The U.S. Department of Health and Human Services (HHS) Essential Health Benefits Final Rule and actuarial value regulations offer few surprises and much needed certainty to enable group health plans and health insurance issuers to move forward with designing their essential health benefits packages for the 2014 benefit year.

On February 20, 2013, the U.S. Department of Health and Human Services (HHS) released the much anticipated Essential Health Benefits final rule (EHB Final Rule).  This rule addresses standards relating to the coverage of essential health benefits (EHB), as well as the determination of the actuarial value of plan benefit packages, for non-grandfathered group health plans and health insurance coverage in the individual and small group markets. 

HHS remains consistent with its previously articulated positions on these topics, including prior bulletins and the November 26, 2012, proposed rule, despite receiving more than 15,000 public comments on the issues.  Appendix A to the EHB Final Rule lists the EHB benchmark plans for the 50 states, the District of Columbia and U.S. territories.

The following are a select group of key issues addressed in the EHB Final Rule.

  • Prescription Drug Coverage: HHS finalized its proposal requiring coverage of “at least the greater of” one drug in every United States Pharmacopeia (USP) category and class or the same number of prescription drugs in each category and class as the EHB-benchmark plan, including its interpretation that drugs would count toward these requirements if chemically distinct (two dosage forms or strengths of the same drug would not meet this requirement).   
  • EHB Substitution: HHS maintains its position that an issuer may substitute actuarially equivalent benefits within any given category of EHB, but not between EHB categories, although states may adopt more stringent standards further limiting or prohibiting benefit substitutions.
  • Utilization of Medical Management Techniques: HHS promulgates new regulatory language to clarify that the prohibition on discrimination (an issuer’s benefit design or implementation thereof may not discriminate based on an individual’s age, expected length of life, present or predicted disability, degree of medical dependency, quality of life or other health conditions) shall not be construed to prevent an issuer from using “reasonable medical management techniques” to control costs. 

    Additionally, the agency removed proposed language in the Qualified Health Plan (QHP) cost-sharing regulation, 45 C.F.R. § 156.130, that had stated that the structure of cost-sharing under the plan must conform to the nondiscrimination requirements.  This deletion was in response to comments expressing concern about the ability of issuers to control costs through use of reasonable medical management.

  • Section 2707 Cost-Sharing: HHS offers further clarification—although still no regulatory language—on its interpretation of the cost-sharing limitations imposed on group health plans under new Section 2707(b) of the Public Health Service Act.  Section 2707(b) states that a group health plan’s cost-sharing requirements may not exceed the limitations that are a part of the essential health benefits package under Section 1302(c) of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the Affordable Care Act).  Section 1302(c)(1) sets out a limitation on annual cost-sharing, and subsection (c)(2) imposes an annual limitation on deductibles for health insurance coverage in the small group market. 

    In the preamble to the EHB Final Rule, HHS offers two alternative interpretations of Section 2707(b), both of which “give strong textual support” for the agency’s interpretation that Section 2707(b) is subject to the same limitations set forth in Section  1302(c)(2).  The limitation on the scope of Section 1302(c), which applies the annual deductible limits only to health insurance coverage in the small group market, also applies to Section 2707(b); accordingly, this annual deductible limitation does not apply to group health plans that are self-insured group health plans or group health plans purchasing health insurance coverage in the large group market.  (The annual limitation on cost-sharing set out in Section 1301(c)(1) would apply to all non-grandfathered group health plans, including self-insured plans and group health plans purchasing coverage in the large group market.)

  • Employer Contributions to HSAs and HRAs: Section 1302(d)(2)(B) of the Affordable Care Act directed promulgation of regulations addressing which employer contributions to a health savings account (HSA) (within the meaning of Internal Revenue Code Section 223) and to a health reimbursement arrangement (HRA) may be taken into account in determining the level of coverage for a plan of the employer under the actuarial value calculation.  The EHB Final Rule, in 45 C.F.R. § 156.135(c), provides that plans, other than those in the individual market, that at the time of purchase are offered in conjunction with an HSA or with an integrated HRA (that may be used only for cost-sharing), may take into account the annual employer contribution to the HSA and amounts newly made available under the HRA for the current year, when calculating the actuarial value of the health plan.

HHS anticipates issuing future guidance on several topics—including an enforcement safe harbor for health insurance coverage in the large group market and self-funded group health plans regarding the Section 2707(b) cost-sharing issues—to address operational and timing concerns regarding annual limits on cost sharing, to address the Exchanges’ responsibility to monitor and oversee QHP quality (other than accreditation), and to address how the accreditation requirements will be operationalized as part of the QHP certification process in the federally facilitated Exchanges.