On February 17, 2012, HHS Issued FAQs to provide additional guidance on its intended approach to defining Essential Health Benefits (EHB) under section 1302 of the Affordable Care Act (ACA). HHS had previously issued an Information Bulletin on December 16, 2011, outlining its proposed approach in defining essential health benefits (EHBs). This article summarizes the main points in the February 17th FAQs. No employer action is required at this time, but all employers will no doubt want to familiarize themselves with the main points of these FAQs and of prior guidance on EHB.
Background on Essential Health Benefits and on the December 16th Bulletin
As of January 1, 2014, non-grandfathered small group health plans and individual health insurance policies (both inside and outside the Exchanges) will be required to provide coverage that includes essential health benefits (EHB), limits on cost-sharing, and provision of specific actuarial levels of coverage (i.e., the plan must pay 60% – 90% of the cost of essential benefits a standard population would be expected to incur, and these levels or tiers of coverage are labeled “bronze” to “platinum”). The ACA specified 10 categories of EHB, such as emergency services, hospitalization, and maternity and newborn care. A list of all 10 categories is at the end of this article. Prior guidance on Essential health benefits was issued October 6, 2011 including a report by the Institute of Medicine (IOM) that recommended a framework for how HHS should decide what benefits are most important for coverage. (IOM Report on Essential Health Benefits)
In its December 16th Bulletin, HHS said it intends to allow each state the flexibility to select a benchmark plan that reflects the scope of services offered by a “typical employer plan” within that state or nationally. The benchmark plan will serve as a reference point, and all small group and individual plans in that state (both within and outside the state Insurance Exchange) must offer benefits that are “substantially equal” to the benchmark plan. The December 16th Bulletin will allow each state to choose one of the following as its benchmark health insurance plan:
- One of the three largest small group plans in the state by enrollment;
- One of the three largest state employee health plans by enrollment;
- One of the three largest federal employee health plan options by enrollment;
- The largest HMO plan offered in the state’s commercial market by enrollment.
The default benchmark plan, if a state chooses not to select a benchmark, will be the small group plan with the largest enrollment in the state.
Summary of Main Points in the Feb 17th FAQs
- States may not adopt separate “benchmark plans” for the individual and small group markets. Each state must select the same benchmark option for both markets, although HHS will permit actuarially equivalent substitution of benefits within the 10 categories required by the ACA. (A state can, however, select a different EHB benchmark plan for its Medicaid section 1937 benchmark than for its individual and small group market benchmark plan.)
- States must select the state “benchmark plan” by the third quarter of 2012, and that plan will apply plan years 2014 and 2015. HHS intends to propose a process for updating EHB in future rulemaking.
- States are required to defray the cost of any state-mandated benefits in qualified health plans (QHPs) that are in excess of the EHB. This is intended as a two-year transitional policy that HHS will revisit for plan years starting in 2016.
- State-mandated benefits that were not in place by end of 2011 may not be included in the benchmark plan for 2014 and 2015, unless such benefits were already included in the benchmark plan (as EHB) regardless of the state mandate.
- If a benchmark plan is missing coverage in one or more of the 10 statutory categories, the State must supplement the benchmark by reference to another benchmark plan that includes coverage of services in the missing category.
- The FAQs noted that the December 16th Bulletin provided special rules to ensure meaningful benefits in the three categories where some of the potential benchmark plans do not include coverage: pediatric oral benefits, pediatric dental benefits, and habilitative services.
- A plan must be substantially equal to the benchmark plan, in both the scope of benefits offered and any limitations on those benefits such as visit limits. However, a plan can substitute coverage of services within each of the 10 categories so long as the substitutions:
- were actuarially equivalent based on standards in the CHIP regulations and
- would not violate other statutory requirements.
- Plans may not impose annual or lifetime dollar limits on EHB. If a state-selected EHB benchmark plan includes a state-mandated benefit that has a dollar limit, the benefit will be included into the EHB definition without the dollar limit. BUT the FAQ (#9) also says that a plan would be permitted to impose non-dollar limits that are at least actuarially equivalent to the annual dollar limits. (This provision immediately raised criticism from some groups.)
- Self-insured group health plans, large group health plans, and grandfathered health plans are not required to offer EHB, but they also cannot impose annual or lifetime dollar limits on EHB. They can impose non-dollar limits on EHB, and they can impose annual and dollar limits on benefits that are not EHB.
- For non-grandfathered insured small group market plans that cover employees residing in more than one state, the employer’s primary place of business determines which state’s EBH benchmark plan applies for all participants, regardless of the employee’s state of residence.
- Preventive services (as defined in section 2713 of the PHS Act, added by section 1001 of the ACA) will be part of EHB.
- The Mental Health Parity and Addiction Equity Act (MHPAEA) parity requirements will apply in the context of EHB. One of the 10 categories of EHB is mental health and substance use disorder services. Applying the MHPAEA parity requirements means plans that must provide EHB cannot impose higher annual dollar limits or aggregate lifetime dollar limits, or more restrictive financial requirements or treatment limitations on mental health or substance use disorder benefits than are imposed on medical/surgical benefits. Additionally, a plan that provides out-of-network medical/surgical benefits also must provide out-of-network mental health and substance use disorder benefits.
- To help states identify the benchmark options, HHS plans to provide states with a list of the top three small group market products in each state (based on data from HealthCare.gov from the first quarter of 2012), and the top three federal employee health benefit plan (FEHBP) benchmark plans (based on information from the Office of Personnel Management). However, if a state selects as its benchmark plan a state employee plan or the largest commercial HMO plans, the state would have to identify its benchmark options itself, as states do today in Medicaid and CHIP.
- Each state will select its benchmark plan by whatever process and through whatever state entity is appropriate under state law. Generally, HHS expects that to be the state Executive Branch (i.e., State Insurance Department), but notes it is also possible that in some states, legislation would be necessary to select the benchmark plan.
The 10 Categories of Essential Health Benefits:
- Ambulatory patient services
- Emergency services
- Maternity and newborn care
- Mental health and substance use disorder services, including behavioral health treatment
- Prescription drugs
- Rehabilitative and habilitative services and devices
- Laboratory services
- Preventive and wellness services and chronic disease management, and
- Pediatric services, including oral and vision care