We Still Need a National Standard for Essential Health Benefits

The health reform law in all its 2,000-plus page glory sets up a bevy of initiatives, specifications and several historic mandates all with the primary goal of making affordable and comprehensive health care available to most Americans. But what’s become increasingly clear is that this transformation is a work in progress, evolving and adapting as politics, a faltering economy and policy insights trigger tweaks, compromises and new approaches.

This is most apparent when it comes to determining what the legislation calls “essential health benefits” (EHBs)—minimum coverage standards that must be met by all new health plans offered to individuals and small employers both on and off the state exchanges. The health bill requires that these EHBs include coverage within 10 general areas; including emergency care, hospitalization, out-patient services, maternity and newborn care, preventive visits, mental health and substance abuse disorder services, pediatric services including vision and dental care, and more. The Affordable Care Act gave the Secretary of Health and Human Services the authority to flesh out the details of coverage within each of these areas and to “ensure that the scope of the essential health benefits … is equal to the scope of benefits provided under a typical employer plan.”

As Sara Collins, vice president for the Affordable Health Care Program at the Commonwealth Fund puts it, “Ideally, people choosing among plans [on state exchanges] will no longer have to worry about benefit variation across plans, but will be able to focus on how plans differ in terms of out-of-pocket costs and premiums.”

The problem is that coming up with a national EHB standard is far harder than it sounds. For starters, what one segment of the population considers “essential” is not the same for another. And of course there is the looming issue of cost; if benefits are too generous, states and the federal government—who both will subsidize some portion of the premiums for many Americans who utilize the exchanges—will simply not be able to afford to help all those who need it. Meanwhile, lobbyists for medical device makers, drug companies, the home health industry and other “stakeholders” have descended on Washington to make the case for including their products and services in the package of essential benefits. Advocates for autistic children, the mentally ill and cancer patients (just to name a few) have also put pressure on HHS and lawmakers to specify coverage for often-costly—yet beneficial—behavioral therapies, drugs and other services. Defining “essential health benefits,” according to the authors of a recent Institute of Medicine report that attempted to do just that “is a politically and socially charged endeavor.”

Last month, the Obama administration decided to scratch the idea of coming up with a national standard and is now recommending that states define their own EHBs, using a choice of four “benchmark” health insurance plans as guidance. On December 16, HHS’s Center for Consumer Information and Insurance Oversight released a bulletin listing the benchmark options:

• 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.

If states choose not to select a benchmark, HHS intends to propose that the default benchmark will be the small group plan with the largest enrollment in the state.

This is a pretty radical change from what the health bill originally specified. But the December HHS Bulletin was met with little outcry and even some cautious optimism that providing states with some flexibility might just dull some of the opposition coming from places like Texas and Virginia where Republican leaders are rebelling against the health law.

The federal punt on EHBs is best understood by taking a look at previous attempts by the Obama administration to come up with a “floor” for coverage. Early last year, HHS took the first step by trying to pin down what the health law meant when it referred to a “typical” employer plan. The agency asked the U.S. Department of Labor to analyze findings from two of its most recent (2008 and 2009) surveys of employer-sponsored health plans. The final report, entitled “Selected Medical Benefits”, was published in April 2011 and concluded that employer-sponsored plans don’t differ greatly in the general types of services they cover. But the authors acknowledged that much of their information came from “broad summaries of coverage” (the general descriptions of covered services typically provided to employees) because most private insurers did not make public detailed policy descriptions. The report did note that there are considerable differences between private plans in terms of co-payments—particularly for providers in or out of network—limits on choice of provider, maximum out-of-pocket expenses, and even which individual services are included within general areas like infertility treatments, mental health, physical therapy, dental, etc.

For example, although virtually all employer plans paid for hospitalization, only 12% offered full coverage and 88% had limits, including a $250 average co-pay per admission. In other areas, details about what was and was not covered were conspicuously absent, with insurers remaining “silent” about coverage of such key services as gynecological exams (40% of insurers) and maternity care (30%), according to Sarah Rosenbaum, Chair of the Department of Health Policy at the George Washington University School of Public Health and Health Services.

The upshot of this attempt to define “the scope of benefits provided under a typical employer plan” was that because the information provided by insurers was so inconsistent and incomplete, the Bureau of Labor Statistics was unable to come up with a clear model for developing a set of essential benefits. As one primary care doctor commented, “it is impossible to know exactly what any specific insurance plan will cover during any given year.”

HHS needed more insight, so the agency also called on the Institute of Medicine to study the issue and take a stab at coming up with guidelines for minimum levels of coverage. In early October, the IOM released its report recommending that,  “the initial EHB package be equivalent in scope to what could be purchased by the average premium that a small business would pay on behalf of an employee.” Anything more generous than this would prove unaffordable to many of those currently uninsured and to small business owners, according to IOM, and ultimately impede the goal of universal coverage. According to an article in the New England Journal of Medicine, “To underscore its strong emphasis on affordability without elimination of appropriate coverage, the report said EHBs ‘should become more fully evidence-based, specific, and value-promoting over time,’ and if additional services are added, ‘the package should be offset by savings’ from the elimination of outmoded or unnecessary services and the making of prioritized choices among services supported by public dollars.”

The IOM’s emphasis on evidence-based and appropriate coverage was a welcome contribution, but the report’s recommendation that EHB’s be modeled after existing small-group plans—whose premiums are about $1,500 less for family coverage than plans offered by large employers —had critics worrying that the new “floor” for benefits would resemble the bare bones plans available to some employees of small firms or, worse yet, it would mirror Medicaid.

Attacks on essential benefits have come from all sides—conservatives bemoaning any kind of mandated services, state officials declaring that they would be bankrupted if forced to pay for mandates and too-generous benefits, and progressives calling the IOM’s recommendation to emulate a small-group policy as being deficient, failing to specify key services such as vision coverage or hospice care. The result was that after a year’s worth of work, the federal government was no closer to defining essential health benefits—standards that have to be in place by January 2014.

Now the onus is on the states. Secretary of Health and Human Services Kathleen Sebelius said the new approach to EHBs would “protect consumers and give states flexibility … to meet their unique needs.”  A recent explainer from Stateline, a nonpartisan, nonprofit news service of the Pew Center on the States notes;

“The Obama administration had little choice but to permit this. Otherwise, it would have faced a dilemma: how to include all state-mandated services — which differ across the country — in one national package, without making the whole package unaffordable. The current array of state insurance systems is simply too diverse to make a national mandate practical.”

Sarah Rosenbaum confers; “The [HHS] Bulletin indicates that its review of state benefit mandates suggests that there are approximately 1600 separate service and provider mandates across all states and the District of Columbia.”

The Stateline piece continues:

“For example, 35 states and the District of Columbia required some level of mental health coverage to be offered in small group plans as of January 2010, whereas 15 states had no such provision, according to the Kaiser Family Foundation.  It’s possible that some states with relatively generous mental health coverage could have found themselves with a substantial extra burden if the Department of Health and Human Services had eliminated mental health services these states require from a national benefits list.

“The same would have been true for any other benefits mandated by some states but not others. [For example, in vitro fertilization coverage is required in 8 states and intensive behavioral therapy (called ABA) for autistic children is required in 29 states] Had they been excluded from federal benefits, the states currently mandating them would have had to either defray the costs of coverage or eliminate the requirement altogether.”

To me, the Bulletin from HHS raises more questions than it answers. It basically brings the essential health benefits issue back to square one. With flexibility comes the danger of inequity; although each state must choose a benchmark for its minimum set of benefits, the particulars are vague enough that this patchwork approach to EHBs threatens to exacerbate the inherent regional inequalities in health care access that already exist. It’s possible that insurers (regulated by the states) may have wiggle room to make substitutions within and between benefit categories; for example, reducing services aimed at more costly subscribers like children with autism and increasing prevention and wellness benefits that attract healthier (and cheaper) enrollees.

As Kavita Patel, a Fellow at the Engelberg Center for Health Care Reform at the Brookings Institution, notes in Health Affairs; “If a state chooses the [federal employees health plan] as a benchmark, consumers are generally going to be satisfied, given the general coverage as well as inclusiveness of services such as physical therapy/speech therapy/occupational therapy for conditions such as autism.”  But in states where a small group or HMO policy is being used as a benchmark, and where some of the EHB mandates are not currently being met, “there might be a risk for less coverage of benefits and very little progress in forging a path for increased benefits for certain conditions,” writes Patel, adding  “the lack of consistency across behavioral health, pediatric oral/vision and habilitative services is concerning and could require more attention from consumers and policymakers.”

In the end, creating a national standard for essential health benefits may have been politically difficult, controversial and required more intensive study and analysis. But it would have been worth it to create a true minimum set of benefits that every American could be guaranteed of receiving. By shifting responsibility to the states and giving them a range of “benchmarks” to choose from HHS has created unneeded complexity and the opportunity for cutting corners. It also shifts the power for enforcing EHBs to state insurance commissioners, diluting federal authority and increasing the risk that comprehensive coverage remains out of reach for those who need it most.