HHS Outlines “Essential Benefits” Under Health Exchanges
A proposal by the Department of Health and Human Services would allow states to use an existing health plan as the benchmark for the essential health benefits package under state’s health exchange. Health insurance plans must offer the essential health benefit package in order to participate in their state’s health insurance exchange. The PPACA requires every state to launch a health insurance exchange by January 1, 2014 or default to a federal fallback program
These benefits will cover at least 10 general categories of preventive, diagnostic and therapeutic services, which HHS defines as essential and equal to benefits under a typical employer plan. States would be able to select a plan with the same services that are covered by a typical employer plan in their state. States and insurers could evolve the benefit package as innovative plan designs are developed and advancements in care become available. States could choose one of the following health insurance plans as a benchmark:
• One of the three largest small group plans in the state.
• One of the three largest state employee health plans.
• One of the three largest federal employee health plan options.
• The largest HMO plan offered in the state’s commercial market.
Plans could modify coverage for a benefit category as long as they don’t reduce the value of coverage. The essential health benefit package has to cover items and services in at least 10 categories of care, including preventive care, emergency services, maternity care, hospital and physician services, and prescription drugs. If a state selects a plan that does not cover all 10 categories of care, the state can examine other benchmark insurance plans, including the Federal Employee Health Benefits Plan.
The role of the federal government in defining minimum standards for health insurance coverage raises many issues for states to consider, according to Kevin Counihan, president of CHOICE Administrators Exchange Solutions. In a recent podcast, he said that these include the dilution of state authority, how essential health benefits will affect large group plans, the absence of guidance on benefit exclusions, and the impact on medical trends, along with a host of policy decisions that state regulators and policymakers will now need to consider.
The federal government’s new level of involvement fundamentally changes the health insurance market in most states. It dilutes the authority states have traditionally had in regulating individual and group insurance coverage and in determining covered and mandated benefits, said Counihan. He said that the medical inflation trend could have a significant effect on premium costs.
Unless the limits for low- and moderate-income individuals rise along with medical inflation, the federal government and the states would have to bear medical-trend increases in the form of tax credits and subsidies. The PPACA limits how much low- to moderate-income individuals pay for coverage.It is critically important that states be aware and prepare for this scenario, explains Counihan.
Counihan said that essential health benefits could affect all health insurance policies in a state. While states can still enact benefit mandates for health insurance policies sold outside of the exchange. But states are likely to surrender this responsibility to HHS via the definition of essential health benefits. Otherwise, individuals and small businesses with higher utilization of services will seek richer policies outside the exchange. This would cause an unbalanced risk pool between members of the exchange and those purchasing outside the exchange. If that happens, insurers are likely to raise rates for non-exchange policies causing a potential death spiral of disproportionate utilization and premium increases between policies written inside and outside of the exchange, he said.
Neil Trautwein of the Essential Health Benefits Coalition said, “The devil will be in the details. The bulletin leaves unanswered the question of affordability in the states…HHS should continue to work to develop a rule that balances state-selected and reasonably comprehensive benefits with affordability for employers and individuals.”
During the podcast, Counihan outlined the key issues that state policymakers need to consider in evaluating the impact of essential health benefits. The podast grew out of a white paper, “Essential Health Benefits: Key Issues for States,” issued last month by CHOICE Administrators Exchange Solutions. The podcast can still be heard at www.blogtalkradio.com/xeroxradio/2011/12/13/essential-health-benefits-opportunities-for-state-influence-1. The he white paper is available at www.choiceadminexchanges.com.
Further information is available at http://www.choiceadminexchanges.com. For a fact sheet on the essential health benefits bulletin, visit: http://www.healthcare.gov/news/factsheets/2011/12/essential-health-benefits12162011a.html
