Last Friday, the United States Department of Health and Human Services (HHS) released a bulletin, sub-regulatory guidance, on the essential health benefits (EHB) package. This highly anticipated guidance was a bit of a letdown—kind of like the ugly reindeer sweater that your mother knits you for Christmas (you appreciate the thought, but it’s not really what you needed or wanted).

The EHB is the floor, created in the Affordable Care Act (ACA), for what benefits many health plans will have to cover. It applies to all new health plans in the individual and small group markets beginning in 2014 (both those sold inside and outside Exchanges) as well as to Medicaid benchmark coverage.

The bulletin is relatively short but jam-packed with consequence. Instead of creating one national standard or even a national minimum benefit package, the bulletin allows each state, within certain parameters, to adopt their own definition of the EHB. States must benchmark their EHB to one of four existing health plan options. Let’s do the math—I believe that’s potentially 50 different EHBs nationwide (not exactly the national floor we hoped for)! But, in the holiday spirit, let’s shelve the sarcasm for a moment and review what the bulletin is, and what it’s not.

Laying Out the Benchmark Options HHS will allow states to choose: (1) any of the three largest Federal Employees Health Benefits Program (FEHBP) plans by enrollment, (2) any of the three largest state employee health benefit plans by enrollment, (3) the largest plan by enrollment in any of the three largest small group insurance products offered in the state, or (4) the largest commercial non-Medicaid Health Maintenance Organization (HMO) plan in the state. The bulletin argues that the scope of benefits in small group plans tend to be in line with the federal and state employee plans and the largest non-Medicaid HMO plan, noting that these plans “do not differ significantly in the range of services they cover.”

Additionally, HHS also notes that the “largest plan by enrollment in the largest product in the State’s small group market” is the “default benchmark plan for the State” in event a state does not elect to choose an EHB benchmark. A reasonable assumption is that what this really means is that a federal Exchange operating in a state would use the default benchmark plan as the EHB. However, because the EHB applies not only to individual and small group plans sold through Exchanges but those sold in the outside market as well, this raises the question of whether HHS is really willing (or able) to impose the default benchmark plan on the outside market (as seems to be required by the ACA).

  • What it is: A benchmark plan approach to setting benefits.
  • What it’s not: A premium target approach, as recommended by the Institute of Medicine. HHS specifically states that the goal of the bulletin is to instruct states on how to model their scope of benefits — it does not address cost sharing or actuarial value in any way.
States Keep Their Mandates, for Now State benefit mandates are a concern for state advocates and state officials from both a comprehensiveness of coverage and a cost perspective; the bulletin gives mandates a grace period. The ACA requires the states to defray the costs of any state mandates beyond the EHB package—a potentially significant problem for mandates that advocates want to preserve. Under the bulletin, however, if a state chooses a benchmark plan as the EHB that includes their state mandates (e.g., one of the small group plan options), they do not have to cover the cost of the mandates. However, if they choose an option not required to offer state mandates (e.g., one of the FEHBP plan options), a state does have to cover the cost of those mandates.

Essentially, this is a powerful incentive for states to choose one of the small group plan options for at least 2014 and 2015 as well as an incentive for states to eliminate their mandates during those two years. This is because the bulletin notes that in 2016 this issue will be revisited and states may not continue to be given an option to include their states as part of the EHB without bearing the cost for these benefits.

  • What it is: A delaying tactic on the mandate problem. Advocates will need to work hard over the next two years to secure the future of key mandates at both the federal and state levels.
  • What it’s not: Any kind of resolution on mandates. The guidance punts any final decision on this by HHS to 2016.
What About Those 10 Categories? The statute demands that the EHB provide benefits across ten categories: (1) ambulatory patient services, (2) emergency services, (3) hospitalization, (4) maternity and newborn care, (5) mental health and substance use disorder services, including behavioral health treatment, (6) prescription drugs, (7) rehabilitative and habilitative services and devices, (8) laboratory services, (9) preventive and wellness services and chronic disease management, and (10) pediatric services, including oral and vision care. Of note, the statute also demands that the EHB be balanced across these ten categories, reflecting coverage found in a “typical employer plan.”

If you peg benefit scope to one of the small group plan options, are all 10 categories covered? HHS says, essentially, “yes . . . well mostly . . . well . . . we hope so.” The bulletin makes clear that HHS struggled to define what is “typical,” noting that if categories are missing from the benchmark they nevertheless must be included, using benefits from any other benchmark option. However, HHS remains uncertain as to how to supplement missing categories that are not traditionally covered, citing habilitative care and pediatric oral and vision care as particular issues.

  • What it is: A balancing act. Categories are filled by services offered in existing plans, leaving potential gaps in some benefits. The bulletin signals that any additional services will be based on other plans that cover those additional categories.
  • What it’s not: A clear method to fill in and balance the benefit categories. The specificity that consumer advocates hoped for is absent from the bulletin.
HHS Gives the Gift of Flexibility Not Just to States but to Insurers As explained above, the bulletin will allow states to modify plans to reflect the 10 categories. But, in addition, the bulletin gives insurers a lot of wiggle room, saying that insurer flexibility promotes innovation. HHS notes in the bulletin that it is considering whether or not substitution may occur by insurers within and across EHB benefit categories and whether substitution across categories requires a “higher level of scrutiny.” Indeed, it does.

Due to the ability of states to choose their own benchmark plan, there will be inevitably be EHB variation across states. By also allowing modifications of plans by insurers within states, there will likely be additional variation among plans with respect to numerical limits, when a type of treatment would be approved, and the availability of particular drugs.

This is troubling on two fronts. First, it undermines the ability for consumers to make apples to apples comparisons across plans. Second, it can lead to discrimination against consumers with some health conditions. In other words, insurers may substitute some services that are needed by someone with a more costly health condition with services that woo healthier consumers.

  • What it is: Potentially, a high level of health plan variation.
  • What it’s not: A way to empower consumers to compare plans. The potential substitution allowance by HHS is risky—and without a clear monitoring plan, may put at risk necessary covered benefits for vulnerable consumers.
Is There Anything Else Under the Tree? It doesn’t seem there’s a secret gift waiting for consumers in the bulletin that hasn’t been noticed yet, but the good news is that some of the more troubling aspects of the bulletin are “under consideration.” However, the general approach is unlikely to change. How this turns out now depends on getting HHS to at least modify its approach in a more positive direction as well as on how robust existing state plans are and which plans states choose. And all of this ultimately means that advocates need to voice their concerns at both federal and state levels as we move forward. The short-term opportunity for this is to submit comments to HHS on the bulletin by January 31, 2012 to

—Eva Marie Stahl, Policy Analyst