The Essential Health Benefits (EHB) rule may be among the many parts of the Affordable Care Act (ACA) that are on the chopping block as the Trump Administration and Congress seek to repeal and replace the law. Essential Health Benefits, which define what health care benefits plans in the Marketplaces and certain other health plans must cover, go to the heart of what it means to have health insurance and what health care we, as a society, want to ensure people can access.
Today, critics of the EHB cite them as a cause of high health insurance costs and as an example of federal overreach. They say the EHB are too expansive and too prescriptive. Sen. Tim Scott (R-SC) was quoted as saying, “In order for us to actually have real impact on making sure that this becomes a patient-centric approach to health care, we’re going to have to address those definitions, the essential benefits, giving more liberty and more flexibility for those definitions.” The Heritage Foundation has cited EHB as one of the mandates of the ACA that drives up insurance premiums. Senate Majority Whip John Cornyn (R-TX) recently expressed his view that EHBs are expensive and force people to buy insurance they do not want.
Several Republican Governors have supported EHB changes in letters to Congress. Tennessee Gov. Bill Haslam and Nevada Gov. Brian Sandoval asked for more state flexibility in defining EHB, without citing elements of the current definitions that are objectionable, apart from opposition to EHB being set at a federal level. Arkansas Gov. Asa Hutchinson recommended eliminating the EHB requirement to “enable states to utilize more and better-tailored benefit design options to fit our populations’ needs.” And Alabama Gov. Robert Bentley recommended eliminating a federal EHB requirement, but asked that states be able to designate which plans would be eligible for federal subsidies.
A careful understanding of how the EHB rule did and did not change the status quo can assist in putting current concerns in context. Because the principal changes to private insurance mandated by the EHB were to increase availability of coverage for maternity, mental health and substance use disorders, and habilitative care, one possible goal of modifying the EHB rule would be to restrict these benefits.
Origins of EHB
Defining EHB is fundamental to the meaning and structure of the ACA. The ACA represents a policy commitment to make health insurance accessible and affordable. To make sure access and affordability are not empty promises, the law needed to define what it means to be health insurance. To do that, the ACA establishes a standard that involves the scope of covered benefits (the EHB) and the extent of financial protection against the cost of these benefits. The latter is defined for individual and small group market plans in terms of their actuarial value — the minimum percentage of costs that a plan would pay for an average plan member, as grouped in metal levels.
The ACA EHB are a minimum for all Marketplace plans and for those in the Medicaid expansion population. While the actuarial value of plans is allowed to vary from metal level to metal level, the EHB are the same across plans. Uniform EHB was not a necessary policy choice. It is possible that, as with actuarial value, the ACA could have allowed different benefits for different plans, allowing consumers to choose a package of coverage that best fit their needs. However, such flexibility would potentially create havoc within the risk pools as, for example, men went to plans that didn’t offer maternity care and those without chronic conditions sought plans with lower premiums and fewer drug benefits.
In addition, a uniform benefit package simplifies the consumer shopping experience. Finally, the EHB rules were intended to deal with state mandated benefits. Many economists argue that these politically created mandates are a factor in driving up health care costs, so the ACA requires states to pick up the costs of mandates in Marketplace plans that exceed the scope of benefits in the EHB package.
EHB in Practice
The ACA defines ten broad categories of services as EHB:
- Ambulatory patient services;
- Emergency services;
- Maternity and newborn care;
- Mental health and substance use disorder services including behavioral health treatment;
- Prescription drugs;
- Rehabilitative and habilitative services and devices;
- Laboratory services;
- Preventive and wellness services and chronic disease management; and,
- Pediatric services, including oral and vision care.
The law tasks the Secretary of Health and Human Services with defining these in detail.
The Obama Administration initially asked the Institute of Medicine (IOM) of the National Academies (now known as the Health and Medicine Division) to recommend how it should define the EHB. In 2011, an IOM committee released a thoughtful and detailed report that suggested HHS “balance the cost with the breadth of benefits covered in the EHB.” IOM’s recommended process would have had HHS start with a budget and fit EHB into that budget. HHS thanked the IOM and completely ignored its advice.
Instead, in 2012, HHS declined to define specific EHB and, instead, gave each state substantial leeway in defining EHB. The department’s regulations allow states to set EHB in reference to their own large private health plans or the Federal Employees Health Benefit Plan. This move had several attributes that were attractive to HHS. First, it avoided HHS having to make controversial decisions about which benefits would be included and which would not. Second, HHS argued that most benefit packages in the private sector were similar so that allowing state flexibility would not create large differences across the country. Third, tying EHB to large private sector health plans could create some natural flexibility as these plans changed or as states chose new benchmarks from time to time. Fourth, the choice to allow states to select a reference plan gave states room to avoid paying for their state mandates since they could choose a reference plan that already included the state mandated benefits.
Over time, HHS needed to intervene to remedy ambiguities in its EHB rules. One major area was in defining habilitative services, one of the 10 statutory defined EHB but not a benefit commonly found in private sector plans. Another area was prescription drug coverage, where the existence of formularies and appeals was more granular than other areas and where reference to existing private sector plans was confusing.
How EHB Changed the Pre-ACA Status Quo
To the extent there is still a role for federal subsidies in health insurance in what we might now call a post-ACA world, there will be some need to define the benefits that are subsidized, whether those are called EHB or something else.
To assess options for the future, it is helpful to have a clear picture of what issues reformers seek to address. As discussed above, critics principally urge that benefit packages be more flexible and many assert that each state, not federal regulators, should establish them. But states already have the option of picking their own benchmark from among about a dozen plans currently offered in the state. Thus, the state-federal division of roles, in and of itself, seems unlikely to be the critical or sole goal or possible benefit of changing EHB.
Put another way, it is entirely possible that EHB critics truly view state control as an end goal and would adopt an EHB standard identical to the current standard, albeit by a different process. But if that were the only goal, this debate would have little interest to the health policy community and is unlikely to be one on which stakeholders would expend political capital.
It seems plausible, then, that changing the required benefit package is itself a significant goal. How might EHB critics seek to change the benefit package? While they do not say, it seems a reasonable inference that they oppose the changes the EHB benefit package made to the pre-ACA status quo for the individual and small group markets. If the EHB increased the cost of coverage, it did so because it required benefits that were not typically included in individual and small group coverage. The IOM’s 2011 report explored what these were, based in part on what three large national insurers said were typical in their individual and small group plans:
- Maternity care was not typically offered in the individual market, but instead offered as a high-cost rider.
- “Habilitation” services were only covered to the extent required by state mandates.
- Full pediatric oral and vision care were not standard benefits, but were typical riders.
- While some mental health or substance use disorder services were covered in nearly every plan, the depth of the coverage varied widely; detox services, whether inpatient or outpatient, frequently were not covered. (Although the requirements of the Mental Health Parity and Addiction Equity Act [MHPAEA], which predates the ACA, now apply to nearly all commercial and Medicaid managed care coverage, MHPAEA does not by its terms require coverage of mental health or substance use disorder services. Therefore, in the absence of EHB, there may be incentives for insurers to drop such coverage and avoid parity entirely.)
Given this view of pre-ACA benefits, the debate on EHB seems more helpfully cast as whether individual and small group coverage should be required to cover maternity care, habilitative services, pediatric dental and vision, and mental health and substance use disorder services and whether this decision should be made at the state or federal levels.
The Urban Institute, in a recent report, warned that changing EHB is “risky territory.” Among the concerns they cite is that “cutting a benefit from the rest of the package puts the cost of that type of care wholly on those families who have a health care need for it” and that “in many circumstances, such cuts would make obtaining that type of care unaffordable.”
Pathways to Reform
In fact or symbol, the EHB requirement seems certain to undergo change as the Trump Administration and Congress take administrative and legislative action to alter or sweep away the ACA. In the short term, during a period in which Marketplace and Medicaid expansion subsidies continue, there are opportunities for the Trump Administration to administratively change EHB. Critically, it cannot eliminate, without legislation, entire categories of EHB, which, as we discussed, might be the critics’ true aim.
Although the HHS approach to EHB delegated substantial flexibility to the states in setting EHB, one option is for HHS to give states even more flexibility. HHS could allow states to choose from a wider variety of reference plans than is currently allowed by regulation. HHS could also give states greater flexibility to choose different reference plans for each of the 10 EHB benefit categories.
HHS might also allow states to define their own EHB without reference to any plans at all. While this would give states the most flexibility, it would also put states in the political hot seat of dealing with each constituency for each benefit. Finally, the new Administration could use its authority under section 1332 of the ACA to approve a state plan alternative to the ACA’s rules that would alter the 10 EHB benefits.
In the longer run, as the Administration and Congress debate an expected replacement (or alteration as some have described it) for the ACA, more options present themselves. Legislation could scrap completely the statutory ACA and, instead, leave it up to states or the health plans themselves to set their own benefit rules or have none at all.
One area where this may be more likely is for the Medicaid expansion population. This group, covered by the EHB requirement, now qualifies for more and different benefits that the traditional Medicaid population. New legislation may allow states to provide the expansion group with the same benefits as the traditional group. This would be consistent with the new Administration’s calls for more state flexibility in administering Medicaid.
Ultimately, whatever course is taken, defining the benefits that are “essential” to good health care will remain a critical issue in any national decision on universal access or universal health care coverage. At a minimum, the nation has agreed, through the Emergency Medical Treatment and Labor Act (EMTALA), that everyone deserves access to emergency care. Beyond that, however, there will remain debate about the extent of benefits that states or the nation as a whole wish to subsidize for some or all.
That debate, where EHB are one statement of position, is key to watch as the country grapples once more with fundamental choices in national health care policy.