States will have a wide latitude in determining what constitutes an essential benefits package that insurers who wish to participate in exchanges will need to start offering in 2014. In a move that may make an uncertain situation even more uncertain, the Obama administration on December 16 issued guidance on what states can demand from participating health plans. But such guidance, issued as a bulletin from Health and Human Services Secretary Kathleen Sebelius, does not have the same force as a regulation. It also means that Congress cannot kill it and that HHS need not estimate the economic effects of the proposal.
America’s Health Insurance Plans (AHIP) President and CEO Karen Ignagni points to a report by the Institutes of Medicine that insurers had hoped would steer HHS’s approach. IOM in October told HHS that benefits should be carefully chosen on the basis of evidence and that their scope be limited. Loading up plans with costly benefits, the IOM noted, threatens the very centerpiece of health care reform: the individual mandate. Anyone without employer-sponsored coverage is exempt from the mandate if exchange-based plans’ premiums exceed 8 percent of income. Some of those people will be eligible for the expanded Medicaid program.
“We are carefully reviewing this guidance and agree that it is vital that the final essential health benefits requirement ‘balance comprehensiveness, affordability, and state flexibility,’” says Ignagni. “As the Institute of Medicine (IOM) made clear in its recent report, ‘state mandates are not typically subjected to a rigorous evidence-based review or cost analysis,’ an issue that should be addressed to ensure affordability for individuals, working families and small employers.”
The HHS bulletin says that “states would have the flexibility to select a benchmark plan that reflects the scope of services offered by a ‘typical employer plan.’ This approach would give states the flexibility to select a plan that would best meet the needs of their citizens.”
States could use these benchmarks:
One of the three largest small group plans in the state by enrollment
One of the three largest state employee health plans by enrollment
One of the three largest federal employee health plan options by enrollment
The largest HMO plan offered in the state’s commercial market by enrollment
If states choose not to select a benchmark, HHS intends to propose that the default benchmark will be the small group plan with the largest enrollment in the state.