HHS to allow states to help select minimum health benefits

The federal proposal would permit state variations in the benefits covered by health insurance exchange plans under the reform law.

By Doug Trapp — Posted Dec. 22, 2011

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States will have a large say in the minimum benefits that many individual and small-group health plans will be required to provide starting in 2014, according to a Dec. 16 proposal by the federal Dept. of Health and Human Services.

HHS proposed allowing states to decide the type of health plan that will serve as a benchmark for local minimum coverage standards. The national health system reform law requires HHS to select the minimum health package -- known as essential health benefits -- that must be offered by health plans in forthcoming health insurance exchanges and many similar health plans outside the exchanges.

HHS would allow states to set essential health benefits benchmark coverage based on one of four possible types of plan offerings: 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.

The HHS proposal is an attempt to balance comprehensiveness, affordability and state flexibility on health insurance coverage, said HHS Secretary Kathleen Sebelius. HHS' intention is to require coverage equal to a typical employer plan in the state.

"The coverage that works in Florida may not work in Nebraska," Sebelius said during a Dec. 16 conference call announcing the proposal.

States would select their benchmark plans even if the federal government operates an exchange in the state. If a state declined to choose a benchmark plan, the default would be the largest small-group plan in the state, said Steve Larsen, director of the HHS Office of Consumer Information and Insurance Oversight.

However, the health reform law still requires individual and small-group health plans to provide, at a minimum, 10 categories of benefits, which include prescription drugs and mental health and substance abuse services. Health plans can change coverage within a benefit category only if they do not reduce the actuarial value of the coverage.

HHS surveys found that virtually all large employers already offer the 10 categories of benefits, said Sherry Glied, PhD, HHS assistant secretary for planning and evaluation.

But some patient and consumer advocates said the HHS proposal is disappointing, because it would allow too much flexibility for states to choose benchmark plans.

Debra L. Ness, president of the National Partnership for Women & Families, said her organization is deeply disappointed that the proposal ignores the health reform law's direction to develop a detailed package that would apply uniformly to health plans across the nation. "If essential benefits are left to the states and based on insurance plans sold on the market today, we will miss the opportunity to ensure consumers get the coverage they need and pay for," she said.

"With today's concerns over high health care costs, the cheapest option certainly will be selected by the state stewards," said Don McCanne, MD, senior health policy fellow for Physicians for a National Health Program, which advocates for a single-payer health system.

The American Academy of Family Physicians expressed concern that the HHS proposal does not adequately emphasize the role of primary care. Patient-centered medical homes make primary care physicians the center of the care team, reduce fragmentation and improve coordination, which helps control health care costs, said AAFP President Glen Stream, MD.

HHS developed its proposal after a series of public meetings and with advice from the Dept. of Labor and the Institute of Medicine. The IOM in October recommended in part that the essential benefits be based on small-group health coverage. The IOM also warned HHS that choosing an unaffordable essential benefits package would cause health insurance exchanges to fail.

Ron Pollack, executive director of the consumer health organization Families USA, said he understands the need to balance comprehensiveness with cost. "However, flexibility must yield to reliable, comprehensive coverage of benefits for consumers -- guaranteed by the [Patient Protection and] Affordable Care Act."

The HHS proposal doesn't address subscriber cost-sharing, such as deductibles, co-payments and coinsurance. HHS will address cost-sharing standards in future bulletins. HHS also intends to re-evaluate and possibly update the essential benefits standards starting in 2016.

The latest proposal would allow states to maintain any existing benefit mandates. However, the health reform law requires states to pay for any benefit costs above the essential health benefit standard.

HHS issued the latest proposed policy in the form of an informal bulletin -- not a formal regulation -- as a preliminary step toward implementing the essential benefits provision. The agency expects to issue an official final regulation after seeking public comments on the proposal, which are due by Jan. 31, 2012. Comments can be emailed to HHS ([email protected]).

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