HHS published final regulations defining essential health benefits (EHB) earlier this year. The final regulations are little changed from the proposed regulations issued in 2012, mainly for clarification. EHB must be available from State exchanges and small group and individual insurance products effective January 1, 2014.

Even though self-funded and large group insured plans are not required to provide EHB, the definition of EHB may affect their plan design. While the employer “play or pay” shared responsibility penalty has been delayed until to 2015, as noted in our prior post, the plan design requirements have not been extended, so the following information applies to self-funded and large group insured employer plan design in 2014. Separate penalties apply to violations of these rules beginning in 2014. 

The definition of EHB affects self-funded and large group insured plans as follows:

  • A self-funded or large group insured employer plan cannot impose annual or lifetime dollar limits on EHB. but, it can impose dollar limits on other benefits and it can also apply non-dollar limits on EHB. These plans must use an authorized definition of EHB to determine which benefits they provide can be made subject to annual or lifetime dollar limits.
  • A self-funded or large group insured employer plan must satisfy the out-of-pocket cost-sharing limitations with respect to the EHB they provide. . These plans must use an authorized definition of EHB to identify which benefits they provide are subject to the out-of-pocket maximums.

According to the preamble to the regulations, confirmed informally by HHS staff, a self-funded employer plan can use any benchmark plan authorized in the regulations to define EHB for these purposes, without regard to any distinctions in the regulations as to products that operate in only one State or more than one State. In addition, the preamble to the regulations states that the enforcement agencies intend to work with plans that make a good faith effort to apply an authorized definition of EHB. Based on an informal conversation with HHS staff, it appears that individually designed definitions of EHB will not be considered for approval by HHS.

These are the available choices under the final regulations:

  • The largest health plan by enrollment in any of the three largest small group insurance products by enrollment in a single State’s small group market.
  • Any of the largest three employee health benefit plan options by enrollment offered and generally available to State employees in a single State.
  • Any of the largest three national Federal Employee Health Benefits Program plan options by aggregate enrollment offered to all federal employees eligible for health benefits, regardless of the employees’ location in all States.
  • The commercial non-Medicaid HMO plan with the largest enrollment operating in a single State.
  • The EHB benchmark plan in each State in which the plan operates, complying with any State standards relating to substitution of benchmark benefits or standard benefit designs.

Your plan’s independent advisers may be able to help you choose the most suitable benchmark for your plan.