In addition to the work that states are doing (or purposefully not doing) to implement State Health Insurance Exchanges for operation in 2014, states have also been given the task of choosing a benchmark plan for purposes of defining the essential health benefits (“EHB”), a minimum package of benefits that must be offered by all insurance policies sold in the small group and individual markets beginning in 2014.
Section 1302(b) of the Affordable Care Act directs the Secretary of Health and Human Services (the “Secretary”) to define the EHB. The scope of the EHB must equal the scope of benefits provided under a typical employer plan. Further, 10 broad categories of services must be covered in the EHB package.
Rather than setting a national standard for the EHB, in December 2011, the Centers for Medicare & Medicaid Services (“CMS”) issued a bulletin providing guidance to the states on CMS’s proposed regulatory approach for defining the EHB. Specifically, CMS is largely leaving the decision to the states to choose from one of 10 benchmark plans in the following four categories:
- The largest plan by enrollment in any of the three largest small group insurance products in the State’s small group market;
- Any of the largest three State employee health plans by enrollment;
- Any of the largest three federal employee health plans by enrollment; and
- The largest insured commercial non-Medicaid HMO operating in the state.
Many states have been actively assessing these benchmark options, given that the definition of what is included in the EHB will have a broad reaching impact in each state. In addition to the non-grandfathered plans in the individual and small group markets both inside and outside of the State Health Insurance Exchange, the EHB package also must be offered by Medicaid benchmark and benchmark-equivalent plans for newly-eligible Medicaid recipients, and Basic Health Programs (which are offered by states to people who are ineligible for Medicaid and who have incomes at or below 200 percent of poverty as an alternative to receiving premium credits to purchase coverage through an exchange). Self-insured group health plans, health insurance coverage offered in the large group market, and grandfathered health plans are not required to cover the EHB.
States were encouraged to select a benchmark plan by the end of the third quarter of 2012. As of October 10, 2012, 24 states and the District of Columbia have made their selections, 12 states have issued letters to the Secretary stating that they are awaiting further federal guidance before making a decision, and the remaining 14 states are at various stages across the decision-making spectrum (from having done the analysis and will likely make a decision imminently to having done no discernible work towards making a decision at all). If a state does not select a benchmark plan, the largest small group plan by enrollment in the state will become the default benchmark plan.
Of the 17 states (including DC) that chose small group plans as their benchmark, at least 10 of those states chose the largest small group plan by enrollment (the federal default benchmark). Three states have chosen a state employee health plan and four states have chosen the largest commercial non-Medicaid HMO plan. One state, Nebraska, has chosen a high deductible health savings plan, which the Governor characterizes as “the Nebraska Essential Health Benefits Plan” that provides “the absolute minimal coverage”. At this time, no states have opted for a federal employee health plan. This is likely because states are required to defray the costs of state-mandated benefits that are in excess of the EHB, if they are not already included in the benchmark plan selected by the state. Since most small group plans are required to comply with state mandates to cover certain benefits (examples include coverage of certain immunizations, contraception, and treatment for autism), but federal employee health plans are not, it makes sense that states would choose state plans over federal plans to reduce their financial burden. However, allowing states to avoid paying for state-mandated benefits by choosing a benchmark plan that already includes them is intended to be a “two-year transitional policy” and will be revisited by CMS in 2016.
Despite good forward progress on selecting EHB benchmark plans, there are many questions that remain. For example:
- When will CMS issue regulations providing states with the guidance they have requested?
- Will CMS accept the benchmark plans that states have proposed, or will they make changes to them? In what ways will individual insurers change particular benefits offered in the EHB benchmark plan but still remain “substantially equal” to the benchmark?
- How will supplemental coverage for categories of services not included in the benchmark plan (such as habilitative services, mental health and substance abuse services, and pediatric oral and vision care) be integrated and priced by insurers?
- How will dental benefit plans, which may be offered as a standalone benefit, be incorporated into an individual’s overall coverage?
- After the first two years, will states have more flexibility to offer innovative plan designs to cover the EHB, instead of relying on the plan designs currently in place?