NQTL Testing: Proving Parity is Harder Than It Looks

The Mental Health Parity and Addiction Equity Act (MHPAEA) was designed to legislate a critical outcome goal: equal treatment for mental health and substance use disorder (MH/SUD) benefits. But as we’ve discussed—the devil is in the details, particularly regarding Non-Quantitative Treatment Limitations (NQTLs) testing. While the concept of parity sounds straightforward, conducting the comparative analyses needed to prove it is anything but.

Current legislation mandates that NQTLs on MH/SUD benefits can’t be more restrictive than those on medical/surgical benefits. At Davies, our experience is that the “in operation” compliance testing of NQTL parity is the most challenging testing area.   The challenges range from uncovering hidden NQTLs to analyzing claims data to assessing whether certain NQTLs even meet the “substantially all” test for medical/surgical claims.   Let’s break down these specific challenges to understand why many employers struggle to achieve true parity.

The Data Dilemma: More Than Meets the Eye

The first hurdle in NQTL compliance is identifying which limitations exist within your plan.  While many NQTLs are articulated clearly in the plan Summary Plan Description (SPD), some NQTLs are not explicitly stated and can be tricky to track down. The data needed to prove compliance can be scattered across various systems, making collecting and analyzing data effectively challenging. Unfortunately, it’s impossible to demonstrate parity without a clear picture of your NQTLs and their impact.

The Hidden Hurdles

Many NQTL restrictions aren’t obvious and can be hidden in provider contracts, clinical guidelines, or innocuous administrative procedures. A recent report by the Department of Labor (DOL) found that 56 unique NQTLs were identified in 53 initial determination letters of non-compliance, highlighting the hidden complexity of these limitations.

Furthermore, while the DOL report doesn’t specify the exact number of non-compliance cases related specifically to hidden NQTLs—as many cases involve multiple issues—what they did find was that, on average, each investigated plan had at least one hidden NQTL that contributed to its non-compliance. The high prevalence highlights the need for thorough plan review and analysis to uncover these often-overlooked limitations.

Data Deficiencies

Even after identifying your NQTLs, tracking how they’re applied is entirely different. The DOL’s 2023 report to Congress emphasized that insufficient data was a major factor in many non-compliance cases. Many health plans lack the systems to easily gather data on approvals, denials, and their denial reasons for MH/SUD and medical or surgical claims.

The “Substantially All” Test

The DOL requires that an NQTL be applied to “substantially all” medical or surgical claims before they can even be considered for MH/SUD benefits. This task is deceptive in its simplicity and requires an in-depth data analysis. According to the DOL, this area is where many plans fall short due to the following reasons:

• Misinterpreting the Meaning of “Substantially All.” Some plans incorrectly assume that applying an NQTL to most medical or surgical claims satisfies the test. However, the DOL has issued preliminary regulations that guide “substantially all” to mean that two-thirds or more of claims in each classification are on a claim dollar basis. This claim dollar threshold requires a rigorous analysis of claims data to ensure the NQTL is applied broadly enough across medical/surgical claims to assess whether the NQTL can be used for MH/SUD benefits.

• Inconsistent Application. Even if an NQTL is theoretically applied to a large percentage of medical or surgical claims, the DOL may find it insufficient if the application isn’t consistent across different types of services within each claim classification. For instance, if prior authorization is applied to most outpatient surgeries but rarely to non-surgical outpatient procedures, it might not meet the “substantially all” standard.

• Lack of Documentation. The DOL requires detailed documentation demonstrating how the “substantially all” test is met. This includes data on the types of claims subject to NQTLs, the percentage of claims affected, and the rationale for any exclusions. Many plans struggle to provide this level of documentation, either due to a lack of data or insufficient analysis.

The “substantially all” test is a high bar for NQTL compliance. It demands a quantitative assessment (applying the NQTL to a large enough percentage of claims) and a qualitative analysis (ensuring consistent and documented application across various services). This level of rigor is often challenging for plans to achieve without expert guidance and comprehensive data analysis.

The Comparison Conundrum: Apples & Oranges

Once you’ve identified and gathered data on your NQTLs, the next challenge is comparing them across MH/SUD and medical/surgical benefits. This is where the “apples to oranges” analogy comes into play. Mental health and medical treatments are fundamentally different, and finding comparable services for analysis is difficult for the following reasons.

1. There can be false equivalencies. It’s tempting to compare MH/SUD benefits directly to medical or surgical benefits, but this can be misleading since the nature of these services is often different, and each requires nuanced comparisons. For instance, is a prior authorization for an MRI the same as a prior authorization for intensive outpatient therapy? The DOL has frequently cited the lack of meaningful comparison as a common deficiency in NQTL testing analyses. Essentially, it’s not enough to simply compare the existence of a similar NQTL across benefits; the specific criteria, processes, and outcomes of applying that NQTL must also be carefully analyzed to ensure they are not more restrictive for MH/SUD benefits. This requires considering factors such as the clinical nature of the services, the evidentiary standards used for medical necessity determinations, and the impact on patient access to care.

1. The “As Applied” Trap. MHPAEA doesn’t just care about how your NQTLs are written; it cares about how they’re applied in practice. This means you need actual plan claims data —not just theoretical plan language. Many non-compliance cases stem from discrepancies between the “as written” and “as applied” aspects of NQTLs.

1. The Moving Target. NQTLs aren’t static. Provider networks change, medical necessity criteria evolve, and even seemingly minor plan updates can throw off your carefully crafted analysis. Ongoing monitoring and regular updates are essential for maintaining compliance.

Why Going It Alone Is a Risky Strategy

The complexity of NQTL testing and analysis can feel overwhelming, especially with the DOL’s increased scrutiny and enforcement. The consequences of non-compliance can be severe, including financial penalties and the need to retroactively adjust benefits.

Partnering with MHPAEA specialists like Davies can be a game-changer. We have the experience, data analysis tools, and in-depth knowledge to help you collect and analyze the right data, conduct robust comparative analyses, and ensure your plan language and practices align with MHPAEA requirements.

How to Plan Your Next Steps

Achieving true mental health parity requires more than good intentions. It demands a meticulous, data-driven approach to NQTL testing and analysis. Though the statistics show that many employers fall short, partnering with an expert and investing in the right tools gives you the confidence to approach NQTL testing with a secure strategy that equips your health plans with equitable access for everyone.

Let Davies be your guide. Contact Michael Berman at Michael.Berman@us.davies-group.com. today to learn more about NQTL testing and compliance services. Learn more about our Actuarial Solutions here.

Sources

1. Employee Benefits Security Administration. (2023). Report to Congress on MHPAEA Enforcement Activities. U.S. Department of Labor. https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/mental-health-parity/report-to-congress-2023-mhpaea-comparative-analysis
2. Employee Benefits Security Administration. (2023). Self-Compliance Tool for MHPAEA. U.S. Department of Labor. https://www.dol.gov/sites/dolgov/files/ebsa/laws-and-regulations/laws/mental-health-parity/self-compliance-tool.pdf