PDF Version of this Article: Essential Health Benefits 8-11-14
Quick summary of Essential Health Benefits
Background on Essential Health Benefits
As of the first day of the 2014 policy year, non-grandfathered small group health plans (both inside and outside the Exchanges) will be required to provide coverage that meets certain minimum standards, including: coverage for the 10 essential health benefits (EHB), limits on the annual out-of-pocket maximum, and provision of specific actuarial levels of coverage (i.e., the plan must pay at least 60%, 70%, 80% or 90% of the cost of allowed benefits a standard population would be expected to incur, and these levels or tiers of coverage are labeled “bronze,” “silver,” “gold” and “platinum.”). Individual health insurance policies were required to comply as of January 1, 2014.
However, non-ACA-compliant small group and individual policies that renewed under the transition rules proposed by the Obama Administration (November 14, 2013 and March 5, 2014), will not be required to cover essential health benefits until November 2017. State approval is also required. Some states have not allowed any renewal of non-compliant policies, while others (such as California) have allowed renewal only through 2015.
For 2014 and 2015, HHS defined EHB by reference to a “benchmark plan” that each state was required to select by the third quarter of 2012. The state benchmark plan should reflect the scope of services offered by a “typical small employer plan” within that state or nationally. Health insurance companies must ensure that all their small group and individual plans in that state (both within and outside the state Insurance Exchange) offer benefits that are “substantially equal” to the benchmark plan.
The 10 Categories of Essential Health Benefits
Ambulatory patient services
Maternity and newborn care
Mental health and substance use disorder services, including behavioral health treatment
Rehabilitative and habilitative services and devices
Preventive and wellness services and chronic disease management, and
Pediatric services, including oral and vision care
What Benefits are NOT “Essential Health Benefits”?
The following benefits are not EHB (see http://www.cms.gov/CCIIO/Resources/Data-Resources/Downloads/ehb-benchmark-review-guide.pdf ):
- Routine non-pediatric dental services,
- Routine non-pediatric eye exam services,
- Long-term/custodial nursing home care benefits
- Non-medically necessary orthodontia.
- Abortion services – Although a state EHB-benchmark plan may cover abortion services, pursuant to ACA section 1303(b)(1)(A), a QHP issuer is not required to cover these services.
The following services appear not to fall under the current PPACA list of essential health benefits:
- Treatment for TMJ or Jaw Joint disorders
- Prosthetics and Orthotics (unless these are deemed rehabilitative devices)
- Chiropractic spinal manipulations (unless this is rehabilitative)
- Organ Transplants (may be essential but does not appear to fall within one of the categories)
- Infertility benefits
What is a Benchmark Plan?
For a list of each state’s benchmark plan, see http://www.cms.gov/CCIIO/Resources/Data-Resources/ehb.html. By the third quarter of 2012, each state was required to choose one of the following as its benchmark health insurance plan for 2014 and 2015.
- 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 chose not to select a benchmark, is the small group plan with the largest enrollment in the state. (See HHS Information Bulletin, 12/16/11, cited above.) HHS intends to propose a process for updating EHB in future rulemaking.
How Did States Select Their Benchmark Plans?
HHS provided a list (on July 3, 2012) of the top three small group market products in each state (based on first quarter data HHS collected from small group and individual health insurance issuers), and the three largest nationally available federal employee health benefit plans (FEHBP). If a state selected as its benchmark plan a state employee plan or the largest commercial HMO plan, the state had to identify its benchmark options itself, as states do in Medicaid and CHIP. States must adopt the same “benchmark plan” for the individual and small group markets, although HHS permitted actuarially equivalent substitution of benefits within the 10 categories of EHB. However, some states (California for one) prohibited substitutes.
Each state selected its benchmark plan by whatever process and through whatever state entity was appropriate under state law. Generally, this was either the State Insurance Department or the State Legislature.
What does it mean to be “Substantially Equal” to the Benchmark Plan?
All small group and individual plans must be substantially equal to the applicable state 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 are actuarially equivalent based on standards in the CHIP regulations and do not violate other statutory requirements.
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. HHS 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. (HHS Information Bulletin (12/16/11))
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 HHS FAQs cited above (2/17/12, item #9) also provide 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.)
Some state laws require health insurance policies to cover certain benefits that are not included in the list of “essential health benefits.” Such state-mandated excess benefits that were in place by end of 2011 may be included in the benchmark plan for 2014 and 2015, but benefits enacted after 2011 could not be included unless they were EHB regardless of the state mandate.
If a state selected a benchmark plan that included state-mandated benefits that are in excess of the EHB, federal subsidies cannot be used to pay for the excess state-mandated benefits. This is intended as a two-year transitional policy that HHS will revisit for plan years starting in 2016.
Preventive Services and Mental Health Services in EHB
Preventive services (as defined in section 2713 of the PHS Act, added by section 1001 of the ACA) are part of EHB. Preventive services must be covered, cannot be subject to cost-sharing (i.e., no patient co-pay or coinsurance), and must be paid on a first-dollar basis (i.e., the plan must pay even if the participant has not yet met his/her deductible under the plan).
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.
- 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.
- Self-insured group health plans, large group health plans, and grandfathered health plans are not required to offer EHB, but if they do they cannot impose annual or lifetime dollar limits on EHB that are provided under the plan. They can impose non-dollar limits on EHB, and they also can impose annual and dollar limits on benefits that are not EHB.
- All employer plans ultimately will be affected by how “essential health benefits” are defined and by what their state selects as its benchmark plan. Small employers will be directly affected, since they purchase insurance policies that must be substantially equal to the benchmark plans. Large employers also will be affected because their employees will likely compare their benefits to those available in the state Exchange. Also, as of 2017 states can opt to allow large employers to purchase coverage through the Exchange, so large employers who do so will be directly subject to the EHB requirements.