Minimum essential health benefits will be largely set by states

December 16, 2011

The Obama administration will give states broad latitude to define the minimum benefits that many health insurance policies will be required to offer under the 2010 health-care law, officials announced Friday.

The plan sparked criticism from interest groups on all sides of the issue. Consumer advocates worried that millions of Americans could end up with insurance substantially less comprehensive than the law’s drafters intended. Representatives of employers and insurers warned of an opposite scenario: A state could make the benefits package so comprehensive that the resulting plans would be prohibitively expensive.

Obama officials have yet to spell out key details, but Friday’s announcement offered a road map for how the administration intends to implement the health-care law’s “essential benefits” mandate. An important provision of the law, it requires affected plans to provide a minimum package of benefits in 10 coverage areas, including maternity care, prescription drugs, mental-health care, rehabilitative and habilitative services, and pediatric services with oral and vision care.

The mandate will apply to new policies purchased by individuals or small businesses beginning in 2014.

The law leaves it to the discretion of Secretary of Health and Human Services Kathleen Sebelius to determine whether to specify precisely which procedures and services should be covered and to what extent insurers can limit the frequency of their use.

Friday’s announcement suggests Sebelius will largely pass the decision on to states. Her proposal calls for each state to select an existing health plan to use as the “benchmark” for the items and services all covered plans in the state must include as part of the minimum package.

The benchmark plan can be either the largest HMO plan in the state’s private market or one of the three largest plans covering small businesses, state employees or federal employees in the state. If a benchmark plan does not cover services in the 10 mandated categories, states will have to come up with supplementary requirements through an as-yet-unspecified process.

If a state does not designate a benchmark plan, the standard will be the small-business plan with the largest enrollment in the state.

At a news conference, Sebelius said the arrangement would ensure state leaders can “tailor” health insurance requirements to local conditions and priorities.

“Coverage that works in Florida may not work in Nebraska,” she said.

But she also stressed that all 30 million Americans in plans affected by the rule would be guaranteed a minimum level of coverage that many currently lack. According to government estimates, more than 1 million Americans will gain prescription drug coverage, for instance, and more than 8 million will gain coverage for maternity care.

Consumer advocates expressed concern that unless the services covered under the general rubric of each category are specified, many plans will be able to comply with the mandate while still offering substandard care.

“Let’s say a plan only covers generic drugs. Well, a lot of cancer drugs are only brand-name,” said Stephen Finan, senior director of policy at the American Cancer Society Cancer Action Network.

Just as important, he said, is how much plans limit use of the services they cover.

Also potentially subject to abuse, consumer advocates said, is a provision that would let insurers modify benefits they offer under the minimum package as long as the total cost is not changed.

“This is a grave disappointment,” concluded Debra Ness, president of the National Partnership for Women & Families.

Employers and insurers also were unsatisfied. Many states require coverage of services beyond those in the minimum package, noted Neil Trautwein, an official at the National Retail Federation who chairs a group of employers and health plans called the Essential Health Benefits Coalition. Friday’s proposal includes a provision that, for the first two years, would effectively allow states to include those additional requirements as part of the minimum benefits package — potentially increasing the cost.

Sebelius declined to set a limit on the cost of the minimum essential package, as recommended by an advisory panel of experts she commissioned.

“The ultimate test of these plans is going to be, ‘Will people be able to buy them?’ ” said Trautwein. “And that question really was not addressed today.”

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