HHS Mental Health Parity Regulations
Health Care Financing Administration
45 CFR Subtitle A, Subchapter B
45 CFR Part 146 is amended as
follows:
PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET
1. The authority citation for Part
146 is revised 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).
2. A new Subpart C is added to
Part 146 to read as follows:
Subpart C--Requirements Related to Benefits
Sec. 146.136 Parity in the application of certain limits to
mental health benefits.
(a) Definitions. For purposes of
this section, except where the context clearly indicates otherwise,
the following definitions apply:
Aggregate lifetime limit means a dollar limitation on the total
amount of specified benefits that may be paid under a group
health plan (or group health insurance coverage offered in
connection with such plan) for an individual (or for a group of
individuals considered a single unit in applying this dollar
limitation, such as a family or an employee plus spouse).
Annual limit means a dollar
limitation on the total amount of specified benefits that may be
paid in a 12-month period under a plan (or group health insurance
coverage offered in connection with such plan) for an individual (or
for a group of individuals considered a single unit in applying this
dollar limitation, such as a family or an employee plus spouse).
Medical/surgical benefits means
benefits for medical or surgical services, as defined under the
terms of the plan or group health insurance coverage, but does not
include mental health benefits.
Mental health benefits means benefits for mental health services, as
defined under the terms of the plan or group health insurance
coverage, but does not include benefits for treatment of substance
abuse or chemical dependency. (b)
Requirements regarding limits on benefits--(1) In general--(i)
General parity requirement. A group health plan (or health insurance
coverage offered by an issuer in connection with a group
[[Page 66962]] health plan) that provides both
medical/surgical benefits and mental health benefits must comply
with paragraph (b)(2), paragraph (b)(3), or paragraph (b)(6) of this
section. (ii) Exception. The rule
in paragraph (b)(1)(i) of this section does not apply if a plan, or
coverage, satisfies the requirements of paragraph (e) or paragraph
(f) of this section. (2) Plan
with no limit or limits on less than one-third of all
medical/surgical benefits. If a plan (or group health insurance
coverage) does not include an aggregate lifetime or annual limit on
any medical/surgical benefits or includes aggregate lifetime or
annual limits that apply to less than one-third of all
medical/surgical benefits, it may not impose an aggregate lifetime
or annual limit, respectively, on mental health benefits.
(3) Plan with a limit on at least
two-thirds of all medical/ surgical benefits. If a plan (or group
health insurance coverage) includes an aggregate lifetime or annual
limit on at least two-thirds of all medical/surgical benefits, it
must either-- (i) Apply the
aggregate lifetime or annual limit both to the medical/surgical
benefits to which the limit would otherwise apply and to mental
health benefits in a manner that does not distinguish between the
medical/surgical and mental health benefits; or
(ii) Not include an aggregate
lifetime or annual limit on mental health benefits that is less than
the aggregate lifetime or annual limit, respectively, on the
medical/surgical benefits. (4)
Examples. The rules of paragraphs (b) (2) and (3) of this section
are illustrated by the following examples:
Example 1. (i) Prior to the
effective date of the mental health parity provisions, a group
health plan had no annual limit on medical/surgical benefits and had
a $10,000 annual limit on mental health benefits. To comply with the
parity requirements of this paragraph (b), the plan sponsor is
considering each of the following options:
(A) Eliminating the plan's annual
limit on mental health benefits;
(B) Replacing the plan's previous annual limit on mental health
benefits with a $500,000 annual limit on all benefits (including
medical/surgical and mental health benefits); and
(C) Replacing the plan's previous
annual limit on mental health benefits with a $250,000 annual limit
on medical/surgical benefits and a $250,000 annual limit on mental
health benefits. (ii) In this
Example 1, each of the three options being considered by the plan
sponsor would comply with the requirements of this section because
they offer parity in the dollar limits placed on medical/surgical
and mental health benefits.
Example 2. (i) Prior to the
effective date of the mental health parity provisions, a group
health plan had a $100,000 annual limit on medical/surgical
inpatient benefits, a $50,000 annual limit on medical/surgical
outpatient benefits, and a $100,000 annual limit on all mental
health benefits. To comply with the parity requirements of this
paragraph (b), the plan sponsor is considering each of the following
options: (A) Replacing the plan's
previous annual limit on mental health benefits with a $150,000
annual limit on mental health benefits; and
(B) Replacing the plan's previous
annual limit on mental health benefits with a $100,000 annual limit
on mental health inpatient benefits and a $50,000 annual limit on
mental health outpatient benefits.
(ii) In this Example 2, each
option under consideration by the plan sponsor would comply with the
requirements of this section because they offer parity in the dollar
limits placed on medical/ surgical and mental health benefits.
Example 3. (i) A group health
plan that is subject to the requirements of this section has no
aggregate lifetime or annual limit for either medical/surgical
benefits or mental health benefits. While the plan provides
medical/surgical benefits with respect to both network and
out-of-network providers, it does not provide mental health benefits
with respect to out-of-network providers.
(ii) In this Example 3, the plan
complies with the requirements of this section because they offer
parity in the dollar limits placed on medical/surgical and mental
health benefits. Example 4. (i)
Prior to the effective date of the mental health parity provisions,
a group health plan had an annual limit on medical/surgical benefits
and a separate but identical annual limit on mental health benefits.
The plan included benefits for treatment of substance abuse and
chemical dependency in its definition of mental health benefits.
Accordingly, claims paid for treatment of substance abuse and
chemical dependency were counted in applying the annual limit on
mental health benefits. To comply with the parity requirements of
this paragraph (b), the plan sponsor is considering each of the
following options: (A) Making no
change in the plan so that claims paid for treatment of substance
abuse and chemical dependency continue to count in applying the
annual limit on mental health benefits;
(B) Amending the plan to count
claims paid for treatment of substance abuse and chemical dependency
in applying the annual limit on medical/surgical benefits (rather
than counting those claims in applying the annual limit on mental
health benefits); (C) Amending
the plan to provide a new category of benefits for treatment of
chemical dependency and substance abuse that is subject to a
separate, lower limit and under which claims paid for treatment of
substance abuse and chemical dependency are counted only in applying
the annual limit on this separate category; and
(D) Amending the plan to
eliminate distinctions between medical/ surgical benefits and mental
health benefits and establishing an overall limit on benefits
offered under the plan under which claims paid for treatment of
substance abuse and chemical dependency are counted with
medical/surgical benefits and mental health benefits in applying the
overall limit. (ii) In this
Example 4, the group health plan is described in paragraph (b)(3) of
this section. Because mental health benefits are defined in
paragraph (a) of this section as excluding benefits for treatment of
substance abuse and chemical dependency, the inclusion of benefits
for treatment of substance abuse and chemical dependency in applying
an aggregate lifetime limit or annual limit on mental health
benefits under option (A) of this Example 4 would not comply with
the requirements of paragraph (b)(3) of this section. However,
options (B), (C), and (D) of this Example 4 would comply with the
requirements of paragraph (b)(3) of this section because they offer
parity in the dollar limits placed on medical/surgical and mental
health benefits.
(5) Determining one-third and
two-thirds of all medical/surgical benefits. For purposes of this
paragraph (b), the determination of whether the portion of
medical/surgical benefits subject to a limit represents one-third or
two-thirds of all medical/surgical benefits is based on the dollar
amount of all plan payments for medical/surgical benefits expected
to be paid under the plan for the plan year (or for the portion of
the plan year after a change in plan benefits that affects the
applicability of the aggregate lifetime or annual limits). Any
reasonable method may be used to determine whether the dollar
amounts expected to be paid under the plan will constitute one-third
or two-thirds of the dollar amount of all plan payments for medical/
surgical benefits. (6) Plan not
described in paragraph (b)(2) or paragraph (b)(3) of this
section--(i) In general. A group health plan (or group health
insurance coverage) that is not described in paragraph (b)(2) or
paragraph (b)(3) of this section, must either impose--
(A) No aggregate lifetime or
annual limit, as appropriate, on mental health benefits; or
(B) An aggregate lifetime or
annual limit on mental health benefits that is no less than an
average limit for medical/surgical benefits calculated in the
following manner. The average limit is calculated by taking into
account the weighted average of the aggregate lifetime or annual
limits, as appropriate, that are applicable to the categories of
medical/surgical benefits. Limits based on delivery systems, such as
inpatient/outpatient treatment, or normal treatment of common,
low-cost conditions (such as treatment of normal births), do not
constitute categories for purposes of this paragraph (b)(6)(i)(B).
In addition, for purposes of determining
[[Page 66963]] weighted averages, any benefits that are not
within a category that is subject to a separately-designated limit
under the plan are taken into account as a single separate category
by using an estimate of the upper limit on the dollar amount that a
plan may reasonably be expected to incur with respect to such
benefits, taking into account any other applicable restrictions
under the plan. (ii) Weighting.
For purposes of this paragraph (b)(6), the weighting applicable to
any category of medical/surgical benefits is determined in the
manner set forth in paragraph (b)(5) of this section for determining
one-third or two-thirds of all medical/surgical benefits.
(iii) Examples. The rules of this
paragraph (b)(6) are illustrated by the following example:
Example. (i) A group health plan
that is subject to the requirements of this section includes a
$100,000 annual limit on medical/surgical benefits related to
cardio-pulmonary diseases. The plan does not include an annual limit
on any other category of medical/surgical benefits. The plan
determines that 40% of the dollar amount of plan payments for
medical/surgical benefits are related to cardio-pulmonary diseases.
The plan determines that $1,000,000 is a reasonable estimate of the
upper limit on the dollar amount that the plan may incur with
respect to the other 60% of payments for medical/surgical benefits.
(ii) In this Example, the plan is
not described in paragraph (b)(3) of this section because there is
not one annual limit that applies to at least two-thirds of all
medical/surgical benefits. Further, the plan is not described in
paragraph (b)(2) of this section because more than one-third of all
medical/surgical benefits are subject to an annual limit. Under this
paragraph (b)(6), the plan sponsor can choose either to include no
annual limit on mental health benefits, or to include an annual
limit on mental health benefits that is not less than the weighted
average of the annual limits applicable to each category of
medical/surgical benefits. In this example, the minimum weighted
average annual limit that can be applied to mental health benefits
is $640,000 (40% `` $100,000 + 60% `` $1,000,000 = $640,000).
(c) Rule in the case of separate
benefit packages. If a group health plan offers two or more benefit
packages, the requirements of this section, including the exemption
provisions in paragraph (f) of this section, apply separately to
each benefit package. Examples of a group health plan that offers
two or more benefit packages include a group health plan that offers
employees a choice between indemnity coverage or HMO coverage, and a
group health plan that provides one benefit package for retirees and
a different benefit package for current employees.
(d) Applicability--(1) Group
health plans. The requirements of this section apply to a group
health plan offering both medical/surgical benefits and mental
health benefits regardless of whether the mental health benefits are
administered separately under the plan.
(2) Health insurance issuers. The
requirements of this section apply to a health insurance issuer
offering health insurance coverage for both medical/surgical
benefits and mental health benefits in connection with a group
health plan. (3) Scope. This
section does not-- (i) Require a
group health plan (or health insurance issuer offering coverage in
connection with a group health plan) to provide any mental health
benefits; or (ii) Affect the
terms and conditions (including cost sharing, limits on the number
of visits or days of coverage, requirements relating to medical
necessity, requiring prior authorization for treatment, or requiring
primary care physicians' referrals for treatment) relating to the
amount, duration, or scope of the mental health benefits under the
plan (or coverage) except as specifically provided in paragraph (b)
of this section. (e) Small
employer exemption--(1) In general. The requirements of this section
do not apply to a group health plan (or health insurance issuer
offering coverage in connection with a group health plan) for a plan
year of a small employer. For purposes of this paragraph (e), the
term small employer means, in connection with a group health plan
with respect to a calendar year and a plan year, an employer who
employed an average of at least two but not more than 50 employees
on business days during the preceding calendar year and who employs
at least two employees on the first day of the plan year. See
regulations at Sec. 146.145(a), which provide that this section (and
certain other sections) does not apply to any group health plan (and
health insurance issuer offering coverage in connection with a group
health plan) for any plan year if, on the first day of the plan
year, the plan has fewer than two participants who are current
employees. (2) Rules in
determining employer size. For purposes of paragraph (e)(1) of this
section-- (i) All persons treated
as a single employer under subsections (b), (c), (m), and (o) of
section 414 of the Internal Revenue Code of 1986 (26 U.S.C. 414) are
treated as one employer; (ii) If
an employer was not in existence throughout the preceding calendar
year, whether it is a small employer is determined based on the
average number of employees the employer reasonably expects to
employ on business days during the current calendar year; and
(iii) Any reference to an
employer for purposes of the small employer exemption includes a
reference to a predecessor of the employer.
(f) Increased cost exemption--(1)
In general. A group health plan (or health insurance coverage
offered in connection with a group health plan) is not subject to
the requirements of this section if the requirements of this
paragraph (f) are satisfied. If a plan offers more than one benefit
package, this paragraph (f) applies separately to each benefit
package. Except as provided in paragraph (h) of this section, a plan
must comply with the requirements of paragraph (b)(1)(i) of this
section for the first plan year beginning on or after January 1,
1998, and must continue to comply with the requirements of paragraph
(b)(1)(i) of this section until the plan satisfies the requirements
in this paragraph (f). In no event is the exemption of this
paragraph (f) effective until 30 days after the notice requirements
in paragraph (f)(3) of this section are satisfied. If the
requirements of this paragraph (f) are satisfied with respect to a
plan, the exemption continues in effect (at the plan's discretion)
until September 30, 2001, even if the plan subsequently purchases a
different policy from the same or a different issuer and regardless
of any other changes to the plan's benefit structure.
(2) Calculation of the
one-percent increase--(i) Ratio. A group health plan (or group
health insurance coverage) satisfies the requirements of this
paragraph (f)(2) if the application of paragraph (b)(1)(i) of this
section to the plan (or to such coverage) results in an increase in
the cost under the plan (or for such coverage) of at least one
percent. The application of paragraph (b)(1)(i) of this section
results in an increased cost of at least one percent under a group
health plan (or for such coverage) only if the ratio below equals or
exceeds 1.01000. The ratio is determined as follows:
(A) The incurred expenditures
during the base period, divided by,
(B) The incurred expenditures
during the base period, reduced by--
(1) The claims incurred during
the base period that would have been denied under the terms of the
plan absent plan amendments required to comply with this section,
and (2) Administrative expenses
attributable to complying with the requirements of this section.
(ii) Formula. The ratio of
paragraph (f)(2)(i) is expressed mathematically as follows:
[[Page 66964]]
[GRAPHIC] [TIFF OMITTED] TR22DE97.004
(A) IE means the incurred
expenditures during the base period.
(B) CE means the claims incurred
during the base period that would have been denied under the terms
of the plan absent plan amendments required to comply with this
section. (C) AE means
administrative costs related to claims in CE and other
administrative costs attributable to complying with the requirements
of this section. (iii) Incurred
expenditures. Incurred expenditures means actual claims incurred
during the base period and reported within two months following the
base period, and administrative costs for all benefits under the
group health plan, including mental health benefits and
medical/surgical benefits, during the base period. Incurred
expenditures do not include premiums.
(iv) Base period. Base period
means the period used to calculate whether the plan may claim the
one-percent increased cost exemption in this paragraph (f). The base
period must begin on the first day in any plan year that the plan
complies with the requirements of paragraph (b)(1)(i) of this
section and must extend for a period of at least six consecutive
calendar months. However, in no event may the base period begin
prior to September 26, 1996 (the date of enactment of the Mental
Health Parity Act (Pub. L. 104-204, 110 Stat. 2944)).
(v) Rating pools. For plans that
are combined in a pool for rating purposes, the calculation under
this paragraph (f)(2) for each plan in the pool for the base period
is based on the incurred expenditures of the pool, whether or not
all the plans in the pool have participated in the pool for the
entire base period. (However, only the plans that have complied with
paragraph (b)(1)(i) of this section for at least six months as a
member of the pool satisfy the requirements of this paragraph
(f)(2).) Otherwise, the calculation under this paragraph (f)(2) for
each plan is calculated by the plan administrator (or issuer) based
on the incurred expenditures of the plan.
(vi) Examples. The rules of this
paragraph (f)(2) are illustrated by the following examples:
Example 1. (i) A group health plan
has a plan year that is the calendar year. The plan satisfies the
requirements of paragraph (b)(1)(i) of this section as of January 1,
1998. On September 15, 1998, the plan determines that $1,000,000 in
claims have been incurred during the period between January 1, 1998
and June 30, 1998 and reported by August 30, 1998. The plan also
determines that $100,000 in administrative costs have been incurred
for all benefits under the group health plan, including mental
health benefits. Thus, the plan determines that its incurred
expenditures for the base period are $1,100,000. The plan also
determines that the claims incurred during the base period that
would have been denied under the terms of the plan absent plan
amendments required to comply with this section are $40,000 and that
administrative expenses attributable to complying with the
requirements of this section are $10,000. Thus, the total amount of
expenditures for the base period had the plan not been amended to
comply with the requirements of paragraph (b)(1)(i) of this section
are $1,050,000 ($1,100,000-- ($40,000 + $10,000) = $1,050,000).
(ii) In this Example 1, the plan
satisfies the requirements of this paragraph (f)(2) because the
application of this section results in an increased cost of at least
one percent under the terms of the plan ($1,100,000/$1,050,000 =
1.04762). Example 2. (i) A health
insurance issuer sells a group health insurance policy that is rated
on a pooled-basis and is sold to 30 group health plans. One of the
group health plans inquires whether it qualifies for the one percent
increased cost exemption. The issuer performs the calculation for
the pool as a whole and determines that the application of this
section results in an increased cost of 0.500 percent (for a ratio
under this paragraph (f)(2) of 1.00500) for the pool. The issuer
informs the requesting plan and the other plans in the pool of the
calculation. (ii) In this Example
2, none of the plans satisfy the requirements of this paragraph
(f)(2) and a plan that purchases a policy not complying with the
requirements of paragraph (b)(1)(i) of this section violates the
requirements of this section. In addition, an issuer that issues to
any of the plans in the pool a policy not complying with the
requirements of paragraph (b)(1)(i) of this section violates the
requirements of this section.
Example 3. (i) A partially-insured plan is collecting the
information to determine whether it qualifies for the exemption. The
plan administrator determines the incurred expenses for the base
period for the self-funded portion of the plan to be $2,000,000 and
the administrative expenses for the base period for the self-funded
portion to be $200,000. For the insured portion of the plan, the
plan administrator requests data from the insurer. For the insured
portion of the plan, the plan's own incurred expenses for the base
period are $1,000,000 and the administrative expenses for the base
period are $100,000. The plan administrator determines that under
the self-funded portion of the plan, the claims incurred for the
base period that would have been denied under the terms of the plan
absent the amendment are $0 because the self-funded portion does not
cover mental health benefits and the plan's administrative costs
attributable to complying with the requirements of this section are
$1,000. The issuer determines that under the insured portion of the
plan, the claims incurred for the base period that would have been
denied under the terms of the plan absent the amendment are $25,000
and the administrative costs attributable to complying with the
requirements of this section are $1,000. Thus, the total incurred
expenditures for the plan for the base period are $3,300,000
($2,000,000 + $200,000 + $1,000,000 + $100,000 = $3,300,000) and the
total amount of expenditures for the base period had the plan not
been amended to comply with the requirements of paragraph (b)(1)(i)
of this section are $3,273,000 ($3,300,000 - ($0 + $1,000 + $25,000
+ $1,000) = $3,273,000). (ii) In
this Example 3, the plan does not satisfy the requirements of this
paragraph (f)(2) because the application of this section does not
result in an increased cost of at least one percent under the terms
of the plan ($3,300,000/$3,273,000 = 1.00825).
(3) Notice of exemption--(i)
Participants and beneficiaries--(A) In general. A group health plan
must notify participants and beneficiaries of the plan's decision to
claim the one percent increased cost exemption. The notice must
include the following information:
(1) A statement that the plan is
exempt from the requirements of this section and a description of
the basis for the exemption. (2)
The name and telephone number of the individual to contact for
further information. (3) The plan
name and plan number (PN). (4)
The plan administrator's name, address, and telephone number.
(5) For single-employer plans,
the plan sponsor's name, address, and telephone number (if different
from paragraph (f)(3)(i)(A)(3) of this section) and the plan
sponsor's employer identification number (EIN).
(6) The effective date of such
exemption. (7) The ability of
participants and beneficiaries to contact the plan administrator to
see how benefits may be affected as a result of the plan's election
of the exemption. (8) The
availability, upon request and free of charge, of a summary of the
information required under paragraph (f)(4) of this section.
(B) Use of summary of material
reductions in covered services or benefits. A plan may satisfy the
requirements of paragraph (f)(3)(i)(A) by providing participants and
beneficiaries (in accordance with paragraph (f)(3)(i)(C)) with a
summary of material reductions in covered services or benefits
consistent with Department of Labor regulations at 29 CFR
2520.104b-3(d) that also includes the information of this paragraph
(f)(3)(i). However, in all cases, the exemption is not effective
until 30 days after notice has been sent.
(C) Delivery. The notice
described in this paragraph (f)(3)(i) is required to be
[[Page 66965]]
provided to all participants and beneficiaries. The notice may be
furnished by any method of delivery that satisfies the requirements
of section 104(b)(1) of ERISA (29 U.S.C. 1024(b)(1)) (e.g.,
first-class mail). If the notice is provided to the participant at
the participant's last known address, then the requirements of this
paragraph (f)(3)(i) are satisfied with respect to the participant
and all beneficiaries residing at that address. If a beneficiary's
last known address is different from the participant's last known
address, a separate notice is required to be provided to the
beneficiary at the beneficiary's last known address.
(D) Example. The rules of this
paragraph (f)(3)(i) are illustrated by the following example:
Example. (i) A group health plan
has a plan year that is the calendar year and has an open enrollment
period every November 1 through November 30. The plan determines on
September 15 that it satisfies the requirements of paragraph (f)(2)
of this section. As part of its open enrollment materials, the plan
mails, on October 15, to all participants and beneficiaries a notice
satisfying the requirements of this paragraph (f)(3)(i).
(ii) In this Example, the plan
has sent the notice in a manner that complies with this paragraph
(f)(3)(i).
(ii) Federal agencies--(A) Church
plans. A church plan (as defined in section 414(e) of the Internal
Revenue Code) claiming the exemption of this paragraph (f) for any
benefit package must provide notice to the Department of the
Treasury. This requirement is satisfied if the plan sends a copy, to
the address designated by the Secretary in generally applicable
guidance, of the notice described in paragraph (f)(3)(i) of this
section identifying the benefit package to which the exemption
applies. (B) Group health plans
subject to Part 7 of Subtitle B of Title I of ERISA. A group health
plan subject to Part 7 of Subtitle B of Title I of ERISA, and
claiming the exemption of this paragraph (f) for any benefit
package, must provide notice to the Department of Labor. This
requirement is satisfied if the plan sends a copy, to the address
designated by the Secretary in generally applicable guidance, of the
notice described in paragraph (f)(3)(i) of this section identifying
the benefit package to which the exemption applies.
(C) Nonfederal governmental
plans. A group health plan that is a nonfederal governmental plan
claiming the exemption of this paragraph (f) for any benefit package
must provide notice to the Department of Health and Human Services
(HHS). This requirement is satisfied if the plan sends a copy, to
the address designated by the Secretary in generally applicable
guidance, of the notice described in paragraph (f)(3)(i) of this
section identifying the benefit package to which the exemption
applies. (4) Availability of
documentation. The plan (or issuer) must make available to
participants and beneficiaries (or their representatives), on
request and at no charge, a summary of the information on which the
exemption was based. An individual who is not a participant or
beneficiary and who presents a notice described in paragraph
(f)(3)(i) of this section is considered to be a representative. A
representative may request the summary of information by providing
the plan a copy of the notice provided to the participant under
paragraph (f)(3)(i) of this section with any individually
identifiable information redacted. The summary of information must
include the incurred expenditures, the base period, the dollar
amount of claims incurred during the base period that would have
been denied under the terms of the plan absent amendments required
to comply with paragraph (b)(1)(i) of this section, the
administrative costs related to those claims, and other
administrative costs attributable to complying with the requirements
for the exemption. In no event should the summary of information
include any individually identifiable information.
(g) Special rules for group
health insurance coverage--(1) Sale of nonparity policies. An issuer
may sell a policy without parity (as described in paragraph (b) of
this section) only to a plan that meets the requirements of
paragraph (e) or paragraph (f) of this section.
(2) Duration of exemption. After
a plan meets the requirements of paragraph (f) of this section, the
plan may change issuers without having to meet the requirements of
paragraph (f) of this section again before September 30, 2001.
(h) Effective dates--(1) In
general. The requirements of this section are applicable for plan
years beginning on or after January 1, 1998.
(2) Limitation on actions. (i)
Except as provided in paragraph (h)(3) of this section, no
enforcement action is to be taken by the Secretary against a group
health plan that has sought to comply in good faith with the
requirements of section 2705 of the PHS Act, with respect to a
violation that occurs before the earlier of--
(A) The first day of the first
plan year beginning on or after April 1, 1998; or
(B) January 1, 1999.
(ii) Compliance with the
requirements of this section is deemed to be good faith compliance
with the requirements of section 2705 of the PHS Act.
(iii) The rules of this paragraph
(h)(2) are illustrated by the following examples:
Example 1. (i) A group health plan
has a plan year that is the calendar year. The plan complies with
section 2705 of the PHS Act in good faith using assumptions
inconsistent with paragraph (b)(6) of this section relating to
weighted averages for categories of benefits.
(ii) In this Example 1, no
enforcement action may be taken against the plan with respect to a
violation resulting solely from those assumptions and occurring
before January 1, 1999.
Example 2. (i) A group health plan
has a plan year that is the calendar year. For the entire 1998 plan
year, the plan applies a $1,000,000 annual limit on medical/surgical
benefits and a $100,000 annual limit on mental health benefits.
(ii) In this Example 2, the plan
has not sought to comply with the requirements of section 2705 of
the PHS Act in good faith and this paragraph (h)(2) does not
apply.
(3) Transition period for
increased cost exemption--(i) In general. No enforcement action will
be taken against a group health plan that is subject to the
requirements of this section based on a violation of this section
that occurs before April 1, 1998 solely because the plan claims the
increased cost exemption under section 2705(c)(2) of the PHS Act
based on assumptions inconsistent with the rules under paragraph (f)
of this section, provided that a plan amendment that complies with
the requirements of paragraph (b)(1)(i) of this section is adopted
and effective no later than March 31, 1998 and the plan complies
with the notice requirements in paragraph (h)(3)(ii) of this
section. (ii) Notice of plan's
use of transition period. (A) A group health plan satisfies the
requirements of this paragraph (h)(3)(ii) only if the plan provides
notice to the applicable federal agency and posts the notice at the
location(s) where documents must be made available for examination
by participants and beneficiaries under section 104(b)(2) of ERISA
and the regulations thereunder (29 CFR 2520.104b-1(b)(3)). The
notice must indicate the plan's decision to use the transition
period in paragraph (h)(3)(i) of this section by 30 days after the
first day of the plan year beginning on or after January 1, 1998,
but in no event later than March 31, 1998. For a group health plan
that is a church plan, the applicable federal agency is the
Department of the Treasury. For a group
[[Page 66966]]
health plan that is subject to Part 7 of Subtitle B of Title I of
ERISA, the applicable federal agency is the Department of Labor. For
a group health plan that is a nonfederal governmental plan, the
applicable federal agency is the Department of Health and Human
Services. The notice must include--
(1) The name of the plan and the
plan number (PN); (2) The name,
address, and telephone number of the plan administrator;
(3) For single-employer plans,
the name, address, and telephone number of the plan sponsor (if
different from the plan administrator) and the plan sponsor's
employer identification number (EIN);
(4) The name and telephone number
of the individual to contact for further information; and
(5) The signature of the plan
administrator and the date of the signature.
(B) The notice must be provided
at no charge to participants or their representative within 15 days
after receipt of a written or oral request for such notification,
but in no event before the notice has been sent to the applicable
federal agency. (i) Sunset. This
section does not apply to benefits for services furnished on or
after September 30, 2001.
Dated: December 16, 1997.
Nancy-Ann Min DeParle, Administrator, Health Care Financing
Administration. Dated: December
16, 1997. Donna E. Shalala, Secretary, Department of Health
and Human Services. [FR Doc. 97-33262 Filed 12-19-97; 8:45 am]
BILLING CODE 4830-01-P; 4510-29-P; 4120-01-P
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