States will have flexibility in providing “essential health benefits” (EHB) in insurance plans offered through the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) under guidance released by the Department of Health and Human Services (HHS) on December 19, 2011.
PPACA section 1302(b) requires that starting in 2014 that most plans in the individual and small group markets both inside and outside of the new state-based health insurance exchanges, as well as most Medicaid plans include at least 10 general EHB categories, including ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services; chronic disease management services; and pediatric services, including oral and vision care.
While PPACA requires the inclusion of EHB in most health plans starting in 2014, it was unclear how strict the federal rules would be regarding the provision of these basic benefits. According to the HHS guidance, “HHS aims to balance comprehensiveness, affordability, and State flexibility while taking into account public input throughout the process of establishing and implementing EHB.” As a general rule, in defining EHB HHS will –
- include the 10 categories of services identified in the statute;
- reflect typical employer health benefit plans;
- reflect balance among the categories;
- account for diverse health needs across many populations;
- ensure there are no incentives for coverage decisions, cost sharing or reimbursement rates to discriminate because of age, disability, or expected length of life;
- ensure compliance with the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA);
- provide states a role in defining EHB; and
- balance comprehensiveness and affordability for those purchasing coverage.
Under the HHS guidance, states would be permitted to select a single benchmark health plan to serve as the standard for qualified health plans inside the Exchange operating in their state and plans offered in the individual and small group markets in their state. The benchmark health plan could be one of the following –
- the largest plan by enrollment in any of the three largest small group insurance products in the State’s small group market;
- any of the largest three State employee health benefit plans by enrollment;
- any of the largest three national FEHBP plan options by enrollment; or
- the largest insured commercial non-Medicaid Health Maintenance Organization (HMO) operating in the state.
If a state does not choose a benchmark health plan, then HHS would choose as the benchmark plan for a state the largest plan by enrollment in the largest product in the state’s small group market.
HHS also recognized that not all benchmark plans may offer the 10 basic categories of services required by law. According to HHS, “in selecting a benchmark plan, a state may need to supplement the benchmark plan to cover each of the 10 categories.” The most commonly non-covered categories of benefits among typical employer plans are habilitative services, pediatric oral services, and pediatric vision services.
According to the HHS guidance, a health insurance issuer under a benchmark plan will have some flexibility to adjust benefits as long as they offer coverage for all 10 statutory EHB categories. “Permitting flexibility would provide greater choice to consumers, promoting plan innovation through coverage and design options, while ensuring that plans providing EHB offer a certain level of benefits,” according to HHS.