June 2010

Dear Business Partner:

I am writing to advise you of recent rules regarding Federal Mental Health Parity (FMHP) and our efforts to assist your clients in complying with these regulations. We will mail letters in the next few weeks to notify our renewing 7/1—9/20 fully insured and ASC accounts about these new regulations. Copies of these letters will be posted on our broker site soon.

This email provides background on the issue as well as an explanation of the time sensitive changes we are implementing starting on 7/1.

More than a year after the enactment of the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA), the Departments of Labor, Health and Human Services, and Treasury issued the Interim Final Rule (the Rule) on February 2, 2010. Generally, the Rule prohibits group health plans from applying financial requirements or treatment limitations to mental health or substance use disorder benefits that are more restrictive than financial requirements or treatment limitations placed on medical and surgical benefits. Starting with October 1, 2009 renewals for employers with 50 or more employees regardless of financial arrangement, we made a number of plan design changes to accommodate MHPAEA requirements. These changes included removing existing treatment visit limits for mental health/substance use and changing cost share for these services to be the same or better than the cost share for medical/surgical benefits.

The Rule provides additional guidance and in some cases may require that additional steps be taken to ensure compliance. The Rule outlines two specific tests that are applied to determine parity. Further, the Rule separates out three categories for analysis: quantitative treatment limitations, financial requirements, and non-quantitative treatment limitations. Milliman has published a detailed overview outlining their opinion on how to implement parity.

So far, testing has revealed that most of our standard plans will need to be changed with regard to outpatient copayments because outpatient, in-network mental health/substance use services include a member copayment, while "substantially all" medical/surgical services in these plans do not. We expect to see the same results in our custom plans since many do not include copayments for many outpatient medical services. Read a fact sheet that provides more detail on our testing methodology.

Who Will Be Affected?
Beginning July 1, 2010, the Rule will take full effect for both insured and self-insured accounts and employer groups with more than 50 employees. Accounts with a collective bargaining arrangement that was in effect on October 3, 2008 may be able to defer implementation until the collective bargaining arrangement terminates.

How Is Blue Cross Blue Shield of Massachusetts Testing for FMHP Compliance?
Since the issuance of the Rule, Blue Cross Blue Shield of Massachusetts has worked toward establishing a model that supports compliance testing for all benefit plans and variations. We have worked internally, as well as within national workgroups at the Blue Cross Blue Shield Association, to ensure that our approach is consistent with the requirements.

Our actuaries have completed compliance testing for our standard insured plans; and our underwriting team is expediting testing for account-specific insured plans, beginning with July 2010 renewals and new business.

Are We Supporting ASC Customers with Testing?
ASC accounts are responsible for ensuring their compliance. We are finalizing our approach to support self-insured customers, as appropriate, without necessitating undue administrative services or financial exposure.

What Will Happen If a Plan Fails to Meet Compliance?
Given the scale of these parity regulations and the timeline for achieving compliance, we are taking the following approach:

• For July, August, and September 2010 renewals and new sales (up to September 25, 2010)—If a plan fails to achieve compliance due to outpatient cost-sharing, we will modify the benefits to have a $0 member cost share for outpatient mental health/substance use services, effective on the plan renewal date. Rates for July and August accounts will be adjusted prospectively, beginning September 1. We will also permit July, August, and September accounts to further modify their medical/surgical benefits off-anniversary beginning September 1, in order to achieve compliance.
• For renewals and new business as of September 25, 2010—We will modify our standard plans and customized plans with medical/surgical benefit changes to meet the test for compliance, wherever feasible. For example, in order for many plans to meet parity standards without resorting to a $0 copayment for mental health/substance use services, we will need to add a copayment for medical/surgical outpatient laboratory services. If this cannot be achieved, or if a customer prefers not to modify medical/surgical benefits, we will default to a $0 copayment for mental health/substance use services.

How Will Our Competitors Achieve Parity?
We developed our response based on advice from outside experts, and believe our approach will minimize non-compliance risk for your insured clients. However, other local plans may take a different approach to compliance with FMHP. Several national plans have already published their strategies:

• Aetna
• United Health Care
• Connecticare

How Will We Further Prepare Our Partners?
We thank you for your patience. We know that these regulations have a big impact on your clients and that your full understanding of FMHP will be essential. For this reason, we will have communication and training plans in place for you in the near future.

In the meantime, if you have any questions or concerns, please contact your account executive.

Sincerely,

Larry Croes
Vice President
Commercial Markets

P.S. Don't Miss MassAHU's Annual Meeting June 24, 2010
The Annual Meeting of the Massachusetts Association of Health Underwriters (MassAHU) will be held tomorrow, June 24 at MassAHU's Milford office.

I encourage you to attend this event, you'll be supporting an organization dedicated to advocating for the interests of you and your clients.

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