Small-group plans driving insurance exchange benchmarks

Pediatricians in particular remain concerned that minimum benefits levels for private plans on the exchanges won’t cover children’s services adequately.

By — Posted Oct. 15, 2012

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Uncertainty continues to surround the essential health benefits provision of the Affordable Care Act, which will determine the minimum level of care that health plans must cover in upcoming health insurance exchanges. Roughly half of the states have yet to select a plan option to serve as the benchmark for these benefits. Among those states that have chosen their benchmarks, however, small-group plans are emerging as a popular, cost-effective option.

Starting in 2014, qualified plans on state health insurance exchanges, and some plans outside of the exchanges, must offer essential health benefits packages covering 10 broad categories of services. States had until Oct. 1 to submit benchmark plans to the Dept. of Health and Human Services, but HHS officials assured states that this wasn’t a hard deadline and that the department would work with any state whose plan decision came in after this date. States drew from guidance HHS issued in 2011 to make their decisions.

In reviewing some of the most popular health plans operating in their jurisdictions, each state had the option of selecting a benchmark plan from one of four plan types: small-group, federal employee, state employee or commercial HMO. Most appear to be choosing the small-group option, according to initial estimates.

At this article’s deadline,, which tracks health reform implementation, reported that 23 states and the District of Columbia had made recommendations on what their benchmark plans should be, with 16 choosing small-group options.

The Institute of Medicine’s recommendation that HHS look to the small-group market for guidance on what benefits an exchange plan should offer is partly why Connecticut ended up choosing ConnectiCare, a popular small-group HMO plan, said Kevin Counihan. He’s the chief executive officer of the state’s health insurance exchange.

IOM had been concerned about the impact of the ACA’s minimum benefits requirement on small businesses that offer coverage to their workers through the exchanges. If the benchmark plan had been too generous with its coverage, it would freeze out these businesses and make it difficult for them to retain employer-sponsored insurance, Counihan said. “I think there was pretty strong, inherent logic on why they picked small-group.” In setting guidance for essential benefits, HHS said the largest small-group plan in the state would become the default benchmark if that state declined to choose one.

It makes sense that states are choosing these types of plans on their own, said Matthew Katz, executive vice president and CEO of the Connecticut State Medical Society. “When you develop an exchange that allows small businesses and individuals to buy insurance, you want to have something that’s familiar” and in line with what the market already is offering, he said.

The Connecticut medical society does not take an official position on the plan option the state selected. ConnectiCare’s benefits package is not as generous as some and not as limited as others, “so it seems to be the middle-of-the-road selection they’ve gone with. But coverage does not necessarily mean access,” Katz said. ConnectiCare’s plan may serve as the model for benefits coverage, but ultimately it’s how those benefits are going to be interpreted and applied by the other insurance plans on the exchange that will matter more than the plan design, he said.

Concerns about children’s benefits

Counihan said the state’s selection also was based on the ability to serve a wide segment of people, “children being one of them.” Pediatric services, including oral and vision care for kids, are one of the 10 required categories of services an essential health benefits package must offer. However, various medical organizations, such as the American Academy of Pediatrics and the American Medical Association, have voiced concerns that too many of the private benchmark plan options available to states would fall short on needed children’s benefits.

In its own research, the AAP found that public insurance options such as Medicaid and the Children’s Health Insurance Program provided more expansive children’s coverage than the private-plan options, and it has advocated that these public programs serve as the benchmark for children’s benefits. Under current HHS guidance, public programs are not among the benchmark plan options available to states.

AAP President Robert Block, MD, acknowledged that some states might end up choosing benchmark plans that “have a thorough menu for coverage for what kids are going to get.” But a problem might arise if a neighboring state fails to pick a plan that covers all of those needed benefits, he said.

Many commercial insurance plans have incomplete benefits for children, Dr. Block said. Whether it’s behavioral health or well-child care, “all of those things are worthy investments, because the long-range outcome of lack of care is simply more sickly adults, and then we have to spend lots of dollars trying to fix what we could have prevented. And that just doesn’t make economic sense,” he said.

Counihan said physicians in Connecticut had yet to raise concerns about inadequate children’s coverage in the benchmark benefits package. A former pediatrician sits on the state’s insurance exchange board, and physicians on the board’s advisory committees also had the opportunity to weigh in on this decision, he said. The state medical society, nevertheless, was disappointed that final decisions on the essential benefits benchmark “were made by the board, which does not have a practicing physician,” said the society’s Katz.

The small-group Blues plan that Kansas recommended as its benchmark option did not include pediatric vision, dental and habilitative services. But in the event such a required category of service isn’t in the plan a state selects, “you have to pull it from something else,” said Sandy Praeger. She’s the state’s insurance commissioner and chair of the health insurance and managed care committee of the National Assn. of Insurance Commissioners.

Praeger said HHS ultimately would determine how these services will be covered. Under these circumstances, federal officials could opt to use CHIP to cover the missing pediatric services, although the Federal Employees Health Benefits Program, which also has some level of coverage in these areas, is another possibility.

Based on the coverage the two programs offer, “we would hope they’d choose the CHIP plan,” she said.

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Half of states still need to choose benchmarks

The Dept. of Health and Human Services asked states and the District of Columbia to submit by Oct. 1 a benchmark plan that would define the essential benefits package that all health insurance exchange plans must offer. Half of the states as of this article’s deadline had yet to select benchmark plans, but those that did submit their choices largely selected small-group plans. Any state that declines to choose will have the largest small-group plan in that state automatically serve as the benchmark.

Number of states planning action
Assessed benchmark plan options 32
Formed a work group on essential benefits 31
Conducted an analysis on existing state benefit mandates 30
Held a public comment period 27
Chose a benchmark plan 24
Selected a small-group option as the benchmark 16

Source: State Progress on Essential Health Benefits,, Oct. 9 (link)

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External links

“Drug Coverage in Essential Health Benefits Benchmark Plans: Formulary Analysis,” Avalere Health LLC, Oct. 1 (link)

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