Let the states decide: HHS passes the buck on essential benefits

Agency bulletin gives states 'flexibility to design coverage options'

HHS on Friday announced that states will determine the "essential benefits" provided by health plans offered in their state health insurance exchanges, the New York Times reports.

Under the federal health reform law, insurance plans offered through state health insurance exchanges must provide 10 categories of benefits, such as maternity care, prescription drugs, and preventive care. HHS was charged with determining which services and benefits must be provided within those 10 categories.

However, in a bulletin released Friday, HHS Secretary Kathleen Sebelius said the federal government will give states "the flexibility to design coverage options that meet their unique needs." Specifically, states can use one of the following health insurance plans as a benchmark:

  • One of the state's three largest small-group plans;
  • One of the state's three largest health plans for state employees;
  • One of the three largest health plans offered under the Federal Employees Health Benefits Plan; or
  • The largest HMO operating in the state's commercial market.

The benefits provided by that plan would be designated as "essential benefits" and all other insurers in the exchange would be required to provide benefits of equal or greater value. Plans could modify coverage within specific benefit categories provided they do not reduce the overall coverage value. If a state does not select benefits, the default will be the benefits available through the largest small business plan in the state.

HHS will accept comments on the proposal until Jan. 31. While the bulletin is non-binding, it typically indicates regulations the federal government will release in the future. HHS did not specify when the final rule on the benefits would be released.

Stakeholders respond
According to the Wall Street Journal, the decision is widely perceived as an attempt to defuse Republican criticism that the health reform law gives the federal government too much control over the health care system. However, some Republicans and employer groups say the approach could allow states to mandate overly generous benefits packages. Moreover, some say the approach could lead to wide disparities between states, incentivizing people to move states for better coverage.

Meanwhile, some disease advocacy groups had hoped health officials would specifically enumerate the essential benefits. According to Carl Schmid, deputy executive director of the AIDS Institute, the approach "is still going to allow a patchwork of care and that's what I thought we were going to try to get beyond."

America's Health Insurance Plans (AHIP) is "carefully reviewing this guidance," says AHIP President and CEO Karen Ignagni. She notes that, "[a]s the Institute of Medicine made clear in its recent report, ‘state mandates are not typically subjected to a rigorous evidence-based review or cost analysis,’ an issue that should be addressed to ensure affordability for individuals, working families, and small employers" (Pear, New York Times, 12/16; AP/Washington Post, 12/16; Krauskopf, Reuters, 12/16; Radnofsky, Wall Street Journal, 12/17; Sanger-Katz, National Journal, 12/18 [subscription required]; AHIP release, 12/16).


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