In health insurance, what counts as ‘essential’?
This Friday, the Institute of Medicine will take a first stab at answering one of health reform’s most important unknowns: What counts as an “essential health benefit”? It’s a key question that just about everyone with a stake in health reform is waiting for an answer on.
Under the health reform law, every insurance plan will be required to cover a set of “essential health benefits.” The Affordable Care Act defines 10 broad categories that must be included, such as “professional services of physicians and other health professionals” and “hospitalizations.” What fits within those categories is up to the Obama administration. On Friday, the Institute of Medicine will make recommendations on how to determine what’s “essential.” And by the end of the year, Health and Human Services will use those recommendations to put out regulation.
It’s hard to overstate what a big deal this will be for health industries. Any plan that wants to sell on the new insurance marketplace will have to cover the benefits. The benefit package is also a crucial benchmark that regulators will use to determine how valuable an insurance plan is. Any plan that pays, on average, 60 percent of the benefit package’s cost is ranked bronze. Cover 90 percent, though, and you’re up at “platinum.”
“It’s a very important part of the regulatory picture,” Karen Ignagni, president of America’s Health Insurance Plans, told me in a recent interview. “It’s a fundamental part of the affordability calculus, whether or not health insurance will be affordable.”
“At the end of the day, there are several things we’re fighting for, but this is our number one priority,” adds Tekisha Dwan Everette, director of federal affairs for the American Diabetes Association, which has had multiple meetings with Health and Human Services on the issue.
For Health and Human Services, a regulation is months off, but work is well underway. “We’re working very much . . . in identifying policy options and what the cost implications would be, meeting with various groups to figure out what it is they want, and figure out what is typical,” says Lee Wilson, director of public health services for HHS’s assistant secretary of health evaluation, who spoke yesterday at a health reform task force meeting.
All the work centers on one very difficult issue: how to make the “essential benefits” both comprehensive and affordable. Make the benefit package relatively sparse, and it won’t provide the robust coverage that health reform envisions — meanwhile angering any patient group whose benefits get left on the cutting room floor. But make the benefit package totally comprehensive, covering any medical treatment out there, and it becomes prohibitively expensive.
“We want to try and create a plan that is sufficiently robust, to be considered a full plan and not a hollow one,” Wilson says. “This is going to be a huge balancing act because it has implications for the federal budget, what individuals will pay for their premiums. It will also likely effect what state mandates are. There are a lot of moving parts to this.”
Patient groups have had to tailor their lobbying approach to Health and Human Services’ concerns. Even when pushing for a particular benefit’s coverage, “you have to be cognizant that you can’t narrowly include every minuscule coverage option or the whole thing will implode on itself,” Everette says of her meetings with Health and Human Services, representing the health needs of diabetics.
The National Health Council, a consortium of patient advocacy groups, went into the process thinking it would want Health and Human Services to create a list of every benefit that insurers should cover. There’s a decent amount of precedent on this in Medicare’s physician insurance, which lists out all benefits and at what level they’re covered.
But in discussions with HHS, and after doing some affordability analyses, the council gravitated away from that. “As we moved through some of the actuarial analysis, we found that covering everything really isn’t affordable,” National Health Council Vice President Marc Boutin told me this summer. For patients with chronic conditions, who require regular treatments and medication, affordability is huge — and it moves increasingly out of reach when everyone else’s benefits, medications and treatments gets covered, too .
Moreover, there’s political risk in asking for a laundry list of benefits: namely, a given benefit could be left on the cutting room floor, with no space to get squeezed back in. So when the council met with HHS this summer and showed off a model regulation it had written, it suggested leaving some flexibility for plans to define their benefits. This is how insurance in the Federal Employees Health Benefits Plan works. “Affordability,” the council wrote in an accompanying report, “is one critical element for patients with chronic health needs.”
In my reporting, I’ve found it’s pretty likely that’s the direction Health and Human Services is headed in: not write up a list of every covered benefit but also get more specific than what the Affordable Care Act outlines. “It’s a continuum,” Wilson says. “We could just leave it at the 10 broad benefit categories. Or we could make a very specific list, like we do in Medicare. We’ll be somewhere in the middle of that road.”
The timeline for a final rule on what counts as essential is long. But the first steps start this week: On Friday, the Institute of Medicine publishes its report on methodology. After that, Wilson says, officials will probably issue a rule by the end of the year and spend awhile taking comments — they expect a lot. A final rule won’t be available until “May of next year at the very earliest,” he says. In between, expect a whole lot of lobbying and meetings with patient groups, all looking to influence this very key health reform decision.