Editor's Note: The Essential Health Benefits (EHB) rule may be among the many parts of the Affordable Care Act (ACA) that are on the chopping block as the Trump Administration and Congress seek to repeal and replace the law. The House's proposed American Health Care Act (AHCA) keeps the ten essential health benefits—though it drops the requirement that Medicaid expansion adults receive a benefits package that covers the EHB. The AHCA also would eliminate the requirement for metal level actuarial values but does not eliminate the ACA's maximum annual limit of enrollee cost sharing, which ensures the minimum actuarial value for a plan would not fall substantially below the bronze level currently defined in the ACA. The Trump Administration has indicated it intends to move forward with additional legislative and regulatory changes to ACA requirements, beyond those proposed in the AHCA.
In a recent post for the Health Affairs Blog, summarized below, Manatt Health looks at the origin of EHB, how EHB changed the pre-ACA status quo and what the future could hold. Click here to read the full post. ____________________________________
EHB defines what healthcare benefits plans in the Marketplaces, as well as certain other plans, must cover—and goes to the heart of what it means to have health insurance. Critics cite essential health benefits as a driver of high health insurance costs, claiming that they are too expansive and too prescriptive. Several Republican governors have supported EHB changes in letters to Congress, calling for greater state flexibility and eliminating the federal EHB requirement, so states could design benefits to meet the needs of their populations.
It is important to understand that the principal changes to private insurance that EHB mandated were to increase availability of coverage for maternity, mental health and substance use disorders, and habilitative care. Therefore, one possible goal of modifying the EHB rule would be to restrict those benefits.
Origins of EHB
To ensure the ACA delivered on its promise of making health insurance accessible and affordable, the law needed to define what health insurance means. To do that, the ACA establishes a standard that involves the scope of benefits (the EHB) and the extent of financial protection against the cost of these benefits. The latter is defined in terms of actuarial value—the minimum percentage of costs that a plan would pay for an average plan member, as grouped in metal levels.
While the actuarial value of plans can vary from metal level to metal level, the EHB are the same across plans. The ACA could have allowed different benefits for different plans, letting consumers choose the package of coverage that best fit their needs. However, that flexibility could create havoc with risk pools, as, for example, men could choose plans that didn't offer maternity care. In addition, a uniform benefits package simplifies the consumer shopping experience.
Finally, EHB was intended to deal with state mandated benefits, which many economists argue are a factor in driving up healthcare costs. Therefore, the ACA requires states to pick up the costs of mandates in Marketplace plans that exceed the scope of benefits in the EHB package.
EHB in Practice
The ACA defines ten broad categories of services as EHB:
- Ambulatory patient services;
- Emergency services;
- Maternity and newborn care;
- Mental health and substance use disorders, 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.
The law tasks the Secretary of Health and Human Services (HHS) with defining these in detail. The Obama Administration initially asked the Institute of Medicine (IOM) of the National Academies, now known as the Health and Medicine Division, to recommend how it should define EHB. The IOM's recommended process would have had HHS start with a budget and fit EHB into that budget. Ignoring this advice, HHS declined to define specific EHB and instead gave each state substantial leeway in defining EHB. The regulations allow states to set EHB in reference to their own private health plans or to the Federal Employee Health Benefit Plan. This approach was attractive to HHS for several reasons:
- It avoided HHS having to make controversial decisions about which benefits to include and exclude.
- HHS argued that most private sector benefit packages were similar, so allowing states flexibility would not create large differences across the country.
- Tying EHB to large private sector health plans could create natural flexibility as plans change or states choose new benchmarks.
- States could select reference plans that already included their state-mandated benefits to avoid paying for state mandates.
Over time, HHS needed to intervene to remedy ambiguities in its EHB rules, in areas such as habilitative services and prescription drugs.
How EHB Changed the Pre-ACA Status Quo
To assess options for the future, it is helpful to have a clear picture of what reformers are seeking to address. It is entirely possible that EHB critics view state control as an end goal and would adopt an EHB standard identical to the current standard, albeit by a different process. But if that were the only goal, it is unlikely that stakeholders would expend political capital.
It seems plausible then that changing the required benefits package is itself a significant goal. It seems a reasonable inference that critics oppose the changes that the EHB package made to the pre-ACA status quo for the individual and small-group markets. If the EHB increased the cost of coverage, it did so because it required benefits that were not typically included in individual and small-group coverage—maternity care, habilitation services, and pediatric oral and vision care. In addition, while some mental health or substance use services were covered in nearly every plan, the depth of coverage varied widely.
Given this view of pre-ACA benefits, the debate on EHB might be framed as a debate about whether individual and small-group coverage should be required to cover maternity care, habilitative services, pediatric dental and vision, and mental health and substance use disorder services, as well as whether this decision should be made at the state or federal level.
Pathways to Reform
In the short term, there are opportunities for the Trump Administration to administratively change EHB. Critically, it cannot eliminate entire categories of EHB without legislation.
One option is for HHS to give states even more flexibility. HHS could allow states to choose from a wider variety of reference plans, to select different reference plans for each of the ten EHB categories and to define their own EHB without reference to any plans at all. Finally, the new Administration could use its waiver authority under section 1332 of the ACA to approve a state alternative to the ACA's EHB rules.
In the longer run, more options present themselves. Legislation could scrap completely the statutory EHB requirements and leave it up to the states or health plans themselves to set their own benefit rules or have none at all. One area where this may be more likely is for the Medicaid expansion population, as has already been proposed in the AHCA. This would be consistent with the Administration's calls for more state flexibility in administering Medicaid.
Whatever course is taken, defining the benefits that are "essential" to good healthcare will remain a critical issue in any national decision on universal healthcare coverage. The debate around the extent of benefits that states or the nation as a whole wish to subsidize is key to watch as the country grapples once more with fundamental changes in healthcare policy.