Arguably one of the most fundamental tasks remaining under PPACA is to define the package of “essential health benefits” that certain health insurance plans will be required to offer beginning in 2014. PPACA requires that private health insurance plans be offered to individuals and small employers through state-created health insurance exchanges in 2014. These plans are required to offer essential health benefits. Although the specific benefit package that will constitute essential health benefits has not yet been determined by HHS, the Institute of Medicine (IOM) recently released its report recommending to HHS a set of methods and criteria to use to define essential health benefits.

The IOM’s report most notably recommends a cost-conscious approach to determining essential health benefits. Cost concerns are addressed repeatedly throughout the report, and the report acknowledges that the IOM’s recommendations started with the premise that the package of benefits must be affordable. Specifically, the report states that the package of benefits should target the premium “small employers would have paid, on average, in 2014.”

Of course, the report also acknowledges that cost must strike a balance with the need for essential health benefits to include a comprehensive set of health products and services. PPACA itself requires that essential health benefits include medical care from ten categories:

  1. Ambulatory patient services;
  2. Emergency services;
  3. Hospitalization;
  4. Maternity and newborn care;
  5. Mental health and substance use disorder services;
  6. Prescription drugs;
  7. Rehabilitative and habilitative services and devices;
  8. Lab services;
  9. Preventive and wellness services and chronic disease management; and
  10. Pediatric services, including oral and vision care.

Mindful of these competing goals, the IOM recommends a three-tiered set of criteria for evaluating employee health benefits:

Criteria to evaluate the aggregate package of benefits offered:

  • Be affordable for consumers, employers and taxpayers.
  • Maximize the number of people with insurance coverage.
  • Protect the most vulnerable by addressing the particular needs of those patients and populations.
  • Encourage better care practices by promoting the right care to the right patient in the right setting at the right time.
  • Advance stewardship of resources by focusing on high-value services and reducing use of low-value services. Value is defined as outcomes relative to cost.
  • Address the medical concerns of greatest impor­tance to enrollees in employee health benefits-related plans, as identified through a public deliberative process.
  • Protect against the greatest financial risks due to catastrophic events or illnesses.

Criteria to evaluate the individual component benefits offered:

  • Be safe—expected benefits should be greater than expected harms.
  • Be medically effective and supported by a sufficient evidence base or, in the absence of evidence on effectiveness, use a credible standard of care.
  • Demonstrate meaningful improvement in outcomes over current effective services/treatments.
  • Be a medical service, not serving primarily a social or educational function.
  • Be cost effective, so that the health gain for individual and population health is sufficient to justify the additional cost to taxpayers and consumers.
  • Caveats:
    • Failure to meet any of the criteria should result in exclusion or significant limits on coverage.
    • Each component still would be subject to the criteria for assembling the aggregate employee health benefits package.
    • Inclusion does not mean that it is appropriate for every person to receive every component.

Criteria to evaluate the methods for defining and updating benefits offered:

  • Be transparent—the rationale for all decisions about benefits, benefit design and changes is made publicly available.
  • Be participatory—current and future enrollees have a role in helping define the priorities for coverage.
  • Be equitable and consistent—enrollees should feel confi­dent that benefits will be developed and administered fairly.
  • Be sensitive to value—to be accountable to taxpayers and plan members, the covered service must provide a meaningful health benefit.
  • Be responsive to new information—employee health benefits will change over time as new scientific information becomes available.
  • Be attentive to stewardship—for judicious use of pooled resources, budgetary constraints are necessary to keep the employee health benefits affordable.
  • Be encouraging to innovation—the employee health benefits should allow for innovation in covered services, service delivery, medical management and new payment models to improve value.
  • Be data driven—an evaluation of the care included in the employee health benefits is based on objective clinical evidence and actuarial reviews.

Ultimately, HHS must define the package of essential health benefits to be offered in 2014 by plans of health insurance exchanges, but the IOM’s recommendations are a significant step in that direction. While the report strongly encourages HHS to construct the package of benefits with cost sustainability in mind, whether this goal can or will be effectively balanced against the need to offer a comprehensive set of health benefits has yet to be determined.