Definition is among the most important steps in PPACA implementation

The Obama administration is in the process of rolling out the health benefits framework for millions of Americans, and has established that states get to decide the specifics. This recent announcement is the first formal indication of the route the Dept. of Health & Human Services (HHS) will take on the “essential benefits package.”

The Patient Protection & Affordable Care Act (PPACA) aimed to provide the American people with access to quality, affordable health insurance. To achieve this goal, the law ensures that health plans offered in the individual/small group markets, both in and outside of the Exchanges, offer a comprehensive package of items and services known as “essential health benefits” beginning in 2014. This package must include items and services within at least the following 10 categories:

• Ambulatory
• Emergency
• Hospitalization
• Maternity & newborn care
• Mental health & substance abuse
• Prescription drugs
• Rehabilitative
• Laboratory
• Preventive & wellness
• Pediatric

Many states already set minimum standards in regulating insurers. Idaho, for instance, mandates insurers to cover 13 types of health services, while Rhode Island requires coverage of 69.

Under the HHS intended approach, states would have the flexibility to select a benchmark plan that reflects the scope of services offered by a “typical employer plan.” This approach would allow states flexibility when selecting plans to best meet the needs of their citizens.

States would choose one of the following benchmark insurance plans:

1. One of the three largest (by enrollment) small group plans in the state;
2. One of the three largest (by enrollment) state employee health plans;
3. One of the three largest (by enrollment) federal employee health plans; OR
4. The largest (by enrollment) HMO plan offered in the state’s commercial market.

Ultimately, the benefits and services included in the elected plan would be the essential health benefits package for that particular state. Plans could modify coverage within a benefit category, but only if doing so would not reduce the value of coverage. If a state opts not to choose a benchmark, HHS will then set Option #1 (above) as the default.

PPACA distinguishes between a health plan’s covered services and the plan’s cost-sharing features, such as deductibles, copayments and coinsurance. Those cost sharing features will be addressed by separate rules (presented in future bulletins), and will determine the actuarial value of the plan (i.e. bronze-level = 60%, silver-level = 70%, gold-level = 80% and platinum = 90%). Although final regulations are still months away, we in the TASC Governmental Affairs shop are watching closely. We know the federal government’s decision is likely to set the new national standard for health insurance.

NOTE – Grandfathered plans, self-insured group health plans, and health insurance coverage offered in the large group market are not required to offer essential health benefits. Nevertheless, the definition of said “essential health benefits” is of concern to employers, advisors, and insurers, since—beginning in 2017—states may allow large employers to obtain coverage through an Exchange and, thus, will be obliged to provide the essential benefits package.

This process could be especially burdensome to multi-state plans, since these would be exposed to 50 different essential health benefits definitions. In addition, while ERISA usually preempts state law with respect to self-funded plans, this is a federal mandate, so ERISA’s preemption provisions may not apply.