The Affordable Care Act calls for the creation of health insurance exchanges in every state to provide a one-stop shop for individuals and small businesses to compare and purchase coverage. All plans operating in the exchange must offer a minimum set of health benefits and services, known as the "essential health benefits" package. Nongrandfathered plans in the individual and small group markets that are sold outside the exchanges must also offer the essential health benefits package.
Plans must include services in 10 benefit categories: ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services (including behavioral health treatment), prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive/wellness services and chronic disease management, and pediatric services (including oral and vision care). The ACA gives the HHS secretary the authority to decide on the set of services that will be covered in each of the 10 categories.
Edward F. Howard
Last December, the Department of Health and Human Services issued a bulletin giving states significant authority in setting those benefits. Rather than issue a national set of essential benefits, the HHS instead instructed states to select a benchmark plan that covers all of the categories. States must choose as a benchmark plan one of the three largest small-group plans in the state, one of the three largest state-employee health plans, one of the three largest federal-employee health plan options, or the largest HMO plan offered in the state’s commercial market.
Edward F. Howard, executive vice president of the Alliance for Health Reform, explains how the benefits package may vary from state to state.
Question: How much discretion do the states have in setting benefits?
Mr. Howard: The precise answer is unknown because the HHS rule-making process is still ongoing. The states have a lot of discretion in some ways. They have to cover benefits in each of the 10 categories and they have to do it in a way that doesn’t discriminate. What they have the discretion to do is to choose from among what are in effect 10 different benchmark plans. Those plans are going to vary widely and the states can make the choice of one plan or another based on what would suit their purposes best. I don’t think there are very many people saying that the states are not going to have enough discretion; even the states don’t seem to be saying that. There are a number of consumer groups and disease groups, who believe there ought to be a national standard instead; a handful of congressional Democrats agree with them and have been making some noise on that front. But this move by the HHS was pretty clearly a way to simplify the process of getting the exchanges up and running by allowing states to avoid making changes to their existing laws on mandated health benefits in the small-group market.
Question: How much state variation are we likely to see?
Mr. Howard: A lot. It reflects the fact that some states have legislated lots and lots of health benefits in the small-group market. But one of the things that the HHS Bulletin points out is that the overwhelming number of state-mandated benefits – and that number is up in the hundreds – are for items and services that are pretty common and almost universal among the states. So, in general, the variation among the mandated benefits wouldn’t produce a benchmark plan that would significantly distort the market from place to place.
Question: Does this benchmark plan approach potentially keep down costs?
Mr. Howard: Most of the real insurance experts would tell you that it won’t hold down costs. In fact, it’s likely to increase them over a national benefits standard. Analysts who have followed this issue very closely expect states to gravitate toward choosing one of the popular plans in the small-group market in that state. By definition, what that means is that the benchmark plan is going to include the state\'s mandated health benefits. If it did not and the state chose, for example, to go with the federal employees’ plan that was most used in that state, it might not have some of the state-mandated benefits. That would mean that individuals who received subsidies to purchase insurance in the exchange would have to get part of that subsidy financed by the state. So states are going to be very much inclined to go for the somewhat richer package that is included in one of their small-group plans so that they don’t have to pay for their own mandated health benefits. For at least a couple of years that benefit package is likely to be richer than it might have been had the HHS issued a national standard.