[Federal Register Volume 68, Number 124 (Friday, June 27, 2003)]
[Rules and Regulations]
[Pages 38206-38208]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-16054]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

45 CFR Part 146

[CMS-2152-F]
RIN 0938-AL42


Amendment to the Interim Final Regulation for Mental Health 
Parity

AGENCY: Centers for Medicare & Medicaid Services, Department of Health 
and Human Services.

ACTION: Amendment to interim final regulation.

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SUMMARY: This document contains an amendment to the interim final 
regulation that implements the Mental Health Parity Act (MHPA) to 
conform the sunset date of the regulation to the sunset date of the 
statute under legislation passed by the 107th Congress.

DATES: Effective date: The amendment to the regulation is effective 
July 28, 2003.
    Applicability dates: Under the amendment, the requirements of the 
MHPA interim final regulation apply to group health plans and health 
insurance issuers offering health insurance coverage in connection with 
a group health plan during the period commencing July 28, 2003 through 
December 30, 2003. Under the extended sunset date, MHPA requirements do 
not apply to benefits for services furnished on or after December 31, 
2003.

FOR FURTHER INFORMATION CONTACT: Dave Mlawsky, Centers for Medicare & 
Medicaid Services (CMS), Department of Health and Human Services, at 1-
877-267-2323, ext. 61565.
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SUPPLEMENTARY INFORMATION:

I. Background

    The Mental Health Parity Act of 1996 (MHPA) was enacted on 
September 26, 1996 (Pub. L. 104-204). MHPA amended the Public Health 
Service Act (PHS Act) and the Employee Retirement Income Security Act 
of 1974 (ERISA) to provide for parity in the application of annual and 
lifetime dollar limits on mental health benefits with dollar limits on 
medical/surgical benefits. Provisions implementing MHPA were later 
added to the Internal Revenue Code of 1986 (Code) under the Taxpayer 
Relief Act of 1997 (Pub. L. 105-34).
    The provisions of MHPA are set forth in Title XXVII of the PHS Act, 
Part 7 of Subtitle B of Title I of ERISA, and Chapter 100 of Subtitle K 
of the Code. The Secretaries of Health and Human Services, Labor, and 
the Treasury share jurisdiction over the MHPA provisions. These 
provisions are substantially similar, except as follows:
    [sbull] The MHPA provisions in the PHS Act generally apply to 
health insurance issuers that offer health insurance coverage in 
connection with group health plans and to certain State and local 
governmental plans. States, in the first instance, enforce the PHS Act 
for issuers. Only if a State does not substantially enforce the MHPA 
provisions under its insurance laws will the Department of Health and 
Human Services enforce the provisions, through the imposition of civil 
money penalties. Moreover, no enforcement action may be taken by the 
Secretary of Health and Human Services against any group health plan 
except certain State and local governmental plans.
    [sbull] The MHPA provisions in ERISA generally apply to all group 
health plans other than governmental plans, church plans, and certain 
other plans. These provisions also apply to health insurance issuers 
that offer health insurance coverage in connection with such group 
health plans. Generally, the Secretary of Labor enforces the MHPA 
provisions in ERISA, except that no enforcement action may be taken by 
the Secretary against issuers. However, individuals may generally 
pursue actions against issuers under ERISA and, in some circumstances, 
under State law.
    [sbull] The MHPA provisions in the Code generally apply to all 
group health plans other than governmental plans, but they

[[Page 38207]]

do not apply to health insurance issuers. A taxpayer that fails to 
comply with these provisions may be subject to an excise tax under 
section 4980D of the Code.

II. Overview of MHPA

    The MHPA provisions are set forth in section 2705 of the PHS Act, 
section 712 of ERISA, and section 9812 of the Code. MHPA applies to a 
group health plan (or health insurance coverage offered by issuers in 
connection with a group health plan) that provides both medical/
surgical benefits and mental health benefits. MHPA's original text 
included a sunset provision specifying that MHPA's provisions would not 
apply to benefits for services furnished on or after September 30, 
2001. On December 22, 1997, the Departments of Health and Human 
Services, Labor, and the Treasury issued interim final regulations 
under MHPA in the Federal Register (62 FR 66931). The interim final 
regulations included this statutory sunset date.
    On January 10, 2002, President Bush signed H.R. 3061 (Pub. L. 107-
116), the 2002 Appropriations Act for the Departments of Labor, Health 
and Human Services, and Education (``Appropriations Act'').\1\ This 
legislation extended MHPA's original sunset date under the PHS Act, 
ERISA, and the Code, so that MHPA's provisions in all three statutes 
would not sunset until December 31, 2002. The Appropriations Act did 
not specifically address whether MHPA's provisions in any of the three 
statutes applied retroactively during the ``gap'' that began upon the 
expiration of the original legislation (September 30, 2001) and ended 
on the day before enactment of the Appropriations Act (January 9, 
2002).
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    \1\ During the 107th Congress, legislation was passed by the 
Senate to substantively amend and expand the provisions of MHPA 
already in place. This legislation was offered as an amendment to 
the provisions of H.R. 3061. The Conference Report accompanying the 
underlying provisions of H.R. 3061 states that instead of the 
amendment proposed by the Senate, the amendment to MHPA contained in 
H.R. 3061 extends the original sunset date of MHPA, so that MHPA's 
provisions will not apply to benefits for services furnished on or 
after December 31, 2002. H.R. Rep. 107-342, at 170 (2001).
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    On March 9, 2002, President Bush signed H.R. 3090 (Pub. L. 107-
147), the Job Creation and Worker Assistance Act of 2002 (``Job 
Creation Act''). That legislation amended section 9812 of the Code (the 
mental health parity provisions), but did not amend the corresponding 
MHPA provisions in the PHS Act or ERISA. The Job Creation Act extended 
the sunset date under the Code to December 31, 2003. However, for 
services furnished ``on or after September 30, 2001, and before January 
10, 2002'' it specifically precluded retroactive application of the 
Code's MHPA provision. In other words, the Code's provisions would not 
apply to services furnished during the ``gap'' between the original 
sunset date and the enactment of the Code's sunset extension in the 
Appropriations Act.
    Because the Job Creation Act did not amend the MHPA provisions of 
the PHS Act or ERISA, we conclude that the MHPA provisions of the PHS 
Act apply during the ``gap,'' based on language in the Joint Committee 
on Taxation's technical explanation of H.R. 3090, the underlying bill 
that became the Job Creation Act. The Joint Committee report 
essentially explained that H.R. 3090 was undoing that part of the 
Appropriations Act that had ``restored'' the Code's MHPA provisions 
retroactively to September 30, 2001. Since the Appropriations Act made 
identical changes to the MHPA provisions of the Code, the PHS Act, and 
ERISA, that observation made by the Joint Committee on Taxation report 
clearly supports the conclusion that the Appropriations Act had 
``restored'' the MHPA provisions of the PHS Act and ERISA as well. In 
other words, because the MHPA provision contained in the PHS Act was 
made retroactive by the Appropriations Act, and was not amended by the 
Job Creation Act, the PHS provisions were ``restored'' retroactively to 
September 30, 2001.
    On December 2, 2002, President Bush signed H.R. 5716 (Pub. L. 107-
313), the Mental Health Parity Reauthorization Act of 2002. This 
legislation further extends MHPA's sunset date under the PHS Act and 
ERISA so that MHPA's provisions will apply to any services furnished 
before December 31, 2003. The new legislation does not contain any 
language that conflicts with the technical explanation of the Joint 
Committee on Taxation, described above, and therefore does not change 
our conclusion that the PHS Act's MHPA provisions are retroactive to 
September 30, 2001.
    These various amendments have not altered MHPA's scope. It 
continues to apply to a group health plan (or health insurance coverage 
offered by issuers in connection with a group health plan) that 
provides both medical/surgical benefits and mental health benefits.\2\ 
As a result of the statutory amendments, and to assist employers, plan 
sponsors, health insurance issuers, and workers, the Department is 
publishing this amendment to the interim final regulations, conforming 
the regulatory sunset date to the new statutory sunset date. The 
Department is making the effective date of this amendment to the 
interim final regulations effective as of July 28, 2003. The Department 
is also making conforming changes extending the duration of the 
increased cost exemption to be consistent with the new sunset date.
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    \2\ The parity requirements under MHPA, the interim regulations, 
and the amendment to the interim regulations do not apply to any 
group health plan (or health insurance coverage offered in 
connection with a group health plan) for any plan year of a small 
employer. The term ``small employer'' is defined as an employer who 
employed an average of at least 2 but not more than 50 employees on 
business days during the preceding calendar year and who employs at 
least 2 employees on the first day of the plan year.
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    Since the extension of this sunset date is essentially self-
implementing, this amendment to the MHPA regulations is published on an 
interim final basis under section 2792 of the PHS Act.
    This amendment to the interim final regulations is adopted under 
the authority contained in sections 2701 through 2763, 2791, and 2792 
of the PHS Act (42 U.S.C. 300gg through 300gg-63, 300gg-91, and 300gg-
92), as added by HIPAA (Pub. L. 104-191), and amended by MHPA (Pub. L. 
104-204, as amended by Pub. L. 107-116, and Pub. L. 107-313).

III. Regulatory Impact Statement

A. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
    Executive Order 12866 (as amended by Executive Order 13258, which 
merely reassigns responsibility of duties) directs agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). A 
regulatory impact analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more in any 1 year). 
Pursuant to the terms of the Executive Order, it has been determined 
that this action is not a ``significant regulatory action'' within the 
meaning of the Executive Order. Rather, it is an amendment to the 1997 
interim final

[[Page 38208]]

regulations that makes no substantive changes to those regulations, and 
merely extends the regulatory sunset date to conform to the new 
statutory sunset date added by Pub. L. 107-313. Because it is not a 
major rule, we are not required to perform an assessment of the costs 
and savings.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and government agencies. 
Most hospitals and most other providers and suppliers are small 
entities, either by nonprofit status or by having revenues of $6 
million to $29 million in any 1 year. Individuals and States are not 
included in the definition of a small entity. We are not preparing an 
analysis for the RFA because we have determined, and we certify, that 
this rule will not have a significant economic impact on a substantial 
number of small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds. We are not preparing an 
analysis for section 1102(b) of the Act because we have determined, and 
we certify, that this rule will not have a significant impact on the 
operations of a substantial number of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in expenditure in any 1 year by State, 
local, or tribal governments, in the aggregate, or by the private 
sector, of $110 million. This rule will have no consequential effect on 
the governments mentioned or on the private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it publishes a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. We have reviewed this final rule and have determined that 
it will not have a substantial effect on State or local governments.
    We have reviewed this rule and determined that, under the 
provisions of Pub. L. 104-121, the Contract with America Act, it is not 
a major rule.

List of Subjects in 45 CFR Part 146

    Health care, Health insurance, Reporting and recordkeeping 
requirements, State regulation of health insurance.

0
For the reasons set forth in the preamble, the Centers for Medicare & 
Medicaid Services amends 45 CFR part 146 as follows:

PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET

0
1. The authority citation for part 146 is amended to read as follows:

    Authority: Secs. 2701 through 2763, 2791, and 2792 of the PHS 
Act (42 U.S.C. 300gg through 300gg-63, 300gg-91, and 300gg-92), as 
added by HIPAA (Pub. L. 104-191), and amended by MHPA (Pub. L. 104-
204, as amended by Pub. L. 107-116, and Pub. L. 107-313), NMHPA 
(Pub. L. 104-204), and WHCRA (Pub. L. 105-277), sec. 102(c) of 
HIPAA.


Sec.  146.136  [Amended]

0
2. In Sec.  146.136, the following amendments are made:
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a. The last sentence of paragraph (f)(1) is amended by removing the 
date ``September 30, 2001'' and adding in its place the date ``December 
31, 2003.''
0
b. Paragraph (g)(2) is amended by removing the date ``September 30, 
2001'' and adding in its place the date ``December 31, 2003.''
0
c. Paragraph (i) is revised to read as follows:


Sec.  146.136  Parity in the application of certain limits to mental 
health benefits.

* * * * *
    (i) Sunset. This section does not apply to benefits for services 
furnished on or after December 31, 2003.

    Dated: December 23, 2002.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: January 21, 2003.
Tommy G. Thompson,
Secretary, Department of Health and Human Services.
[FR Doc. 03-16054 Filed 6-26-03; 8:45 am]
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