Health-care law benefits must be limited to ensure affordability, panel says

October 6, 2011

An advisory panel of experts on Thursday recommended that the Obama administration emphasize affordability over breadth of coverage when it comes to implementing a key insurance provision of the 2010 health-care law.

Obama officials charged with stipulating what “essential benefits” many health plans will have to cover should make it a priority to keep premiums reasonable, even if that means allowing plans to be less comprehensive, counseled the committee of the National Academy of Science’s Institute of Medicine (IOM).

“The question is what is the fairest, most transparent way to get a reasonable set of benefits and still keep it affordable for both the user and for the taxpayers,” said committee member Marjorie Ginsburg. “We don’t want to say that one is more important than the other. . . . But the limiting issue obviously is affordability.”

The findings highlight the difficult balancing act the administration faces in carrying out one of the the health-care law’s most sweeping, yet ambiguous, mandates. The statute sets out 10 general categories — ranging from hospitalization to prescription drugs — that all new insurance plans for individuals and small businesses must offer starting in 2014. It also states that the scope of the essential benefits package should be equal to that of a “typical employer plan.”

But Congress did not specify whether this referred to the more generous plans sponsored by large employers or the more minimalist versions bought by many small businesses. And it gave Secretary of Health and Human Services Kathleen Sebelius ultimate authority to decide both how much more detailed to make the package and what to include in it.

If she adds little to the legal requirement, the market could end up split between cheap, bare-bones plans of use only to the healthy, and exorbitantly priced full coverage plans financially out of reach of many sick people who need them most.

If she adds too many requirements, premiums for all plans could soar — with consequences for not just individuals but the success of the law as a whole. That’s because many healthy people could decide to pay a penalty instead of buying pricey insurance, skewing the risk pool toward the sick and causing premiums to spiral higher.

That would also cause a spike in the subsidies for health insurance premiums, which the law requires the federal government to offer low-income people, hammering the national budget.

The committee proposed that the law be interpreted to require that the scope of benefits be equivalent to a typical small-employer plan. HHS officials would then determine what the national average premium of small-employer plans would be in 2014. They would then ensure that the benefits they require will not end up costing more than the premium target they set.

The panel, commissioned by Sebelius to propose a process for setting the benefits package, said it approached its task like a trip to the grocery store.

“One option is to . . . fill up your cart with the groceries you want, and then find out what it costs,” the committee wrote in a report released Thursday. “The other option is to walk into the store with a firm idea of what you can spend and to fill the cart carefully, with only enough food to fit within your budget. The committee . . . recommends the latter approach.”

Karen Ignagni, president of America’s Health Insurance Plans, an industry trade group, said the recommendations were “very helpful to the discussion.”

Marc Boutin, executive vice president of the National Health Council, an umbrella organization for dozens of patient advocacy groups, countered that using small rather than large employer plans as a guide “raises the issue of whether the benefits will be effective for people with chronic conditions.” Still, he said he felt the committee generally went in “the right direction.”

Earlier this week, an HHS official said the agency would soon begin a series of listening sessions with consumer and industry groups around the country, with the goal of releasing a draft “essential benefits” package by the end of the year.

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