Essential Health Benefits: Balancing Affordability and Adequacy

1. Essential Health Benefits Under the Affordable Care Act: HHS Guidance and Key Implementation Issues Sara R. Collins, Ph.D. Vice President, Affordable Health Insurance The Commonwealth Fund Alliance for Health Reform Briefing on Essential Health Benefits: Balancing Affordability and Adequacy Washington, D.C. February 3, 2012

2. What are Essential Health Benefits? 68 million people are estimated to enroll in plans subject to the EHB provision Note: Actuarial values are the average percent of medical costs covered by a health plan. Source: Federal poverty levels are for 2012; Commonwealth Fund Health Reform Resource Center: What’s in the Affordable Care Act? (PL 111-148 and 111-152), http://www.commonwealthfund.org/Health-Reform/Health-Reform-Resource.aspx.

3. Premium Tax Credits and Cost-Sharing ProtectionsUnder the Affordable Care Act Note: FPL refers to Federal Poverty Level. Actuarial values are the average percent of medical costs covered by a health plan. Premium and cost-sharing credits are for silver plan. Source: Federal poverty levels are for 2012; Commonwealth Fund Health Reform Resource Center: What’s in the Affordable Care Act? (PL 111-148 and 111-152), http://www.commonwealthfund.org/Health-Reform/Health-Reform-Resource.aspx.

4. How Does HHS Propose to Define Essential Health Benefits? • Rather than defining one standard benefit package for all states, HHS is proposing that each state select a benchmark plan in their state that covers all 10 categories • States can select a benchmark plan from the any of four options: • Any of the three largest small-group plans in the state by enrollment; • Any of the three largest state employee health plans by enrollment; • Any of the three largest federal employee health benefits program (FEHBP) plan options by enrollment; or • The largest insured commercial non-Medicaid HMO plan in the state. • Largest small group plan is default option for states that do not select a benchmark • States must add any missing required benefits to benchmark plans • This “benchmark” approach is currently used for health plans offered through Children’s Health Insurance Program (CHIP), some Medicaidenrollees.

5. Will State Benefit Mandates Be Included in Benchmark Plans? • The law requires states to pay for benefits mandated by state law that fall outside of the 10 benefit categories • HHS proposes to allow states a transition period 2014-2015 where states with benchmark plans that include state benefit mandates outside the 10 categories will not have to pay the cost of the additional benefits Will Health Plans Be Required to Meet All Provisions in the Benchmark Plan? • HHS proposes that health plans be required to offer benefits that are “substantially equal” to the benefits of the benchmark plans • Plans may adjust services covered and quantitative limits, as long as they continue to offer coverage for all 10 categories • HHS considering whether plan substitutions for the benchmark plan only be allowed within each of the 10 categories, or if health plans might be permitted to substitute benefits across the categories, while maintaining actuarial equivalence (plans would be of the same value in terms of cost protection)

6. Key Questions and Implementation Issues • Benchmark Plans • Do small employer plans meet the standard of a “typical employer plan” envisioned by the statute? • Do small employer plans generally cover all 10 categories or are some categories routinely not included? • State Choice of Benchmark Plans • What are the tradeoffs and considerations in selecting from the four options? • Whither state benefit mandates after the two year transition period? • Health Plan Flexibility • Will benefit substitutions, variation in visit limits, make it difficult for consumers to compare plans if benefits vary across plans? • Maintaining Premium Affordability and Cost Protection Over Time • What are risks of rapid premium inflation for the benchmark plans? • What are the consequences of premium inflation to government, consumers, employers, viability of exchanges? • What are options for limiting premium inflation over time?