December 19, 2011 — The Obama administration in a bulletin released on Friday said it would allow states to determine what "essential benefits" health plans will be required to cover in the state insurance exchanges under the federal health reform law (PL 111-148), the New York Times reports (Pear, New York Times, 12/16).
The essential benefits are the minimum coverage health plans will have to offer in selling policies through the state-based health insurance exchanges, which will launch in 2014. The health reform law outlines 10 broad categories of coverage -- such as hospitalization, maternity care, prescription drugs and pediatrics -- that should be included, but it directs HHS to specify what services should be covered. The law also sets caps on out-of-pocket costs -- $6,000 per year for an individual or $12,000 for a family -- and requires that the essential benefits package be equal to the benefits provided in a typical employer-sponsored health plans (Women's Health Policy Report, 10/7).
Although many expected HHS to provide greater detail of particular services and benefits that would be required in each category, HHS Secretary Kathleen Sebelius said the federal government would give states "the flexibility to design coverage options that meet their unique needs."
In the bulletin, HHS said states could choose one of four categories of health insurance plans as a benchmark: one of the state's three largest small-group plans; one of the state's three largest health plans for state employees; one of the three largest health plans offered under the Federal Employees Health Benefits Plan; or the largest HMO operating in the state's commercial market.
The benefits provided by that plan would be designated as essential benefits and all other insurers in the exchange would be required to provide benefits of equal or greater value. Plans could modify coverage within specific benefit categories provided they do not reduce the overall coverage value (New York Times, 12/16). If a state does not want to select benefits, the default will be the benefits available through the largest small business plan in the state (AP/Washington Post, 12/16).
HHS will accept comments on the proposal until Jan. 31 (Krauskopf, Reuters, 12/16).
While the bulletin is non-binding, it is likely an indication of the regulations the federal government will release in the future (Radnofsky, Wall Street Journal, 12/17). HHS did not specify when the final rule on the benefits would be released (Sanger-Katz, National Journal, 12/18).
The move to give states more flexibility to determine essential benefits was widely seen as an attempt by the Obama administration to defuse Republican criticism that the health reform law gives the federal government too much control over the health care system, the Journal reports.
Some Republicans and employer groups said the approach could allow some states to mandate generous benefits packages, noting that the federal employees' benefits plan is considered one of the country's most comprehensive plans. The approach also could lead to wide disparities between states (Wall Street Journal, 12/17).
Consumer groups have been pushing the administration for specific essential benefits requirements. Judy Waxman, vice president of the National Women's Law Center, said her initial reaction is "very mixed," adding, "The disappointing part is that we still had hoped there would be some federal standard on what is medical necessity and how you determine actuarial value" (Millman, Politico, 12/18).
Some disease advocacy groups had hoped health officials would spell out exactly what benefits would be covered. Carl Schmid, deputy executive director of the AIDS Institute, said the approach "is still going to allow a patchwork of care and that's what I thought we were going to try to get beyond" (Wall Street Journal, 12/17).