most of you follow policy matters more than the average American; otherwise, you would never have located our crazy little corner of the Interwebs. So, we’re pretty sure you, like us, have noticed the annoying predilection federal and state policymakers have of exempting themselves from the rules and laws they impose on the rest of the country.
A key example of this “do as we say, but not as we do” behavior is the preeminent federal law regulating employee benefit plans, the Employee Retirement Income Security Act (ERISA). Governmental retirement and health and welfare plans, which 29 USC §1002(32) defines as any plan established or maintained “by the federal government, a state government or political subdivision, or by any agency or instrumentality of any of the foregoing,” are generally exempt from ERISA. Similarly, several federal laws place coverage requirements on group health plans and insurance issuers but allow self-funded state and local government health plans, including those subject to collective bargaining agreements, to “opt-out” of those requirements annually. Until recently, the list of federal health coverage mandates that specific governmental plans could skip out on if desired included:
However, when Congress passed the Consolidated Appropriations Act 2023 (CAA 2023), not only did they fund the government for the year ahead, but they also did something practically unheard of! The CAA 2023 removes the MHPAEA from the list of laws that self-funded state and local government health plans can choose to ignore. It stopped all new opt-outs immediately. Any opt-out election that expires on or after June 27, 2023 (180 days after enactment) is non-renewable. CMS issued guidance to explain all the details, including a special provision for governmental plans with a union component subject to collective bargaining agreements. If only one agreement is involved, the opt-out may extend until the agreement expires. If multiple agreements with varying expiration dates are involved, a plan should email HIPAAOptOut@cms.hhs.gov with documentation about the agreements and their deadlines. If CMS approves extending the opt-out, they will let the plan know.
While the CAA 2023 and the CMS guidance do not address this issue specifically, and we do not personally know of any state or local government plans that were in this situation, we assume that if an eligible plan’s opt-out expired at any point between December 29, 2022, and June 26, 2023, those plans were able to renew their opt-out one more time. The bottom line is that all self-funded state and local government plans will be fully subject to the MHPAEA in the near future.
Federal policymakers didn’t just stop at ending the exemption for their state and local government colleagues. The CAA 2023 also includes significant new funding to help state governments enforce the MHPAEA within their jurisdictions. States may use this funding to beef up their reviews of fully insured plans for MHPAEA compliance during the plan approval process.
So, what does this mean? For state and local governments that self-fund their plans and are losing opt-out status, taking a good long look at current benefit designs is imperative. Preemptively conducting quantitative and non-quantitative treatment limitation analyses to determine if the plan has any issues before compliance requirements kick in is also a prudent strategy.
For every other group health plan administrator, broker, ERISA attorney, or compliance geek out there still harboring doubts about the federal government’s commitment to mental health parity, we think this means you should change your tune. Congress and the Biden Administration are demonstrating extreme mettle by eliminating the state and local government exemption and forcing fellow policymakers to get on board. Like the potty-mouth mom who responded to a child getting in trouble at school for cursing, the federal government is breaking out the swear jar and making the whole family clean up their respective acts. For the record, we are all for it. Also, for the record, the referenced child used the words appropriately, and everyone in the neighborhood knows the kid at the receiving end of the diatribe is a big #$%@!