Federal Government Offers States Greater Flexibility In Designing Essential Benefits

Despite the GOP’s characterization of the Affordable Care Act as a one-size-fits-all federal mandate, the actual provisions of the law and the regulations promulgated by federal agencies reveal a state-based reform that allows governors and state legislators significant leeway and input in its implementation. For instance, today, the federal government issued guidance about oh the law’s essential health benefits: the standard benefits insurers will have to offer beginning in 2014.

Regulators have long sought to balance affordability with comprehensiveness and in today’s “pre-rule bulletin,” the federal government has chosen to leave that task up to the states. Instead of establishing a single national standard, “states will be able to design benchmark plans based on one of four choices: The benefits offered in one of the three largest federal employee plans (by enrollment), one of the three largest plans offered to their state employees, one of the three largest small-business plans in the state or the plan offered by the largest HMO in the state,” Kaiser Health News explains:

Those benefits, which must be offered by insurers in most policies sold to individuals and small businesses, are one of the key flash points in the federal health law. Patient advocates have called for a broad national standard covering a wide range of treatments, while business groups say affordability must be a top consideration, even if it means a more limited package.

Because state employee plans and policies sold in the states can vary widely, the move means there will likely not be one national standard benefit package, but rather “benchmark” plans in each state. That gives states the flexibility they had called for, but also means coverage will vary.


Indeed, the package will vary depending on the coverage levels in each state, though the differences may not be too great. The law requires that all insurers offer at least 10 general categories of services like hospitalization, maternity care, mental health and substance abuse treatment, and prescription drugs, and states will, as HHS Secretary Kathleen Sebelius put it, “tailor their package to the needs of their own residents.”