How do Tennessee's substance abuse coverage statutes interact with the federal Mental Health Parity and Addiction Equity Act of 2008, who enforces them in Tennessee, and is there a private right of action under § 56-7-2602?

Plain-English summary

Senator Henry asked eight questions about how Tennessee insurance law interacts with the federal Mental Health Parity and Addiction Equity Act of 2008 (the Wellstone/Domenici Act). The federal law generally requires that if a group health plan covers substance use disorders or mental health, those benefits have to come on terms no worse than the plan's medical and surgical benefits. Tennessee already had three statutes covering this ground: Tenn. Code Ann. §§ 56-7-2360 (mental health parity, with a carve-out excluding substance use disorders), 56-7-2601 (mental health offerings within major medical), and 56-7-2602 (substance abuse coverage offer requirement).

The AG concluded:

1. The Commissioner of Commerce and Insurance enforces § 56-7-2602. To the extent it conflicts with the federal parity law for groups covering more than 50 employees, federal law preempts.
2. Section 56-7-2602 does not create a private right of action. Enforcement runs through the Commissioner and through criminal prosecution as a Class C misdemeanor (Tenn. Code Ann. § 56-1-801).
3. No state agency enforces ERISA or the Internal Revenue Code, but the Commissioner may enforce the federal parity law as it applies to group health insurance policies issued in Tennessee.
4. Section 56-7-2602(b)(1) on its face requires insurers and HMOs to offer substance use disorder coverage on terms no less favorable than medical/surgical benefits. The group plan purchaser may decline the offer or pick lower coverage.
5. and 6. For plans not preempted, the state statute requires "not less favorable" benefits subject to the same durational/dollar/deductible/coinsurance factors, but the Commissioner had not promulgated regulations defining those standards by reference to the federal regulations.
6. Evidence required varies by enforcement track: material evidence for written orders, substantial and material evidence in contested case hearings, and proof beyond a reasonable doubt for criminal prosecution.
7. The federal parity law requires disclosure of medical necessity criteria for mental health and substance use disorder benefits to participants and providers, but does not require disclosure of the corresponding limits on medical and surgical benefits.

Currency note

This opinion was issued in 2011. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

A note for readers: the AG flagged that several of the federal statutes cited here (42 U.S.C. §§ 300gg-22, -23, -26, -91) had been held unconstitutional as not severable from the ACA's individual mandate by Florida ex rel. Bondi v. HHS in January 2011, then stayed pending appeal. That ruling was eventually reversed; the federal parity framework remained in force, and the Affordable Care Act later expanded it. The age of this opinion and the surrounding legal turmoil make it a poor source for current practice.

Common questions

Did Tennessee already have a mental health and substance abuse parity statute when the federal law was enacted?
Partially. Tenn. Code Ann. § 56-7-2360 required mental health parity within group plans, but expressly did not apply to services for alcohol or drug abuse or dependency. Section 56-7-2601 required insurers to offer mental health coverage within major medical plans; the purchaser could reject it. Section 56-7-2602 required insurers to offer substance abuse coverage on terms equivalent to physical illness; again, the purchaser could reject it.

Which state agency enforced these statutes?
The Commissioner of the Tennessee Department of Commerce and Insurance. The Commissioner has broad regulatory authority over insurance companies and HMOs licensed in Tennessee, including the power to examine, order corrective action, penalize through contested case hearings (Tenn. Code Ann. § 56-2-305), and revoke certificates of authority.

Could a beneficiary sue an insurer directly under § 56-7-2602?
The AG said no. The statute itself does not authorize a private right of action, and Tennessee courts had been reluctant to imply one where a statute provides for both administrative and criminal enforcement. The AG relied on Brown v. Tennessee Title Loans, Inc., 328 S.W.3d 850, 855 (Tenn. 2010), and on the three-factor test that asks whether the plaintiff is an intended beneficiary, whether the legislature intended a private remedy, and whether a private right of action is consistent with the statute's purposes.

Did federal law preempt the Tennessee statute?
Partially. The Public Health Service Act preemption clause (42 U.S.C. § 300gg-23(a)(1)) is the "narrowest" preemption: state law is preempted only to the extent it would prevent application of a federal requirement. The Tennessee statute requires only an offer of coverage (which the purchaser can reject); federal parity law says that if the plan provides any substance abuse benefits, those benefits must comply with parity. So an entity buying a group plan subject to federal law cannot accept a lower-tier substance abuse package; if it accepts any substance abuse benefits, the package has to meet federal parity standards. To that extent, federal law preempts § 56-7-2602.

Did the federal law cover all employers?
No. The federal parity law generally applies to plans with more than 50 employees (for ERISA/IRC-covered plans) or more than 100 employees (for nonfederal governmental plans), per HHS's interpretation. Smaller plans continued under the state statute.

When a member or provider alleges disparity, must the insurer disclose how it treats medical and surgical claims?
The AG said the federal law (42 U.S.C. § 300gg-26(a)(4)) only requires disclosure of medical necessity criteria for mental health and substance use disorder benefits, not for the corresponding medical/surgical limits. The provider's contract with the insurer or the member's policy might provide some access, but no Tennessee or federal statute the AG found required the disclosure the question asked about.

What evidence supported enforcement under § 56-7-2602?
The evidence standard depended on the enforcement track. Under § 56-1-411(d)(3), the Commissioner could issue written orders after an examination, reviewable on certiorari for whether there was material evidence to support the decision. Under § 56-2-305(a), penalties imposed after a contested case hearing are reviewed under the UAPA (Tenn. Code Ann. § 4-5-322) for substantial and material evidence in light of the entire record. Criminal prosecution for the Class C misdemeanor required proof beyond a reasonable doubt.

Background and statutory framework

The federal Wellstone/Domenici Act of 2008 amended three different federal statutory schemes (ERISA, the Public Health Service Act, and the Internal Revenue Code) and added parity provisions for substance use disorders to the existing 1996 mental health parity framework. The interim final rules from Treasury, Labor, and HHS appeared at 75 F.R. 5410 (February 2, 2010). For Tennessee insurance regulators, only the Public Health Service Act portion was directly enforceable; ERISA and IRC provisions are federal enforcement matters.

Tennessee's parity statutes evolved through the 1980s and 1990s and were structured as offer-and-make-available laws rather than mandatory coverage laws. The Commissioner's enforcement authority lives across Title 56 (insurance), Title 4 (UAPA judicial review), and Title 27 (common-law writ of certiorari for non-UAPA orders).

The most analytically interesting piece of the opinion is the question of whether the Commissioner has authority to enforce federal law. The AG concluded yes, because the Commissioner's regulatory statutes (§§ 56-1-409(b), 56-1-411(d)(2)(A), 56-2-305(a), 56-2-407(1)) refer to "any law" or "any statute, rule or order" rather than only Tennessee law. Combined with the federal grant of state enforcement under 42 U.S.C. § 300gg-22, this read gives the Commissioner authority over federal parity rules as they touch Tennessee-licensed group insurers.

Citations

• Tenn. Code Ann. §§ 56-7-2360, 56-7-2601, 56-7-2602 (Tennessee parity and substance abuse coverage)
• Tenn. Code Ann. § 56-1-204 (Commissioner's investigative authority)
• Tenn. Code Ann. §§ 56-1-409, 56-1-410, 56-1-411 (examination and orders)
• Tenn. Code Ann. §§ 56-2-302, -304, -305, -407 (enforcement and revocation)
• Tenn. Code Ann. § 56-1-801 (Class C misdemeanor)
• 42 U.S.C. § 300gg-26 (parity requirements added by the Wellstone/Domenici Act)
• 42 U.S.C. § 300gg-23 (PHSA narrow preemption)
• 42 U.S.C. § 300gg-22 (state enforcement authority)
• 29 C.F.R. § 2590.712 and 45 C.F.R. § 146.136 (parity regulations)
• Brown v. Tennessee Title Loans, Inc., 328 S.W.3d 850 (Tenn. 2010) (no implied private right of action)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2011/op11-025.pdf

Original opinion text

The ANALYSIS section of this opinion did not extract cleanly from the source PDF and is omitted here. The questions presented and the AG's opinions are reproduced verbatim below; see the linked PDF for the full analysis.

March 21, 2011
Opinion No. 11-25
Mental Health Parity and Addiction Equity Act of 2008

QUESTIONS

The United States Department of Health and Human Services, together with the United States Department of Labor and the United States Treasury Department, has promulgated interim final regulations to implement the Mental Health Parity and Addiction Equity Act of 2008 (the "Federal Parity Law"). The Federal Parity Law applies to certain health insurance policies that provide benefits for mental health treatment. It requires these policies generally to provide benefits for mental health treatment and substance use disorders on financial terms similar to benefits for medical and surgical treatment under the same plan. Three Tennessee statutes address the obligations of group health insurance policies with regard to benefits for coverage of substance use disorders: Tenn. Code Ann. §§ 56-7-2360, 56-7-2601, and 56-7-2602.

1. Which state department is responsible for the implementation and enforcement of Tenn. Code Ann. § 56-7-2602?

2. Does there exist a private cause of action under Tenn. Code Ann. § 56-7-2602?

3. Which state department is responsible for implementing and enforcing the Federal Parity Law and regulations promulgated by the United States Department of Labor at 29 C.F.R. 2590, et seq.?

4. Does Tenn. Code Ann. § 56-7-2602 require insurers and health maintenance organizations to offer and make available benefits for the treatment of substance use disorders that are not less favorable than for medical and surgical benefits under the same plan?

5. United States Department of Labor regulations at 29 C.F.R. §§ 2590, et seq., establish certain quantitative and qualitative standards within which certain insurance plans must administer benefits for the necessary care and treatment of alcohol and other drug dependency. Does Tenn. Code Ann. § 56-7-2602 impose the same requirements on insurers and health maintenance organizations?

6. United States Department of Labor regulations at 29 C.F.R. §§ 2590, et seq., establish financial parameters within which certain insurance plans must administer benefits for the necessary care and treatment of alcohol and other drug dependency. Does Tenn. Code Ann. § 56-7-2602 impose the same requirements on insurers and health maintenance organizations?

7. What evidence is required under Tenn. Code Ann. § 56-7-2602 in order to show that an insurance company or managed care organization is administering benefits in a disparate manner?

8. When an allegation of disparity is made, must an insurance company or managed care organization, upon the request of a member or provider, provide documentation of the availability and/or administration of benefits including all treatment limitations, on the medical and surgical side of a plan?

OPINIONS

1. The Commissioner of the Tennessee Department of Commerce and Insurance (the "Commissioner") is responsible for enforcing Tenn. Code Ann. § 56-7-2602. But, with certain exceptions, the Federal Parity Law requires a group plan covering more than fifty employees that provides any substance abuse benefits to provide them in accordance with the parity requirements. Thus, an entity subject to the Federal Parity Law purchasing a group health plan may not purchase a lower level of coverage for substance abuse benefits; if it chooses to provide them at all, it must do so in accordance with the Federal Parity Law requirements. To this extent, therefore, the Federal Parity Law preempts Tenn. Code Ann. § 56-7-2602.

2. Tenn. Code Ann. § 56-7-2602 provides for administrative enforcement by the Commissioner and for criminal penalties for its violation. Tennessee courts have been reluctant to find that a statutory scheme providing for administrative and criminal enforcement also creates a private right of action. For this reason, it is our opinion that Tenn. Code Ann. § 56-7-2602 does not create a private right of action.

3. This Office is unaware of any statutory authority for a state agency to enforce the Internal Revenue Code or ERISA. No state agency, therefore, may enforce portions of the Federal Parity Law that amend those statutory schemes. The Commissioner, through her general regulatory authority, may enforce the Federal Parity Law and regulations to the extent they apply to group health insurance policies offered and sold in Tennessee.

4. Yes, by its terms, Tenn. Code Ann. § 56-7-2602 requires insurers selling group health insurance plans to offer coverage for the treatment of alcohol and substance abuse on the same terms as medical and surgical benefits; but the entity purchasing the insurance is free to reject this coverage.

5. and 6. As discussed in the answer to Question 1, to the extent that it conflicts with the Federal Parity Law, Tenn. Code Ann. § 56-7-2602(b)(1) has been preempted. But the requirement that a group health insurance plan offer benefits for the "necessary care and treatment of alcohol and other drug dependency" has not been preempted. Thus, all group health plans offered or sold in Tennessee must meet this requirement. It is not clear, however, whether this mandated offer must meet all the requirements that a plan covering more than fifty employees must meet under the Federal Parity Law once it provides any such benefits. The answer to Questions 5 and 6 ultimately depends on the standards that the Commissioner determines are "benefits for the necessary care and treatment of alcohol and other drug dependency that are not less favorable than for physical illness generally, subject to the same durational limits, dollar limits, deductibles and coinsurance factors" within the meaning of Tenn. Code Ann. § 56-7-2602(b)(1). These standards may, but do not necessarily, include some or all of the standards established by the Federal Parity Law and implementing regulations.

6. Evidence required for the Commissioner's enforcement of Tenn. Code Ann. § 56-7-2602 would depend on the statute under which she is acting. The Commissioner's written order to a company in the course of an examination must be supported by some material evidence. The Commissioner's decision to impose penalties after a contested case hearing under Tenn. Code Ann. § 56-2-305 must be supported by evidence that is both substantial and material in light of the entire record of the hearing. Other enforcement proceedings by the Commissioner may be subject to different levels of review. Evidence is sufficient to support a finding of guilt in a criminal action if any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.

7. By its terms, 42 U.S.C. § 300gg-26(a)(4), part of the Public Health Service Act added by the Federal Parity Law, requires a health insurance issuer of a group health plan to provide criteria for medical necessity determinations only with respect to mental health or substance use disorder benefits. It does not require the issuer to provide criteria with respect to medical and surgical limitations. This Office is unaware of any other statute that might impose this requirement.

ROBERT E. COOPER, JR.
Attorney General and Reporter

GORDON W. SMITH
Associate Solicitor General

ANN LOUISE VIX
Senior Counsel

Requested by:
The Honorable Douglas Henry
State Senator
301 6th Avenue North
Suite 321 War Memorial Building
Nashville, Tennessee 37243-0021