On December 16, 2011, HHS released a “bulletin” describing the approach that it intends to take to establishing the “essential health benefits” under the Affordable Care Act. A bulletin is a form of guidance that lacks the legal stature of a rule. HHS believed, however, that the states, insurers, consumer advocates, and the public needed some indication as to the direction HHS was intending to take in defining the EHB, and the Bulletin was intended to serve this purpose until an actual rule is issued.
The “essential health benefits” (EHB) concept is one of the most important innovations of the ACA. The EHB is a menu of services that specific types of health plans must cover. Essential health benefits can be covered, however, with various levels of cost sharing, and cost sharing is addressed separately by the ACA. Different plans could each cover the same EHB and differ dramatically in their actuarial value and their cost.
Beginning on January 1, 2014, all small group and individual insurance plans (in or out of the exchanges) must cover the “essential health benefits package.” The essential health benefits package includes the EHB, but also imposes limits on out-of-pocket spending and deductibles in group plans, as well as the metal tier cost-sharing level requirements. The EHB (but not necessarily the EHB package) must also be covered under the ACA by catastrophic plans, plans in the Office of Personnel Management (OPM)-administered multi-state plan program, the basic health plan in states where it exists, and at least some Medicaid plans.
Insurers may provide benefits in addition to the EHB and states may require plans subject to their regulation to provide additional benefits. If states require “qualified health plans” or multi-state plans to cover benefits in addition to the EHB, the state must pay the cost of additional benefits. “Qualified health plans” are plans certified to participate in the exchange, but may also be offered outside of the exchange. The federal cost-sharing subsidies that are available for lower-income Americans beginning in 2014 only apply to the EHB and not to additional benefits offered by plans. The EHB requirements do not apply to large group plans and self-insured plans, although employer plans must meet a “minimum value” standard that has yet to be defined.
The Process Of Identifying Essential Health Benefits Under The Affordable Care Act
The ACA specifies in some detail how the EHB are supposed to be identified. First, the ACA lists ten categories of services that must be covered in the EHB. Some of these have long been standard, like hospitalization and ambulatory patient services. The EHB list also includes a few services, however, that are not uniformly covered today, including habilitation services and pediatric oral and vision care. HHS is supposed to ensure that the EHB scope of benefits is “equal to the scope of benefits provided under a typical employer plan,” based on a survey conducted by the Department of Labor. The CMS Chief Actuary is directed to certify that the EHB meet this standard. HHS is also required to receive public comment as it defines the benefits.
HHS must ensure that:
- The benefits are balanced among the 10 categories;
- The EHB definition does not “make coverage decisions, determine reimbursement rates, establish incentive programs, or design benefits in ways that discriminate against individuals because of their age, disability, or expected length of life”; and
- The EHB take into account health needs of diverse population groups.
HHS must also periodically review and update the EHB. The EHB must cover emergency care without prior authorization, network participation, or out-of-network cost sharing requirements; must permit stand-alone dental coverage; must ensure mental health parity; and cannot include abortion coverage.
In addition to receiving the DOL report and receiving public comments, as required by the ACA, HHS also commissioned the Institute of Medicine to prepare a report on how the EHB should be determined. This study took much of 2011 and contributed to the delay in HHS getting an EHB definition out.
State legislatures will be meeting shortly to consider the legislation they must adopt to be ready for the state exchanges to be operational for 2014, and an item that will certainly be on their agenda is what to do with state mandated benefits that exceed EHB requirements. Insurers, moreover, will need to price their exchange and small group products early in 2013 to be able to offer them when exchange open enrollment begins in late 2013. Although HHS is apparently not ready yet to issue proposed regulations on this issue, some guidance on HHS plans was needed. The Bulletin attempts to fill this need.
States Will Get Flexibility In Defining Essential Health Benefits
It is likely that the intent of those who drafted the ACA was to establish a uniform national EHB standard. This is not what the Bulletin proposes, however, at least for 2014 and 2015. Rather the Bulletin proposes that each state define its own EHB within federal guidelines. States will do this by choosing among federally-defined “benchmark” plans. This is the approach that the Children’s Health Insurance Program (CHIP) has used since 1997 and that states may use for some Medicaid populations. The Bulletin signals that HHS intends to extend this approach to those groups guaranteed the EHB under the ACA.
For 2014 and 2015, states may pick a benchmark plan from one of the following four categories:
(1) the largest plan by enrollment in any of the three largest small group insurance products in the State’s small group market (a product being a package of services and riders offered by an insurer and a plan being a specific selection of benefits and cost-sharing) ;
(2) any of the largest three State employee health benefit plans by enrollment;
(3) any of the largest three national Federal Employee Health Benefit Plan plan options by enrollment; or
(4) the largest insured commercial non-Medicaid Health Maintenance Organization (HMO) operating in the State.
If a state fails to pick a benchmark plan, the largest plan in any of the three largest small group products will be the default. Under the Bulletin, exchange plans and plans offered in the individual and small group market must cover the services included in the benchmark plan. Although the ACA amends the Medicaid statute to require Medicaid benchmark plans (including plans covering adults under 138 percent of the poverty level) to cover the EHB, the Bulletin focuses on private plans and provides that further guidance will be issued for the Medicaid program. Multi-state plans are not addressed, although this approach may be problematic for them.
The benchmark approach allows the states to defer having to pay for mandated services that exceed the EHB. If a state chooses a small group market plan, that plan will presumably cover all mandated benefits and thus the state will not need to pay for extra benefits. HHS will apply this approach for 2014 and 2015, but gives notice that it may cease to cover some state-mandated benefits beginning in 2016. Of course, a state that chooses to include mandated benefits within the EHB will also probably need to cover them for at least the Medicaid expansion population.
Most benchmark plans will cover most of the ten categories of services listed in the statue. Many small group plans do not currently, however, cover behavioral health and habilitation care and pediatric oral and vision services. (Individual health plans also often do not cover maternity care, but individual plans will not be a benchmark option.) If the benchmark plan does not cover a particular category of services, the state must supplement the benchmark plan using the benefits from the largest plan in the category covering the missing services, or, if none is available, benefits from the FEHBP plan. The Bulletin discloses alternatives that HHS is considering for ensuring coverage of habilitation and pediatric oral and vision coverage—including a required equivalence between habilitation and rehabilitation services and basing oral and vision coverage on services covered under federal employee plans. All plans must cover mental health and substance abuse care, including behavioral health care at parity with physical health services.
Insurer flexibility. The menu of benchmark plans gives the states considerable flexibility in defining the EHB. Beyond that, however, the Bulletin signals the intent of HHS to give insurers additional flexibility. Health plans need only offer benefits that are “substantially equal” to the benefits of the benchmark benefits (as is currently the case in CHIP). Insurers will have “some flexibility to adjust” the specific services they cover and quantitative limits on benefits. The Bulletin states that flexibility “would be subject to a baseline set of relevant benefits,” but it is far from clear how this baseline will be set.
HHS is considering allowing actuarially equivalent substitutions of benefits within categories, but possibly also between categories, subject to “a higher level of scrutiny” … “to mitigate the potential for eliminating important services or benefits.” HHS will also permit flexibility with respect to drug coverage as long as all categories and classes of drugs are covered. Health insurers will also be allowed to update their benefits on an annual basis. The Bulletin, however, promises guidelines to ensure balance and discourage discrimination. HHS will review and update the EHB and re-evaluate the benchmark approach.
Future blog analysis by others will explore in more depth the policy issues raised and settled by the Bulletin. The Bulletin gives states some assurances that they will have a good deal of control over the EHB. On the other hand, it will also give them more political responsibility than some might like. It assures insurers that they will continue to have a lot of discretion in establishing their benefit packages, although beginning in 2014 many will need to cover some benefits they have not heretofore covered. Consumers may be reassured that state benefit mandates are probably not going away soon. Many are likely to be concerned, however, that the Bulletin is not going to establish a uniform, comprehensive floor of benefits that many had hoped for.