The Obama Administration announced on December 16, 2011 that it would allow states a measure of discretion in determining what constitutes “essential health benefits” which must be provided by health insurance plans under the 2010 health reform overhaul, known as the Affordable Care Act (ACA). The announcement, by the Department of Health and Human Services (HHS) came in the form of a bulletin that outlined a policy HHS hopes to impose. A formal regulation is yet to be issued, but would likely be forthcoming in 2012.
The idea, according to HHS, is to give states, “more flexibility and freedom” to implement the part of the ACA that includes the essential health benefits requirement. Rather than creating a single federal definition for essential health benefits, the announced policy will allow each state to “benchmark” against an existing health insurance plan operating in that state and against a federally pre-set menu of mandated benefit categories. States could choose one of the following health insurance plans as their benchmark:
- One of the three largest small employee group plans in the state.
- One of the three largest state employee health coverage plans.
- One of the three largest federal employee health plan options.
- The largest HMO plan offered in the state’s commercial market.
In addition, if a chosen benchmark plan does not cover services in all of the 10 mandated categories, states will have to come up with supplementary requirements through an as-yet-unspecified process. If a state does not designate a benchmark plan, the standard would be the small business plan with the largest enrollment in the state.
Services that plans must cover include:
- Emergency
- Maternity and Newborn Care
- Mental Health and Substance-use Disorder Services
- Prescription Drugs
- Rehabilitative Services
- Laboratory Services
- Preventive Services and Chronic-Disease Management
- Pediatric Services, including oral and vision care
- Hospitalization
- Certain Outpatient Services
Services where states will have leeway include:
- Autism Services
- Chiropractic Services
- Acupuncture
- Infertility
Although this announced framework provides the appearance of flexibility for states, it is likely to be more prescriptive than meets the eye. HHS Secretary Kathleen Sibelius said as much when she emphasized that more then one million Americans will gain prescription coverage under this policy, and more than eight million will gain coverage for maternity care.
Predictably, certain disease-specific interest groups were unhappy. They would have preferred a very broad and open-ended definition of essential health benefits, defined entirely at the federal level. Of course, such an approach would be completely beyond control, unpredictable, and totally unaffordable.
From my vantage point, this presumptive framework policy, if it holds up, has less immediate practical impact than one might imagine. Most, if not all, states have comprehensive coverage plans among the options of benchmark plans. I suspect these states for political reasons will choose a fairly comprehensive coverage plan, and that plan will in turn become the health benefit “standard” under the law for that state. The real impact will be with costs. No matter how one defines “essential health benefits”, the result will be a rising tide that lifts all boats, and increased costs.
Inexpensive coverage plans, or plans that now target certain benefit categories, are the only ones that many people can afford. I see such plans becoming illegal or just going away, under this more “flexible” approach. The HHS framework, though preferable to a one-size-fits-all definition of essential benefits, still resides within a massive federal law that is mainly a one-size-fits-all law.
At the end of the day, what is essential to one person may be completely unnecessary to another and what is essential to a 60 year old may not be needed by a 20 year old. Medical needs and wants change. A pure single definition of essential health benefits can never be possible. At least HHS recognized the obvious. But, the more flexibility we can leave in the hands of states, and in the hands of small businesses and consumers themselves, the better off we will be in offering affordable coverage to all people.
The Washington Post – Minimum Essential Health Benefits Will be Largely Set by States – Dated: December 16, 2011
The Wall Street Journal – States told they can decide on Coverage by Health Plans – Dated: December 17, 2011