How To Ensure That Essential Health Benefits Are Sustainable Over The Long-Term

Our guest blogger is Topher Spiro, the Managing Director of Health Policy at the Center for American Progress.

The Affordable Care Act includes a requirement that new health insurance plans offered to individuals and small businesses cover “essential health benefits.” The law requires coverage of benefits within 10 broad categories, including maternity and newborn care, mental health benefits, and prescription drugs. Today, many of these benefits are not typically offered by individual health care plans and employer coverage may eschew wellness services and pediatric oral and vision care. The 10 categories, therefore, go a long way to ensure that insurance provides access to needed care. But otherwise, the law tasks the Secretary of Health and Human Services to define the essential health benefits (the “EHB”). On December 16, 2011, the Secretary did just that. The Department of Health and Human Services released an “Essential Health Benefits Bulletin” — its proposed framework for defining the EHB. Under that approach, states can choose a benchmark plan from among the largest small employer plans, Federal Employees Health Benefits Plans, or state employee plans, or the largest HMO plan offered in a state. In evaluating this proposed approach, it’s important to remember the purposes of the EHB. First, the EHB should ensure that coverage provides access to essential health care. Second, the EHB should minimize abuse in which insurers design benefits to attract healthier individuals and deter less healthy individuals. And third, the EHB should provide some degree of standardization to make it easier for consumers and small businesses to make apples-to-apples plan comparisons. On this last point, the Congressional Budget Office concluded that standardization is a key element in enhancing competition and lowering premiums. HHS’s proposed approach has the potential to meet these objectives in the short term, but would require substantial review and oversight — which could in turn require some modification. Based upon further review and analysis, HHS may need to reduce the number of potential benchmark plans. Research indicates that the potential benchmark plans cover substantially similar benefits. But insurers might impose a dollar limit, frequency/visit limit, and/or other nonmonetary limits (prior authorization) on a specific benefit. Insurers could use such limits as loopholes that undermine the ACA’s prohibitions on lifetime and annual limits and the EHB itself. Substantial review and oversight is therefore needed to ensure that no benchmark plans — in particular, small employer plans — impose limits that are inconsistent with medical practice or that undermine the ACA’s important consumer protections. Also, allowing insurers to substitute benefits or limits could undermine the purposes of the EHB. Insurers could use this flexibility to design benefits that attract healthier individuals and deter less healthy individuals — in other words, to “cherry pick” enrollees. Moreover, too much flexibility could exponentially increase the number of plan designs offered through the exchange — making it more difficult for consumers and small businesses to compare and enroll in plans. All in all, given practical realities, a state-based approach is sensible for the short term and will help ensure a smooth implementation in 2014. Over the long term, however, a state-based approach would not be sustainable, and HHS should adopt a national benchmark as soon as possible. That benchmark should guide both the scope of covered services as well as limits on those services. It should also ensure that the package is equivalent in value to the benefits that members of Congress receive. Such a benchmark would be clear, consistent, and ensure a degree of comprehensiveness that is widely acceptable. You can read CAP’s full comment letter here.