In a report by the Institute of Medicine (IOM) to the U.S. Department of Health and Human Services (HHS), the IOM recommends that in developing the essential health benefits (EHB) that certain insurance plans must offer under the Affordable Care Act, HHS should ensure that such benefits are affordable to consumers, employers, and taxpayers, and that the health gain provided by the benefit is sufficient to justify the additional cost. In addition, the IOM recommends that the initial EHB package be equivalent in scope and design to that provided under a typical small employer plan in today’s market.
The new health care law requires that insurance plans offered in health insurance exchanges and in the individual and small group markets cover a package of services and products deemed “essential” by the HHS beginning in 2014. The definition of “essential health benefits” is also relevant to the prohibitions on lifetime and annual limits on such benefits that do apply to large group plans. The statute does not specify the benefits that are to be considered essential, but rather sets forth a number of general categories of health services that must be covered and states that the benefits must be akin to typical employer-provided coverage. HHS solicited the IOM’s help in developing a process and set of criteria to determine the health care benefits to be included in the EHB list and how to update it. The IOM is an independent, nonprofit organization that provides health-related advice to government decision makers and the general public.
Notably, the IOM’s report stresses the importance of overall affordability and the cost-effectiveness of providing each benefit. As stated in a press release, the IOM recommends that the HHS
gauge potential services and products against a set of criteria, including medical effectiveness, safety, and relative value compared with alternative options, and evaluate whether the package as a whole protects the most vulnerable individuals, promotes services that have proved effective, and addresses the medical concerns of greatest importance to the public . . . Benefits that have been mandated for insurance coverage by individual states should be subject to the same review and criteria. Products and services that do not meet the criteria should not be included.
In addition, the report suggests that customary health care packages offered by small employers – which generally are less generous than those offered by larger employers – should be considered the standard in defining what is a “typical employer plan.” Looking at small employer plans is recommended because these employers “will be among the main customers for policies in the state-based exchanges.”
Other recommendations contained in the IOM report include the following:
- When updating the EHB package, the HHS should consider “both the cost of the current package and medical inflation.” Therefore, after an initial EHB list has been established, the HHS should adjust this package “so that the expected national average premium for a silver plan with the EHB package is actuarially equivalent to the average premium that would have been paid by small employers in 2014 for a comparable population with a typical benefit design.”
- With respect to HHS guidance on EHB inclusions and exclusions, the report recommends that such guidance on the contents of the EHB package should list standard benefit inclusions and exclusions at a level of specificity at least comparable to current best practice in the private and public insurance market.
- States should be given flexibility to establish alternatives to the federal EHB package so long as the alternatives are consistent with the Affordable Care Act requirements and the criteria specified in the IOM report and do not vary significantly from the federal package.
- The HHS should work with the private sector to find ways to control the rates of growth in health care spending across public and private sectors in line with the rate of growth of the economy.
More information on the IOM’s report can be found here.