IOM Issues Report on Essential Health Benefits under the ACA
On October 6, 2011, the Institute of Medicine (IOM) issued a report that provides guidance to the US Department of Health and Human Services (HHS) on how to determine essential health benefits. Under the Affordable Care Act (ACA), HHS must identify essential health benefits that must be covered by certain insurance plans, including those participating in state-based health insurance exchanges.
Under the Affordable Care Act (ACA), certain insurance plans, including those participating in the state-based health insurance exchanges, must cover essential health benefits. On October 6, 2011, the Institute of Medicine issued a report, Essential Health Benefits: Balancing Coverage and Cost, that provides guidance to the Department of Health and Human Services (HHS), that provides guidance to the US Department of Health and Human Services (HHS) on how to determine essential health benefits. Because the report provides a set of criteria and methods for HHS to develop a package of essential health benefits, it should be influential in forthcoming guidance from HHS.Close speedread
The Affordable Care Act (ACA) requires that a broad package of essential health benefits (EHBs) be offered beginning in 2014 to individuals and small groups in state-based exchanges to ensure that a consistent level of health insurance benefits are offered in the exchanges.
Beginning in 2014, health insurance exchanges are being established to provide a competitive market through which individuals and employees of small business can obtain private health insurance. Only qualified health plans that meet certain requirements, such as providing EHBs, can be sold in the exchanges. The EHBs include diagnostic, preventive and therapeutic services and products that have been defined as "essential" by the US Department of Health and Human Services (HHS). This package of benefits constitutes the minimum set of benefits that plans must cover but insurers may offer additional benefits.
The ACA does not specifically define which benefits are EHBs but generally provides that EHBs should include ten general categories of health services and be similar to those benefits provided by a typical employer. The task of defining which benefits are EHBs was left to HHS, which asked the Institute of Medicine of the National Academies (IOM) to recommend guidelines for determining which specific health benefits should be considered EHBs.
In response to the request from HHS, the IOM issued a committee report on October 6, 2011, entitled, Essential Health Benefits: Balancing Coverage and Cost. The IOM report, can be downloaded at the IOM website. In addition to the report, the following documents were also issued:
The report does not provide a list of EHBs, but offers guidelines regarding how HHS should determine EHBs. The report divides the process into two parts. First, it advises how an initial package of EHBs should be defined. Second, it presents considerations for updating that initial definition of EHBs.
Defining the Initial Essential Health Benefits Package
The ACA requires that EHBs:
Reflect the scope of benefits covered by a typical employer plan.
Include ten general categories of health services.
The report provides that HHS should modify this package by determining what is typical of small employer plans since small employers are the main customers for policies in the state-based exchanges. To do this, the report then provides that HHS:
Should gauge potential services and products against a set of criteria, including:
relative value compared with alternative options.
Should evaluate whether the packages:
protect the most vulnerable individuals;
promote services that have proved effective; and
address the medical concerns of the greatest importance to the public.
The report further provides that:
Benefits that have been mandated for insurance coverage by individual states should be subject to the same review and criteria.
Products and services that do not meet the criteria should not be included.
Because the package must be affordable to small firms and individuals who are the main customers for the exchanges, the comprehensiveness of the package should be balanced against its potential cost. The report recommends that HHS set a defined cost target and then create EHBs that can be purchased within that limit. In determining this cost target, HHS should determine what the estimated national average premium that would have been paid by a typical small employer in 2014 and ensure that the scope of benefits does not exceed this amount.
The report indicates that cost factors should only be used as criteria in developing the package since the premium that a particular employer or individual purchaser will pay could differ as a result of other factors.
Updating the Essential Health Benefits Package
The report provides that the package of EHBs is expected to change over time, as medical needs evolve, insurance practices improve, and new health treatments and services are developed. The report recommends that cost play an important role in determining how the package is updated. Specifically, services added to the package that increase average costs should be offset by savings acquired through improved medical management or eliminating inappropriate or unneeded services.
The report also recommends that HHS:
Collect and analyze data on the use of health plans, changes in demographics, and changes to health plans themselves, in order to implement updates of the EHBs.
Use the information it collects to establish a framework for monitoring and updating the EHBs by January 2013.
The report further notes that the EHBs should become more fully evidence-based, specific and value-based over time, as research yields more knowledge.
Finally, the IOM recommends that HHS establish a National Benefits Council to address how the selection of EHBs should be altered. Council members should be appointed on a nonpartisan basis.
For analysis of the ACA, see Affordable Care Act (ACA) Toolkit (www.practicallaw.com/7-502-3192).