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December 29‚ 2011
Department of Health and Human Services Issues Bulletin
Outlining Essential Health Benefits, Granting Significant Flexibility to
the States
By Alden J. Bianchi
and Gary E. Bacher
The Patient Protection and Affordable Care Act (the Act)
enacted a series of insurance market reforms that impose new rules on health
insurance issuers and group health plans. Commencing in 2014, the Act
requires that polices of health insurance offered in the individual and
small group markets as well as Medicaid benchmark plans offer a
comprehensive package of items and services known as “essential health
benefits” (EHB). Essential health benefits must include items and services
within at least the following 10 categories: (1) ambulatory patient
services, (2) emergency services (3) hospitalization, (4) maternity and
newborn care, (5) mental health and substance use disorder services,
including behavioral health treatment, (6) prescription drugs, (7)
rehabilitative and habilitative services and devices, (8) laboratory
services, (9) preventive and wellness services and chronic disease
management, and (10) pediatric services, including oral and vision care.
Self-insured group health plans, health insurance coverage offered in the
large group market, and grandfathered health plans are not required to
provide essential health benefits.
Act Section 1302(b) directs the Department of Health and
Human Services (HHS) to further define essential health benefits. Act
Section 1302(b)(2) requires that essential health benefits be modeled on “a
typical employer plan,” with respect to which HHS must strike “an
appropriate balance among the benefit categories.” Benefits must not,
however, discriminate based on age, disability, or expected length of life,
but must consider the health care needs of diverse segments of the
population.
In addition to mandating essential health benefits, the Act
also prescribes certain cost-sharing features,
such as deductibles, copayments, and coinsurance. An individual contract or
policy or a group health insurance plan that provides essential
health benefits and conforms to the applicable
cost sharing requirements is said to offer an “essential health
benefits package.”
On December 16, HHS issued a bulletin (the Bulletin) that
proposes granting the states significant flexibility to establish what
constitutes essential health benefits in their states. Importantly, the
Bulletin addresses covered items and services; it does not offer any
proposals on the topic of cost sharing or the calculation of actuarial
value. Instead, HHS simply announced plans to release guidance on these and
other issues “in the near future.”
The Bulletin explains at length HHS’s intended regulatory
approach, starting with currently available employer-sponsored coverage as
a benchmark, but supplementing that coverage as necessary to ensure that
plans cover each of the 10 statutory categories of essential health
benefits. Specifically, HHS said that its goal is to pursue an approach
that will:
·
Encompass the 10 categories of services identified in the statute;
·
Reflect typical employer health benefit plans;
·
Reflect balance among the categories;
·
Account for diverse health needs across many populations;
·
Ensure there are no incentives for coverage decisions, cost sharing,
or reimbursement rates to discriminate impermissibly against individuals
because of their age, disability, or expected length of life;
·
Ensure compliance with the Mental Health Parity and Addiction Equity
Act of 2008 (MHPAEA);
·
Provide states a role in defining essential health benefits; and
·
Balance comprehensiveness and affordability for those purchasing
coverage.
To achieve these goals, HHS proposes to permit each state to designate
what constitutes essential health benefits from among the following four
benchmark plan types:
1. The
largest plan by enrollment in any of the three largest small group
insurance products in the state’s small group market;
2. Any
of the largest three state employee health benefit plans by enrollment;
3. Any
of the largest three national Federal Employees Health Benefit Plan (FEHBP)
options by enrollment; or
4. The
largest insured commercial non-Medicaid Health Maintenance Organization
(HMO) operating in the state.
If a state does not exercise the option to select a benchmark
health plan, HHS proposes that the default benchmark plan for that state
would be the largest plan by enrollment in the largest product in the
state’s small group market.
If a category of benefit is missing in the benchmark plan, it
must nevertheless be covered by health plans required to offer essential
health benefits. Thus, in selecting a benchmark plan, a state may need to
supplement the benchmark plan to cover each of the 10 essential health
benefit categories listed above. (The Bulletin notes that the most commonly
non-covered categories of benefits among typical employer plans are
habilitative services, pediatric oral services, and pediatric vision services.)
The Bulletin proposes a rule under which, if a benchmark is missing other
categories of benefits, the state must supplement the missing categories
using the benefits from any other benchmark option. In a state with a
default benchmark with missing categories, the benchmark plan would be
supplemented using the largest plan in the benchmark type by enrollment
offering the benefit. If none of the benchmark options in that benchmark
type offer the benefit, the benefit will be supplemented using the FEHBP with
the largest enrollment.
Example: In a state where the default
benchmark is in place but that default plan did not offer prescription drug
benefits, the benchmark would be supplemented using the prescription drug
benefits offered in the largest small group benchmark plan option with
coverage for prescription drugs. If none of the three small group market
benchmark options offer prescription drug benefits, that category would be
based on the largest plan offering prescription drug benefits in FEHBP.
There is also the matter of state-mandated benefits, which
might go above and beyond the federal standards. Act Section 1311(d)(3)(B)
requires states to defray the costs of state-mandated benefits in excess of
essential health benefits for individuals enrolled in any qualified health
plan. The Bulletin proposes a two-year transition period for states to
coordinate their benefit mandates. In the transitional years of 2014 and
2015, if a state chooses a benchmark plan that is subject to state
mandates, the benchmark plan would include those state mandates as a part
of the essential health benefits package. Under this approach, the state
would nevertheless be required to cover the cost of the mandates that
exceed the federal standards. In the alternative, a state could select a
benchmark such as an FEHBP, which may not include some or all of the
state’s benefit mandates.
Separately, in an effort to provide an added measure of
design flexibility, HHS proposed to treat as providing essential health
benefits any health plan that offers benefits that are “substantially
equal” to the benefits of the state’s benchmark plan (as modified to
reflect the 10 coverage categories). Under this proposal, a health
insurance issuer would be free to adjust benefits, including both the
specific services covered and any quantitative limits. According to HHS,
“Permitting flexibility would provide greater choice to consumers,
promoting plan innovation through coverage and design options, while
ensuring that plans providing essential health benefits offer a certain
level of benefits.” This proposed approach to the “substantially equal”
standard makes the “benchmark” plan the presumptive standard, but then
permits some variation. There is precedent for this approach under
the Children’s Health Insurance Program. Clearly, the extent to which
variation is allowed will have significant plan coverage and choice
implications.
Defining what constitutes “essential health benefits” is a
critically important task that is fraught with political and policy
overtones. The Bulletin’s approach of shifting responsibility to the states
has disappointed some consumer groups and others who had hoped for a
single, comprehensive federal “essential health benefits” standard. A
number of industry groups and state regulators, on the other hand, have
applauded HHS’s proposal to give the states a large measure of control in
the matter, while continuing to voice concern about the impact of the EHB
provision on overall affordability. Since 1945, with the enactment of the
McCarran–Ferguson Act, the states have been the primary regulators of
insurance, including individual and group health insurance. In the
intervening decades, Congress has adopted federal standards imposing
discrete requirements on policies of individual and group health insurance.
These include mandates relating to health care continuation, portability,
privacy and security, among others. But the states’ role as the primary
regulators of insurance has remained generally undisturbed despite some federal
encroachment at the periphery. By making the states the locus of decision
making, HHS has at least arguably respected the long history of state
primacy in matters of insurance regulation, with much remaining on the
horizon in implementing the EHB and other Act provisions.
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