Since the Mental Health Parity and Addiction Equity Act (MHPAEA) passed in 2008, efforts to expand access to care for mental health and substance use disorders (MH/SUD) have increasingly become a priority in many states across the country. While much of the compliance and enforcement activity surrounding this law has focused on its application to commercial market healthcare plans, MHPAEA also applies to certain types of Medicaid programs. Specifically, managed care entities within state Medicaid and Children’s Health Insurance Programs (CHIP) are required to comply with certain standards, enforcing the parity of MH/SUD benefits to coverage for medical/surgical (M/S) care. This is especially important since Medicaid is the largest payer for MH/SUD care. Despite the increased focus on access to care, many state Medicaid agencies still encounter difficulties in fully implementing and enforcing mental health parity requirements.1
In September 2024, the Centers for Medicare and Medicaid Services (CMS) invited public comments on draft tools designed to help state Medicaid agencies strengthen parity. While not yet final, these tools signaled renewed federal attention to MH/SUD parity in Medicaid.2 Since then, priorities at the federal level have become less certain due to the change in administration, and in May 2025 federal regulators announced their suspension of enforcement of certain portions of the September 2024 rules (particularly those that applied to the commercial market).3 However, existing Medicaid parity requirements remain in force. Therefore, states that view MH/SUD parity as a priority already have the authority and opportunity to improve compliance and enforcement efforts by targeting high-impact treatment limitations and strengthening their own oversight processes.
Foundational context: Mental health parity
Mental health parity requires that insurance coverage for MH/SUD services be at least as comprehensive—and no more restrictive—than coverage for M/S care. Although the law does not obligate insurers to offer MH/SUD benefits, it stipulates that when such benefits are provided, they must be offered at parity with M/S benefits. This principle is embedded in MHPAEA, which bars payers from applying treatment limits to MH/SUD benefits that are more stringent than those applied to comparable M/S benefits.4
As illustrated in Figure 1, MHPEA defines three types of limitations: financial requirements (FRs), quantitative treatment limitations (QTLs), and nonquantitative treatment limitations (NQTLs).
Figure 1: Examples of treatment limitations
The rules for compliance with FRs and QTLs are relatively straightforward and consist of mathematical tests to determine the types and levels of FRs or QTLs that can be applied to MH/SUD benefits. The rules for NQTLs are more complex and consist of a comparative analysis documenting the processes, strategies, evidentiary standards, and other factors used in the design and application of NQTLs.
In 2016, CMS issued a final rule intended to address the application of MHPAEA in state Medicaid programs, including coverage offered by Medicaid managed care organizations (MCOs).5 Under MHPAEA and the 2016 rule, state Medicaid agencies are responsible for ensuring all MCOs meet the federal parity requirements in 42 CFR §§ 438.3(n), Subpart K, and 457.496(d).6,7 This means that when an MCO covers M/S and MH/SUD benefits, it is required to perform a formal parity analysis demonstrating compliance with rules for FRs, QTLs, and NQTLs, and provide those results to the state as requested. MCOs are required to refresh these analyses when appropriate, such as when a change in benefits or policies around a specific treatment limitation is implemented or when cost sharing for plan benefits changes. Testing should also reflect the anticipated mix of services in the covered population, incorporating actual experience where credible.
To date, approaches for monitoring compliance with parity standards among Medicaid MCOs have varied widely between states, with some states having relatively mature and comprehensive processes in place, others in the midst of active efforts to improve their processes, and some still in the early stages of developing the capabilities necessary to complete these functions.
In June 2024, the Center for Medicaid and CHIP Services (CMCS) released an informational bulletin after the U.S. Department of Health and Human Services’ (HHS) Office of Inspector General (OIG) determined that CMS had not adequately overseen states’ compliance with parity requirements.8 The bulletin clarified and reinforced states’ responsibility to monitor and enforce MCO compliance with parity standards, including the duty to submit documentation to CMS demonstrating this compliance.9 More specifically, it underscored that states should establish procedures to routinely evaluate MCO parity compliance, such as during contract renewals or when submitting a State Plan Amendment (SPA). Additionally, the guidance reminds states that federal law obligates them to make documentation of the state’s parity compliance and the MCOs’ parity analyses publicly available, including positing them on the state’s website.
Renewed push: Draft templates for reporting and compliance
Parity requirements have been generally well understood in the context of FRs and QTLs, but their application in the context of NQTLs has proven to be less straightforward for state regulators, health plans, and other relevant stakeholders. Recognizing these challenges, CMS released draft templates for public comment in fall 2024 to support states with parity compliance in Medicaid and CHIP.10 The stated intent of the templates was to standardize and improve states’ monitoring of parity compliance and reduce administrative burden for states, MCOs, and CMS.11 Though the templates have yet to be finalized, in the September 2024 draft, CMS uses the stepwise process shown in Figure 2 (repeated for each NQTL) for conducting a comparative analysis of the design and application of NQTLs.
Figure 2: Steps of a comparative analysis
These steps are in line with the requirements of the Consolidated Appropriations Act (CAA) of 2021 and are similar to a process previously outlined by the U.S. Department of Labor.13,14 In addition to the three templates summarized in Figure 3, CMS released instructional guides to support states and MCOs attempting to complete the templates. The public comment period for the templates and instructional guides closed in December, though, as of the publication of this paper, CMS has not yet published final documents.
Figure 3: Draft templates
| Document | Description |
|---|---|
| Parity State Summary Template | For use by states to summarize and document parity compliance to CMS |
| Parity Plan Reporting Template | For use by health plans to demonstrate and document parity compliance for benefits under Medicaid MCOs, Medicaid Alternative Benefit Plans, and CHIP |
| Parity State FFS Reporting Program Template | For use by states to demonstrate and document parity compliance with their fee-for-service (FFS) benefits |
Initial considerations for state Medicaid agencies moving forward
Although CMS has not yet finalized the draft parity templates and instructional guides (as of the publication of this policy brief), the June 2024 bulletin—along with the earlier OIG report—reaffirms that states retain primary responsibility for monitoring Medicaid parity compliance. Accordingly, state Medicaid agencies should review their current oversight approach and consider updated strategies and practices for future parity enforcement. As states evaluate their approach to parity implementation, there are a few considerations to keep in mind.
Federal uncertainty
Since CMS issued last summer’s informational bulletin and released the draft templates, a new presidential administration has taken office. Leadership changes typically bring shifts in policy priorities, so the strong emphasis on parity reflected in CMS’s 2024 guidance and draft templates may not automatically extend into 2025 and beyond.
Reflecting this uncertainty, in response to litigation challenging the September 2024 final rule adding new requirements related to parity enforcement in the commercial market, HHS—together with the departments of Labor and Treasury—issued a joint statement indicating it will suspend enforcement of the latest amendment to the parity rules.15 It is important to note that 2024 rules pertain solely to commercial health insurance—not Medicaid.16 As such, this most recent action by the administration has no direct bearing on parity enforcement within Medicaid. Additionally, the statement was careful to emphasize that MHPAEA’s statutory mandates and earlier regulations continue to be in effect.
Therefore, existing parity enforcement and reporting obligations for Medicaid remain unchanged.
State priorities
Regardless of shifting federal priorities or CMS oversight, the responsibility for enforcing parity in Medicaid ultimately rests with state Medicaid agencies. States that wish to uphold parity within their Medicaid programs need not wait for federal directives—they already have the authority to act.
To the extent that increasing access to MH/SUD care remains a priority for states, improved monitoring of parity compliance by MCOs remains an effective tool for achieving that goal. Although CMS has not yet indicated if or when it will release final templates and instructional guides, the draft materials issued in 2024 can serve as a useful interim resource or point of reference for states that are looking for additional structure and guidance moving forward.
Key NQTLs
Beyond the broader objective of expanding access to MH/SUD care, states should identify the specific treatment limitations that have historically impeded access to MH/SUD care in their states. As noted, testing for, achieving, and documenting parity compliance for NQTLs has been especially difficult in both the commercial and Medicaid markets.
State Medicaid agencies that plan to strengthen parity enforcement should determine which NQTLs—such as prior authorization, step-therapy protocols, provider reimbursement, network adequacy standards, or medical necessity criteria—warrant more focused attention and require better guidance.
In the commercial market, some state regulators have opted to focus on NQTLs that were perceived to have broad applicability across the market, such that an enforcement action with one carrier or plan sponsor could potentially have an amplified effect by signaling to others where they should consider making changes proactively before falling under scrutiny for the same issues. A similar strategy may be helpful in the Medicaid managed care market as well.
Establish a process
Beyond pinpointing state priorities and NQTLs of concern, states must create clear protocols for monitoring parity compliance. In Medicaid managed care, for example, this could involve adding parity reporting requirements to contracts and collaborating with plans and other stakeholders to build a robust compliance framework. Such a framework should spell out all necessary protocols and provide clear guidance and instructions to minimize administrative burden on both plans and state regulators, including establishing a timeline for parity audits.
States can also draw on CMS’s draft templates (as described in Figure 3). These documents can be adopted as-is or serve as a foundation for customized templates that require managed care plans to demonstrate compliance with federal and state laws—including the NQTL analysis components described above. As noted in the 2024 CMS guidance, this process should also include making results of the parity analyses available to the public.
States must establish a clear, actionable process for enforcing parity compliance.
This could include:
- Embedding reporting requirements in Medicaid managed care contracts
- Collaborating with plans and stakeholders to establish an audit and compliance framework
- Publishing parity analysis results for transparency and accountability
A well-defined protocol minimizes administrative burden and allows for consistent enforcement.
Conclusion: Advancing mental health parity compliance in Medicaid
As the nation’s largest payer of MH/SUD services, state Medicaid agencies play a pivotal role in ensuring access to behavioral healthcare. Although CMS’s approach to parity may evolve with the executive branch, the underlying statutory requirements remain, providing states both the authority and responsibility to act. By using existing federal guidance and collaborating with health plans, providers, and other relevant stakeholders, states can strengthen parity compliance and improve behavioral health coverage for Medicaid beneficiaries.
1 For additional details on policy and regulatory actions undertaken by state agencies, see: https://www.inseparable.us/wp-content/uploads/dlm_uploads/2025/06/AccessReport.pdf .
2 Centers for Medicare and Medicaid Services. (September 2024). Request for comments on templates for documenting compliance with Mental Health Parity and Addiction Equity Act requirements in Medicaid and CHIP. Retrieved October 15, 2025, from https://www.medicaid.gov/medicaid/downloads/parity-temp-rfc.pdf .
3 U.S. Departments of Labor (DOL), Health and Human Services (HHS), and Treasury. (May 15, 2025). Statement of U.S. Departments of Labor, Health and Human Services, and the Treasury regarding enforcement of the Final Rule on requirements related to the Mental Health Parity and Addiction Equity Act. Retrieved October 15, 2025, from https://www.dol.gov/sites/dolgov/files/ebsa/laws-and-regulations/laws/mental-health-parity/statement-regarding-enforcement-of-the-final-rule-on-requirements-related-to-mhpaea.pdf .
4 Text of the legislation is available online at https://www.congress.gov/bill/110th-congress/house-bill/1424/text .
5 The 2016 final rule is available online at https://www.federalregister.gov/d/2016-06876 .
6 Electronic Code of Federal Regulations. (March 30, 2016). Medicaid and children's health insurance programs; Mental Health Parity and Addiction Equity Act of 2008; the application of mental health parity requirements to coverage offered by Medicaid managed care organizations, the Children's Health Insurance Program (CHIP), and Alternative Benefit Plans. 42 CFR Part 438 Subpart K. Retrieved October 15, 2025, from https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-C/part-438/subpart-K .
7 Electronic Code of Federal Regulations. (March 30, 2016). 42 CFR 457.496. Retrieved October 15, 2025, from https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-D/part-457/subpart-D/section-457.496 .
8 Department of Health and Human Services, Office of Inspector General. (March 25, 2024). CMS did not ensure that selected states complied with Medicaid managed care mental health and substance use disorder parity requirements. Retrieved October 15, 2025, from https://oig.hhs.gov/reports/all/2024/cms-did-not-ensure-that-selected-states-complied-with-medicaid-managed-care-mental-health-and-substance-use-disorder-parity-requirements .
9 Centers for Medicare and Medicaid Services, Center for Medicaid and CHIP Services. (June 12, 2024). Informational bulletin: Ensuring compliance with the Mental Health Parity and Addiction Equity Act in Medicaid and CHIP. Retrieved October 15, 2025, from https://www.medicaid.gov/federal-policy-guidance/downloads/cib06122024.pdf .
10 Centers for Medicare and Medicaid Services. (September 2024). Request for comments on templates for documenting compliance with Mental Health Parity and Addiction Equity Act requirements in Medicaid and CHIP. Retrieved October 15, 2025, from https://www.medicaid.gov/medicaid/downloads/parity-temp-rfc.pdf .
11 Centers for Medicare and Medicaid Services. (September 2024). Instructional guide for mental health and substance use disorder parity state summary template. Retrieved October 15, 2025, from https://www.medicaid.gov/medicaid/downloads/parity-state-summary-temp-instr-guide.pdf .
12 Examples found in CMS’s draft Instructional Guide for Mental Health and Substance Use Disorder Parity Plan/State Fee-For Service Program Reporting Template. Available at https://www.medicaid.gov/medicaid/downloads/parity-state-summary-temp-instr-guide.pdf .
13 116th Congress (2019-2020). (December 27, 2020). H.R.133 - Consolidated Appropriations Act, 2021. Retrieved October 15, 2025, from https://www.congress.gov/bill/116th-congress/house-bill/133/text .
14 Department of Labor. Self-compliance tool for the Mental Health Parity and Addiction Equity Act (MHPAEA). Retrieved October 15, 2025, from https://www.dol.gov/sites/dolgov/files/EBSA/laws-and-regulations/laws/mental-health-parity/self-compliance-tool.pdf .
15 DOL, HHS, Treasury September 2025, op. cit.
16 Refer to footnote 125 in the 2024 rules, available at https://www.federalregister.gov/d/2024-20612/p-540 .