January 31, 201 is the deadline for employers, insurers, and others with concerns about the proposal of the Department of Health and Human Services (HHS) to delegate authority to individual states to decide the definition of essential benefits for purposes of the state exchange and other requirements of the Patient Protection and Affordable Care Act (Affordable Care Act) on a state-by-state.
As part of its sweeping health care reforms, the Affordable Care Act requires that health insurance plans offered in the individual and small group markets, both inside and outside of the Affordable Insurance Exchanges (Exchanges), offer a comprehensive package of items and services, known as “essential health benefits.” The definition of “essential health benefits” also has significant implications on employers. Under the Affordable Care Act, employers that fail to provide health coverage through an insured or self-insured group health plan that provides the required package of essential health benefits will be required to make payments to help subsidize the cost for their employees to purchase qualifying health care coverage through one of the health care exchanges established pursuant to the Affordable Care Act.
HHS announced its proposal for state determination of the meaning of essential benefits in an Essential Health Benefits Bulletinc (Bulletin) published December 16, 2011. The Bulletin only addresses the services and items covered as “essential benefits” by a health plan, not the cost sharing, such as deductibles, copayments, and coinsurance. HHS says it will address the cost-sharing features in future bulletins and cost-sharing rules will determine the actuarial value of the plan.
While HHS touts its proposal for allowing flexibility to the states, many employers, insurers, union and employer-sponsored health plans and others are concerned. Organizations and individuals concerned about the proposal or its implications should act quickly to prepare and submit comments reflecting their concerns by the January 31, 2012 comment deadline.
HHS Proposal Allows State-By-State Essential Benefit Definition
As proposed in the Bulletin, HHS would give states the flexibility to decide the items and services included in the essential health benefits package required within their states in accordance with the guidance outlined in the Bulletin.
Within the limits established by HHS, states would decide the package of benefits required to be offered as “essential benefits” within their state by selecting a benchmark plan for to set the essential benefit definition for their states. In choosing the benchmark plan that will decide the required essential benefits for their state, states would be required to choose from one of four allowable health insurance plan options set by HHS:
- 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; or
- The largest HMO plan offered in the state’s commercial market.
The benefits and services included in the health insurance plan selected by the state would be the essential health benefits package.
When picking a benchmark plan, HHS intends to continue to require that the states make sure their essential health benefits package at least covers items and services in at least ten categories of care specifically listed as in the Affordable Care Act as included in the definition of essential benefits. These categories are:
Essential health benefits must include items and services within at least the following 10 categories:
- Ambulatory patient services
- Emergency services
- Hospitalization
- Maternity and newborn care
- Mental health and substance use disorder services, including behavioral health treatment
- Prescription drugs
- Rehabilitative and habilitative services and devices
- Laboratory services
- Preventive and wellness services and chronic disease management, and
- Pediatric services, including oral and vision care.
Consequently, if a state selects a plan that does not cover all ten categories of care, HHS intends to require the state to examine other benchmark insurance plans, including the Federal Employee Health Benefits Plan, to determine the type of benefits that will be included in the essential health benefits package.
Proposal Prompts Many Questions & Concerns
HHS says that its proposed approach to allowing states to decide the definition of essential benefits “would give states the flexibility to select a plan that would be equal in scope to the services covered by a typical employer plan in their state” while allowing states and insurers to keep the flexibility to evolve the benefits package with the market as innovative plan designs emerge. However the proposal is drawing criticism from many.
When Congress enacted the Affordable Care Act, supporters touted it as ensuring that all Americans would have access to a uniform set of core benefits that the Act refers to as “essential benefits” while promoting efficiency by providing a uniform set of mandate benefits to be provided by all group health plans, health insurers and health insurance exchanges.
The proposal has raised many questions among employers and unions that sponsor self-insured group heath plans for employees and those involved in their design and administration. Since 1974, the preemptive provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA) generally have exempted single employer self-insured group health plans and their insurers from the administrative and cost burdens of complying with state insurance laws and regulations.
Among other things, critics complain that the proposal to forgo a uniform national definition will:
- Drive up costs by requiring states to use as a benchmark plan programs that are much richer and most costly than the insured or self-insured benefit plans offered by most employers;
- Undermine cost savings that would have resulted from the use of a uniform national definition of essential benefits;
- Subject insurers, health plans, and employers and unions to conflicting regulatory obligations, create disparities;
Proposal Prompts Many Questions & Concerns
Organizations and individuals concerned about the proposal in the Bulletin will need to move quickly to share their concerns with HHS. Comments are due by January 31, 2012. Parties wishing to comment can send their comments to:EssentialHealthBenefits@cms.hhs.gov.
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