In a February 14, 2017 article for Health Affairs Blog, Ian Spatz and Michael Kolber argue that the Affordable Care Act’s (ACA’s) essential health benefit (EHB) provisions “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.” To be sure, they recognize that states play the primary role in regulating health insurance. But the ACA’s essential health benefits place a floor nationwide on the parameters of coverage in the two markets—individual and small group coverage—that historically have been the most vulnerable to policies containing huge gaps in covered benefits and services. At the same time, the ACA’s essential health benefit guarantee, which by regulation (45 C.F.R. §156.100 et seq) is linked to states’ own baseline insurance laws is broad; indeed, the standard assumes that states will continue to adopt coverage standards that reflect the desires of their populations.
One of the ironies of the election of Donald Trump and the consequent focus on repealing and replacing the ACA is that it focuses the policy mind, and perhaps even public debate, on this key element of health insurance reform. And regardless of whether the concept of a nationwide floor on coverage in the most vulnerable health insurance markets survives, states will continue to bear the lions’ share of responsibility for making this coverage meaningful.
Inspired by Spatz and Kolber’s article, we outline here five key points that we believe policymakers should consider when approaching the law’s essential health benefit provision:
- Standardizing benefits for qualified health plans is both desirable and viable
- Plans should be allowed to vary actuarial exposure of beneficiaries while holding benefits constant
- Policymakers should establish a true budget for basic health coverage and then adjust the actual terms of coverage to reflect budgetary realities
- Any reference plan should incorporate these basic coverage concepts, coupled with a mechanism for periodically updating the model as technology, population health needs, and local circumstances warrant; and,
- States should continue to assume the primary role in determining coverage
Lessons From Israel
US policymakers confronting these complex questions could benefit from a close look at how other health systems approach them. In particular, it may surprise readers to know that Israel has a system very much in line with many US policymakers’ goals of fostering a competitive private insurance market. The Israeli system rests on the concept of competing private health plans selling care in a market of empowered consumers. But one crucial difference is how Israel approaches the question of what it means to be covered.
In this respect, we believe that US policymakers have much to learn — especially those states willing to use their regulatory powers over health insurance markets to guarantee relatively robust coverage as a basic population health protection. The Israeli system, which guarantees its population a “basic basket of health services” that is defined and updated over time may hold lessons for states and the federal government.
In establishing its national health system in 1995, the Israeli government in great part followed the core elements we outlined above. Israel is of course a small state, though its population of 8 million exceeds that of 42 US states. At the same time, Israel’s health care system, like that of any nation, needed the stability and structure produced by a comprehensive health reform strategy aimed at ensuring universal coverage while containing costs and building incentives to provide care that is both appropriate and efficient. Of course, as in any nation, there are robust debates about how generous the system should be, but to a remarkable degree, Israel has succeeded in achieving these goals.
As of 1995 every Israeli citizen is required to be insured through enrollment in one of four qualified private nonprofit health plans. Participating health plans must accept all registrants during open enrollment periods with no underwriting and must provide a mandated set of benefits to policyholders. Under the Israeli system, the government pays the full premium, risk-adjusted to health status, which in turn is financed through a combination of taxes and general revenues. Cost sharing for basic coverage is limited, though it can be burdensome for some vulnerable populations.
Israeli law requires that the public budget, based on earmarked health tax revenues supplemented by government funds, for basic coverage (Israelis can supplement this basic level of coverage with privately purchased plans as discussed below) be sufficient to cover its benefits. In Israeli parlance, this is known as “the cost of the basket.” The law also stipulates that the addition of treatments to the EHB be conditional on the availability of adequate funding. This requirement reflects the law’s intent to create a system that is financially accountable.
The mandated set of benefits reflects the level of coverage available under Israel’s most popular health plan sold in 1994, similar to the ACA’s essential health benefit statute, which by rule is linked to states’ most popular small group plans. Using this basic coverage norm, the Israeli law made certain adjustments and then required the government to further establish a detailed description of coverage that goes well beyond the 10 broad essential health benefit categories and specifies the actual treatments and prescribed drugs that plans must cover and pay for. This specification process is carried out through a broadly inclusive and transparent process that allows for extensive public discussion.
The process does not demand monolithic plans with no variation. Indeed, the plans can add services to the basic basket voluntarily as long as they do not charge for them. Plans also can offer supplemental insurance for services not included in the basic basket as long as there is no medical underwriting and it is consistent with community rated by age. At the same time, this process means that all residents have basic coverage that is adequate to health and based on the best available evidence.
The process of defining and updating the basket is itself worth considering. Since 1998, a government appointed committee of experts receives a pre-determined budget increase of about 1.5 percent above to the current “cost of the basket.” It is then the committee’s task to consider how this update will be allocated across the basket. The process used to make this decision is open and transparent, not conducted out of view. An open call is issued to health plans, providers, citizens, drug companies, and all other interested parties to submit briefs promoting technologies and treatments that should be added to the basket. Not surprisingly, the available budgets can only cover a fraction of the proposed items up for inclusion in the basket. New treatments are adopted, usually, with highly detailed indications for their use.
Shaping The Nation’s Public Policy Landscape
Not all treatments, including some perceived by at least part of the public as “lifesaving,” are included. But this decision-making process has become part of the nation’s public policy fabric, much as Medicare, Medicaid, and private insurance through employers are part of the U.S. policy landscape. Research shows that the Israeli public has “matured” over time, preferring that evidence-based, cost-effective services be prioritized by the committee over expensive technologies that offer only limited additions to quality adjusted life years. Israel, as a nation, also has been able to contain the cost of its national health expenditure—7.5 percent of its gross domestic product (GDP) and $2,300 per capita on health care—and its population demonstrates relatively high health indicators by international standards.
The Israeli process creates a situation in which the entire population, regardless of age, sex, and income level, are covered without resort to fragmented high-risk pools. While most Israelis hold supplemental insurance, sometimes even overlaid with private commercial insurance, those who buy supplemental coverage do so to gain provider choice and quicker service than the Health Plans are able to provide within the budget of the basic basket. But these extra insurance plans do not provide access to benefits beyond the basic basket.
Israelis have access to the most advanced care while at the same time enjoying primary, preventive, and standard health care for acute problems that is free of heavy cost sharing at the point of service. Deductibles of $10,000 and brutal patient cost sharing—the absolute essence of what Americans hate about their health care system—are unheard of. Because the basic basket of benefits is the same across all health plans, Israelis do not choose plans based on actuarial value. Instead Israel’s health plans compete over levels of service and quality of care. About 90 percent of Israelis report being satisfied or very satisfied with their health plan.
Americans place great value on individualism, but so do Israelis. The Israeli case demonstrates that a system based on competing private but not-for-profit health plans providing standard coverage but with room for innovation can result in high levels of health status, consumer satisfaction, and democratic accountability. As Spatz and Kolber point out, the question of coverage will dominate any attempt to replace the ACA. Israel demonstrates that the common goals of good coverage, reasonable access, affordable care, and public accountability can, indeed, coexist.