Government sets “essential health benefits”

This year, the federal government issued final regulations to set “essential health benefits” for individual and small group health plans operating under the Patient Protection and Affordable Care Act.

Revisions to employer-sponsored health plans

The regulations take effect January 1, 2014, and individual and small group health plans must provide the specified benefits after that date. Revised regulations for large groups and employer-sponsored health plans will be issued later and are likely to be similar in the nature of services that are covered.

Under the regulations, the federal government sets broad standards for what must be covered and then leaves it to each state to work out the details. The federal government lists 10 categories of services that must be covered. The list includes traditional areas of health insurance coverage, such as hospitalization, emergency services, ambulatory care and prescription drugs.

Expanded health benefits in some areas

What is comparatively new—and often not covered by current health plans—is pediatric oral and vision care. In addition, there will be increased coverage for mental health services under the Affordable Care Act.

The Obama administration estimates that 32 million people will receive mental health coverage that did not have it before, and that the scope of coverage for many who already have mental health coverage will improve. (For the list of the 10 categories of services, see the sidebar on page 23.)

If a state wishes to require that insurance provided in the state cover benefits beyond those required by the federal government, the state is free to do so, but the state will need to absorb the added costs, such as the cost of providing extra insurance for Medicaid patients.

The regulations direct states to select a “base-benchmark plan” that will define specific benefits that will be covered under each of the 10 categories.

The benchmark plan can be selected from several options, including one of the three largest small group insurance products offered in the state, the state employee health plan, or one of the three largest federal employee health plans. For most states, the benchmark will be a plan offered by BlueCross BlueShield; for California it will be the Kaiser Foundation Health Plan; and for New York it will be Oxford Health Insurance.

If a benchmark plan selected by a state does not provide benefits in one or more of the 10 categories, then the state must select another plan to define the benefits in the missing category.

Health coverage may vary among states

The deference given to states in selecting benchmark plans means that package of specific health benefits will vary from state to state. Regarding drug benefits, for example, the formulary of a benchmark plan chosen in one state may list 500 drugs while the formulary of a benchmark plan in another state may offer 1,000 drugs.

Under the federal regulations, however, “A health plan providing essential health benefits must have procedures in place that allow an enrollee to request and gain access to clinically appropriate drugs not covered by the health plan.”

The federal regulations also affirm the principle under the Affordable Care Act that health plans may not discriminate against individuals on the basis of health condition, age or quality of life.

The regulations track the Affordable Care Act regarding giving consumers a choice of levels of coverage, which will affect the premium the consumers will pay. The different amounts of coverage are described as “metal levels.” A bronze level plan will cover 60 percent of a patient’s expenses; a silver plan, 70 percent; a gold plan, 80 percent; and a platinum plan, 90 percent.

Regardless of which metal plan a consumer chooses, there are limits to the annual deductible that can be imposed on people obtaining coverage through the small group market. For an individual, the maximum deductible is $2,000. For coverage of two or more people, the limit is $4,000. After 2014, the deductible limits may increase with inflation.

In addition, if a patient is in a network plan and chooses to receive care out of network, the added cost of receiving out-of-network care is borne by the patient and is not part of the annual limit.

Pros and cons of expanded coverage

The “essential benefit plan” is designed to accomplish at least two goals—to provide a base level of coverage for people obtaining coverage through the individual and small group markets (subject to variation between states), and to give consumers a better opportunity to compare insurance plans.

By requiring insurance companies to standardize their products regarding scope of coverage and the levels of deductibles, consumers will better be able to compare the value of products that are offered.

Under the new regulations, the cost of insurance is likely to go up, particularly for healthy young adults. More people will be covered by insurance, but the costs for some will be more difficult to bear.