Essential Health Benefits

1. Essential Health Benefits Amy Monahan University of Minnesota Law School Presentation to the Health & Human Services Reform Committee February 8, 2012

2. IOM Study Background • The Institute of Medicine (IOM) was commissioned by HHS to develop policy foundations, criteria, and methods for defining and updating Essential Health Benefits (EHB) • Over the course of 9 months, the committee: • Held two public workshops where we heard from 59 speakers • Solicited public input online • Conducted research and analysis • Held 4 in-person committee meetings

3. Key Issues that Emerged • Setting a balance between comprehensiveness and affordability • Defining what “typical” should mean • Determining whether state mandates should be automatically included • Deciding whether state variation might be allowable

4. Key Conclusions and Recommendations • Incorporate consideration of cost • Initial package should be guided by a national average premium target • EHB package should be actuarially equivalent to the average premium that would have been paid by small employers in 2014 for a comparable population with a typical benefit design. • Role for a public deliberative process in weighing tradeoffs

5. Key Conclusions and Recommendations • Provide states with the ability to apply for approval of a state-specific EHB definition • For states administering their own exchanges, provided: • Statutory criteria met • Package is actuarially equivalent to national package • State has adopted a process that has included meaningful public input • State mandates would not receive preferential treatment • “Because state mandates are not typically subject to a rigorous evidence-based review or cost analysis, cornerstones of the committee’s criteria, the committee does not believe that state-mandated benefits should receive any special treatment in the definition of the EHB.”

6. Key Conclusions and Recommendations • Better data • Independent advisors – National Benefits Advisory Council • Continue to incorporate cost into updates • Goal for EHBs to become more fully evidence-based, specific, and value-promoting over time

7. HHS Bulletin • “HHS aims to balance comprehensiveness, affordability, and State flexibility” • States may choose one of four benchmark plans for 2014 and 2015 • At least two of which incorporate state mandates (one of the three largest small group plans and largest non-Medicaid HMO) • One of which will not incorporate state mandates (one of the three largest national FEHBP plan options)

8. HHS Bulletin • Benchmark plan will need to be adjusted to cover the 10 categories of care specified in the statute • Habilitative services and pediatric oral and vision care likely to require adjustments • Mental health and substance abuse benefit parity • Benchmark choice will influence whether state must pay the “additional cost” associated with state mandates in excess of the EHBs • HHS has indicated that beginning in 2016, some state mandates may be excluded from the EHB package

9. Reconciling the IOM and HHS Recommendations from a State Perspective • Lack of cost constraint on state choice • Allows states to have their mandated benefits federally subsidized • Selecting too generous a benchmark may result in unaffordable insurance • How high a priority to place on existing mandates? • What role for a public deliberative process? • Creates significant uncertainty going forward • How to plan for 2016 and beyond?