DHHS Bulletin on Essential Health Benefits

In an unexpected announcement, the US Department of Health and Human Services (DHHS) issued a bulletin on December 16, 2011, allowing states to choose the items and benefits that health plans must offer as part of regulations included in the Patient Protection and Affordable Care Act (ACA). Beginning in 2014, insurers that want to offer plans in the small business and individual marketplaces are required to include certain essential health benefits. States will select an existing health plan as the benchmark that the new plans must follow. DHHS said formal regulations will be announced later, as will information on deductibles, copayments, and coinsurance. Rather than specific items and benefits, DHHS released a list of mandatory general categories that must be part of the new plans: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder, 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. For the benchmark, states can choose among the state’s 3 largest small group plans, the 3 largest state employee plans, the 3 largest federal employee plans, or the state’s largest commercial health maintenance organization. If states refuse to choose a plan, the benchmark will be the state’s largest small group plan. Under the proposal, insurers do not have to offer plans that are the same as the benchmark. They can adjust the specific services covered, but the services offered must be in the same 10 categories as the benchmark plan and must be of the same or higher value. “I think everybody was surprised,” Timothy S. Jost, professor at the Washington and Lee University School of Law in Lexington, Virginia, said in an interview with First Report Managed Care. “I think Congress was probably surprised. They thought [DHHS Secretary Kathleen Sebelius] would put out a list of essential benefits. What [DHHS] did instead was to pass the buck onto the states for the states to decide the essential benefits. There’s just a lot of unanswered questions.” Some groups criticized DHHS for the vagueness of its guidelines and were stunned that states were given the responsibility to choose the essential health benefits, which could lead to variations in health plans across states. “It’s not what we were asking for,” Carl Schmid, deputy executive director of the AIDS Institute, told the Wall Street Journal. “I think it’s very clever what they did, but I think that what patient groups were looking for was a list of mandated services. This is still going to allow a patchwork of care, and that’s what I thought we were going to try to get beyond.” With the 2012 election approaching, some also speculated that the announcement was politically motivated. Republicans have said the ACA will provide the federal government with too much influence on the healthcare industry. By shifting the responsibilities to states, Erik Gordon, a business professor at the University of Michigan, told Bloomberg in an e-mail that “[President Barack] Obama has taken all the grief he can stand over healthcare” and “he doesn’t want to give the Republicans any more political ammunition.” Still, although the proposal gave states the power, Republican Policy Committee analyst Chris Jacobs told the New York Times that states may choose to impose more benefit mandates, leading to higher premiums. Mr. Jacobs wrote on the Republican Policy Committee Web site that despite states having flexibility, “individuals could be paying for that flexibility for a long time to come.” Ms. Sebelius explained the department’s decision on essential health benefits in a USA Today op-ed piece published in early January. She defended giving the states an opportunity to choose the benchmark plan, writing that “essential health benefits will not differ greatly from state to state” and that “instead of having to build a health plan from scratch, this approach will give states the flexibility to use proven employer models that have already been priced and purchased in the state.” Ms. Sebelius claimed 62% of plans in the individual market currently do not offer maternity coverage, 18% do not cover mental health services, and 9% do not cover prescription drugs. With the required categories, Ms. Sebelius wrote that consumers will have access to more comprehensive coverage in 2014. DHHS also plans on evaluating the guidelines in 2016 and making any appropriate adjustments. “Through these efforts, our ultimate goal is to make sure the insurance market works better for consumers,” Ms. Sebelius wrote. “Insurance needs and health systems vary state to state, and experience tells us that the best way forward is not to mandate a one-size-fits-all answer. Instead, our approach gives states the flexibility to take their own paths, while ensuring they all end up in the best place possible: with an Affordable Insurance Exchange that offers access to comprehensive, quality, affordable health insurance to small business owners and individuals who currently have few good choices in an expensive and broken market.” Families USA, a nonprofit consumer health organization, has been a proponent of the ACA and its mandate to offer coverage to millions more people. Ron Pollack, the executive director of Families USA, issued a statement after the essential health benefits announcement in which he praised DHHS but reiterated that benefits should be a priority over costs. “Moving forward, it will be important to ensure that adequate coverage is provided across all 10 required benefit categories—marking an improvement over many plans offered today,” Mr. Pollack wrote. “We understand the inclination to balance flexibility, comprehensiveness of coverage, and cost in developing the Essential Benefits standard. However, any flexibility must yield to reliable, comprehensive coverage of benefits for consumers—guaranteed by the Affordable Care Act.” Before issuing the guidelines, DHHS requested input from several parties, including the Department of Labor and the Institute of Medicine (IOM), an independent, nonprofit organization. The IOM convened a group of 18 industry leaders with experience in healthcare delivery, clinical services, benefit design, public and private insurance, law, ethics, and research. The committee members were not paid for their work and spent 9 months discussing issues in person and on the telephone, according to Judith Salerno, MD, the IOM’s executive officer. Dr. Salerno, who was not on the committee, and several committee members discussed the IOM’s recommendations during a public briefing and Webcast in October. John Ball, MD, the committee’s chairman and former executive vice president of the American Society of Clinical Pathology, said DHHS did not ask for a list of services or categories, but instead asked the committee to formulate policy foundations, criteria, and methods to define the essential health benefits. The committee concluded the most important aspect of essential health benefits was considering both the comprehensiveness of insurance coverage and its affordability. By 2016, the essential health benefits will affect an estimated 68 million people, according to Dr. Ball. “Appropriate balance will reduce the number of uninsured and ensure the sustainability of the program over the long term,” Dr. Ball said. Christopher F. Koller, a committee member and Rhode Island’s health insurance commissioner, said that in his dealings with consumers and purchasers of health insurance, they indicate the rules currently in place are “unfair and inconsistent” in terms of the price of insurance as well as consumers’ access to benefits. He added that any rules must take costs and benefits into consideration and must be adaptable to different states. “It is extremely hard to prescribe a set of benefits from a federal vantage point that will fit every particular environment,” Mr. Koller said. “The benefits that are going to be needed in Wyoming may be considerably different from what’s needed in Rhode Island.”