A central feature of health reform is the state exchanges, through which a variety of plans will be offered. Each of those plans will be required to offer a package of “essential benefits” as defined in the Affordable Care Act.  When most people think of benefits, they think of monthly premiums, annual deductibles and co-pays for physician or hospital services. However, essential benefits also include the definition of what services will be covered in the insurance plan and how each plan will apply those benefits to individual cases.

The Affordable Care Act itself provides relatively little guidance about what “essential” really means, other than to outline the following broad categories of services:

•          ambulatory patient services
•          emergency services
•          hospitalization
•          maternity and newborn care
•          mental health and substance abuse disorder services, including behavioral health treatment
•          prescription drugs
•          rehabilitative and habilitative services and devices
•          laboratory services
•          preventive and wellness services and chronic disease management
•          pediatric services, including oral and vision care

The law further clarifies that the essential benefits package must be “equal to the scope of benefits under a typical employer plan.”

From Nixon To Clinton To Obama

The debate over what is “essential”, or “basic” as it used to be called, has been going on for decades.  In December 1973, when President Nixon signed the HMO Act, the press release said:

HMO’s which receive assistance under this act would agree to provide a comprehensive package of basic benefits including essential preventive services, along with a list of supplemental benefits for which the enrollee could make an extra payment. (emphasis added)

There was relatively little dispute over what basic benefits or essential preventive services meant in the 1970s. While HMOs were required by law to offer consistent “categories” of benefits to everyone, there were differences among HMOs in how those benefits were interpreted, and those variations continued to increase over the years as plans and medical directors applied the benefits to individual cases.  We learned that enumerating a list of services was only one part of promoting consistency.

For example, a study I did for CalPERS in 1994 showed considerable variation among their various HMOs in the way they covered oxygen products, preventive services, family planning, psychological services, smoking cessation, and treatment of obesity.  The variation was a problem for CalPERS because their intention was to offer nearly identical benefits to their members regardless of which HMO they selected. In fact, the HMOs were interpreting benefits in different ways, leading to greater variation across plans.

Between the administrations of Nixon and Clinton, twenty years later, there were significant health reform changes (e.g. prospective payment for Medicare), but no successful proposals for a comprehensive universal health insurance program that would have had to address the issue of basic or essential benefits. When Clinton was elected in 1992 and he formed the White House Health Care Reform Task Force, the issue of what would be included in the basic benefit package became an issue of considerable debate.  An article in Health Affairs  “Benefit Design Choices under Managed Competition” outlined some of our thinking at that time.

Every universal health insurance proposal requires a core benefit package. The design of that package intersects with almost all other aspects of the health insurance debate. It is a financing issue (what benefits can we afford to provide?); a consumer information and protection issue (what do consumers need to know about their coverage?); a federal versus state issue (at what level of government should benefits be prescribed?); and a quality issue (how will required treatment be defined and delivered?). Despite its central importance, benefit design has not received the analysis it deserves.

The challenge of benefit design is not merely to enumerate a list of covered services, but to think through the underlying principles and process for determining what is included or left out. While any insurance system raises these issues, proposals for universal coverage based on managed competition raise some distinctive questions: Should benefits be standardized across plans? Should states, purchasing cooperatives, or individual plans be able to add benefits above those federally mandated? And how will disputes over coverage be adjudicated?

Most of these questions still require answers as the Affordable Care Act is implemented.  What makes it so difficult to define essential now is that the concepts of what is “medical” and what is “necessary” have been expanded so much in the last twenty years. In the 1970s, people initially flocked to HMOs without much question about their coverage.  They liked the simplicity of the process and the (then) lower costs.

By the 1990s, there was considerably more skepticism about what should be included in a benefit package.  The term “medical necessity” was beginning to be questioned, as providers and consumers alike realized that managed care companies were making decisions about coverage, but no one was quite sure who was making the decisions or on what basis. Large and public lawsuits over denials of care on the basis of “experimental and investigational” determinations led to less consensus and even more public disputes over coverage, revealing a public ignorance of how plans defined and applied the relevant definitions in these benefit contracts.

Principles For Going Forward

As we embark on yet another effort to define what is “essential” health care for all Americans twenty years later, it is imperative that we educate the public about the issues well in advance of the implementation of the exchanges.  This time the stakes are high because expectations are so high. As the Department of Health and Human Services supplements the language of the Affordable Care Act and clarifies what is an “essential” benefit, there are a few principles that may be helpful to consider.

Keep the service categories relatively broad. Use state and federal regulatory authority to ensure that services are not unfairly restricted instead of specifying every service or provider type to be covered.  There will undoubtedly be variation from state to state and product to product as plans and medical directors interpret the benefits, but that cannot be completely avoided.  There needs to be a balance between specificity and simplicity.

If the use of the term “medical necessity” is to be continued as a placeholder for coverage decisions  (and I would still argue as I have in the past for its elimination),   make it clear to consumers how that term will be applied and by whom.  The law already requires stronger appeals and dispute resolution processes. HHS should consider using a more evidence-based definition of “medically necessary” services that includes explicit reference to evidence of effectiveness, so that plans, in considering coverage requests, can take into account whether or not a treatment is proven to work for the specific condition.

Require true transparency of all insurers that offer benefit packages through the exchange. This means requiring insurers to define clearly on their websites what services will be excluded and how coverage decisions will be made, and by whom. Given that plans have only four pages in which to describe their benefit packages, additional URLs can be posted making it easy for consumers to find the information they need. Consumers should also be given easy access to a plan’s “medical policies” or “clinical bulletins” online, so that they can look up treatments of interest to them and find out exactly how the plan intends to cover them.  It is the medical policy that defines whether or not a treatment will be essential (i.e. medically necessary) and thus covered for an individual’s specific circumstances.

Insurers such as Aetna and Wellpoint and some of the Blues plans already have such policies online.  Currently both Anthem/Wellpoint and Aetna’s medical policies are in a section of their websites that says “For health professionals” or “Providers”.  Unless a member knows about these policies, they would never find them, since they would assume that only physicians can access these parts of the website.  In fact, anyone can open the provider page and find these policies.

Make an effort to communicate the way in which the essential benefits are similar to what a “typical employer plan” would offer, even though defining “typical” will be very challenging.  Is a typical plan an HMO or PPO? Self insured or insured plan?  If the latter, how can we sort out the hundreds of state benefit mandates that govern insured plans? Will typical mean what “most” employer plans offer, and how do you define “most”? If a plan is “typical”, can it be innovative or does the very meaning of typical imply “average”? Would value-based insurance designs be considered too innovative and not typical enough? If, however, the essential benefits end up looking familiar to consumers — something like what their own employers have offered in the past — they may be reassured that health reform offers them something of value.

One good place to look for guidance on how to define and communicate essential benefits through an exchange is the experience of the Massachusetts Connector.  The Connector acts as the state exchange for health insurance purchases in Massachusetts, and the public seems to be making their choices reasonably well.  I went online to see how the various plans describe their benefits.  The description of deductibles, copays, out of pocket maximums, and general categories of service were fairly straightforward and appeared to be consistently displayed across the various plans being offered.  But most online plan descriptions gave only cursory descriptions of the details of how specific benefit decisions would be made by the plans. List of exclusions  (cosmetic surgery, custodial care, hearing aids) were in small print, and consumers were directed to the plan itself to obtain more detail. The fact that the plan covers “surgery” doesn’t tell a consumer much about how it would cover “bariatric surgery”, which depends on details about the type of procedure, where it is done, in what setting, and for what indications. A plan that does not help the public understand those details is bound to disappoint and frustrate.

The pressure to include certain benefits as essential will not come from the public at large so much as from a variety of provider, industry and advocacy groups seeking the inclusion of their specific treatment or device. But even if a benefit is part of the package, how it is applied will still be a matter for the insurance company’s medical director to resolve. Fortunately, despite a common view that the public demands everything be covered at a low price, recent research has shown that consumers can, indeed, discriminate between essential and non-essential benefits.

The study “What Matters Most”, by the Center for Healthcare Decisions, demonstrated a remarkable ability by consumers to sort out essential medical care from care that might be more discretionary and thus not part of a package of benefits that everyone has to purchase. Respondents tended to support the coverage of services if the treatment would improve functioning in daily life, would prevent a worse illness, or when the treatment was proven to be effective for the condition. When asked about the following two situations, respondents to the survey were pretty clear: Example (1) was a situation where medical care should be paid for; Example (2) was probably not.

  1. A 24-year-old woman has long-standing asthma that prevents her from being active. With an inhaler and medications, she can live a more normal life.
  2. After salsa dancing, a young woman notices stiffness in her ankle. This does not interfere with walking or standing but makes it uncomfortable to dance. Physical therapy will help her recover faster.

The Central Messages For The Public

The “What Matters Most” study and the Massachusetts Connector experience have demonstrated a much more resilient and able public than we might have anticipated, a public that can sort out the nuances of coverage and choose life saving over merely lifestyle enhancing treatments. What we need to communicate to the public as we go forward are a few central messages:

  1. Not every service or treatment will be defined as essential, either in the benefit package or by the medical director;
  2. The real devilish details are described in the medical or clinical policies of the plan; and
  3. Even if a treatment is essential for some, it may not be essential for everyone.